We are pleased to present this semiannual report for Dreyfus California AMT-Free Municipal Bond Fund, covering the six-month period from June 1, 2017 through November 30, 2017. 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.
Equity markets generally rallied over the past six months as corporate earnings grew, global economic conditions improved, and tax reform legislation appeared to make progress. While the rally was relatively broad-based, growth companies produced substantially higher returns than value-oriented companies. International stocks also performed well amid more positive economic data from Europe, Japan, and the emerging markets. In the bond market, U.S. government securities and municipal bonds generally lost a degree of value as economic and inflation expectations increased, while corporate-backed securities fared better in anticipation of improved business conditions.
The strong performance of riskier assets has been supported by solid underlying fundamentals, including rising corporate profits, a robust labor market, and business-friendly government policies. While we currently expect these favorable conditions to persist, we remain watchful for economic and political risks that could derail the markets. As always, we encourage you to discuss the risks and opportunities of today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
DISCUSSION OF FUND PERFORMANCE
For the period from June 1, 2017 through November 30, 2017, as provided by Jeffrey Burger and Thomas Casey, Portfolio Managers
Market and Fund Performance Overview
For the six-month period ended November 30, 2017, Dreyfus California AMT-Free Municipal Bond Fund’s Class A shares produced a total return of 0.35%, Class C shares returned -0.10%, Class I shares returned 0.48%, Class Y shares returned 0.49%, and Class Z shares returned 0.46%.1 In comparison, the Bloomberg Barclays U.S. 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 0.40% for the same period.2
Municipal bonds produced generally flat returns over the reporting period due to uncertainty surrounding tax reform legislation during the fall. Despite the underperformance of California municipal bonds compared to the Index, the fund produced returns that were roughly in line with national market averages.
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 at least 80% of its net assets in municipal bonds that provide income exempt from federal and California state income taxes. The fund also seeks to provide income exempt from the federal alternative minimum tax. The fund invests 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 may invest without regard to maturity.
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.
Investors Responded Cautiously to Tax Reform Proposals
Municipal bonds fared relatively well early in the reporting period, when the market was supported by technical factors, including robust investor demand and a limited supply of newly issued securities. However, from September through the reporting period’s end, municipal bonds gave back most of their previous gains as investors looked forward to additional rate hikes from the Federal Reserve Board, and the U.S. Congress turned its attention to tax reform legislation that some investors worried might reduce the tax advantages of municipal bonds. Issuers responded to tax reform proposals with a temporary surge of new issuance in light of certain provisions that, if enacted, would limit their tax-exempt financing alternatives in 2018 and beyond.
3
DISCUSSION OF FUND PERFORMANCE (continued)
For the reporting period overall, long-term municipal bonds fared better than their shorter-term counterparts, and lower-rated securities generally outperformed bonds with higher credit ratings.
Although growth in tax revenues has slowed nationally and several states are facing pressure from underfunded pension systems, California’s fiscal condition has remained sound due to a diverse economic base, high wealth levels, and prudent budget management.
Favorable Security Selections Supported Fund Results
Although California municipal bonds generally lagged national market averages, the fund produced returns that were roughly in line with the Index for the reporting period. Relative performance was buoyed by overweighted exposure to higher-yielding revenue-backed bonds, particularly among bonds backed by revenues from education infrastructure, health care facilities, special taxes, and the state’s settlement of litigation with U.S. tobacco companies. Conversely, the fund benefited from relatively light exposure to lower-yielding general obligation bonds.
On a more negative note, the fund’s interest-rate strategies weighed to a degree on relative performance. Our duration management strategy proved mistimed, as a longer duration posture during market declines magnified weakness. More positive results from our yield curve strategy—most notably underweighted exposure to bonds with maturities in the 5- to 10-year range—were not enough to offset duration-related shortfalls. In addition, the fund’s holdings of bonds backed by public power utilities dampened relative results, as did weakness among insured securities from Puerto Rico.
A Constructive Investment Posture
We believe that market volatility surrounding tax reform legislation will ease in early 2018. Indeed, if the current proposal is enacted into law, we expect the supply of newly issued municipal bonds to decrease, while demand should remain robust from individuals in the higher tax brackets. These favorable supply-and-demand dynamics should support municipal bond prices. In addition, municipal bonds historically have been less sensitive than U.S. Treasury securities to rising interest rates. Therefore, we have maintained a constructive investment posture, including an emphasis on higher-yielding, longer-term revenue bonds.
December 15, 2017
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.
2 Source: Lipper Inc. — The Bloomberg Barclays U.S. Municipal Bond Index covers the USD-denominated long-term tax-exempt bond market. Investors cannot invest directly in any index.
Bonds 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.
4
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, 2017 to November 30, 2017. 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, 2017 | |
| | | Class A | Class C | Class I | Class Y | Class Z |
Expenses paid per $1,000† | | $4.72 | | $8.47 | | $3.42 | | $3.32 | | $3.62 |
Ending value (after expenses) | | $1,003.50 | | $999.00 | | $1,004.80 | | $1,004.90 | | $1,004.60 |
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, 2017 |
| | | | | | | | |
| | | Class A | Class C | Class I | Class Y | Class Z |
Expenses paid per $1,000† | | $4.76 | | $8.54 | | $3.45 | | $3.35 | | $3.65 |
Ending value (after expenses) | $ | $1,020.36 | | $1,016.60 | | $1,021.66 | | $1,021.76 | | $1,021.46 |
† Expenses are equal to the fund’s annualized expense ratio of .94% for Class A, 1.69% for Class C, .68% for Class I, .66% for Class Y and .72% for Class Z, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
November 30, 2017 (Unaudited)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 99.2% | | | | | |
California - 98.5% | | | | | |
ABAG Finance Authority for Nonprofit Corporations,
Revenue (Sharp HealthCare) | | 6.00 | | 8/1/30 | | 5,000,000 | | 5,768,950 | |
ABAG Finance Authority for Nonprofit Corporations,
Revenue (Sharp HealthCare) | | 5.00 | | 8/1/43 | | 3,000,000 | | 3,358,830 | |
Alameda Corridor Transportation Authority,
Second Subordinate Lien Revenue | | 5.00 | | 10/1/37 | | 1,650,000 | | 1,876,710 | |
Anaheim Community Facilities District Number 08-1,
Special Tax Revenue (Platinum Triangle) | | 4.00 | | 9/1/41 | | 5,250,000 | | 5,394,165 | |
Anaheim Community Facilities District Number 08-1,
Special Tax Revenue (Platinum Triangle) | | 4.00 | | 9/1/46 | | 2,000,000 | | 2,048,880 | |
California,
GO (Various Purpose) | | 5.00 | | 11/1/23 | | 5,000,000 | | 5,475,150 | |
California,
GO (Various Purpose) | | 5.25 | | 2/1/29 | | 13,835,000 | | 15,750,732 | |
California,
GO (Various Purpose) | | 5.00 | | 10/1/29 | | 2,750,000 | | 2,780,663 | |
California,
GO (Various Purpose) | | 5.25 | | 3/1/30 | | 15,000,000 | | 16,159,050 | |
California,
GO (Various Purpose) | | 5.25 | | 9/1/31 | | 25,000,000 | | 28,174,500 | |
California,
GO (Various Purpose) | | 5.25 | | 9/1/32 | | 19,500,000 | | 21,930,675 | |
California,
GO (Various Purpose) | | 5.25 | | 10/1/32 | | 9,170,000 | | 10,337,708 | |
California,
GO (Various Purpose) | | 6.00 | | 3/1/33 | | 3,000,000 | | 3,297,810 | |
California,
GO (Various Purpose) | | 6.50 | | 4/1/33 | | 30,000,000 | | 32,021,400 | |
California,
GO (Various Purpose) | | 5.50 | | 11/1/35 | | 10,000,000 | | 11,094,700 | |
California,
GO (Various Purpose) | | 5.00 | | 8/1/36 | | 7,000,000 | | 8,253,140 | |
California,
GO (Various Purpose) | | 5.00 | | 9/1/36 | | 10,000,000 | | 11,805,500 | |
California,
GO (Various Purpose) | | 5.00 | | 2/1/38 | | 5,000,000 | | 5,593,400 | |
California,
GO (Various Purpose) | | 5.50 | | 3/1/40 | | 17,500,000 | | 18,947,950 | |
6
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 99.2% (continued) | | | | | |
California - 98.5% (continued) | | | | | |
California Communities Development Authority,
Revenue, Refunding (Front Porch Communities & Services) | | 5.00 | | 4/1/47 | | 1,250,000 | | 1,415,025 | |
California County Tobacco Securitization Agency,
Tobacco Settlement Asset-Backed Refunding Bonds (Kern County Tobacco Funding Corporation) | | 5.00 | | 6/1/34 | | 5,000,000 | | 5,486,900 | |
California Department of Water Resources,
Water System Revenue (Central Valley Project) | | 5.00 | | 12/1/26 | | 230,000 | | 234,363 | |
California Education Facilities Authority,
Revenue (Loma Linda University) | | 5.00 | | 4/1/36 | | 3,845,000 | | 4,419,097 | |
California Education Facilities Authority,
Revenue (Loma Linda University) | | 5.00 | | 4/1/37 | | 1,500,000 | | 1,720,050 | |
California Educational Facilities Authority,
Revenue (Chapman University) | | 5.00 | | 4/1/40 | | 5,000,000 | | 5,562,600 | |
California Educational Facilities Authority,
Revenue (Chapman University) | | 5.00 | | 4/1/45 | | 2,305,000 | | 2,553,272 | |
California Educational Facilities Authority,
Revenue (Occidental College) | | 5.00 | | 10/1/45 | | 500,000 | | 564,425 | |
California Educational Facilities Authority,
Revenue (Pepperdine University) | | 5.00 | | 9/1/45 | | 5,000,000 | | 5,708,300 | |
California Educational Facilities Authority,
Revenue (Pooled College and University Projects) (Escrowed to Maturity) | | 5.63 | | 7/1/23 | | 105,000 | | 116,154 | |
California Health Facilities Financing Authority,
Revenue (Adventist Health System/West) | | 4.00 | | 3/1/39 | | 7,925,000 | | 8,310,472 | |
California Health Facilities Financing Authority,
Revenue (Children's Hospital) | | 5.00 | | 8/15/47 | | 2,000,000 | | 2,280,100 | |
California Health Facilities Financing Authority,
Revenue (City of Hope) | | 5.00 | | 11/15/23 | | 1,650,000 | | 1,893,771 | |
California Health Facilities Financing Authority,
Revenue (City of Hope) | | 5.00 | | 11/15/24 | | 1,600,000 | | 1,835,568 | |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 99.2% (continued) | | | | | |
California - 98.5% (continued) | | | | | |
California Health Facilities Financing Authority,
Revenue (Lucie Salter Packard Children's Hospital at Sanford) | | 5.00 | | 7/1/37 | | 590,000 | a | 674,358 | |
California Health Facilities Financing Authority,
Revenue (Lucie Salter Packard Children's Hospital at Sanford) | | 5.00 | | 7/1/47 | | 875,000 | a | 981,733 | |
California Health Facilities Financing Authority,
Revenue (Providence Health and Services) | | 5.00 | | 10/1/30 | | 3,500,000 | | 4,080,930 | |
California Health Facilities Financing Authority,
Revenue (Providence Health and Services) | | 5.00 | | 10/1/31 | | 4,430,000 | | 5,164,494 | |
California Health Facilities Financing Authority,
Revenue (Rady Children's Hospital - San Diego) | | 5.25 | | 8/15/41 | | 8,500,000 | | 9,250,720 | |
California Health Facilities Financing Authority,
Revenue (Saint Joseph Health System) | | 5.00 | | 7/1/37 | | 7,500,000 | | 8,486,625 | |
California Health Facilities Financing Authority,
Revenue (Scripps Health) | | 5.00 | | 11/15/36 | | 7,525,000 | | 8,085,010 | |
California Health Facilities Financing Authority,
Revenue (Stanford Hospital and Clinics) | | 5.00 | | 8/15/42 | | 1,000,000 | | 1,141,450 | |
California Health Facilities Financing Authority,
Revenue (Sutter Health) | | 5.00 | | 11/15/30 | | 750,000 | | 890,910 | |
California Health Facilities Financing Authority,
Revenue (Sutter Health) | | 5.25 | | 8/15/31 | | 3,500,000 | | 3,936,625 | |
California Health Facilities Financing Authority,
Revenue (Sutter Health) | | 5.00 | | 11/15/31 | | 1,150,000 | | 1,361,497 | |
California Health Facilities Financing Authority,
Revenue (Sutter Health) | | 5.00 | | 8/15/43 | | 2,000,000 | | 2,299,700 | |
California Health Facilities Financing Authority,
Revenue (Sutter Health) | | 5.00 | | 11/15/46 | | 12,275,000 | | 14,147,183 | |
California Infrastructure and Economic Development Bank,
Revenue (Academy of Motion Pictures Arts and Sciences Obligated Group) | | 5.00 | | 11/1/41 | | 2,250,000 | | 2,546,573 | |
8
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 99.2% (continued) | | | | | |
California - 98.5% (continued) | | | | | |
California Municipal Finance Authority,
Charter School Revenue (The Palmdale Aerospace Academy Project) | | 5.00 | | 7/1/41 | | 1,750,000 | a | 1,811,618 | |
California Municipal Finance Authority,
Charter School Revenue (The Palmdale Aerospace Academy Project) | | 5.00 | | 7/1/46 | | 1,670,000 | a | 1,721,603 | |
California Municipal Finance Authority,
Revenue (Biola University) | | 5.00 | | 10/1/39 | | 1,000,000 | | 1,165,350 | |
California Municipal Finance Authority,
Revenue (California Baptist University) | | 5.00 | | 11/1/46 | | 2,500,000 | a | 2,707,150 | |
California Municipal Finance Authority,
Revenue (Channing House Project) | | 5.00 | | 5/15/47 | | 2,500,000 | | 2,889,675 | |
California Municipal Finance Authority,
Revenue (Community Medical Centers) | | 5.00 | | 2/1/36 | | 1,000,000 | | 1,133,380 | |
California Municipal Finance Authority,
Revenue (Community Medical Centers) | | 5.00 | | 2/1/37 | | 1,000,000 | | 1,130,850 | |
California Municipal Finance Authority,
Revenue (Eisenhower Medical Center) | | 5.00 | | 7/1/36 | | 1,100,000 | | 1,252,427 | |
California Municipal Finance Authority,
Revenue (Eisenhower Medical Center) | | 5.00 | | 7/1/37 | | 1,000,000 | | 1,135,090 | |
California Municipal Finance Authority,
Revenue (Eisenhower Medical Center) | | 5.00 | | 7/1/42 | | 3,500,000 | | 3,948,210 | |
California Municipal Finance Authority,
Revenue (Eisenhower Medical Center) | | 5.00 | | 7/1/42 | | 2,500,000 | | 2,820,150 | |
California Municipal Finance Authority,
Student Housing Revenue (Bowles Hall Foundation) | | 5.00 | | 6/1/50 | | 1,500,000 | | 1,633,740 | |
California Pollution Control Financing Authority,
Revenue (San Jose Water Company Project) | | 5.10 | | 6/1/40 | | 5,500,000 | | 5,883,295 | |
California Pollution Control Financing Authority,
Water Facilities Revenue (American Water Capital Corporation Project) | | 5.25 | | 8/1/40 | | 7,500,000 | a | 8,111,550 | |
California Public Finance Authority,
Revenue (Henry Mayo Newhall Hospital) | | 5.00 | | 10/15/47 | | 3,000,000 | | 3,309,000 | |
California Public Finance Authority,
University Housing Revenue (NCCD-Claremont Properties LLC-Claremont Colleges Project) | | 5.00 | | 7/1/47 | | 1,000,000 | a | 1,091,340 | |
California School Finance Authority,
Charter School Revenue (Aspire Public Schools - Obligated Group) | | 5.00 | | 8/1/41 | | 1,750,000 | a | 1,922,463 | |
California School Finance Authority,
School Facility Revenue (Alliance for College-Ready Public Schools Projects) | | 5.00 | | 7/1/45 | | 3,500,000 | a | 3,831,975 | |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 99.2% (continued) | | | | | |
California - 98.5% (continued) | | | | | |
California State Public Works Board,
LR (Department of Corrections and Rehabilitation) (Various Correctional Facilities) | | 5.00 | | 9/1/26 | | 5,000,000 | | 5,872,550 | |
California State Public Works Board,
LR (Judicial Council of California) (Various Judicial Council Projects) | | 5.00 | | 12/1/31 | | 10,000,000 | | 11,092,700 | |
California State University Trustees,
Systemwide Revenue | | 5.00 | | 11/1/27 | | 85,000 | | 86,296 | |
California State University Trustees,
Systemwide Revenue | | 5.00 | | 11/1/28 | | 165,000 | | 167,510 | |
California Statewide Communities Development Authority,
Revenue (American Baptist Homes of the West) | | 5.00 | | 10/1/45 | | 3,550,000 | | 3,896,302 | |
California Statewide Communities Development Authority,
Revenue (Baptist University) | | 5.00 | | 11/1/32 | | 1,855,000 | a | 2,069,772 | |
California Statewide Communities Development Authority,
Revenue (Baptist University) | | 5.00 | | 11/1/41 | | 700,000 | a | 766,374 | |
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 | | 2,737,673 | |
California Statewide Communities Development Authority,
Revenue (Cottage Health System Obligated Group) | | 5.25 | | 11/1/30 | | 3,750,000 | | 4,076,137 | |
California Statewide Communities Development Authority,
Revenue (Cottage Health System Obligated Group) | | 5.00 | | 11/1/40 | | 11,940,000 | | 12,723,622 | |
California Statewide Communities Development Authority,
Revenue (Cottage Health System Obligated Group) | | 5.00 | | 11/1/43 | | 4,000,000 | | 4,456,840 | |
California Statewide Communities Development Authority,
Revenue (Henry Mayo Newhall Memorial Hospital) (Insured; Assured Guaranty Municipal Corp.) | | 5.25 | | 10/1/43 | | 2,100,000 | | 2,373,105 | |
California Statewide Communities Development Authority,
Revenue (John Muir Health) | | 5.00 | | 8/15/41 | | 1,200,000 | | 1,359,132 | |
California Statewide Communities Development Authority,
Revenue (Kaiser Permanente) | | 5.00 | | 4/1/42 | | 3,000,000 | | 3,376,170 | |
10
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 99.2% (continued) | | | | | |
California - 98.5% (continued) | | | | | |
California Statewide Communities Development Authority,
Revenue (Loma Linda University Medical Center) | | 5.00 | | 12/1/36 | | 5,250,000 | a | 5,751,322 | |
California Statewide Communities Development Authority,
Revenue (University of California, Irvine East Campus Apartments) | | 5.00 | | 5/15/40 | | 3,000,000 | | 3,427,890 | |
California Statewide Communities Development Authority,
Student Housing Revenue (University of California Irvine Campus Apartments Phase IV) | | 5.00 | | 5/15/42 | | 4,000,000 | | 4,621,760 | |
Carlsbad Unified School District,
GO | | 0/6.00 | | 5/1/34 | | 5,000,000 | b,c | 5,692,950 | |
Escondido Union High School District,
GO | | 0.00 | | 8/1/41 | | 2,525,000 | d | 994,774 | |
Escondido Union High School District,
GO | | 0.00 | | 8/1/46 | | 3,000,000 | d | 979,260 | |
Foothill/Eastern Transportation Corridor Agency,
Senior Lien Toll Road Revenue (Insured; Assured Guaranty Municipal Corp.) | | 0.00 | | 1/15/35 | | 10,000,000 | d | 5,146,000 | |
Fresno Joint Powers Financing Authority,
Lease Revenue (Master Lease Project) (Insured; Assured Guaranty Municipal Corporation) | | 5.00 | | 4/1/35 | | 1,000,000 | | 1,166,020 | |
Fresno Joint Powers Financing Authority,
Lease Revenue (Master Lease Project) (Insured; Assured Guaranty Municipal Corporation) | | 5.00 | | 4/1/37 | | 850,000 | | 988,856 | |
Golden State Tobacco Securitization Corporation,
Enhanced Tobacco Settlement Asset-Backed Bonds (Insured; Assured Guaranty Municipal Corp.) | | 4.55 | | 6/1/22 | | 1,725,000 | | 1,751,272 | |
Golden State Tobacco Securitization Corporation,
Tobacco Settlement Asset-Backed Bonds | | 5.00 | | 6/1/29 | | 6,000,000 | | 7,011,780 | |
Golden State Tobacco Securitization Corporation,
Tobacco Settlement Asset-Backed Bonds | | 5.00 | | 6/1/33 | | 19,575,000 | | 19,574,608 | |
Grossmont Union High School District,
GO (Insured; Assured Guaranty Municipal Corp.) | | 0.00 | | 8/1/21 | | 4,375,000 | d | 4,075,181 | |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 99.2% (continued) | | | | | |
California - 98.5% (continued) | | | | | |
Grossmont Union High School District,
GO (Insured; Assured Guaranty Municipal Corp.) | | 0.00 | | 8/1/22 | | 4,605,000 | d | 4,176,044 | |
Grossmont Union High School District,
GO (Insured; Assured Guaranty Municipal Corp.) | | 0.00 | | 8/1/23 | | 4,850,000 | d | 4,280,416 | |
Grossmont Union High School District,
GO (Insured; Assured Guaranty Municipal Corp.) | | 0.00 | | 8/1/26 | | 3,265,000 | d | 2,621,828 | |
Imperial Irrigation District,
Electric System Revenue | | 5.00 | | 11/1/37 | | 2,500,000 | | 2,921,700 | |
Imperial Irrigation District,
Electric System Revenue | | 5.00 | | 11/1/38 | | 1,800,000 | | 2,099,196 | |
Irvine Community Facilities District Number 2013-3 Improvement Area Number 1,
Special Tax Revenue (Great Park) | | 5.00 | | 9/1/44 | | 2,500,000 | | 2,720,200 | |
Irvine Unified School District,
Special Tax | | 5.00 | | 9/1/42 | | 1,000,000 | | 1,121,990 | |
Irvine Unified School District,
Special Tax | | 5.00 | | 9/1/42 | | 400,000 | | 448,796 | |
Irvine Unified School District,
Special Tax | | 5.00 | | 9/1/42 | | 1,000,000 | | 1,121,990 | |
Jurupa Public Financing Authority,
Special Tax Revenue | | 5.00 | | 9/1/42 | | 3,420,000 | | 3,863,471 | |
Kaweah Delta Health Care District,
Revenue | | 5.00 | | 6/1/40 | | 2,500,000 | | 2,756,025 | |
Lancaster Redevelopment Agency,
Successor Agency Tax Allocation (Comb Redevelopment Project Areas) (Insured; Assured Guaranty Municipal Corporation) | | 5.00 | | 8/1/33 | | 1,200,000 | | 1,400,688 | |
Long Beach,
Harbor Revenue | | 5.00 | | 5/15/42 | | 3,500,000 | | 4,016,845 | |
Los Angeles Community Facilities District Number 4,
Special Tax Revenue (Playa Vista-Phase 1) | | 5.00 | | 9/1/29 | | 1,190,000 | | 1,359,980 | |
Los Angeles Community Facilities District Number 4,
Special Tax Revenue (Playa Vista-Phase 1) | | 5.00 | | 9/1/30 | | 1,110,000 | | 1,261,226 | |
Los Angeles County Public Works Financing Authority,
LR | | 5.00 | | 12/1/45 | | 4,000,000 | | 4,564,720 | |
Los Angeles County Regional Financing Authority,
Revenue (MonteCedro Inc. Project) | | 5.00 | | 11/15/44 | | 2,000,000 | | 2,246,140 | |
12
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 99.2% (continued) | | | | | |
California - 98.5% (continued) | | | | | |
Los Angeles Department of Airports,
Senior Revenue (Los Angeles International Airport) | | 5.25 | | 5/15/26 | | 5,000,000 | | 5,437,500 | |
Los Angeles Department of Airports,
Senior Revenue (Los Angeles International Airport) | | 5.00 | | 5/15/29 | | 3,915,000 | | 4,231,215 | |
Los Angeles Department of Airports,
Senior Revenue (Los Angeles International Airport) | | 5.25 | | 5/15/29 | | 16,090,000 | | 16,941,000 | |
Los Angeles Department of Airports,
Senior Revenue (Los Angeles International Airport) | | 5.00 | | 5/15/35 | | 25,000,000 | | 26,906,750 | |
Los Angeles Department of Airports,
Senior Revenue (Los Angeles International Airport) | | 5.00 | | 5/15/38 | | 3,500,000 | | 3,931,585 | |
Los Angeles Department of Airports,
Subordinate Revenue (Los Angeles International Airport) | | 5.00 | | 5/15/38 | | 4,500,000 | | 5,193,945 | |
Los Angeles Harbor Department,
Revenue | | 5.25 | | 8/1/25 | | 26,055,000 | | 27,604,751 | |
Los Angeles Harbor Department,
Revenue | | 4.00 | | 8/1/39 | | 10,000,000 | | 10,631,600 | |
Los Angeles Harbor Department,
Revenue | | 5.00 | | 8/1/39 | | 2,050,000 | | 2,336,857 | |
Los Angeles Unified School District,
GO | | 5.00 | | 7/1/28 | | 3,000,000 | | 3,671,490 | |
Metropolitan Water District of Southern California,
Water Revenue | | 5.00 | | 10/1/34 | | 5,000,000 | | 5,618,400 | |
Metropolitan Water District of Southern California,
Water Revenue | | 5.00 | | 1/1/39 | | 5,000,000 | | 5,183,700 | |
Metropolitan Water District of Southern California,
Water Revenue | | 5.00 | | 7/1/40 | | 2,000,000 | | 2,310,220 | |
Murrieta Valley Unified School District,
GO (Insured; National Public Finance Guarantee Corp.) | | 0.00 | | 9/1/21 | | 4,950,000 | d | 4,598,203 | |
North Natomas Community Facilities District Number 4,
Special Tax Bonds | | 5.25 | | 9/1/26 | | 2,760,000 | | 3,193,872 | |
Northern California Power Agency,
Revenue (Hydroelectric Project Number 1) (Insured; AMBAC) (Prerefunded) | | 7.50 | | 7/1/21 | | 340,000 | b | 386,549 | |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 99.2% (continued) | | | | | |
California - 98.5% (continued) | | | | | |
Northern California Transmission Agency,
Revenue (California-Oregon Transmission Project) | | 5.00 | | 5/1/38 | | 1,565,000 | | 1,814,962 | |
Northern California Transmission Agency,
Revenue (California-Oregon Transmission Project) | | 5.00 | | 5/1/39 | | 1,500,000 | | 1,737,150 | |
Norwalk-La Mirada Unified School District,
GO (Insured; Assured Guaranty Corp.) | | 0.00 | | 8/1/38 | | 5,645,000 | d | 2,494,356 | |
Oakland Redevelopment Successor Agency,
Subordinated Tax Allocation Revenue (Insured; Assured Guaranty Municipal Corp.) | | 5.00 | | 9/1/36 | | 3,000,000 | | 3,385,110 | |
Oakland Unified School District,
GO | | 5.00 | | 8/1/40 | | 3,500,000 | | 4,006,555 | |
Orange County Community Facilities District Number 2016-1,
Special Tax Revenue (Village of Esencia) | | 5.00 | | 8/15/41 | | 6,000,000 | | 6,712,500 | |
Palomar Community College District,
GO | | 0/6.38 | | 8/1/30 | | 16,615,000 | c | 12,918,993 | |
Palomar Health,
Revenue | | 5.00 | | 11/1/26 | | 1,845,000 | | 2,137,783 | |
Peralta Community College District,
GO (Dedicated Unlimited Ad Valorem Property Tax Bonds) | | 4.00 | | 8/1/39 | | 5,000,000 | | 5,273,100 | |
Placentia-Yorba Linda Unified School District,
GO | | 0.00 | | 8/1/46 | | 7,000,000 | d | 2,264,010 | |
Pomona Redevelopment Agency,
Tax Allocation Revenue (West Holt Avenue Redevelopment Project) | | 5.50 | | 5/1/32 | | 3,000,000 | | 3,762,870 | |
Pomona Unified School District,
GO (Insured; Build America Mutual Assurance Company) | | 5.00 | | 8/1/39 | | 2,000,000 | | 2,242,280 | |
Sacramento County,
Airport System Senior Revenue | | 5.13 | | 7/1/25 | | 5,890,000 | | 6,022,702 | |
Sacramento County,
Airport System Senior Revenue | | 5.00 | | 7/1/41 | | 3,250,000 | | 3,759,470 | |
Sacramento County Sanitation Districts Financing Authority,
Revenue (Sacramento Regional County Sanitation District) | | 5.00 | | 12/1/26 | | 7,000,000 | | 7,882,070 | |
14
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 99.2% (continued) | | | | | |
California - 98.5% (continued) | | | | | |
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 | | 5,013,800 | |
Sacramento Municipal Utility District,
Electric Revenue | | 5.00 | | 8/15/28 | | 1,845,000 | | 2,062,230 | |
San Diego Association of Governments,
South Bay Expressway Toll Revenue, Refunding | | 5.00 | | 7/1/38 | | 2,000,000 | | 2,359,900 | |
San Diego Association of Governments,
South Bay Expressway Toll Revenue, Refunding | | 5.00 | | 7/1/42 | | 4,000,000 | | 4,712,480 | |
San Diego County Regional Airport Authority,
Revenue, Refunding | | 5.00 | | 7/1/42 | | 3,000,000 | | 3,542,610 | |
San Diego County Regional Airport Authority,
Subordinate Airport Revenue | | 5.00 | | 7/1/34 | | 3,000,000 | | 3,261,840 | |
San Diego County Regional Transportation Commission,
Sales Tax Revenue | | 5.00 | | 4/1/44 | | 10,000,000 | | 11,378,600 | |
San Francisco City & County Commission International Airport,
Revenue, Refunding | | 5.00 | | 5/1/47 | | 10,000,000 | | 11,727,100 | |
San Francisco City and County Airport Commission,
Second Series Revenue (San Francisco International Airport) | | 5.00 | | 5/1/28 | | 2,000,000 | | 2,282,800 | |
San Francisco City and County Airport Commission,
Second Series Revenue (San Francisco International Airport) | | 5.00 | | 5/1/29 | | 1,000,000 | | 1,210,440 | |
San Francisco City and County Airport Commission,
Second Series Revenue (San Francisco International Airport) | | 5.00 | | 5/1/29 | | 2,000,000 | | 2,280,060 | |
San Francisco City and County Airport Commission,
Second Series Revenue (San Francisco International Airport) | | 5.00 | | 5/1/32 | | 1,000,000 | | 1,194,360 | |
San Francisco City and County Public Utilities Commission,
San Francisco Water Revenue | | 5.00 | | 11/1/37 | | 10,000,000 | | 11,147,800 | |
15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 99.2% (continued) | | | | | |
California - 98.5% (continued) | | | | | |
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 | d | 430,133 | |
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 | | 1,620,853 | |
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 | d | 407,725 | |
San Joaquin Hills Transportation Corridor Agency,
Senior Lien Toll Road Revenue | | 5.00 | | 1/15/50 | | 5,000,000 | | 5,578,500 | |
San Jose Airport,
Revenue | | 5.00 | | 3/1/42 | | 2,550,000 | | 2,985,795 | |
Santa Margarita Water District Community Facilities District Number 2013-1,
Special Tax Revenue (Village of Sendero) | | 5.63 | | 9/1/43 | | 7,000,000 | | 7,702,240 | |
Santa Margarita Water District Community Facilities District Number 99-1,
Special Tax Revenue (Talega) | | 5.00 | | 9/1/27 | | 1,945,000 | | 2,211,271 | |
South Orange County Public Financing Authority,
Special Tax Senior Lien Revenue (Ladera Ranch) | | 5.00 | | 8/15/29 | | 1,500,000 | | 1,655,580 | |
South Orange County Public Financing Authority,
Special Tax Senior Lien Revenue (Ladera Ranch) | | 5.00 | | 8/15/30 | | 1,000,000 | | 1,101,470 | |
Southern California Public Power Authority,
Revenue (Linden Wind Energy Project) | | 5.00 | | 7/1/28 | | 3,145,000 | | 3,407,859 | |
Southern California Public Power Authority,
Revenue (Linden Wind Energy Project) | | 5.00 | | 7/1/29 | | 2,230,000 | | 2,415,202 | |
Southern California Public Power Authority,
Revenue (Milford Wind Corridor Phase I Project) | | 5.00 | | 7/1/29 | | 11,865,000 | | 12,664,820 | |
16
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 99.2% (continued) | | | | | |
California - 98.5% (continued) | | | | | |
Southern California Public Power Authority,
Revenue (Windy Point/Windy Flats Project) | | 5.00 | | 7/1/27 | | 13,765,000 | | 14,922,636 | |
Stockton Unified School District,
GO (Insured; Assured Guaranty Municipal Corp.) | | 5.00 | | 7/1/25 | | 1,620,000 | | 1,842,086 | |
Stockton Unified School District,
GO (Insured; Assured Guaranty Municipal Corp.) | | 5.00 | | 7/1/26 | | 1,115,000 | | 1,266,283 | |
Stockton Unified School District,
GO (Insured; Assured Guaranty Municipal Corp.) | | 5.00 | | 8/1/38 | | 2,500,000 | | 2,820,550 | |
Successor Agency to the Redevelopment Agency of the City and County of San Francisco,
Tax Allocation Revenue (Mission Bay North Redevelopment Project) | | 5.00 | | 8/1/36 | | 1,555,000 | | 1,798,233 | |
Successor Agency to the Redevelopment Agency of the City and County of San Francisco,
Tax Allocation Revenue (Mission Bay South Redevelopment Project) (Insured; National Public Finance Guarantee Corp.) | | 5.00 | | 8/1/41 | | 1,750,000 | | 1,997,870 | |
Successor Agency to the Redevelopment Agency of the City and County of San Francisco,
Tax Allocation Revenue (Mission Bay South Redevelopment Project) (Insured; National Public Finance Guarantee Corp.) | | 5.00 | | 8/1/43 | | 1,100,000 | | 1,256,706 | |
Successor Agency to the Redevelopment Agency of the City of Pittsburg,
Subordinate Tax Allocation Revenue (Los Medanos Community Development Project) (Insured; Assured Guaranty Municipal Corp.) | | 5.00 | | 9/1/28 | | 3,000,000 | | 3,544,200 | |
Tender Option Bond Trust Receipts (Series 2016-XM0375), 06/01/39,
(Riverside County Transportation Commission, Sales Tax Revenue) Non-recourse | | 5.25 | | 6/1/21 | | 7,500,000 | a,e | 8,652,675 | |
Tender Option Bond Trust Receipts (Series 2016-XM0379), 07/01/43,
(Los Angeles Department of Water and Power, Water System Revenue) Non-recourse | | 5.00 | | 7/1/20 | | 12,000,000 | a,e | 13,467,480 | |
17
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 99.2% (continued) | | | | | |
California - 98.5% (continued) | | | | | |
Tobacco Securitization Authority,
North Tobacco Settlement Revenue (Capital Appreciation-2nd Sub-Asset Backed C) | | 0.00 | | 6/1/45 | | 66,760,000 | d | 6,272,770 | |
Tobacco Securitization Authority of Southern California,
Tobacco Settlement Asset-Backed Bonds (San Diego County Tobacco Asset Securitization Corporation) | | 4.75 | | 6/1/25 | | 840,000 | | 840,445 | |
Tobacco Securitization Authority of Southern California,
Tobacco Settlement Asset-Backed Bonds (San Diego County Tobacco Asset Securitization Corporation) | | 5.13 | | 6/1/46 | | 8,850,000 | | 8,862,921 | |
Torrance,
Revenue (Torrance Memorial Medical Center) | | 5.00 | | 9/1/40 | | 3,000,000 | | 3,177,810 | |
Turlock Irrigation District,
First Priority Subordinated Revenue | | 5.00 | | 1/1/36 | | 4,415,000 | | 5,165,373 | |
Turlock Irrigation District,
Revenue | | 5.00 | | 1/1/25 | | 1,255,000 | | 1,338,809 | |
Turlock Irrigation District,
Revenue | | 5.00 | | 1/1/26 | | 25,000 | | 26,696 | |
University of California,
Systemwide Revenue | | 5.00 | | 11/1/38 | | 5,000,000 | | 5,922,350 | |
University of California Regents,
General Revenue | | 5.25 | | 5/15/30 | | 3,000,000 | | 3,572,970 | |
University of California Regents,
Limited Project Revenue | | 5.00 | | 5/15/42 | | 10,000,000 | | 11,099,300 | |
University of California Regents,
Medical Center Pooled Revenue | | 5.00 | | 5/15/43 | | 10,000,000 | | 11,394,500 | |
University of California Regents,
Medical Center Pooled Revenue | | 4.00 | | 5/15/44 | | 3,000,000 | | 3,131,310 | |
Walnut Energy Center Authority,
Revenue | | 5.00 | | 1/1/27 | | 3,150,000 | | 3,738,010 | |
Wiseburn School District,
GO | | 0.00 | | 8/1/37 | | 6,400,000 | d | 3,149,248 | |
| | 940,142,042 | |
18
| | | | | | | | | | |
| |
Description | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Long-Term Municipal Investments - 99.2% (continued) | | | | | |
U.S. Related - .7% | | | | | |
Puerto Rico Highway and Transportation Authority,
Highway Revenue (Insured; Assured Guaranty Municipal Corporation) | | 5.25 | | 7/1/34 | | 5,905,000 | | 6,476,486 | |
Total Investments (cost $896,603,541) | | 99.2% | 946,618,528 | |
Cash and Receivables (Net) | | 0.8% | 7,246,070 | |
Net Assets | | 100.0% | 953,864,598 | |
a 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, 2017, these securities were valued at $53,561,413 or 5.62% of net assets.
b 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.
c Zero coupon until a specified date at which time the stated coupon rate becomes effective until maturity.
d Security issued with a zero coupon. Income is recognized through the accretion of discount.
e Collateral for floating rate borrowings.
| | |
Portfolio Summary (Unaudited) † | Value (%) |
Health Care | 17.2 |
Transportation Services | 16.3 |
State/Territory | 15.8 |
Education | 10.9 |
Utility-Water and Sewer | 10.5 |
Special Tax | 6.6 |
Utility-Electric | 5.0 |
City | 3.0 |
Lease | 2.5 |
Asset-Backed | 2.3 |
Prerefunded | .6 |
Industrial | .6 |
Housing | .4 |
Other | 7.5 |
| | 99.2 |
† Based on net assets.
See notes to financial statements.
19
| | | | |
| |
Summary of Abbreviations (Unaudited) |
| |
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.
20
STATEMENT OF ASSETS AND LIABILITIES
November 30, 2017 (Unaudited)
| | | | | | | |
| | | | | | |
| | | Cost | | Value | |
Assets ($): | | | | |
Investments in securities—See Statement of Investments | 896,603,541 | | 946,618,528 | |
Cash | | | | | 1,838,803 | |
Interest receivable | | 10,326,691 | |
Receivable for investment securities sold | | 5,869,467 | |
Receivable for shares of Common Stock subscribed | | 425,542 | |
Prepaid expenses | | | | | 43,440 | |
| | | | | 965,122,471 | |
Liabilities ($): | | | | |
Due to The Dreyfus Corporation and affiliates—Note 3(c) | | | | | 574,407 | |
Payable for floating rate notes issued—Note 4 | | 9,750,000 | |
Payable for shares of Common Stock redeemed | | 763,483 | |
Interest and expense payable related to
floating rate notes issued—Note 4 | | 72,584 | |
Accrued expenses | | | | | 97,399 | |
| | | | | 11,257,873 | |
Net Assets ($) | | | 953,864,598 | |
Composition of Net Assets ($): | | | | |
Paid-in capital | | | | | 894,033,517 | |
Accumulated undistributed investment income—net | | 106,041 | |
Accumulated net realized gain (loss) on investments | | | | | 9,710,053 | |
Accumulated net unrealized appreciation (depreciation)
on investments | | | | 50,014,987 | |
Net Assets ($) | | | 953,864,598 | |
| | | | | | | |
Net Asset Value Per Share | Class A | Class C | Class I | Class Y | Class Z | |
Net Assets ($) | 82,993,165 | 14,099,465 | 53,756,954 | 3,547,899 | 799,467,115 | |
Shares Outstanding | 5,512,210 | 936,647 | 3,571,916 | 235,734 | 53,096,161 | |
Net Asset Value Per Share ($) | 15.06 | 15.05 | 15.05 | 15.05 | 15.06 | |
| | | | | | | |
See notes to financial statements. | | | | | | |
21
STATEMENT OF OPERATIONS
Six Months Ended November 30, 2017 (Unaudited)
| | | | | | | |
| | | | | | | |
| | | | | | |
| | | | | | |
Investment Income ($): | | | | |
Interest Income | | | 19,458,138 | |
Expenses: | | | | |
Management fee—Note 3(a) | | | 2,906,106 | |
Shareholder servicing costs—Note 3(c) | | | 436,930 | |
Interest and expense related to floating rate notes issued—Note 4 | | | 79,299 | |
Distribution fees—Note 3(b) | | | 57,855 | |
Professional fees | | | 46,214 | |
Directors’ fees and expenses—Note 3(d) | | | 42,306 | |
Registration fees | | | 36,642 | |
Prospectus and shareholders’ reports | | | 11,998 | |
Loan commitment fees—Note 2 | | | 11,085 | |
Custodian fees—Note 3(c) | | | 5,776 | |
Miscellaneous | | | 35,611 | |
Total Expenses | | | 3,669,822 | |
Less—reduction in fees due to earnings credits—Note 3(c) | | | (7,421) | |
Net Expenses | | | 3,662,401 | |
Investment Income—Net | | | 15,795,737 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | | |
Net realized gain (loss) on investments | 5,505,763 | |
Net unrealized appreciation (depreciation) on investments | | | (17,170,346) | |
Net Realized and Unrealized Gain (Loss) on Investments | | | (11,664,583) | |
Net Increase in Net Assets Resulting from Operations | | 4,131,154 | |
| | | | | | | |
See notes to financial statements. | | | | | |
22
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | | | |
| | | | | | | | | | |
| | | | Six Months Ended
November 30, 2017 (Unaudited) | | Year Ended
May 31, 2017 | |
Operations ($): | | | | | | | | |
Investment income—net | | | 15,795,737 | | | | 33,704,112 | |
Net realized gain (loss) on investments | | 5,505,763 | | | | 19,171,034 | |
Net unrealized appreciation (depreciation)
on investments | | (17,170,346) | | | | (50,670,628) | |
Net Increase (Decrease) in Net Assets
Resulting from Operations | 4,131,154 | | | | 2,204,518 | |
Distributions to Shareholders from ($): | |
Investment income—net: | | | | | | | | |
Class A | | | (1,262,839) | | | | (2,939,041) | |
Class C | | | (177,003) | | | | (409,918) | |
Class I | | | (857,475) | | | | (1,754,992) | |
Class Y | | | (60,113) | | | | (119,421) | |
Class Z | | | (13,332,266) | | | | (28,201,258) | |
Net realized gain on investments: | | | | | | | | |
Class A | | | - | | | | (17,236) | |
Class C | | | - | | | | (3,363) | |
Class I | | | - | | | | (9,801) | |
Class Y | | | - | | | | (574) | |
Class Z | | | - | | | | (163,850) | |
Total Distributions | | | (15,689,696) | | | | (33,619,454) | |
Capital Stock Transactions ($): | |
Net proceeds from shares sold: | | | | | | | | |
Class A | | | 7,406,985 | | | | 12,790,854 | |
Class C | | | 1,227,100 | | | | 4,544,830 | |
Class I | | | 9,900,035 | | | | 35,599,069 | |
Class Y | | | 175,000 | | | | 797,000 | |
Class Z | | | 9,796,645 | | | | 26,183,723 | |
Distributions reinvested: | | | | | | | | |
Class A | | | 954,683 | | | | 2,135,182 | |
Class C | | | 136,103 | | | | 312,310 | |
Class I | | | 790,163 | | | | 1,381,412 | |
Class Y | | | 5,095 | | | | 11,504 | |
Class Z | | | 10,207,001 | | | | 21,486,607 | |
Cost of shares redeemed: | | | | | | | | |
Class A | | | (6,736,811) | | | | (36,487,533) | |
Class C | | | (3,176,213) | | | | (4,490,443) | |
Class I | | | (6,182,165) | | | | (34,134,128) | |
Class Y | | | (132,450) | | | | (968,200) | |
Class Z | | | (35,508,633) | | | | (71,349,353) | |
Increase (Decrease) in Net Assets
from Capital Stock Transactions | (11,137,462) | | | | (42,187,166) | |
Total Increase (Decrease) in Net Assets | (22,696,004) | | | | (73,602,102) | |
Net Assets ($): | |
Beginning of Period | | | 976,560,602 | | | | 1,050,162,704 | |
End of Period | | | 953,864,598 | | | | 976,560,602 | |
Undistributed investment income—net | 106,041 | | | | - | |
23
STATEMENT OF CHANGES IN NET ASSETS (continued)
| | | | | | | | | | |
| | | | | | | | | | |
| | | | Six Months Ended
November 30, 2017 (Unaudited) | | Year Ended
May 31, 2017 | |
Capital Share Transactions (Shares): | |
Class A | | | | | | | | |
Shares sold | | | 486,646 | | | | 829,507 | |
Shares issued for distributions reinvested | | | 62,886 | | | | 139,730 | |
Shares redeemed | | | (442,695) | | | | (2,415,913) | |
Net Increase (Decrease) in Shares Outstanding | 106,837 | | | | (1,446,676) | |
Class C | | | | | | | | |
Shares sold | | | 80,739 | | | | 292,030 | |
Shares issued for distributions reinvested | | | 8,968 | | | | 20,480 | |
Shares redeemed | | | (208,928) | | | | (298,845) | |
Net Increase (Decrease) in Shares Outstanding | (119,221) | | | | 13,665 | |
Class I | | | | | | | | |
Shares sold | | | 650,497 | | | | 2,323,945 | |
Shares issued for distributions reinvested | | | 52,074 | | | | 90,718 | |
Shares redeemed | | | (406,485) | | | | (2,252,345) | |
Net Increase (Decrease) in Shares Outstanding | 296,086 | | | | 162,318 | |
Class Y | | | | | | | | |
Shares sold | | | 11,468 | | | | 53,093 | |
Shares issued for distributions reinvested | | | 336 | | | | 754 | |
Shares redeemed | | | (8,727) | | | | (64,702) | |
Net Increase (Decrease) in Shares Outstanding | 3,077 | | | | (10,855) | |
Class Z | | | | | | | | |
Shares sold | | | 643,872 | | | | 1,713,903 | |
Shares issued for distributions reinvested | | | 672,236 | | | | 1,407,833 | |
Shares redeemed | | | (2,335,089) | | | | (4,692,813) | |
Net Increase (Decrease) in Shares Outstanding | (1,018,981) | | | | (1,571,077) | |
| | | | | | | | | | |
See notes to financial statements. | | | | | | | | |
24
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, 2017 | Year Ended May 31, |
Class A Shares | (Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 15.24 | 15.69 | 15.22 | 15.20 | 15.35 | 15.30 |
Investment Operations: | | | | | | |
Investment income—neta | .23 | .48 | .51 | .52 | .54 | .51 |
Net realized and unrealized
gain (loss) on investments | (.18) | (.45) | .47 | .01 | (.16) | .05 |
Total from Investment Operations | .05 | .03 | .98 | .53 | .38 | .56 |
Distributions: | | | | | | |
Dividends from investment
income—net | (.23) | (.48) | (.51) | (.51) | (.53) | (.51) |
Dividends from net realized
gain on investments | — | (.00)b | — | — | — | (.00)b |
Total Distributions | (.23) | (.48) | (.51) | (.51) | (.53) | (.51) |
Net asset value, end of period | 15.06 | 15.24 | 15.69 | 15.22 | 15.20 | 15.35 |
Total Return (%)c | .35d | .25 | 6.54 | 3.54 | 2.71 | 3.67 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to
average net assets | .94e | .94 | .93 | .93 | .93 | .92 |
Ratio of net expenses to
average net assets | .94e | .94 | .93 | .93 | .93 | .92 |
Ratio of interest and expense
related to floating rate notes
issued to average net assets | .02e | .01 | .01 | .01 | .01 | — |
Ratio of net investment income
to average net assets | 3.08e | 3.15 | 3.29 | 3.38 | 3.68 | 3.28 |
Portfolio Turnover Rate | 7.36d | 21.23 | 11.03 | 9.33 | 13.90 | 9.57 |
Net Assets, end of period ($ x 1,000) | 82,993 | 82,369 | 107,497 | 90,386 | 89,525 | 115,773 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
See notes to financial statements.
25
FINANCIAL HIGHLIGHTS (continued)
| | | | | | | | |
| | |
Six Months Ended | |
November 30, 2017 | Year Ended May 31, |
Class C Shares | (Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 15.24 | 15.69 | 15.21 | 15.19 | 15.34 | 15.30 |
Investment Operations: | | | | | | |
Investment income—neta | .18 | .37 | .38 | .40 | .43 | .39 |
Net realized and unrealized
gain (loss) on investments | (.19) | (.46) | .49 | .02 | (.16) | .04 |
Total from Investment Operations | (.01) | (.09) | .87 | .42 | .27 | .43 |
Distributions: | | | | | | |
Dividends from investment
income—net | (.18) | (.36) | (.39) | (.40) | (.42) | (.39) |
Dividends from net realized
gain on investments | — | (.00)b | — | — | — | (.00)b |
Total Distributions | (.18) | (.36) | (.39) | (.40) | (.42) | (.39) |
Net asset value, end of period | 15.05 | 15.24 | 15.69 | 15.21 | 15.19 | 15.34 |
Total Return (%)c | (.10)d | (.52) | 5.79 | 2.76 | 1.92 | 2.81 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to
average net assets | 1.69e | 1.70 | 1.70 | 1.69 | 1.70 | 1.68 |
Ratio of net expenses to
average net assets | 1.69e | 1.70 | 1.70 | 1.69 | 1.70 | 1.68 |
Ratio of interest and expense
related to floating rate notes
issued to average net assets | .02e | .01 | .01 | .01 | .01 | — |
Ratio of net investment income
to average net assets | 2.32e | 2.39 | 2.50 | 2.62 | 2.92 | 2.51 |
Portfolio Turnover Rate | 7.36d | 21.23 | 11.03 | 9.33 | 13.90 | 9.57 |
Net Assets, end of period ($ x 1,000) | 14,099 | 16,087 | 16,347 | 9,427 | 9,251 | 12,351 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
See notes to financial statements.
26
| | | | | | | | |
| | |
Six Months Ended | |
November 30, 2017 | Year Ended May 31, |
Class I Shares | (Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 15.23 | 15.68 | 15.21 | 15.19 | 15.34 | 15.29 |
Investment Operations: | | | | | | |
Investment income—neta | .25 | .52 | .53 | .55 | .57 | .54 |
Net realized and unrealized
gain (loss) on investments | (.18) | (.45) | .49 | .02 | (.15) | .06 |
Total from Investment Operations | .07 | .07 | 1.02 | .57 | .42 | .60 |
Distributions: | | | | | | |
Dividends from investment
income—net | (.25) | (.52) | (.55) | (.55) | (.57) | (.55) |
Dividends from net realized
gain on investments | — | (.00)b | — | — | — | (.00)b |
Total Distributions | (.25) | (.52) | (.55) | (.55) | (.57) | (.55) |
Net asset value, end of period | 15.05 | 15.23 | 15.68 | 15.21 | 15.19 | 15.34 |
Total Return (%) | .48c | .49 | 6.80 | 3.79 | 2.96 | 3.93 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to
average net assets | .69d | .69 | .69 | .68 | .68 | .66 |
Ratio of net expenses to
average net assets | .68d | .69 | .69 | .68 | .68 | .66 |
Ratio of interest and expense
related to floating rate notes
issued to average net assets | .02d | .01 | .01 | .01 | .01 | — |
Ratio of net investment income
to average net assets | 3.33d | 3.39 | 3.51 | 3.63 | 3.93 | 3.52 |
Portfolio Turnover Rate | 7.36c | 21.23 | 11.03 | 9.33 | 13.90 | 9.57 |
Net Assets, end of period ($ x 1,000) | 53,757 | 49,897 | 48,827 | 20,289 | 19,350 | 43,363 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Not annualized.
d Annualized.
See notes to financial statements.
27
FINANCIAL HIGHLIGHTS (continued)
| | | | | | | | | | | |
| | | | |
Six Months Ended | |
November 30, 2017 | Year Ended May 31, |
Class Y Shares | | (Unaudited) | 2017 | 2016 | 2015 | 2014a |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | | 15.23 | 15.68 | 15.21 | 15.19 | 14.72 |
Investment Operations: | | | | | | |
Investment income—netb | | .26 | .53 | .55 | .60 | .53 |
Net realized and unrealized
gain (loss) on investments | | (.19) | (.46) | .47 | (.03) | .46 |
Total from Investment Operations | | .07 | .07 | 1.02 | .57 | .99 |
Distributions: | | | | | | |
Dividends from investment
income—net | | (.25) | (.52) | (.55) | (.55) | (.52) |
Dividends from net realized
gain on investments | | — | (.00)c | — | — | — |
Total Distributions | | (.25) | (.52) | (.55) | (.55) | (.52) |
Net asset value, end of period | | 15.05 | 15.23 | 15.68 | 15.21 | 15.19 |
Total Return (%) | | .49d | .52 | 6.83 | 3.79 | 6.95d |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to
average net assets | | .66e | .67 | .65 | .67 | .63e |
Ratio of net expenses to
average net assets | | .66e | .67 | .65 | .67 | .63e |
Ratio of interest and expense
related to floating rate notes
issued to average net assets | | .02e | .01 | .01 | .01 | .01e |
Ratio of net investment income
to average net assets | | 3.35e | 3.43 | 3.57 | 3.63 | 3.97e |
Portfolio Turnover Rate | | 7.36d | 21.23 | 11.03 | 9.33 | 13.90 |
Net Assets, end of period ($ x 1,000) | | 3,548 | 3,544 | 3,819 | 3,841 | 1 |
a From July 1, 2013 (commencement of initial offering) to May 31, 2014.
b Based on average shares outstanding.
c Amount represents less than $.01 per share.
d Not annualized.
e Annualized.
See notes to financial statements.
28
| | | | | | | | |
| | |
Six Months Ended | |
November 30, 2017 | Year Ended May 31, |
Class Z Shares | (Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 15.24 | 15.69 | 15.22 | 15.20 | 15.35 | 15.30 |
Investment Operations: | | | | | | |
Investment income—neta | .25 | .52 | .54 | .55 | .57 | .54 |
Net realized and unrealized
gain (loss) on investments | (.18) | (.46) | .47 | .02 | (.16) | .05 |
Total from Investment Operations | .07 | .06 | 1.01 | .57 | .41 | .59 |
Distributions: | | | | | | |
Dividends from investment
income—net | (.25) | (.51) | (.54) | (.55) | (.56) | (.54) |
Dividends from net realized
gain on investments | — | (.00)b | — | — | — | (.00)b |
Total Distributions | (.25) | (.51) | (.54) | (.55) | (.56) | (.54) |
Net asset value, end of period | 15.06 | 15.24 | 15.69 | 15.22 | 15.20 | 15.35 |
Total Return (%) | .46c | .47 | 6.76 | 3.76 | 2.92 | 3.89 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to
average net assets | .73d | .72 | .72 | .72 | .72 | .70 |
Ratio of net expenses to
average net assets | .72d | .72 | .72 | .72 | .72 | .70 |
Ratio of interest and expense
related to floating rate notes
issued to average net assets | .02d | .01 | .01 | .01 | .01 | — |
Ratio of net investment income
to average net assets | 3.29d | 3.38 | 3.50 | 3.59 | 3.89 | 3.50 |
Portfolio Turnover Rate | 7.36c | 21.23 | 11.03 | 9.33 | 13.90 | 9.57 |
Net Assets, end of period ($ x 1,000) | 799,467 | 824,664 | 873,673 | 881,000 | 920,175 | 1,034,822 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Not annualized.
d Annualized.
See notes to financial statements
29
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 700 million shares of $.001 par value Common Stock. The fund currently has authorized five classes of shares: Class A (100 million shares authorized), Class C (100 million shares authorized), Class I (100 million shares authorized), Class T (100 million shares authorized), Class Y (100 million shares authorized) and Class Z (200 million shares authorized). Class A and Class T 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 to certain shareholders of the fund. Class Z shares generally are not available for new accounts. As of the date of this report, the fund did not offer Class T shares for purchase. 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 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.
30
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
31
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 is engaged under the general supervision of the Board.
When market quotations or official closing prices are not readily available, or are determined to not accurately reflect 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, 2017 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 | — | 946,618,528 | — | 946,618,528 |
Liabilities ($) | | | | |
Floating Rate Notes† | — | (9,750,000) | — | (9,750,000) |
† Certain of the fund’s liabilities are held at carrying amount, which approximates fair value for financial reporting purposes.
At November 30, 2017, there were no transfers between levels of the fair value hierarchy. It is the fund’s policy to recognize transfers between levels at the end of the reporting period.
32
(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 and distributions 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, 2017, 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, 2017, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended May 31, 2017 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The tax character of distributions paid to shareholders during the fiscal year ended May 31, 2017 was as follows: tax-exempt income $33,424,630 and ordinary income $194,824. The tax character of current year distributions will be determined at the end of the current fiscal year.
33
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in an $830 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 4, 2017, the unsecured credit facility with Citibank, N.A. was $810 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, 2017, 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% 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, 2017, there was no reduction in expenses pursuant to the Agreement.
During the period ended November 30, 2017, the Distributor retained $3,520 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, 2017, Class C shares were charged $57,855 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
34
professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended November 30, 2017, Class A and Class C shares were charged $103,268 and $19,285, 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, 2017, Class Z shares were charged $170,948 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 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, 2017, the fund was charged $82,241 for transfer agency services and $5,466 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were offset by earnings credits of $5,466.
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, 2017, the fund was charged $5,776 pursuant to the custody agreement. These fees were partially offset by earnings credits of $1,953.
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, 2017, the fund was charged $3,611 pursuant to the agreement, which is included in Shareholder servicing costs in the
35
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Statement of Operations. These fees were partially offset by earnings credits of $2.
During the period ended November 30, 2017, the fund was charged $5,604 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 $473,456, Distribution Plan fees $8,918, Shareholder Services Plan fees $47,029, custodian fees $7,238, Chief Compliance Officer fees $7,472 and transfer agency fees $30,294.
(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, 2017, amounted to $70,345,135 and $90,758,948, 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 “Inverse Floater Trust”). The Inverse Floater 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-exempt security is also created by the Inverse Floater Trust, which is transferred to the fund, and is paid interest based on the remaining cash flows of the Inverse Floater Trust, after payment of interest on the other securities and various expenses of the Inverse Floater Trust. An Inverse Floater Trust 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 Inverse Floater Trust as secured borrowings, with the securities transferred remaining in the fund’s investments, and the Trust Certificates 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
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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 Inverse Floater Trust. A liquidation shortfall occurs if the Trust Certificates exceed the proceeds of the sale of the bonds in the Inverse Floater 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, 2017, was approximately $9,750,000, with a related weighted average annualized interest rate of 1.62%.
At November 30, 2017, accumulated net unrealized appreciation on investments was $50,014,987, consisting of $54,842,160 gross unrealized appreciation and $4,827,173 gross unrealized depreciation.
At November 30, 2017, 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).
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Directors held on October 30-31, 2017, 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 Broadridge Financial Solutions, Inc. (“Broadridge”), 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, 2017, 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 funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Broadridge 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
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applicable to the fund and comparison funds. The Board discussed with representatives of Dreyfus and/or its affiliates the results of the comparisons and considered that the fund’s total return performance was 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 Board also considered 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 Board considered the relative proximity of the fund’s total return and/or yield performance to the Performance Group and/or Performance Universe median in certain periods when performance was below median. 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 considered 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 of the fund’s management fee.
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, considered in relation to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, supported the renewal of the Agreement 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
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
benefit of fund shareholders. Dreyfus representatives stated 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 stated 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 took into consideration 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.
· The Board was concerned about the fund’s performance and agreed to closely monitor performance.
· The Board concluded that the fee paid to Dreyfus continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed 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 Dreyfus 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 the Agreement for the fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, during which lengthy discussions took place
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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 fund’s arrangements, or substantially similar arrangements for other Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreement.
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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, D.C. (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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© 2018 MBSC Securities Corporation
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