We are pleased to present this semiannual report for Dreyfus California AMT-Free Municipal Bond Fund, covering the six-month period from December 1, 2014, through November 30, 2015. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
Financial markets proved volatile over the reporting period amid choppy U.S. and global economic growth. Employment and housing market gains helped U.S. stocks advance over the reporting period’s first half, driving some broad measures of market performance to new record highs in the spring. Although those gains were erased over the summer when global economic instability undermined investor sentiment, a renewed rally in the fall enabled most stock indices to end the reporting period in mildly positive territory. In contrast, international stocks mostly provided negative results, but developed markets fared better than emerging markets amid falling commodity prices and depreciating currency values. U.S. bonds produced modestly positive total returns overall, with municipal bonds achieving higher returns, on average, than U.S. government securities and corporate-backed bonds.
We expect market volatility to persist over the near term until investors see greater clarity regarding domestic and global economic conditions. Our investment strategists and portfolio managers are monitoring developments carefully, keeping a close watch on credit spreads, currency values, commodity prices, corporate profits, economic trends in the emerging markets, and other developments that could influence investor sentiment. Over the longer term, we remain confident that markets are likely to benefit as investors increasingly recognize that inflation is likely to stay low, economic growth expectations are stabilizing, and monetary policies remain accommodative in most regions of the world. In our view, investors will continue to be well served under these circumstances by a long-term perspective and a disciplined investment approach.
Thank you for your continued confidence and support.
DISCUSSION OF FUND PERFORMANCE
For the period of June 1, 2015, through November 30, 2015, as provided by Jeffrey B. Burger and Thomas Casey, Portfolio Managers
Fund and Market Performance Overview
For the six-month period ended November 30, 2015, Dreyfus California AMT-Free Municipal Bond Fund’s Class A shares produced a total return of 2.51%, Class C shares returned 2.18%, Class I shares returned 2.64%, Class Y shares returned 2.65%, and Class Z shares returned 2.62%.1 In comparison, the Barclays Municipal Bond Index (the “Index”), the fund’s benchmark index, which is composed of bonds issued nationally and not solely within California, achieved a total return of 2.37% for the same period.2
Municipal bonds gained value over the reporting period despite heightened volatility amid shifting economic sentiment. An emphasis on higher yielding, revenue-backed bonds enabled the fund’s Class A, Class I, Class Y, and Class Z shares to produce higher returns than the benchmark.
The Fund’s Investment Approach
The fund seeks as high a level of current income exempt from federal and California state income taxes as is consistent with the preservation of capital. To pursue its goal, the fund normally invests substantially all of its assets in municipal bonds that provide income exempt from federal and California state personal income taxes. The fund also seeks to provide income exempt from the federal Alternative Minimum Tax. The fund will invest at least 80% of its assets in investment-grade municipal bonds or the unrated equivalent as determined by Dreyfus. The fund may invest up to 20% of its assets in municipal bonds rated below investment grade (“junk” bonds) or the unrated equivalent as determined by Dreyfus. The dollar-weighted average maturity of the fund’s portfolio normally exceeds 10 years, but the fund’s average portfolio maturity is not restricted.
We focus on identifying undervalued sectors and securities, and we minimize the use of interest rate forecasting. We select municipal bonds by using fundamental credit analysis to estimate the relative value and attractiveness of various sectors and securities and to exploit pricing inefficiencies in the municipal bond market. We actively trade among various sectors, such as pre-refunded, general obligation, and revenue, based on their apparent relative values.
Improving Credit Quality Supported Municipal Bonds
Municipal bonds encountered heightened volatility stemming from bouts of economic uncertainty. The reporting period began in the midst of rising long-term interest rates as U.S. economic growth reaccelerated from an earlier soft patch. However, renewed concerns about global economic instability—including a debt crisis in Greece, and a persistent economic slowdown and currency devaluation in China—pushed bond yields lower and prices higher over the summer. In the fall, declining commodity prices and global economic worries continued to put downward pressure on bond yields. The resulting market volatility had a smaller impact on municipal bonds than U.S. Treasuries.
The municipal bond market also weathered some volatility when new issuance volumes continued to increase in response to issuers rushing to refinance existing debt before
3
DISCUSSION OF FUND PERFORMANCE (continued)
expected hikes in short-term interest rates. Meanwhile, demand for municipal bonds remained strong and steady as investors were attracted to competitive after-tax yields compared to U.S. Treasury securities, even as they adopted more risk-averse investment postures during a time of economic uncertainty.
Municipal bonds further benefited during the reporting period from improving credit conditions as tax revenues continued to climb beyond pre-recession levels for many states and local municipalities. California ranked as one of the leaders of the national economic recovery due to higher-than-projected tax collections, greater spending discipline, and efforts to reduce pension liabilities.
Revenue Bonds Bolstered Fund Results
The fund achieved positive relative results through an emphasis on revenue bonds. Results were particularly attractive among “A” and “BBB” rated bonds, in the hospital, airports, industrial development projects, and tobacco securitization sectors. The fund further benefited from lack of direct exposure to struggling Puerto Rico bonds. On the other hand, a lower allocation to state general obligation bonds and real estate-backed bonds prevented the fund from participating more fully in their strength.
Our interest-rate strategies generally proved effective over the reporting period. A mildly long average duration, an emphasis on longer term maturities, and a correspondingly light position in short maturities helped the fund earn higher levels of current income and capture gains when yield differences narrowed along the market’s maturity spectrum.
A Supportive Constructive Investment Posture
We remain optimistic regarding the prospects for the municipal bond market as the U.S. economy continues to grow and fiscal conditions generally improve. Therefore, we have looked for opportunities to add higher yielding securities when attractively valued opportunities arise. We have retained the fund’s focus on revenue-backed bonds, and we have maintained a slightly long average duration. Conversely, we have established underweighted positions in shorter term securities that could prove vulnerable to rising short-term interest rates. Indeed, soon after the reporting period’s end, the Federal Reserve Board implemented its first short-term rate hike in nearly 10 years.
December 17, 2015
Bond funds are subject generally to interest rate, credit, liquidity, and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
High yield bonds involve increased credit and liquidity risks compared with investment grade bonds and are considered speculative in terms of the issuer’s ability to pay interest and repay principal on a timely basis.
The use of derivatives involves risk different from, or possibly greater than, the risk associated with investing directly in the underlying assets. Derivatives can be highly volatile, illiquid, and difficult to value, and there is the risk that the changes in the value of a derivative held by the fund will not correlate with the underlying instruments or the fund’s other investments.
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 C shares. Had these charges been reflected, returns would have been lower. Class I, Class Y, and Class Z (which is closed to new investors) shares are not subject to any initial or deferred sales charge. 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-California residents. Capital gains, if any, are fully taxable.
4
2 SOURCE: Lipper Inc. — Reflects reinvestment of dividends and, where applicable, capital gain distributions. The Barclays Municipal Bond Index is a widely accepted, unmanaged and geographically unrestricted 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.
5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus California AMT-Free Municipal Bond Fund from June 1, 2015 to November 30, 2015. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| | | | | | | | | | | | | |
EXPENSES AND VALUE OF A $1,000 INVESTMENT | |
assuming actual returns for the six months ended November 30, 2015 | |
| | | Class A | Class C | Class I | Class Y | Class Z |
Expenses paid per $1,000† | | $ 4.71 | | $ 8.54 | | $ 3.50 | | $ 3.34 | | $ 3.65 |
Ending value (after expenses) | | $ 1,025.10 | | $ 1,021.80 | | $1,026.40 | | $ 1,026.50 | | $ 1,026.20 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| | | | | | | | | | | | | | | |
EXPENSES AND VALUE OF A $1,000 INVESTMENT | |
assuming a hypothetical 5% annualized return for the six months ended November 30, 2015 |
| | | | | | | | |
| | | Class A | Class C | Class I | Class Y | Class Z |
Expenses paid per $1,000† | | $ 4.70 | | $ 8.52 | | $ 3.49 | | $ 3.34 | | $ 3.64 |
Ending value (after expenses) | | $ 1,020.35 | | $ 1,016.55 | | $ 1,021.55 | | $ 1,021.70 | | $ 1,021.40 |
† Expenses are equal to the fund’s annualized expense ratio of .93% for Class A, 1.69% for Class C, .69% for Class I, .66 for Class Y and .72% for Class Z, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).
6
STATEMENT OF INVESTMENTS
November 30, 2015 (Unaudited)
| | | | | | | | | | | |
| |
Long-Term Municipal Investments - 98.4% | | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
California - 96.4% | | | | | |
ABAG Finance Authority for Nonprofit Corporations,
Revenue (Sharp HealthCare) | | 6.00 | | 8/1/30 | | 5,000,000 | | 6,048,850 | |
ABAG Finance Authority for Nonprofit Corporations,
Revenue (Sharp HealthCare) | | 5.00 | | 8/1/43 | | 3,000,000 | | 3,360,210 | |
Bay Area Toll Authority,
San Francisco Bay Area Subordinate Lien Toll Bridge Revenue | | 5.00 | | 4/1/43 | | 7,500,000 | | 8,433,600 | |
Bay Area Toll Authority,
San Francisco Bay Area Toll Bridge Revenue (Prerefunded) | | 5.25 | | 4/1/19 | | 10,000,000 | a | 11,391,000 | |
Brentwood Infrastructure Financing Authority,
Water Revenue (Prerefunded) | | 5.75 | | 7/1/18 | | 2,250,000 | a | 2,529,247 | |
California,
GO | | 5.00 | | 8/1/22 | | 5,000,000 | | 5,253,350 | |
California,
GO (Various Purpose) | | 5.00 | | 11/1/23 | | 5,000,000 | | 5,899,700 | |
California,
GO (Various Purpose) | | 5.25 | | 2/1/29 | | 13,835,000 | | 16,317,691 | |
California,
GO (Various Purpose) | | 5.00 | | 10/1/29 | | 5,250,000 | | 5,741,295 | |
California,
GO (Various Purpose) | | 5.25 | | 3/1/30 | | 15,000,000 | | 17,369,100 | |
California,
GO (Various Purpose) | | 5.75 | | 4/1/31 | | 4,500,000 | | 5,194,710 | |
California,
GO (Various Purpose) | | 5.25 | | 9/1/31 | | 25,000,000 | | 29,186,500 | |
California,
GO (Various Purpose) | | 5.25 | | 9/1/32 | | 19,500,000 | | 22,685,130 | |
California,
GO (Various Purpose) | | 5.25 | | 10/1/32 | | 9,170,000 | | 10,688,277 | |
California,
GO (Various Purpose) | | 6.00 | | 3/1/33 | | 3,000,000 | | 3,603,510 | |
California,
GO (Various Purpose) | | 6.50 | | 4/1/33 | | 30,000,000 | | 35,563,200 | |
California,
GO (Various Purpose) | | 5.50 | | 11/1/35 | | 10,000,000 | | 11,910,900 | |
California,
GO (Various Purpose) | | 5.00 | | 2/1/38 | | 5,000,000 | | 5,658,150 | |
California,
GO (Various Purpose) | | 5.50 | | 3/1/40 | | 17,500,000 | | 20,247,850 | |
California County Tobacco Securitization Agency,
Tobacco Settlement Asset-Backed Refunding Bonds (Kern County Tobacco Funding Corporation) | | 5.00 | | 6/1/34 | | 5,000,000 | | 5,460,100 | |
California Department of Water Resources,
Water System Revenue (Central Valley Project) | | 5.00 | | 12/1/26 | | 230,000 | | 252,982 | |
California Educational Facilities Authority,
Revenue (Chapman University) | | 5.00 | | 4/1/40 | | 5,000,000 | | 5,592,700 | |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | | |
| |
Long-Term Municipal Investments - 98.4% (continued) | | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
California - 96.4% (continued) | | | | | |
California Educational Facilities Authority,
Revenue (Chapman University) | | 5.00 | | 4/1/45 | | 2,305,000 | | 2,560,763 | |
California Educational Facilities Authority,
Revenue (Pepperdine University) | | 5.00 | | 9/1/45 | | 5,000,000 | | 5,766,750 | |
California Educational Facilities Authority,
Revenue (Pooled College and University Projects) (Escrowed to Maturity) | | 5.63 | | 7/1/23 | | 135,000 | | 157,382 | |
California Educational Facilities Authority,
Revenue (University of Southern California) | | 5.25 | | 10/1/38 | | 5,000,000 | | 5,567,750 | |
California Health Facilities Financing Authority,
Revenue (City of Hope) | | 5.00 | | 11/15/23 | | 1,650,000 | | 1,944,970 | |
California Health Facilities Financing Authority,
Revenue (City of Hope) | | 5.00 | | 11/15/24 | | 1,600,000 | | 1,871,264 | |
California Health Facilities Financing Authority,
Revenue (Providence Health and Services) | | 5.00 | | 10/1/30 | | 3,500,000 | | 4,101,930 | |
California Health Facilities Financing Authority,
Revenue (Providence Health and Services) | | 5.00 | | 10/1/31 | | 4,430,000 | | 5,161,659 | |
California Health Facilities Financing Authority,
Revenue (Rady Children's Hospital - San Diego) | | 5.25 | | 8/15/41 | | 8,500,000 | | 9,474,865 | |
California Health Facilities Financing Authority,
Revenue (Saint Joseph Health System) | | 5.00 | | 7/1/37 | | 7,500,000 | | 8,570,925 | |
California Health Facilities Financing Authority,
Revenue (Scripps Health) | | 5.00 | | 11/15/36 | | 7,525,000 | | 8,434,848 | |
California Health Facilities Financing Authority,
Revenue (Stanford Hospital and Clinics) | | 5.00 | | 8/15/42 | | 1,000,000 | | 1,104,670 | |
California Health Facilities Financing Authority,
Revenue (Sutter Health) | | 5.25 | | 8/15/22 | | 6,000,000 | | 6,673,560 | |
California Health Facilities Financing Authority,
Revenue (Sutter Health) | | 5.25 | | 8/15/31 | | 3,500,000 | | 4,075,715 | |
California Health Facilities Financing Authority,
Revenue (Sutter Health) | | 5.00 | | 8/15/43 | | 2,000,000 | | 2,280,380 | |
California Housing Finance Agency,
Home Mortgage Revenue (Collateralized; FNMA) | | 5.50 | | 8/1/38 | | 3,945,000 | | 4,015,024 | |
California Infrastructure and Economic Development Bank,
Revenue (Academy of Motion Pictures Arts and Sciences Obligated Group) | | 5.00 | | 11/1/41 | | 2,250,000 | | 2,549,790 | |
California Municipal Finance Authority,
COP (Community Hospitals of Central California Obligated Group) | | 5.25 | | 2/1/27 | | 3,965,000 | | 4,115,234 | |
8
| | | | | | | | | | | |
| |
Long-Term Municipal Investments - 98.4% (continued) | | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
California - 96.4% (continued) | | | | | |
California Municipal Finance Authority,
COP (Community Hospitals of Central California Obligated Group) (Prerefunded) | | 5.25 | | 2/1/17 | | 2,785,000 | a | 2,936,504 | |
California Municipal Finance Authority,
Student Housing Revenue (Bowles Hall Foundation) | | 5.00 | | 6/1/50 | | 1,500,000 | | 1,621,305 | |
California Pollution Control Financing Authority,
Revenue (San Jose Water Company Project) | | 5.10 | | 6/1/40 | | 5,500,000 | | 6,190,470 | |
California Pollution Control Financing Authority,
Water Facilities Revenue (American Water Capital Corporation Project) | | 5.25 | | 8/1/40 | | 7,500,000 | b | 7,987,350 | |
California School Finance Authority,
School Facility Revenue (Alliance for College-Ready Public Schools Projects) | | 5.00 | | 7/1/45 | | 3,500,000 | b | 3,607,415 | |
California State Public Works Board,
LR (Department of Corrections and Rehabilitation) (Various Correctional Facilities) | | 5.00 | | 9/1/26 | | 5,000,000 | | 5,992,950 | |
California State Public Works Board,
LR (Judicial Council of California) (Various Judicial Council Projects) | | 5.00 | | 3/1/25 | | 1,795,000 | | 2,118,118 | |
California State Public Works Board,
LR (Judicial Council of California) (Various Judicial Council Projects) | | 5.00 | | 12/1/31 | | 10,000,000 | | 11,542,100 | |
California State University Trustees,
Systemwide Revenue | | 5.00 | | 11/1/27 | | 2,510,000 | | 2,736,628 | |
California State University Trustees,
Systemwide Revenue | | 5.00 | | 11/1/28 | | 5,000,000 | | 5,451,450 | |
California Statewide Communities Development Authority,
COP (The Internext Group) | | 5.38 | | 4/1/30 | | 4,800,000 | | 4,814,304 | |
California Statewide Communities Development Authority,
Revenue (899 Charleston Project) | | 5.25 | | 11/1/44 | | 2,500,000 | | 2,552,550 | |
California Statewide Communities Development Authority,
Revenue (American Baptist Homes of the West) | | 2.10 | | 10/1/19 | | 2,000,000 | | 2,000,540 | |
California Statewide Communities Development Authority,
Revenue (American Baptist Homes of the West) | | 5.00 | | 10/1/45 | | 3,550,000 | | 3,834,639 | |
California Statewide Communities Development Authority,
Revenue (Buck Institute for Research on Aging) (Insured; Assured Guaranty Municipal Corp.) | | 5.00 | | 11/15/34 | | 2,390,000 | | 2,726,727 | |
California Statewide Communities Development Authority,
Revenue (Cottage Health System Obligated Group) | | 5.25 | | 11/1/30 | | 3,750,000 | | 4,252,350 | |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | | |
| |
Long-Term Municipal Investments - 98.4% (continued) | | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
California - 96.4% (continued) | | | | | |
California Statewide Communities Development Authority,
Revenue (Cottage Health System Obligated Group) | | 5.00 | | 11/1/40 | | 11,940,000 | | 13,098,777 | |
California Statewide Communities Development Authority,
Revenue (Cottage Health System Obligated Group) | | 5.00 | | 11/1/43 | | 4,000,000 | | 4,477,320 | |
California Statewide Communities Development Authority,
Revenue (Henry Mayo Newhall Memorial Hospital) (Insured; Assured Guaranty Municipal Corp.) | | 5.25 | | 10/1/43 | | 2,100,000 | | 2,362,689 | |
California Statewide Communities Development Authority,
Revenue (Kaiser Permanente) | | 5.00 | | 4/1/42 | | 3,000,000 | | 3,349,260 | |
California Statewide Communities Development Authority,
Revenue (Saint Joseph Health System) (Insured; FGIC) | | 5.75 | | 7/1/47 | | 10,000,000 | | 11,029,700 | |
California Statewide Communities Development Authority,
Revenue (Saint Joseph Health System) (Insured; National Public Finance Guarantee Corp.) | | 5.13 | | 7/1/24 | | 5,000,000 | | 5,493,050 | |
California Statewide Communities Development Authority,
School Facility Revenue (Aspire Public Schools) | | 6.00 | | 7/1/40 | | 7,975,000 | | 8,438,587 | |
California Statewide Communities Development Authority,
Student Housing Revenue (CHF-Irvine, LLC-UCI East Campus Apartments, Phase II) | | 5.75 | | 5/15/32 | | 4,000,000 | | 4,331,160 | |
Chabot-Las Positas Community College District,
GO (Insured; AMBAC) | | 0.00 | | 8/1/22 | | 3,000,000 | c | 2,236,740 | |
Coast Community College District,
GO (Insured; Assured Guaranty Municipal Corp.) (Prerefunded) | | 5.00 | | 8/1/18 | | 15,565,000 | a | 17,244,308 | |
Foothill/Eastern Transportation Corridor Agency,
Senior Lien Toll Road Revenue (Insured; Assured Guaranty Municipal Corp.) | | 0.00 | | 1/15/35 | | 10,000,000 | c | 4,511,900 | |
Golden State Tobacco Securitization Corporation,
Enhanced Tobacco Settlement Asset-Backed Bonds | | 5.00 | | 6/1/40 | | 3,500,000 | | 3,957,555 | |
Golden State Tobacco Securitization Corporation,
Enhanced Tobacco Settlement Asset-Backed Bonds (Insured; Assured Guaranty Municipal Corp.) | | 4.55 | | 6/1/22 | | 1,725,000 | | 1,855,306 | |
10
| | | | | | | | | | | |
| |
Long-Term Municipal Investments - 98.4% (continued) | | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
California - 96.4% (continued) | | | | | |
Golden State Tobacco Securitization Corporation,
Tobacco Settlement Asset-Backed Bonds | | 4.50 | | 6/1/27 | | 9,755,000 | | 9,626,624 | |
Golden State Tobacco Securitization Corporation,
Tobacco Settlement Asset-Backed Bonds | | 5.13 | | 6/1/47 | | 8,000,000 | | 6,815,520 | |
Golden State Tobacco Securitization Corporation,
Tobacco Settlement Asset-Backed Bonds | | 5.75 | | 6/1/47 | | 12,500,000 | | 11,581,000 | |
Grossmont Union High School District,
GO (Insured; Assured Guaranty Municipal Corp.) | | 0.00 | | 8/1/21 | | 4,375,000 | c | 3,859,406 | |
Grossmont Union High School District,
GO (Insured; Assured Guaranty Municipal Corp.) | | 0.00 | | 8/1/22 | | 4,605,000 | c | 3,926,776 | |
Grossmont Union High School District,
GO (Insured; Assured Guaranty Municipal Corp.) | | 0.00 | | 8/1/23 | | 4,850,000 | c | 3,985,099 | |
Grossmont Union High School District,
GO (Insured; Assured Guaranty Municipal Corp.) | | 0.00 | | 8/1/26 | | 3,265,000 | c | 2,364,905 | |
Irvine Community Facilities District Number 2013-3 Improvement Area Number 1,
Special Tax Revenue (Great Park) | | 5.00 | | 9/1/44 | | 2,500,000 | | 2,679,125 | |
JPMorgan Chase Putters/Drivers Trust (Series 4354) ,
(Riverside County Transportation Commission, Sales Tax Revenue) Non-recourse | | 5.25 | | 6/1/21 | | 7,500,000 | b,d | 8,730,150 | |
JPMorgan Chase Putters/Drivers Trust (Series 4361),
(Los Angeles Department of Water and Power, Water System Revenue) Non-recourse | | 5.00 | | 7/1/20 | | 12,000,000 | b,d | 13,789,560 | |
Jurupa Public Financing Authority,
Special Tax Revenue | | 5.00 | | 9/1/42 | | 3,420,000 | | 3,763,094 | |
Long Beach,
Harbor Revenue | | 5.00 | | 5/15/42 | | 3,500,000 | | 4,050,830 | |
Los Angeles Community Facilities District Number 4,
Special Tax Revenue (Playa Vista-Phase 1) | | 5.00 | | 9/1/29 | | 1,190,000 | | 1,358,195 | |
Los Angeles Community Facilities District Number 4,
Special Tax Revenue (Playa Vista-Phase 1) | | 5.00 | | 9/1/30 | | 1,110,000 | | 1,258,707 | |
Los Angeles County Regional Financing Authority,
Revenue (MonteCedro Inc. Project) | | 5.00 | | 11/15/44 | | 2,000,000 | | 2,261,560 | |
Los Angeles Department of Airports,
Senior Revenue (Los Angeles International Airport) | | 5.25 | | 5/15/26 | | 5,000,000 | | 5,847,600 | |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | | |
| |
Long-Term Municipal Investments - 98.4% (continued) | | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
California - 96.4% (continued) | | | | | |
Los Angeles Department of Airports,
Senior Revenue (Los Angeles International Airport) | | 5.00 | | 5/15/29 | | 3,915,000 | | 4,508,436 | |
Los Angeles Department of Airports,
Senior Revenue (Los Angeles International Airport) | | 5.25 | | 5/15/29 | | 16,090,000 | | 18,225,304 | |
Los Angeles Department of Airports,
Senior Revenue (Los Angeles International Airport) | | 5.00 | | 5/15/35 | | 25,000,000 | | 28,400,500 | |
Los Angeles Department of Airports,
Senior Revenue (Los Angeles International Airport) | | 5.00 | | 5/15/38 | | 3,500,000 | | 3,927,350 | |
Los Angeles Department of Airports,
Subordinate Revenue (Los Angeles International Airport) | | 5.00 | | 5/15/38 | | 4,500,000 | | 5,160,465 | |
Los Angeles Harbor Department,
Revenue | | 5.25 | | 8/1/25 | | 26,055,000 | | 29,850,953 | |
Los Angeles Harbor Department,
Revenue | | 5.00 | | 8/1/39 | | 2,050,000 | | 2,360,862 | |
Metropolitan Water District of Southern California,
Water Revenue | | 5.00 | | 10/1/34 | | 5,000,000 | | 5,891,700 | |
Metropolitan Water District of Southern California,
Water Revenue | | 5.00 | | 1/1/39 | | 5,000,000 | | 5,514,600 | |
Murrieta Valley Unified School District,
GO (Insured; National Public Finance Guarantee Corp.) | | 0.00 | | 9/1/21 | | 4,950,000 | c | 4,338,526 | |
North Natomas Community Facilities District Number 4,
Special Tax Bonds | | 5.25 | | 9/1/26 | | 2,760,000 | | 3,218,408 | |
Northern California Power Agency,
Revenue (Hydroelectric Project Number 1) (Insured; AMBAC) (Prerefunded) | | 7.00 | | 1/1/16 | | 670,000 | a | 673,946 | |
Northern California Power Agency,
Revenue (Hydroelectric Project Number 1) (Insured; AMBAC) (Prerefunded) | | 7.50 | | 7/1/21 | | 375,000 | a | 463,286 | |
Northern California Power Agency,
Revenue (Hydroelectric Project Number 1) (Insured; National Public Finance Guarantee Corp.) | | 6.30 | | 7/1/18 | | 17,665,000 | | 19,022,909 | |
Oakland Redevelopment Successor Agency,
Subordinated Tax Allocation Revenue (Insured; Assured Guaranty Municipal Corp.) | | 5.00 | | 9/1/36 | | 3,000,000 | | 3,422,190 | |
Oakland Unified School District,
GO | | 6.63 | | 8/1/38 | | 5,000,000 | | 6,128,950 | |
Oakland Unified School District,
GO | | 5.00 | | 8/1/40 | | 3,500,000 | | 3,884,895 | |
Palomar Community College District,
GO | | 0/6.38 | | 8/1/45 | | 15,515,000 | e | 10,911,389 | |
Pomona Redevelopment Agency,
Tax Allocation Revenue (West Holt Avenue Redevelopment Project) | | 5.50 | | 5/1/32 | | 3,000,000 | | 3,761,640 | |
12
| | | | | | | | | | | |
| |
Long-Term Municipal Investments - 98.4% (continued) | | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
California - 96.4% (continued) | | | | | |
Pomona Unified School District,
GO (Insured; Build America Mutual Assurance Company) | | 5.00 | | 8/1/39 | | 2,000,000 | | 2,273,840 | |
Poway Unified School District School Facilities Improvement District Number 2007-1,
GO | | 0.00 | | 8/1/35 | | 12,850,000 | c | 5,922,051 | |
Sacramento County,
Airport System Senior Revenue | | 5.00 | | 7/1/24 | | 5,090,000 | | 5,589,431 | |
Sacramento County,
Airport System Senior Revenue | | 5.13 | | 7/1/25 | | 5,890,000 | | 6,480,296 | |
Sacramento County Sanitation Districts Financing Authority,
Revenue (Sacramento Regional County Sanitation District) | | 5.00 | | 12/1/26 | | 7,000,000 | | 8,389,920 | |
Sacramento County Water Financing Authority,
Revenue (Sacramento County Water Agency Zones 40 and 41 Water System Project) (Insured; National Public Finance Guarantee Corp.) | | 5.00 | | 6/1/25 | | 5,000,000 | | 5,312,800 | |
Sacramento Municipal Utility District,
Electric Revenue | | 5.00 | | 8/15/28 | | 2,500,000 | | 2,940,675 | |
San Bernardino County,
COP (Capital Facilities Project) (Escrowed to Maturity) | | 6.88 | | 8/1/24 | | 5,000,000 | | 6,564,650 | |
San Diego County Regional Airport Authority,
Subordinate Airport Revenue | | 5.00 | | 7/1/34 | | 3,000,000 | | 3,379,170 | |
San Diego County Regional Transportation Commission,
Sales Tax Revenue | | 5.00 | | 4/1/44 | | 10,000,000 | | 11,425,400 | |
San Diego Public Facilities Financing Authority,
Senior Sewer Revenue | | 5.25 | | 5/15/34 | | 6,045,000 | | 6,835,565 | |
San Diego Public Facilities Financing Authority,
Water Revenue | | 5.25 | | 8/1/28 | | 6,000,000 | | 6,948,180 | |
San Francisco City and County Airport Commission,
Second Series Revenue (San Francisco International Airport) | | 5.00 | | 5/1/23 | | 6,775,000 | | 8,028,036 | |
San Francisco City and County Airport Commission,
Second Series Revenue (San Francisco International Airport) | | 5.25 | | 5/1/26 | | 4,000,000 | | 4,395,040 | |
San Francisco City and County Airport Commission,
Second Series Revenue (San Francisco International Airport) | | 5.00 | | 5/1/28 | | 2,000,000 | | 2,368,160 | |
San Francisco City and County Airport Commission,
Second Series Revenue (San Francisco International Airport) | | 5.00 | | 5/1/29 | | 2,000,000 | | 2,347,080 | |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | | |
| |
Long-Term Municipal Investments - 98.4% (continued) | | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
California - 96.4% (continued) | | | | | |
San Francisco City and County Public Utilities Commission,
San Francisco Water Revenue | | 5.00 | | 11/1/37 | | 10,000,000 | | 11,271,700 | |
San Francisco City and County Redevelopment Agency Community Facilities District Number 6,
Special Tax Revenue (Mission Bay South Public Improvements) | | 0.00 | | 8/1/18 | | 445,000 | c | 386,798 | |
San Francisco City and County Redevelopment Agency Community Facilities District Number 6,
Special Tax Revenue (Mission Bay South Public Improvements) | | 5.00 | | 8/1/18 | | 1,585,000 | | 1,736,494 | |
San Francisco City and County Redevelopment Agency Community Facilities District Number 6,
Special Tax Revenue (Mission Bay South Public Improvements) | | 0.00 | | 8/1/21 | | 500,000 | c | 364,545 | |
San Joaquin Hills Transportation Corridor Agency,
Senior Lien Toll Road Revenue | | 5.00 | | 1/15/50 | | 5,000,000 | | 5,367,000 | |
Santa Margarita Water District Community Facilities District Number 2013-1,
Special Tax Revenue (Village of Sendero) | | 5.63 | | 9/1/43 | | 7,000,000 | | 7,748,090 | |
Santa Margarita Water District Community Facilities District Number 99-1,
Special Tax Revenue (Talega) | | 5.00 | | 9/1/27 | | 1,945,000 | | 2,201,857 | |
South Orange County Public Financing Authority,
Special Tax Senior Lien Revenue (Ladera Ranch) | | 5.00 | | 8/15/29 | | 1,500,000 | | 1,707,915 | |
South Orange County Public Financing Authority,
Special Tax Senior Lien Revenue (Ladera Ranch) | | 5.00 | | 8/15/30 | | 1,000,000 | | 1,134,050 | |
Southern California Public Power Authority,
Revenue (Canyon Power Project) | | 5.25 | | 7/1/27 | | 7,485,000 | | 8,577,361 | |
Southern California Public Power Authority,
Revenue (Linden Wind Energy Project) | | 5.00 | | 7/1/28 | | 3,145,000 | | 3,601,025 | |
Southern California Public Power Authority,
Revenue (Linden Wind Energy Project) | | 5.00 | | 7/1/29 | | 2,230,000 | | 2,553,350 | |
Southern California Public Power Authority,
Revenue (Milford Wind Corridor Phase I Project) | | 5.00 | | 7/1/29 | | 11,865,000 | | 13,444,231 | |
Southern California Public Power Authority,
Revenue (Windy Point/Windy Flats Project) | | 5.00 | | 7/1/27 | | 13,765,000 | | 15,849,572 | |
Stockton Unified School District,
GO (Insured; Assured Guaranty Municipal Corp.) | | 5.00 | | 7/1/25 | | 1,620,000 | | 1,908,101 | |
14
| | | | | | | | | | | |
| |
Long-Term Municipal Investments - 98.4% (continued) | | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
California - 96.4% (continued) | | | | | |
Stockton Unified School District,
GO (Insured; Assured Guaranty Municipal Corp.) | | 5.00 | | 7/1/26 | | 1,115,000 | | 1,302,454 | |
Stockton Unified School District,
GO (Insured; Assured Guaranty Municipal Corp.) | | 5.00 | | 8/1/38 | | 2,500,000 | | 2,822,075 | |
Tobacco Securitization Authority of Southern California,
Tobacco Settlement Asset-Backed Bonds (San Diego County Tobacco Asset Securitization Corporation) | | 4.75 | | 6/1/25 | | 1,000,000 | | 1,000,110 | |
Tobacco Securitization Authority of Southern California,
Tobacco Settlement Asset-Backed Bonds (San Diego County Tobacco Asset Securitization Corporation) | | 5.13 | | 6/1/46 | | 8,850,000 | | 7,957,123 | |
Torrance,
Revenue (Torrance Memorial Medical Center) | | 5.00 | | 9/1/40 | | 3,000,000 | | 3,197,340 | |
Tuolumne Wind Project Authority,
Revenue (Tuolumne Company Project) | | 5.63 | | 1/1/29 | | 8,000,000 | | 9,035,440 | |
Turlock Irrigation District,
Revenue | | 5.00 | | 1/1/25 | | 5,610,000 | | 6,390,127 | |
Turlock Irrigation District,
Revenue | | 5.00 | | 1/1/26 | | 8,120,000 | | 9,224,970 | |
University of California Regents,
General Revenue | | 5.25 | | 5/15/30 | | 3,000,000 | | 3,650,970 | |
University of California Regents,
General Revenue (Prerefunded) | | 5.25 | | 5/15/17 | | 6,000,000 | a | 6,462,660 | |
University of California Regents,
General Revenue (Prerefunded) | | 5.75 | | 5/15/19 | | 3,000,000 | a | 3,477,990 | |
University of California Regents,
Limited Project Revenue | | 5.00 | | 5/15/42 | | 10,000,000 | | 11,440,000 | |
University of California Regents,
Medical Center Pooled Revenue | | 5.00 | | 5/15/43 | | 10,000,000 | | 11,129,700 | |
Walnut Energy Center Authority,
Revenue | | 5.00 | | 1/1/27 | | 3,150,000 | | 3,741,664 | |
| | 963,016,749 | |
U.S. Related - 2.0% | | | | | |
Guam,
Business Privilege Tax Revenue | | 5.00 | | 11/15/34 | | 6,930,000 | | 7,729,653 | |
Guam,
Hotel Occupancy Tax Revenue | | 6.00 | | 11/1/26 | | 3,300,000 | | 3,909,543 | |
15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | | |
| |
Long-Term Municipal Investments - 98.4% (continued) | | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
U.S. Related - 2.0% (continued) | | | | | |
Guam,
LOR (Section 30) | | 5.63 | | 12/1/29 | | 2,850,000 | | 3,155,149 | |
Virgin Islands Public Finance Authority,
Revenue (Virgin Islands Matching Fund Loan Notes) | | 5.00 | | 10/1/25 | | 5,000,000 | | 5,537,450 | |
| | 20,331,795 | |
| | | | |
Total Investments (cost $884,745,364) | | 98.4% | 983,348,544 | |
Cash and Receivables (Net) | | 1.6% | 16,282,431 | |
Net Assets | | 100.0% | 999,630,975 | |
a These securities are prerefunded; the date shown represents the prerefunded date. 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 Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At November 30, 2015, these securities were valued at $34,114,475, or 3.41% of net assets.
c Security issued with a zero coupon. Income is recognized through the accretion of discount.
d Collateral for floating rate borrowings.
e Zero coupon until a specified date at which time the stated coupon rate becomes effective until maturity.
| | |
Portfolio Summary (Unaudited) † | Value (%) |
State/Territory | 14.6 |
Transportation Services | 14.0 |
Health Care | 12.7 |
Utility-Water and Sewer | 11.8 |
Education | 9.0 |
Utility-Electric | 7.6 |
Special Tax | 4.9 |
City | 4.2 |
Prerefunded | 3.5 |
Asset-Backed | 3.1 |
Lease | 2.0 |
Housing | 1.1 |
Industrial | .5 |
County | .2 |
Other | 9.2 |
| | 98.4 |
† Based on net assets.
See notes to financial statements.
16
| | | | |
| |
Summary of Abbreviations |
| |
ABAG | Association of Bay Area
Governments | ACA | American Capital Access |
AGC | ACE Guaranty Corporation | AGIC | Asset Guaranty Insurance Company |
AMBAC | American Municipal Bond
Assurance Corporation | ARRN | Adjustable Rate
Receipt Notes |
BAN | Bond Anticipation Notes | BPA | Bond Purchase Agreement |
CIFG | CDC Ixis Financial Guaranty | COP | Certificate of Participation |
CP | Commercial Paper | DRIVERS | Derivative Inverse
Tax-Exempt Receipts |
EDR | Economic Development
Revenue | EIR | Environmental Improvement
Revenue |
FGIC | Financial Guaranty
Insurance Company | FHA | Federal Housing Administration |
FHLB | Federal Home
Loan Bank | FHLMC | Federal Home Loan Mortgage
Corporation |
FNMA | Federal National
Mortgage Association | GAN | Grant Anticipation Notes |
GIC | Guaranteed Investment
Contract | GNMA | Government National Mortgage
Association |
GO | General Obligation | HR | Hospital Revenue |
IDB | Industrial Development Board | IDC | Industrial Development Corporation |
IDR | Industrial Development
Revenue | LIFERS | Long Inverse Floating
Exempt Receipts |
LOC | Letter of Credit | LOR | Limited Obligation Revenue |
LR | Lease Revenue | MERLOTS | Municipal Exempt Receipts
Liquidity Option Tender |
MFHR | Multi-Family Housing Revenue | MFMR | Multi-Family Mortgage Revenue |
PCR | Pollution Control Revenue | PILOT | Payment in Lieu of Taxes |
P-FLOATS | Puttable Floating Option
Tax-Exempt Receipts | PUTTERS | Puttable Tax-Exempt Receipts |
RAC | Revenue Anticipation Certificates | RAN | Revenue Anticipation Notes |
RAW | Revenue Anticipation Warrants | RIB | Residual Interest Bonds |
ROCS | Reset Options Certificates | RRR | Resources Recovery Revenue |
SAAN | State Aid Anticipation Notes | SBPA | Standby Bond Purchase Agreement |
SFHR | Single Family Housing Revenue | SFMR | Single Family Mortgage Revenue |
SONYMA | State of New York
Mortgage Agency | SPEARS | Short Puttable Exempt
Adjustable Receipts |
SWDR | Solid Waste Disposal Revenue | TAN | Tax Anticipation Notes |
TAW | Tax Anticipation Warrants | TRAN | Tax and Revenue Anticipation Notes |
XLCA | XL Capital Assurance | | |
See notes to financial statements.
17
STATEMENT OF ASSETS AND LIABILITIES
November 30, 2015 (Unaudited)
| | | | | | | |
| | | | | | |
| | | Cost | | Value | |
Assets ($): | | | | |
Investments in securities—See Statement of Investments | | 884,745,364 | | 983,348,544 | |
Cash | | | | | 15,539,428 | |
Interest receivable | | | | | 11,609,068 | |
Receivable for shares of Common Stock subscribed | | | | | 292,500 | |
Prepaid expenses | | | | | 45,174 | |
| | | | | 1,010,834,714 | |
Liabilities ($): | | | | |
Due to The Dreyfus Corporation and affiliates—Note 3(c) | | | | | 632,703 | |
Payable for floating rate notes issued—Note 4 | | | | | 9,750,000 | |
Payable for shares of Common Stock redeemed | | | | | 692,610 | |
Interest and expense payable related to
floating rate notes issued—Note 4 | | | | | 32,445 | |
Accrued expenses | | | | | 95,981 | |
| | | | | 11,203,739 | |
Net Assets ($) | | | 999,630,975 | |
Composition of Net Assets ($): | | | | |
Paid-in capital | | | | | 919,718,262 | |
Accumulated undistributed investment income—net | | | | | 75,818 | |
Accumulated net realized gain (loss) on investments | | | | | (18,766,285) | |
Accumulated net unrealized appreciation (depreciation)
on investments | | | | | 98,603,180 | |
Net Assets ($) | | | 999,630,975 | |
| | | | | | | |
Net Asset Value Per Share | Class A | Class C | Class I | Class Y | Class Z | |
Net Assets ($) | 92,338,182 | 11,257,143 | 26,578,198 | 4,139,985 | 865,317,467 | |
Shares Outstanding | 6,019,329 | 733,986 | 1,733,335 | 269,988 | 56,406,023 | |
Net Asset Value Per Share ($) | 15.34 | 15.34 | 15.33 | 15.33 | 15.34 | |
See notes to financial statements.
18
STATEMENT OF OPERATIONS
Six Months Ended November 30, 2015 (Unaudited)
| | | | | | | |
| | | | | | |
| | | | | | |
Investment Income ($): | | | | |
Interest Income | | | 21,391,602 | |
Expenses: | | | | |
Management fee—Note 3(a) | | | 2,981,538 | |
Shareholder servicing costs—Note 3(c) | | | 459,265 | |
Professional fees | | | 44,923 | |
Interest and expense related to floating rate notes issued—Note 4 | | | 39,190 | |
Custodian fees—Note 3(c) | | | 38,285 | |
Directors’ fees and expenses—Note 3(d) | | | 36,943 | |
Distribution fees—Note 3(b) | | | 35,373 | |
Registration fees | | | 31,809 | |
Prospectus and shareholders’ reports | | | 15,444 | |
Loan commitment fees—Note 2 | | | 5,447 | |
Miscellaneous | | | 30,188 | |
Total Expenses | | | 3,718,405 | |
Less—reduction in fees due to earnings credits—Note 3(c) | | | (219) | |
Net Expenses | | | 3,718,186 | |
Investment Income—Net | | | 17,673,416 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | | |
Net realized gain (loss) on investments | 4,992,708 | |
Net unrealized appreciation (depreciation) on investments | | | 3,003,064 | |
Net Realized and Unrealized Gain (Loss) on Investments | | | 7,995,772 | |
Net Increase in Net Assets Resulting from Operations | | 25,669,188 | |
See notes to financial statements.
19
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | Six Months Ended November 30, 2015 (Unaudited) | | | | Year Ended
May 31, 2015 | |
Operations ($): | | | | | | | | |
Investment income—net | | | 17,673,416 | | | | 36,598,311 | |
Net realized gain (loss) on investments | | 4,992,708 | | | | 1,703,612 | |
Net unrealized appreciation (depreciation)
on investments | | 3,003,064 | | | | (520,008) | |
Net Increase (Decrease) in Net Assets
Resulting from Operations | 25,669,188 | | | | 37,781,915 | |
Dividends to Shareholders from ($): | | | | | | | | |
Investment income—net: | | | | | | | | |
Class A | | | (1,544,154) | | | | (3,012,537) | |
Class C | | | (123,075) | | | | (240,841) | |
Class I | | | (393,135) | | | | (690,160) | |
Class Y | | | (75,078) | | | | (133,641) | |
Class Z | | | (15,658,911) | | | | (32,273,337) | |
Total Dividends | | | (17,794,353) | | | | (36,350,516) | |
Capital Stock Transactions ($): | | | | | | | | |
Net proceeds from shares sold: | | | | | | | | |
Class A | | | 4,584,051 | | | | 10,767,856 | |
Class C | | | 3,154,904 | | | | 1,156,925 | |
Class I | | | 9,632,343 | | | | 11,044,112 | |
Class Y | | | 497,000 | | | | 5,693,990 | |
Class Z | | | 9,215,356 | | | | 18,500,901 | |
Dividends reinvested: | | | | | | | | |
Class A | | | 1,027,490 | | | | 1,969,875 | |
Class C | | | 78,932 | | | | 152,522 | |
Class I | | | 243,496 | | | | 396,176 | |
Class Y | | | 6,329 | | | | 26,105 | |
Class Z | | | 11,744,115 | | | | 24,021,627 | |
Cost of shares redeemed: | | | | | | | | |
Class A | | | (4,394,352) | | | | (11,953,228) | |
Class C | | | (1,484,309) | | | | (1,139,120) | |
Class I | | | (3,770,810) | | | | (10,432,566) | |
Class Y | | | (238,428) | | | | (1,933,240) | |
Class Z | | | (43,482,913) | | | | (83,061,935) | |
Increase (Decrease) in Net Assets
from Capital Stock Transactions | (13,186,796) | | | | (34,790,000) | |
Total Increase (Decrease) in Net Assets | (5,311,961) | | | | (33,358,601) | |
Net Assets ($): | | | | | | | | |
Beginning of Period | | | 1,004,942,936 | | | | 1,038,301,537 | |
End of Period | | | 999,630,975 | | | | 1,004,942,936 | |
Undistributed investment income—net | 75,818 | | | | 196,755 | |
20
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | Six Months Ended November 30, 2015 (Unaudited) | | | | Year Ended
May 31, 2015 | |
Capital Share Transactions (Shares): | | | | | | | | |
Class A | | | | | | | | |
Shares sold | | | 301,481 | | | | 701,243 | |
Shares issued for dividends reinvested | | | 67,345 | | | | 128,489 | |
Shares redeemed | | | (288,879) | | | | (780,980) | |
Net Increase (Decrease) in Shares Outstanding | 79,947 | | | | 48,752 | |
Class C | | | | | | | | |
Shares sold | | | 206,751 | | | | 75,332 | |
Shares issued for dividends reinvested | | | 5,174 | | | | 9,950 | |
Shares redeemed | | | (97,582) | | | | (74,486) | |
Net Increase (Decrease) in Shares Outstanding | 114,343 | | | | 10,796 | |
Class Ia | | | | | | | | |
Shares sold | | | 632,085 | | | | 722,174 | |
Shares issued for dividends reinvested | | | 15,962 | | | | 25,837 | |
Shares redeemed | | | (248,483) | | | | (688,019) | |
Net Increase (Decrease) in Shares Outstanding | 399,564 | | | | 59,992 | |
Class Ya | | | | | | | | |
Shares sold | | | 32,792 | | | | 377,966 | |
Shares issued for dividends reinvested | | | 415 | | | | 1,698 | |
Shares redeemed | | | (15,683) | | | | (127,268) | |
Net Increase (Decrease) in Shares Outstanding | 17,524 | | | | 252,396 | |
Class Z | | | | | | | | |
Shares sold | | | 605,110 | | | | 1,208,564 | |
Shares issued for dividends reinvested | | | 769,807 | | | | 1,566,779 | |
Shares redeemed | | | (2,857,604) | | | | (5,430,077) | |
Net Increase (Decrease) in Shares Outstanding | (1,482,687) | | | | (2,654,734) | |
| | | | | | | | | | |
a During the period ended May 31, 2015, 304,327 Class I shares representing $4,564,899 were exchanged for 304,327 Class Y shares. | |
See notes to financial statements.
21
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
| | | | | | | | |
Six Months Ended | |
November 30, 2015 | Year Ended May 31, |
Class A Shares | (Unaudited) | 2015 | 2014 | 2013 | 2012 | 2011 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 15.22 | 15.20 | 15.35 | 15.30 | 14.12 | 14.52 |
Investment Operations: | | | | | | |
Investment income—neta | .26 | .52 | .54 | .51 | .55 | .57 |
Net realized and unrealized
gain (loss) on investments | .12 | .01 | (.16) | .05 | 1.17 | (.40) |
Total from Investment Operations | .38 | .53 | .38 | .56 | 1.72 | .17 |
Distributions: | | | | | | |
Dividends from investment
income—net | (.26) | (.51) | (.53) | (.51) | (.54) | (.57) |
Dividends from net realized
gain on investments | - | — | — | (.00)b | — | — |
Total Distributions | (.26) | (.51) | (.53) | (.51) | (.54) | (.57) |
Net asset value, end of period | 15.34 | 15.22 | 15.20 | 15.35 | 15.30 | 14.12 |
Total Return (%)c | 2.51d | 3.54 | 2.71 | 3.67 | 12.41 | 1.20 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to
average net assets | .93e | .93 | .93 | .92 | .93 | .93 |
Ratio of net expenses to
average net assets | .93e | .93 | .93 | .92 | .93 | .93 |
Ratio of interest and expense
related to floating rate note
issued to average net assets | .01e | .01 | .01 | — | — | — |
Ratio of net investment income
to average net assets | 3.36e | 3.38 | 3.68 | 3.28 | 3.70 | 4.00 |
Portfolio Turnover Rate | 4.32d | 9.33 | 13.90 | 9.57 | 20.88 | 14.78 |
Net Assets, end of period ($ x 1,000) | 92,338 | 90,386 | 89,525 | 115,773 | 116,939 | 105,584 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized
e Annualized.
See notes to financial statements.
22
| | | | | | | | |
Six Months Ended | |
November 30, 2015 | Year Ended May 31, |
Class C Shares | (Unaudited) | 2015 | 2014 | 2013 | 2012 | 2011 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 15.21 | 15.19 | 15.34 | 15.30 | 14.12 | 14.51 |
Investment Operations: | | | | | | |
Investment income—neta | .20 | .40 | .43 | .39 | .43 | .46 |
Net realized and unrealized
gain (loss) on investments | .13 | .02 | (.16) | .04 | 1.18 | (.39) |
Total from Investment Operations | .33 | .42 | .27 | .43 | 1.61 | .07 |
Distributions: | | | | | | |
Dividends from investment
income—net | (.20) | (.40) | (.42) | (.39) | (.43) | (.46) |
Dividends from net realized
gain on investments | — | — | — | (.00)b | — | — |
Total Distributions | (.20) | (.40) | (.42) | (.39) | (.45) | (.46) |
Net asset value, end of period | 15.34 | 15.21 | 15.19 | 15.34 | 15.30 | 14.12 |
Total Return (%)c | 2.18d | 2.76 | 1.92 | 2.81 | 11.58 | .48 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to
average net assets | 1.69e | 1.69 | 1.70 | 1.68 | 1.66 | 1.71 |
Ratio of net expenses to
average net assets | 1.69e | 1.69 | 1.70 | 1.68 | 1.66 | 1.71 |
Ratio of interest and expense
related to floating rate note
issued to average net assets | .01e | .01 | .01 | — | — | — |
Ratio of net investment income
to average net assets | 2.59e | 2.62 | 2.92 | 2.51 | 2.95 | 3.23 |
Portfolio Turnover Rate | 4.32d | 9.33 | 13.90 | 9.57 | 20.88 | 14.78 |
Net Assets, end of period ($ x 1,000) | 11,257 | 9,427 | 9,251 | 12,351 | 11,742 | 9,485 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized
e Annualized.
See notes to financial statements.
23
FINANCIAL HIGHLIGHTS (continued)
| | | | | | | | |
Six Months Ended | |
November 30, 2015 | Year Ended May 31, |
Class I Shares | (Unaudited) | 2015 | 2014 | 2013 | 2012 | 2011 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 15.21 | 15.19 | 15.34 | 15.29 | 14.12 | 14.51 |
Investment Operations: | | | | | | |
Investment income—neta | .27 | .55 | .57 | .54 | .58 | .61 |
Net realized and unrealized
gain (loss) on investments | .13 | .02 | (.15) | .06 | 1.17 | (.40) |
Total from Investment Operations | .40 | .57 | .42 | .60 | 1.75 | .21 |
Distributions: | | | | | | |
Dividends from investment
income—net | (.28) | (.55) | (.57) | (.55) | (.58) | (.60) |
Dividends from net realized
gain on investments | — | — | — | (.00)b | — | — |
Total Distributions | (.28) | (.55) | (.57) | (.55) | (.58) | (.60) |
Net asset value, end of period | 15.33 | 15.21 | 15.19 | 15.34 | 15.29 | 14.12 |
Total Return (%) | 2.64c | 3.79 | 2.96 | 3.93 | 12.60 | 1.54 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to
average net assets | .69d | .68 | .68 | .66 | .68 | .66 |
Ratio of net expenses to
average net assets | .69d | .68 | .68 | .66 | .68 | .66 |
Ratio of interest and expense
related to floating rate note
issued to average net assets | .01d | .01 | .01 | — | — | — |
Ratio of net investment income
to average net assets | 3.60d | 3.63 | 3.93 | 3.52 | 3.92 | 4.29 |
Portfolio Turnover Rate | 4.32c | 9.33 | 13.90 | 9.57 | 20.88 | 14.78 |
Net Assets, end of period ($ x 1,000) | 26,578 | 20,289 | 19,350 | 43,363 | 30,742 | 24,039 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Not annualized.
d Annualized.
See notes to financial statements.
24
| | | | | | | | | |
Six Months Ended | | | |
November 30, 2015 | | Year Ended May 31, |
Class Y Shares | (Unaudited) | | 2015 | 2014a |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | | | 15.21 | | 15.19 | 14.72 |
Investment Operations: | | | | | | |
Investment income—netb | | | .28 | | .60 | .53 |
Net realized and unrealized
gain (loss) on investments | | | .12 | | (.03) | .46 |
Total from Investment Operations | | | .40 | | .57 | .99 |
Distributions: | | | | | | |
Dividends from investment
income—net | | | (.28) | | (.55) | (.52) |
Net asset value, end of period | | | 15.33 | | 15.21 | 15.19 |
Total Return (%) | | | 2.65c | | 3.79 | 6.95c |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to
average net assets | | | .66d | | .67 | .63d |
Ratio of net expenses to
average net assets | | | .66d | | .67 | .63d |
Ratio of interest and expense
related to floating rate note
issued to average net assets | | | .01d | | .01 | .01d |
Ratio of net investment income
to average net assets | | | 3.64d | | 3.63 | 3.97d |
Portfolio Turnover Rate | | | 4.32c | | 9.33 | 13.90 |
Net Assets, end of period ($ x 1,000) | | | 4,140 | | 3,841 | 1 |
a From July 1, 2013 (commencement of initial offering) to May 31, 2014.
b Based on average shares outstanding.
c Not annualized.
d Annualized.
See notes to financial statements.
25
FINANCIAL HIGHLIGHTS (continued)
| | | | | | | | |
Six Months Ended | |
November 30, 2015 | Year Ended May 31, |
Class Z Shares | (Unaudited) | 2015 | 2014 | 2013 | 2012 | 2011 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 15.22 | 15.20 | 15.35 | 15.30 | 14.12 | 14.52 |
Investment Operations: | | | | | | |
Investment income—neta | .27 | .55 | .57 | .54 | .58 | .60 |
Net realized and unrealized
gain (loss) on investments | .12 | .02 | (.16) | .05 | 1.17 | (.40) |
Total from Investment Operations | .39 | .57 | .41 | .59 | 1.75 | .20 |
Distributions: | | | | | | |
Dividends from investment
income—net | (.27) | (.55) | (.56) | (.54) | (.57) | (.60) |
Dividends from net realized
gain on investments | — | — | — | (.00)b | — | — |
Total Distributions | (.27) | (.55) | (.56) | (.54) | (.57) | (.60) |
Net asset value, end of period | 15.34 | 15.22 | 15.20 | 15.35 | 15.30 | 14.12 |
Total Return (%) | 2.62c | 3.76 | 2.92 | 3.89 | 12.63 | 1.43 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to
average net assets | .72d | .72 | .72 | .70 | .73 | .71 |
Ratio of net expenses to
average net assets | .72d | .72 | .72 | .70 | .73 | .71 |
Ratio of interest and expense
related to floating rate note
issued to average net assets | .01d | .01 | .01 | — | — | — |
Ratio of net investment income
to average net assets | 3.57d | 3.59 | 3.89 | 3.50 | 3.90 | 4.23 |
Portfolio Turnover Rate | 4.32c | 9.33 | 13.90 | 9.57 | 20.88 | 14.78 |
Net Assets, end of period ($ x 1,000) | 865,317 | 881,000 | 920,175 | 1,034,822 | 1,066,153 | 1,016,288 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Not annualized.
d Annualized.
See notes to financial statements
26
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus California AMT-Free Municipal Bond Fund (the “fund”) is the sole series of Dreyfus Premier California AMT-Free Municipal Bond Fund Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as a non-diversified open-end management investment company. The fund’s investment objective is to seek as high a level of current income exempt from federal and California state income taxes, as is consistent with the preservation of capital. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 600 million shares of $.001 par value Common Stock. The fund currently offers five classes of shares: Class A (100 million shares authorized), Class C (100 million shares authorized), Class I (100 million shares authorized), Class Y (100 million shares authorized) and Class Z (200 million shares authorized). Class A shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I and Class Y shares are sold at net asset value per share generally to institutional investors. Class Z shares are sold at net asset value per share generally to certain shareholders of the fund. Class Z shares generally are not available for new accounts. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued each business day by an independent pricing service (the “Service”) approved by the Company’s Board of Directors (the “Board”). 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
28
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 the following: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. All of the preceding securities are generally categorized within Level 2 of the fair value hierarchy.
The Service’s procedures are reviewed by Dreyfus under the general supervision of the Board.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of November 30, 2015 in valuing the fund’s investments:
| | | | | |
| | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total |
Assets ($) | | | | |
Investments in Securities: | | | | |
Municipal Bonds† | — | 983,348,544 | — | 983,348,544 |
Liabilities ($)
| | | | |
Floating Rate Notes†† | — | (9,750,000) | — | (9,750,000) |
† See Statement of Investments for additional detailed categorizations.
†† Certain of the fund’s liabilities are held at carrying amount, which approximates fair value for financial reporting purposes.
29
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
At November 30, 2015, there were no transfers between levels of the fair value hierarchy.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income, adjusted for accretion of discount and amortization of premium 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.
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 gains, 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 gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(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.
As of and during the period ended November 30, 2015, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended November 30, 2015, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended May 31, 2015 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010 (the “2010 Act”), the fund is permitted to carry forward capital losses
30
incurred in taxable years beginning after December 22, 2010 (“post-enactment losses”) for an unlimited period. Furthermore, post-enactment capital loss carryovers retain their character as either short-term or long-term capital losses rather than short-term as they were under previous statute. The 2010 Act requires post-enactment losses to be utilized before the utilization of losses incurred in taxable years prior to the effective date of the 2010 Act (“pre-enactment losses”). As a result of this ordering rule, pre-enactment losses may be more likely to expire unused.
The fund has an unused capital loss carryover of $24,578,608 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to May 31, 2015. If not applied, $158,542 of the carryover expires in fiscal year 2016 and $15,819,359 expires in fiscal year 2018. The fund has $2,885,969 of post-enactment short-term capital losses and $5,714,738 of post-enactment long-term capital losses which can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended May 31, 2015 was as follows: tax-exempt income $36,250,044 and ordinary income $100,472. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $480 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. Prior to October 7, 2015, the unsecured credit facility with Citibank, N.A. was $430 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended November 30, 2015, the fund did not borrow under the Facilities.
NOTE 3—Management Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement (the “Agreement”) with Dreyfus, the management fee is computed at the annual rate of .60% of the value of the fund’s average daily net assets and is payable monthly. The Agreement provides that if in any fiscal year the aggregate expenses allocable to Class Z shares (excluding taxes, brokerage commissions, interest expense, commitment fees on borrowings and extraordinary expenses) exceed 1½%
31
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
of the value of the average daily net assets of Class Z shares, the fund may deduct from the fees paid to Dreyfus, or Dreyfus will bear, such excess expense. During the period ended November 30, 2015, there was no reduction in expenses pursuant to the Agreement.
During the period ended November 30, 2015, the Distributor retained $1,746 from commissions earned on sales of the fund's Class A shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended November 30, 2015, Class C shares were charged $35,373 pursuant to the Distribution Plan.
(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% 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 (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended November 30, 2015, Class A and Class C shares were charged $113,695 and $11,791, respectively, pursuant to the Shareholder Services Plan.
Under the Shareholder Services Plan, Class Z shares reimburse the Distributor at an amount not to exceed an annual rate of .25% of the value of Class Z shares’ 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 Class Z shares and providing reports and other information, and services related to the maintenance of shareholder accounts. During the period ended November 30, 2015, Class Z shares were charged $186,226 pursuant to the Shareholder Services Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of
32
transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended November 30, 2015, the fund was charged $91,446 for transfer agency services and $4,658 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $219.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended November 30, 2015, the fund was charged $38,285 pursuant to the custody agreement.
The fund compensates The Bank of New York Mellon under a shareholder redemption draft processing agreement for providing certain services related to the fund’s check writing privilege. During the period ended November 30, 2015, the fund was charged $3,730 pursuant to the agreement, which is included in Shareholder servicing costs in the Statement of Operations.
During the period ended November 30, 2015, the fund was charged $5,249 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $489,302, Distribution Plan fees $6,544, Shareholder Services Plan fees $53,021, custodian fees $45,261, Chief Compliance Officer fees $1,765 and transfer agency fees $36,810.
(d) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended November 30, 2015, amounted to $42,511,635 and $70,280,738, respectively.
Inverse Floater Securities: The fund participates in secondary inverse floater structures in which fixed-rate, tax-exempt municipal bonds are transferred to a trust (the “Trust”). The Trust typically issues two variable rate securities that are collateralized by the cash flows of the fixed-rate, tax-exempt municipal bonds. One of these variable rate securities pays interest based on a short-term floating rate set by a remarketing agent at predetermined intervals (“Trust Certificates”). A residual interest tax-
33
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
exempt security is also created by the Trust, which is transferred to the fund, and is paid interest based on the remaining cash flows of the Trust, after payment of interest on the other securities and various expenses of the Trust. An inverse floater security may be collapsed without the consent of the fund due to certain termination events such as bankruptcy, default or other credit event.
The fund accounts for the transfer of bonds to the Trust as secured borrowings, with the securities transferred remaining in the fund’s investments, and the related floating rate certificate securities reflected as fund liabilities in the Statement of Assets and Liabilities.
The fund may invest in inverse floater securities on either a non-recourse or recourse basis. These securities are typically supported by a liquidity facility provided by a bank or other financial institution (the “Liquidity Provider”) that allows the holders of the Trust Certificates to tender their certificates in exchange for payment from the Liquidity Provider of par plus accrued interest on any business day prior to a termination event. When the fund invests in inverse floater securities on a non-recourse basis, the Liquidity Provider is required to make a payment under the liquidity facility due to a termination event to the holders of the Trust Certificates. When this occurs, the Liquidity Provider typically liquidates all or a portion of the municipal securities held in the Trust. A liquidation shortfall occurs if the Trust Certificates exceed the proceeds of the sale of the bonds in the Trust (“Liquidation Shortfall”). When a fund invests in inverse floater securities on a recourse basis, the fund typically enters into a reimbursement agreement with the Liquidity Provider where the fund is required to repay the Liquidity Provider the amount of any Liquidation Shortfall. As a result, a fund investing in a recourse inverse floater security bears the risk of loss with respect to any Liquidation Shortfall.
The average amount of borrowings outstanding under the inverse floater structure during the period ended November 30, 2015, was approximately $9,750,000, with a related weighted average annualized interest rate of .80%.
At November 30, 2015, accumulated net unrealized appreciation on investments was $98,603,180, consisting of $99,248,152 gross unrealized appreciation and $644,972 gross unrealized depreciation.
At November 30, 2015, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
34
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Directors held on November 2-3, 2015, the Board considered the renewal of the fund’s Management Agreement pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the “Agreement”). The Board members, a majority of whom are not “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from Dreyfus representatives. In considering the renewal of the Agreement, the Board considered all factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered Dreyfus’ extensive administrative, accounting and compliance infrastructures.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Lipper, Inc. (“Lipper”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended September 30, 2015, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of
35
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Lipper as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds. The Board discussed the results of the comparisons and noted that the fund’s total return performance was at or below the Performance Group and Performance Universe medians for all periods, except for the one-year period when it was above the Performance Group and Performance Universe medians. The Dreyfus representatives noted the fund performance proximity to the Performance Group and/or Performance Universe medians during certain periods when performance was below median. The Board also noted that the fund’s yield performance was below the Performance Group and Performance Universe medians for all ten one-year periods ended September 30th. The Dreyfus representatives also noted the fund yield proximity to the Performance Group and/or Performance Universe medians during certain periods, particularly in the last two years. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s Lipper category average.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board noted that the fund’s contractual management fee was above the Expense Group median and the fund’s actual management fee and total expenses were above the Expense Group and Expense Universe medians.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Lipper category as the fund and (2) paid to Dreyfus or the Dreyfus-affiliated primary employer of the fund's primary portfolio manager(s) for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness and reasonableness of the fund’s management fee.
36
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement bear a reasonable relationship to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Dreyfus representatives noted that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund's assets had been stable or decreasing, the possibility that Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to Dreyfus from acting as investment adviser and noted that there were no soft dollar arrangements in effect for trading the fund's investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
The Board concluded that the nature, extent and quality of the services provided by Dreyfus are adequate and appropriate.
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
· The Board was concerned about the fund's performance, but expressed confidence in the portfolio management team, noted the fund's improving performance and agreed to closely monitor performance.
· The Board concluded that the fee paid to Dreyfus was reasonable in light of the considerations described above.
· The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with Dreyfus and its affiliates, of the fund and the services provided to the fund by Dreyfus. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreement, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the same or similar arrangements in prior years. The Board determined to renew the Agreement.
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39
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Dreyfus California AMT-Free Municipal Bond Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York Mellon
225 Liberty Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
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Ticker Symbols: | Class A: DCAAX Class C: DCACX Class I: DCMIX
Class Y: DCAYX Class Z: DRCAX |
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. (phone 1-800-SEC-0330 for information).
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.dreyfus.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
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© 2016 MBSC Securities Corporation
6124SA1115 | 
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