UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number | 811 - 4906 | |||||
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| Dreyfus State Municipal Bond Funds |
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| (Exact name of Registrant as specified in charter) |
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c/o The Dreyfus Corporation 200 Park Avenue New York, New York 10166 |
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| (Address of principal executive offices) (Zip code) |
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| John Pak, Esq. 200 Park Avenue New York, New York 10166 |
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| (Name and address of agent for service) |
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Registrant's telephone number, including area code: | (212) 922-6000 | |||||
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Date of fiscal year end:
| 4/30 |
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Date of reporting period: | 10/31/13 |
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Dreyfus State |
Municipal Bond Funds, |
Dreyfus Connecticut Fund |
SEMIANNUAL REPORT October 31, 2013
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The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents | |
THE FUND | |
2 | A Letter from the President |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
18 | Statement of Assets and Liabilities |
19 | Statement of Operations |
20 | Statement of Changes in Net Assets |
23 | Financial Highlights |
28 | Notes to Financial Statements |
37 | Information About the Renewal of the Fund’s Management Agreement |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus State
Municipal Bond Funds,
Dreyfus Connecticut Fund
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Connecticut Fund, a series of Dreyfus State Municipal Bond Funds, covering the six-month period from May 1, 2013, through October 31, 2013. 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.
The reporting period produced a relatively challenging environment for most fixed-income securities, as a gradually strengthening U.S. economy and expectations of more moderately stimulative monetary policies drove longer term interest rates higher and bond prices lower. Municipal bonds proved particularly sensitive to these developments, as the negative effects of rising rates were exacerbated by selling pressure among investors seeking safer havens.
We currently expect U.S. economic conditions to continue to improve in 2014, with accelerating growth and credit conditions supported by the fading drags of tighter federal fiscal policies and downsizing on the state and local levels. Moreover, inflation is likely to remain muted, so monetary policy can remain stimulative. Globally, we anticipate stronger growth in developed countries due to past and continuing monetary ease, while emerging markets seem poised for moderate economic expansion despite recently negative investor sentiment. For more information on how these observations may affect your investments, we encourage you to speak with your financial advisor.
Thank you for your continued confidence and support.
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J. Charles Cardona
President
The Dreyfus Corporation
November 15, 2013
2
DISCUSSION OF FUND PERFORMANCE
For the period of May 1, 2013, through October 31, 2013, as provided by Daniel Barton and Jeffrey Burger, Portfolio Managers
Fund and Market Performance Overview
For the six-month period ended October 31, 2013, Class A shares of Dreyfus Connecticut Fund, a series of Dreyfus State Municipal Bond Funds, produced a total return of –5.91%, Class C shares returned –6.29%, Class I shares returned –5.80%, ClassY shares from inception (9/3/13) returned 3.45%, and Class Z shares returned –5.80%.1 In comparison, the Barclays Municipal Bond Index, the fund’s benchmark index, which is composed of bonds issued nationally and not solely within Connecticut, achieved a total return of –3.44% for the same period.2
Selling pressure stemming from concerns about actual and anticipated interest rate changes sent municipal bonds into negative territory during the reporting period. The fund lagged its benchmark, mainly due to overweighted exposure to longer dated revenue bonds and weakness among Puerto Rico municipal bonds.
The Fund’s Investment Approach
The fund seeks to maximize current income exempt from federal and Connecticut state income taxes, without undue risk.To pursue its goal, the fund normally invests substantially all of its assets in municipal bonds that provide income exempt from federal and Connecticut state income taxes.The fund invests at least 70% of its assets in investment-grade municipal bonds or the unrated equivalent as determined by Dreyfus. For additional yield, the fund may invest up to 30% of its assets in municipal bonds rated below investment grade 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.
In managing the fund, 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 of various sectors and securities and to exploit pricing inefficiencies in the municipal bond market. Additionally, we trade among the market’s various sectors, such as the pre-refunded,
The Fund | 3 |
DISCUSSION OF FUND PERFORMANCE (continued)
general obligation and revenue sectors, based on their apparent relative values.The fund generally will invest simultaneously in several of these sectors.
Selling Pressure Sparked Declines Among Municipal Bonds
Municipal bonds encountered heightened volatility over the reporting period. The robust investor demand that had characterized much of 2012 failed to rematerialize in 2013, sending municipal bond yields higher despite a relatively meager supply of newly issued securities.Yields of U.S.Treasury securities also generally climbed in response to improved economic trends, putting additional pressure on municipal bond prices.
In late May, remarks by Federal Reserve Board (the “Fed”) Chairman Ben Bernanke were widely interpreted as a signal that the central bank would back away from its ongoing quantitative easing program sooner than expected. This development sent longer term interest rates sharply higher, further eroding returns from municipal bonds. In July, a bankruptcy filing by the city of Detroit also intensified selling pressure, and in September, municipal bonds issued by Puerto Rico contributed to market weakness after media reports detailed the U.S. territory’s fiscal and economic problems. Yet, municipal bonds generally rallied over the final weeks of September and during October when the Fed refrained from tapering its quantitative easing program.
Despite the fiscal problems facing Detroit and Puerto Rico, credit conditions continued to improve for most states and municipalities. Connecticut also has experienced improved credit conditions, as evidenced by a budget surplus for its 2013 fiscal year. However, the state’s unemployment rate has stayed higher than national averages, and unfunded pension liabilities remain a concern.
Long Average Duration Dampened Fund Performance
The fund was undermined over the reporting period by a relatively long average duration and an emphasis on longer term securities, which magnified the impact of rising long-term interest rates. Relative performance also was hurt by a position in Puerto Rico bonds, which we believe were punished more severely than warranted by underlying credit fundamentals. In addition, the fund’s emphasis on revenue bonds proved counterproductive, as they lagged Connecticut general obligation bonds. Overweighted exposure to the lower end of the investment-grade spectrum also weighed on results compared to the benchmark.
4
Our security selection strategy achieved better results in other areas, especially among bonds backed by educational institutions and essential municipal facilities, such as sewer districts and waterworks.
Finding Attractive Values in a Dislocated Market
Although market volatility may persist over the near term, we believe that improved economic conditions and restored investor demand will help lift municipal bond valuations toward historical norms over the longer term.
In the meantime, we have continued to emphasize attractive relative values, including longer dated revenue bonds with credit ratings toward the bottom of the investment-grade spectrum.We also have retained the fund’s Puerto Rico holdings for income and diversification purposes. In light of steep yield differences along the market’s maturity range, the fund’s average duration remains in a position that is slightly longer than market averages.
November 15, 2013
Bond funds are subject generally to interest rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
The amount of public information available about municipal bonds is generally less than that for corporate equities or bonds. Special factors, such as legislative changes, and state and local economic and business developments, may adversely affect the yield and/or value of the fund’s investments in municipal bonds. Other factors include the general conditions of the municipal bond market, the size of the particular offering, the maturity of the obligation and the rating of the issue. Changes in economic, business or political conditions relating to a particular municipal project, municipality, or state in which the fund invests may have an impact on the fund’s share price.
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 charge imposed |
on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Class |
Z, ClassY and Class I 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-Connecticut |
residents, and some income may be subject to the federal alternative minimum tax (AMT) for certain investors. |
Capital gains, if any, are fully taxable. Returns for ClassY are from inception date of 9/3/2013. |
2 SOURCE: LIPPER INC. — Reflects reinvestment of dividends and, where applicable, capital gain distributions. |
The Barclays Municipal Bond Index is a widely accepted, unmanaged total return performance benchmark for the |
long-term, investment-grade, tax-exempt bond market. Index returns do not reflect fees and expenses associated with |
operating a mutual fund. Investors cannot invest directly in any index. |
The Fund | 5 |
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus State Municipal Bond Funds, Dreyfus Connecticut Fund from May 1, 2013 to October 31, 2013. 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 October 31, 2013 †
Class A | Class C | Class I | Class Y | Class Z | ||||||
Expenses paid per $1,000†† | $ | 4.35 | $ | 8.11 | $ | 3.13 | $ | 1.15 | $ | 3.28 |
Ending value (after expenses) | $ | 940.90 | $ | 937.10 | $ | 942.00 | $ | 1,034.50 | $ | 942.00 |
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 October 31, 2013
Class A | Class C | Class I | Class Y | Class Z | ||||||
Expenses paid per $1,000†††† | $ | 4.53 | $ | 8.44 | $ | 3.26 | $ | 3.62 | $ | 3.41 |
Ending value (after expenses) | $ | 1,020.72 | $ | 1,016.84 | $ | 1,021.98 | $ | 1,021.63 | $ | 1,021.83 |
† | From September 3, 2013 (commencement of initial offering) to October 31, 2013 for ClassY shares. |
†† | Expenses are equal to the fund’s annualized expense ratio of .89% for Class A, 1.66% for Class C , .64% for |
Class I and .67% for Class Z, multiplied by the average account value over the period, multiplied by 184/365 (to | |
reflect the one-half year period). Expenses are equal to the fund’s annualized expense ratio of .71% for ClassY, | |
multiplied by the average account value over the period, multiplied by 58/365 (to reflect the actual days in the period) | |
††† | Please note that while ClassY shares commenced operations on September 3, 2013, the hypothetical expenses paid |
during the period reflect projected activity for the full six month period for purposes of comparability.This projection | |
assumes that annualized expense ratios were in effect during the period May 1, 2013 to October 31, 2013. | |
†††† | Expenses are equal to the fund’s annualized expense ratio of .89% for Class A, 1.66% for Class C, .64% for |
Class I, .71% for ClassY and .67% for Class Z, multiplied by the average account value over the period, | |
multiplied by 184/365 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS |
October 31, 2013 (Unaudited) |
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments—98.6% | Rate (%) | Date | Amount ($) | Value ($) | |
Connecticut—81.8% | |||||
Connecticut, | |||||
GO | 5.00 | 11/1/18 | 5,000,000 | 5,916,150 | |
Connecticut, | |||||
GO | 5.00 | 12/15/22 | 1,855,000 | 2,082,367 | |
Connecticut, | |||||
GO | 5.00 | 4/15/24 | 2,500,000 | 2,840,700 | |
Connecticut, | |||||
GO | 5.00 | 11/1/27 | 2,000,000 | 2,251,660 | |
Connecticut, | |||||
GO | 5.00 | 11/1/27 | 5,000,000 | 5,617,650 | |
Connecticut, | |||||
GO | 5.00 | 11/1/28 | 3,000,000 | 3,365,760 | |
Connecticut, | |||||
GO | 5.00 | 11/1/28 | 5,000,000 | 5,571,050 | |
Connecticut, | |||||
GO | 5.00 | 11/1/31 | 5,000,000 | 5,439,350 | |
Connecticut, | |||||
Special Tax Obligation | |||||
Revenue (Transportation | |||||
Infrastructure Purposes) | 5.00 | 12/1/21 | 5,000,000 | 5,976,900 | |
Connecticut, | |||||
Special Tax Obligation | |||||
Revenue (Transportation | |||||
Infrastructure Purposes) | 5.00 | 11/1/22 | 5,000,000 | 5,800,400 | |
Connecticut, | |||||
Special Tax Obligation Revenue | |||||
(Transportation Infrastructure | |||||
Purposes) (Insured; AMBAC) | 5.25 | 7/1/19 | 3,395,000 | 4,084,219 | |
Connecticut, | |||||
State Revolving Fund | |||||
General Revenue | 5.00 | 1/1/19 | 5,275,000 | 6,267,491 | |
Connecticut, | |||||
State Revolving Fund | |||||
General Revenue | 5.00 | 1/1/23 | 1,250,000 | 1,470,875 | |
Connecticut Development Authority, | |||||
Airport Facility Revenue | |||||
(Learjet Inc. Project) | 7.95 | 4/1/26 | 2,300,000 | 2,428,432 | |
Connecticut Development Authority, | |||||
First Mortgage Gross Revenue | |||||
(The Elim Park Baptist Home, Inc. | |||||
Project) (Prerefunded) | 5.25 | 12/1/15 | 1,765,000 | a | 1,959,521 |
The Fund | 7 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Connecticut (continued) | ||||
Connecticut Development Authority, | ||||
PCR (The Connecticut Light and | ||||
Power Company Project) | 4.38 | 9/1/28 | 3,900,000 | 3,989,427 |
Connecticut Development Authority, | ||||
Water Facilities Revenue | ||||
(Aquarion Water Company of | ||||
Connecticut Project) | 5.50 | 4/1/21 | 4,500,000 | 5,071,725 |
Connecticut Development Authority, | ||||
Water Facilities Revenue (Aquarion | ||||
Water Company of Connecticut | ||||
Project) (Insured; XLCA) | 5.10 | 9/1/37 | 6,550,000 | 6,576,658 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Ascension Health Senior | ||||
Credit Group) | 5.00 | 11/15/40 | 10,000,000 | 10,277,600 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Bridgeport Hospital Issue) | 5.00 | 7/1/25 | 3,625,000 | 3,875,778 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Connecticut State University | ||||
System Issue) | 5.00 | 11/1/18 | 1,320,000 | 1,560,808 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Fairfield University Issue) | 5.00 | 7/1/25 | 1,340,000 | 1,480,928 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Fairfield University Issue) | 5.00 | 7/1/27 | 1,420,000 | 1,546,763 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Fairfield University Issue) | 5.00 | 7/1/34 | 4,000,000 | 4,130,360 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Fairfield University Issue) | 5.00 | 7/1/35 | 2,000,000 | 2,065,060 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Fairfield University Issue) | 5.00 | 7/1/40 | 2,500,000 | 2,563,925 |
8
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Connecticut (continued) | ||||
Connecticut Health and | ||||
Educational Facilities | ||||
Authority, Revenue | ||||
(Greenwich Academy Issue) | ||||
(Insured; Assured Guaranty | ||||
Municipal Corp.) | 5.25 | 3/1/32 | 10,880,000 | 13,331,482 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Hartford HealthCare Issue) | 5.00 | 7/1/32 | 1,000,000 | 1,006,580 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Hartford HealthCare Issue) | 5.00 | 7/1/41 | 2,000,000 | 1,980,620 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Hospital for Special Care | ||||
Issue) (Insured; Radian) | 5.25 | 7/1/32 | 2,000,000 | 2,006,780 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Lawrence and Memorial | ||||
Hospital Issue) | 5.00 | 7/1/31 | 1,000,000 | 1,034,350 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Loomis Chaffee School Issue) | ||||
(Insured; AMBAC) | 5.25 | 7/1/28 | 1,760,000 | 2,103,042 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Quinnipiac University Issue) | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 5.00 | 7/1/19 | 2,000,000 | 2,218,220 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Quinnipiac University Issue) | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 5.75 | 7/1/33 | 5,000,000 | 5,533,550 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Sacred Heart University Issue) | 5.38 | 7/1/31 | 1,000,000 | 1,037,420 |
The Fund | 9 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Connecticut (continued) | ||||
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Salisbury School Issue) (Insured; | ||||
Assured Guaranty Corp.) | 5.00 | 7/1/33 | 5,000,000 | 5,177,700 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Stamford Hospital Issue) | 5.00 | 7/1/30 | 6,750,000 | 6,908,895 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(The William W. Backus Hospital | ||||
Issue) (Insured; Assured Guaranty | ||||
Municipal Corp.) | 5.25 | 7/1/23 | 2,000,000 | 2,183,620 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Trinity College Issue) | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 5.00 | 7/1/22 | 1,000,000 | 1,028,130 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(University of Hartford Issue) | ||||
(Insured; Radian) | 5.00 | 7/1/17 | 1,220,000 | 1,309,609 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(University of Hartford Issue) | ||||
(Insured; Radian) | 5.25 | 7/1/36 | 5,070,000 | 4,922,514 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Wesleyan University Issue) | 5.00 | 7/1/35 | 5,000,000 | 5,253,950 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Wesleyan University Issue) | 5.00 | 7/1/39 | 6,500,000 | 6,764,745 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Western Connecticut Health | ||||
Network Issue) | 5.38 | 7/1/41 | 1,000,000 | 1,029,020 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Yale University Issue) | 5.00 | 7/1/40 | 5,000,000 | 5,376,050 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Yale-New Haven Hospital Issue) | 5.75 | 7/1/34 | 4,000,000 | 4,361,840 |
10
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Connecticut (continued) | ||||
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Yale-New Haven Hospital | ||||
Issue) (Insured; AMBAC) | 5.00 | 7/1/31 | 2,500,000 | 2,534,075 |
Connecticut Health and Educational | ||||
Facilities Authority, State | ||||
Supported Child Care Revenue | 5.00 | 7/1/25 | 1,490,000 | 1,633,860 |
Connecticut Higher Education | ||||
Supplemental Loan Authority, | ||||
Senior Revenue (Connecticut | ||||
Family Education Loan Program) | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 4.50 | 11/15/20 | 1,535,000 | 1,536,443 |
Connecticut Higher Education | ||||
Supplemental Loan Authority, | ||||
Senior Revenue (Connecticut | ||||
Family Education Loan Program) | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 4.80 | 11/15/22 | 3,255,000 | 3,356,165 |
Connecticut Housing Finance | ||||
Authority, Revenue (Housing | ||||
Mortgage Finance Program) | ||||
(Insured; AMBAC) | 5.10 | 11/15/33 | 2,155,000 | 2,180,968 |
Connecticut Municipal Electric | ||||
Energy Cooperative, Power | ||||
Supply System Revenue | 5.00 | 1/1/38 | 3,000,000 | 3,100,080 |
Connecticut Resources Recovery | ||||
Authority, RRR (American | ||||
Ref-Fuel Company of Southeastern | ||||
Connecticut Project) | 5.50 | 11/15/15 | 1,000,000 | 1,000,070 |
Connecticut Resources Recovery | ||||
Authority, RRR (American | ||||
Ref-Fuel Company of Southeastern | ||||
Connecticut Project) | 5.50 | 11/15/15 | 3,250,000 | 3,250,227 |
Connecticut Transmission Municipal | ||||
Electric Energy Cooperative, | ||||
Transmission System Revenue | 5.00 | 1/1/42 | 3,000,000 | 3,103,470 |
Eastern Connecticut Resource | ||||
Recovery Authority, Solid | ||||
Waste Revenue (Wheelabrator | ||||
Lisbon Project) | 5.50 | 1/1/14 | 910,000 | 910,919 |
The Fund | 11 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Connecticut (continued) | |||||
Eastern Connecticut Resource | |||||
Recovery Authority, Solid | |||||
Waste Revenue (Wheelabrator | |||||
Lisbon Project) | 5.50 | 1/1/20 | 7,000,000 | 7,007,070 | |
Greater New Haven Water Pollution | |||||
Control Authority, Regional | |||||
Wastewater System Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 5.00 | 11/15/37 | 1,800,000 | 1,845,684 | |
Greater New Haven Water Pollution | |||||
Control Authority, Regional | |||||
Wastewater System Revenue | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 5.00 | 11/15/30 | 5,000,000 | 5,222,200 | |
Greater New Haven Water Pollution | |||||
Control Authority, Regional | |||||
Wastewater System Revenue | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 5.00 | 8/15/35 | 2,000,000 | 2,082,140 | |
Hamden, | |||||
GO (Insured; National Public | |||||
Finance Guarantee Corp.) | |||||
(Escrowed to Maturity) | 5.25 | 8/15/14 | 5,000 | 5,202 | |
Hartford, | |||||
GO | 5.00 | 7/15/16 | 1,775,000 | 1,974,528 | |
Hartford, | |||||
GO | 5.00 | 4/1/24 | 1,000,000 | 1,137,920 | |
Hartford, | |||||
GO (Escrowed to Maturity) | 5.00 | 4/1/17 | 1,325,000 | 1,518,251 | |
Hartford, | |||||
GO (Insured; Assured Guaranty | |||||
Municipal Corp.) | 5.00 | 4/1/32 | 595,000 | 619,014 | |
Hartford, | |||||
GO (Insured; Assured | |||||
Guaranty Municipal Corp.) | |||||
(Prerefunded) | 5.00 | 4/1/22 | 255,000 | a | 309,045 |
Hartford County Metropolitan | |||||
District, Clean Water | |||||
Project Revenue | 5.00 | 4/1/31 | 3,510,000 | 3,769,003 |
12
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Connecticut (continued) | ||||
Meriden, | ||||
GO (Insured; National Public | ||||
Finance Guarantee Corp.) | 5.00 | 8/1/16 | 2,090,000 | 2,345,607 |
New Britain, | ||||
GO (Insured; Assured | ||||
Guaranty Corp.) | 5.00 | 4/1/24 | 4,500,000 | 5,386,815 |
New Haven, | ||||
GO | 5.00 | 3/1/17 | 1,425,000 | 1,585,455 |
New Haven, | ||||
GO (Insured; Assured | ||||
Guaranty Corp.) | 5.00 | 3/1/29 | 1,000,000 | 1,028,670 |
Norwalk, | ||||
GO | 5.00 | 7/15/24 | 1,000,000 | 1,177,020 |
South Central Connecticut | ||||
Regional Water Authority, | ||||
Water System Revenue | 5.00 | 8/1/31 | 3,940,000 | 4,186,605 |
South Central Connecticut | ||||
Regional Water Authority, | ||||
Water System Revenue | 5.00 | 8/1/32 | 1,370,000 | 1,458,762 |
South Central Connecticut | ||||
Regional Water Authority, | ||||
Water System Revenue | 5.00 | 8/1/33 | 4,000,000 | 4,244,080 |
South Central Connecticut Regional | ||||
Water Authority, Water System | ||||
Revenue (Insured; National | ||||
Public Finance Guarantee Corp.) | 5.25 | 8/1/24 | 2,000,000 | 2,411,120 |
South Central Connecticut Regional | ||||
Water Authority, Water System | ||||
Revenue (Insured; National | ||||
Public Finance Guarantee Corp.) | 5.25 | 8/1/31 | 2,000,000 | 2,161,480 |
Stamford, | ||||
GO | 5.00 | 7/1/21 | 4,410,000 | 5,335,659 |
Stamford, | ||||
Water Pollution | ||||
Control System and | ||||
Facility Revenue | 5.50 | 8/15/38 | 400,000 | 435,660 |
University of Connecticut, | ||||
GO | 5.00 | 2/15/25 | 1,000,000 | 1,134,820 |
The Fund | 13 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Connecticut (continued) | |||||
University of Connecticut, | |||||
GO | 5.00 | 2/15/27 | 1,000,000 | 1,116,600 | |
University of Connecticut, | |||||
GO | 5.00 | 2/15/28 | 1,000,000 | 1,107,260 | |
University of Connecticut, | |||||
GO (Insured; Assured Guaranty | |||||
Municipal Corp.) (Prerefunded) | 5.00 | 2/15/15 | 1,225,000 | a | 1,300,276 |
University of Connecticut, | |||||
Special Obligation | |||||
Student Fee Revenue | 5.00 | 11/15/24 | 5,000,000 | 5,822,050 | |
U.S. Related—16.8% | |||||
Children’s Trust Fund of Puerto | |||||
Rico, Tobacco Settlement | |||||
Asset-Backed Bonds | 5.50 | 5/15/39 | 3,000,000 | 2,679,690 | |
Children’s Trust Fund of Puerto | |||||
Rico, Tobacco Settlement | |||||
Asset-Backed Bonds | 0.00 | 5/15/50 | 12,000,000 | b | 707,400 |
Guam, | |||||
LOR (Section 30) | 5.63 | 12/1/29 | 1,000,000 | 1,048,410 | |
Guam Economic Development | |||||
Authority, Tobacco Settlement | |||||
Asset-Backed Bonds (Escrowed | |||||
to Maturity) | 5.45 | 5/15/16 | 1,445,000 | 1,616,189 | |
Guam Power Authority, | |||||
Revenue | 5.50 | 10/1/30 | 1,750,000 | 1,787,222 | |
Guam Power Authority, | |||||
Revenue | 5.00 | 10/1/34 | 2,000,000 | 1,954,260 | |
Guam Waterworks Authority, | |||||
Water and Wastewater | |||||
System Revenue | 5.50 | 7/1/16 | 750,000 | 753,607 | |
Guam Waterworks Authority, | |||||
Water and Wastewater | |||||
System Revenue | 5.63 | 7/1/40 | 2,000,000 | 1,900,660 | |
Puerto Rico Aqueduct and Sewer | |||||
Authority, Senior Lien Revenue | 5.13 | 7/1/37 | 620,000 | 456,345 | |
Puerto Rico Aqueduct and Sewer | |||||
Authority, Senior Lien Revenue | 6.00 | 7/1/38 | 2,500,000 | 1,969,400 |
14
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
U.S. Related (continued) | |||||
Puerto Rico Commonwealth, | |||||
Public Improvement GO | |||||
(Insured; FGIC) | 5.50 | 7/1/16 | 3,270,000 | 3,054,834 | |
Puerto Rico Commonwealth, | |||||
Public Improvement GO | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 5.25 | 7/1/14 | 2,925,000 | 2,923,216 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.25 | 7/1/28 | 5,000,000 | 3,778,600 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.00 | 7/1/32 | 3,550,000 | 2,572,472 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.25 | 7/1/40 | 3,000,000 | 2,204,340 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.00 | 7/1/42 | 380,000 | 269,321 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 5.25 | 7/1/19 | 1,525,000 | 1,423,359 | |
Puerto Rico Highways and | |||||
Transportation Authority, | |||||
Highway Revenue | |||||
(Prerefunded) | 5.50 | 7/1/16 | 5,000,000 | a | 5,672,100 |
Puerto Rico Highways and | |||||
Transportation Authority, | |||||
Transportation Revenue | 5.50 | 7/1/22 | 3,025,000 | 2,384,365 | |
Puerto Rico Highways and | |||||
Transportation Authority, | |||||
Transportation Revenue | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 5.25 | 7/1/33 | 3,000,000 | 2,381,370 | |
Puerto Rico Infrastructure | |||||
Financing Authority, Special | |||||
Tax Revenue (Insured; AMBAC) | 0.00 | 7/1/35 | 5,500,000 | b | 958,210 |
Puerto Rico Sales Tax Financing | |||||
Corporation, Sales Tax Revenue | |||||
(First Subordinate Series) | 5.38 | 8/1/39 | 1,500,000 | 1,198,815 |
The Fund | 15 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
U.S. Related (continued) | |||||
Puerto Rico Sales Tax Financing | |||||
Corporation, Sales Tax Revenue | |||||
(First Subordinate Series) | 6.00 | 8/1/42 | 7,450,000 | 6,450,061 | |
Virgin Islands Public Finance | |||||
Authority, Revenue (Virgin Islands | |||||
Matching Fund Loan Note) | 5.00 | 10/1/25 | 5,000,000 | 5,263,850 | |
Total Investments (cost $324,946,287) | 98.6 | % | 324,522,043 | ||
Cash and Receivables (Net) | 1.4 | % | 4,720,155 | ||
Net Assets | 100.0 | % | 329,242,198 |
a These securities are prerefunded; the date shown represents the prerefunded date. Bonds which are prerefunded are |
collateralized by U.S. Government securities which are held in escrow and are used to pay principal and interest on |
the municipal issue and to retire the bonds in full at the earliest refunding date. |
b Security issued with a zero coupon. Income is recognized through the accretion of discount. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Education | 20.8 | Transportation Services | 3.4 |
Health Care | 15.1 | City | 3.0 |
Utility-Water and Sewer | 13.2 | Housing | 1.3 |
State/Territory | 12.5 | Asset-Backed | 1.0 |
Special Tax | 8.8 | Resource Recovery | .6 |
Utility-Electric | 8.0 | Other | 3.4 |
Pre-Refunded | 3.8 | ||
Industrial | 3.7 | 98.6 | |
† Based on net assets. | |||
See notes to financial statements. |
16
Summary of Abbreviations | |||
ABAG | Association of Bay Area | ACA | American Capital Access |
Governments | |||
AGC | ACE Guaranty Corporation | AGIC | Asset Guaranty Insurance Company |
AMBAC | American Municipal Bond | ARRN | Adjustable Rate |
Assurance Corporation | 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 | EIR | Environmental Improvement |
Revenue | Revenue | ||
FGIC | Financial Guaranty | FHA | Federal Housing |
Insurance Company | Administration | ||
FHLB | Federal Home | FHLMC | Federal Home Loan Mortgage |
Loan Bank | Corporation | ||
FNMA | Federal National | GAN | Grant Anticipation Notes |
Mortgage Association | |||
GIC | Guaranteed Investment | GNMA | Government National Mortgage |
Contract | Association | ||
GO | General Obligation | HR | Hospital Revenue |
IDB | Industrial Development Board | IDC | Industrial Development Corporation |
IDR | Industrial Development | LIFERS | Long Inverse Floating |
Revenue | 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 | PUTTERS | Puttable Tax-Exempt Receipts |
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 | SPEARS | Short Puttable Exempt |
Mortgage Agency | 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 |
The Fund | 17 |
STATEMENT OF ASSETS AND LIABILITIES |
October 31, 2013 (Unaudited) |
Cost | Value | |||||
Assets ($): | ||||||
Investments in securities—See Statement of Investments | 324,946,287 | 324,522,043 | ||||
Cash | 133,713 | |||||
Interest receivable | 5,100,737 | |||||
Receivable for shares of Beneficial Interest subscribed | 10,000 | |||||
Prepaid expenses | 29,559 | |||||
329,796,052 | ||||||
Liabilities ($): | ||||||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 244,285 | |||||
Payable for shares of Beneficial Interest redeemed | 261,371 | |||||
Accrued expenses | 48,198 | |||||
553,854 | ||||||
Net Assets ($) | 329,242,198 | |||||
Composition of Net Assets ($): | ||||||
Paid-in capital | 330,252,360 | |||||
Accumulated undistributed investment income—net | 8,057 | |||||
Accumulated net realized gain (loss) on investments | (593,975 | ) | ||||
Accumulated net unrealized appreciation | ||||||
(depreciation) on investments | (424,244 | ) | ||||
Net Assets ($) | 329,242,198 | |||||
Net Asset Value Per Share | ||||||
Class A | Class C | Class I | Class Y | Class Z | ||
Net Assets ($) | 204,068,932 | 11,747,082 | 9,023,367 | 1,029 | 104,401,788 | |
Shares Outstanding | 17,791,739 | 1,025,784 | 786,609 | 89.69 | 9,103,790 | |
Net Asset Value | ||||||
Per Share ($) | 11.47 | 11.45 | 11.47 | 11.47 | 11.47 | |
See notes to financial statements. |
18
STATEMENT OF OPERATIONS
Six Months Ended October 31, 2013 (Unaudited)
Investment Income ($): | ||
Interest Income | 7,215,271 | |
Expenses: | ||
Management fee—Note 3(a) | 966,893 | |
Shareholder servicing costs—Note 3(c) | 369,920 | |
Distribution fees—Note 3(b) | 50,951 | |
Professional fees | 27,854 | |
Registration fees | 18,641 | |
Custodian fees—Note 3(c) | 16,252 | |
Trustees’ fees and expenses—Note 3(d) | 9,771 | |
Prospectus and shareholders’ reports | 6,216 | |
Loan commitment fees—Note 2 | 1,590 | |
Miscellaneous | 21,827 | |
Total Expenses | 1,489,915 | |
Less—reduction in fees due to earnings credits—Note 3(c) | (114 | ) |
Net Expenses | 1,489,801 | |
Investment Income—Net | 5,725,470 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments | (255,698 | ) |
Net unrealized appreciation (depreciation) on investments | (28,118,131 | ) |
Net Realized and Unrealized Gain (Loss) on Investments | (28,373,829 | ) |
Net (Decrease) in Net Assets Resulting from Operations | (22,648,359 | ) |
See notes to financial statements. |
The Fund | 19 |
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
October 31, 2013 | Year Ended | |||
(Unaudited)a | April 30, 2013 | |||
Operations ($): | ||||
Investment income—net | 5,725,470 | 12,070,470 | ||
Net realized gain (loss) on investments | (255,698 | ) | 420,757 | |
Net unrealized appreciation | ||||
(depreciation) on investments | (28,118,131 | ) | 5,400,756 | |
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | (22,648,359 | ) | 17,891,983 | |
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A | (3,507,222 | ) | (7,360,932 | ) |
Class C | (164,711 | ) | (386,785 | ) |
Class I | (182,230 | ) | (440,751 | ) |
Class Y | (6 | ) | — | |
Class Z | (1,863,244 | ) | (3,859,875 | ) |
Net realized gain on investments: | ||||
Class A | — | (569,762 | ) | |
Class C | — | (40,438 | ) | |
Class I | — | (35,345 | ) | |
Class Z | — | (275,082 | ) | |
Total Dividends | (5,717,413 | ) | (12,968,970 | ) |
Beneficial Interest Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A | 2,562,319 | 26,531,322 | ||
Class C | 141,306 | 2,198,197 | ||
Class I | 1,516,444 | 7,784,011 | ||
Class Y | 1,000 | — | ||
Class Z | 1,342,427 | 6,045,162 |
20
Six Months Ended | ||||
October 31, 2013 | Year Ended | |||
(Unaudited)a | April 30, 2013 | |||
Beneficial Interest Transactions ($) (continued): | ||||
Dividends reinvested: | ||||
Class A | 2,708,763 | 5,838,337 | ||
Class C | 129,350 | 315,905 | ||
Class I | 92,541 | 261,740 | ||
Class Z | 1,460,750 | 3,142,328 | ||
Cost of shares redeemed: | ||||
Class A | (23,169,918 | ) | (23,202,561 | ) |
Class C | (3,866,782 | ) | (2,037,144 | ) |
Class I | (3,768,973 | ) | (9,047,573 | ) |
Class Z | (6,378,631 | ) | (9,026,854 | ) |
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | (27,229,404 | ) | 8,802,870 | |
Total Increase (Decrease) in Net Assets | (55,595,176 | ) | 13,725,883 | |
Net Assets ($): | ||||
Beginning of Period | 384,837,374 | 371,111,491 | ||
End of Period | 329,242,198 | 384,837,374 | ||
Undistributed investment income—net | 8,057 | — |
The Fund | 21 |
STATEMENT OF CHANGES IN NET ASSETS (continued)
Six Months Ended | ||||
October 31, 2013 | Year Ended | |||
(Unaudited)a | April 30, 2013 | |||
Capital Share Transactions: | ||||
Class Ab | ||||
Shares sold | 217,077 | 2,140,455 | ||
Shares issued for dividends reinvested | 234,226 | 470,956 | ||
Shares redeemed | (1,999,797 | ) | (1,872,114 | ) |
Net Increase (Decrease) in Shares Outstanding | (1,548,494 | ) | 739,297 | |
Class Cb | ||||
Shares sold | 12,070 | 177,520 | ||
Shares issued for dividends reinvested | 11,198 | 25,519 | ||
Shares redeemed | (331,482 | ) | (165,401 | ) |
Net Increase (Decrease) in Shares Outstanding | (308,214 | ) | 37,638 | |
Class I | ||||
Shares sold | 130,242 | 626,623 | ||
Shares issued for dividends reinvested | 7,980 | 21,107 | ||
Shares redeemed | (327,477 | ) | (735,171 | ) |
Net Increase (Decrease) in Shares Outstanding | (189,255 | ) | (87,441 | ) |
Class Y | ||||
Shares sold | 89.69 | — | ||
Class Z | ||||
Shares sold | 116,209 | 488,690 | ||
Shares issued for dividends reinvested | 126,361 | 253,555 | ||
Shares redeemed | (552,798 | ) | (728,279 | ) |
Net Increase (Decrease) in Shares Outstanding | (310,228 | ) | 13,966 |
a Effective September 3, 2013, the fund commenced offering ClassY shares. |
b During the period ended October 31, 2013, 16,378 Class C shares representing $201,623 were exchanged for |
16,365 Class A shares. |
See notes to financial statements.
22
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||||
October 31, 2013 | Year Ended April 30, | |||||||||||
Class A Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 12.39 | 12.23 | 11.32 | 11.68 | 11.16 | 11.55 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .19 | .38 | .44 | .45 | .47 | .47 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (.92 | ) | .19 | .91 | (.36 | ) | .52 | (.39 | ) | |||
Total from Investment Operations | (.73 | ) | .57 | 1.35 | .09 | .99 | .08 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.19 | ) | (.38 | ) | (.44 | ) | (.45 | ) | (.47 | ) | (.47 | ) |
Dividends from net realized | ||||||||||||
gain on investments | — | (.03 | ) | — | — | — | — | |||||
Total Distributions | (.19 | ) | (.41 | ) | (.44 | ) | (.45 | ) | (.47 | ) | (.47 | ) |
Net asset value, end of period | 11.47 | 12.39 | 12.23 | 11.32 | 11.68 | 11.16 | ||||||
Total Return (%)b | (5.91 | )c | 4.74 | 12.07 | .75 | 8.98 | .86 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .89 | d | .90 | .91 | .91 | .90 | .93 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .89 | d | .90 | .91 | .91 | .90 | .93 | |||||
Ratio of interest and expense | ||||||||||||
related to floating rate notes | ||||||||||||
issued to average net assets | — | — | — | — | — | .02 | ||||||
Ratio of net investment income | ||||||||||||
to average net assets | 3.21 | d | 3.10 | 3.69 | 3.90 | 4.07 | 4.29 | |||||
Portfolio Turnover Rate | 2.67 | c | 19.13 | 13.77 | 17.05 | 11.42 | 26.41 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 204,069 | 239,626 | 227,398 | 215,132 | 246,190 | 238,183 |
a | Based on average shares outstanding at each month end. |
b | Exclusive of sales charge. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
The Fund | 23 |
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||||
October 31, 2013 | Year Ended April 30, | |||||||||||
Class C Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 12.37 | 12.21 | 11.30 | 11.66 | 11.14 | 11.53 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .14 | .29 | .35 | .36 | .38 | .39 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (.92 | ) | .19 | .91 | (.36 | ) | .52 | (.39 | ) | |||
Total from Investment Operations | (.78 | ) | .48 | 1.26 | — | .90 | — | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.14 | ) | (.29 | ) | (.35 | ) | (.36 | ) | (.38 | ) | (.39 | ) |
Dividends from net realized | ||||||||||||
gain on investments | — | (.03 | ) | — | — | — | — | |||||
Total Distributions | (.14 | ) | (.32 | ) | (.35 | ) | (.36 | ) | (.38 | ) | (.39 | ) |
Net asset value, end of period | 11.45 | 12.37 | 12.21 | 11.30 | 11.66 | 11.14 | ||||||
Total Return (%)b | (6.29 | )c | 3.94 | 11.25 | (.01 | ) | 8.17 | .09 | ||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.66 | d | 1.66 | 1.67 | 1.67 | 1.66 | 1.69 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.66 | d | 1.66 | 1.67 | 1.66 | 1.66 | 1.68 | |||||
Ratio of interest and expense | ||||||||||||
related to floating rate notes | ||||||||||||
issued to average net assets | — | — | — | — | — | .02 | ||||||
Ratio of net investment income | ||||||||||||
to average net assets | 2.43 | d | 2.34 | 2.94 | 3.14 | 3.30 | 3.53 | |||||
Portfolio Turnover Rate | 2.67 | c | 19.13 | 13.77 | 17.05 | 11.42 | 26.41 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 11,747 | 16,502 | 15,823 | 16,322 | 18,466 | 15,045 |
a | Based on average shares outstanding at each month end. |
b | Exclusive of sales charge. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
24
Six Months Ended | ||||||||||||
October 31, 2013 | Year Ended April 30, | |||||||||||
Class I Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | a | |||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 12.39 | 12.22 | 11.31 | 11.68 | 11.16 | 10.13 | ||||||
Investment Operations: | ||||||||||||
Investment income—netb | .20 | .41 | .46 | .48 | .44 | .19 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (.92 | ) | .21 | .92 | (.37 | ) | .58 | 1.03 | ||||
Total from Investment Operations | (.72 | ) | .62 | 1.38 | .11 | 1.02 | 1.22 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.20 | ) | (.42 | ) | (.47 | ) | (.48 | ) | (.50 | ) | (.19 | ) |
Dividends from net realized | ||||||||||||
gain on investments | — | (.03 | ) | — | — | — | — | |||||
Total Distributions | (.20 | ) | (.45 | ) | (.47 | ) | (.48 | ) | (.50 | ) | (.19 | ) |
Net asset value, end of period | 11.47 | 12.39 | 12.22 | 11.31 | 11.68 | 11.16 | ||||||
Total Return (%) | (5.80 | )c | 5.09 | 12.38 | .92 | 9.27 | 12.10 | c | ||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .64 | d | .64 | .65 | .63 | .70 | .64 | d | ||||
Ratio of net expenses | ||||||||||||
to average net assets | .64 | d | .63 | .65 | .63 | .65 | .63 | d | ||||
Ratio of interest and expense | ||||||||||||
related to floating rate notes | ||||||||||||
issued to average net assets | — | — | — | — | — | .02 | ||||||
Ratio of net investment income | ||||||||||||
to average net assets | 3.44 | d | 3.34 | 3.90 | 4.16 | 4.30 | 4.70 | d | ||||
Portfolio Turnover Rate | 2.67 | c | 19.13 | 13.77 | 17.05 | 11.42 | 26.41 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 9,023 | 12,092 | 12,999 | 6,309 | 5,441 | 11 |
a | From December 15, 2008 (commencement of initial offering) to April 30, 2009. |
b | Based on average shares outstanding at each month end. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
The Fund | 25 |
FINANCIAL HIGHLIGHTS (continued)
Period Ended | ||
Class Y Shares | October 31, 2013 a | |
Per Share Data ($): | ||
Net asset value, beginning of period | 11.15 | |
Investment Operations: | ||
Investment income—netb | .06 | |
Net realized and unrealized | ||
gain (loss) on investments | .32 | |
Total from Investment Operations | .38 | |
Distributions: | ||
Dividends from investment income—net | (.06 | ) |
Net asset value, end of period | 11.47 | |
Total Return (%) | 3.45 | c |
Ratios/Supplemental Data (%): | ||
Ratio of total expenses to average net assets | .71 | d |
Ratio of net expenses to average net assets | .71 | d |
Ratio of net investment income to average net assets | 3.59 | d |
Portfolio Turnover Rate | 2.67 | c |
Net Assets, end of period ($ x 1,000) | 1 |
a | From September 3, 2013 (commencement of initial offering) to October 31, 2013. |
b | Based on average shares outstanding. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
26
Six Months Ended | ||||||||||||
October 31, 2013 | Year Ended April 30, | |||||||||||
Class Z Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 12.39 | 12.22 | 11.31 | 11.67 | 11.16 | 11.55 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .20 | .41 | .46 | .48 | .49 | .49 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (.92 | ) | .20 | .91 | (.37 | ) | .51 | (.39 | ) | |||
Total from Investment Operations | (.72 | ) | .61 | 1.37 | .11 | 1.00 | .10 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.20 | ) | (.41 | ) | (.46 | ) | (.47 | ) | (.49 | ) | (.49 | ) |
Dividends from net realized | ||||||||||||
gain on investments | — | (.03 | ) | — | — | — | — | |||||
Total Distributions | (.20 | ) | (.44 | ) | (.46 | ) | (.47 | ) | (.49 | ) | (.49 | ) |
Net asset value, end of period | 11.47 | 12.39 | 12.22 | 11.31 | 11.67 | 11.16 | ||||||
Total Return (%) | (5.80 | )b | 5.04 | 12.31 | .97 | 9.11 | 1.03 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .67 | c | .69 | .71 | .70 | .70 | .76 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .67 | c | .69 | .71 | .70 | .70 | .76 | |||||
Ratio of interest and expense | ||||||||||||
related to floating rate notes | ||||||||||||
issued to average net assets | — | — | — | — | — | .02 | ||||||
Ratio of net investment income | ||||||||||||
to average net assets | 3.43 | c | 3.32 | 3.89 | 4.11 | 4.27 | 4.46 | |||||
Portfolio Turnover Rate | 2.67 | b | 19.13 | 13.77 | 17.05 | 11.42 | 26.41 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 104,402 | 116,617 | 114,892 | 106,076 | 112,728 | 108,416 |
a | Based on average shares outstanding at each month end. |
b | Not annualized. |
c | Annualized. |
See notes to financial statements.
The Fund | 27 |
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus State Municipal Bond Funds (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as a non-diversified open-end management investment company, and operates as a series company that offers three series including the Dreyfus Connecticut Fund (the “fund”).The fund’s investment objective is to maximize current income exempt from federal income tax and from Connecticut state income tax, without undue risk. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary ofThe Bank of NewYork Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
At a meeting held on May 7, 2013, the Company’s Board of Trustees (the “Board”) approved effective September 3, 2013, for the fund to offer Class Y shares.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Manager, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C, Class I, ClassY and Class Z. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I shares are sold at net asset value per share only to institutional investors. Class Y shares are sold at net asset value per share to certain investors, including certain institutional investors. Class Z shares are sold at net asset value per share generally only to shareholders of the fund who received Class Z shares in exchange for their shares of a Dreyfus-managed fund as a result of the reorganization of such Dreyfus-managed fund, and who continue to maintain accounts with the fund at the time of purchase. Class Z shares generally are not available for new accounts. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses
28
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.
As of October 31, 2013, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held all of the Class Y shares of the fund.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The 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.
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).
The Fund | 29 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 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 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
30
type; indications as to values from dealers; and general market conditions. All of the preceding securities are categorized within Level 2 of the fair value hierarchy.
The Service’s procedures are reviewed by Dreyfus under the general supervision of the Board.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers.These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of October 31, 2013 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Municipal Bonds† | — | 324,522,043 | — | 324,522,043 |
† | See Statement of Investments for additional detailed categorizations. |
The Fund | 31 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
At October 31, 2013, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gain and loss from securities transactions are recorded on the identified cost basis. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when issued or delayed delivery basis may be settled a month or more after the trade date.
The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund.
(c) Dividends to shareholders: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”).To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(d) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax-exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended October 31, 2013, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes
32
interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended October 31, 2013, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended April 30, 2013 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 April 30, 2013 was as follows: tax-exempt income $12,049,889, ordinary income $205,699 and long-term capital gains $713,382. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $265 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 9, 2013, the unsecured credit facility with Citibank, N.A. was $210 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 October 31, 2013, the fund did not borrow under the Facilities.
NOTE 3—Management Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .55% of the value of the fund’s average daily net assets and is payable monthly.
The Fund | 33 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
During the period ended October 31, 2013, the Distributor retained $2,736 from commissions earned on sales of the fund’s Class A shares and $355 from CDSCs on redemptions of the fund’s Class C 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 October 31, 2013, Class C shares were charged $50,951, 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 the average daily net assets of their shares for the provision of certain services.The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts.The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services.The Distributor determines the amounts to be paid to Service Agents. During the period ended October 31, 2013, Class A and Class C shares were charged $273,383 and $16,984, respectively, pursuant to the Shareholder Services Plan.
Under the Shareholder Services Plan, Class Z shares reimburse the Distributor an amount not to exceed an annual rate of .25% of the value of Class Z shares’ average daily net assets for certain allocated expenses of providing personal services and/or maintaining shareholder accounts. The services provided may include personal services relating to shareholders 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 October 31, 2013, Class Z shares were charged $17,000 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
34
custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates DreyfusTransfer, Inc., a wholly-owned subsidiary of the Manager, 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 October 31, 2013, the fund was charged $42,325 for transfer agency services and $1,482 for cash management services.These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $114.
The fund compensates The Bank of NewYork 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 October 31, 2013, the fund was charged $16,252 pursuant to the custody agreement.
The fund compensated The Bank of New York Mellon for performing certain cash management services related to fund subscriptions and redemptions, including shareholder redemption draft processing, under a cash management agreement that was in effect until September 30, 2013 and, beginning October 1, 2013, compensates The Bank of New York Mellon for processing shareholder redemption drafts under a shareholder draft processing agreement. During the period ended October 31, 2013, the fund was charged $567 pursuant to the agreements, which is included in Shareholder servicing costs in the Statement of Operations.
During the period ended October 31, 2013, the fund was charged $4,445 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 $153,218, Distribution Plan fees $7,486, Shareholder Services Plan fees $45,745, custodian fees $10,604, Chief Compliance Officer fees $7,445 and transfer agency fees $19,787.
The Fund | 35 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(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 October 31, 2013, amounted to $9,212,640 and $31,985,040, respectively.
At October 31, 2013, accumulated net unrealized depreciation on investments was $424,244 consisting of $11,129,925 gross unrealized appreciation and $11,554,169 gross unrealized depreciation.
At October 31, 2013, 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).
36
INFORMATION ABOUT THE RENEWAL OF THE |
FUND’S MANAGEMENT AGREEMENT (Unaudited) |
At a meeting of the fund’s Board of Trustees held on July 23, 2013, 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, none of whom are “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.
The Fund | 37 |
INFORMATION ABOUT THE RENEWAL OF THE FUND’S |
MANAGEMENT AGREEMENT (Unaudited) (continued) |
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Lipper, Inc. (“Lipper”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended May 31, 2013, 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 Lipper as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds.The Board discussed the results of the comparisons and noted that the fund’s total return performance was below the Performance Group median, except for the two- and three-year periods, and above the Performance Universe median for all periods.The Board noted that there were only three other funds in the Performance Group.The Board also noted that the fund’s yield performance was at or above the Performance Group median for five of the ten one-year periods ended May 31st and above the Performance Universe median for eight of the ten one-year periods ended May 31st. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s Lipper category average.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons.The Board noted that the fund’s contractual management fee was above the Expense
38
Group median and the fund’s actual management fee and total expenses were above the Expense Group and Expense Universe medians.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Lipper category as the fund and (2) paid to Dreyfus or the Dreyfus affiliated primary employer of the fund’s primary portfolio manager(s) for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients.They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness and reasonableness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus of managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex.The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered on the advice of its counsel the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement bear a reasonable relationship to the mix of services provided by Dreyfus, including the nature, extent and quality of such
The Fund | 39 |
INFORMATION ABOUT THE RENEWAL OF THE FUND’S |
MANAGEMENT AGREEMENT (Unaudited) (continued) |
services, and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Dreyfus representatives noted that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to Dreyfus from acting as investment adviser and noted that there were no soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
The Board concluded that the nature, extent and quality of the services provided by Dreyfus are adequate and appropriate.
The Board generally was satisfied with the fund’s overall performance.
The Board concluded that the fee paid to Dreyfus was reasonable in light of the considerations described above.
The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
40
In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with Dreyfus and its affiliates, of the fund and the services provided to the fund by Dreyfus. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreement, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the same or similar arrangements in prior years.The Board determined that renewal of the Agreement was in the best interests of the fund and its shareholders.
The Fund | 41 |
For More Information
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Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
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 http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Information regarding how the fund voted proxies relating to portfolio securities for the most recent 12-month period ended June 30 is available on the SEC’s website at http://www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
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Dreyfus State |
Municipal Bond Funds, |
Dreyfus Massachusetts Fund |
SEMIANNUAL REPORT October 31, 2013
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Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes.
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents | |
THE FUND | |
2 | A Letter from the President |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
17 | Statement of Assets and Liabilities |
18 | Statement of Operations |
19 | Statement of Changes in Net Assets |
21 | Financial Highlights |
24 | Notes to Financial Statements |
33 | Information About the Renewal of the Fund’s Management Agreement |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus State
Municipal Bond Funds,
Dreyfus Massachusetts Fund
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Massachusetts Fund, a series of Dreyfus State Municipal Bond Funds, covering the six-month period from May 1, 2013, through October 31, 2013. 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.
The reporting period produced a relatively challenging environment for most fixed-income securities, as a gradually strengthening U.S. economy and expectations of more moderately stimulative monetary policies drove longer term interest rates higher and bond prices lower. Municipal bonds proved particularly sensitive to these developments, as the negative effects of rising rates were exacerbated by selling pressure among investors seeking safer havens.
We currently expect U.S. economic conditions to continue to improve in 2014, with accelerating growth and credit conditions supported by the fading drags of tighter federal fiscal policies and downsizing on the state and local levels. Moreover, inflation is likely to remain muted, so monetary policy can remain stimulative. Globally, we anticipate stronger growth in developed countries due to past and continuing monetary ease, while emerging markets seem poised for moderate economic expansion despite recently negative investor sentiment. For more information on how these observations may affect your investments, we encourage you to speak with your financial advisor.
Thank you for your continued confidence and support.
![](https://capedge.com/proxy/N-CSRS/0000806176-13-000032/smbmancsrx4x1.jpg)
J. Charles Cardona
President
The Dreyfus Corporation
November 15, 2013
2
DISCUSSION OF FUND PERFORMANCE
For the period of May 1, 2013, through October 31, 2013, as provided by Thomas Casey and David Belton, Portfolio Managers
Fund and Market Performance Overview
For the six-month period ended October 31, 2013, Class A shares of Dreyfus Massachusetts Fund, a series of Dreyfus State Municipal Bond Funds, produced a total return of –5.24%, Class C shares returned –5.60%, and Class Z shares returned –5.13%.1 In comparison, the Barclays Municipal Bond Index, the fund’s benchmark index, which is composed of bonds issued nationally and not solely within Massachusetts, achieved a total return of –3.44% for the same period.2
Selling pressure stemming from concerns about actual and anticipated interest rate changes sent municipal bonds into negative territory during the reporting period. The fund lagged its benchmark, mainly due to a relatively long duration posture and weakness among Puerto Rico municipal bonds.
The Fund’s Investment Approach
The fund seeks to maximize current income exempt from federal and Massachusetts state income taxes, without undue risk. To pursue its goal, the fund normally invests substantially all of its assets in municipal bonds that provide income exempt from federal and Massachusetts state income taxes.The fund invests at least 70% of its assets in investment-grade municipal bonds or the unrated equivalent as determined by Dreyfus. For additional yield, the fund may invest up to 30% of its assets in municipal bonds rated below investment grade or the unrated equivalent as determined by Dreyfus.The dollar-weighted average maturity of the fund’s portfolio is not restricted, but normally exceeds 10 years.
In managing the fund, 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 of various sectors and securities and to exploit pricing inefficiencies in the municipal bond market. Additionally, we trade among the market’s various sectors, such as the pre-refunded, general obligation, and revenue sectors, based on their apparent relative values.The fund generally will invest simultaneously in several of these sectors.
The Fund | 3 |
DISCUSSION OF FUND PERFORMANCE (continued)
Selling Pressure Sparked Declines Among Municipal Bonds
Municipal bonds encountered heightened volatility over the reporting period.The robust investor demand that had characterized much of 2012 failed to rematerialize in 2013, and municipal bond yields rose despite a relatively meager supply of newly issued securities.Yields of U.S.Treasury securities also generally climbed in response to improved economic trends, putting additional pressure on municipal bond prices.
In late May, remarks by Federal Reserve Board (the “Fed”) Chairman Ben Bernanke were widely interpreted as a signal that the central bank would back away from its ongoing quantitative easing program sooner than expected. This development sent longer term interest rates sharply higher, further eroding returns from municipal bonds. In July, a bankruptcy filing by the city of Detroit also intensified selling pressure, and in September, municipal bonds issued by Puerto Rico contributed to market weakness after media reports detailed the U.S. territory’s fiscal and economic problems. Yet, municipal bonds generally rallied over the final weeks of September and during October after the Fed refrained from tapering its quantitative easing program.
Despite the fiscal problems facing Detroit and Puerto Rico, credit conditions continued to improve for most states and municipalities. Massachusetts weathered the economic downturn relatively well, as evidenced by a balanced budget for its current fiscal year and an unemployment rate that has stayed below national averages.
Long Average Duration Dampened Fund Performance
The fund was undermined over the reporting period by a relatively long average duration and an emphasis on longer term securities, which magnified the impact of rising long-term interest rates. Relative performance also was hurt by a position in Puerto Rico bonds, which we believe were punished more severely than warranted by underlying credit fundamentals. In addition, the fund’s emphasis on revenue bonds proved counterproductive, particularly among those backed by hospitals, electric utilities, and special tax districts.
Our security selection strategy achieved better results in other areas, especially among bonds backed by housing projects and the state’s settlement of litigation with U.S. tobacco companies. Overweighted exposure to high-quality escrow bonds also supported relative performance, as did an underweighted position in bonds backed by municipal water and sewer facilities.
4
Finding Attractive Values in a Dislocated Market
Although market volatility may persist over the near term, we believe that improved economic conditions and restored investor demand will help lift municipal bond valuations toward historical norms over the longer term.
In the meantime, we have continued to emphasize attractive relative values, including revenue bonds that, in our analysis, have solid underlying credit fundamentals.We also have retained the fund’s Puerto Rico holdings for income and diversification purposes. In light of steep yield differences along the market’s maturity range, the fund’s average duration remains in a position that is slightly longer than market averages.
November 15, 2013
Bond funds are subject generally to interest rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
The amount of public information available about municipal bonds is generally less than that for corporate equities or bonds. Special factors, such as legislative changes, and state and local economic and business developments, may adversely affect the yield and/or value of the fund’s investments in municipal bonds. Other factors include the general conditions of the municipal bond market, the size of the particular offering, the maturity of the obligation and the rating of the issue. Changes in economic, business or political conditions relating to a particular municipal project, municipality, or state in which the fund invests may have an impact on the fund’s share price.
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 charge imposed |
on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Class |
Z is 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-Massachusetts residents, and some income may be |
subject to the federal alternative minimum tax (AMT) for certain investors. Capital gains, if any, are taxable. |
2 SOURCE: LIPPER INC. — Reflects reinvestment of dividends and, where applicable, capital gain distributions. |
The Barclays Municipal Bond Index is a widely accepted, unmanaged total return performance benchmark for the |
long-term, investment-grade, tax-exempt bond market. Index returns do not reflect fees and expenses associated with |
operating a mutual fund. Investors cannot invest directly in any index. |
The Fund | 5 |
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus State Municipal Bond Funds, Dreyfus Massachusetts Fund from May 1, 2013 to October 31, 2013. 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 October 31, 2013
Class A | Class C | Class Z | ||||
Expenses paid per $1,000† | $ | 4.56 | $ | 8.33 | $ | 3.49 |
Ending value (after expenses) | $ | 946.60 | $ | 944.00 | $ | 948.70 |
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 October 31, 2013
Class A | Class C | Class Z | ||||
Expenses paid per $1,000† | $ | 4.74 | $ | 8.64 | $ | 3.62 |
Ending value (after expenses) | $ | 1,020.52 | $ | 1,016.64 | $ | 1,021.63 |
Expenses are equal to the fund’s annualized expense ratio of .93% for Class A, 1.70% for Class C and .71% for |
Class Z, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half |
year period). |
6
STATEMENT OF INVESTMENTS |
October 31, 2013 (Unaudited) |
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments—98.3% | Rate (%) | Date | Amount ($) | Value ($) | |
Massachusetts—86.1% | |||||
Boston Housing Authority, | |||||
Capital Program Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 5.00 | 4/1/24 | 1,900,000 | 2,020,441 | |
Boston Industrial Development | |||||
Financing Authority, Sewage | |||||
Facility Revenue (Harbor Electric | |||||
Energy Company Project) | 7.38 | 5/15/15 | 640,000 | 643,072 | |
Boston Water and Sewer Commission, | |||||
Revenue (Prerefunded) | 5.00 | 11/1/14 | 2,000,000 | a | 2,096,780 |
Cambridge, | |||||
GO | 5.00 | 1/1/20 | 2,000,000 | 2,402,960 | |
Marblehead, | |||||
GO (Prerefunded) | 5.00 | 8/15/14 | 1,835,000 | a | 1,905,446 |
Massachusetts, | |||||
GO | 5.00 | 8/1/22 | 2,000,000 | 2,420,740 | |
Massachusetts, | |||||
GO | 5.25 | 8/1/22 | 2,650,000 | 3,259,633 | |
Massachusetts, | |||||
GO | 5.25 | 8/1/23 | 1,000,000 | 1,233,450 | |
Massachusetts, | |||||
GO | 0.73 | 11/1/25 | 5,000,000 | b | 4,515,200 |
Massachusetts, | |||||
GO (Consolidated Loan) | 5.50 | 8/1/20 | 1,000,000 | 1,233,550 | |
Massachusetts, | |||||
GO (Insured; AMBAC) | 5.50 | 8/1/30 | 1,750,000 | 2,154,180 | |
Massachusetts, | |||||
GO (Insured; Assured Guaranty | |||||
Municipal Corp.) | 5.25 | 9/1/23 | 2,500,000 | 3,086,150 | |
Massachusetts, | |||||
Special Obligation Dedicated | |||||
Tax Revenue (Insured; National | |||||
Public Finance Guarantee Corp.) | 5.50 | 1/1/23 | 3,000,000 | 3,562,650 | |
Massachusetts Bay Transportation | |||||
Authority, Assessment Revenue | 5.25 | 7/1/34 | 2,500,000 | 2,739,175 | |
Massachusetts Bay Transportation | |||||
Authority, Assessment | |||||
Revenue (Prerefunded) | 5.00 | 7/1/15 | 2,400,000 | a | 2,588,424 |
The Fund | 7 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Massachusetts (continued) | |||||
Massachusetts Bay Transportation | |||||
Authority, GO (General | |||||
Transportation System) | 7.00 | 3/1/21 | 425,000 | 537,740 | |
Massachusetts Bay Transportation | |||||
Authority, GO (General | |||||
Transportation System) | |||||
(Escrowed to Maturity) | 7.00 | 3/1/21 | 425,000 | 474,083 | |
Massachusetts Bay Transportation | |||||
Authority, Senior Sales | |||||
Tax Revenue | 5.00 | 7/1/21 | 1,000,000 | 1,202,820 | |
Massachusetts Bay Transportation | |||||
Authority, Senior Sales Tax | |||||
Revenue (Insured; National | |||||
Public Finance Guarantee Corp.) | 5.50 | 7/1/27 | 3,000,000 | 3,656,370 | |
Massachusetts Clean Energy | |||||
Cooperative Corporation, | |||||
Massachusetts Clean Energy | |||||
Cooperative Revenue | 5.00 | 7/1/24 | 2,580,000 | 2,989,007 | |
Massachusetts College Building | |||||
Authority, Project Revenue | 5.00 | 5/1/27 | 2,000,000 | 2,234,520 | |
Massachusetts College Building | |||||
Authority, Project Revenue | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | |||||
(Escrowed to Maturity) | 0.00 | 5/1/26 | 5,385,000 | c | 3,550,654 |
Massachusetts College Building | |||||
Authority, Project Revenue | |||||
(Insured; XLCA) | 5.50 | 5/1/28 | 1,450,000 | 1,679,912 | |
Massachusetts Department of | |||||
Transportation, Metropolitan | |||||
Highway System Senior Revenue | 5.00 | 1/1/27 | 4,000,000 | 4,275,080 | |
Massachusetts Development Finance | |||||
Agency, Higher Education | |||||
Revenue (Emerson College Issue) | 5.00 | 1/1/22 | 1,000,000 | 1,058,400 | |
Massachusetts Development Finance | |||||
Agency, Revenue (Berklee | |||||
College of Music Issue) | 5.00 | 10/1/31 | 1,000,000 | 1,052,000 | |
Massachusetts Development Finance | |||||
Agency, Revenue (Brandeis | |||||
University Issue) | 5.00 | 10/1/26 | 1,250,000 | 1,380,588 |
8
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Massachusetts (continued) | |||||
Massachusetts Development Finance | |||||
Agency, Revenue (Brandeis | |||||
University Issue) | 5.00 | 10/1/29 | 1,475,000 | 1,591,953 | |
Massachusetts Development Finance | |||||
Agency, Revenue (Milton | |||||
Academy Issue) | 5.00 | 9/1/30 | 2,000,000 | 2,171,980 | |
Massachusetts Development Finance | |||||
Agency, Revenue (Noble and | |||||
Greenough School Issue) | 5.00 | 4/1/21 | 600,000 | 706,764 | |
Massachusetts Development Finance | |||||
Agency, Revenue (North Hill | |||||
Communities Issue) | 6.50 | 11/15/43 | 2,000,000 | 1,908,800 | |
Massachusetts Development Finance | |||||
Agency, Revenue (Partners | |||||
HealthCare System Issue) | 5.38 | 7/1/41 | 4,000,000 | 4,150,400 | |
Massachusetts Development Finance | |||||
Agency, Revenue (Suffolk | |||||
University Issue) | 5.00 | 7/1/30 | 1,000,000 | 1,006,690 | |
Massachusetts Development Finance | |||||
Agency, Revenue (Tufts Medical | |||||
Center Issue) | 5.50 | 1/1/22 | 1,500,000 | 1,661,070 | |
Massachusetts Development Finance | |||||
Agency, Revenue (UMass | |||||
Memorial Issue) | 5.50 | 7/1/31 | 500,000 | 521,055 | |
Massachusetts Development Finance | |||||
Agency, Revenue (Wheelock | |||||
College Issue) | 5.25 | 10/1/37 | 2,500,000 | 2,479,700 | |
Massachusetts Development Finance | |||||
Agency, Revenue (Whitehead | |||||
Institute for Biomedical | |||||
Research Issue) | 5.00 | 6/1/23 | 1,350,000 | 1,568,065 | |
Massachusetts Development | |||||
Finance Agency, SWDR | |||||
(Dominion Energy Brayton | |||||
Point Issue) (Prerefunded) | 5.00 | 8/1/16 | 2,000,000 | a | 2,235,160 |
Massachusetts Educational | |||||
Financing Authority, Education | |||||
Loan Revenue (Issue E) | |||||
(Insured; AMBAC) | 4.70 | 1/1/27 | 4,750,000 | 4,582,325 |
The Fund | 9 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Massachusetts (continued) | ||||
Massachusetts Educational | ||||
Financing Authority, Education | ||||
Loan Revenue (Issue K) | 5.25 | 7/1/29 | 2,000,000 | 1,960,120 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Community | ||||
Colleges Program Issue) | ||||
(Insured; AMBAC) | 5.25 | 10/1/26 | 2,845,000 | 2,846,764 |
Massachusetts Health and | ||||
Educational Facilities Authority, | ||||
Revenue (Dana-Farber Cancer | ||||
Institute Issue) | 5.25 | 12/1/27 | 1,000,000 | 1,091,030 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Harvard | ||||
University Issue) | 5.00 | 12/15/24 | 2,350,000 | 2,736,669 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue | ||||
(Massachusetts Eye and | ||||
Ear Infirmary Issue) | 5.00 | 7/1/20 | 1,000,000 | 1,106,940 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue | ||||
(Massachusetts Eye and | ||||
Ear Infirmary Issue) | 5.38 | 7/1/35 | 1,000,000 | 1,002,140 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue | ||||
(Massachusetts Institute of | ||||
Technology Issue) | 5.25 | 7/1/33 | 4,000,000 | 4,832,360 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Partners | ||||
HealthCare System Issue) | 5.00 | 7/1/19 | 1,000,000 | 1,177,280 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Partners | ||||
HealthCare System Issue) | 5.25 | 7/1/29 | 1,000,000 | 1,067,990 |
10
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Massachusetts (continued) | ||||
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Partners | ||||
HealthCare System Issue) | 5.00 | 7/1/47 | 3,950,000 | 4,061,666 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Suffolk | ||||
University Issue) | 6.00 | 7/1/24 | 1,000,000 | 1,130,740 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Tufts | ||||
University Issue) | 5.50 | 8/15/18 | 1,625,000 | 1,944,069 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Tufts | ||||
University Issue) | 5.38 | 8/15/38 | 3,000,000 | 3,298,620 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (UMass | ||||
Memorial Issue) | 5.25 | 7/1/25 | 1,895,000 | 1,986,491 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (UMass | ||||
Memorial Issue) | 5.00 | 7/1/33 | 1,070,000 | 1,070,524 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Wheaton | ||||
College Issue) | 5.00 | 1/1/30 | 2,405,000 | 2,503,124 |
Massachusetts Housing Finance | ||||
Agency, Housing Revenue | 5.00 | 12/1/24 | 1,160,000 | 1,166,809 |
Massachusetts Housing Finance | ||||
Agency, Housing Revenue | 5.00 | 12/1/26 | 1,200,000 | 1,205,376 |
Massachusetts Housing Finance | ||||
Agency, Housing Revenue | 5.00 | 12/1/28 | 2,000,000 | 2,017,620 |
Massachusetts Housing Finance | ||||
Agency, Housing Revenue | 5.00 | 6/1/30 | 350,000 | 351,295 |
Massachusetts Housing Finance | ||||
Agency, Housing Revenue | 5.25 | 12/1/33 | 1,350,000 | 1,350,040 |
The Fund | 11 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Massachusetts (continued) | |||||
Massachusetts Housing Finance | |||||
Agency, Housing Revenue | 5.10 | 12/1/37 | 2,130,000 | 2,131,981 | |
Massachusetts Housing Finance | |||||
Agency, Housing Revenue | 5.20 | 12/1/37 | 1,905,000 | 1,906,143 | |
Massachusetts Housing Finance | |||||
Agency, SFHR | 4.75 | 12/1/30 | 1,205,000 | 1,205,651 | |
Massachusetts Port Authority, | |||||
Revenue | 5.00 | 7/1/25 | 1,500,000 | 1,718,190 | |
Massachusetts Port Authority, | |||||
Revenue | 5.00 | 7/1/27 | 5,475,000 | 6,100,081 | |
Massachusetts School Building | |||||
Authority, Senior Dedicated | |||||
Sales Tax Revenue | 5.00 | 8/15/21 | 6,610,000 | 7,936,230 | |
Massachusetts School Building | |||||
Authority, Senior Dedicated | |||||
Sales Tax Revenue | 5.00 | 8/15/22 | 2,000,000 | 2,406,360 | |
Massachusetts School Building | |||||
Authority, Senior Dedicated | |||||
Sales Tax Revenue | 5.00 | 10/15/35 | 4,000,000 | 4,253,360 | |
Massachusetts Water Pollution | |||||
Abatement Trust, State | |||||
Revolving Fund Bonds | 5.00 | 8/1/27 | 1,535,000 | 1,735,624 | |
Massachusetts Water Resources | |||||
Authority, General Revenue | 5.00 | 8/1/25 | 2,000,000 | 2,293,680 | |
Massachusetts Water Resources | |||||
Authority, General Revenue | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 5.25 | 8/1/21 | 1,405,000 | 1,613,952 | |
Massachusetts Water Resources | |||||
Authority, General Revenue | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 5.25 | 8/1/26 | 1,875,000 | 2,126,512 | |
Massachusetts Water Resources | |||||
Authority, General Revenue | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | |||||
(Prerefunded) | 5.25 | 8/1/17 | 95,000 | a | 110,945 |
12
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Massachusetts (continued) | |||||
Metropolitan Boston Transit | |||||
Parking Corporation, | |||||
Systemwide Senior Lien | |||||
Parking Revenue | 5.00 | 7/1/24 | 1,320,000 | 1,485,132 | |
Sandwich, | |||||
GO (Insured; National Public | |||||
Finance Guarantee Corp.) | |||||
(Prerefunded) | 5.00 | 7/15/15 | 1,000,000 | a | 1,090,220 |
U.S. Related—12.2% | |||||
Children’s Trust Fund of Puerto | |||||
Rico, Tobacco Settlement | |||||
Asset-Backed Bonds | 5.38 | 5/15/33 | 1,515,000 | 1,423,433 | |
Children’s Trust Fund of Puerto | |||||
Rico, Tobacco Settlement | |||||
Asset-Backed Bonds | 5.50 | 5/15/39 | 1,245,000 | 1,112,071 | |
Children’s Trust Fund of Puerto | |||||
Rico, Tobacco Settlement | |||||
Asset-Backed Bonds | 0.00 | 5/15/50 | 5,000,000 | c | 294,750 |
Guam, | |||||
Business Privilege | |||||
Tax Revenue | 5.13 | 1/1/42 | 1,000,000 | 1,000,920 | |
Guam, | |||||
Hotel Occupancy | |||||
Tax Revenue | 5.00 | 11/1/17 | 1,000,000 | 1,096,850 | |
Guam Power Authority, | |||||
Revenue | 5.50 | 10/1/30 | 1,000,000 | 1,021,270 | |
Puerto Rico Aqueduct and Sewer | |||||
Authority, Senior Lien Revenue | 5.13 | 7/1/37 | 310,000 | 228,172 | |
Puerto Rico Aqueduct and Sewer | |||||
Authority, Senior Lien Revenue | 6.00 | 7/1/38 | 1,000,000 | 787,760 | |
Puerto Rico Commonwealth, | |||||
Public Improvement GO | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 6.00 | 7/1/27 | 1,000,000 | 897,330 | |
Puerto Rico Commonwealth, | |||||
Public Improvement GO | |||||
(Insured; XLCA) | 5.25 | 7/1/17 | 1,460,000 | 1,323,636 |
The Fund | 13 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
U.S. Related (continued) | |||||
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.25 | 7/1/27 | 2,500,000 | 1,886,700 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.00 | 7/1/32 | 1,000,000 | 724,640 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.25 | 7/1/40 | 1,000,000 | 734,780 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.00 | 7/1/42 | 190,000 | 134,661 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 5.25 | 7/1/30 | 1,000,000 | 839,720 | |
Puerto Rico Infrastructure | |||||
Financing Authority, Special | |||||
Tax Revenue (Insured; AMBAC) | 0.00 | 7/1/35 | 6,840,000 | c | 1,191,665 |
Puerto Rico Infrastructure | |||||
Financing Authority, Special | |||||
Tax Revenue (Insured; FGIC) | 5.50 | 7/1/19 | 1,225,000 | 1,019,531 | |
Puerto Rico Sales Tax Financing | |||||
Corporation, Sales Tax Revenue | |||||
(First Subordinate Series) | 5.38 | 8/1/39 | 1,000,000 | 799,210 | |
Puerto Rico Sales Tax Financing | |||||
Corporation, Sales Tax Revenue | |||||
(First Subordinate Series) | 6.00 | 8/1/42 | 4,500,000 | 3,896,010 | |
Virgin Islands Public Finance | |||||
Authority, Revenue (Virgin | |||||
Islands Matching Fund Loan Note) | 5.00 | 10/1/25 | 2,500,000 | 2,631,925 | |
Total Long-Term Municipal Investments | |||||
(cost $184,156,301) | 185,603,749 |
14
Short-Term Municipal | Coupon | Maturity | Principal | ||
Investment—.3% | Rate (%) | Date | Amount ($) | Value ($) | |
Massachusetts; | |||||
Massachusetts Health and | |||||
Educational Facilities | |||||
Authority, Revenue (Baystate | |||||
Medical Center Issue) (LOC; | |||||
Wells Fargo Bank) | |||||
(cost $500,000) | 0.04 | 11/1/13 | 500,000 | d | 500,000 |
Total Investments (cost $184,656,301) | 98.6 | % | 186,103,749 | ||
Cash and Receivables (Net) | 1.4 | % | 2,634,643 | ||
Net Assets | 100.0 | % | 188,738,392 |
a These securities are prerefunded; the date shown represents the prerefunded date. Bonds which are prerefunded are |
collateralized by U.S. Government securities which are held in escrow and are used to pay principal and interest on |
the municipal issue and to retire the bonds in full at the earliest refunding date. |
b Variable rate security—interest rate subject to periodic change. |
c Security issued with a zero coupon. Income is recognized through the accretion of discount. |
d Variable rate demand note—rate shown is the interest rate in effect at October 31, 2013. Maturity date represents |
the next demand date, or the ultimate maturity date if earlier. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Education | 24.6 | Utility-Water and Sewer | 3.7 |
Special Tax | 16.8 | Asset-Backed | 1.5 |
Transportation Services | 11.5 | City | 1.3 |
Health Care | 9.4 | Pollution Control | .9 |
State/Territory | 8.2 | Industrial | .3 |
Pre-Refunded | 7.5 | Other | 1.4 |
Housing | 7.1 | ||
Utility-Electric | 4.4 | 98.6 | |
† Based on net assets. | |||
See notes to financial statements. |
The Fund | 15 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Summary of Abbreviations | |||
ABAG | Association of Bay Area | ACA | American Capital Access |
Governments | |||
AGC | ACE Guaranty Corporation | AGIC | Asset Guaranty Insurance Company |
AMBAC | American Municipal Bond | ARRN | Adjustable Rate |
Assurance Corporation | 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 | EIR | Environmental Improvement |
Revenue | Revenue | ||
FGIC | Financial Guaranty | FHA | Federal Housing |
Insurance Company | Administration | ||
FHLB | Federal Home | FHLMC | Federal Home Loan Mortgage |
Loan Bank | Corporation | ||
FNMA | Federal National | GAN | Grant Anticipation Notes |
Mortgage Association | |||
GIC | Guaranteed Investment | GNMA | Government National Mortgage |
Contract | Association | ||
GO | General Obligation | HR | Hospital Revenue |
IDB | Industrial Development Board | IDC | Industrial Development Corporation |
IDR | Industrial Development | LIFERS | Long Inverse Floating |
Revenue | 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 | PUTTERS | Puttable Tax-Exempt Receipts |
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 | SPEARS | Short Puttable Exempt |
Mortgage Agency | 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 |
16
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2013 (Unaudited)
Cost | Value | ||
Assets ($): | |||
Investments in securities—See Statement of Investments | 184,656,301 | 186,103,749 | |
Cash | 344,065 | ||
Interest receivable | 2,518,806 | ||
Prepaid expenses | 18,128 | ||
188,984,748 | |||
Liabilities ($): | |||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 123,102 | ||
Payable for shares of Beneficial Interest redeemed | 74,743 | ||
Accrued expenses | 48,511 | ||
246,356 | |||
Net Assets ($) | 188,738,392 | ||
Composition of Net Assets ($): | |||
Paid-in capital | 186,879,934 | ||
Accumulated undistributed investment income—net | 7,510 | ||
Accumulated net realized gain (loss) on investments | 403,500 | ||
Accumulated net unrealized appreciation | |||
(depreciation) on investments | 1,447,448 | ||
Net Assets ($) | 188,738,392 | ||
Net Asset Value Per Share | |||
Class A | Class C | Class Z | |
Net Assets ($) | 34,960,852 | 3,663,097 | 150,114,443 |
Shares Outstanding | 3,094,932 | 323,995 | 13,290,026 |
Net Asset Value Per Share ($) | 11.30 | 11.31 | 11.30 |
See notes to financial statements. |
The Fund | 17 |
STATEMENT OF OPERATIONS |
Six Months Ended October 31, 2013 (Unaudited) |
Investment Income ($): | ||
Interest Income | 4,004,883 | |
Expenses: | ||
Management fee—Note 3(a) | 551,592 | |
Shareholder servicing costs—Note 3(c) | 125,640 | |
Professional fees | 26,570 | |
Distribution fees—Note 3(b) | 14,644 | |
Registration fees | 14,477 | |
Custodian fees—Note 3(c) | 11,167 | |
Prospectus and shareholders’ reports | 7,404 | |
Trustees’ fees and expenses—Note 3(d) | 6,842 | |
Loan commitment fees—Note 2 | 1,058 | |
Miscellaneous | 18,262 | |
Total Expenses | 777,656 | |
Less—reduction in fees due to earnings credits—Note 3(c) | (80 | ) |
Net Expenses | 777,576 | |
Investment Income—Net | 3,227,307 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments | (45,793 | ) |
Net unrealized appreciation (depreciation) on investments | (14,643,521 | ) |
Net Realized and Unrealized Gain (Loss) on Investments | (14,689,314 | ) |
Net (Decrease) in Net Assets Resulting from Operations | (11,462,007 | ) |
See notes to financial statements. |
18
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
October 31, 2013 | Year Ended | |||
(Unaudited) | April 30, 2013 | |||
Operations ($): | ||||
Investment income—net | 3,227,307 | 6,668,956 | ||
Net realized gain (loss) on investments | (45,793 | ) | 505,218 | |
Net unrealized appreciation | ||||
(depreciation) on investments | (14,643,521 | ) | 2,624,519 | |
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | (11,462,007 | ) | 9,798,693 | |
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A | (580,857 | ) | (1,204,038 | ) |
Class C | (44,645 | ) | (93,309 | ) |
Class Z | (2,594,295 | ) | (5,357,064 | ) |
Net realized gain on investments: | ||||
Class A | — | (15,966 | ) | |
Class C | — | (1,706 | ) | |
Class Z | — | (66,820 | ) | |
Total Dividends | (3,219,797 | ) | (6,738,903 | ) |
Beneficial Interest Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A | 1,660,205 | 4,574,778 | ||
Class C | 68,989 | 497,831 | ||
Class Z | 1,849,885 | 11,717,343 | ||
Dividends reinvested: | ||||
Class A | 476,809 | 945,516 | ||
Class C | 16,976 | 37,607 | ||
Class Z | 2,098,009 | 4,202,677 | ||
Cost of shares redeemed: | ||||
Class A | (6,021,103 | ) | (4,131,502 | ) |
Class C | (527,228 | ) | (257,433 | ) |
Class Z | (13,413,367 | ) | (13,435,538 | ) |
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | (13,790,825 | ) | 4,151,279 | |
Total Increase (Decrease) in Net Assets | (28,472,629 | ) | 7,201,069 | |
Net Assets ($): | ||||
Beginning of Period | 217,211,021 | 210,009,952 | ||
End of Period | 188,738,392 | 217,211,021 | ||
Undistributed investment income—net | 7,510 | — |
The Fund | 19 |
STATEMENT OF CHANGES IN NET ASSETS (continued)
Six Months Ended | ||||
October 31, 2013 | Year Ended | |||
(Unaudited) | April 30, 2013 | |||
Capital Share Transactions: | ||||
Class Aa | ||||
Shares sold | 142,751 | 377,532 | ||
Shares issued for dividends reinvested | 41,975 | 78,152 | ||
Shares redeemed | (530,497 | ) | (340,946 | ) |
Net Increase (Decrease) in Shares Outstanding | (345,771 | ) | 114,738 | |
Class Ca | ||||
Shares sold | 6,101 | 40,941 | ||
Shares issued for dividends reinvested | 1,494 | 3,106 | ||
Shares redeemed | (45,717 | ) | (21,262 | ) |
Net Increase (Decrease) in Shares Outstanding | (38,122 | ) | 22,785 | |
Class Z | ||||
Shares sold | 160,177 | 968,273 | ||
Shares issued for dividends reinvested | 184,749 | 347,463 | ||
Shares redeemed | (1,186,504 | ) | (1,111,998 | ) |
Net Increase (Decrease) in Shares Outstanding | (841,578 | ) | 203,738 |
a During the period ended October 31, 2013, 19,810 Class C shares representing $238,914 were exchanged for |
19,843 Class A shares. |
See notes to financial statements.
20
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||||
October 31, 2013 | Year Ended April 30, | |||||||||||
Class A Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 12.11 | 11.94 | 11.05 | 11.44 | 10.91 | 11.29 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .18 | .36 | .41 | .43 | .45 | .46 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (.81 | ) | .17 | .94 | (.33 | ) | .54 | (.36 | ) | |||
Total from Investment Operations | (.63 | ) | .53 | 1.35 | .10 | .99 | .10 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.18 | ) | (.36 | ) | (.41 | ) | (.43 | ) | (.45 | ) | (.46 | ) |
Dividends from net realized | ||||||||||||
gain on investments | — | (.00 | )b | (.05 | ) | (.06 | ) | (.01 | ) | (.02 | ) | |
Total Distributions | (.18 | ) | (.36 | ) | (.46 | ) | (.49 | ) | (.46 | ) | (.48 | ) |
Net asset value, end of period | 11.30 | 12.11 | 11.94 | 11.05 | 11.44 | 10.91 | ||||||
Total Return (%)c | (5.24 | )d | 4.51 | 12.40 | .94 | 9.16 | 1.07 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .93 | e | .93 | .95 | .94 | .94 | .94 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .93 | e | .93 | .95 | .94 | .94 | .94 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 3.06 | e | 2.97 | 3.56 | 3.84 | 4.00 | 4.25 | |||||
Portfolio Turnover Rate | 4.45 | d | 14.28 | 11.44 | 15.03 | 12.60 | 9.04 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 34,961 | 41,675 | 39,705 | 36,232 | 41,909 | 39,079 |
a | Based on average shares outstanding at each month end. |
b | Amount represents less than $.01 per share. |
c | Exclusive of sales charge. |
d | Not annualized. |
e | Annualized. |
See notes to financial statements.
The Fund | 21 |
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||||
October 31, 2013 | Year Ended April 30, | |||||||||||
Class C Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 12.12 | 11.95 | 11.06 | 11.45 | 10.92 | 11.30 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .13 | .27 | .32 | .35 | .36 | .38 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (.81 | ) | .17 | .94 | (.33 | ) | .54 | (.36 | ) | |||
Total from Investment Operations | (.68 | ) | .44 | 1.26 | .02 | .90 | .02 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.13 | ) | (.27 | ) | (.32 | ) | (.35 | ) | (.36 | ) | (.38 | ) |
Dividends from net realized | ||||||||||||
gain on investments | — | (.00 | )b | (.05 | ) | (.06 | ) | (.01 | ) | (.02 | ) | |
Total Distributions | (.13 | ) | (.27 | ) | (.37 | ) | (.41 | ) | (.37 | ) | (.40 | ) |
Net asset value, end of period | 11.31 | 12.12 | 11.95 | 11.06 | 11.45 | 10.92 | ||||||
Total Return (%)c | (5.60 | )d | 3.72 | 11.54 | .20 | 8.33 | .32 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.70 | e | 1.69 | 1.71 | 1.68 | 1.70 | 1.69 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.70 | e | 1.69 | 1.71 | 1.68 | 1.70 | 1.69 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 2.29 | e | 2.21 | 2.79 | 3.09 | 3.21 | 3.51 | |||||
Portfolio Turnover Rate | 4.45 | d | 14.28 | 11.44 | 15.03 | 12.60 | 9.04 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 3,663 | 4,390 | 4,054 | 3,377 | 3,362 | 3,163 |
a | Based on average shares outstanding at each month end. |
b | Amount represents less than $.01 per share. |
c | Exclusive of sales charge. |
d | Not annualized. |
e | Annualized. |
See notes to financial statements.
22
Six Months Ended | ||||||||||||
October 31, 2013 | Year Ended April 30, | |||||||||||
Class Z Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 12.11 | 11.94 | 11.05 | 11.44 | 10.91 | 11.29 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .19 | .38 | .44 | .46 | .47 | .48 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (.81 | ) | .17 | .94 | (.33 | ) | .54 | (.36 | ) | |||
Total from Investment Operations | (.62 | ) | .55 | 1.38 | .13 | 1.01 | .12 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.19 | ) | (.38 | ) | (.44 | ) | (.46 | ) | (.47 | ) | (.48 | ) |
Dividends from net realized | ||||||||||||
gain on investments | — | (.00 | )b | (.05 | ) | (.06 | ) | (.01 | ) | (.02 | ) | |
Total Distributions | (.19 | ) | (.38 | ) | (.49 | ) | (.52 | ) | (.48 | ) | (.50 | ) |
Net asset value, end of period | 11.30 | 12.11 | 11.94 | 11.05 | 11.44 | 10.91 | ||||||
Total Return (%) | (5.13 | )c | 4.73 | 12.64 | 1.16 | 9.39 | 1.28 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .71 | d | .72 | .74 | .73 | .73 | .73 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .71 | d | .72 | .74 | .73 | .73 | .73 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 3.28 | d | 3.18 | 3.78 | 4.05 | 4.18 | �� | 4.46 | ||||
Portfolio Turnover Rate | 4.45 | c | 14.28 | 11.44 | 15.03 | 12.60 | 9.04 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 150,114 | 171,146 | 166,251 | 153,513 | 167,326 | 160,394 |
a | Based on average shares outstanding at each month end. |
b | Amount represents less than $.01 per share. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
The Fund | 23 |
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus State Municipal Bond Funds (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as a non-diversified open-end management investment company, and operates as a series company that offers three series, including the Dreyfus Massachusetts Fund (the “fund”).The fund’s investment objective is to maximize current income exempt from federal income tax and from Massachusetts state income tax, without undue risk.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 the Manager, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C and Class Z. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class Z shares are sold at net asset value per share generally only to shareholders of the fund who received Class Z shares in exchange for their shares of a Dreyfus-managed fund as a result of the reorganization of such Dreyfus-managed fund, and who continue to maintain accounts with the fund at the time of purchase. Class Z shares generally are not available for new accounts. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are
24
charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
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.
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.
The Fund | 25 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 Trustees (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 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 categorized within Level 2 of the fair value hierarchy.
The Service’s procedures are reviewed by Dreyfus under the general supervision of the Board.
26
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers.These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of October 31, 2013 in valuing the fund's investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Municipal Bonds† | — | 186,103,749 | — | 186,103,749 |
† See Statement of Investments for additional detailed categorizations. |
At October 31, 2013, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income, adjusted for accretion of discount and amortization of
The Fund | 27 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when issued or delayed delivery basis may be settled a month or more after the trade date.
The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund.
(c) Dividends to shareholders: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”).To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(d) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax-exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended October 31, 2013, 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 October 31, 2013, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended April 30, 2013 remains subject to examination by the Internal Revenue Service and state taxing authorities.
28
The tax character of distributions paid to shareholders during the fiscal year ended April 30, 2013 was as follows: tax-exempt income $6,654,411, ordinary income $2,956 and long-term capital gains $81,536. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $265 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 9, 2013, the unsecured credit facility with Citibank, N.A. was $210 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 October 31, 2013, the fund did not borrow under the Facilities.
NOTE 3—Management Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .55% of the value of the fund’s average daily net assets and is payable monthly.
During the period ended October 31, 2013, the Distributor retained $1,737 from commissions earned on sales of the fund’s Class A shares and $1,084 from CDSCs on redemptions of the fund’s Class C 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 October 31, 2013, Class C shares were charged $14,644 pursuant to the Distribution Plan.
The Fund | 29 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services.The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts.The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services.The Distributor determines the amounts to be paid to Service Agents. During the period ended October 31, 2013, Class A and Class C shares were charged $47,613 and $4,881, respectively, pursuant to the Shareholder Services Plan.
Under the Shareholder Services Plan, Class Z shares reimburse the Distributor an amount not to exceed an annual rate of .25% of the value of Class Z shares’ average daily net assets for certain allocated expenses for providing personal services and/or maintaining shareholder accounts.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 October 31, 2013, Class Z shares were charged $33,000 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 DreyfusTransfer, Inc., a wholly-owned subsidiary of the Manager, 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
30
basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended October 31, 2013, the fund was charged $27,806 for transfer agency services and $1,043 for cash management services.These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $80.
The fund compensates The Bank of NewYork 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 October 31, 2013, the fund was charged $11,167 pursuant to the custody agreement.
The fund compensated The Bank of New York Mellon for performing certain cash management services related to fund subscriptions and redemptions, including shareholder redemption draft processing, under a cash management agreement that was in effect until September 30, 2013 and, beginning October 1, 2013, compensates The Bank of New York Mellon for processing shareholder redemption drafts under a shareholder draft processing agreement. During the period ended October 31, 2013, the fund was charged $399 pursuant to the agreements, which is included in Shareholder servicing costs in the Statement of Operations.
During the period ended October 31, 2013, the fund was charged $4,445 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 $87,840, Distribution Plan fees $2,309, Shareholder Services Plan fees $8,209, custodian fees $7,350, Chief Compliance Officer fees $7,445 and transfer agency fees $9,949.
(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.
The Fund | 31 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended October 31, 2013, amounted to $8,781,840 and $23,336,384, respectively.
At October 31, 2013, accumulated net unrealized appreciation on investments was $1,447,448, consisting of $7,379,556 gross unrealized appreciation and $5,932,108 gross unrealized depreciation.
At October 31, 2013, 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).
32
INFORMATION ABOUT THE RENEWAL OF THE |
FUND’S MANAGEMENT AGREEMENT (Unaudited) |
At a meeting of the fund’s Board of Trustees held on July 23, 2013, 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, none of whom are “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.
The Fund | 33 |
INFORMATION ABOUT THE RENEWAL OF THE FUND’S |
MANAGEMENT AGREEMENT (Unaudited) (continued) |
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Lipper, Inc. (“Lipper”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended May 31, 2013, 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 Lipper as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds.The Board discussed the results of the comparisons and noted that the fund’s total return performance was below the Performance Group median and variously above and below the Performance Universe medians. The Board also noted that the fund’s yield performance was below the Performance Group median for all of the one-year periods ended May 31st and at or above the Performance Universe median for six of the ten one-year periods ended May 31st. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s Lipper category average and noted that the fund’s calendar year total returns were above the Lipper category average for six of the ten calendar years.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons.The Board noted that the fund’s contractual management fee was above the Expense
34
Group median and the fund’s actual management fee and total expenses were above the Expense Group and Expense Universe medians.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Lipper category as the fund and (2) paid to Dreyfus or the Dreyfus affiliated primary employer of the fund’s primary portfolio manager(s) for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients.They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness and reasonableness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus of managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit.The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus.The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex.The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered on the advice of its counsel the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement bear a reasonable relationship to the mix of services provided by Dreyfus, including the nature, extent and quality of such
The Fund | 35 |
INFORMATION ABOUT THE RENEWAL OF THE FUND’S |
MANAGEMENT AGREEMENT (Unaudited) (continued) |
services, and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Dreyfus representatives noted that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to Dreyfus from acting as investment adviser and noted that there were no soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
The Board concluded that the nature, extent and quality of the services provided by Dreyfus are adequate and appropriate.
The Board generally was satisfied with the fund’s overall performance.
The Board concluded that the fee paid to Dreyfus was reasonable in light of the considerations described above.
The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
36
In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with Dreyfus and its affiliates, of the fund and the services provided to the fund by Dreyfus.The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreement, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the same or similar arrangements in prior years.The Board determined that renewal of the Agreement was in the best interests of the fund and its shareholders.
The Fund | 37 |
For More Information
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Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
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 http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Information regarding how the fund voted proxies relating to portfolio securities for the most recent 12-month period ended June 30 is available on the SEC’s website at http://www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
![](https://capedge.com/proxy/N-CSRS/0000806176-13-000032/smbmancsrx40x2.jpg)
Dreyfus State |
Municipal Bond Funds, |
Dreyfus Pennsylvania Fund |
SEMIANNUAL REPORT October 31, 2013
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Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes.
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents | |
THE FUND | |
2 | A Letter from the President |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
17 | Statement of Assets and Liabilities |
18 | Statement of Operations |
19 | Statement of Changes in Net Assets |
21 | Financial Highlights |
24 | Notes to Financial Statements |
33 | Information About the Renewal of the Fund’s Management Agreement |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus State
Municipal Bond Funds,
Dreyfus Pennsylvania Fund
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Pennsylvania Fund, a series of Dreyfus State Municipal Bond Funds, covering the six-month period from May 1, 2013, through October 31, 2013. 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.
The reporting period produced a relatively challenging environment for most fixed-income securities, as a gradually strengthening U.S. economy and expectations of more moderately stimulative monetary policies drove longer term interest rates higher and bond prices lower. Municipal bonds proved particularly sensitive to these developments, as the negative effects of rising rates were exacerbated by selling pressure among investors seeking safer havens.
We currently expect U.S. economic conditions to continue to improve in 2014, with accelerating growth and credit conditions supported by the fading drags of tighter federal fiscal policies and downsizing on the state and local levels. Moreover, inflation is likely to remain muted, so monetary policy can remain stimulative. Globally, we anticipate stronger growth in developed countries due to past and continuing monetary ease, while emerging markets seem poised for moderate economic expansion despite recently negative investor sentiment. For more information on how these observations may affect your investments, we encourage you to speak with your financial advisor.
Thank you for your continued confidence and support.
![](https://capedge.com/proxy/N-CSRS/0000806176-13-000032/smbpancsrx4x1.jpg)
J. Charles Cardona
President
The Dreyfus Corporation
November 15, 2013
2
DISCUSSION OF FUND PERFORMANCE
For the period of May 1, 2013, through October 31, 2013, as provided by Steven Harvey and Daniel Rabasco, Portfolio Managers
Fund and Market Performance Overview
For the six-month period ended October 31, 2013, Class A shares of Dreyfus Pennsylvania Fund, a series of Dreyfus State Municipal Bond Funds, produced a total return of –4.44%, Class C shares returned –4.81%, and Class Z shares returned –4.34%.1 In comparison, the Barclays Municipal Bond Index, the fund’s benchmark index, which is composed of bonds issued nationally and not solely within Pennsylvania, achieved a total return of –3.44% for the same period.2
Selling pressure stemming from investors’ concerns about actual and anticipated interest rate changes sent the municipal bond market’s returns into negative territory during the reporting period.The fund lagged its benchmark, mainly due to weakness among Puerto Rico municipal bonds and overweighted exposure to revenue bonds.
The Fund’s Investment Approach
The fund seeks to maximize current income exempt from federal income tax and Pennsylvania state income tax, without undue risk.To pursue its goal, the fund normally invests substantially all of its assets in municipal bonds that provide income exempt from federal income tax and Pennsylvania state income tax.The fund invests at least 70% of its assets in investment-grade municipal bonds or the unrated equivalent as determined by Dreyfus. For additional yield, the fund may invest up to 30% of its assets in municipal bonds rated below investment grade 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.
In managing the fund, 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 of various sectors and securities and to exploit pricing inefficiencies in the municipal bond market. Additionally, we trade among various sectors, such as pre-refunded, general obligation and revenue sectors, based on their apparent relative values. The fund generally will invest simultaneously in several of these sectors.
The Fund | 3 |
DISCUSSION OF FUND PERFORMANCE (continued)
Selling Pressure Sparked Declines Among Municipal Bonds
Municipal bonds encountered heightened volatility over the reporting period. The robust investor demand that had characterized much of 2012 failed to rematerialize in 2013, sending municipal bond yields higher despite a relatively meager supply of newly issued securities.Yields of U.S.Treasury securities also generally climbed in response to improved economic trends, putting additional pressure on municipal bond prices.
In late May, remarks by Federal Reserve Board (the “Fed”) Chairman Ben Bernanke were widely interpreted as a signal that the central bank would back away from its ongoing quantitative easing program sooner than expected. This development sent longer term interest rates sharply higher, further eroding returns from municipal bonds. In July, a bankruptcy filing by the city of Detroit also intensified selling pressure, and in September, municipal bonds issued by Puerto Rico contributed to market weakness after media reports detailed the U.S. territory’s fiscal and economic problems. Yet, municipal bonds generally rallied over the final weeks of September and during October when the Fed refrained from tapering its quantitative easing program.
Despite the fiscal problems facing Detroit and Puerto Rico, credit conditions continued to improve for most states and municipalities. Pennsylvania generally weathered the economic downturn well. The state’s unemployment rate has remained higher than national averages, but its economy has benefited from strength in the energy, technology, and health care industries.
Puerto Rico Bonds Dampened Fund Performance
The fund’s returns over the reporting period were undermined by Puerto Rico bonds, which we believe were punished more severely than warranted by underlying credit fundamentals. In addition, we responded to market declines early in the reporting period by selling some of the fund’s high-grade holdings and redeploying the proceeds into longer-term, higher yielding revenue bonds that we regarded as more attractively valued. However, bonds with these characteristics generally weighed on relative results.
The fund achieved better results in other areas.A relatively short average duration early in the reporting period helped cushion the brunt of heightened market volatility at the time. From a security selection standpoint, bonds backed by hospitals and airports fared relatively well.
4
Finding Attractive Values in a Recovering Economy
Although market volatility may persist over the near term, we believe that improved economic conditions and restored investor demand will help lift municipal bond valuations toward historical norms over the longer term.Therefore, we have continued to emphasize longer dated revenue bonds with credit ratings in the middle of the investment-grade spectrum, and we have set the fund’s average duration in a position that is roughly in line with market averages. In our view, these strategies position the fund appropriately for any upcoming market rebounds.
November 15, 2013
Bond funds are subject generally to interest rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
The amount of public information available about municipal bonds is generally less than that for corporate equities or bonds. Special factors, such as legislative changes, and state and local economic and business developments, may adversely affect the yield and/or value of the funds investments in municipal bonds. Other factors include the general conditions of the municipal bond market, the size of the particular offering, the maturity of the obligation and the rating of the issue. Changes in economic, business or political conditions relating to a particular municipal project, municipality, or state in which the fund invests may have an impact on the funds share price.
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 charge imposed on |
redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Class Z is |
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-Pennsylvania residents, and some income may be subject to |
the federal alternative minimum tax (AMT) for certain investors. Capital gains, if any, are taxable. |
2 SOURCE: LIPPER INC. — Reflects reinvestment of dividends and, where applicable, capital gain distributions. |
The Barclays Municipal Bond Index is a widely accepted, unmanaged total return performance benchmark for the |
long-term, investment-grade, tax-exempt bond market. Index returns do not reflect fees and expenses associated with |
operating a mutual fund. Investors cannot invest directly in any index. |
The Fund | 5 |
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus State Municipal Bond Funds, Dreyfus Pennsylvania Fund from May 1, 2013 to October 31, 2013. 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 October 31, 2013 |
Class A | Class C | Class Z | ||||
Expenses paid per $1,000† | $ | 4.58 | $ | 8.36 | $ | 3.50 |
Ending value (after expenses) | $ | 955.60 | $ | 951.90 | $ | 956.60 |
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 October 31, 2013 |
Class A | Class C | Class Z | ||||
Expenses paid per $1,000† | $ | 4.74 | $ | 8.64 | $ | 3.62 |
Ending value (after expenses) | $ | 1,020.52 | $ | 1,016.64 | $ | 1,021.63 |
† Expenses are equal to the fund’s annualized expense ratio of .93% for Class A, 1.70% for Class C and .71% for |
Class Z, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half |
year period). |
6
STATEMENT OF INVESTMENTS |
October 31, 2013 (Unaudited) |
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments—97.7% | Rate (%) | Date | Amount ($) | Value ($) | |
Pennsylvania—86.3% | |||||
Adams County Industrial | |||||
Development Authority, Revenue | |||||
(Gettysburg College) | 5.00 | 8/15/25 | 1,000,000 | 1,085,350 | |
Adams County Industrial | |||||
Development Authority, Revenue | |||||
(Gettysburg College) | 5.00 | 8/15/26 | 1,000,000 | 1,075,370 | |
Allegheny County Airport | |||||
Authority, Airport Revenue | |||||
(Pittsburgh International | |||||
Airport) (Insured; Assured | |||||
Guaranty Municipal Corp.) | 5.00 | 1/1/17 | 1,000,000 | 1,117,380 | |
Allegheny County Higher Education | |||||
Building Authority, Revenue | |||||
(Carnegie Mellon University) | 5.00 | 3/1/24 | 3,150,000 | 3,647,448 | |
Allegheny County Hospital | |||||
Development Authority, HR | |||||
(South Hills Health System) | 5.13 | 5/1/29 | 1,100,000 | 1,083,819 | |
Allegheny County Port Authority, | |||||
Special Transportation Revenue | 5.25 | 3/1/22 | 1,305,000 | 1,502,708 | |
Allegheny County Sanitary | |||||
Authority, Sewer Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 5.00 | 12/1/19 | 1,500,000 | 1,763,160 | |
Beaver County Hospital Authority, | |||||
Revenue (Heritage Valley | |||||
Health System, Inc.) | 5.00 | 5/15/28 | 1,575,000 | 1,636,063 | |
Bucks County Water and Sewer | |||||
Authority, Water System | |||||
Revenue (Insured; Assured | |||||
Guaranty Municipal Corp.) | 5.00 | 12/1/29 | 1,250,000 | 1,344,513 | |
Butler County Industrial | |||||
Development Authority, Health | |||||
Care Facilities Revenue (Saint | |||||
John Lutheran Care Center | |||||
Project) (Collateralized; GNMA) | 5.80 | 4/20/29 | 4,945,000 | 4,951,874 | |
Centre County Hospital Authority, | |||||
HR (Mount Nittany Medical Center | |||||
Project) (Insured; Assured | |||||
Guaranty Corp.) (Prerefunded) | 6.13 | 11/15/14 | 2,000,000 | a | 2,123,520 |
The Fund | 7 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Pennsylvania (continued) | |||||
Charleroi Area School Authority, | |||||
School Revenue (Insured; | |||||
National Public Finance | |||||
Guarantee Corp.) | 0.00 | 10/1/20 | 2,000,000 | b | 1,599,960 |
Chester County Industrial | |||||
Development Authority, | |||||
Revenue (Avon Grove | |||||
Charter School Project) | 6.38 | 12/15/37 | 1,600,000 | 1,621,776 | |
Chester County School Authority, | |||||
School LR (Chester County | |||||
Intermediate Unit Project) | |||||
(Insured; AMBAC) | 5.00 | 4/1/25 | 2,195,000 | 2,359,186 | |
Clairton Municipal Authority, | |||||
Sewer Revenue | 5.00 | 12/1/37 | 2,000,000 | 1,937,320 | |
Commonwealth Financing Authority | |||||
of Pennsylvania, Revenue | 5.00 | 6/1/19 | 500,000 | 585,385 | |
Dauphin County General Authority, | |||||
Health System Revenue | |||||
(Pinnacle Health System Project) | 5.00 | 6/1/42 | 1,500,000 | 1,465,365 | |
Delaware County Industrial | |||||
Development Authority, Water | |||||
Facilities Revenue (Aqua | |||||
Pennsylvania, Inc. Project) | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 5.00 | 11/1/37 | 3,165,000 | 3,182,629 | |
Delaware River Port Authority, | |||||
Revenue | 5.00 | 1/1/30 | 1,500,000 | 1,587,060 | |
Donegal School District, | |||||
GO (Limited Tax Obligations) | 5.00 | 6/1/23 | 2,080,000 | 2,305,243 | |
Erie Higher Education Building | |||||
Authority, College Revenue | |||||
(Mercyhurst College Project) | 5.35 | 3/15/28 | 1,000,000 | 1,033,230 | |
Harrisburg Redevelopment | |||||
Authority, Guaranteed Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 0.00 | 11/1/16 | 1,000,000 | b | 850,780 |
Harrisburg Redevelopment | |||||
Authority, Guaranteed Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 0.00 | 5/1/18 | 2,750,000 | b | 2,135,485 |
8
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Pennsylvania (continued) | |||||
Harrisburg Redevelopment | |||||
Authority, Guaranteed Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 0.00 | 11/1/18 | 2,750,000 | b | 2,076,305 |
Harrisburg Redevelopment | |||||
Authority, Guaranteed Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 0.00 | 11/1/19 | 2,750,000 | b | 1,951,400 |
Harrisburg Redevelopment | |||||
Authority, Guaranteed Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 0.00 | 5/1/20 | 2,750,000 | b | 1,890,433 |
Harrisburg Redevelopment | |||||
Authority, Guaranteed Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 0.00 | 11/1/20 | 2,500,000 | b | 1,669,725 |
McKeesport Area School District, | |||||
GO (Insured; AMBAC) | |||||
(Escrowed to Maturity) | 0.00 | 10/1/21 | 2,915,000 | b | 2,398,724 |
McKeesport Municipal Authority, | |||||
Sewer Revenue (Insured; | |||||
Assured Guaranty Municipal Corp.) | 5.00 | 12/15/20 | 1,230,000 | 1,424,844 | |
Montgomery County Higher Education | |||||
and Health Authority, HR | |||||
(Abington Memorial Hospital | |||||
Obligated Group) | 5.00 | 6/1/31 | 1,000,000 | 1,030,570 | |
Montgomery County Industrial | |||||
Development Authority, Health | |||||
System Revenue (Jefferson | |||||
Health System) | 5.00 | 10/1/41 | 2,000,000 | 2,021,820 | |
Neshaminy School District, | |||||
GO (Insured; National Public Finance | |||||
Guarantee Corp.) (Prerefunded) | 5.00 | 4/15/14 | 1,250,000 | a | 1,277,712 |
Norristown, | |||||
GO (Insured; Radian) | 0.00 | 12/15/13 | 735,000 | b | 734,530 |
Pennsylvania Economic Development | |||||
Financing Authority, Sewage | |||||
Sludge Disposal Revenue | |||||
(Philadelphia Biosolids | |||||
Facility Project) | 6.25 | 1/1/32 | 1,000,000 | 1,001,460 |
The Fund | 9 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Pennsylvania (continued) | ||||
Pennsylvania Economic Development | ||||
Financing Authority, Unemployment | ||||
Compensation Revenue | 5.00 | 7/1/21 | 5,000,000 | 5,704,200 |
Pennsylvania Higher Educational | ||||
Facilities Authority, Revenue | ||||
(Carnegie Mellon University) | 5.00 | 8/1/21 | 3,000,000 | 3,387,120 |
Pennsylvania Higher Educational | ||||
Facilities Authority, Revenue | ||||
(Temple University) | 5.00 | 4/1/24 | 1,100,000 | 1,249,842 |
Pennsylvania Higher Educational | ||||
Facilities Authority, Revenue | ||||
(The Trustees of the | ||||
University of Pennsylvania) | 5.00 | 9/1/19 | 2,000,000 | 2,403,140 |
Pennsylvania Higher Educational | ||||
Facilities Authority, Revenue | ||||
(The Trustees of the | ||||
University of Pennsylvania) | 5.00 | 9/1/31 | 1,300,000 | 1,406,860 |
Pennsylvania Higher Educational | ||||
Facilities Authority, Revenue | ||||
(Thomas Jefferson University) | 5.00 | 3/1/40 | 1,000,000 | 1,027,230 |
Pennsylvania Higher Educational | ||||
Facilities Authority, Revenue | ||||
(University of Pennsylvania | ||||
Health System) | 5.25 | 8/15/25 | 1,000,000 | 1,108,110 |
Pennsylvania Higher Educational | ||||
Facilities Authority, Revenue | ||||
(University of Pennsylvania | ||||
Health System) | 6.00 | 8/15/26 | 2,500,000 | 2,890,650 |
Pennsylvania Housing Finance | ||||
Agency, Capital Fund | ||||
Securitization Revenue | ||||
(Insured; Assured Guaranty | ||||
Municipal Corp.) | 5.00 | 12/1/25 | 2,285,000 | 2,345,507 |
Pennsylvania Housing Finance | ||||
Agency, SFMR | 4.70 | 10/1/25 | 745,000 | 749,276 |
Pennsylvania Housing Finance | ||||
Agency, SFMR | 4.60 | 10/1/27 | 5,000,000 | 5,033,400 |
Pennsylvania Housing Finance | ||||
Agency, SFMR | 4.88 | 10/1/31 | 2,960,000 | 2,972,225 |
Pennsylvania Housing Finance | ||||
Agency, SFMR | 4.70 | 10/1/37 | 1,450,000 | 1,399,453 |
10
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Pennsylvania (continued) | |||||
Pennsylvania Industrial | |||||
Development Authority, EDR | 5.50 | 7/1/23 | 900,000 | 1,008,729 | |
Pennsylvania Industrial | |||||
Development Authority, | |||||
EDR (Prerefunded) | 5.50 | 7/1/18 | 100,000 | a | 120,444 |
Pennsylvania State University, | |||||
Revenue | 5.00 | 3/1/35 | 2,000,000 | 2,119,760 | |
Pennsylvania Turnpike Commission, | |||||
Motor License Fund-Enhanced | |||||
Turnpike Subordinate | |||||
Special Revenue | 5.00 | 12/1/37 | 5,325,000 | 5,481,715 | |
Pennsylvania Turnpike Commission, | |||||
Turnpike Revenue | |||||
(Insured; AMBAC) | 5.00 | 12/1/22 | 1,815,000 | 1,947,695 | |
Pennsylvania Turnpike Commission, | |||||
Turnpike Subordinate Revenue | 5.25 | 6/1/39 | 1,030,000 | 1,050,909 | |
Pennsylvania Turnpike Commission, | |||||
Turnpike Subordinate | |||||
Revenue (Insured; | |||||
Assured Guaranty Corp.) | 6.00 | 6/1/28 | 3,000,000 | 3,394,980 | |
Philadelphia, | |||||
Airport Revenue | 5.25 | 6/15/25 | 2,500,000 | 2,674,800 | |
Philadelphia, | |||||
Airport Revenue (Insured; | |||||
National Public Finance | |||||
Guarantee Corp.) | 5.00 | 6/15/25 | 510,000 | 538,045 | |
Philadelphia, | |||||
Gas Works Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 5.25 | 8/1/22 | 2,000,000 | 2,006,700 | |
Philadelphia, | |||||
GO (Insured; Assured Guaranty | |||||
Municipal Corp.) | 5.25 | 12/15/23 | 1,500,000 | 1,719,195 | |
Philadelphia, | |||||
Water and Wastewater Revenue | 5.00 | 1/1/23 | 2,180,000 | 2,532,767 | |
Philadelphia, | |||||
Water and Wastewater | |||||
Revenue (Insured; | |||||
National Public Finance | |||||
Guarantee Corp.) | |||||
(Escrowed to Maturity) | 5.60 | 8/1/18 | 800,000 | 941,648 |
The Fund | 11 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Pennsylvania (continued) | ||||
Philadelphia Authority for | ||||
Industrial Development, | ||||
Revenue (Independence | ||||
Charter School Project) | 5.50 | 9/15/37 | 1,700,000 | 1,560,515 |
Philadelphia Authority for | ||||
Industrial Development, | ||||
Revenue (Russell Byers | ||||
Charter School Project) | 5.15 | 5/1/27 | 1,230,000 | 1,171,341 |
Philadelphia Authority for | ||||
Industrial Development, | ||||
Revenue (Russell Byers | ||||
Charter School Project) | 5.25 | 5/1/37 | 1,715,000 | 1,503,300 |
Philadelphia Hospitals and Higher | ||||
Education Facilities Authority, | ||||
HR (The Children’s Hospital of | ||||
Philadelphia Project) | 5.00 | 7/1/25 | 1,800,000 | 1,994,148 |
Philadelphia Housing Authority, | ||||
Capital Fund Program Revenue | ||||
(Insured; Assured Guaranty | ||||
Municipal Corp.) | 5.00 | 12/1/21 | 1,685,000 | 1,690,442 |
Philadelphia Municipal Authority, | ||||
LR (Insured; Assured Guaranty | ||||
Municipal Corp.) | 5.25 | 11/15/15 | 2,115,000 | 2,119,039 |
Philadelphia School District, | ||||
GO | 5.25 | 9/1/23 | 1,000,000 | 1,118,160 |
Philadelphia School District, | ||||
GO | 6.00 | 9/1/38 | 1,000,000 | 1,074,770 |
Pittsburgh Urban Redevelopment | ||||
Authority, MFHR | ||||
(West Park Court Project) | ||||
(Collateralized; GNMA) | 4.90 | 11/20/47 | 1,245,000 | 1,252,358 |
Reading Area Water Authority, | ||||
Water Revenue | 5.00 | 12/1/31 | 2,000,000 | 2,076,680 |
Schuylkill County Industrial | ||||
Development Authority, Revenue | ||||
(Charity Obligation Group) | 5.00 | 11/1/14 | 790,000 | 792,931 |
State Public School Building | ||||
Authority, Community College | ||||
Revenue (Community College of | ||||
Philadelphia Project) | 6.00 | 6/15/28 | 3,000,000 | 3,421,200 |
12
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Pennsylvania (continued) | |||||
State Public School Building | |||||
Authority, Revenue (Central | |||||
Montgomery County Area | |||||
Vocational Technical School) | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | |||||
(Prerefunded) | 5.25 | 5/15/14 | 1,055,000 | a | 1,084,076 |
State Public School Building | |||||
Authority, Revenue (Central | |||||
Montgomery County Area | |||||
Vocational Technical School) | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | |||||
(Prerefunded) | 5.25 | 5/15/14 | 1,110,000 | a | 1,140,592 |
State Public School Building | |||||
Authority, School Revenue | |||||
(School District of | |||||
Haverford Township | |||||
Project) (Insured; XLCA) | 5.25 | 3/15/25 | 3,360,000 | 3,624,432 | |
University Area Joint Authority, | |||||
Sewer Revenue (Insured; Assured | |||||
Guaranty Municipal Corp.) | 5.00 | 11/1/19 | 1,500,000 | 1,743,375 | |
West Mifflin Area School District, | |||||
GO (Insured; Assured Guaranty | |||||
Municipal Corp.) | 5.00 | 10/1/22 | 710,000 | 768,767 | |
West Shore Area Authority, | |||||
HR (Holy Spirit Hospital of | |||||
the Sisters of Christian | |||||
Charity Project) | 6.00 | 1/1/26 | 2,000,000 | 2,187,660 | |
Westmoreland County Industrial | |||||
Development Authority, | |||||
Health System Revenue | |||||
(Excela Health Project) | 5.00 | 7/1/25 | 2,390,000 | 2,490,882 | |
U.S. Related—11.4% | |||||
Guam, | |||||
Business Privilege Tax Revenue | 5.00 | 1/1/42 | 1,000,000 | 983,600 | |
Guam, | |||||
Business Privilege Tax Revenue | 5.13 | 1/1/42 | 1,000,000 | 1,000,920 | |
Guam Power Authority, | |||||
Revenue | 5.50 | 10/1/30 | 1,000,000 | 1,021,270 |
The Fund | 13 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
U.S. Related (continued) | ||||
Guam Waterworks Authority, | ||||
Water and Wastewater | ||||
System Revenue | 5.50 | 7/1/16 | 320,000 | 321,539 |
Guam Waterworks Authority, | ||||
Water and Wastewater | ||||
System Revenue | 6.00 | 7/1/25 | 1,000,000 | 1,011,100 |
Puerto Rico Aqueduct and Sewer | ||||
Authority, Senior Lien Revenue | 6.00 | 7/1/44 | 2,500,000 | 1,935,675 |
Puerto Rico Commonwealth, | ||||
Public Improvement GO | 5.25 | 7/1/23 | 1,000,000 | 767,210 |
Puerto Rico Commonwealth, | ||||
Public Improvement GO | 6.00 | 7/1/28 | 1,500,000 | 1,206,975 |
Puerto Rico Commonwealth, | ||||
Public Improvement GO | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 6.00 | 7/1/27 | 1,000,000 | 897,330 |
Puerto Rico Electric Power | ||||
Authority, Power Revenue | 5.25 | 7/1/27 | 2,000,000 | 1,509,360 |
Puerto Rico Electric Power | ||||
Authority, Power Revenue | 5.50 | 7/1/38 | 1,185,000 | 870,039 |
Puerto Rico Electric Power | ||||
Authority, Power Revenue | 5.25 | 7/1/40 | 1,500,000 | 1,102,170 |
Puerto Rico Electric Power | ||||
Authority, Power Revenue | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 5.25 | 7/1/30 | 1,170,000 | 982,472 |
Puerto Rico Sales Tax Financing | ||||
Corporation, Sales Tax Revenue | ||||
(First Subordinate Series) | 6.00 | 8/1/42 | 3,200,000 | 2,770,496 |
Puerto Rico Sales Tax Financing | ||||
Corporation, Sales Tax Revenue | ||||
(First Subordinate Series) | 6.50 | 8/1/44 | 2,500,000 | 2,298,575 |
Virgin Islands Public Finance | ||||
Authority, Revenue (Virgin Islands | ||||
Matching Fund Loan Note) | 5.00 | 10/1/25 | 1,000,000 | 1,052,770 |
Total Long-Term Municipal Investments | ||||
(cost $167,506,672) | 169,232,716 |
14
Short-Term Municipal | Coupon | Maturity | Principal | ||
Investment—.6% | Rate (%) | Date | Amount ($) | Value ($) | |
Pennsylvania; | |||||
Geisinger Authority, | |||||
Health System Revenue | |||||
(Geisinger Health System) | |||||
(Liquidity Facility; | |||||
JPMorgan Chase Bank) | |||||
(cost $1,000,000) | 0.05 | 11/1/13 | 1,000,000 | c | 1,000,000 |
Total Investments (cost $168,506,672) | 98.3 | % | 170,232,716 | ||
Cash and Receivables (Net) | 1.7 | % | 2,908,966 | ||
Net Assets | 100.0 | % | 173,141,682 |
a These securities are prerefunded; the date shown represents the prerefunded date. Bonds which are prerefunded are |
collateralized by U.S. Government securities which are held in escrow and are used to pay principal and interest on |
the municipal issue and to retire the bonds in full at the earliest refunding date. |
b Security issued with a zero coupon. Income is recognized through the accretion of discount. |
c Variable rate demand note—rate shown is the interest rate in effect at October 31, 2013. Maturity date represents |
the next demand date, or the ultimate maturity date if earlier. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Education | 21.4 | Utility-Electric | 4.3 |
Health Care | 14.2 | City | 3.4 |
Transportation Services | 11.1 | Industrial | 2.4 |
Special Tax | 10.3 | Lease | 1.2 |
Utility-Water and Sewer | 10.2 | State/Territory | 1.0 |
Housing | 8.9 | Other | 4.6 |
Pre-Refunded | 5.3 | 98.3 | |
† Based on net assets. | |||
See notes to financial statements. |
The Fund | 15 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Summary of Abbreviations | |||
ABAG | Association of Bay Area | ACA | American Capital Access |
Governments | |||
AGC | ACE Guaranty Corporation | AGIC | Asset Guaranty Insurance Company |
AMBAC | American Municipal Bond | ARRN | Adjustable Rate |
Assurance Corporation | 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 | EIR | Environmental Improvement |
Revenue | Revenue | ||
FGIC | Financial Guaranty | FHA | Federal Housing |
Insurance Company | Administration | ||
FHLB | Federal Home | FHLMC | Federal Home Loan Mortgage |
Loan Bank | Corporation | ||
FNMA | Federal National | GAN | Grant Anticipation Notes |
Mortgage Association | |||
GIC | Guaranteed Investment | GNMA | Government National Mortgage |
Contract | Association | ||
GO | General Obligation | HR | Hospital Revenue |
IDB | Industrial Development Board | IDC | Industrial Development Corporation |
IDR | Industrial Development | LIFERS | Long Inverse Floating |
Revenue | 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 | PUTTERS | Puttable Tax-Exempt Receipts |
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 | SPEARS | Short Puttable Exempt |
Mortgage Agency | 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 |
16
STATEMENT OF ASSETS AND LIABILITIES |
October 31, 2013 (Unaudited) |
Cost | Value | ||
Assets ($): | |||
Investments in securities—See Statement of Investments | 168,506,672 | 170,232,716 | |
Cash | 883,914 | ||
Interest receivable | 2,316,012 | ||
Receivable for shares of Beneficial Interest subscribed | 244 | ||
Prepaid expenses | 11,516 | ||
173,444,402 | |||
Liabilities ($): | |||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 135,300 | ||
Payable for shares of Beneficial Interest redeemed | 127,555 | ||
Accrued expenses | 39,865 | ||
302,720 | |||
Net Assets ($) | 173,141,682 | ||
Composition of Net Assets ($): | |||
Paid-in capital | 171,252,169 | ||
Accumulated undistributed investment income—net | 15,375 | ||
Accumulated net realized gain (loss) on investments | 148,094 | ||
Accumulated net unrealized appreciation | |||
(depreciation) on investments | 1,726,044 | ||
Net Assets ($) | 173,141,682 | ||
Net Asset Value Per Share | |||
Class A | Class C | Class Z | |
Net Assets ($) | 114,924,704 | 4,556,409 | 53,660,569 |
Shares Outstanding | 7,249,078 | 287,264 | 3,385,252 |
Net Asset Value Per Share ($) | 15.85 | 15.86 | 15.85 |
See notes to financial statements. |
The Fund | 17 |
STATEMENT OF OPERATIONS |
Six Months Ended October 31, 2013 (Unaudited) |
Investment Income ($): | ||
Interest Income | 4,046,561 | |
Expenses: | ||
Management fee—Note 3(a) | 505,527 | |
Shareholder servicing costs—Note 3(c) | 213,048 | |
Professional fees | 24,198 | |
Distribution fees—Note 3(b) | 18,359 | |
Registration fees | 10,535 | |
Custodian fees—Note 3(c) | 10,243 | |
Prospectus and shareholders’ reports | 5,530 | |
Trustees’ fees and expenses—Note 3(d) | 5,320 | |
Loan commitment fees—Note 2 | 830 | |
Miscellaneous | 19,113 | |
Total Expenses | 812,703 | |
Less—reduction in fees due to earnings credits—Note 3(c) | (70 | ) |
Net Expenses | 812,633 | |
Investment Income—Net | 3,233,928 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments | (220,677 | ) |
Net unrealized appreciation (depreciation) on investments | (11,756,998 | ) |
Net Realized and Unrealized Gain (Loss) on Investments | (11,977,675 | ) |
Net (Decrease) in Net Assets Resulting from Operations | (8,743,747 | ) |
See notes to financial statements. |
18
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
October 31, 2013 | Year Ended | |||
(Unaudited) | April 30, 2013 | |||
Operations ($): | ||||
Investment income—net | 3,233,928 | 6,779,867 | ||
Net realized gain (loss) on investments | (220,677 | ) | 1,929,117 | |
Net unrealized appreciation | ||||
(depreciation) on investments | (11,756,998 | ) | 1,966,811 | |
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | (8,743,747 | ) | 10,675,795 | |
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A | (2,127,553 | ) | (4,494,571 | ) |
Class C | (65,756 | ) | (146,849 | ) |
Class Z | (1,025,244 | ) | (2,109,120 | ) |
Net realized gain on investments: | ||||
Class A | — | (450,351 | ) | |
Class C | — | (19,426 | ) | |
Class Z | — | (198,289 | ) | |
Total Dividends | (3,218,553 | ) | (7,418,606 | ) |
Beneficial Interest Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A | 1,904,287 | 10,576,088 | ||
Class C | 402,284 | 762,703 | ||
Class Z | 1,662,160 | 3,030,411 | ||
Dividends reinvested: | ||||
Class A | 1,777,089 | 3,898,116 | ||
Class C | 56,062 | 140,452 | ||
Class Z | 865,565 | 1,832,481 | ||
Cost of shares redeemed: | ||||
Class A | (14,452,415 | ) | (12,631,404 | ) |
Class C | (975,348 | ) | (1,183,352 | ) |
Class Z | (4,234,035 | ) | (4,678,814 | ) |
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | (12,994,351 | ) | 1,746,681 | |
Total Increase (Decrease) in Net Assets | (24,956,651 | ) | 5,003,870 | |
Net Assets ($): | ||||
Beginning of Period | 198,098,333 | 193,094,463 | ||
End of Period | 173,141,682 | 198,098,333 | ||
Undistributed investment income—net | 15,375 | — |
The Fund | 19 |
STATEMENT OF CHANGES IN NET ASSETS (continued)
Six Months Ended | ||||
October 31, 2013 | Year Ended | |||
(Unaudited) | April 30, 2013 | |||
Capital Share Transactions: | ||||
Class Aa | ||||
Shares sold | 118,066 | 627,164 | ||
Shares issued for dividends reinvested | 111,089 | 231,298 | ||
Shares redeemed | (901,731 | ) | (750,448 | ) |
Net Increase (Decrease) in Shares Outstanding | (672,576 | ) | 108,014 | |
Class Ca | ||||
Shares sold | 24,423 | 45,352 | ||
Shares issued for dividends reinvested | 3,503 | 8,329 | ||
Shares redeemed | (59,958 | ) | (70,411 | ) |
Net Increase (Decrease) in Shares Outstanding | (32,032 | ) | (16,730 | ) |
Class Z | ||||
Shares sold | 104,275 | 180,463 | ||
Shares issued for dividends reinvested | 54,141 | 108,751 | ||
Shares redeemed | (267,462 | ) | (278,713 | ) |
Net Increase (Decrease) in Shares Outstanding | (109,046 | ) | 10,501 |
a During the period ended October 31, 2013, 9,447 Class C shares representing $159,153 were exchanged for |
9,457 Class A shares. |
See notes to financial statements.
20
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||||
October 31, 2013 | Year Ended April 30, | |||||||||||
Class A Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 16.88 | 16.60 | 15.51 | 15.96 | 15.28 | 15.67 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .28 | .57 | .63 | .65 | .66 | .65 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (1.03 | ) | .34 | 1.11 | (.46 | ) | .67 | (.40 | ) | |||
Total from | ||||||||||||
Investment Operations | (.75 | ) | .91 | 1.74 | .19 | 1.33 | .25 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.28 | ) | (.57 | ) | (.63 | ) | (.64 | ) | (.65 | ) | (.64 | ) |
Dividends from net realized | ||||||||||||
gain on investments | — | (.06 | ) | (.02 | ) | — | — | — | ||||
Total Distributions | (.28 | ) | (.63 | ) | (.65 | ) | (.64 | ) | (.65 | ) | (.64 | ) |
Net asset value, end of period | 15.85 | 16.88 | 16.60 | 15.51 | 15.96 | 15.28 | ||||||
Total Return (%)b | (4.44 | )c | 5.53 | 11.40 | 1.21 | 8.85 | 1.75 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .93 | d | .94 | .95 | .96 | .94 | .96 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .93 | d | .94 | .95 | .96 | .94 | .96 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 3.47 | d | 3.40 | 3.91 | 4.09 | 4.17 | 4.27 | |||||
Portfolio Turnover Rate | 2.27 | c | 15.27 | 10.69 | 18.40 | 10.93 | 16.60 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 114,925 | 133,727 | 129,697 | 124,286 | 137,969 | 130,611 |
a | Based on average shares outstanding at each month end. |
b | Exclusive of sales charge. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
The Fund | 21 |
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||||
October 31, 2013 | Year Ended April 30, | |||||||||||
Class C Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 16.89 | 16.61 | 15.52 | 15.97 | 15.29 | 15.68 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .22 | .44 | .51 | .53 | .54 | .53 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (1.03 | ) | .34 | 1.11 | (.45 | ) | .67 | (.39 | ) | |||
Total from | ||||||||||||
Investment Operations | (.81 | ) | .78 | 1.62 | .08 | 1.21 | .14 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.22 | ) | (.44 | ) | (.51 | ) | (.53 | ) | (.53 | ) | (.53 | ) |
Dividends from net realized | ||||||||||||
gain on investments | — | (.06 | ) | (.02 | ) | — | — | — | ||||
Total Distributions | (.22 | ) | (.50 | ) | (.53 | ) | (.53 | ) | (.53 | ) | (.53 | ) |
Net asset value, end of period | 15.86 | 16.89 | 16.61 | 15.52 | 15.97 | 15.29 | ||||||
Total Return (%)b | (4.81 | )c | 4.73 | 10.56 | .46 | 8.03 | 1.00 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.70 | d | 1.70 | 1.71 | 1.70 | 1.69 | 1.70 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.70 | d | 1.70 | 1.71 | 1.70 | 1.69 | 1.69 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 2.70 | d | 2.64 | 3.16 | 3.34 | 3.41 | 3.54 | |||||
Portfolio Turnover Rate | 2.27 | c | 15.27 | 10.69 | 18.40 | 10.93 | 16.60 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 4,556 | 5,393 | 5,580 | 5,127 | 6,087 | 4,983 |
a | Based on average shares outstanding at each month end. |
b | Exclusive of sales charge. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
22
Six Months Ended | ||||||||||||
October 31, 2013 | Year Ended April 30, | |||||||||||
Class Z Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 16.88 | 16.60 | 15.51 | 15.96 | 15.28 | 15.67 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .30 | .61 | .67 | .68 | .69 | .68 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (1.03 | ) | .34 | 1.10 | (.45 | ) | .68 | (.40 | ) | |||
Total from | ||||||||||||
Investment Operations | (.73 | ) | .95 | 1.77 | .23 | 1.37 | .28 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.30 | ) | (.61 | ) | (.66 | ) | (.68 | ) | (.69 | ) | (.67 | ) |
Dividends from net realized | ||||||||||||
gain on investments | — | (.06 | ) | (.02 | ) | — | — | — | ||||
Total Distributions | (.30 | ) | (.67 | ) | (.68 | ) | (.68 | ) | (.69 | ) | (.67 | ) |
Net asset value, end of period | 15.85 | 16.88 | 16.60 | 15.51 | 15.96 | 15.28 | ||||||
Total Return (%) | (4.34 | )b | 5.75 | 11.64 | 1.41 | 9.10 | 1.96 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .71 | c | .73 | .74 | .75 | .72 | .78 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .71 | c | .73 | .74 | .75 | .72 | .77 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 3.69 | c | 3.61 | 4.13 | 4.29 | 4.40 | 4.48 | |||||
Portfolio Turnover Rate | 2.27 | b | 15.27 | 10.69 | 18.40 | 10.93 | 16.60 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 53,661 | 58,978 | 57,818 | 54,006 | 57,175 | 55,649 |
a | Based on average shares outstanding at each month end. |
b | Not annualized. |
c | Annualized. |
See notes to financial statements.
The Fund | 23 |
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus State Municipal Bond Funds (the “Company”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as a non-diversified open-end management investment company, and operates as a series company currently offering three series including the Dreyfus Pennsylvania Fund (the “fund”). The fund’s investment objective is to maximize current income exempt from federal income tax and from Pennsylvania state income tax, without undue risk.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 the Manager, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C and Class Z. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class Z shares are sold at net asset value per share generally only to shareholders of the fund who received Class Z shares in exchange for their shares of a Dreyfus-managed fund as a result of the reorganization of such Dreyfus-managed fund, and who continue to maintain accounts with the fund at the time of purchase. Class Z shares generally are not available for new accounts. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
24
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The 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.
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
The Fund | 25 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 Trustees (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 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 categorized within Level 2 of the fair value hierarchy.
26
The Service’s procedures are reviewed by Dreyfus under the general supervision of the Board.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers.These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of October 31, 2013 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Municipal Bonds† | — | 170,232,716 | — | 170,232,716 |
† See Statement of Investments for additional detailed categorizations. |
At October 31, 2013, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.
The Fund | 27 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when issued or delayed delivery basis may be settled a month or more after the trade date.
The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund.
(c) Dividends to shareholders: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”).To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(d) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax-exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended October 31, 2013, 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 October 31, 2013, the fund did not incur any interest or penalties.
28
Each tax year in the three-year period ended April 30, 2013 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 April 30, 2013 was as follows: tax-exempt income $6,750,540 and long-term capital gains $668,066. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $265 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 9, 2013, the unsecured credit facility with Citibank, N.A. was $210 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 October 31, 2013, the fund did not borrow under the Facilities.
NOTE 3—Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .55% of the value of the fund’s average daily net assets and is payable monthly.
During the period ended October 31, 2013, the Distributor retained $1,149 from commissions earned on sales of the fund’s Class A shares and $52 from CDSCs on redemptions of the fund’s Class C shares.
The Fund | 29 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(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 October 31, 2013, Class C shares were charged $18,359 pursuant to the Distribution Plan.
(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services.The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts.The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services.The Distributor determines the amounts to be paid to Service Agents. During the period ended October 31, 2013, Class A and Class C shares were charged $153,882 and $6,120, respectively, pursuant to the Shareholder Services Plan.
Under the Shareholder Services Plan, Class Z shares reimburse the Distributor an amount not to exceed an annual rate of .25% of the value of Class Z shares’ average daily net assets for certain allocated expenses for providing personal services and/or maintaining shareholder accounts.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 October 31, 2013, Class Z shares were charged $11,000 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.
30
The fund compensates DreyfusTransfer, Inc., a wholly-owned subsidiary of the Manager, 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 October 31, 2013, the fund was charged $26,619 for transfer agency services and $910 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $70.
The fund compensates The Bank of NewYork 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 October 31, 2013, the fund was charged $10,243 pursuant to the custody agreement.
The fund compensated The Bank of New York Mellon for performing certain cash management services related to fund subscriptions and redemptions, including shareholder redemption draft processing, under a cash management agreement that was in effect until September 30, 2013 and, beginning October 1, 2013, compensates The Bank of New York Mellon for processing shareholder redemption drafts under a shareholder draft processing agreement. During the period ended October 31, 2013, the fund was charged $348 pursuant to the agreements, which is included in Shareholder servicing costs in the Statement of Operations.
During the period ended October 31, 2013, the fund was charged $4,445 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 $80,268, Distribution Plan fees $2,889, Shareholder Services Plan fees $25,310, custodian fees $6,133, Chief Compliance Officer fees $7,445 and transfer agent fees $13,255.
The Fund | 31 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(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 October 31, 2013, amounted to $4,069,495 and $15,444,766, respectively.
At October 31, 2013, accumulated net unrealized appreciation on investments was $1,726,044, consisting of $6,781,374 gross unrealized appreciation and $5,055,330 gross unrealized depreciation.
At October 31, 2013, 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).
32
INFORMATION ABOUT THE RENEWAL OF THE |
FUND’S MANAGEMENT AGREEMENT (Unaudited) |
At a meeting of the fund’s Board of Trustees held on July 23, 2013, 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, none of whom are “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.
The Fund | 33 |
INFORMATION ABOUT THE RENEWAL OF THE FUND’S |
MANAGEMENT AGREEMENT (Unaudited) (continued) |
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Lipper, Inc. (“Lipper”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended May 31, 2013, 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 Lipper as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds.The Board discussed the results of the comparisons and noted that the fund’s total return performance was variously above and below the Performance Group median and above the Performance Universe median. The Board also noted that the fund’s yield performance was below the Performance Group median for all of the one-year periods ended May 31st and at or above the Performance Universe median for five of the ten one-year periods ended May 31st. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s Lipper category average.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons.The Board noted that the fund’s contractual management fee was above the Expense Group median and the fund’s actual management fee and total expenses were above the Expense Group and Expense Universe medians.
34
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Lipper category as the fund and (2) paid to Dreyfus or the Dreyfus affiliated primary employer of the fund’s primary portfolio manager(s) for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients.They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness and reasonableness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus of managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex.The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered on the advice of its counsel the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement bear a reasonable relationship to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and
The Fund | 35 |
INFORMATION ABOUT THE RENEWAL OF THE FUND’S |
MANAGEMENT AGREEMENT (Unaudited) (continued) |
whether fee levels reflect these economies of scale for the benefit of fund shareholders. Dreyfus representatives noted that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to Dreyfus from acting as investment adviser and noted that there were no soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
The Board concluded that the nature, extent and quality of the services provided by Dreyfus are adequate and appropriate.
The Board generally was satisfied with the fund’s overall performance.
The Board concluded that the fee paid to Dreyfus was reasonable in light of the considerations described above.
The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
36
In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with Dreyfus and its affiliates, of the fund and the services provided to the fund by Dreyfus. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreement, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the same or similar arrangements in prior years.The Board determined that renewal of the Agreement was in the best interests of the fund and its shareholders.
The Fund | 37 |
For More Information
![](https://capedge.com/proxy/N-CSRS/0000806176-13-000032/smbpancsrx40x1.jpg)
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
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 http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Information regarding how the fund voted proxies relating to portfolio securities for the most recent 12-month period ended June 30 is available on the SEC’s website at http://www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
![](https://capedge.com/proxy/N-CSRS/0000806176-13-000032/smbpancsrx40x2.jpg)
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.
Not applicable. [CLOSED END FUNDS ONLY]
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures applicable to Item 10.
Item 11. Controls and Procedures.
(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes to the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable.
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.
(a)(3) Not applicable.
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dreyfus State Municipal Bond Funds
By: /s/ Bradley J. Skapyak | |
Bradley J. Skapyak, President
| |
Date: | December 18, 2013 |
| |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. | |
| |
By: /s/ Bradley J. Skapyak | |
Bradley J. Skapyak, President
| |
Date: | December 18, 2013 |
| |
By: /s/ James Windels | |
James Windels, Treasurer
| |
Date: | December 18, 2013 |
|
EXHIBIT INDEX
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940. (EX-99.CERT)
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940. (EX-99.906CERT)