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
|
|
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.
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.
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.
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.
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:
|
|
|
|
|
|
|
Level 2—Other
|
Level 3—
|
|
|
Level 1—
|
Significant
|
Significant
|
|
|
Unadjusted
|
Observable
|
Unobservable
|
|
|
Quoted Prices
|
Inputs
|
Inputs
|
Total
|
Assets ($)
|
|
|
|
|
Investments in Securities:
|
|
|
|
Municipal Bonds
|
—
|
378,582,754
|
—
|
378,582,754
|
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.
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
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.
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
|
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