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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:
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4/30 |
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Date of reporting period: |
4/30/13 |
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Dreyfus State |
Municipal Bond Funds, |
Dreyfus Connecticut Fund |
ANNUAL REPORT April 30, 2013
Save time. Save paper. View your next shareholder report online as soon as its available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. Its 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 |
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THE FUND |
|
2 |
A Letter from the President |
3 |
Discussion of Fund Performance |
6 |
Fund Performance |
8 |
Understanding Your Funds Expenses |
8 |
Comparing Your Funds Expenses With Those of Other Funds |
9 |
Statement of Investments |
21 |
Statement of Assets and Liabilities |
22 |
Statement of Operations |
23 |
Statement of Changes in Net Assets |
25 |
Financial Highlights |
29 |
Notes to Financial Statements |
39 |
Report of Independent Registered Public Accounting Firm |
40 |
Important Tax Information |
41 |
Board Members Information |
43 |
Officers of the Fund |
FOR MORE INFORMATION |
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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 annual report for Dreyfus Connecticut Fund, a series of Dreyfus State Municipal Bond Funds, covering the 12-month period from May 1, 2012, through April 30, 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 search for higher after-tax yields amid historically low interest rates continued to exert a major influence on the municipal bond market over the past year, as investors increasingly turned to lower rated and longer term securities for higher levels of current income.The market’s supply-and-demand dynamics were buoyed further when political pressure to reduce government spending and borrowing led to a relatively meager supply of newly issued securities through most of the reporting period. The market also benefited from a generally recovering U.S. economy, including a declining U.S. unemployment rate and improving housing markets, which helped to alleviate fiscal pressures for many states and municipalities.
Our chief economist currently expects the U.S. economic recovery to persist at a choppy and moderate pace over the next several months, but sees the potential for stronger growth to begin in the fall. Moreover, the United States generally is expected to remain in the lead in a global march toward better economic conditions, while Europe’s recovery from recession likely will be delayed as regional policymakers continue their efforts to resolve structural issues. As always, we encourage you to discuss our observations with your financial advisor, who can help you assess their implications for your investment portfolio.
Thank you for your continued confidence and support.
J. Charles Cardona
President
The Dreyfus Corporation
May 15, 2013
2
DISCUSSION OF FUND PERFORMANCE
For the period of May 1, 2012, through April 30, 2013, as provided by Daniel Barton and Jeffrey Burger, Portfolio Managers
Fund and Market Performance Overview
For the 12-month period ended April 30, 2013, Class A shares of Dreyfus Connecticut Fund, a series of Dreyfus State Municipal Bond Funds, produced a total return of 4.74%, Class C shares returned 3.94%, Class I shares returned 5.09% and Class Z shares returned 5.04%. 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 5.19% for the same period. 2
Despite bouts of heightened volatility, positive supply-and-demand dynamics and strong investor demand for competitive levels of after-tax income helped support municipal bond prices over the reporting period.
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, 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)
Municipal Bonds Encountered Heightened Volatility
Although the reporting period began in the midst of heightened economic concerns, investor sentiment soon began to recover when U.S. employment trends improved, housing markets recovered and the Federal Reserve Board launched a new quantitative easing program. Investor optimism faltered briefly in November 2012 due to uncertainty surrounding automatic tax hikes and spending cuts scheduled for the start of 2013, but last-minute legislation to address the increases helped alleviate these worries. Positive economic data offered further support to investor sentiment over the first four months of 2013.
Lower rated municipal bonds generally outperformed broader market averages, supported by robust demand from investors seeking higher levels of after-tax income in a low interest rate environment. While the supply of newly issued municipal bonds increased compared to the very low levels reached earlier in 2012, new issuance remained muted relative to historical norms.
From a credit quality perspective, Connecticut has continued to struggle with fiscal pressures stemming from tax revenue shortfalls, a higher-than-average unemployment rate, and rising health care-related expenditures.
Connecticut Bonds Trailed National Market Averages
The fund’s mildly lagging returns can be attributed mainly to the underperformance of Connecticut municipal bonds relative to the national benchmark. In addition, the fund’s holdings of Puerto Rico bonds, which are exempt from federal and Connecticut state income taxes, faltered amid intensifying concerns regarding the U.S. territory’s budget deficits and pension liabilities.
The fund achieved better relative results through its emphasis on revenue bonds over general obligation bonds. Overweighted exposure to revenue bonds backed by hospitals, universities and industrial development projects fared particularly well. In addition, our interest rate strategies added value during the reporting period, as a relatively long duration posture enabled the fund to participate more fully in the benefits of falling long-term interest rates, and a focus on bonds with maturities in the 15- to 20-year range bolstered the fund’s exposure to one of the market’s better performing segments.
4
Maintaining a Selective Approach
We have been encouraged by recently improved economic data, but we believe that the U.S. economy remains vulnerable to fiscal uncertainty and potentially adverse international developments. In addition, while credit fundamentals are improving for most states, many localities face ongoing fiscal pressures.Therefore, we have maintained our research-intensive credit selection process to help identify attractively valued opportunities among fundamentally sound issuers of municipal securities.
As of the reporting period’s end, we have maintained overweighted exposure to higher yielding revenue bonds with credit ratings toward the lower end of the investment-grade range. Moreover, we have reduced the fund’s average duration toward a market-neutral position, and we have focused new purchases on municipal bonds with maturities in the 15-year range, where we believe values are relatively attractive.
May 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 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. |
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 |
† | Source: Lipper Inc. |
†† | The total return figures presented for Class I shares of the fund reflect the performance of the fund’s Class A shares |
for the period prior to 12/15/08 (the inception date for Class I shares). |
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in each of the Class A, Class C and Class I shares of Dreyfus State Municipal Bond Funds, Dreyfus Connecticut Fund on 4/30/03 to a $10,000 investment made in the Barclays Municipal Bond Index (the “Index”) on that date.All dividends and capital gain distributions are reinvested.
The fund invests primarily in Connecticut municipal securities and its performance shown in the line graph above takes into account the maximum initial sales charge on Class A shares and all other applicable fees and expenses on all classes. Performance for Class Z shares will vary from the performance of Class A, Class C and Class I shares shown above due to differences in charges and expenses.The Index is not limited to investments principally in Connecticut municipal obligations.The Index, unlike the fund, is an unmanaged total return performance benchmark for the long-term, investment-grade, geographically unrestricted tax-exempt bond market, calculated by using municipal bonds selected to be representative of the municipal market overall.These factors can contribute to the Index potentially outperforming or underperforming the fund. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report.
6
Average Annual Total Returns as of 4/30/13 | |||||||||
Inception | From | ||||||||
Date | 1 | Year | 5 Years | 10 Years | Inception | ||||
Class A shares | |||||||||
with maximum sales charge (4.5%) | 5/28/87 | –0.01 | % | 4.43 | % | 3.82 | % | — | |
without sales charge | 5/28/87 | 4.74 | % | 5.39 | % | 4.29 | % | — | |
Class C shares | |||||||||
with applicable redemption charge † | 8/15/95 | 2.94 | % | 4.60 | % | 3.51 | % | — | |
without redemption | 8/15/95 | 3.94 | % | 4.60 | % | 3.51 | % | — | |
Class I shares | 12/15/08 | 5.09 | % | 5.63 | % †† | 4.41 | % †† | — | |
Class Z shares | 5/30/07 | 5.04 | % | 5.60 | % | — | 5.06 % | ||
Barclays Municipal Bond Index | 5/31/07 | 5.19 | % | 6.09 | % | 5.05 | % | 5.69 % | ††† |
Past performance is not predictive of future performance.The fund’s performance shown in the graph and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
† | The maximum contingent deferred sales charge for Class C shares is 1% for shares redeemed within one year of the |
date of purchase. | |
†† | The total return performance figures presented for Class I shares of the fund reflect the performance of the fund’s |
Class A shares for the period prior to 12/15/08 (the inception date for Class I shares). | |
††† | The Index date is based on the life of Class Z shares. For comparative purposes, the value of the Index as of |
5/31/07 is used as the beginning value on 5/30/07 (the inception date for Class Z shares). |
The Fund | 7 |
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 November 1, 2012 to April 30, 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 April 30, 2013
Class A | Class C | Class I | Class Z | |||||
Expenses paid per $1,000 † | $ | 4.45 | $ | 8.23 | $ | 3.15 | $ | 3.35 |
Ending value (after expenses) | $ | 1,014.60 | $ | 1,010.80 | $ | 1,015.90 | $ | 1,015.70 |
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 April 30, 2013
Class A | Class C | Class I | Class Z | |||||
Expenses paid per $1,000 † | $ | 4.46 | $ | 8.25 | $ | 3.16 | $ | 3.36 |
Ending value (after expenses) | $ | 1,020.38 | $ | 1,016.61 | $ | 1,021.67 | $ | 1,021.47 |
† Expenses are equal to the fund’s annualized expense ratio of .89% for Class A, 1.65% for Class C, .63% for |
Class I and .67% for Class Z, multiplied by the average account value over the period, multiplied by 181/365 (to |
reflect the one-half year period). |
8
STATEMENT OF INVESTMENTS | ||||
April 30, 2013 | ||||
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments—97.9% | Rate (%) | Date | Amount ($) | Value ($) |
Connecticut—80.2% | ||||
Connecticut, | ||||
GO | 5.00 | 12/1/16 | 5,000,000 | 5,775,750 |
Connecticut, | ||||
GO | 5.00 | 11/1/18 | 5,000,000 | 6,062,150 |
Connecticut, | ||||
GO | 5.00 | 9/15/22 | 4,500,000 | 5,746,095 |
Connecticut, | ||||
GO | 5.00 | 12/15/22 | 1,855,000 | 2,128,946 |
Connecticut, | ||||
GO | 5.00 | 4/15/24 | 2,500,000 | 2,921,400 |
Connecticut, | ||||
GO | 5.00 | 11/1/27 | 5,000,000 | 6,052,950 |
Connecticut, | ||||
GO | 5.00 | 11/1/27 | 2,000,000 | 2,339,960 |
Connecticut, | ||||
GO | 5.00 | 11/1/28 | 3,000,000 | 3,499,650 |
Connecticut, | ||||
GO | 5.00 | 11/1/28 | 5,000,000 | 6,035,050 |
Connecticut, | ||||
GO | 5.00 | 11/1/31 | 5,000,000 | 5,954,250 |
Connecticut, | ||||
Special Tax Obligation | ||||
Revenue (Transportation | ||||
Infrastructure Purposes) | 5.00 | 1/1/17 | 5,000,000 | 5,792,300 |
Connecticut, | ||||
Special Tax Obligation | ||||
Revenue (Transportation | ||||
Infrastructure Purposes) | 5.00 | 12/1/21 | 5,000,000 | 6,334,150 |
Connecticut, | ||||
Special Tax Obligation | ||||
Revenue (Transportation | ||||
Infrastructure Purposes) | 5.00 | 11/1/22 | 5,000,000 | 6,100,500 |
Connecticut, | ||||
Special Tax Obligation Revenue | ||||
(Transportation Infrastructure | ||||
Purposes) (Insured; AMBAC) | 5.25 | 7/1/19 | 3,395,000 | 4,213,738 |
Connecticut, | ||||
State Revolving Fund | ||||
General Revenue | 5.00 | 1/1/19 | 5,275,000 | 6,472,636 |
The Fund | 9 |
STATEMENT OF INVESTMENTS (continued)
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Connecticut (continued) | |||||
Connecticut, | |||||
State Revolving Fund | |||||
General Revenue | 5.00 | 1/1/23 | 1,250,000 | 1,550,987 | |
Connecticut Development Authority, | |||||
Airport Facility Revenue | |||||
(Learjet Inc. Project) | 7.95 | 4/1/26 | 2,300,000 | 2,460,172 | |
Connecticut Development Authority, | |||||
First Mortgage Gross Revenue | |||||
(The Elim Park Baptist Home, | |||||
Inc. Project) (Prerefunded) | 5.25 | 12/1/15 | 1,765,000 | a | 1,997,398 |
Connecticut Development Authority, | |||||
PCR (The Connecticut Light and | |||||
Power Company Project) | 4.38 | 9/1/28 | 3,000,000 | 3,279,000 | |
Connecticut Development Authority, | |||||
Water Facilities Revenue | |||||
(Aquarion Water Company of | |||||
Connecticut Project) | 5.50 | 4/1/21 | 4,500,000 | 5,319,090 | |
Connecticut Development Authority, | |||||
Water Facilities Revenue | |||||
(Aquarion Water Company of | |||||
Connecticut Project) | |||||
(Insured; XLCA) | 5.10 | 9/1/37 | 6,550,000 | 7,165,045 | |
Connecticut Health and Educational | |||||
Facilities Authority, Revenue | |||||
(Ascension Health Senior | |||||
Credit Group) | 5.00 | 11/15/40 | 12,000,000 | 13,577,160 | |
Connecticut Health and Educational | |||||
Facilities Authority, Revenue | |||||
(Bridgeport Hospital Issue) | 5.00 | 7/1/25 | 3,625,000 | 4,178,755 | |
Connecticut Health and Educational | |||||
Facilities Authority, Revenue | |||||
(Connecticut State University | |||||
System Issue) | 5.00 | 11/1/18 | 1,320,000 | 1,583,327 | |
Connecticut Health and Educational | |||||
Facilities Authority, Revenue | |||||
(Fairfield University Issue) | 5.00 | 7/1/25 | 1,340,000 | 1,558,366 | |
Connecticut Health and Educational | |||||
Facilities Authority, Revenue | |||||
(Fairfield University Issue) | 5.00 | 7/1/27 | 1,420,000 | 1,608,775 |
10
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Connecticut (continued) | ||||
Connecticut Health and | ||||
Educational Facilities | ||||
Authority, Revenue | ||||
(Fairfield University Issue) | 5.00 | 7/1/34 | 4,000,000 | 4,414,960 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Fairfield University Issue) | 5.00 | 7/1/35 | 2,000,000 | 2,213,380 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Fairfield University Issue) | 5.00 | 7/1/40 | 2,500,000 | 2,763,375 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Greenwich Academy Issue) | ||||
(Insured; Assured Guaranty | ||||
Municipal Corp.) | 5.25 | 3/1/32 | 10,880,000 | 15,443,834 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Hartford HealthCare Issue) | 5.00 | 7/1/32 | 1,000,000 | 1,121,960 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Hartford HealthCare Issue) | 5.00 | 7/1/41 | 2,000,000 | 2,176,620 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Hospital for Special Care | ||||
Issue) (Insured; Radian) | 5.25 | 7/1/32 | 3,500,000 | 3,619,385 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Lawrence and Memorial | ||||
Hospital Issue) | 5.00 | 7/1/31 | 1,000,000 | 1,121,960 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Loomis Chaffee School Issue) | ||||
(Insured; AMBAC) | 5.25 | 7/1/28 | 1,760,000 | 2,327,178 |
Connecticut Health and | ||||
Educational Facilities | ||||
Authority, Revenue | ||||
(Quinnipiac University Issue) | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 5.00 | 7/1/19 | 2,000,000 | 2,266,300 |
The Fund | 11 |
STATEMENT OF INVESTMENTS (continued)
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Connecticut (continued) | ||||
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Quinnipiac University Issue) | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 5.75 | 7/1/33 | 5,000,000 | 5,805,700 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Quinnipiac University Issue) | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 5.00 | 7/1/37 | 2,000,000 | 2,202,020 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Sacred Heart University Issue) | 5.38 | 7/1/31 | 1,000,000 | 1,120,110 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Salisbury School Issue) | ||||
(Insured; Assured Guaranty | ||||
Municipal Corp.) | 5.00 | 7/1/33 | 5,000,000 | 5,582,950 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Stamford Hospital Issue) | 5.00 | 7/1/30 | 6,750,000 | 7,447,545 |
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 | 2,281,260 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Trinity College Issue) | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 5.00 | 7/1/22 | 1,000,000 | 1,049,690 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(University of Hartford Issue) | ||||
(Insured; Radian) | 5.00 | 7/1/17 | 1,220,000 | 1,337,742 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(University of Hartford Issue) | ||||
(Insured; Radian) | 5.25 | 7/1/36 | 5,070,000 | 5,232,189 |
12
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Connecticut (continued) | ||||
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Wesleyan University Issue) | 5.00 | 7/1/35 | 5,000,000 | 5,666,450 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Wesleyan University Issue) | 5.00 | 7/1/39 | 6,500,000 | 7,294,885 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Western Connecticut Health | ||||
Network Issue) | 5.38 | 7/1/41 | 1,000,000 | 1,142,480 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Yale University Issue) | 5.00 | 7/1/40 | 5,000,000 | 5,745,050 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Yale-New Haven Hospital Issue) | 5.75 | 7/1/34 | 4,000,000 | 4,788,800 |
Connecticut Health and Educational | ||||
Facilities Authority, Revenue | ||||
(Yale-New Haven Hospital | ||||
Issue) (Insured; AMBAC) | 5.00 | 7/1/31 | 2,500,000 | 2,726,750 |
Connecticut Health and Educational | ||||
Facilities Authority, State | ||||
Supported Child Care Revenue | 5.00 | 7/1/25 | 1,490,000 | 1,741,482 |
Connecticut Higher Education | ||||
Supplemental Loan Authority, | ||||
Senior Revenue (Connecticut | ||||
Family Education Loan Program) | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 4.50 | 11/15/20 | 1,670,000 | 1,672,355 |
Connecticut Higher Education | ||||
Supplemental Loan Authority, | ||||
Senior Revenue (Connecticut | ||||
Family Education Loan Program) | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 4.80 | 11/15/22 | 3,430,000 | 3,628,871 |
Connecticut Housing Finance | ||||
Authority, Revenue (Housing | ||||
Mortgage Finance Program) | 5.00 | 11/15/21 | 365,000 | 383,155 |
The Fund | 13 |
STATEMENT OF INVESTMENTS (continued)
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Connecticut (continued) | ||||
Connecticut Housing Finance | ||||
Authority, Revenue (Housing | ||||
Mortgage Finance Program) | 5.00 | 11/15/35 | 1,740,000 | 1,769,737 |
Connecticut Housing Finance | ||||
Authority, Revenue (Housing | ||||
Mortgage Finance Program) | ||||
(Insured; AMBAC) | 5.10 | 11/15/33 | 2,500,000 | 2,632,500 |
Connecticut Municipal Electric | ||||
Energy Cooperative, Power | ||||
Supply System Revenue | 5.00 | 1/1/38 | 3,000,000 | 3,431,160 |
Connecticut Resources Recovery | ||||
Authority, RRR (American Ref-Fuel | ||||
Company of Southeastern | ||||
Connecticut Project) | 5.50 | 11/15/15 | 1,000,000 | 1,007,430 |
Connecticut Resources Recovery | ||||
Authority, RRR (American Ref-Fuel | ||||
Company of Southeastern | ||||
Connecticut Project) | 5.50 | 11/15/15 | 3,250,000 | 3,274,147 |
Connecticut Transmission | ||||
Municipal Electric Energy | ||||
Cooperative, Transmission | ||||
System Revenue | 5.00 | 1/1/42 | 3,000,000 | 3,390,120 |
Eastern Connecticut Resource | ||||
Recovery Authority, Solid | ||||
Waste Revenue (Wheelabrator | ||||
Lisbon Project) | 5.50 | 1/1/14 | 910,000 | 913,440 |
Eastern Connecticut Resource | ||||
Recovery Authority, Solid | ||||
Waste Revenue (Wheelabrator | ||||
Lisbon Project) | 5.50 | 1/1/20 | 7,000,000 | 7,027,720 |
Greater New Haven Water Pollution | ||||
Control Authority, Regional | ||||
Wastewater System Revenue | ||||
(Insured; Assured Guaranty | ||||
Municipal Corp.) | 5.00 | 11/15/37 | 1,800,000 | 2,009,880 |
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 | 5,417,850 |
14
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Connecticut (continued) | ||||
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 | 2,169,740 |
Hamden, | ||||
GO (Insured; National Public | ||||
Finance Guarantee Corp.) | 5.25 | 8/15/14 | 5,000 | 5,322 |
Hartford, | ||||
GO | 5.00 | 7/15/16 | 1,775,000 | 2,011,004 |
Hartford, | ||||
GO | 5.00 | 4/1/17 | 2,325,000 | 2,714,554 |
Hartford, | ||||
GO | 5.00 | 4/1/24 | 1,000,000 | 1,215,710 |
Hartford, | ||||
GO (Insured; Assured Guaranty | ||||
Municipal Corp.) | 5.00 | 4/1/32 | 850,000 | 960,491 |
Meriden, | ||||
GO (Insured; National Public | ||||
Finance Guarantee Corp.) | 5.00 | 8/1/16 | 2,090,000 | 2,392,674 |
New Britain, | ||||
GO (Insured; Assured Guaranty | ||||
Municipal Corp.) | 5.00 | 4/1/24 | 4,500,000 | 5,838,840 |
New Haven, | ||||
GO | 5.00 | 3/1/17 | 1,425,000 | 1,624,172 |
New Haven, | ||||
GO (Insured; Assured Guaranty | ||||
Municipal Corp.) | 5.00 | 3/1/29 | 1,000,000 | 1,116,230 |
Norwalk, | ||||
GO | 5.00 | 7/15/24 | 1,000,000 | 1,257,660 |
South Central Connecticut | ||||
Regional Water Authority, | ||||
Water System Revenue | 5.00 | 8/1/31 | 3,940,000 | 4,601,487 |
South Central Connecticut | ||||
Regional Water Authority, | ||||
Water System Revenue | 5.00 | 8/1/32 | 1,370,000 | 1,602,558 |
South Central Connecticut | ||||
Regional Water Authority, | ||||
Water System Revenue | 5.00 | 8/1/33 | 4,000,000 | 4,650,800 |
The Fund | 15 |
STATEMENT OF INVESTMENTS (continued)
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Connecticut (continued) | |||||
South Central Connecticut Regional | |||||
Water Authority, Water System | |||||
Revenue (Insured; National | |||||
Public Finance Guarantee Corp.) | 5.25 | 8/1/24 | 2,000,000 | 2,627,420 | |
South Central Connecticut Regional | |||||
Water Authority, Water System | |||||
Revenue (Insured; National | |||||
Public Finance Guarantee Corp.) | 5.25 | 8/1/31 | 2,000,000 | 2,266,960 | |
Stamford, | |||||
GO | 5.00 | 7/1/21 | 4,410,000 | 5,637,479 | |
University of Connecticut, | |||||
GO | 5.00 | 2/15/25 | 1,000,000 | 1,184,220 | |
University of Connecticut, | |||||
GO | 5.00 | 2/15/27 | 1,000,000 | 1,182,170 | |
University of Connecticut, | |||||
GO | 5.00 | 2/15/28 | 1,000,000 | 1,182,170 | |
University of Connecticut, | |||||
GO (Insured; Assured Guaranty | |||||
Municipal Corp.) | 5.00 | 2/15/24 | 1,225,000 | 1,324,691 | |
University of Connecticut, | |||||
Special Obligation Student | |||||
Fee Revenue | 5.00 | 11/15/24 | 5,000,000 | 6,277,950 | |
U.S. Related—17.7% | |||||
Children’s Trust Fund of Puerto | |||||
Rico, Tobacco Settlement | |||||
Asset-Backed Bonds | 5.50 | 5/15/39 | 3,000,000 | 3,033,690 | |
Children’s Trust Fund of Puerto | |||||
Rico, Tobacco Settlement | |||||
Asset-Backed Bonds | 0.00 | 5/15/50 | 12,000,000 | b | 951,480 |
Guam, | |||||
LOR (Section 30) | 5.63 | 12/1/29 | 1,000,000 | 1,114,970 | |
Guam Economic Development | |||||
Authority, Tobacco Settlement | |||||
Asset-Backed Bonds | 5.45 | 5/15/16 | 1,445,000 | 1,650,638 | |
Guam Power Authority, | |||||
Revenue | 5.50 | 10/1/30 | 1,750,000 | 1,975,697 | |
Guam Power Authority, | |||||
Revenue | 5.00 | 10/1/34 | 2,000,000 | 2,220,260 | |
Guam Waterworks Authority, | |||||
Water and Wastewater | |||||
System Revenue | 5.50 | 7/1/16 | 750,000 | 776,107 |
16
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
U.S. Related (continued) | |||||
Guam Waterworks Authority, | |||||
Water and Wastewater | |||||
System Revenue | 5.63 | 7/1/40 | 2,000,000 | 2,141,500 | |
Puerto Rico Aqueduct and | |||||
Sewer Authority, | |||||
Senior Lien Revenue | 5.13 | 7/1/37 | 620,000 | 591,058 | |
Puerto Rico Aqueduct and Sewer | |||||
Authority, Senior Lien Revenue | 6.00 | 7/1/38 | 2,500,000 | 2,552,550 | |
Puerto Rico Commonwealth, | |||||
Public Improvement GO | |||||
(Insured; FGIC) | 5.50 | 7/1/16 | 3,270,000 | 3,484,676 | |
Puerto Rico Commonwealth, | |||||
Public Improvement GO | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 5.25 | 7/1/14 | 4,925,000 | 5,084,078 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.25 | 7/1/28 | 5,000,000 | 5,078,700 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.00 | 7/1/32 | 3,550,000 | 3,491,745 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.25 | 7/1/40 | 3,000,000 | 2,993,310 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.00 | 7/1/42 | 380,000 | 365,047 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 5.25 | 7/1/19 | 1,525,000 | 1,656,470 | |
Puerto Rico Highways and | |||||
Transportation Authority, | |||||
Highway Revenue (Prerefunded) | 5.50 | 7/1/16 | 5,000,000 | a | 5,794,550 |
Puerto Rico Highways and | |||||
Transportation Authority, | |||||
Transportation Revenue | 5.50 | 7/1/22 | 3,025,000 | 3,169,020 | |
Puerto Rico Highways and | |||||
Transportation Authority, | |||||
Transportation Revenue | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 5.25 | 7/1/33 | 3,000,000 | 3,020,250 | |
Puerto Rico Infrastructure | |||||
Financing Authority, Special | |||||
Tax Revenue (Insured; AMBAC) | 0.00 | 7/1/35 | 5,500,000 | b | 1,355,915 |
The Fund | 17 |
STATEMENT OF INVESTMENTS (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) | 5.38 | 8/1/39 | 1,500,000 | 1,570,695 | ||
Puerto Rico Sales Tax Financing | ||||||
Corporation, Sales Tax Revenue | ||||||
(First Subordinate Series) | 6.00 | 8/1/39 | 4,000,000 | 4,410,360 | ||
Puerto Rico Sales Tax Financing | ||||||
Corporation, Sales Tax Revenue | ||||||
(First Subordinate Series) | 6.00 | 8/1/42 | 3,450,000 | 3,781,166 | ||
Virgin Islands Public Finance | ||||||
Authority, Revenue (Virgin Islands | ||||||
Matching Fund Loan Note) | 5.00 | 10/1/25 | 5,000,000 | 5,694,500 | ||
Total Long-Term Municipal Investments | ||||||
(cost $349,008,867) | 376,702,754 | |||||
Short-Term Municipal | ||||||
Investments—.5% | ||||||
Connecticut; | ||||||
Connecticut Health and Educational | ||||||
Facilities Authority, Revenue | ||||||
(Yale University Issue) | 0.14 | 5/1/13 | 1,015,000 | c | 1,015,000 | |
Connecticut Health and Educational | ||||||
Facilities Authority, Revenue | ||||||
(Yale University Issue) | 0.14 | 5/1/13 | 865,000 | c | 865,000 | |
Total Short-Term Municipal Investments | ||||||
(cost $1,880,000) | 1,880,000 | |||||
Total Investments (cost $350,888,867) | 98.4 | % | 378,582,754 | |||
Cash and Receivables (Net) | 1.6 | % | 6,254,620 | |||
Net Assets | 100.0 | % | 384,837,374 |
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 April 30, 2013. Maturity date represents the |
next demand date, or the ultimate maturity date if earlier. |
18
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 | ROCS | Reset Options Certificates |
RRR | Resources Recovery Revenue | SAAN | State Aid Anticipation Notes |
SBPA | Standby Bond Purchase Agreement | SFHR | Single Family Housing Revenue |
SFMR | Single Family Mortgage Revenue | SONYMA | State of New York Mortgage Agency |
SPEARS | Short Puttable Exempt | SWDR | Solid Waste Disposal Revenue |
Adjustable Receipts | |||
TAN | Tax Anticipation Notes | TAW | Tax Anticipation Warrants |
TRAN | Tax and Revenue Anticipation Notes | XLCA | XL Capital Assurance |
The Fund | 19 |
STATEMENT OF INVESTMENTS (continued)
Summary of Combined Ratings (Unaudited) | |||||
Fitch | or | Moody’s | or | Standard & Poor’s | Value (%) † |
AAA | Aaa | AAA | 8.3 | ||
AA | Aa | AA | 47.8 | ||
A | A | A | 18.9 | ||
BBB | Baa | BBB | 19.4 | ||
BB | Ba | BB | 2.8 | ||
F1 | MIG1/P1 | SP1/A1 | .5 | ||
Not Rated d | Not Rated d | Not Rated d | 2.3 | ||
100.0 |
† Based on total investments. |
d Securities which, while not rated by Fitch, Moody’s and Standard & Poor’s, have been determined by the Manager to |
be of comparable quality to those rated securities in which the fund may invest. |
See notes to financial statements.
20
STATEMENT OF ASSETS AND LIABILITIES |
April 30, 2013 |
Cost | Value | ||||
Assets ($): | |||||
Investments in securities—See Statement of Investments | 350,888,867 | 378,582,754 | |||
Cash | 1,137,779 | ||||
Interest receivable | 5,385,038 | ||||
Receivable for shares of Beneficial Interest subscribed | 205,115 | ||||
Prepaid expenses | 14,585 | ||||
385,325,271 | |||||
Liabilities ($): | |||||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 270,144 | ||||
Payable for shares of Beneficial Interest redeemed | 182,861 | ||||
Accrued expenses | 34,892 | ||||
487,897 | |||||
Net Assets ($) | 384,837,374 | ||||
Composition of Net Assets ($): | |||||
Paid-in capital | 357,481,764 | ||||
Accumulated net realized gain (loss) on investments | (338,277 | ) | |||
Accumulated net unrealized appreciation | |||||
(depreciation) on investments | 27,693,887 | ||||
Net Assets ($) | 384,837,374 | ||||
Net Asset Value Per Share | |||||
Class A | Class C | Class I | Class Z | ||
Net Assets ($) | 239,626,329 | 16,502,252 | 12,092,114 | 116,616,679 | |
Shares Outstanding | 19,340,233 | 1,333,998 | 975,864 | 9,414,018 | |
Net Asset Value Per Share ($) | 12.39 | 12.37 | 12.39 | 12.39 | |
See notes to financial statements. |
The Fund | 21 |
STATEMENT OF OPERATIONS |
Year Ended April 30, 2013 |
Investment Income ($): | ||
Interest Income | 15,362,568 | |
Expenses: | ||
Management fee—Note 3(a) | 2,112,502 | |
Shareholder servicing costs—Note 3(c) | 814,274 | |
Distribution fees—Note 3(b) | 124,235 | |
Professional fees | 82,470 | |
Registration fees | 40,223 | |
Custodian fees—Note 3(c) | 34,069 | |
Prospectus and shareholders’ reports | 24,121 | |
Trustees’ fees and expenses—Note 3(d) | 18,739 | |
Loan commitment fees—Note 2 | 3,681 | |
Miscellaneous | 38,195 | |
Total Expenses | 3,292,509 | |
Less—reduction in fees due to earnings credits—Note 3(c) | (411 | ) |
Net Expenses | 3,292,098 | |
Investment Income—Net | 12,070,470 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments | 420,757 | |
Net unrealized appreciation (depreciation) on investments | 5,400,756 | |
Net Realized and Unrealized Gain (Loss) on Investments | 5,821,513 | |
Net Increase in Net Assets Resulting from Operations | 17,891,983 | |
See notes to financial statements. |
22
STATEMENT OF CHANGES IN NET ASSETS
Year Ended April 30, | ||||
2013 | 2012 | a | ||
Operations ($): | ||||
Investment income—net | 12,070,470 | 13,203,016 | ||
Net realized gain (loss) on investments | 420,757 | 1,113,866 | ||
Net unrealized appreciation | ||||
(depreciation) on investments | 5,400,756 | 25,971,421 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 17,891,983 | 40,288,303 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A Shares | (7,360,932 | ) | (8,104,790 | ) |
Class B Shares | — | (3,566 | ) | |
Class C Shares | (386,785 | ) | (473,633 | ) |
Class I Shares | (440,751 | ) | (324,165 | ) |
Class Z Shares | (3,859,875 | ) | (4,260,884 | ) |
Net realized gain on investments: | ||||
Class A Shares | (569,762 | ) | — | |
Class C Shares | (40,438 | ) | — | |
Class I Shares | (35,345 | ) | — | |
Class Z Shares | (275,082 | ) | — | |
Total Dividends | (12,968,970 | ) | (13,167,038 | ) |
Beneficial Interest Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A Shares | 26,531,322 | 14,060,787 | ||
Class B Shares | — | 473 | ||
Class C Shares | 2,198,197 | 916,850 | ||
Class I Shares | 7,784,011 | 7,663,190 | ||
Class Z Shares | 6,045,162 | 7,463,443 | ||
Dividends reinvested: | ||||
Class A Shares | 5,838,337 | 5,718,231 | ||
Class B Shares | — | 2,149 | ||
Class C Shares | 315,905 | 355,214 | ||
Class I Shares | 261,740 | 120,150 | ||
Class Z Shares | 3,142,328 | 3,252,196 | ||
Cost of shares redeemed: | ||||
Class A Shares | (23,202,561 | ) | (24,394,934 | ) |
Class B Shares | — | (365,169 | ) | |
Class C Shares | (2,037,144 | ) | (3,017,366 | ) |
Class I Shares | (9,047,573 | ) | (1,672,086 | ) |
Class Z Shares | (9,026,854 | ) | (10,303,509 | ) |
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | 8,802,870 | (200,381 | ) | |
Total Increase (Decrease) in Net Assets | 13,725,883 | 26,920,884 | ||
Net Assets ($): | ||||
Beginning of Period | 371,111,491 | 344,190,607 | ||
End of Period | 384,837,374 | 371,111,491 |
The Fund | 23 |
STATEMENT OF CHANGES IN NET ASSETS (continued)
Year Ended April 30, | ||||
2013 | 2012 | a | ||
Capital Share Transactions: | ||||
Class A b | ||||
Shares sold | 2,140,455 | 1,168,015 | ||
Shares issued for dividends reinvested | 470,956 | 481,247 | ||
Shares redeemed | (1,872,114 | ) | (2,059,435 | ) |
Net Increase (Decrease) in Shares Outstanding | 739,297 | (410,173 | ) | |
Class B b | ||||
Shares sold | — | 41 | ||
Shares issued for dividends reinvested | — | 184 | ||
Shares redeemed | — | (31,199 | ) | |
Net Increase (Decrease) in Shares Outstanding | — | (30,974 | ) | |
Class C | ||||
Shares sold | 177,520 | 76,190 | ||
Shares issued for dividends reinvested | 25,519 | 30,001 | ||
Shares redeemed | (165,401 | ) | (254,511 | ) |
Net Increase (Decrease) in Shares Outstanding | 37,638 | (148,320 | ) | |
Class I | ||||
Shares sold | 626,623 | 634,801 | ||
Shares issued for dividends reinvested | 21,107 | 9,969 | ||
Shares redeemed | (735,171 | ) | (139,098 | ) |
Net Increase (Decrease) in Shares Outstanding | (87,441 | ) | 505,672 | |
Class Z | ||||
Shares sold | 488,690 | 622,167 | ||
Shares issued for dividends reinvested | 253,555 | 273,823 | ||
Shares redeemed | (728,279 | ) | (871,874 | ) |
Net Increase (Decrease) in Shares Outstanding | 13,966 | 24,116 |
a Effective as of the close of business on March 13, 2012, the fund no longer offers Class B shares. |
b During the period ended April 30, 2012, 6,687 Class B shares representing $78,217, were automatically converted |
to 6,685 Class A shares. |
See notes to financial statements.
24
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Year Ended April 30, | ||||||||||
Class A Shares | 2013 | 2012 | 2011 | 2010 | 2009 | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 12.23 | 11.32 | 11.68 | 11.16 | 11.55 | |||||
Investment Operations: | ||||||||||
Investment income—net a | .38 | .44 | .45 | .47 | .47 | |||||
Net realized and unrealized | ||||||||||
gain (loss) on investments | .19 | .91 | (.36 | ) | .52 | (.39 | ) | |||
Total from Investment Operations | .57 | 1.35 | .09 | .99 | .08 | |||||
Distributions: | ||||||||||
Dividends from investment income—net | (.38 | ) | (.44 | ) | (.45 | ) | (.47 | ) | (.47 | ) |
Dividends from net realized | ||||||||||
gain on investments | (.03 | ) | — | — | — | — | ||||
Total Distributions | (.41 | ) | (.44 | ) | (.45 | ) | (.47 | ) | (.47 | ) |
Net asset value, end of period | 12.39 | 12.23 | 11.32 | 11.68 | 11.16 | |||||
Total Return (%) b | 4.74 | 12.07 | .75 | 8.98 | .86 | |||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | ||||||||||
to average net assets | .90 | .91 | .91 | .90 | .93 | |||||
Ratio of net expenses | ||||||||||
to average net assets | .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 | 3.10 | 3.69 | 3.90 | 4.07 | 4.29 | |||||
Portfolio Turnover Rate | 19.13 | 13.77 | 17.05 | 11.42 | 26.41 | |||||
Net Assets, end of period ($ x 1,000) | 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. |
See notes to financial statements.
The Fund | 25 |
FINANCIAL HIGHLIGHTS (continued)
Year Ended April 30, | ||||||||||
Class C Shares | 2013 | 2012 | 2011 | 2010 | 2009 | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 12.21 | 11.30 | 11.66 | 11.14 | 11.53 | |||||
Investment Operations: | ||||||||||
Investment income—net a | .29 | .35 | .36 | .38 | .39 | |||||
Net realized and unrealized | ||||||||||
gain (loss) on investments | .19 | .91 | (.36 | ) | .52 | (.39 | ) | |||
Total from Investment Operations | .48 | 1.26 | — | .90 | — | |||||
Distributions: | ||||||||||
Dividends from investment income—net | (.29 | ) | (.35 | ) | (.36 | ) | (.38 | ) | (.39 | ) |
Dividends from net realized | ||||||||||
gain on investments | (.03 | ) | — | — | — | — | ||||
Total Distributions | (.32 | ) | (.35 | ) | (.36 | ) | (.38 | ) | (.39 | ) |
Net asset value, end of period | 12.37 | 12.21 | 11.30 | 11.66 | 11.14 | |||||
Total Return (%) b | 3.94 | 11.25 | (.01 | ) | 8.17 | .09 | ||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | ||||||||||
to average net assets | 1.66 | 1.67 | 1.67 | 1.66 | 1.69 | |||||
Ratio of net expenses | ||||||||||
to average net assets | 1.66 | 1.67 | 1.66 | 1.66 | 1.68 | |||||
Ratio of interest and expense related | ||||||||||
to floating rate notes issued | ||||||||||
to average net assets | — | — | — | — | .02 | |||||
Ratio of net investment income | ||||||||||
to average net assets | 2.34 | 2.94 | 3.14 | 3.30 | 3.53 | |||||
Portfolio Turnover Rate | 19.13 | 13.77 | 17.05 | 11.42 | 26.41 | |||||
Net Assets, end of period ($ x 1,000) | 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. |
See notes to financial statements.
26
Year Ended April 30, | ||||||||||
Class I Shares | 2013 | 2012 | 2011 | 2010 | 2009 | a | ||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 12.22 | 11.31 | 11.68 | 11.16 | 10.13 | |||||
Investment Operations: | ||||||||||
Investment income—net b | .41 | .46 | .48 | .44 | .19 | |||||
Net realized and unrealized | ||||||||||
gain (loss) on investments | .21 | .92 | (.37 | ) | .58 | 1.03 | ||||
Total from Investment Operations | .62 | 1.38 | .11 | 1.02 | 1.22 | |||||
Distributions: | ||||||||||
Dividends from investment income—net | (.42 | ) | (.47 | ) | (.48 | ) | (.50 | ) | (.19 | ) |
Dividends from net realized | ||||||||||
gain on investments | (.03 | ) | — | — | — | — | ||||
Total Distributions | (.45 | ) | (.47 | ) | (.48 | ) | (.50 | ) | (.19 | ) |
Net asset value, end of period | 12.39 | 12.22 | 11.31 | 11.68 | 11.16 | |||||
Total Return (%) | 5.09 | 12.38 | .92 | 9.27 | 12.10 | c | ||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | ||||||||||
to average net assets | .64 | .65 | .63 | .70 | .64 | d | ||||
Ratio of net expenses | ||||||||||
to average net assets | .63 | .65 | .63 | .65 | .63 | d | ||||
Ratio of interest and expense related | ||||||||||
to floating rate notes issued | ||||||||||
to average net assets | — | — | — | — | .02 | |||||
Ratio of net investment income | ||||||||||
to average net assets | 3.34 | 3.90 | 4.16 | 4.30 | 4.70 | d | ||||
Portfolio Turnover Rate | 19.13 | 13.77 | 17.05 | 11.42 | 26.41 | |||||
Net Assets, end of period ($ x 1,000) | 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 | 27 |
FINANCIAL HIGHLIGHTS (continued)
Year Ended April 30, | ||||||||||
Class Z Shares | 2013 | 2012 | 2011 | 2010 | 2009 | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 12.22 | 11.31 | 11.67 | 11.16 | 11.55 | |||||
Investment Operations: | ||||||||||
Investment income—net a | .41 | .46 | .48 | .49 | .49 | |||||
Net realized and unrealized | ||||||||||
gain (loss) on investments | .20 | .91 | (.37 | ) | .51 | (.39 | ) | |||
Total from Investment Operations | .61 | 1.37 | .11 | 1.00 | .10 | |||||
Distributions: | ||||||||||
Dividends from investment income—net | (.41 | ) | (.46 | ) | (.47 | ) | (.49 | ) | (.49 | ) |
Dividends from net realized | ||||||||||
gain on investments | (.03 | ) | — | — | — | — | ||||
Total Distributions | (.44 | ) | (.46 | ) | (.47 | ) | (.49 | ) | (.49 | ) |
Net asset value, end of period | 12.39 | 12.22 | 11.31 | 11.67 | 11.16 | |||||
Total Return (%) | 5.04 | 12.31 | .97 | 9.11 | 1.03 | |||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | ||||||||||
to average net assets | .69 | .71 | .70 | .70 | .76 | |||||
Ratio of net expenses | ||||||||||
to average net assets | .69 | .71 | .70 | .70 | .76 | |||||
Ratio of interest and expense related | ||||||||||
to floating rate notes issued | ||||||||||
to average net assets | — | — | — | — | .02 | |||||
Ratio of net investment income | ||||||||||
to average net assets | 3.32 | 3.89 | 4.11 | 4.27 | 4.46 | |||||
Portfolio Turnover Rate | 19.13 | 13.77 | 17.05 | 11.42 | 26.41 | |||||
Net Assets, end of period ($ x 1,000) | 116,617 | 114,892 | 106,076 | 112,728 | 108,416 | |||||
a Based on average shares outstanding at each month end. | ||||||||||
See notes to financial statements. |
28
NOTES TO FINANCIAL STATEMENTS
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 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, Class I 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 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 Fund | 29 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
30
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 Fund | 31 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 April 30, 2013 in valuing the fund’s investments:
At April 30, 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
32
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 April 30, 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.
Each tax year in the four-year period ended April 30, 2013 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The Fund | 33 |
NOTES TO FINANCIAL STATEMENTS (continued)
At April 30, 2013, the components of accumulated earnings on a tax basis were as follows: undistributed tax-exempt income $336,719 and unrealized appreciation $27,707,680. In addition, the fund had $352,070 of capital losses realized after October 31, 2012, which were deferred for tax purposes to the first day of the following fiscal year.
The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2013 and April 30, 2012 were as follows: tax-exempt income $12,049,889 and $13,167,038, ordinary income $205,699 and $0 and long-term capital gains $713,382 and $0, respectively.
During the period ended April 30, 2013, as a result of permanent book to tax differences, primarily due to the tax treatment for amortization adjustments, the fund decreased accumulated undistributed investment income-net by $22,127, increased accumulated net realized gain (loss) on investments by $8,997 and increased paid-in capital by $13,130. Net assets and net asset value per share were not affected by this reclassification.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $210 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 10, 2012, the unsecured credit facility with Citibank, N.A. was $225 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 April 30, 2013, the fund did not borrow under the Facilities.
34
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 April 30, 2013, the Distributor retained $19,623 from commissions earned on sales of the fund’s Class A shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended April 30, 2013, Class C shares were charged $124,235, 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 April 30, 2013, Class A and Class C shares were charged $594,310 and $41,412, 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
The Fund | 35 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 April 30, 2013, Class Z shares were charged $46,780 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 services for the fund and, since May 29, 2012, cash management services related to fund subscriptions and redemptions. During the period ended April 30, 2013, the fund was charged $86,188 for transfer agency services and $2,506 for cash management services. Cash management fees were partially offset by earnings credits of $367.These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensatesThe Bank of NewYork Mellon under a custody agreement for providing custodial services for the fund. During the period ended April 30, 2013, the fund was charged $34,069 pursuant to the custody agreement.
Prior to May 29, 2012, the fund compensated The Bank of NewYork Mellon under a cash management agreement for performing cash management services related to fund subscriptions and redemptions. Subsequent to May 29, 2012,The Bank of NewYork Mellon has continued to provide shareholder redemption draft processing services.
36
During the period ended April 30, 2013, the fund was charged $2,108 pursuant to the cash management agreement, which is included in Shareholder servicing costs in the Statement of Operations.These fees were partially offset by earnings credits of $44.
During the period ended April 30, 2013, the fund was charged $8,414 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 $173,691, Distribution Plan fees $10,240, Shareholder Services Plan fees $55,582, custodian fees $8,540, Chief Compliance Officer fees $3,054 and transfer agency fees $19,037.
(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 April 30, 2013, amounted to $74,841,199 and $71,782,753, respectively.
At April 30, 2013, the cost of investments for federal income tax purposes was $350,875,074; accordingly, accumulated net unrealized appreciation on investments was $27,707,680, consisting of $29,050,880 gross unrealized appreciation and $1,343,200 gross unrealized depreciation.
NOTE 5—Subsequent Event:
On May 7, 2013, the Board authorized the fund to offer ClassY shares, as a new class of shares, to certain investors, including certain institutional investors. Effective on or about September 1, 2013, ClassY shares will be offered at net asset value and will not be subject to certain fees, including Distribution Plan and Shareholder Services Plan fees.
The Fund | 37 |
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 6—Other:
The sales charge may be reduced or waived for certain purchases of Class A shares. Effective April 1, 2013, pursuant to new/modified front-end sales charge waivers, Class A shares of the fund may be purchased at net asset value without payment of a sales charge by (a) investors who participate in a self-directed investment brokerage account program offered by financial intermediaries that have entered into an agreement with the fund’s Distributor (financial intermediaries offering self-directed investment brokerage accounts may or may not charge their customers a transaction fee) and (b) investors who purchase Class A shares directly through the fund’s Distributor, and either (i) have, or whose spouse or minor children have, beneficially owned shares and continuously maintained an open account with the Distributor in a Dreyfus-managed fund since on or before February 28, 2006, or (ii) such purchase is for a self-directed investment account that may or may not be subject to a transaction fee.
38
REPORT OF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM |
Shareholders and Board of Trustees
Dreyfus State Municipal Bond Funds, Dreyfus Connecticut Fund
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus State Municipal Bond Funds, Dreyfus Connecticut Fund (one of the series comprising Dreyfus State Municipal Bond Funds) as of April 30, 2013, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement.We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of April 30, 2013 by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus State Municipal Bond Funds, Dreyfus Connecticut Fund at April 30, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with U.S. generally accepted accounting principles.
New York, New York |
June 25, 2013 |
The Fund | 39 |
IMPORTANT TAX INFORMATION (Unaudited)
In accordance with federal tax law, the fund hereby reports all the dividends paid from investment income-net during its fiscal year ended April 30, 2013 as “exempt-interest dividends” (not subject to regular federal income tax, and for individuals who are Connecticut residents, Connecticut personal income taxes).Where required by federal tax law rules, shareholders will receive notification of their portion of the fund’s taxable ordinary dividends (if any), capital gains distributions (if any) and tax-exempt dividends paid for the 2013 calendar year on Form 1099-DIV which will be mailed in early 2014. Also, the fund hereby reports $.0066 per share as a short-term capital gain distribution and $.0226 per share as a long-term capital gain distribution paid on December 13, 2012.
40
BOARD MEMBERS INFORMATION (Unaudited)
The Fund | 41 |
BOARD MEMBERS INFORMATION (Unaudited) (continued)
Diane Dunst (73) |
Board Member (2007) |
Principal Occupation During Past 5Years: |
• President of Huntting House Antiques |
No. of Portfolios for which Board Member Serves: 14 |
——————— |
Nathan Leventhal (70) |
Board Member (1989) |
Principal Occupation During Past 5Years: |
• Chairman of the Avery-Fisher Artist Program (November 1997-present) |
• Commissioner, NYC Planning Commission (March 2007-November 2011) |
Other Public Company Board Memberships During Past 5Years: |
• Movado Group, Inc., Director (2003-present) |
No. of Portfolios for which Board Member Serves: 37 |
——————— |
Robin A. Melvin (49) |
Board Member (2012) † |
Principal Occupation During Past 5Years: |
• Director, Boisi Family Foundation, a private family foundation that supports youth-serving orga- |
nizations that promote the self sufficiency of youth from disadvantaged circumstances (1995-2012) |
• Board Member, Illinois Mentoring Partnership, non-profit organization dedicated to increasing |
the quantity and quality of mentoring service in Illinois (April 2013-present) |
No. of Portfolios for which Board Member Serves: 90 |
——————— |
† Board Member of the fund as of November 7, 2012. |
Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80.The |
address of the Board Members and Officers is c/o The Dreyfus Corporation, 200 Park Avenue, NewYork, NewYork |
10166.Additional information about the Board Members is available in the fund’s Statement of Additional Information |
which can be obtained from Dreyfus free of charge by calling this toll free number: 1-800-DREYFUS. |
David W. Burke, Emeritus Board Member
Ernest Kafka, Emeritus Board Member
Jay I. Meltzer, Emeritus Board Member
Daniel Rose, Emeritus Board Member
Sander Vanocur, Emeritus Board Member
42
OFFICERS OF THE FUND (Unaudited)
BRADLEY J. SKAPYAK, President since January 2010.
Chief Operating Officer and a director of the Manager since June 2009; from April 2003 to June 2009, Mr. Skapyak was the head of the Investment Accounting and Support Department of the Manager. He is an officer of 68 investment companies (comprised of 139 portfolios) managed by the Manager. He is 54 years old and has been an employee of the Manager since February 1988.
JOHN PAK, Chief Legal Officer since March 2013.
Chief Legal Officer of the Manager and Associate General Counsel and Managing Director of BNY Mellon since August 2012; from March 2005 to July 2012, Managing Director of Deutsche Bank, Deputy Global Head of Deutsche Asset Management Legal and Regional Head of Deutsche Asset Management Americas Legal. He is an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since August 2012.
JANETTE E. FARRAGHER, Vice President and Secretary since December 2011.
Assistant General Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. She is 50 years old and has been an employee of the Manager since February 1984.
KIESHA ASTWOOD, Vice President and Assistant Secretary since January 2010.
Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. She is 40 years old and has been an employee of the Manager since July 1995.
JAMES BITETTO, Vice President and Assistant Secretary since August 2005.
Senior Counsel of BNY Mellon and Secretary of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 46 years old and has been an employee of the Manager since December 1996.
JONI LACKS CHARATAN, Vice President and Assistant Secretary since August 2005.
Senior Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. She is 57 years old and has been an employee of the Manager since October 1988.
JOSEPH M. CHIOFFI, Vice President and Assistant Secretary since August 2005.
Senior Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 51 years old and has been an employee of the Manager since June 2000.
JOHN B. HAMMALIAN, Vice President and Assistant Secretary since August 2005.
Senior Managing Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since February 1991.
ROBERT R. MULLERY, Vice President and Assistant Secretary since August 2005.
Managing Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 61 years old and has been an employee of the Manager since May 1986.
The Fund | 43 |
OFFICERS OF THE FUND (Unaudited) (continued)
JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.
Senior Managing Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 47 years old and has been an employee of the Manager since October 1990.
JAMES WINDELS, Treasurer since November 2001.
Director – Mutual Fund Accounting of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 54 years old and has been an employee of the Manager since April 1985.
RICHARD CASSARO, Assistant Treasurer since January 2008.
Senior Accounting Manager – Money Market and Municipal Bond Funds of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 54 years old and has been an employee of the Manager since September 1982.
GAVIN C. REILLY, Assistant Treasurer since December 2005.
Tax Manager of the Investment Accounting and Support Department of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since April 1991.
ROBERT S. ROBOL, Assistant Treasurer since August 2005.
Senior Accounting Manager – Fixed Income Funds of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since October 1988.
ROBERT SALVIOLO, Assistant Treasurer since July 2007.
Senior Accounting Manager – Equity Funds of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 46 years old and has been an employee of the Manager since June 1989.
ROBERT SVAGNA, Assistant Treasurer since August 2005.
Senior Accounting Manager – Equity Funds of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 46 years old and has been an employee of the Manager since November 1990.
JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.
Chief Compliance Officer of the Manager and The Dreyfus Family of Funds (69 investment companies, comprised of 165 portfolios). He is 55 years old and has served in various capacities with the Manager since 1980, including manager of the firm’s Fund Accounting Department from 1997 through October 2001.
MATTHEW D. CONNOLLY, Anti-Money Laundering Compliance Officer since April 2012.
Anti-Money Laundering Compliance Officer of the Distributor since October 2011; from March 2010 to September 2011, Global Head, KYC Reviews and Director, UBS Investment Bank; until March 2010,AML Compliance Officer and Senior Vice President, Citi Global Wealth Management. He is an officer of 64 investment companies (comprised of 160 portfolios) managed by the Manager. He is 40 years old and has been an employee of the Distributor since October 2011.
44
For More Information
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.
Dreyfus State |
Municipal Bond Funds, |
Dreyfus Massachusetts Fund |
ANNUAL REPORT April 30, 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 |
Fund Performance |
8 |
Understanding Your Fund’s Expenses |
8 |
Comparing Your Fund’s Expenses With Those of Other Funds |
9 |
Statement of Investments |
20 |
Statement of Assets and Liabilities |
21 |
Statement of Operations |
22 |
Statement of Changes in Net Assets |
24 |
Financial Highlights |
27 |
Notes to Financial Statements |
37 |
Report of Independent Registered Public Accounting Firm |
38 |
Important Tax Information |
39 |
Board Members Information |
41 |
Officers of the Fund |
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 annual report for Dreyfus Massachusetts Fund, a series of Dreyfus State Municipal Bond Funds, covering the 12-month period from May 1, 2012, through April 30, 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 search for higher after-tax yields amid historically low interest rates continued to exert a major influence on the municipal bond market over the past year, as investors increasingly turned to lower rated and longer term securities for higher levels of current income.The market’s supply-and-demand dynamics were buoyed further when political pressure to reduce government spending and borrowing led to a relatively meager supply of newly issued securities through most of the reporting period. The market also benefited from a generally recovering U.S. economy, including a declining U.S. unemployment rate and improving housing markets, which helped to alleviate fiscal pressures for many states and municipalities.
Our chief economist currently expects the U.S. economic recovery to persist at a choppy and moderate pace over the next several months, but sees the potential for stronger growth to begin in the fall. Moreover, the United States generally is expected to remain in the lead in a global march toward better economic conditions, while Europe’s recovery from recession likely will be delayed as regional policymakers continue their efforts to resolve structural issues. As always, we encourage you to discuss our observations with your financial advisor, who can help you assess their implications for your investment portfolio.
Thank you for your continued confidence and support.
Sincerely,
J. Charles Cardona
President
The Dreyfus Corporation
May 15, 2013
2
DISCUSSION OF FUND PERFORMANCE
For the period of May 1, 2012, through April 30, 2013, as provided by Thomas Casey and David Belton, Portfolio Managers
Fund and Market Performance Overview
For the 12-month period ended April 30, 2013, Class A shares of Dreyfus Massachusetts Fund, a series of Dreyfus State Municipal Bond Funds, produced a total return of 4.51%, Class C shares returned 3.72%, and Class Z shares returned 4.73%. 1 In comparison, the Barclays Municipal Bond Index (the “Index”), the fund’s benchmark index, which is composed of bonds issued nationally and not solely within Massachusetts, achieved a total return of 5.19% for the same period. 2
Despite bouts of heightened volatility, positive supply-and-demand dynamics stemming in part from investors’ search for higher levels of tax-exempt income helped support municipal bond prices over the reporting period.The fund produced lower returns than its benchmark, mainly due to lagging results from Massachusetts municipal bonds compared to national market averages.
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,
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.
Municipal Bonds Encountered Heightened Volatility
Although the reporting period began in the midst of heightened economic concerns, investor sentiment soon began to recover when U.S. employment trends improved, housing markets recovered and the Federal Reserve Board launched a new quantitative easing program. Investor optimism faltered briefly in November 2012 due to uncertainty surrounding automatic tax hikes and spending cuts scheduled for the start of 2013, but last-minute legislation to address the increases helped alleviate these worries. Positive economic data offered further support to investor sentiment over the first four months of 2013.
Lower rated municipal bonds generally outperformed broader market averages, supported by robust demand from investors seeking higher levels of after-tax income in a low interest rate environment. While the supply of newly issued municipal bonds increased compared to the very low levels reached earlier in 2012, new issuance remained muted relative to historical norms.
From a credit quality perspective, Massachusetts has remained in sound fiscal condition. Solid economic fundamentals and strong management practices have helped keep new issuance of Massachusetts bonds at relatively modest levels.
Revenue Bonds Drove Fund Performance
We attribute the fund’s underperformance compared to the Index to investors’ preference for higher yielding municipal bonds, including those from less fiscally secure states than Massachusetts. In addition, high-quality revenue bonds backed by essential municipal services, such as water and sewer facilities, weighed to a degree on relative performance. Other laggards during the reporting period included high-quality bonds backed by educational institutions and special tax, which remained out of favor among investors despite what we believe to be attractive valuations.
The fund achieved stronger relative results through an emphasis on revenue bonds over general obligation bonds. Overweighted exposure to securities backed by hospitals, housing projects, airports, and the state’s settlement of litigation with U.S. tobacco companies helped bolster relative results, as did an underweighted position
4
in lower yielding escrowed bonds. The fund also benefited from our interest rate strategies, including a modestly long average duration and an emphasis on securities with maturities in the 10- to 15-year range.
Maintaining a Selective Approach
We have been encouraged by recently improved economic data, but the U.S. economy remains vulnerable to fiscal uncertainty and unexpected global developments. In addition, while credit fundamentals are improving for most states, many localities face ongoing fiscal pressures.Therefore, we have maintained our research-intensive credit selection process to help identify attractively valued opportunities among fundamentally sound issuers of municipal securities.
As of the reporting period’s end, we have maintained overweighted exposure to revenue bonds backed by housing projects, hospitals, airports, special tax and educational institutions.We have retained a slightly long duration posture and a focus at the long end of the intermediate-term maturity range, which we expect to benefit from robust demand from individuals facing higher income tax rates.
May 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 |
† Source: Lipper Inc. |
Past performance is not predictive of future performance. |
The above graph compares a $10,000 investment made in each of the Class A and Class C shares of Dreyfus State |
Municipal Bond Funds, Dreyfus Massachusetts Fund on 4/30/03 to a $10,000 investment made in the Barclays |
Municipal Bond Index (the “Index”) on that date.All dividends and capital gain distributions are reinvested. |
The fund invests primarily in Massachusetts municipal securities and its performance shown in the line graph above takes |
into account the maximum initial sales charge on Class A shares and all other applicable fees and expenses for Class A |
and Class C shares. Performance for Class Z shares will vary from the performance of Class A and Class C shares shown |
above due to differences in charges and expenses.The Index is not limited to investments principally in Massachusetts |
municipal obligations.The Index, unlike the fund, is an unmanaged total return performance benchmark for the long-term, |
investment-grade, geographically unrestricted tax-exempt bond market, calculated by using municipal bonds selected to be |
representative of the municipal market overall.These factors can contribute to the Index potentially outperforming or |
underperforming the fund. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors |
cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if |
applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report. |
6
Average Annual Total Returns as of 4/30/13 | |||||||||
Inception | From | ||||||||
Date | 1 | Year | 5 Years | 10 Years | Inception | ||||
Class A shares | |||||||||
with maximum sales charge (4.5%) | 5/28/87 | –0.18 | % | 4.56 | % | 3.99 | % | — | |
without sales charge | 5/28/87 | 4.51 | % | 5.52 | % | 4.47 | % | — | |
Class C shares | |||||||||
with applicable redemption charge † | 8/15/95 | 2.72 | % | 4.73 | % | 3.68 | % | — | |
without redemption | 8/15/95 | 3.72 | % | 4.73 | % | 3.68 | % | — | |
Class Z shares | 10/20/04 | 4.73 | % | 5.74 | % | — | 4.58 | % | |
Barclays Municipal Bond Index | 10/31/04 | 5.19 | % | 6.09 | % | 5.05 | % | 5.06 | % †† |
Past performance is not predictive of future performance.The fund’s performance shown in the graph and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
† | The maximum contingent deferred sales charge for Class C shares is 1% for shares redeemed within one year of the |
date of purchase. | |
†† | The Index date is based on the life of Class Z shares. For comparative purposes, the value of the Index as of |
10/31/04 is used as the beginning value on 10/20/04 (the inception date for Class Z shares). |
The Fund | 7 |
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 November 1, 2012 to April 30, 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 April 30, 2013
Class A | Class C | Class Z | ||||
Expenses paid per $1,000 † | $ | 4.59 | $ | 8.27 | $ | 3.55 |
Ending value (after expenses) | $ | 1,013.40 | $ | 1,009.60 | $ | 1,015.30 |
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 April 30, 2013
Class A | Class C | Class Z | ||||
Expenses paid per $1,000 † | $ | 4.61 | $ | 8.30 | $ | 3.56 |
Ending value (after expenses) | $ | 1,020.23 | $ | 1,016.56 | $ | 1,021.27 |
Expenses are equal to the fund’s annualized expense ratio of .92% for Class A, 1.66% for Class C and .71% for |
Class Z, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half |
year period). |
8
STATEMENT OF INVESTMENTS | |||||
April 30, 2013 | |||||
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments—99.2% | Rate (%) | Date | Amount ($) | Value ($) | |
Massachusetts—85.6% | |||||
Boston Housing Authority, | |||||
Capital Program Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 5.00 | 4/1/24 | 1,900,000 | 2,101,172 | |
Boston Industrial Development | |||||
Financing Authority, Sewage | |||||
Facility Revenue (Harbor Electric | |||||
Energy Company Project) | 7.38 | 5/15/15 | 805,000 | 808,953 | |
Boston Water and Sewer Commission, | |||||
Revenue (Prerefunded) | 5.00 | 11/1/14 | 2,000,000 | a | 2,141,520 |
Cambridge, | |||||
GO | 5.00 | 1/1/20 | 3,255,000 | 4,082,226 | |
Marblehead, | |||||
GO (Prerefunded) | 5.00 | 8/15/14 | 1,835,000 | a | 1,947,320 |
Marblehead, | |||||
GO (Prerefunded) | 5.00 | 8/15/14 | 1,925,000 | a | 2,042,829 |
Massachusetts, | |||||
GO | 5.25 | 8/1/22 | 2,650,000 | 3,448,313 | |
Massachusetts, | |||||
GO | 5.25 | 8/1/23 | 1,000,000 | 1,305,120 | |
Massachusetts, | |||||
GO | 0.75 | 11/1/25 | 5,000,000 | b | 4,929,300 |
Massachusetts, | |||||
GO (Consolidated Loan) | 5.00 | 8/1/16 | 2,000,000 | 2,295,120 | |
Massachusetts, | |||||
GO (Consolidated Loan) | 5.50 | 8/1/20 | 1,000,000 | 1,293,110 | |
Massachusetts, | |||||
GO (Insured; AMBAC) | 5.50 | 8/1/30 | 1,750,000 | 2,371,302 | |
Massachusetts, | |||||
GO (Insured; Assured Guaranty | |||||
Municipal Corp.) | 5.25 | 9/1/23 | 2,500,000 | 3,266,550 | |
Massachusetts, | |||||
Special Obligation Dedicated | |||||
Tax Revenue (Insured; National | |||||
Public Finance Guarantee Corp.) | 5.50 | 1/1/23 | 3,000,000 | 3,767,220 | |
Massachusetts Bay Transportation | |||||
Authority, Assessment Revenue | 5.25 | 7/1/34 | 2,500,000 | 2,883,175 | |
Massachusetts Bay Transportation | |||||
Authority, Assessment | |||||
Revenue (Prerefunded) | 5.00 | 7/1/15 | 2,400,000 | a | 2,642,352 |
The Fund | 9 |
STATEMENT OF INVESTMENTS (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 | 485,945 | |
Massachusetts Bay Transportation | |||||
Authority, GO (General | |||||
Transportation System) | 7.00 | 3/1/21 | 425,000 | 559,002 | |
Massachusetts Bay Transportation | |||||
Authority, Senior Sales | |||||
Tax Revenue | 5.50 | 7/1/18 | 3,250,000 | 4,015,537 | |
Massachusetts Bay Transportation | |||||
Authority, Senior Sales | |||||
Tax Revenue | 5.00 | 7/1/21 | 1,000,000 | 1,270,380 | |
Massachusetts Bay Transportation | |||||
Authority, Senior Sales Tax | |||||
Revenue (Insured; National | |||||
Public Finance Guarantee Corp.) | 5.50 | 7/1/27 | 3,000,000 | 4,023,480 | |
Massachusetts Clean Energy | |||||
Cooperative Corporation, | |||||
Massachusetts Clean Energy | |||||
Cooperative Revenue | 5.00 | 7/1/24 | 2,580,000 | 3,189,912 | |
Massachusetts College Building | |||||
Authority, Project Revenue | 5.00 | 5/1/27 | 2,000,000 | 2,383,380 | |
Massachusetts College Building | |||||
Authority, Project Revenue | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 0.00 | 5/1/26 | 5,385,000 | c | 3,870,953 |
Massachusetts College Building | |||||
Authority, Project Revenue | |||||
(Insured; XLCA) | 5.50 | 5/1/28 | 1,450,000 | 1,863,975 | |
Massachusetts Department of | |||||
Transportation, Metropolitan | |||||
Highway System Senior Revenue | 5.00 | 1/1/27 | 4,000,000 | 4,590,800 | |
Massachusetts Development Finance | |||||
Agency, Higher Education | |||||
Revenue (Emerson College Issue) | 5.00 | 1/1/22 | 1,000,000 | 1,094,270 | |
Massachusetts Development Finance | |||||
Agency, Revenue (Assumption | |||||
College Issue) (Insured; Radian) | 6.00 | 3/1/30 | 1,905,000 | 1,907,972 |
10
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Massachusetts (continued) | ||||
Massachusetts Development Finance | ||||
Agency, Revenue (Berklee | ||||
College of Music Issue) | 5.00 | 10/1/31 | 1,000,000 | 1,149,010 |
Massachusetts Development Finance | ||||
Agency, Revenue (Brandeis | ||||
University Issue) | 5.00 | 10/1/26 | 1,250,000 | 1,473,850 |
Massachusetts Development Finance | ||||
Agency, Revenue (Brandeis | ||||
University Issue) | 5.00 | 10/1/29 | 1,475,000 | 1,711,767 |
Massachusetts Development Finance | ||||
Agency, Revenue (Milton | ||||
Academy Issue) | 5.00 | 9/1/30 | 2,000,000 | 2,317,920 |
Massachusetts Development Finance | ||||
Agency, Revenue (Noble and | ||||
Greenough School Issue) | 5.00 | 4/1/21 | 600,000 | 744,132 |
Massachusetts Development Finance | ||||
Agency, Revenue (Partners | ||||
HealthCare System Issue) | 5.38 | 7/1/41 | 4,000,000 | 4,560,120 |
Massachusetts Development Finance | ||||
Agency, Revenue (Suffolk | ||||
University Issue) | 5.00 | 7/1/30 | 1,000,000 | 1,104,680 |
Massachusetts Development Finance | ||||
Agency, Revenue (Tufts Medical | ||||
Center Issue) | 5.50 | 1/1/22 | 1,500,000 | 1,762,455 |
Massachusetts Development Finance | ||||
Agency, Revenue (UMass | ||||
Memorial Issue) | 5.50 | 7/1/31 | 500,000 | 572,215 |
Massachusetts Development Finance | ||||
Agency, Revenue (Wheelock | ||||
College Issue) | 5.25 | 10/1/37 | 2,500,000 | 2,625,350 |
Massachusetts Development Finance | ||||
Agency, Revenue (Whitehead | ||||
Institute for Biomedical | ||||
Research Issue) | 5.00 | 6/1/23 | 1,350,000 | 1,638,819 |
Massachusetts Development | ||||
Finance Agency, SWDR | ||||
(Dominion Energy | ||||
Brayton Point Issue) | 5.00 | 2/1/36 | 2,000,000 | 2,099,220 |
The Fund | 11 |
STATEMENT OF INVESTMENTS (continued)
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Massachusetts (continued) | ||||
Massachusetts Educational | ||||
Financing Authority, Education | ||||
Loan Revenue (Insured; AMBAC) | 4.70 | 1/1/27 | 4,750,000 | 4,881,005 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Community | ||||
Colleges Program Issue) | ||||
(Insured; AMBAC) | 5.25 | 10/1/26 | 2,845,000 | 2,848,841 |
Massachusetts Health and | ||||
Educational Facilities Authority, | ||||
Revenue (Dana-Farber Cancer | ||||
Institute Issue) | 5.25 | 12/1/27 | 1,000,000 | 1,154,080 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Harvard | ||||
University Issue) | 5.00 | 12/15/24 | 2,350,000 | 2,862,582 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue | ||||
(Massachusetts Eye and | ||||
Ear Infirmary Issue) | 5.00 | 7/1/20 | 1,000,000 | 1,160,650 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue | ||||
(Massachusetts Eye and | ||||
Ear Infirmary Issue) | 5.38 | 7/1/35 | 1,000,000 | 1,085,890 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue | ||||
(Massachusetts Institute of | ||||
Technology Issue) | 5.25 | 7/1/33 | 4,000,000 | 5,589,680 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Partners | ||||
HealthCare System Issue) | 5.00 | 7/1/19 | 1,000,000 | 1,226,330 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Partners | ||||
HealthCare System Issue) | 5.25 | 7/1/29 | 2,000,000 | 2,307,000 |
12
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 | 4,950,000 | 5,435,298 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Suffolk | ||||
University Issue) | 6.00 | 7/1/24 | 1,000,000 | 1,194,500 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Tufts | ||||
University Issue) | 5.50 | 8/15/18 | 1,625,000 | 2,003,609 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Tufts | ||||
University Issue) | 5.38 | 8/15/38 | 3,000,000 | 3,511,320 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (UMass | ||||
Memorial Issue) | 5.25 | 7/1/25 | 1,895,000 | 2,029,886 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (UMass | ||||
Memorial Issue) | 5.00 | 7/1/33 | 1,070,000 | 1,115,154 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue (Wheaton | ||||
College Issue) | 5.00 | 1/1/30 | 2,405,000 | 2,711,517 |
Massachusetts Health and | ||||
Educational Facilities | ||||
Authority, Revenue | ||||
(Winchester Hospital Issue) | 5.25 | 7/1/38 | 1,000,000 | 1,101,070 |
Massachusetts Housing Finance | ||||
Agency, Housing Revenue | 5.00 | 12/1/24 | 1,160,000 | 1,181,147 |
Massachusetts Housing Finance | ||||
Agency, Housing Revenue | 5.00 | 12/1/26 | 1,200,000 | 1,220,724 |
Massachusetts Housing Finance | ||||
Agency, Housing Revenue | 5.00 | 12/1/28 | 2,000,000 | 2,055,920 |
The Fund | 13 |
STATEMENT OF INVESTMENTS (continued)
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Massachusetts (continued) | ||||
Massachusetts Housing Finance | ||||
Agency, Housing Revenue | 5.00 | 6/1/30 | 350,000 | 356,699 |
Massachusetts Housing Finance | ||||
Agency, Housing Revenue | 5.25 | 12/1/33 | 1,350,000 | 1,351,337 |
Massachusetts Housing Finance | ||||
Agency, Housing Revenue | 5.10 | 12/1/37 | 2,130,000 | 2,180,907 |
Massachusetts Housing Finance | ||||
Agency, Housing Revenue | 5.20 | 12/1/37 | 1,905,000 | 1,983,448 |
Massachusetts Housing Finance | ||||
Agency, SFHR | 4.75 | 12/1/30 | 1,205,000 | 1,222,882 |
Massachusetts Port Authority, | ||||
Revenue | 5.00 | 7/1/25 | 1,500,000 | 1,840,725 |
Massachusetts Port Authority, | ||||
Revenue | 5.00 | 7/1/27 | 5,475,000 | 6,552,261 |
Massachusetts School Building | ||||
Authority, Senior Dedicated | ||||
Sales Tax Revenue | 5.00 | 8/15/17 | 3,000,000 | 3,552,870 |
Massachusetts School Building | ||||
Authority, Senior Dedicated | ||||
Sales Tax Revenue | 5.00 | 8/15/21 | 6,610,000 | 8,388,487 |
Massachusetts School Building | ||||
Authority, Senior Dedicated | ||||
Sales Tax Revenue | 5.00 | 8/15/22 | 2,000,000 | 2,559,160 |
Massachusetts School Building | ||||
Authority, Senior Dedicated | ||||
Sales Tax Revenue | 5.00 | 10/15/35 | 4,000,000 | 4,643,920 |
Massachusetts Water Pollution | ||||
Abatement Trust, State | ||||
Revolving Fund Bonds | 5.00 | 8/1/27 | 1,535,000 | 1,834,739 |
Massachusetts Water Resources | ||||
Authority, General Revenue | 5.00 | 8/1/25 | 2,000,000 | 2,456,320 |
Massachusetts Water Resources | ||||
Authority, General Revenue | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 5.25 | 8/1/21 | 1,500,000 | 1,769,415 |
Massachusetts Water Resources | ||||
Authority, General Revenue | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 5.25 | 8/1/26 | 2,000,000 | 2,329,200 |
14
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 | 1,580,766 | |
Sandwich, | |||||
GO (Insured; National Public | |||||
Finance Guarantee Corp.) | 5.00 | 7/15/19 | 1,000,000 | 1,108,400 | |
University of Massachusetts | |||||
Building Authority, | |||||
Project Revenue | 4.00 | 5/1/17 | 1,000,000 | 1,129,420 | |
U.S. Related—13.6% | |||||
Children’s Trust Fund of Puerto | |||||
Rico, Tobacco Settlement | |||||
Asset-Backed Bonds | 5.38 | 5/15/33 | 1,720,000 | 1,739,316 | |
Children’s Trust Fund of Puerto | |||||
Rico, Tobacco Settlement | |||||
Asset-Backed Bonds | 5.50 | 5/15/39 | 1,245,000 | 1,258,981 | |
Children’s Trust Fund of Puerto | |||||
Rico, Tobacco Settlement | |||||
Asset-Backed Bonds | 0.00 | 5/15/50 | 5,000,000 | c | 396,450 |
Guam, | |||||
Business Privilege Tax Revenue | 5.13 | 1/1/42 | 1,000,000 | 1,117,790 | |
Guam, | |||||
Hotel Occupancy Tax Revenue | 5.00 | 11/1/17 | 1,000,000 | 1,112,360 | |
Guam Power Authority, | |||||
Revenue | 5.50 | 10/1/30 | 1,000,000 | 1,128,970 | |
Puerto Rico Aqueduct and Sewer | |||||
Authority, Senior Lien Revenue | 5.13 | 7/1/37 | 310,000 | 295,529 | |
Puerto Rico Aqueduct and Sewer | |||||
Authority, Senior Lien Revenue | 6.00 | 7/1/38 | 1,000,000 | 1,021,020 | |
Puerto Rico Commonwealth, | |||||
Public Improvement GO | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 6.00 | 7/1/27 | 1,000,000 | 1,057,330 | |
Puerto Rico Commonwealth, | |||||
Public Improvement GO | |||||
(Insured; XLCA) | 5.25 | 7/1/17 | 1,460,000 | 1,551,279 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.25 | 7/1/27 | 2,500,000 | 2,549,175 |
The Fund | 15 |
STATEMENT OF INVESTMENTS (continued)
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
U.S. Related (continued) | |||||
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.00 | 7/1/32 | 1,000,000 | 983,590 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.25 | 7/1/40 | 1,000,000 | 997,770 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | 5.00 | 7/1/42 | 190,000 | 182,524 | |
Puerto Rico Electric Power | |||||
Authority, Power Revenue | |||||
(Insured; National Public | |||||
Finance Guarantee Corp.) | 5.25 | 7/1/30 | 1,000,000 | 1,016,380 | |
Puerto Rico Infrastructure | |||||
Financing Authority, Special | |||||
Tax Revenue (Insured; AMBAC) | 0.00 | 7/1/35 | 6,840,000 | c | 1,686,265 |
Puerto Rico Infrastructure | |||||
Financing Authority, Special | |||||
Tax Revenue (Insured; FGIC) | 5.50 | 7/1/19 | 1,225,000 | 1,316,214 | |
Puerto Rico Public Buildings | |||||
Authority, Guaranteed | |||||
Government Facilities | |||||
Revenue (Insured; AMBAC) | 6.25 | 7/1/15 | 1,100,000 | 1,235,663 | |
Puerto Rico Sales Tax Financing | |||||
Corporation, Sales Tax Revenue | |||||
(First Subordinate Series) | 5.38 | 8/1/39 | 1,000,000 | 1,047,130 | |
Puerto Rico Sales Tax Financing | |||||
Corporation, Sales Tax Revenue | |||||
(First Subordinate Series) | 6.00 | 8/1/39 | 2,500,000 | 2,756,475 | |
Puerto Rico Sales Tax Financing | |||||
Corporation, Sales Tax Revenue | |||||
(First Subordinate Series) | 6.00 | 8/1/42 | 2,000,000 | 2,191,980 | |
Virgin Islands Public Finance | |||||
Authority, Revenue (Virgin Islands | |||||
Matching Fund Loan Note) | 5.00 | 10/1/25 | 2,500,000 | 2,847,250 | |
Total Long-Term Municipal Investments | |||||
(cost $199,256,357) | 215,347,326 |
16
Short-Term Municipal | Coupon | Maturity | Principal | ||
Investment—.1% | Rate (%) | Date | Amount ($) | Value ($) | |
Massachusetts; | |||||
Massachusetts Health and | |||||
Educational Facilities | |||||
Authority, Revenue | |||||
(Stonehill College Issue) | |||||
(LOC; JPMorgan Chase Bank) | |||||
(cost $300,000) | 0.17 | 5/1/13 | 300,000 | d | 300,000 |
Total Investments (cost $199,556,357) | 99.3 | % | 215,647,326 | ||
Cash and Receivables (Net) | .7 | % | 1,563,695 | ||
Net Assets | 100.0 | % | 217,211,021 |
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 April 30, 2013. Maturity date represents the |
next demand date, or the ultimate maturity date if earlier. |
The Fund | 17 |
STATEMENT OF INVESTMENTS (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 | ROCS | Reset Options Certificates |
RRR | Resources Recovery Revenue | SAAN | State Aid Anticipation Notes |
SBPA | Standby Bond Purchase Agreement | SFHR | Single Family Housing Revenue |
SFMR | Single Family Mortgage Revenue | SONYMA | State of New York Mortgage Agency |
SPEARS | Short Puttable Exempt | SWDR | Solid Waste Disposal Revenue |
Adjustable Receipts | |||
TAN | Tax Anticipation Notes | TAW | Tax Anticipation Warrants |
TRAN | Tax and Revenue Anticipation Notes | XLCA | XL Capital Assurance |
18
Summary of Combined Ratings (Unaudited) | |||||
Fitch | or | Moody’s | or | Standard & Poor’s | Value (%) † |
AAA | Aaa | AAA | 15.4 | ||
AA | Aa | AA | 49.0 | ||
A | A | A | 15.9 | ||
BBB | Baa | BBB | 15.4 | ||
BB | Ba | BB | .2 | ||
F1 | MIG1/P1 | SP1/A1 | .1 | ||
Not Rated e | Not Rated e | Not Rated e | 4.0 | ||
100.0 |
† Based on total investments. |
e Securities which, while not rated by Fitch, Moody’s and Standard & Poor’s, have been determined by the Manager to |
be of comparable quality to those rated securities in which the fund may invest. |
See notes to financial statements.
The Fund | 19 |
STATEMENT OF ASSETS AND LIABILITIES |
April 30, 2013 |
Cost | Value | ||
Assets ($): | |||
Investments in securities—See Statement of Investments | 199,556,357 | 215,647,326 | |
Interest receivable | 2,630,652 | ||
Receivable for shares of Beneficial Interest subscribed | 10,362 | ||
Prepaid expenses | 10,901 | ||
218,299,241 | |||
Liabilities ($): | |||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 135,244 | ||
Cash overdraft due to Custodian | 505,263 | ||
Payable for shares of Beneficial Interest redeemed | 379,863 | ||
Accrued expenses | 67,850 | ||
1,088,220 | |||
Net Assets ($) | 217,211,021 | ||
Composition of Net Assets ($): | |||
Paid-in capital | 200,670,759 | ||
Accumulated net realized gain (loss) on investments | 449,293 | ||
Accumulated net unrealized appreciation | |||
(depreciation) on investments | 16,090,969 | ||
Net Assets ($) | 217,211,021 | ||
Net Asset Value Per Share | |||
Class A | Class C | Class Z | |
Net Assets ($) | 41,674,889 | 4,389,865 | 171,146,267 |
Shares Outstanding | 3,440,703 | 362,117 | 14,131,604 |
Net Asset Value Per Share ($) | 12.11 | 12.12 | 12.11 |
See notes to financial statements. |
20
STATEMENT OF OPERATIONS |
Year Ended April 30, 2013 |
Investment Income ($): | ||
Interest Income | 8,336,916 | |
Expenses: | ||
Management fee—Note 3(a) | 1,176,180 | |
Shareholder servicing costs—Note 3(c) | 277,047 | |
Professional fees | 66,425 | |
Registration fees | 33,641 | |
Distribution fees—Note 3(b) | 31,783 | |
Custodian fees—Note 3(c) | 22,477 | |
Prospectus and shareholders’ reports | 12,771 | |
Trustees’ fees and expenses—Note 3(d) | 12,395 | |
Loan commitment fees—Note 2 | 2,055 | |
Miscellaneous | 33,478 | |
Total Expenses | 1,668,252 | |
Less—reduction in fees due to earnings credits—Note 3(c) | (292 | ) |
Net Expenses | 1,667,960 | |
Investment Income—Net | 6,668,956 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments | 505,218 | |
Net unrealized appreciation (depreciation) on investments | 2,614,519 | |
Net Realized and Unrealized Gain (Loss) on Investments | 3,119,737 | |
Net Increase in Net Assets Resulting from Operations | 9,788,693 | |
See notes to financial statements. |
The Fund | 21 |
STATEMENT OF CHANGES IN NET ASSETS
Year Ended April 30, | ||||
2013 | 2012 | a | ||
Operations ($): | ||||
Investment income—net | 6,668,956 | 7,548,827 | ||
Net realized gain (loss) on investments | 505,218 | 273,655 | ||
Net unrealized appreciation | ||||
(depreciation) on investments | 2,614,519 | 16,035,247 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 9,788,693 | 23,857,729 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A Shares | (1,204,038 | ) | (1,367,965 | ) |
Class B Shares | — | (4,543 | ) | |
Class C Shares | (93,309 | ) | (101,732 | ) |
Class Z Shares | (5,357,064 | ) | (6,059,925 | ) |
Net realized gain on investments: | ||||
Class A Shares | (15,966 | ) | (154,086 | ) |
Class B Shares | — | (735 | ) | |
Class C Shares | (1,706 | ) | (14,342 | ) |
Class Z Shares | (66,820 | ) | (637,769 | ) |
Total Dividends | (6,738,903 | ) | (8,341,097 | ) |
Beneficial Interest Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A Shares | 4,574,778 | 2,897,391 | ||
Class B Shares | — | 541 | ||
Class C Shares | 497,831 | 519,271 | ||
Class Z Shares | 11,717,343 | 5,483,597 | ||
Dividends reinvested: | ||||
Class A Shares | 945,516 | 1,154,936 | ||
Class B Shares | — | 3,105 | ||
Class C Shares | 37,607 | 46,132 | ||
Class Z Shares | 4,202,677 | 5,197,001 | ||
Cost of shares redeemed: | ||||
Class A Shares | (4,131,502 | ) | (3,511,581 | ) |
Class B Shares | — | (204,324 | ) | |
Class C Shares | (257,433 | ) | (164,594 | ) |
Class Z Shares | (13,435,538 | ) | (10,237,233 | ) |
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | 4,151,279 | 1,184,242 | ||
Total Increase (Decrease) in Net Assets | 7,201,069 | 16,700,874 | ||
Net Assets ($): | ||||
Beginning of Period | 210,009,952 | 193,309,078 | ||
End of Period | 217,211,021 | 210,009,952 |
22
Year Ended April 30, | ||||
2013 | 2012 | a | ||
Capital Share Transactions: | ||||
Class A b | ||||
Shares sold | 377,532 | 251,067 | ||
Shares issued for dividends reinvested | 78,152 | 99,624 | ||
Shares redeemed | (340,946 | ) | (302,552 | ) |
Net Increase (Decrease) in Shares Outstanding | 114,738 | 48,139 | ||
Class B b | ||||
Shares sold | — | 46 | ||
Shares issued for dividends reinvested | — | 269 | ||
Shares redeemed | — | (17,234 | ) | |
Net Increase (Decrease) in Shares Outstanding | — | (16,919 | ) | |
Class C | ||||
Shares sold | 40,941 | 44,609 | ||
Shares issued for dividends reinvested | 3,106 | 3,972 | ||
Shares redeemed | (21,262 | ) | (14,528 | ) |
Net Increase (Decrease) in Shares Outstanding | 22,785 | 34,053 | ||
Class Z | ||||
Shares sold | 968,273 | 473,828 | ||
Shares issued for dividends reinvested | 347,463 | 448,339 | ||
Shares redeemed | (1,111,998 | ) | (883,774 | ) |
Net Increase (Decrease) in Shares Outstanding | 203,738 | 38,393 |
a Effective as of the close of business on March 13, 2012, the fund no longer offers Class B shares. |
b During the period ended April 30, 2012, 8,110 Class B shares representing $96,574 were automatically converted |
to 8,098 Class A shares. |
See notes to financial statements.
The Fund | 23 |
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Year Ended April 30, | ||||||||||
Class A Shares | 2013 | 2012 | 2011 | 2010 | 2009 | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 11.94 | 11.05 | 11.44 | 10.91 | 11.29 | |||||
Investment Operations: | ||||||||||
Investment income—net a | .36 | .41 | .43 | .45 | .46 | |||||
Net realized and unrealized | ||||||||||
gain (loss) on investments | .17 | .94 | (.33 | ) | .54 | (.36 | ) | |||
Total from Investment Operations | .53 | 1.35 | .10 | .99 | .10 | |||||
Distributions: | ||||||||||
Dividends from investment income—net | (.36 | ) | (.41 | ) | (.43 | ) | (.45 | ) | (.46 | ) |
Dividends from net realized | ||||||||||
gain on investments | (.00 | ) b | (.05 | ) | (.06 | ) | (.01 | ) | (.02 | ) |
Total Distributions | (.36 | ) | (.46 | ) | (.49 | ) | (.46 | ) | (.48 | ) |
Net asset value, end of period | 12.11 | 11.94 | 11.05 | 11.44 | 10.91 | |||||
Total Return (%) c | 4.51 | 12.40 | .94 | 9.16 | 1.07 | |||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | ||||||||||
to average net assets | .93 | .95 | .94 | .94 | .94 | |||||
Ratio of net expenses | ||||||||||
to average net assets | .93 | .95 | .94 | .94 | .94 | |||||
Ratio of net investment income | ||||||||||
to average net assets | 2.97 | 3.56 | 3.84 | 4.00 | 4.25 | |||||
Portfolio Turnover Rate | 14.28 | 11.44 | 15.03 | 12.60 | 9.04 | |||||
Net Assets, end of period ($ x 1,000) | 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 $.01 per share. |
c | Exclusive of sales charge. |
See notes to financial statements.
24
Year Ended April 30, | ||||||||||
Class C Shares | 2013 | 2012 | 2011 | 2010 | 2009 | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 11.95 | 11.06 | 11.45 | 10.92 | 11.30 | |||||
Investment Operations: | ||||||||||
Investment income—net a | .27 | .32 | .35 | .36 | .38 | |||||
Net realized and unrealized | ||||||||||
gain (loss) on investments | .17 | .94 | (.33 | ) | .54 | (.36 | ) | |||
Total from Investment Operations | .44 | 1.26 | .02 | .90 | .02 | |||||
Distributions: | ||||||||||
Dividends from investment income—net | (.27 | ) | (.32 | ) | (.35 | ) | (.36 | ) | (.38 | ) |
Dividends from net realized | ||||||||||
gain on investments | (.00 | ) b | (.05 | ) | (.06 | ) | (.01 | ) | (.02 | ) |
Total Distributions | (.27 | ) | (.37 | ) | (.41 | ) | (.37 | ) | (.40 | ) |
Net asset value, end of period | 12.12 | 11.95 | 11.06 | 11.45 | 10.92 | |||||
Total Return (%) c | 3.72 | 11.54 | .20 | 8.33 | .32 | |||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | ||||||||||
to average net assets | 1.69 | 1.71 | 1.68 | 1.70 | 1.69 | |||||
Ratio of net expenses | ||||||||||
to average net assets | 1.69 | 1.71 | 1.68 | 1.70 | 1.69 | |||||
Ratio of net investment income | ||||||||||
to average net assets | 2.21 | 2.79 | 3.09 | 3.21 | 3.51 | |||||
Portfolio Turnover Rate | 14.28 | 11.44 | 15.03 | 12.60 | 9.04 | |||||
Net Assets, end of period ($ x 1,000) | 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 $.01 per share. |
c | Exclusive of sales charge. |
See notes to financial statements.
The Fund | 25 |
FINANCIAL HIGHLIGHTS (continued)
Year Ended April 30, | ||||||||||
Class Z Shares | 2013 | 2012 | 2011 | 2010 | 2009 | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 11.94 | 11.05 | 11.44 | 10.91 | 11.29 | |||||
Investment Operations: | ||||||||||
Investment income—net a | .38 | .44 | .46 | .47 | .48 | |||||
Net realized and unrealized | ||||||||||
gain (loss) on investments | .17 | .94 | (.33 | ) | .54 | (.36 | ) | |||
Total from Investment Operations | .55 | 1.38 | .13 | 1.01 | .12 | |||||
Distributions: | ||||||||||
Dividends from investment income—net | (.38 | ) | (.44 | ) | (.46 | ) | (.47 | ) | (.48 | ) |
Dividends from net realized | ||||||||||
gain on investments | (.00 | ) b | (.05 | ) | (.06 | ) | (.01 | ) | (.02 | ) |
Total Distributions | (.38 | ) | (.49 | ) | (.52 | ) | (.48 | ) | (.50 | ) |
Net asset value, end of period | 12.11 | 11.94 | 11.05 | 11.44 | 10.91 | |||||
Total Return (%) | 4.73 | 12.64 | 1.16 | 9.39 | 1.28 | |||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | ||||||||||
to average net assets | .72 | .74 | .73 | .73 | .73 | |||||
Ratio of net expenses | ||||||||||
to average net assets | .72 | .74 | .73 | .73 | .73 | |||||
Ratio of net investment income | ||||||||||
to average net assets | 3.18 | 3.78 | 4.05 | 4.18 | 4.46 | |||||
Portfolio Turnover Rate | 14.28 | 11.44 | 15.03 | 12.60 | 9.04 | |||||
Net Assets, end of period ($ x 1,000) | 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. |
See notes to financial statements.
26
NOTES TO FINANCIAL STATEMENTS
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 Fund | 27 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
28
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 Fund | 29 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 April 30, 2013 in valuing the fund's investments:
At April 30, 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
30
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 April 30, 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, the fund did not incur any interest or penalties.
The Fund | 31 |
NOTES TO FINANCIAL STATEMENTS (continued)
Each tax year in the four-year period ended April 30, 2013 remains subject to examination by the Internal Revenue Service and state taxing authorities.
At April 30, 2013, the components of accumulated earnings on a tax basis were as follows: undistributed tax-exempt income $77,102, undistributed capital gains $380,661 and unrealized appreciation $16,159,601.
The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2013 and April 30, 2012 were as follows: tax-exempt income $6,654,411 and $7,535,214, ordinary income $2,956 and $28,143, and long-term capital gains $81,536 and $777,740, respectively.
During the period ended April 30, 2013, as a result of permanent book to tax differences, primarily due to the tax treatment for amortization adjustments, the fund decreased accumulated undistributed investment income-net by $14,545, increased accumulated net realized gain (loss) on investments by $13,949 and increased paid-in capital by $596. Net assets and net asset value per share were not affected by this reclassification.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $210 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 10, 2012, the unsecured credit facility with Citibank, N.A. was $225 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 April 30, 2013, the fund did not borrow under the Facilities.
32
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 April 30, 2013, the Distributor retained $2,681 from commissions earned on sales of the fund’s Class A shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended April 30, 2013, Class C shares were charged $31,783, 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 April 30, 2013, Class A and Class C shares were charged $101,657 and $10,594, 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
The Fund | 33 |
NOTES TO FINANCIAL STATEMENTS (continued)
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 April 30, 2013, Class Z shares were charged $79,106 pursuant to the Shareholder Services Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing transfer agency services for the fund and, since May 29, 2012, cash management services related to fund subscriptions and redemptions. During the period ended April 30, 2013, the fund was charged $56,956 for transfer agency services and $1,777 for cash management services. Cash management fees were partially offset by earnings credits of $260.These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of NewYork Mellon under a custody agreement for providing custodial services for the fund. During the period ended April 30, 2013, the fund was charged $22,477 pursuant to the custody agreement.
Prior to May 29, 2012, the fund compensated The Bank of NewYork Mellon under a cash management agreement for performing cash management services related to fund subscriptions and redemptions. Subsequent to May 29, 2012,The Bank of NewYork Mellon has continued to provide shareholder redemption draft processing services. During the period ended April 30, 2013, the fund was charged $1,494
34
pursuant to the cash management agreement, which is included in Shareholder servicing costs in the Statement of Operations.These fees were partially offset by earnings credits of $32.
During the period ended April 30, 2013, the fund was charged $8,414 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 $98,023, Distribution Plan fees $2,691, Shareholder Services Plan fees $16,401, custodian fees $5,350, Chief Compliance Officer fees $3,054 and transfer agent fees $9,725.
(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 April 30, 2013, amounted to $36,264,442 and $29,978,030, respectively.
At April 30, 2013, the cost of investments for federal income tax purposes was $199,487,725; accordingly, accumulated net unrealized appreciation on investments was $16,159,601, consisting of $17,104,505 gross unrealized appreciation and $944,904 gross unrealized depreciation.
NOTE 5—Other:
The sales charge may be reduced or waived for certain purchases of Class A shares. Effective April 1, 2013, pursuant to new/modified front-end sales charge waivers, Class A shares of the fund may be purchased at net asset value without payment of a sales charge by (a)
The Fund | 35 |
NOTES TO FINANCIAL STATEMENTS (continued)
investors who participate in a self-directed investment brokerage account program offered by financial intermediaries that have entered into an agreement with the fund’s Distributor (financial intermediaries offering self-directed investment brokerage accounts may or may not charge their customers a transaction fee) and (b) investors who purchase Class A shares directly through the fund’s Distributor, and either (i) have, or whose spouse or minor children have, beneficially owned shares and continuously maintained an open account with the Distributor in a Dreyfus-managed fund since on or before February 28, 2006, or (ii) such purchase is for a self-directed investment account that may or may not be subject to a transaction fee.
36
REPORT OF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM |
Shareholders and Board of Trustees
Dreyfus State Municipal Bond Funds,
Dreyfus Massachusetts Fund
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus State Municipal Bond Funds, Dreyfus Massachusetts Fund (one of the series comprising Dreyfus State Municipal Bond Funds) as of April 30, 2013, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement.We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting.Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of April 30, 2013 by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus State Municipal Bond Funds, Dreyfus Massachusetts Fund at April 30, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
June 25, 2013
The Fund | 37 |
IMPORTANT TAX INFORMATION (Unaudited)
In accordance with federal tax law, the fund hereby reports all the dividends paid from investment income-net during its fiscal year ended April 30, 2013 as “exempt-interest dividends” (not subject to regular federal income tax, and for individuals who are Massachusetts residents, Massachusetts personal income taxes). Where required by federal tax law rules, shareholders will receive notification of their portion of the fund’s taxable ordinary dividends (if any), capital gains distributions (if any) and tax-exempt dividends paid for the 2013 calendar year on Form 1099-DIV which will be mailed in early 2014. Also, the fund hereby reports $.0004 per share as a short-term capital gain distribution and $.0044 per share as a long-term capital gain distribution paid on December 13, 2012.
38
BOARD MEMBERS INFORMATION (Unaudited)
The Fund | 39 |
BOARD MEMBERS INFORMATION (Unaudited) (continued)
Diane Dunst (73) |
Board Member (2007) |
Principal Occupation During Past 5Years: |
• President of Huntting House Antiques |
No. of Portfolios for which Board Member Serves: 14 |
——————— |
Nathan Leventhal (70) |
Board Member (1989) |
Principal Occupation During Past 5Years: |
• Chairman of the Avery-Fisher Artist Program (November 1997-present) |
• Commissioner, NYC Planning Commission (March 2007-November 2011) |
Other Public Company Board Memberships During Past 5Years: |
• Movado Group, Inc., Director (2003-present) |
No. of Portfolios for which Board Member Serves: 37 |
——————— |
Robin A. Melvin (49) |
Board Member (2012) † |
Principal Occupation During Past 5Years: |
• Director, Boisi Family Foundation, a private family foundation that supports youth-serving orga- |
nizations that promote the self sufficiency of youth from disadvantaged circumstances (1995-2012) |
• Board Member, Illinois Mentoring Partnership, non-profit organization dedicated to increasing |
the quantity and quality of mentoring service in Illinois (April 2013-present) |
No. of Portfolios for which Board Member Serves: 90 |
——————— |
† Board Member of the fund as of November 7, 2012. |
Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80.The |
address of the Board Members and Officers is c/o The Dreyfus Corporation, 200 Park Avenue, NewYork, NewYork |
10166.Additional information about the Board Members is available in the fund’s Statement of Additional Information |
which can be obtained from Dreyfus free of charge by calling this toll free number: 1-800-DREYFUS. |
David W. Burke, Emeritus Board Member
Ernest Kafka, Emeritus Board Member
Jay I. Meltzer, Emeritus Board Member
Daniel Rose, Emeritus Board Member
Sander Vanocur, Emeritus Board Member
40
OFFICERS OF THE FUND (Unaudited)
BRADLEY J. SKAPYAK, President since January 2010.
Chief Operating Officer and a director of the Manager since June 2009; from April 2003 to June 2009, Mr. Skapyak was the head of the Investment Accounting and Support Department of the Manager. He is an officer of 68 investment companies (comprised of 139 portfolios) managed by the Manager. He is 54 years old and has been an employee of the Manager since February 1988.
JOHN PAK, Chief Legal Officer since March 2013.
Chief Legal Officer of the Manager and Associate General Counsel and Managing Director of BNY Mellon since August 2012; from March 2005 to July 2012, Managing Director of Deutsche Bank, Deputy Global Head of Deutsche Asset Management Legal and Regional Head of Deutsche Asset Management Americas Legal. He is an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since August 2012.
JANETTE E. FARRAGHER, Vice President and Secretary since December 2011.
Assistant General Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. She is 50 years old and has been an employee of the Manager since February 1984.
KIESHA ASTWOOD, Vice President and Assistant Secretary since January 2010.
Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. She is 40 years old and has been an employee of the Manager since July 1995.
JAMES BITETTO, Vice President and Assistant Secretary since August 2005.
Senior Counsel of BNY Mellon and Secretary of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 46 years old and has been an employee of the Manager since December 1996.
JONI LACKS CHARATAN, Vice President and Assistant Secretary since August 2005.
Senior Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. She is 57 years old and has been an employee of the Manager since October 1988.
JOSEPH M. CHIOFFI, Vice President and Assistant Secretary since August 2005.
Senior Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 51 years old and has been an employee of the Manager since June 2000.
JOHN B. HAMMALIAN, Vice President and Assistant Secretary since August 2005.
Senior Managing Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since February 1991.
ROBERT R. MULLERY, Vice President and Assistant Secretary since August 2005.
Managing Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 61 years old and has been an employee of the Manager since May 1986.
The Fund | 41 |
OFFICERS OF THE FUND (Unaudited) (continued)
JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.
Senior Managing Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 47 years old and has been an employee of the Manager since October 1990.
JAMES WINDELS, Treasurer since November 2001.
Director – Mutual Fund Accounting of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 54 years old and has been an employee of the Manager since April 1985.
RICHARD CASSARO, Assistant Treasurer since January 2008.
Senior Accounting Manager – Money Market and Municipal Bond Funds of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 54 years old and has been an employee of the Manager since September 1982.
GAVIN C. REILLY, Assistant Treasurer since December 2005.
Tax Manager of the Investment Accounting and Support Department of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since April 1991.
ROBERT S. ROBOL, Assistant Treasurer since August 2005.
Senior Accounting Manager – Fixed Income Funds of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since October 1988.
ROBERT SALVIOLO, Assistant Treasurer since July 2007.
Senior Accounting Manager – Equity Funds of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 46 years old and has been an employee of the Manager since June 1989.
ROBERT SVAGNA, Assistant Treasurer since August 2005.
Senior Accounting Manager – Equity Funds of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 46 years old and has been an employee of the Manager since November 1990.
JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.
Chief Compliance Officer of the Manager and The Dreyfus Family of Funds (69 investment companies, comprised of 165 portfolios). He is 55 years old and has served in various capacities with the Manager since 1980, including manager of the firm’s Fund Accounting Department from 1997 through October 2001.
MATTHEW D. CONNOLLY, Anti-Money Laundering Compliance Officer since April 2012.
Anti-Money Laundering Compliance Officer of the Distributor since October 2011; from March 2010 to September 2011, Global Head, KYC Reviews and Director, UBS Investment Bank; until March 2010,AML Compliance Officer and Senior Vice President, Citi Global Wealth Management. He is an officer of 64 investment companies (comprised of 160 portfolios) managed by the Manager. He is 40 years old and has been an employee of the Distributor since October 2011.
42
NOTES
For More Information
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.
Dreyfus State |
Municipal Bond Funds, |
Dreyfus Pennsylvania Fund |
ANNUAL REPORT April 30, 2013
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 |
Fund Performance |
8 |
Understanding Your Fund’s Expenses |
8 |
Comparing Your Fund’s Expenses With Those of Other Funds |
9 |
Statement of Investments |
21 |
Statement of Assets and Liabilities |
22 |
Statement of Operations |
23 |
Statement of Changes in Net Assets |
25 |
Financial Highlights |
28 |
Notes to Financial Statements |
37 |
Report of Independent Registered Public Accounting Firm |
38 |
Important Tax Information |
39 |
Board Members Information |
41 |
Officers of the Fund |
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 annual report for Dreyfus Pennsylvania Fund, a series of Dreyfus State Municipal Bond Funds, covering the 12-month period from May 1, 2012, through April 30, 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 search for higher after-tax yields amid historically low interest rates continued to exert a major influence on the municipal bond market over the past year, as investors increasingly turned to lower rated and longer term securities for higher levels of current income. The market’s supply-and-demand dynamics were buoyed further when political pressure to reduce government spending and borrowing led to a relatively meager supply of newly issued securities through most of the reporting period.The market also benefited from a generally recovering U.S. economy, including a declining U.S. unemployment rate and improving housing markets, which helped to alleviate fiscal pressures for many states and municipalities.
Our chief economist currently expects the U.S. economic recovery to persist at a choppy and moderate pace over the next several months, but sees the potential for stronger growth to begin in the fall. Moreover, the United States generally is expected to remain in the lead in a global march toward better economic conditions, while Europe’s recovery from recession likely will be delayed as regional policymakers continue their efforts to resolve structural issues. As always, we encourage you to discuss our observations with your financial advisor, who can help you assess their implications for your investment portfolio.
Thank you for your continued confidence and support.
Sincerely,
J. Charles Cardona
President
The Dreyfus Corporation
May 15, 2013
2
DISCUSSION OF FUND PERFORMANCE
For the period of May 1, 2012, through April 30, 2013, as provided by Steven Harvey and Daniel Rabasco, Portfolio Managers
Fund and Market Performance Overview
For the 12-month period ended April 30, 2013, Class A shares of Dreyfus Pennsylvania Fund, a series of Dreyfus State Municipal Bond Funds, produced a total return of 5.53%, Class C shares returned 4.73%, and Class Z shares returned 5.75%. 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 5.19% for the same period. 2
Despite bouts of heightened volatility, strong investor demand for competitive levels of after-tax income helped support municipal bond prices over the reporting period. The fund’s Class A and Class Z shares produced higher returns than the benchmark, mainly due to an emphasis on higher yielding 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)
Municipal Bonds Encountered Heightened Volatility
Although the reporting period began in the midst of heightened economic concerns, investor sentiment soon began to recover when U.S. employment trends improved, housing markets recovered and the Federal Reserve Board launched a new quantitative easing program. Investor optimism faltered briefly in November 2012 due to uncertainty surrounding automatic tax hikes and spending cuts scheduled for the start of 2013, but last-minute legislation to address the increases helped alleviate these worries. Positive economic data offered further support to investor sentiment over the first four months of 2013.
Lower rated municipal bonds generally outperformed broader market averages, supported by robust demand from investors seeking higher levels of after-tax income in a low interest rate environment. While the supply of newly issued municipal bonds increased compared to the very low levels reached earlier in 2012, new issuance remained muted relative to historical norms.
From a credit quality perspective, Pennsylvania has achieved budget surpluses over its last two fiscal years, and another is expected for the one currently underway. However, the state has continued to face burdensome pension obligations and higher-than-average unemployment.
Revenue Bonds Drove Fund Performance
The fund achieved strong relative results through its emphasis on revenue bonds over general obligation bonds. Overweighted exposure to revenue bonds backed by hospitals, airports, and industrial development projects fared particularly well.
On the other hand, the fund’s holdings of Puerto Rico bonds, which are exempt from federal and Pennsylvania state income taxes, faltered amid intensifying concerns regarding the U.S. territory’s budget deficits and pension liabilities. High-quality revenue bonds backed by essential municipal services also weighed to a degree on relative performance. The fund maintained a market-neutral average duration throughout the reporting period, which had little impact on its relative results.
4
Maintaining a Selective Approach
We have been encouraged by recently improved economic data, but we believe that the U.S. economy remains vulnerable to fiscal uncertainty and potentially adverse global developments. In addition, while credit fundamentals are improving for most states, many localities face ongoing fiscal pressures. Therefore, we have maintained our research-intensive credit selection process to help identify attractively valued opportunities among fundamentally sound issuers of municipal securities.
As of the reporting period’s end, we have maintained overweighted exposure to higher yielding revenue bonds with credit ratings toward the lower end of the investment-grade range.While we have retained a market-neutral duration posture, we are watching carefully for signs of changes in U.S. monetary policy, and we remain prepared to adjust our strategies as needed.
May 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-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 |
† Source: Lipper Inc. |
Past performance is not predictive of future performance. |
The above graph compares a $10,000 investment made in each of the Class A and Class C shares of Dreyfus State |
Municipal Bond Funds, Dreyfus Pennsylvania Fund on 4/30/03 to a $10,000 investment made in the Barclays |
Municipal Bond Index (the “Index”) on that date.All dividends and capital gain distributions are reinvested. |
The fund invests primarily in Pennsylvania municipal securities and its performance shown in the line graph above takes |
into account the maximum initial sales charge on Class A shares and all other applicable fees and expenses for Class A |
and Class C shares. Performance for Class Z shares will vary from the performance of Class A and Class C shares shown |
above due to differences in charges and expenses.The Index is not limited to investments principally in Pennsylvania |
municipal obligations.The Index, unlike the fund, is an unmanaged total return performance benchmark for the long-term, |
investment-grade, geographically unrestricted tax-exempt bond market, calculated by using municipal bonds selected to be |
representative of the municipal market overall.These factors can contribute to the Index potentially outperforming or |
underperforming the fund. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors |
cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if |
applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report. |
6
Past performance is not predictive of future performance.The fund’s performance shown in the graph and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
† | The maximum contingent deferred sales charge for Class C shares is 1% for shares redeemed within one year of the |
date of purchase. | |
†† | The Index date is based on the life of Class Z shares. For comparative purposes, the value of the Index as of |
11/30/07 is used as the beginning value on 11/29/07 (the inception date for Class Z shares). |
The Fund | 7 |
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 November 1, 2012 to April 30, 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 April 30, 2013
Class A | Class C | Class Z | ||||
Expenses paid per $1,000 † | $ | 4.61 | $ | 8.39 | $ | 3.56 |
Ending value (after expenses) | $ | 1,019.20 | $ | 1,015.30 | $ | 1,020.20 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS
(Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment
assuming a hypothetical 5% annualized return for the six months ended April 30, 2013
Class A | Class C | Class Z | ||||
Expenses paid per $1,000 † | $ | 4.61 | $ | 8.40 | $ | 3.56 |
Ending value (after expenses) | $ | 1,020.23 | $ | 1,016.46 | $ | 1,021.27 |
† Expenses are equal to the fund’s annualized expense ratio of .92% for Class A, 1.68% for Class C and .71% for |
Class Z, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half |
year period). |
8
STATEMENT OF INVESTMENTS | |||||
April 30, 2013 | |||||
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments—97.3% | Rate (%) | Date | Amount ($) | Value ($) | |
Pennsylvania—85.0% | |||||
Adams County Industrial | |||||
Development Authority, Revenue | |||||
(Gettysburg College) | 5.00 | 8/15/25 | 1,000,000 | 1,151,280 | |
Adams County Industrial | |||||
Development Authority, Revenue | |||||
(Gettysburg College) | 5.00 | 8/15/26 | 1,000,000 | 1,142,920 | |
Allegheny County Airport | |||||
Authority, Airport Revenue | |||||
(Pittsburgh International | |||||
Airport) (Insured; Assured | |||||
Guaranty Municipal Corp.) | 5.00 | 1/1/17 | 1,000,000 | 1,150,590 | |
Allegheny County Higher Education | |||||
Building Authority, Revenue | |||||
(Carnegie Mellon University) | 5.00 | 3/1/24 | 3,150,000 | 3,905,150 | |
Allegheny County Hospital | |||||
Development Authority, HR | |||||
(South Hills Health System) | 5.13 | 5/1/29 | 1,100,000 | 1,100,671 | |
Allegheny County Port Authority, | |||||
Special Transportation Revenue | 5.25 | 3/1/22 | 1,305,000 | 1,578,933 | |
Allegheny County Sanitary | |||||
Authority, Sewer Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 5.00 | 12/1/19 | 1,500,000 | 1,827,780 | |
Beaver County Hospital Authority, | |||||
Revenue (Heritage Valley | |||||
Health System, Inc.) | 5.00 | 5/15/28 | 1,575,000 | 1,783,546 | |
Bucks County Water and Sewer | |||||
Authority, Water System | |||||
Revenue (Insured; Assured | |||||
Guaranty Municipal Corp.) | 5.00 | 12/1/29 | 1,250,000 | 1,453,900 | |
Butler County Industrial | |||||
Development Authority, Health | |||||
Care Facilities Revenue (Saint | |||||
John Lutheran Care Center | |||||
Project) (Collateralized; GNMA) | 5.80 | 4/20/29 | 5,040,000 | 5,051,642 | |
Centre County Hospital Authority, | |||||
HR (Mount Nittany Medical | |||||
Center Project) (Insured; | |||||
Assured Guaranty Municipal | |||||
Corp.) (Prerefunded) | 6.13 | 11/15/14 | 2,000,000 | a | 2,178,720 |
The Fund | 9 |
STATEMENT OF INVESTMENTS (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 | 1,681,380 |
Chester County Industrial | |||||
Development Authority, | |||||
Revenue (Avon Grove | |||||
Charter School Project) | 6.38 | 12/15/37 | 1,600,000 | 1,686,016 | |
Chester County School Authority, | |||||
School LR (Chester County | |||||
Intermediate Unit Project) | |||||
(Insured; AMBAC) | 5.00 | 4/1/25 | 2,195,000 | 2,411,273 | |
Clairton Municipal Authority, | |||||
Sewer Revenue | 5.00 | 12/1/37 | 2,000,000 | 2,121,060 | |
Commonwealth Financing Authority | |||||
of Pennsylvania, Revenue | 5.00 | 6/1/19 | 500,000 | 604,745 | |
Cumberland County Municipal | |||||
Authority, Revenue | |||||
(Presbyterian Homes | |||||
Obligated Group Project) | 5.35 | 1/1/20 | 515,000 | 516,045 | |
Cumberland County Municipal | |||||
Authority, Revenue | |||||
(Presbyterian Homes | |||||
Obligated Group Project) | 5.45 | 1/1/21 | 885,000 | 886,673 | |
Dauphin County General Authority, | |||||
Health System Revenue | |||||
(Pinnacle Health | |||||
System Project) | 5.00 | 6/1/42 | 1,500,000 | 1,619,805 | |
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 | 3,400,476 | |
Delaware River Port Authority, | |||||
Revenue | 5.00 | 1/1/30 | 1,500,000 | 1,705,785 | |
Delaware River Port Authority, | |||||
Revenue | 5.00 | 1/1/35 | 1,500,000 | 1,688,265 | |
Donegal School District, | |||||
GO (Limited Tax Obligations) | 5.00 | 6/1/23 | 2,080,000 | 2,425,946 |
10
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Pennsylvania (continued) | |||||
Erie Higher Education Building | |||||
Authority, College Revenue | |||||
(Mercyhurst College Project) | 5.35 | 3/15/28 | 1,000,000 | 1,089,120 | |
Harrisburg Redevelopment | |||||
Authority, Guaranteed Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 0.00 | 11/1/16 | 1,000,000 | b | 857,570 |
Harrisburg Redevelopment | |||||
Authority, Guaranteed Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 0.00 | 5/1/18 | 2,750,000 | b | 2,123,523 |
Harrisburg Redevelopment | |||||
Authority, Guaranteed Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 0.00 | 11/1/18 | 2,750,000 | b | 2,063,820 |
Harrisburg Redevelopment | |||||
Authority, Guaranteed Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 0.00 | 11/1/19 | 2,750,000 | b | 1,958,907 |
Harrisburg Redevelopment | |||||
Authority, Guaranteed Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 0.00 | 5/1/20 | 2,750,000 | b | 1,901,983 |
Harrisburg Redevelopment | |||||
Authority, Guaranteed Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 0.00 | 11/1/20 | 2,500,000 | b | 1,684,150 |
McKeesport Area School District, | |||||
GO (Insured; AMBAC) | 0.00 | 10/1/21 | 2,915,000 | b | 2,497,368 |
McKeesport Municipal Authority, | |||||
Sewer Revenue (Insured; Assured | |||||
Guaranty Municipal Corp.) | 5.00 | 12/15/20 | 1,230,000 | 1,481,154 | |
Montgomery County Higher Education | |||||
and Health Authority, HR | |||||
(Abington Memorial Hospital | |||||
Obligated Group) | 5.00 | 6/1/31 | 1,000,000 | 1,119,570 | |
Montgomery County Industrial | |||||
Development Authority, Health | |||||
System Revenue (Jefferson | |||||
Health System) | 5.00 | 10/1/41 | 2,000,000 | 2,220,800 |
The Fund | 11 |
STATEMENT OF INVESTMENTS (continued)
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Pennsylvania (continued) | |||||
Neshaminy School District, | |||||
GO (Insured; National Public | |||||
Finance Guarantee Corp.) | |||||
(Prerefunded) | 5.00 | 4/15/14 | 1,250,000 | a | 1,306,825 |
Norristown, | |||||
GO (Insured; Radian) | 0.00 | 12/15/13 | 735,000 | b | 730,759 |
Pennsylvania, | |||||
GO (Insured; Assured Guaranty | |||||
Municipal Corp.) | 5.38 | 7/1/18 | 1,525,000 | 1,871,983 | |
Pennsylvania Economic Development | |||||
Financing Authority, Sewage | |||||
Sludge Disposal Revenue | |||||
(Philadelphia Biosolids | |||||
Facility Project) | 6.25 | 1/1/32 | 1,000,000 | 1,152,300 | |
Pennsylvania Economic Development | |||||
Financing Authority, Unemployment | |||||
Compensation Revenue | 5.00 | 7/1/18 | 2,500,000 | 3,025,775 | |
Pennsylvania Economic Development | |||||
Financing Authority, Unemployment | |||||
Compensation Revenue | 5.00 | 7/1/21 | 5,000,000 | 5,908,900 | |
Pennsylvania Higher Educational | |||||
Facilities Authority, Revenue | |||||
(Carnegie Mellon University) | 5.00 | 8/1/21 | 3,000,000 | 3,548,160 | |
Pennsylvania Higher Educational | |||||
Facilities Authority, Revenue | |||||
(Temple University) | 5.00 | 4/1/24 | 1,100,000 | 1,329,625 | |
Pennsylvania Higher Educational | |||||
Facilities Authority, Revenue | |||||
(The Trustees of the | |||||
University of Pennsylvania) | 5.00 | 9/1/19 | 2,000,000 | 2,470,320 | |
Pennsylvania Higher Educational | |||||
Facilities Authority, Revenue | |||||
(The Trustees of the | |||||
University of Pennsylvania) | 5.00 | 9/1/31 | 1,300,000 | 1,511,354 | |
Pennsylvania Higher Educational | |||||
Facilities Authority, Revenue | |||||
(Thomas Jefferson University) | 5.00 | 3/1/40 | 1,000,000 | 1,111,320 | |
Pennsylvania Higher Educational | |||||
Facilities Authority, Revenue | |||||
(University of Pennsylvania | |||||
Health System) | 5.25 | 8/15/25 | 1,000,000 | 1,197,830 |
12
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Pennsylvania (continued) | |||||
Pennsylvania Higher Educational | |||||
Facilities Authority, Revenue | |||||
(University of Pennsylvania | |||||
Health System) | 6.00 | 8/15/26 | 2,500,000 | 2,997,450 | |
Pennsylvania Housing Finance | |||||
Agency, Capital Fund | |||||
Securitization Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 5.00 | 12/1/25 | 2,285,000 | 2,411,178 | |
Pennsylvania Housing Finance | |||||
Agency, SFMR | 4.70 | 10/1/25 | 760,000 | 774,318 | |
Pennsylvania Housing Finance | |||||
Agency, SFMR | 4.60 | 10/1/27 | 5,000,000 | 5,191,200 | |
Pennsylvania Housing Finance | |||||
Agency, SFMR | 4.88 | 10/1/31 | 3,000,000 | 3,082,530 | |
Pennsylvania Housing Finance | |||||
Agency, SFMR | 4.70 | 10/1/37 | 1,630,000 | 1,681,198 | |
Pennsylvania Industrial | |||||
Development Authority, EDR | 5.50 | 7/1/23 | 900,000 | 1,077,228 | |
Pennsylvania Industrial | |||||
Development Authority, | |||||
EDR (Prerefunded) | 5.50 | 7/1/18 | 100,000 | a | 123,469 |
Pennsylvania State University, | |||||
Revenue | 5.00 | 3/1/35 | 2,000,000 | 2,350,800 | |
Pennsylvania Turnpike Commission, | |||||
Motor License Fund-Enhanced | |||||
Turnpike Subordinate | |||||
Special Revenue | 5.00 | 12/1/37 | 5,325,000 | 5,931,624 | |
Pennsylvania Turnpike Commission, | |||||
Turnpike Revenue | |||||
(Insured; AMBAC) | 5.00 | 12/1/22 | 1,815,000 | 2,008,098 | |
Pennsylvania Turnpike | |||||
Commission, Turnpike | |||||
Subordinate Revenue | 5.25 | 6/1/39 | 1,030,000 | 1,127,119 | |
Pennsylvania Turnpike Commission, | |||||
Turnpike Subordinate Revenue | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) | 6.00 | 6/1/28 | 3,000,000 | 3,599,100 | |
Philadelphia, | |||||
Airport Revenue | 5.25 | 6/15/25 | 2,500,000 | 2,842,350 |
The Fund | 13 |
STATEMENT OF INVESTMENTS (continued)
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
Pennsylvania (continued) | ||||
Philadelphia, | ||||
Airport Revenue (Insured; | ||||
National Public Finance | ||||
Guarantee Corp.) | 5.00 | 6/15/25 | 510,000 | 549,739 |
Philadelphia, | ||||
Gas Works Revenue (Insured; | ||||
Assured Guaranty Municipal Corp.) | 5.25 | 8/1/22 | 2,000,000 | 2,021,260 |
Philadelphia, | ||||
GO (Insured; Assured Guaranty | ||||
Municipal Corp.) | 5.25 | 12/15/23 | 1,500,000 | 1,789,155 |
Philadelphia, | ||||
GO (Insured; XLCA) | 5.25 | 2/15/14 | 2,000,000 | 2,008,100 |
Philadelphia, | ||||
Water and Wastewater Revenue | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 5.60 | 8/1/18 | 800,000 | 967,728 |
Philadelphia Authority for | ||||
Industrial Development, | ||||
Revenue (Independence | ||||
Charter School Project) | 5.50 | 9/15/37 | 1,700,000 | 1,718,292 |
Philadelphia Authority for | ||||
Industrial Development, | ||||
Revenue (Russell Byers | ||||
Charter School Project) | 5.15 | 5/1/27 | 1,230,000 | 1,237,503 |
Philadelphia Authority for | ||||
Industrial Development, | ||||
Revenue (Russell Byers | ||||
Charter School Project) | 5.25 | 5/1/37 | 1,715,000 | 1,710,352 |
Philadelphia Hospitals and Higher | ||||
Education Facilities Authority, HR | ||||
(The Children’s Hospital of | ||||
Philadelphia Project) | 5.00 | 7/1/25 | 1,800,000 | 2,156,328 |
Philadelphia Housing Authority, | ||||
Capital Fund Program Revenue | ||||
(Insured; Assured Guaranty | ||||
Municipal Corp.) | 5.00 | 12/1/21 | 1,685,000 | 1,707,545 |
Philadelphia Municipal Authority, | ||||
LR (Insured; Assured Guaranty | ||||
Municipal Corp.) | 5.25 | 11/15/15 | 2,115,000 | 2,171,259 |
Philadelphia School District, | ||||
GO | 5.25 | 9/1/23 | 1,000,000 | 1,177,010 |
14
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Pennsylvania (continued) | |||||
Philadelphia School District, | |||||
GO | 6.00 | 9/1/38 | 1,000,000 | 1,171,510 | |
Pittsburgh Urban Redevelopment | |||||
Authority, MFHR | |||||
(West Park Court Project) | |||||
(Collateralized; GNMA) | 4.90 | 11/20/47 | 1,255,000 | 1,297,620 | |
Reading Area Water Authority, | |||||
Water Revenue | 5.00 | 12/1/31 | 2,000,000 | 2,245,200 | |
Schuylkill County Industrial | |||||
Development Authority, Revenue | |||||
(Charity Obligation Group) | 5.00 | 11/1/14 | 790,000 | 793,018 | |
State Public School Building | |||||
Authority, Community College | |||||
Revenue (Community College of | |||||
Philadelphia Project) | 6.00 | 6/15/28 | 3,000,000 | 3,583,710 | |
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 | 1,103,435 |
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 | 1,159,772 |
State Public School Building | |||||
Authority, School Revenue | |||||
(School District of Haverford | |||||
Township Project) (Insured; XLCA) | 5.25 | 3/15/25 | 3,360,000 | 3,751,205 | |
State Public School Building | |||||
Authority, School Revenue | |||||
(York School District Project) | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) (Prerefunded) | 5.00 | 5/1/13 | 275,000 | a | 275,036 |
State Public School Building | |||||
Authority, School Revenue | |||||
(York School District Project) | |||||
(Insured; Assured Guaranty | |||||
Municipal Corp.) (Prerefunded) | 5.00 | 5/1/13 | 270,000 | a | 270,035 |
The Fund | 15 |
STATEMENT OF INVESTMENTS (continued)
Long-Term Municipal | Coupon | Maturity | Principal | ||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | |
Pennsylvania (continued) | |||||
Swarthmore Borough Authority, | |||||
Revenue (Swarthmore College) | 5.00 | 9/15/18 | 1,000,000 | 1,215,010 | |
University Area Joint Authority, | |||||
Sewer Revenue (Insured; | |||||
Assured Guaranty Municipal Corp.) | 5.00 | 11/1/19 | 1,500,000 | 1,798,710 | |
Wayne Memorial Hospital and Health | |||||
Facilities Authority, County | |||||
Guaranteed HR (Wayne Memorial | |||||
Hospital Project) (Insured; | |||||
National Public Finance | |||||
Guarantee Corp.) (Prerefunded) | 5.25 | 7/1/13 | 2,135,000 | a | 2,153,019 |
West Mifflin Area School District, | |||||
GO (Insured; Assured Guaranty | |||||
Municipal Corp.) | 5.00 | 10/1/22 | 710,000 | 786,282 | |
West Shore Area Authority, | |||||
HR (Holy Spirit Hospital of | |||||
the Sisters of Christian | |||||
Charity Project) | 6.00 | 1/1/26 | 2,000,000 | 2,359,440 | |
Westmoreland County Industrial | |||||
Development Authority, Health | |||||
System Revenue (Excela | |||||
Health Project) | 5.00 | 7/1/25 | 2,390,000 | 2,688,822 | |
U.S. Related—12.3% | |||||
Guam, | |||||
Business Privilege Tax Revenue | 5.00 | 1/1/42 | 1,000,000 | 1,108,520 | |
Guam, | |||||
Business Privilege Tax Revenue | 5.13 | 1/1/42 | 1,000,000 | 1,117,790 | |
Guam Power Authority, | |||||
Revenue | 5.50 | 10/1/30 | 1,000,000 | 1,128,970 | |
Guam Waterworks Authority, | |||||
Water and Wastewater | |||||
System Revenue | 5.50 | 7/1/16 | 320,000 | 331,139 | |
Guam Waterworks Authority, | |||||
Water and Wastewater | |||||
System Revenue | 6.00 | 7/1/25 | 1,000,000 | 1,043,000 |
16
Long-Term Municipal | Coupon | Maturity | Principal | |
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) |
U.S. Related (continued) | ||||
Puerto Rico Aqueduct and Sewer | ||||
Authority, Senior Lien Revenue | 6.00 | 7/1/44 | 2,500,000 | 2,546,925 |
Puerto Rico Commonwealth, | ||||
Public Improvement GO | 5.25 | 7/1/23 | 1,000,000 | 1,024,380 |
Puerto Rico Commonwealth, | ||||
Public Improvement GO | 6.00 | 7/1/28 | 1,500,000 | 1,584,540 |
Puerto Rico Commonwealth, | ||||
Public Improvement GO | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 6.00 | 7/1/27 | 1,000,000 | 1,057,330 |
Puerto Rico Electric Power | ||||
Authority, Power Revenue | 5.25 | 7/1/27 | 2,000,000 | 2,039,340 |
Puerto Rico Electric Power | ||||
Authority, Power Revenue | 5.50 | 7/1/38 | 1,185,000 | 1,199,504 |
Puerto Rico Electric Power | ||||
Authority, Power Revenue | 5.25 | 7/1/40 | 1,500,000 | 1,496,655 |
Puerto Rico Electric Power | ||||
Authority, Power Revenue | ||||
(Insured; National Public | ||||
Finance Guarantee Corp.) | 5.25 | 7/1/30 | 1,170,000 | 1,189,165 |
Puerto Rico Sales Tax Financing | ||||
Corporation, Sales Tax Revenue | ||||
(First Subordinate Series) | 6.00 | 8/1/39 | 1,690,000 | 1,863,377 |
Puerto Rico Sales Tax Financing | ||||
Corporation, Sales Tax Revenue | ||||
(First Subordinate Series) | 6.00 | 8/1/42 | 1,500,000 | 1,643,985 |
Puerto Rico Sales Tax Financing | ||||
Corporation, Sales Tax Revenue | ||||
(First Subordinate Series) | 6.50 | 8/1/44 | 2,500,000 | 2,838,850 |
Virgin Islands Public Finance | ||||
Authority, Revenue (Virgin Islands | ||||
Matching Fund Loan Note) | 5.00 | 10/1/25 | 1,000,000 | 1,138,900 |
Total Long-Term Municipal Investments | ||||
(cost $179,168,802) | 192,651,844 |
The Fund | 17 |
STATEMENT OF INVESTMENTS (continued)
Short-Term Municipal | Coupon | Maturity | Principal | ||
Investment—1.8% | Rate (%) | Date | Amount ($) | Value ($) | |
Pennsylvania; | |||||
Geisinger Authority, | |||||
Health System Revenue | |||||
(Geisinger Health System) | |||||
(Liquidity Facility; | |||||
JPMorgan Chase Bank) | |||||
(cost $3,600,000) | 0.15 | 5/1/13 | 3,600,000 | c | 3,600,000 |
Total Investments (cost $182,768,802) | 99.1 | % | 196,251,844 | ||
Cash and Receivables (Net) | .9 | % | 1,846,489 | ||
Net Assets | 100.0 | % | 198,098,333 |
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 April 30, 2013. Maturity date represents the |
next demand date, or the ultimate maturity date if earlier. |
18
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 | ROCS | Reset Options Certificates |
RRR | Resources Recovery Revenue | SAAN | State Aid Anticipation Notes |
SBPA | Standby Bond Purchase Agreement | SFHR | Single Family Housing Revenue |
SFMR | Single Family Mortgage Revenue | SONYMA | State of New York Mortgage Agency |
SPEARS | Short Puttable Exempt | SWDR | Solid Waste Disposal Revenue |
Adjustable Receipts | |||
TAN | Tax Anticipation Notes | TAW | Tax Anticipation Warrants |
TRAN | Tax and Revenue Anticipation Notes | XLCA | XL Capital Assurance |
The Fund | 19 |
STATEMENT OF INVESTMENTS (continued)
Summary of Combined Ratings (Unaudited) | |||||
Fitch | or | Moody’s | or | Standard & Poor’s | Value (%) † |
AAA | Aaa | AAA | 5.8 | ||
AA | Aa | AA | 48.4 | ||
A | A | A | 27.1 | ||
BBB | Baa | BBB | 15.3 | ||
BB | Ba | BB | .7 | ||
F1 | MIG1/P1 | SP1/A1 | 1.8 | ||
Not Rated d | Not Rated d | Not Rated d | .9 | ||
100.0 |
† Based on total investments. |
d Securities which, while not rated by Fitch, Moody’s and Standard & Poor’s, have been determined by the Manager to |
be of comparable quality to those rated securities in which the fund may invest. |
See notes to financial statements.
20
STATEMENT OF ASSETS AND LIABILITIES |
April 30, 2013 |
Cost | Value | ||
Assets ($): | |||
Investments in securities—See Statement of Investments | 182,768,802 | 196,251,844 | |
Interest receivable | 2,536,402 | ||
Receivable for shares of Beneficial Interest subscribed | 3,500 | ||
Prepaid expenses | 10,341 | ||
198,802,087 | |||
Liabilities ($): | |||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 144,815 | ||
Cash overdraft due to Custodian | 12,040 | ||
Payable for shares of Beneficial Interest redeemed | 478,888 | ||
Accrued expenses | 68,011 | ||
703,754 | |||
Net Assets ($) | 198,098,333 | ||
Composition of Net Assets ($): | |||
Paid-in capital | 184,246,520 | ||
Accumulated net realized gain (loss) on investments | 368,771 | ||
Accumulated net unrealized appreciation | |||
(depreciation) on investments | 13,483,042 | ||
Net Assets ($) | 198,098,333 | ||
Net Asset Value Per Share | |||
Class A | Class C | Class Z | |
Net Assets ($) | 133,727,213 | 5,392,650 | 58,978,470 |
Shares Outstanding | 7,921,654 | 319,296 | 3,494,298 |
Net Asset Value Per Share ($) | 16.88 | 16.89 | 16.88 |
See notes to financial statements. |
The Fund | 21 |
STATEMENT OF OPERATIONS |
Year Ended April 30, 2013 |
Investment Income ($): | ||
Interest Income | 8,547,260 | |
Expenses: | ||
Management fee—Note 3(a) | 1,083,291 | |
Shareholder servicing costs—Note 3(c) | 467,429 | |
Professional fees | 65,326 | |
Distribution fees—Note 3(b) | 41,895 | |
Registration fees | 23,973 | |
Custodian fees—Note 3(c) | 19,737 | |
Prospectus and shareholders’ reports | 18,943 | |
Trustees’ fees and expenses—Note 3(d) | 9,300 | |
Loan commitment fees—Note 2 | 2,192 | |
Miscellaneous | 35,591 | |
Total Expenses | 1,767,677 | |
Less—reduction in fees due to earnings credits—Note 3(c) | (284 | ) |
Net Expenses | 1,767,393 | |
Investment Income—Net | 6,779,867 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments | 1,929,117 | |
Net unrealized appreciation (depreciation) on investments | 1,966,811 | |
Net Realized and Unrealized Gain (Loss) on Investments | 3,895,928 | |
Net Increase in Net Assets Resulting from Operations | 10,675,795 | |
See notes to financial statements. |
22
STATEMENT OF CHANGES IN NET ASSETS
Year Ended April 30, | ||||
2013 | 2012 | a | ||
Operations ($): | ||||
Investment income—net | 6,779,867 | 7,467,761 | ||
Net realized gain (loss) on investments | 1,929,117 | 729,628 | ||
Net unrealized appreciation | ||||
(depreciation) on investments | 1,966,811 | 12,204,429 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 10,675,795 | 20,401,818 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A Shares | (4,494,571 | ) | (4,984,261 | ) |
Class B Shares | — | (5,584 | ) | |
Class C Shares | (146,849 | ) | (160,859 | ) |
Class Z Shares | (2,109,120 | ) | (2,284,061 | ) |
Net realized gain on investments: | ||||
Class A Shares | (450,351 | ) | (159,116 | ) |
Class B Shares | — | (204 | ) | |
Class C Shares | (19,426 | ) | (6,089 | ) |
Class Z Shares | (198,289 | ) | (68,483 | ) |
Total Dividends | (7,418,606 | ) | (7,668,657 | ) |
Beneficial Interest Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A Shares | 10,576,088 | 7,494,115 | ||
Class B Shares | — | 94 | ||
Class C Shares | 762,703 | 837,923 | ||
Class Z Shares | 3,030,411 | 3,604,872 | ||
Dividends reinvested: | ||||
Class A Shares | 3,898,116 | 3,989,197 | ||
Class B Shares | — | 5,106 | ||
Class C Shares | 140,452 | 133,896 | ||
Class Z Shares | 1,832,481 | 1,829,790 | ||
Cost of shares redeemed: | ||||
Class A Shares | (12,631,404 | ) | (14,715,487 | ) |
Class B Shares | — | (347,555 | ) | |
Class C Shares | (1,183,352 | ) | (860,472 | ) |
Class Z Shares | (4,678,814 | ) | (5,357,270 | ) |
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | 1,746,681 | (3,385,791 | ) | |
Total Increase (Decrease) in Net Assets | 5,003,870 | 9,347,370 | ||
Net Assets ($): | ||||
Beginning of Period | 193,094,463 | 183,747,093 | ||
End of Period | 198,098,333 | 193,094,463 |
The Fund | 23 |
STATEMENT OF CHANGES IN NET ASSETS (continued)
Year Ended April 30, | ||||
2013 | 2012 | a | ||
Capital Share Transactions: | ||||
Class A b | ||||
Shares sold | 627,164 | 461,144 | ||
Shares issued for dividends reinvested | 231,298 | 246,671 | ||
Shares redeemed | (750,448 | ) | (907,084 | ) |
Net Increase (Decrease) in Shares Outstanding | 108,014 | (199,269 | ) | |
Class B b | ||||
Shares sold | — | 6 | ||
Shares issued for dividends reinvested | — | 319 | ||
Shares redeemed | — | (21,476 | ) | |
Net Increase (Decrease) in Shares Outstanding | — | (21,151 | ) | |
Class C | ||||
Shares sold | 45,352 | 51,159 | ||
Shares issued for dividends reinvested | 8,329 | 8,276 | ||
Shares redeemed | (70,411 | ) | (53,812 | ) |
Net Increase (Decrease) in Shares Outstanding | (16,730 | ) | 5,623 | |
Class Z | ||||
Shares sold | 180,464 | 221,045 | ||
Shares issued for dividends reinvested | 108,751 | 113,152 | ||
Shares redeemed | (278,714 | ) | (332,809 | ) |
Net Increase (Decrease) in Shares Outstanding | 10,501 | 1,388 |
a Effective as of the close of business on March 13, 2012, the fund no longer offers Class B shares. |
b During the period ended April 30, 2012, 11,168 Class B shares representing $178,651 were automatically |
converted to 11,154 Class A shares. |
See notes to financial statements.
24
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Year Ended April 30, | ||||||||||
Class A Shares | 2013 | 2012 | 2011 | 2010 | 2009 | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 16.60 | 15.51 | 15.96 | 15.28 | 15.67 | |||||
Investment Operations: | ||||||||||
Investment income—net a | .57 | .63 | .65 | .66 | .65 | |||||
Net realized and unrealized | ||||||||||
gain (loss) on investments | .34 | 1.11 | (.46 | ) | .67 | (.40 | ) | |||
Total from Investment Operations | .91 | 1.74 | .19 | 1.33 | .25 | |||||
Distributions: | ||||||||||
Dividends from investment income—net | (.57 | ) | (.63 | ) | (.64 | ) | (.65 | ) | (.64 | ) |
Dividends from net realized | ||||||||||
gain on investments | (.06 | ) | (.02 | ) | — | — | — | |||
Total Distributions | (.63 | ) | (.65 | ) | (.64 | ) | (.65 | ) | (.64 | ) |
Net asset value, end of period | 16.88 | 16.60 | 15.51 | 15.96 | 15.28 | |||||
Total Return (%) b | 5.53 | 11.40 | 1.21 | 8.85 | 1.75 | |||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | ||||||||||
to average net assets | .94 | .95 | .96 | .94 | .96 | |||||
Ratio of net expenses | ||||||||||
to average net assets | .94 | .95 | .96 | .94 | .96 | |||||
Ratio of net investment income | ||||||||||
to average net assets | 3.40 | 3.91 | 4.09 | 4.17 | 4.27 | |||||
Portfolio Turnover Rate | 15.27 | 10.69 | 18.40 | 10.93 | 16.60 | |||||
Net Assets, end of period ($ x 1,000) | 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. |
See notes to financial statements.
The Fund | 25 |
FINANCIAL HIGHLIGHTS (continued)
Year Ended April 30, | ||||||||||
Class C Shares | 2013 | 2012 | 2011 | 2010 | 2009 | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 16.61 | 15.52 | 15.97 | 15.29 | 15.68 | |||||
Investment Operations: | ||||||||||
Investment income—net a | .44 | .51 | .53 | .54 | .53 | |||||
Net realized and unrealized | ||||||||||
gain (loss) on investments | .34 | 1.11 | (.45 | ) | .67 | (.39 | ) | |||
Total from Investment Operations | .78 | 1.62 | .08 | 1.21 | .14 | |||||
Distributions: | ||||||||||
Dividends from investment income—net | (.44 | ) | (.51 | ) | (.53 | ) | (.53 | ) | (.53 | ) |
Dividends from net realized | ||||||||||
gain on investments | (.06 | ) | (.02 | ) | — | — | — | |||
Total Distributions | (.50 | ) | (.53 | ) | (.53 | ) | (.53 | ) | (.53 | ) |
Net asset value, end of period | 16.89 | 16.61 | 15.52 | 15.97 | 15.29 | |||||
Total Return (%) b | 4.73 | 10.56 | .46 | 8.03 | 1.00 | |||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | ||||||||||
to average net assets | 1.70 | 1.71 | 1.70 | 1.69 | 1.70 | |||||
Ratio of net expenses | ||||||||||
to average net assets | 1.70 | 1.71 | 1.70 | 1.69 | 1.69 | |||||
Ratio of net investment income | ||||||||||
to average net assets | 2.64 | 3.16 | 3.34 | 3.41 | 3.54 | |||||
Portfolio Turnover Rate | 15.27 | 10.69 | 18.40 | 10.93 | 16.60 | |||||
Net Assets, end of period ($ x 1,000) | 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. |
See notes to financial statements.
26
The Fund | 27 |
NOTES TO FINANCIAL STATEMENTS
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.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are
28
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 | 29 |
NOTES TO FINANCIAL STATEMENTS (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.
30
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 April 30, 2013 in valuing the fund’s investments:
At April 30, 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 | 31 |
NOTES TO FINANCIAL STATEMENTS (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 April 30, 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, the fund did not incur any interest or penalties.
Each tax year in the four-year period ended April 30, 2013 remains subject to examination by the Internal Revenue Service and state taxing authorities.
32
At April 30, 2013, the components of accumulated earnings on a tax basis were as follows: undistributed tax-exempt income $255,725, undistributed ordinary income $2,311, undistributed capital gains $242,156 and unrealized appreciation $13,607,346.
The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2013 and April 30, 2012 were as follows: tax-exempt income $6,750,540 and $7,412,713, ordinary income $0 and $255,944 and long-term capital gains $668,066 and $0, respectively.
During the period ended April 30, 2013, as a result of permanent book to tax differences, primarily due to the tax treatment for amortization adjustments, the fund decreased accumulated undistributed investment income-net by $29,327, increased accumulated net realized gain (loss) on investments by $28,785 and increased paid-in capital by $542. Net assets and net asset value per share were not affected by this reclassification.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $210 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 10, 2012, the unsecured credit facility with Citibank, N.A. was $225 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 April 30, 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 (continued)
During the period ended April 30, 2013, the Distributor retained $8,595 from commissions earned on sales of the fund’s Class A shares and $195 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 April 30, 2013, Class C shares were charged $41,895, 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 April 30, 2013, Class A and Class C shares were charged $331,853 and $13,965, 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 April 30, 2013, Class Z shares were charged $25,259 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
34
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 services for the fund and, since May 29, 2012, cash management services related to fund subscriptions and redemptions. During the period ended April 30, 2013, the fund was charged $61,875 for transfer agency services and $1,731 for cash management services. Cash management fees were partially offset by earnings credits of $253.These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensatesThe Bank of NewYork Mellon under a custody agreement for providing custodial services for the fund. During the period ended April 30, 2013, the fund was charged $19,737 pursuant to the custody agreement.
Prior to May 29, 2012, the fund compensated The Bank of NewYork Mellon under a cash management agreement for performing cash management services related to fund subscriptions and redemptions. Subsequent to May 29, 2012,The Bank of NewYork Mellon has continued to provide shareholder redemption draft processing services. During the period ended April 30, 2013, the fund was charged $1,460 pursuant to the cash management agreement, which is included in Shareholder servicing costs in the Statement of Operations.These fees were partially offset by earnings credits of $31.
During the period ended April 30, 2013, the fund was charged $8,414 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 $89,489, Distribution Plan fees $3,312, Shareholder Services Plan fees $30,568, custodian fees $4,290, Chief Compliance Officer fees $3,054 and transfer agent fees $14,102.
The Fund | 35 |
NOTES TO FINANCIAL STATEMENTS (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 April 30, 2013, amounted to $29,410,496 and $29,782,211, respectively.
At April 30, 2013, the cost of investments for federal income tax purposes was $182,644,498; accordingly, accumulated net unrealized appreciation on investments was $13,607,346, consisting of $13,715,782 gross unrealized appreciation and $108,436 gross unrealized depreciation.
NOTE 5—Other:
The sales charge may be reduced or waived for certain purchases of Class A shares. Effective April 1, 2013, pursuant to new/modified front-end sales charge waivers, Class A shares of the fund may be purchased at net asset value without payment of a sales charge by (a) investors who participate in a self-directed investment brokerage account program offered by financial intermediaries that have entered into an agreement with the fund’s Distributor (financial intermediaries offering self-directed investment brokerage accounts may or may not charge their customers a transaction fee) and (b) investors who purchase Class A shares directly through the fund’s Distributor, and either (i) have, or whose spouse or minor children have, beneficially owned shares and continuously maintained an open account with the Distributor in a Dreyfus-managed fund since on or before February 28, 2006, or (ii) such purchase is for a self-directed investment account that may or may not be subject to a transaction fee.
36
REPORT OF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM |
Shareholders and Board of Trustees
Dreyfus State Municipal Bond Funds, Dreyfus Pennsylvania Fund
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus State Municipal Bond Funds, Dreyfus Pennsylvania Fund (one of the series comprising Dreyfus State Municipal Bond Funds) as of April 30, 2013, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement.We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting.Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of April 30, 2013 by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus State Municipal Bond Funds, Dreyfus Pennsylvania Fund atApril 30, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
June 25, 2013
The Fund | 37 |
IMPORTANT TAX INFORMATION (Unaudited)
In accordance with federal tax law, the fund hereby reports all the dividends paid from investment income-net during its fiscal year ended April 30, 2013 as “exempt-interest dividends” (not subject to regular federal income tax, and for individuals who are Pennsylvania residents, Pennsylvania personal income taxes). Where required by federal tax law rules, shareholders will receive notification of their portion of the fund’s taxable ordinary dividends (if any), capital gains distributions (if any) and tax-exempt dividends paid for the 2013 calendar year on Form 1099-DIV which will be mailed in early 2014. Also, the fund hereby reports $.0566 per share as a long-term capital gain distribution paid on December 13, 2012.
38
BOARD MEMBERS INFORMATION (Unaudited)
The Fund | 39 |
BOARD MEMBERS INFORMATION (Unaudited) (continued)
Diane Dunst (73) |
Board Member (2007) |
Principal Occupation During Past 5Years: |
• President of Huntting House Antiques |
No. of Portfolios for which Board Member Serves: 14 |
——————— |
Nathan Leventhal (70) |
Board Member (1989) |
Principal Occupation During Past 5Years: |
• Chairman of the Avery-Fisher Artist Program (November 1997-present) |
• Commissioner, NYC Planning Commission (March 2007-November 2011) |
Other Public Company Board Memberships During Past 5Years: |
• Movado Group, Inc., Director (2003-present) |
No. of Portfolios for which Board Member Serves: 37 |
——————— |
Robin A. Melvin (49) |
Board Member (2012) † |
Principal Occupation During Past 5Years: |
• Director, Boisi Family Foundation, a private family foundation that supports youth-serving orga- |
nizations that promote the self sufficiency of youth from disadvantaged circumstances (1995-2012) |
• Board Member, Illinois Mentoring Partnership, non-profit organization dedicated to increasing |
the quantity and quality of mentoring service in Illinois (April 2013-present) |
No. of Portfolios for which Board Member Serves: 90 |
——————— |
† Board Member of the fund as of November 7, 2012.
Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80.The address of the Board Members and Officers is c/o The Dreyfus Corporation, 200 Park Avenue, NewYork, NewYork 10166.Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from Dreyfus free of charge by calling this toll free number: 1-800-DREYFUS.
David W. Burke, Emeritus Board Member
Ernest Kafka, Emeritus Board Member
Jay I. Meltzer, Emeritus Board Member
Daniel Rose, Emeritus Board Member
Sander Vanocur, Emeritus Board Member
40
OFFICERS OF THE FUND (Unaudited)
BRADLEY J. SKAPYAK, President since January 2010.
Chief Operating Officer and a director of the Manager since June 2009; from April 2003 to June 2009, Mr. Skapyak was the head of the Investment Accounting and Support Department of the Manager. He is an officer of 68 investment companies (comprised of 139 portfolios) managed by the Manager. He is 54 years old and has been an employee of the Manager since February 1988.
JOHN PAK, Chief Legal Officer since March 2013.
Chief Legal Officer of the Manager and Associate General Counsel and Managing Director of BNY Mellon since August 2012; from March 2005 to July 2012, Managing Director of Deutsche Bank, Deputy Global Head of Deutsche Asset Management Legal and Regional Head of Deutsche Asset Management Americas Legal. He is an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since August 2012.
JANETTE E. FARRAGHER, Vice President and Secretary since December 2011.
Assistant General Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. She is 50 years old and has been an employee of the Manager since February 1984.
KIESHA ASTWOOD, Vice President and Assistant Secretary since January 2010.
Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. She is 40 years old and has been an employee of the Manager since July 1995.
JAMES BITETTO, Vice President and Assistant Secretary since August 2005.
Senior Counsel of BNY Mellon and Secretary of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 46 years old and has been an employee of the Manager since December 1996.
JONI LACKS CHARATAN, Vice President and Assistant Secretary since August 2005.
Senior Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. She is 57 years old and has been an employee of the Manager since October 1988.
JOSEPH M. CHIOFFI, Vice President and Assistant Secretary since August 2005.
Senior Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 51 years old and has been an employee of the Manager since June 2000.
JOHN B. HAMMALIAN, Vice President and Assistant Secretary since August 2005.
Senior Managing Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since February 1991.
ROBERT R. MULLERY, Vice President and Assistant Secretary since August 2005.
Managing Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 61 years old and has been an employee of the Manager since May 1986.
The Fund | 41 |
OFFICERS OF THE FUND (Unaudited) (continued)
JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.
Senior Managing Counsel of BNY Mellon, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 47 years old and has been an employee of the Manager since October 1990.
JAMES WINDELS, Treasurer since November 2001.
Director – Mutual Fund Accounting of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 54 years old and has been an employee of the Manager since April 1985.
RICHARD CASSARO, Assistant Treasurer since January 2008.
Senior Accounting Manager – Money Market and Municipal Bond Funds of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 54 years old and has been an employee of the Manager since September 1982.
GAVIN C. REILLY, Assistant Treasurer since December 2005.
Tax Manager of the Investment Accounting and Support Department of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since April 1991.
ROBERT S. ROBOL, Assistant Treasurer since August 2005.
Senior Accounting Manager – Fixed Income Funds of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since October 1988.
ROBERT SALVIOLO, Assistant Treasurer since July 2007.
Senior Accounting Manager – Equity Funds of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 46 years old and has been an employee of the Manager since June 1989.
ROBERT SVAGNA, Assistant Treasurer since August 2005.
Senior Accounting Manager – Equity Funds of the Manager, and an officer of 69 investment companies (comprised of 165 portfolios) managed by the Manager. He is 46 years old and has been an employee of the Manager since November 1990.
JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.
Chief Compliance Officer of the Manager and The Dreyfus Family of Funds (69 investment companies, comprised of 165 portfolios). He is 55 years old and has served in various capacities with the Manager since 1980, including manager of the firm’s Fund Accounting Department from 1997 through October 2001.
MATTHEW D. CONNOLLY, Anti-Money Laundering Compliance Officer since April 2012.
Anti-Money Laundering Compliance Officer of the Distributor since October 2011; from March 2010 to September 2011, Global Head, KYC Reviews and Director, UBS Investment Bank; until March 2010,AML Compliance Officer and Senior Vice President, Citi Global Wealth Management. He is an officer of 64 investment companies (comprised of 160 portfolios) managed by the Manager. He is 40 years old and has been an employee of the Distributor since October 2011.
42
NOTES
For More Information
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.
Item 2. Code of Ethics.
The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. There have been no amendments to, or waivers in connection with, the Code of Ethics during the period covered by this Report.
Item 3. Audit Committee Financial Expert.
The Registrant's Board has determined that Joseph S. DiMartino, a member of the Audit Committee of the Board, is an audit committee financial expert as defined by the Securities and Exchange Commission (the "SEC"). Mr. DiMartino is "independent" as defined by the SEC for purposes of audit committee financial expert determinations.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees . The aggregate fees billed for each of the last two fiscal years (the "Reporting Periods") for professional services rendered by the Registrant's principal accountant (the "Auditor") for the audit of the Registrant's annual financial statements or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $188,408 in 2012 and $96,448 in 2013.
(b) Audit-Related Fees . The aggregate fees billed in the Reporting Periods for assurance and related services by the Auditor that are reasonably related to the performance of the audit of the Registrant's financial statements and are not reported under paragraph (a) of this Item 4 were $36,000 in 2012 and $18,000 in 2013. These services consisted of one or more of the following: (i) agreed upon procedures related to compliance with Internal Revenue Code section 817(h), (ii) security counts required by Rule 17f-2 under the Investment Company Act of 1940, as amended, (iii) advisory services as to the accounting or disclosure treatment of Registrant transactions or events and (iv) advisory services to the accounting or disclosure treatment of the actual or potential impact to the Registrant of final or proposed rules, standards or interpretations by the Securities and Exchange Commission, the Financial Accounting Standards Boards or other regulatory or standard-setting bodies.
The aggregate fees billed in the Reporting Periods for non-audit assurance and related services by the Auditor to the Registrant's investment adviser (not including any sub-investment adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant ("Service Affiliates"), that were reasonably related to the performance of the annual audit of the Service Affiliate, which required pre-approval by the Audit Committee were $0 in 2012 and $0 in 2013.
(c) Tax Fees . The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice, and tax planning ("Tax Services") were $17,596 in 2012 and $9,878 in 2013. These services consisted of: (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments; (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held. The aggregate fees billed in the Reporting Periods for Tax Services by the Auditor to Service Affiliates, which required pre-approval by the Audit Committee were $0 in 2012 and $0 in 2013.
(d) All Other Fees . The aggregate fees billed in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) of this Item, were $1,559 in 2012 and $0 in 2013. These services consisted of a review of the Registrant's anti-money laundering program.
The aggregate fees billed in the Reporting Periods for Non-Audit Services by the Auditor to Service Affiliates, other than the services reported in paragraphs (b) through (c) of this Item, which required pre-approval by the Audit Committee, were $0 in 2012 and $200,000 in 2013.
(e)(1) Audit Committee Pre-Approval Policies and Procedures . The Registrant's Audit Committee has established policies and procedures (the "Policy") for pre-approval (within specified fee limits) of the Auditor's engagements for non-audit services to the Registrant and Service Affiliates without specific case-by-case consideration. The pre-approved services in the Policy can include pre-approved audit services, pre-approved audit-related services, pre-approved tax services and pre-approved all other services. Pre-approval considerations include whether the proposed services are compatible with maintaining the Auditor's independence. Pre-approvals pursuant to the Policy are considered annually.
(e)(2) Note: None of the services described in paragraphs (b) through (d) of this Item 4 were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) None of the hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal account's full-time, permanent employees.
Non-Audit Fees . The aggregate non-audit fees billed by the Auditor for services rendered to the Registrant, and rendered to Service Affiliates, for the Reporting Periods were $35,337,885 in 2012 and $46,010,490 in 2013.
Auditor Independence . The Registrant's Audit Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates, which were not pre-approved (not requiring pre-approval), is compatible with maintaining the Auditor's independence.
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.
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) Code of ethics referred to in Item 2.
(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: |
June 17, 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. |
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|
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By: /s/ Bradley J. Skapyak |
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Bradley J. Skapyak, President
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Date: |
June 17, 2013 |
|
|
By: /s/ James Windels |
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James Windels, Treasurer
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Date: |
June 17, 2013 |
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EXHIBIT INDEX
(a)(1) Code of ethics referred to in Item 2.
(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)
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