UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER
REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
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Investment Company Act file number |
811-04906 |
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BNY Mellon State Municipal Bond Funds |
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(Exact name of Registrant as specified in charter) |
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c/o BNY Mellon Investment Adviser, Inc. 240 Greenwich Street New York, New York 10286 |
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(Address of principal executive offices) (Zip code) |
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Bennett A. MacDougall, Esq. 240 Greenwich Street New York, New York 10286 |
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(Name and address of agent for service) |
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Registrant's telephone number, including area code: |
(212) 922-6400 |
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Date of fiscal year end:
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04/30 |
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Date of reporting period: |
04/30/2020
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BNY Mellon State Municipal Bond Funds, BNY Mellon Connecticut Fund
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ANNUAL REPORT April 30, 2020 |
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Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.bnymellonim.com/us and sign up for eCommunications. It’s simple and only takes a few minutes. |
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The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
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Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
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BNY Mellon Investment Adviser, Inc. |
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With Those of Other Funds |
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Public Accounting Firm |
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FO R MORE INFORMATION
Back Cover
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The Fund |
A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.
Dear Shareholder:
We are pleased to present this annual report for BNY Mellon Connecticut Fund (formerly, Dreyfus Connecticut Fund), covering the 12-month period from May 1, 2019 through April 30, 2020. 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.
Early in the reporting period, equity markets benefited from the U.S. Federal Reserve’s (the “Fed”) accommodative interest rate policy. Trade tensions between the U.S. and China flared periodically, disrupting markets, but the pace of U.S. economic growth remained steady, and stocks rose in mid-2019. Volatility returned in the later summer and early fall, when investors grew concerned about slowing global growth, leading the Fed to cut the federal funds rate in July, September and October 2019. The rate cuts helped to support stock prices, which rallied through the end of the calendar year. The announcement of a “phase one” trade deal between the U.S. and China also worked to bolster valuations. Early in 2020, concerns about COVID-19 roiled markets, compounded by an oil price war between Saudi Arabia and Russia. Stocks posted historic losses in March 2020 but regained some ground in April.
Fixed-income markets benefited from Fed interest rate cuts and from investor concerns about an economic slowdown. Responding to global sluggishness, the Fed reduced rates three times in 2019, which worked to bolster valuations of some fixed income instruments. However, as stocks subsequently rallied, Treasury prices declined, and rates across much of the yield curve rose until early in 2020, when the threat posed by COVID-19 began to emerge. A flight to quality ensued, and rates fell significantly. March 2020 brought high volatility and risk-asset spreads widened. The Fed cut rates twice in March, and the government launched a large stimulus package. In April 2020, bond prices began to recover some of their prior losses.
The near-term outlook for the U.S. will be challenging, as the country continues to face COVID-19. However, we believe that once the economic effects have been mitigated, the economy will rebound. As always, we will monitor relevant data for any signs of a change. We encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
May 15, 2020
2
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from May 1, 2019 through April 30, 2020, as provided by Daniel Barton and Jeffrey Burger, Portfolio Managers
Market and Fund Performance Overview
For the 12-month period ended April 30, 2020, Class A shares of BNY Mellon Connecticut Fund (formerly, Dreyfus Connecticut Fund), a series of BNY Mellon State Municipal Bond Funds, produced a total return of 0.71%, Class C shares returned -0.17%, Class I shares returned 0.97%, Class Y shares returned 0.91% and Class Z shares returned 0.94%.1 In comparison, the Bloomberg Barclays U.S. Municipal Bond Index (the “Index”), the fund’s benchmark index, which is comprised of bonds issued nationally and not solely within Connecticut, achieved a total return of 2.16% for the same period.2
Municipal bonds encountered volatility during the reporting period due to the COVID-19 crisis. The fund underperformed the Index, mainly due to shorter duration and an overweight position in lower-quality and revenue bonds.
The Fund’s Investment Approach
The fund seeks to maximize current income exempt from federal income tax and from Connecticut state income tax, without undue risk. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in municipal bonds that provide income exempt from federal and Connecticut state income taxes. The fund invests at least 70% of its assets in municipal bonds rated, at the time of purchase, investment grade (i.e., Baa/BBB or higher) or the unrated equivalent as determined by BNY Mellon Investment Adviser, Inc. For additional yield, the fund may invest up to 30% of its assets in municipal bonds rated below investment grade (“high-yield” or “junk” bonds) or the unrated equivalent as determined by BNY Mellon Investment Adviser, Inc. The dollar-weighted average maturity of the fund’s portfolio normally exceeds ten years, but the fund may invest without regard to maturity.
The fund’s portfolio managers focus on identifying undervalued sectors and securities and minimize the use of interest rate forecasting. The portfolio managers select municipal bonds for the fund’s portfolio by using fundamental credit analysis to estimate the relative value and attractiveness of various sectors and securities and to exploit pricing inefficiencies in the municipal bond market, and by actively trading among various sectors, such as pre-refunded, general obligation and revenue, based on their apparent relative values. The fund seeks to invest in several of these sectors.
COVID-19 Concerns and Supply-Demand Factors Drove Municipal Bonds
Through most of the reporting period, the municipal bond market benefited from strong demand resulting from concerns about domestic economic growth. Demand was also driven by investors in states with high income tax rates. These investors moved into municipal bonds as a way to reduce their federal income tax liability, which rose as a result of the cap on the federal deductibility of state and local taxes in the Tax Cuts and Jobs Act of 2017.
Actions by the Federal Reserve (the “Fed”) midway through the period, including three rate cuts, also helped performance in the municipal bond market. This contributed to a decline in
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
yields across the municipal bond yield curve, though investors largely favored longer-term issues, causing the municipal bond yield curve to flatten.
Performance of the market was also assisted by a manageable supply of new bonds. Supply increased somewhat during the reporting period as low interest rates led issuers to seek to capture favorable financing.
The municipal bond market continued to perform well early in 2020, until the emergence of the COVID-19 crisis, which resulted in turmoil and hindered returns, particularly in March 2020. Actions by the Fed, including two emergency rate cuts in March 2020, provided some support to the municipal bond market, but technical supply and demand factors became the predominant driver.
Though the municipal bond market often benefits from economic uncertainty, in this environment that was not the case. Fears of widespread economic damage due to COVID-19 caused investors to shift out of the municipal bond market, resulting in large outflows from municipal bond mutual funds. In a normal market, broker-dealers would step in to buy municipal bonds. But a decline in the municipal bond market, combined with a rally in the Treasury market, prevented the broker-dealers from hedging their municipal bond purchases by shorting Treasuries, as they normally do.
In addition, the municipal bond market was hurt by the inability of large investors to capitalize on the volatility. As municipal bond yields rose, insurance companies and other large investors were expected to step in, but since there was also a lack of liquidity in corporate bonds, which normally would have financed their municipal bond purchases, these investors were hindered in their ability to act. As a result, the municipal market yield spreads rose significantly, weakening performance.
Fundamentals in the municipal bond market generally remained healthy during the reporting period. Steady but slower economic growth through most of the period supported tax revenues, fiscal balances and “rainy day” funds.
Connecticut’s improving fundamentals and generally higher yields were attractive to investors through much of the reporting period, and the state outperformed the benchmark up until the COVID-19 crisis hit in March 2020.
Short Duration and Lower Quality Drove Fund Results
The fund’s relative performance was hindered by its shorter duration. Through most of the reporting period, healthy economic and fiscal conditions encouraged investors to seek longer bonds. (The fund’s shorter duration versus the Index is also a result of Connecticut’s restriction on general obligation bonds longer than 20 years, which has only recently been lifted.) The fund’s overweight position in lower-quality bonds also detracted from performance as the emergence of the COVID-19 crisis led investors to move into higher-quality issues and segments. An overweight in industrial development bonds and in the health care segment was also unfavorable as hospitals and other providers are expected to experience financial difficulties as a result of COVID-19. The fund’s overweight in revenue bonds and underweight in general obligation bonds also proved disadvantageous.
On the other hand, the fund benefited from positions in essential services, including water, sewer and electric. Positions in the education segment also contributed positively over the
4
full reporting period, though that segment was hit hard in the last two months. In addition, an overweight in the 10-year portion of the municipal bond yield curve was beneficial.
Positioned Conservatively
The outlook for the municipal bond market is uncertain, but steps taken by the Fed, including two emergency rate cuts in March 2020 and the initiation of other forms of relief may support the municipal bond market. In addition, if the next phase of COVID-19 relief from Congress includes states and municipalities, that may provide a catalyst to the market. We believe this relief is likely, but significant political wrangling is likely in the near term over the extent of that relief. Aside from this, Connecticut’s fiscal health has improved in recent years, which may provide greater flexibility to manage the state budget through the duration of the pandemic.
We expect to keep the fund’s duration roughly neutral to long versus the benchmark. As the market improves, we believe longer-duration bonds are likely to benefit. We will continue to focus on yield opportunities among higher-grade credits, especially in essential services, and we will avoid lower-grade credits, especially in health care, education and transportation, which may experience downgrades.
May 15, 2020
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 I, Class Y, and Class Z 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, and some income may be subject to the federal alternative minimum tax (AMT) for certain investors. Capital gains, if any, are taxable.
The fund’s return reflects the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through August 30, 2020, at which time it may be extended, modified or terminated. Had these expenses not been absorbed, returns would have been lower.
2 Source: Lipper Inc. — The Bloomberg Barclays U.S. Municipal Bond Index covers the U.S.-dollar-denominated, long-term, tax-exempt bond market. Investors cannot invest directly in any index.
Bonds are subject generally to interest-rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
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.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
5
FUND PERFORMANCE (Unaudited)
Comparison of change in value of a $10,000 investment in Class A shares, Class C shares, Class I shares and Class Z shares of BNY Mellon State Municipal Bond Funds, BNY Mellon Connecticut Fund with a hypothetical investment of $10,000 in the Bloomberg Barclays U.S. Municipal Bond Index (the “Index”).
† Source: Lipper Inc.
Past performance is not predictive of future performance.
The above graph compares a hypothetical $10,000 investment made in Class A, Class C, Class I and Class Z shares of BNY Mellon State Municipal Bond Funds, BNY Mellon Connecticut Fund on 4/30/10 to a hypothetical investment of $10,000 made in the Index on that date. All dividends and capital gain distributions are reinvested.
The fund’s 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. The Index is not limited to investments principally in Connecticut municipal obligations. The Index, unlike the fund, covers the U.S. dollar-denominated long-term tax-exempt bond market. 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
Comparison of change in value of a $1,000,000 investment in Class Y shares of BNY Mellon State Municipal Bond Funds, BNY Mellon Connecticut Fund with a hypothetical investment of $1,000,000 in the Bloomberg Barclays U.S. Municipal Bond Index (the “Index”).
† Source: Lipper Inc.
†† The total return figures presented for Class Y shares of the fund reflect the performance of the fund’s Class A shares for the period prior to 9/3/13 (the inception date for Class Y shares), not reflecting the applicable sales load for Class A shares.
Past performance is not predictive of future performance.
The above graph compares a hypothetical $1,000,000 investment made in Class Y of BNY Mellon State Municipal Bond Funds, BNY Mellon Connecticut Fund on 4/30/10 to a hypothetical investment of $1,000,000 made in the Index on that date. All dividends and capital gain distributions are reinvested.
The fund’s performance shown in the line graph above takes into account all applicable fees and expenses of the fund’s Class Y shares. The Index is not limited to investments principally in Connecticut municipal obligations. The Index, unlike the fund, covers the U.S. dollar-denominated long-term tax-exempt bond market. 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.
7
FUND PERFORMANCE (Unaudited) (continued)
† 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 Y shares of the fund reflect the performance of the fund’s Class A shares for the period prior to 9/3/13 (the inception date for Class Y shares), not reflecting the applicable sales load for Class A shares.
The performance data quoted represents past performance, which is no guarantee of future results. Share price and investment return fluctuate and an investor’s shares may be worth more or less than original cost upon redemption. Current performance may be lower or higher than the performance quoted. Go to bnymellonim.com/us for the fund’s most recent month-end returns.
The fund’s performance shown in the graphs and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. In addition to the performance of Class A shares shown with and without a maximum sales charge, the fund's performance shown in the table takes into account all other applicable fees and expenses on all classes.
8
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 BNY Mellon State Municipal Bond Funds, BNY Mellon Connecticut Fund from November 1, 2019 to April 30, 2020. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
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 $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
9
STATEMENT OF INVESTMENTS
April 30, 2020
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Description |
Coupon
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Maturity
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Principal
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Value ($) |
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Long-Term Municipal Investments - 98.6% |
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Connecticut - 97.0% |
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Connecticut, GO, Ser. A |
5.00 |
10/15/2025 |
1,645,000 |
1,811,819 |
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Connecticut, GO, Ser. A |
5.00 |
3/1/2026 |
5,000,000 |
5,536,300 |
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Connecticut, GO, Ser. D |
5.00 |
11/1/2031 |
2,500,000 |
2,615,750 |
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Connecticut, GO, Ser. D |
5.00 |
11/1/2027 |
3,500,000 |
3,676,890 |
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Connecticut, GO, Ser. D |
5.00 |
11/1/2028 |
5,000,000 |
5,248,150 |
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Connecticut, Revenue Bonds, Ser. A |
4.00 |
9/1/2035 |
5,000,000 |
5,210,900 |
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Connecticut, Revenue Bonds, Ser. A |
5.00 |
8/1/2034 |
3,000,000 |
3,339,540 |
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Connecticut Bradley International Airport, Revenue Bonds, Ser. A |
5.00 |
7/1/2049 |
2,500,000 |
2,795,625 |
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Connecticut Clean Water Fund - State Revolving Fund, Revenue Bonds (Green Bond) Ser. A |
4.00 |
2/1/2035 |
2,125,000 |
2,433,019 |
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Connecticut Clean Water Fund - State Revolving Fund, Revenue Bonds (Green Bond) Ser. A |
5.00 |
3/1/2029 |
2,600,000 |
3,053,102 |
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Connecticut Development Authority, Revenue Bonds (Aquarion Water Project) |
5.50 |
4/1/2021 |
4,500,000 |
4,655,475 |
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Connecticut Development Authority, Revenue Bonds, Refunding (The Connecticut Light & Power Company Project) Ser. A |
4.38 |
9/1/2028 |
3,900,000 |
4,029,792 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds (Church Home of Hartford Obligated Group Project) Ser. A |
5.00 |
9/1/2046 |
1,000,000 |
a |
888,910 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds (Church Home of Hartford Obligated Group Project) Ser. A |
5.00 |
9/1/2053 |
1,500,000 |
a |
1,307,925 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds (Covenant Home Retirement Communities Obligated Group) Ser. B |
5.00 |
12/1/2040 |
4,020,000 |
4,070,170 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds (Fairfield University) Ser. Q1 |
5.00 |
7/1/2046 |
1,000,000 |
1,071,650 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds (Hartford HealthCare Obligated Group) |
5.00 |
7/1/2045 |
2,500,000 |
2,673,850 |
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10
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Description |
Coupon
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Maturity
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Principal
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Value ($) |
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Long-Term Municipal Investments - 98.6% (continued) |
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Connecticut - 97.0% (continued) |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds (Hartford HealthCare Obligated Group) Ser. E |
5.00 |
7/1/2027 |
3,265,000 |
3,593,949 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds (Mary Wade Home Obligated Group) Ser. A1 |
5.00 |
10/1/2054 |
2,000,000 |
a |
1,692,380 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds (The Stamford Hospital Obligated Group) Ser. K |
4.00 |
7/1/2046 |
2,000,000 |
1,943,600 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding |
5.00 |
7/1/2025 |
1,490,000 |
1,554,860 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (Bridgeport Hospital) Ser. D |
5.00 |
7/1/2025 |
3,625,000 |
3,875,342 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (Connecticut College) Ser. L1 |
4.00 |
7/1/2046 |
2,000,000 |
2,006,640 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (Fairfield University) Ser. R |
5.00 |
7/1/2032 |
1,000,000 |
1,113,030 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (Hartford HealthCare Obligated Group) Ser. A |
5.00 |
7/1/2021 |
2,000,000 |
b |
2,098,540 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (Hartford HealthCare Obligated Group) Ser. A |
5.00 |
7/1/2021 |
1,000,000 |
b |
1,049,270 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (Nuvance Health Obligated Group) Ser. A |
4.00 |
7/1/2041 |
2,250,000 |
2,298,847 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (Quinnipiac University) Ser. L |
5.00 |
7/1/2045 |
3,000,000 |
3,185,340 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (Quinnipiac University) Ser. L |
5.00 |
7/1/2036 |
5,000,000 |
5,384,150 |
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11
STATEMENT OF INVESTMENTS (continued)
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Description |
Coupon
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Maturity
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Principal
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Value ($) |
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Long-Term Municipal Investments - 98.6% (continued) |
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Connecticut - 97.0% (continued) |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (Quinnipiac University) Ser. M |
5.00 |
7/1/2036 |
200,000 |
218,054 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (Sacred Heart University) Ser. I1 |
5.00 |
7/1/2042 |
2,000,000 |
2,165,060 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (The Choate Rosemary Hall) |
4.00 |
7/1/2042 |
1,110,000 |
1,266,299 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (The Greenwich Academy) (Insured; Assured Guaranty Municipal Corp.) Ser. E |
5.25 |
3/1/2032 |
6,880,000 |
8,913,453 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (The Loomis Institute) (Insured; American Municipal Bond Assurance Corp.) Ser. F |
5.25 |
7/1/2028 |
1,760,000 |
2,250,019 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (The Stamford Hospital Obligated Group) Ser. I |
5.00 |
7/1/2030 |
6,750,000 |
6,838,627 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (The University of Hartford) |
5.00 |
7/1/2034 |
425,000 |
433,309 |
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (Trinity Health Obligated Group) |
5.00 |
12/1/2045 |
7,500,000 |
8,275,200 |
|||||
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (University of New Haven) |
5.00 |
7/1/2036 |
1,000,000 |
1,011,010 |
|||||
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Refunding (Yale New Haven Health Obligated Group) Ser. E |
5.00 |
7/1/2027 |
3,960,000 |
4,450,763 |
|||||
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Ser. A |
4.00 |
7/1/2040 |
500,000 |
510,965 |
|||||
12
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Description |
Coupon
|
Maturity
|
Principal
|
Value ($) |
|||||
|
Long-Term Municipal Investments - 98.6% (continued) |
|||||||||
|
Connecticut - 97.0% (continued) |
|||||||||
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Connecticut Health & Educational Facilities Authority, Revenue Bonds, Ser. A |
5.00 |
7/1/2027 |
750,000 |
869,153 |
|||||
|
Connecticut Higher Education Supplemental Loan Authority, Revenue Bonds, Ser. A |
5.00 |
11/15/2021 |
1,450,000 |
1,516,540 |
|||||
|
Connecticut Higher Education Supplemental Loan Authority, Revenue Bonds, Ser. A |
5.00 |
11/15/2022 |
1,400,000 |
1,500,800 |
|||||
|
Connecticut Higher Education Supplemental Loan Authority, Revenue Bonds, Ser. A |
5.00 |
11/15/2023 |
1,400,000 |
1,533,056 |
|||||
|
Connecticut Housing Finance Authority, Revenue Bonds, Refunding, Ser. A1 |
3.65 |
11/15/2032 |
5,470,000 |
5,778,672 |
|||||
|
Connecticut Housing Finance Authority, Revenue Bonds, Refunding, Ser. C1 |
4.00 |
11/15/2047 |
4,060,000 |
4,275,830 |
|||||
|
Connecticut Municipal Electric Energy Cooperative, Revenue Bonds, Refunding, Ser. A |
5.00 |
1/1/2038 |
3,000,000 |
3,247,560 |
|||||
|
Connecticut Transmission Municipal Electric Energy Cooperative, Revenue Bonds, Refunding, Ser. A |
5.00 |
1/1/2042 |
3,000,000 |
3,157,020 |
|||||
|
Greater New Haven Water Pollution Control Authority, Revenue Bonds, Refunding (Insured; National Public Finance Guarantee Corp.) Ser. A |
5.00 |
8/15/2035 |
25,000 |
25,079 |
|||||
|
Greater New Haven Water Pollution Control Authority, Revenue Bonds, Refunding, Ser. B |
5.00 |
8/15/2026 |
700,000 |
802,039 |
|||||
|
Greater New Haven Water Pollution Control Authority, Revenue Bonds, Refunding, Ser. B |
5.00 |
8/15/2029 |
1,500,000 |
1,711,965 |
|||||
|
Greater New Haven Water Pollution Control Authority, Revenue Bonds, Refunding, Ser. B |
5.00 |
8/15/2027 |
1,250,000 |
1,431,100 |
|||||
|
Harbor Point Infrastructure Improvement District, Tax Allocation Bonds, Refunding (Harbor Point Project) |
5.00 |
4/1/2039 |
4,000,000 |
a |
4,067,560 |
||||
|
New Haven, GO (Insured; Assured Guaranty Municipal Corp.) Ser. A |
5.00 |
8/1/2039 |
3,000,000 |
3,295,170 |
|||||
|
New Haven, GO, Refunding (Insured; Build America Mutual) Ser. B |
5.00 |
8/15/2027 |
750,000 |
838,508 |
|||||
|
New Haven, GO, Refunding (Insured; Build America Mutual) Ser. B |
5.00 |
8/15/2026 |
610,000 |
685,835 |
|||||
13
STATEMENT OF INVESTMENTS (continued)
|
Description |
Coupon
|
Maturity
|
Principal
|
Value ($) |
|||||
|
Long-Term Municipal Investments - 98.6% (continued) |
|||||||||
|
Connecticut - 97.0% (continued) |
|||||||||
|
New Haven, GO, Ser. A |
5.25 |
8/1/2027 |
1,740,000 |
1,963,903 |
|||||
|
South Central Connecticut Regional Water Authority, Revenue Bonds, Refunding, Ser. B |
5.00 |
8/1/2037 |
3,430,000 |
3,984,768 |
|||||
|
South Central Connecticut Regional Water Authority, Revenue Bonds, Refunding, Ser. B |
5.00 |
8/1/2038 |
3,500,000 |
4,055,030 |
|||||
|
South Central Connecticut Regional Water Authority, Revenue Bonds, Refunding, Ser. B1 |
5.00 |
8/1/2041 |
2,445,000 |
2,897,594 |
|||||
|
The Metropolitan District, GO, Refunding |
5.00 |
7/15/2034 |
1,065,000 |
1,249,469 |
|||||
|
The Metropolitan District, GO, Ser. A |
4.00 |
7/15/2035 |
1,275,000 |
1,403,864 |
|||||
|
The Metropolitan District, Revenue Bonds, Refunding (Green Bond) Ser. A |
5.00 |
11/1/2042 |
2,000,000 |
2,176,980 |
|||||
|
The Metropolitan District, Revenue Bonds, Refunding, Ser. A |
5.00 |
4/1/2031 |
3,510,000 |
3,708,104 |
|||||
|
University of Connecticut, Revenue Bonds, Ser. A |
5.25 |
11/15/2047 |
4,000,000 |
4,592,440 |
|||||
|
Waterbury, GO (Green Bond) Ser. A |
4.00 |
2/1/2045 |
5,000,000 |
5,439,350 |
|||||
|
Waterbury, GO, Ser. A |
5.00 |
11/15/2038 |
2,500,000 |
2,951,650 |
|||||
|
189,706,613 |
|||||||||
|
U.S. Related - 1.6% |
|||||||||
|
Children's Trust Fund, Revenue Bonds, Refunding, Ser. A |
0.00 |
5/15/2050 |
12,000,000 |
c |
1,647,960 |
||||
|
Puerto Rico Highway & Transportation Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. CC |
5.25 |
7/1/2034 |
1,500,000 |
1,608,855 |
|||||
|
3,256,815 |
|||||||||
|
Total Investments (cost $191,537,918) |
98.6% |
192,963,428 |
|||||||
|
Cash and Receivables (Net) |
1.4% |
2,676,577 |
|||||||
|
Net Assets |
100.0% |
195,640,005 |
|||||||
a Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2020, these securities were valued at $7,956,775 or 4.07% of net assets.
b These securities are prerefunded; the date shown represents the prerefunded date. Bonds which are prerefunded are collateralized by U.S. Government securities which are held in escrow and are used to pay principal and interest on the municipal issue and to retire the bonds in full at the earliest refunding date.
c Security issued with a zero coupon. Income is recognized through the accretion of discount.
14
† Based on net assets.
See notes to financial statements.
15
See notes to financial statements.
16
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
Value |
|
|
Assets ($): |
|
|
|
|
||
|
Investments in securities—See Statement of Investments |
191,537,918 |
|
192,963,428 |
|
||
|
Cash |
|
|
|
|
469,624 |
|
|
Interest receivable |
|
2,581,210 |
|
|||
|
Receivable for shares of Beneficial Interest subscribed |
|
49,304 |
|
|||
|
Prepaid expenses |
|
|
|
|
37,451 |
|
|
|
|
|
|
|
196,101,017 |
|
|
Liabilities ($): |
|
|
|
|
||
|
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
|
110,686 |
|
|||
|
Payable for shares of Beneficial Interest redeemed |
|
274,385 |
|
|||
|
Trustees’ fees and expenses payable |
|
1,571 |
|
|||
|
Other accrued expenses |
|
|
|
|
74,370 |
|
|
|
|
|
|
|
461,012 |
|
|
Net Assets ($) |
|
|
195,640,005 |
|
||
|
Composition of Net Assets ($): |
|
|
|
|
||
|
Paid-in capital |
|
|
|
|
195,884,091 |
|
|
Total distributable earnings (loss) |
|
|
|
|
(244,086) |
|
|
Net Assets ($) |
|
|
195,640,005 |
|
||
|
Net Asset Value Per Share |
Class A |
Class C |
Class I |
Class Y |
Class Z |
|
|
Net Assets ($) |
110,498,486 |
2,783,678 |
13,543,571 |
368,733 |
68,445,537 |
|
|
Shares Outstanding |
9,669,183 |
243,941 |
1,185,057 |
32,276 |
5,990,456 |
|
|
Net Asset Value Per Share ($) |
11.43 |
11.41 |
11.43 |
11.42 |
11.43 |
|
|
|
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
|
|
17
STATEMENT OF OPERATIONS
Year Ended April 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
|
||
|
Interest Income |
|
|
6,704,162 |
|
||
|
Expenses: |
|
|
|
|
||
|
Management fee—Note 3(a) |
|
|
1,131,712 |
|
||
|
Shareholder servicing costs—Note 3(c) |
|
|
404,040 |
|
||
|
Professional fees |
|
|
97,132 |
|
||
|
Registration fees |
|
|
59,047 |
|
||
|
Distribution fees—Note 3(b) |
|
|
25,221 |
|
||
|
Trustees’ fees and expenses—Note 3(d) |
|
|
15,097 |
|
||
|
Prospectus and shareholders’ reports |
|
|
13,762 |
|
||
|
Chief Compliance Officer fees—Note 3(c) |
|
|
12,994 |
|
||
|
Loan commitment fees—Note 2 |
|
|
5,640 |
|
||
|
Custodian fees—Note 3(c) |
|
|
4,388 |
|
||
|
Miscellaneous |
|
|
29,708 |
|
||
|
Total Expenses |
|
|
1,798,741 |
|
||
|
Less—reduction in expenses due to undertaking—Note 3(a) |
|
|
(137,887) |
|
||
|
Less—reduction in fees due to earnings credits—Note 3(c) |
|
|
(4,388) |
|
||
|
Net Expenses |
|
|
1,656,466 |
|
||
|
Investment Income—Net |
|
|
5,047,696 |
|
||
|
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
|
||||
|
Net realized gain (loss) on investments |
819,710 |
|
||||
|
Net change in unrealized appreciation (depreciation) on investments |
(4,116,469) |
|
||||
|
Net Realized and Unrealized Gain (Loss) on Investments |
|
|
(3,296,759) |
|
||
|
Net Increase in Net Assets Resulting from Operations |
|
1,750,937 |
|
|||
|
|
|
|
|
|
|
|
|
See notes to financial statements. |
||||||
18
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
Year Ended April 30, |
|||||
|
|
|
|
|
2020 |
|
2019 |
|
||
|
Operations ($): |
|
|
|
|
|
|
|
|
|
|
Investment income—net |
|
|
5,047,696 |
|
|
|
5,478,428 |
|
|
|
Net realized gain (loss) on investments |
|
819,710 |
|
|
|
1,161,877 |
|
||
|
Net change in unrealized appreciation
|
|
(4,116,469) |
|
|
|
3,783,541 |
|
||
|
Net Increase (Decrease) in Net Assets
|
1,750,937 |
|
|
|
10,423,846 |
|
|||
|
Distributions ($): |
|
||||||||
|
Distributions to shareholders: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
(2,756,646) |
|
|
|
(3,085,817) |
|
|
|
Class C |
|
|
(52,791) |
|
|
|
(67,603) |
|
|
|
Class I |
|
|
(333,260) |
|
|
|
(247,675) |
|
|
|
Class Y |
|
|
(10,113) |
|
|
|
(11,396) |
|
|
|
Class Z |
|
|
(1,873,307) |
|
|
|
(2,044,220) |
|
|
|
Total Distributions |
|
|
(5,026,117) |
|
|
|
(5,456,711) |
|
|
|
Beneficial Interest Transactions ($): |
|
||||||||
|
Net proceeds from shares sold: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
3,333,309 |
|
|
|
2,740,550 |
|
|
|
Class C |
|
|
434,976 |
|
|
|
275,112 |
|
|
|
Class I |
|
|
7,433,579 |
|
|
|
3,921,751 |
|
|
|
Class Z |
|
|
1,384,129 |
|
|
|
547,915 |
|
|
|
Distributions reinvested: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
2,195,474 |
|
|
|
2,406,924 |
|
|
|
Class C |
|
|
40,309 |
|
|
|
53,061 |
|
|
|
Class I |
|
|
325,794 |
|
|
|
239,282 |
|
|
|
Class Z |
|
|
1,402,137 |
|
|
|
1,520,955 |
|
|
|
Cost of shares redeemed: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
(11,254,858) |
|
|
|
(17,893,779) |
|
|
|
Class C |
|
|
(1,369,612) |
|
|
|
(1,215,169) |
|
|
|
Class I |
|
|
(3,795,427) |
|
|
|
(4,137,326) |
|
|
|
Class Y |
|
|
(5,000) |
|
|
|
(66,457) |
|
|
|
Class Z |
|
|
(5,957,428) |
|
|
|
(9,379,082) |
|
|
|
Increase (Decrease) in Net Assets
|
(5,832,618) |
|
|
|
(20,986,263) |
|
|||
|
Total Increase (Decrease) in Net Assets |
(9,107,798) |
|
|
|
(16,019,128) |
|
|||
|
Net Assets ($): |
|
||||||||
|
Beginning of Period |
|
|
204,747,803 |
|
|
|
220,766,931 |
|
|
|
End of Period |
|
|
195,640,005 |
|
|
|
204,747,803 |
|
|
19
STATEMENT OF CHANGES IN NET ASSETS (continued)
|
|
|
|
|
Year Ended April 30, |
|||||
|
|
|
|
|
2020 |
|
2019 |
|
||
|
Capital Share Transactions (Shares): |
|
||||||||
|
Class Aa |
|
|
|
|
|
|
|
|
|
|
Shares sold |
|
|
279,682 |
|
|
|
239,501 |
|
|
|
Shares issued for distributions reinvested |
|
|
185,254 |
|
|
|
210,206 |
|
|
|
Shares redeemed |
|
|
(952,439) |
|
|
|
(1,563,580) |
|
|
|
Net Increase (Decrease) in Shares Outstanding |
(487,503) |
|
|
|
(1,113,873) |
|
|||
|
Class Ca |
|
|
|
|
|
|
|
|
|
|
Shares sold |
|
|
36,686 |
|
|
|
23,906 |
|
|
|
Shares issued for distributions reinvested |
|
|
3,407 |
|
|
|
4,642 |
|
|
|
Shares redeemed |
|
|
(115,940) |
|
|
|
(106,440) |
|
|
|
Net Increase (Decrease) in Shares Outstanding |
(75,847) |
|
|
|
(77,892) |
|
|||
|
Class I |
|
|
|
|
|
|
|
|
|
|
Shares sold |
|
|
630,113 |
|
|
|
342,579 |
|
|
|
Shares issued for distributions reinvested |
|
|
27,493 |
|
|
|
20,893 |
|
|
|
Shares redeemed |
|
|
(321,547) |
|
|
|
(362,847) |
|
|
|
Net Increase (Decrease) in Shares Outstanding |
336,059 |
|
|
|
625 |
|
|||
|
Class Y |
|
|
|
|
|
|
|
|
|
|
Shares redeemed |
|
|
(426) |
|
|
|
(5,776) |
|
|
|
Net Increase (Decrease) in Shares Outstanding |
(426) |
|
|
|
(5,776) |
|
|||
|
Class Z |
|
|
|
|
|
|
|
|
|
|
Shares sold |
|
|
116,131 |
|
|
|
47,964 |
|
|
|
Shares issued for distributions reinvested |
|
|
118,328 |
|
|
|
132,846 |
|
|
|
Shares redeemed |
|
|
(501,637) |
|
|
|
(820,863) |
|
|
|
Net Increase (Decrease) in Shares Outstanding |
(267,178) |
|
|
|
(640,053) |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
aDuring the period ended April 30, 2019, 766 Class C shares representing $8,703 were automatically converted to 766 Class A shares. |
|||||||||
|
See notes to financial statements. |
|||||||||
20
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
|
Year Ended April 30, |
||||||
|
Class A Shares |
2020 |
2019 |
2018 |
2017 |
2016 |
|
|
Per Share Data ($): |
||||||
|
Net asset value, beginning of period |
11.62 |
11.35 |
11.68 |
12.10 |
11.88 |
|
|
Investment Operations: |
||||||
|
Investment income—neta |
.28 |
.29 |
.30 |
.32 |
.34 |
|
|
Net realized and unrealized
|
(.19) |
.27 |
(.32) |
(.42) |
.21 |
|
|
Total from Investment Operations |
.09 |
.56 |
(.02) |
(.10) |
.55 |
|
|
Distributions: |
||||||
|
Dividends from investment
|
(.28) |
(.29) |
(.31) |
(.32) |
(.33) |
|
|
Net asset value, end of period |
11.43 |
11.62 |
11.35 |
11.68 |
12.10 |
|
|
Total Return (%)b |
.71 |
4.98 |
(.24) |
(.87) |
4.75 |
|
|
Ratios/Supplemental Data (%): |
||||||
|
Ratio of total expenses
|
.95 |
.95 |
.94 |
.93 |
.91 |
|
|
Ratio of net expenses
|
.89 |
.95 |
.94 |
.93 |
.91 |
|
|
Ratio of net investment income
|
2.37 |
2.53 |
2.61 |
2.66 |
2.82 |
|
|
Portfolio Turnover Rate |
19.22 |
4.84 |
10.71 |
9.93 |
9.75 |
|
|
Net Assets, end of period ($ x 1,000) |
110,498 |
118,062 |
127,921 |
145,523 |
167,984 |
|
a Based on average shares outstanding.
b Exclusive of sales charge.
See notes to financial statements.
21
FINANCIAL HIGHLIGHTS (continued)
|
Year Ended April 30, |
||||||
|
Class C Shares |
2020 |
2019 |
2018 |
2017 |
2016 |
|
|
Per Share Data ($): |
||||||
|
Net asset value, beginning of period |
11.61 |
11.33 |
11.66 |
12.08 |
11.86 |
|
|
Investment Operations: |
||||||
|
Investment income—neta |
.19 |
.20 |
.21 |
.23 |
.24 |
|
|
Net realized and unrealized
|
(.20) |
.28 |
(.33) |
(.43) |
.22 |
|
|
Total from Investment Operations |
(.01) |
.48 |
(.12) |
(.20) |
.46 |
|
|
Distributions: |
||||||
|
Dividends from investment
|
(.19) |
(.20) |
(.21) |
(.22) |
(.24) |
|
|
Net asset value, end of period |
11.41 |
11.61 |
11.33 |
11.66 |
12.08 |
|
|
Total Return (%)b |
(.17) |
4.23 |
(1.02) |
(1.63) |
3.96 |
|
|
Ratios/Supplemental Data (%): |
||||||
|
Ratio of total expenses
|
1.76 |
1.75 |
1.71 |
1.69 |
1.68 |
|
|
Ratio of net expenses
|
1.69 |
1.75 |
1.70 |
1.69 |
1.68 |
|
|
Ratio of net investment income
|
1.58 |
1.72 |
1.82 |
1.89 |
2.06 |
|
|
Portfolio Turnover Rate |
19.22 |
4.84 |
10.71 |
9.93 |
9.75 |
|
|
Net Assets, end of period ($ x 1,000) |
2,784 |
3,712 |
4,507 |
10,653 |
11,919 |
|
a Based on average shares outstanding.
b Exclusive of sales charge.
See notes to financial statements.
22
|
Year Ended April 30, |
||||||
|
Class I Shares |
2020 |
2019 |
2018 |
2017 |
2016 |
|
|
Per Share Data ($): |
||||||
|
Net asset value, beginning of period |
11.62 |
11.35 |
11.68 |
12.10 |
11.88 |
|
|
Investment Operations: |
||||||
|
Investment income—neta |
.31 |
.31 |
.33 |
.34 |
.36 |
|
|
Net realized and unrealized
|
(.19) |
.27 |
(.33) |
(.42) |
.22 |
|
|
Total from Investment Operations |
.12 |
.58 |
.00b |
(.08) |
.58 |
|
|
Distributions: |
||||||
|
Dividends from investment
|
(.31) |
(.31) |
(.33) |
(.34) |
(.36) |
|
|
Net asset value, end of period |
11.43 |
11.62 |
11.35 |
11.68 |
12.10 |
|
|
Total Return (%) |
.97 |
5.22 |
.00c |
(.64) |
5.01 |
|
|
Ratios/Supplemental Data (%): |
||||||
|
Ratio of total expenses
|
.71 |
.72 |
.70 |
.69 |
.67 |
|
|
Ratio of net expenses
|
.64 |
.72 |
.70 |
.69 |
.67 |
|
|
Ratio of net investment income
|
2.62 |
2.76 |
2.84 |
2.90 |
3.06 |
|
|
Portfolio Turnover Rate |
19.22 |
4.84 |
10.71 |
9.93 |
9.75 |
|
|
Net Assets, end of period ($ x 1,000) |
13,544 |
9,869 |
9,629 |
12,555 |
9,794 |
|
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Amount represents less than .01% per share.
See notes to financial statements.
23
FINANCIAL HIGHLIGHTS (continued)
|
Year Ended April 30, |
||||||
|
Class Y Shares |
2020 |
2019 |
2018 |
2017 |
2016 |
|
|
Per Share Data ($): |
||||||
|
Net asset value, beginning of period |
11.62 |
11.35 |
11.68 |
12.10 |
11.88 |
|
|
Investment Operations: |
||||||
|
Investment income—neta |
.31 |
.32 |
.34 |
.34 |
.37 |
|
|
Net realized and unrealized
|
(.20) |
.27 |
(.33) |
(.41) |
.22 |
|
|
Total from Investment Operations |
.11 |
.59 |
.01 |
(.07) |
.59 |
|
|
Distributions: |
||||||
|
Dividends from investment
|
(.31) |
(.32) |
(.34) |
(.35) |
(.37) |
|
|
Net asset value, end of period |
11.42 |
11.62 |
11.35 |
11.68 |
12.10 |
|
|
Total Return (%) |
.91 |
5.26 |
.03 |
(.60) |
5.04 |
|
|
Ratios/Supplemental Data (%): |
||||||
|
Ratio of total expenses
|
.68 |
.68 |
.66 |
.65 |
.64 |
|
|
Ratio of net expenses
|
.61 |
.68 |
.66 |
.65 |
.64 |
|
|
Ratio of net investment income
|
2.65 |
2.79 |
2.87 |
2.93 |
3.11 |
|
|
Portfolio Turnover Rate |
19.22 |
4.84 |
10.71 |
9.93 |
9.75 |
|
|
Net Assets, end of period ($ x 1,000) |
369 |
380 |
437 |
813 |
1,614 |
|
a Based on average shares outstanding.
See notes to financial statements.
24
|
Year Ended April 30, |
||||||
|
Class Z Shares |
2020 |
2019 |
2018 |
2017 |
2016 |
|
|
Per Share Data ($): |
||||||
|
Net asset value, beginning of period |
11.62 |
11.35 |
11.68 |
12.10 |
11.87 |
|
|
Investment Operations: |
||||||
|
Investment income—neta |
.31 |
.31 |
.33 |
.34 |
.36 |
|
|
Net realized and unrealized
|
(.19) |
.27 |
(.33) |
(.42) |
.23 |
|
|
Total from Investment Operations |
.12 |
.58 |
.00 |
(.08) |
.59 |
|
|
Distributions: |
||||||
|
Dividends from investment
|
(.31) |
(.31) |
(.33) |
(.34) |
(.36) |
|
|
Net asset value, end of period |
11.43 |
11.62 |
11.35 |
11.68 |
12.10 |
|
|
Total Return (%) |
.94 |
5.21 |
.07 |
(.74) |
5.05 |
|
|
Ratios/Supplemental Data (%): |
||||||
|
Ratio of total expenses
|
.73 |
.75 |
.70 |
.71 |
.71 |
|
|
Ratio of net expenses
|
.67 |
.75 |
.70 |
.71 |
.71 |
|
|
Ratio of net investment income
|
2.59 |
2.74 |
2.83 |
2.88 |
3.03 |
|
|
Portfolio Turnover Rate |
19.22 |
4.84 |
10.71 |
9.93 |
9.75 |
|
|
Net Assets, end of period ($ x 1,000) |
68,446 |
72,725 |
78,274 |
86,696 |
94,240 |
|
a Based on average shares outstanding.
See notes to financial statements.
25
NOTES TO FINANCIAL STATEMENTS
NOTE 1—Significant Accounting Policies:
BNY Mellon Connecticut Fund (the “fund”) is a separate non-diversified series of BNY Mellon State Municipal Bond Funds (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering three series, including the fund. The fund’s investment objective is to seek to maximize current income exempt from federal income tax and from Connecticut state income tax, without undue risk. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
The Company’s Board of Directors (the “Board”) approved, effective December 31, 2019 (the “Effective Date”), the termination of the fund’s authorized Class T shares. Prior to the Effective Date, the fund did not offer such Class T shares for purchase.
Effective June 3, 2019, the fund changed its name from Dreyfus Connecticut Fund to BNY Mellon Connecticut Fund and the Company changed its name from Dreyfus State Municipal Bond Funds to BNY Mellon State Municipal Bond Funds. In addition, The Dreyfus Corporation, the fund’s investment adviser, changed its name to “BNY Mellon Investment Adviser, Inc.”, MBSC Securities Corporation, the fund’s distributor, changed its name to “BNY Mellon Securities Corporation” and Dreyfus Transfer, Inc., the fund’s transfer agent, changed its name to “BNY Mellon Transfer, Inc.”
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, 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, Class Y 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 C shares automatically convert to Class A shares ten years after the date of purchase, without the imposition of a sales charge. Class I and Class Y shares are sold at net asset value per share generally to institutional investors. Class Z shares are sold at net asset value per share to certain shareholders of the fund. Class Z shares generally are not available for new accounts. 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.
26
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 (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. 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.
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:
27
NOTES TO FINANCIAL STATEMENTS (continued)
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued each business day by an independent pricing service (the “Service”) approved by the Board. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Debt investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of the following: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. All of the preceding securities are generally categorized within Level 2 of the fair value hierarchy.
The Service is engaged under the general oversight of the Board.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers.
28
These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of April 30, 2020 in valuing the fund’s investments:
|
Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 -Significant Unobservable Inputs |
Total |
|
|
Assets ($) |
|
|
|
|
|
Investments in Securities: † |
||||
|
Municipal Securities |
- |
192,963,428 |
- |
192,963,428 |
† See Statement of Investments for additional detailed categorizations, if any.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when issued or delayed delivery basis may be settled a month or more after the trade date.
The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund.
(c) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments,
29
NOTES TO FINANCIAL STATEMENTS (continued)
including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
(d) Dividends and distributions to shareholders: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(e) 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, 2020, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended April 30, 2020, the fund did not incur any interest or penalties.
Each tax year in the four-year period ended April 30, 2020 remains subject to examination by the Internal Revenue Service and state taxing authorities.
At April 30, 2020, the components of accumulated earnings on a tax basis were as follows: undistributed tax-exempt income $422,318, accumulated capital losses $1,677,885 and unrealized appreciation $1,425,570.
The fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
The accumulated capital loss carryover is available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to April 30, 2020. The fund has $1,677,885 of short-term capital losses which can be carried forward for an unlimited period.
30
The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2020 and April 30, 2019 were as follows: tax-exempt income $5,003,528 and $5,456,711 and ordinary income $22,589 and $0, respectively.
During the period ended April 30, 2020, as a result of permanent book to tax differences, primarily due to the tax treatment for amortization adjustments and dividend reclassification, the fund decreased total distributed earnings (loss) by $27,769 and increased paid-in capital by the same amount. Net assets and net asset value per share were not affected by this reclassification.
(e) New Accounting Pronouncements: Effective June 1, 2019, the fund adopted Accounting Standards Update 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization On Purchased Callable Debt Securities (“ASU 2017-08”). The update shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date.
Also effective June 1, 2019, the fund adopted Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The update provides guidance that modifies certain disclosure requirements for fair value measurements. The adoption of ASU 2017-08 and ASU 2018-13 had no impact on the operations of the fund for the period ended April 30, 2020.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $927 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), a subsidiary of BNY Mellon and an affiliate of the Adviser, each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $747 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $180 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. Prior to March 11, 2020, the Citibank Credit Facility was $1.030 billion with Tranche A available in an amount equal to $830 million and Tranche B available in an amount equal to $200 million.
31
NOTES TO FINANCIAL STATEMENTS (continued)
In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit 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, 2020, 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 Adviser, 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 Adviser has contractually agreed, from August 30, 2019 through August 30, 2020, to waive receipt of a portion of its management fee, in the amount of .10% of the value of the fund’s average daily net assets. On or after August 30, 2020, the Adviser may terminate this waiver agreement at any time. The reduction in expenses, pursuant to the undertaking, amounted to $137,887 during the period ended April 30, 2020.
During the period ended April 30, 2020, the Distributor retained $1,838 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, 2020, Class C shares were charged $25,221 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, 2020, Class A and Class C shares were charged $291,647 and $8,408, respectively, pursuant to the Shareholder Services Plan.
Under the Shareholder Services Plan, Class Z shares reimburse the Distributor at an amount not to exceed an annual rate of .25% of the value of Class Z shares’ average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding Class Z shares and providing reports and other information, and services related to the maintenance of shareholder accounts. During the period ended April 30, 2020, Class Z shares were charged $27,389 pursuant to the Shareholder Services Plan.
32
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, if any, as an expense offset in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended April 30, 2020, the fund was charged $38,626 for transfer agency services. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended April 30, 2020, the fund was charged $4,388 pursuant to the custody agreement. These fees were offset by earnings credits of $4,388.
The fund compensates The Bank of New York Mellon under a shareholder redemption draft processing agreement for providing certain services related to the fund’s check writing privilege. During the period ended April 30, 2020, the fund was charged $1,880 pursuant to the agreement, which is included in Shareholder servicing costs in the Statement of Operations.
During the period ended April 30, 2020, the fund was charged $12,994 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: management fees of $89,326, Distribution Plan fees of $1,817, Shareholder Services Plan fees of $23,553, custodian fees of $1,498, Chief Compliance Officer fees of $4,438 and transfer agency fees of $6,297, which are offset against an expense reimbursement currently in effect in the amount of $16,243.
33
NOTES TO FINANCIAL STATEMENTS (continued)
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds 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, 2020, amounted to $38,968,952 and $41,575,337, respectively.
At April 30, 2020, the cost of investments for federal income tax purposes was $191,537,858; accordingly, accumulated net unrealized appreciation on investments was $1,425,570, consisting of $5,031,677 gross unrealized appreciation and $3,606,107 gross unrealized depreciation.
34
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of BNY Mellon Connecticut Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of BNY Mellon Connecticut Fund (the “Fund”) (one of the funds constituting BNY Mellon State Municipal Bond Funds), including the statement of investments, as of April 30, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting BNY Mellon State Municipal Bond Funds) at April 30, 2020, 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 its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of April 30, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the BNY Mellon Family of Funds since at least 1957, but we are unable to determine the specific year.
New York, New York
June 25, 2020
35
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, 2020 as “exempt-interest dividends” (not subject to regular federal income tax, and for individuals who are Connecticut residents, Connecticut personal income taxes), except $22,589 that is being reported as an ordinary income distribution for reporting purposes. 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 2020 calendar year on Form 1099-DIV which will be mailed in early 2021.
36
BOARD MEMBERS INFORMATION (Unaudited)
INDEPENDENT BOARD MEMBERS
Joseph S. DiMartino (76)
Chairman of the Board (1995)
Principal Occupation During Past 5 Years:
· Director or Trustee of funds in the BNY Mellon Family of Funds and certain other entities (as described in the fund’s Statement of Additional Information) (1995-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ, Inc., a public company providing professional business services, products and solutions, Director (1997-Present)
No. of Portfolios for which Board Member Serves: 114
———————
Francine J. Bovich (68)
Board Member (2012)
Principal Occupation During Past 5 Years:
· Trustee, The Bradley Trusts, private trust funds (2011-Present)
Other Public Company Board Memberships During Past 5 Years:
· Annaly Capital Management, Inc., a real estate investment trust, Director (2014-Present)
No. of Portfolios for which Board Member Serves: 68
———————
Peggy C. Davis (77)
Board Member (1990)
Principal Occupation During Past 5 Years:
· Shad Professor of Law, New York University School of Law (1983-present)
No. of Portfolios for which Board Member Serves: 40
———————
Nathan Leventhal (77)
Board Member (1989)
Principal Occupation During Past 5 Years:
· President Emeritus of Lincoln Center for the Performing Arts (2001-Present)
· President of the Palm Beach Opera (2016-Present)
Other Public Company Board Memberships During Past 5 Years:
· Movado Group, Inc., a public company that designs, markets and distributes watches, Director (2003-Present)
No. of Portfolios for which Board Member Serves: 46
———————
37
BOARD MEMBERS INFORMATION (Unaudited) (continued)
INDEPENDENT BOARD MEMBERS (continued)
Robin A. Melvin (56)
Board Member (2012)
Principal Occupation During Past 5 Years:
· Co-chairman, Mentor Illinois, a non-profit organization dedicated to increasing the quantity and quality of mentoring services in Illinois (2014-Present); Board member (2013-Present)
No. of Portfolios for which Board Member Serves: 92
———————
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 BNY Mellon Investment Adviser, Inc. 240 Greenwich Street, New York, New York 10286. Additional information about the Board Member is available in the fund’s Statement of Additional Information which can be obtained from the Adviser free of charge by calling this toll free number: 1-800-373-9387.
Clifford L. Alexander, Jr., Emeritus Board Member
Diane Dunst, Emeritus Board Member
Ernest Kafka, Emeritus Board Member
38
OFFICERS OF THE FUND (Unaudited)
RENEE LAROCHE-MORRIS, President since May 2019.
President and a director of BNY Mellon Investment Adviser, Inc. since January 2018. She is an officer of 62 investment companies (comprised of 114 portfolios) managed by the Adviser. She is 48 years old and has been an employee of BNY Mellon since 2003.
JAMES WINDELS, Treasurer since November 2001.
Director-BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 61 years old and has been an employee of the Adviser since April 1985.
BENNETT A. MACDOUGALL, Chief Legal Officer since October 2015.
Chief Legal Officer of the Adviser and Associate General Counsel and Managing Director of BNY Mellon since June 2015; Director and Associate General Counsel of Deutsche Bank–Asset & Wealth Management Division from June 2005 to June 2015, and as Chief Legal Officer of Deutsche Investment Management Americas Inc. from June 2012 to May 2015. He is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 48 years old and has been an employee of the Adviser since June 2015.
DAVID DIPETRILLO, Vice President since May 2019.
Head of North America Product, BNY Mellon Investment Management since January 2018, Director of Product Strategy, BNY Mellon Investment Management from January 2016 to December 2017; Head of US Retail Product and Channel Marketing, BNY Mellon Investment Management from January 2014 to December 2015. He is an officer of 63 investment companies (comprised of 122 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 42 years old and has been an employee of BNY Mellon since 2005.
JAMES BITETTO, Vice President since August 2005 and Secretary since February 2018.
Senior Managing Counsel of BNY Mellon since December 2019; Managing Counsel of BNY Mellon from April 2014 to December 2019; Secretary of the Adviser, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of the Adviser since December 1996.
SONALEE CROSS, Vice President and Assistant Secretary since March 2018.
Counsel of BNY Mellon since October 2016; Associate at Proskauer Rose LLP from April 2016 to September 2016; Attorney at EnTrust Capital from August 2015 to February 2016; Associate at Sidley Austin LLP from September 2013 to August 2015. She is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 32 years old and has been an employee of the Adviser since October 2016.
DEIRDRE CUNNANE, Vice President and Assistant Secretary since March 2019.
Counsel of BNY Mellon since August 2018; Senior Regulatory Specialist at BNY Mellon Investment Management Services from February 2016 to August 2018; Trustee Associate at BNY Mellon Trust Company (Ireland) Limited from August 2013 to February 2016. She is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 29 years old and has been an employee of the Adviser since August 2018.
SARAH S. KELLEHER, Vice President and Assistant Secretary since April 2014.
Managing Counsel of BNY Mellon since December 2017, Senior Counsel of BNY Mellon from March 2013 to December 2017. She is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 44 years old and has been an employee of the Adviser since March 2013.
JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.
Senior Managing Counsel of BNY Mellon, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 54 years old and has been an employee of the Adviser since October 1990.
PETER M. SULLIVAN, Vice President and Assistant Secretary since March 2019.
Managing Counsel of BNY Mellon, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 52 years old and has been an employee of the Adviser since April 2004.
39
OFFICERS OF THE FUND (Unaudited) (continued)
AMANDA QUINN, Vice President and Assistant Secretary since March 2020.
Counsel of BNY Mellon since June 2019; Regulatory Administration Manager at BNY Mellon Investment Management Services from September 2018 to May 2019; Senior Regulatory Specialist at BNY Mellon Investment Management Services from April 2015 to August 2018. She is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 35 years old and has been an employee of the Adviser since June 2019.
NATALYA ZELENSKY, Vice President and Assistant Secretary since March 2017.
Managing Counsel of BNY Mellon since December 2019; Counsel of BNY Mellon from May 2016 to December 2019; Attorney at Wildermuth Endowment Strategy Fund/Wildermuth Advisory, LLC from November 2015 to May 2016 and Assistant General Counsel at RCS Advisory Services from July 2014 to November 2015. She is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 34 years old and has been an employee of the Adviser since May 2016.
GAVIN C. REILLY, Assistant Treasurer since December 2005.
Tax Manager-BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 51 years old and has been an employee of the Adviser since April 1991.
ROBERT S. ROBOL, Assistant Treasurer since August 2005.
Senior Accounting Manager-BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 56 years old and has been an employee of the Adviser since October 1988.
ROBERT SALVIOLO, Assistant Treasurer since July 2007.
Senior Accounting Manager–BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of the Adviser since June 1989.
ROBERT SVAGNA, Assistant Treasurer since August 2005.
Senior Accounting Manager–BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of the Adviser since November 1990.
JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.
Chief Compliance Officer of the Adviser, the BNY Mellon Family of Funds and BNY Mellon Funds Trust (63 investment companies, comprised of 137 portfolios). He is 62 years old and has served in various capacities with the Adviser since 1980, including manager of the firm’s Fund Accounting Department from 1997 through October 2001.
CARIDAD M. CAROSELLA, Anti-Money Laundering Compliance Officer since January 2016.
Anti-Money Laundering Compliance Officer of the BNY Mellon Family of Funds and BNY Mellon Funds Trust since January 2016; from May 2015 to December 2015, Interim Anti-Money Laundering Compliance Officer of the BNY Mellon Family of Funds and BNY Mellon Funds Trust and the Distributor; from January 2012 to May 2015, AML Surveillance Officer of the Distributor. She is an officer of 57 investment companies (comprised of 138 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 51 years old and has been an employee of the Distributor since 1997.
40
NOTES
41
BNY Mellon State Municipal Bond Funds, BNY Mellon Connecticut Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
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Ticker Symbols: |
Class A: PSCTX Class C: PMCCX Class I: DTCIX Class Y: DPMYX Class Z: DPMZX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@bnymellon.com
Internet Information can be viewed online or downloaded at www.bnymellonim.com/us
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-PORT. The fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
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© 2020 BNY Mellon Securities Corporation
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BNY Mellon State Municipal Bond Funds, BNY Mellon Massachusetts Fund
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ANNUAL REPORT April 30, 2020 |
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Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.bnymellonim.com/us and sign up for eCommunications. It’s simple and only takes a few minutes. |
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The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
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Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
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BNY Mellon Investment Adviser, Inc. |
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With Those of Other Funds |
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Public Accounting Firm |
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FOR MORE INFORMATION
Back Cover
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The Fund |
A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.
Dear Shareholder:
We are pleased to present this annual report for BNY Mellon Massachusetts Fund (formerly, Dreyfus Massachusetts Fund), covering the 12-month period from May 1, 2019 through April 30, 2020. 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.
Early in the reporting period, equity markets benefited from the U.S. Federal Reserve’s (the “Fed”) accommodative interest rate policy. Trade tensions between the U.S. and China flared periodically, disrupting markets, but the pace of U.S. economic growth remained steady, and stocks rose in mid-2019. Volatility returned in the later summer and early fall, when investors grew concerned about slowing global growth, leading the Fed to cut the federal funds rate in July, September and October 2019. The rate cuts helped to support stock prices, which rallied through the end of the calendar year. The announcement of a “phase one” trade deal between the U.S. and China also worked to bolster valuations. Early in 2020, concerns about COVID-19 roiled markets, compounded by an oil price war between Saudi Arabia and Russia. Stocks posted historic losses in March 2020 but regained some ground in April.
Fixed-income markets benefited from Fed interest rate cuts and from investor concerns about an economic slowdown. Responding to global sluggishness, the Fed reduced rates three times in 2019, which worked to bolster valuations of some fixed income instruments. However, as stocks subsequently rallied, Treasury prices declined, and rates across much of the yield curve rose until early in 2020, when the threat posed by COVID-19 began to emerge. A flight to quality ensued, and rates fell significantly. March 2020 brought high volatility and risk-asset spreads widened. The Fed cut rates twice in March, and the government launched a large stimulus package. In April 2020, bond prices began to recover some of their prior losses.
The near-term outlook for the U.S. will be challenging, as the country continues to face COVID-19. However, we believe that once the economic effects have been mitigated, the economy will rebound. As always, we will monitor relevant data for any signs of a change. We encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
May 15, 2020
2
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from May 1, 2019 through April 30, 2020, as provided by Daniel Rabasco and Thomas Casey, Portfolio Managers
Market and Fund Performance Overview
For the 12-month period ended April 30, 2020, Class A shares of BNY Mellon Massachusetts Fund (formerly, Dreyfus Massachusetts Fund), a series of BNY Mellon State Municipal Bond Funds (formerly, Dreyfus State Municipal Bond Funds), produced a total return of 0.46%, Class C shares returned -0.64% and Class Z shares returned 0.69%.1 In comparison, the Bloomberg Barclays U.S. Municipal Bond Index (the “Index”), the fund’s benchmark index, which is comprised of bonds issued nationally and not solely within Massachusetts, achieved a total return of 2.16% for the same period.2
Municipal bonds encountered turmoil during the reporting period due to the spread of the COVID-19 virus and the efforts to contain it. The fund lagged the Index, due to sector allocation and security selection.
The Fund’s Investment Approach
The fund seeks to maximize current income exempt from federal income tax and from Massachusetts state income tax, without undue risk. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in municipal bonds that provide income exempt from federal and Massachusetts state income taxes. The fund invests at least 70% of its assets in municipal bonds rated, at the time of purchase, investment grade (i.e., Baa/BBB or higher) or the unrated equivalent as determined by BNY Mellon Investment Adviser, Inc. For additional yield, the fund may invest up to 30% of its assets in municipal bonds rated below investment grade (“high yield” or “junk” bonds) or the unrated equivalent as determined by BNY Mellon Investment Adviser, Inc. The dollar-weighted average maturity of the fund’s portfolio normally exceeds ten years, but the fund may invest without regard to maturity.
The fund’s portfolio managers focus on identifying undervalued sectors and securities and minimize the use of interest rate forecasting. The portfolio managers select municipal bonds for the fund’s portfolio by using fundamental credit analysis to estimate the relative value and attractiveness of various sectors and securities and to exploit pricing inefficiencies in the municipal bond market, and by actively trading among various sectors, such as pre-refunded, general obligation and revenue, based on their apparent relative values. The fund seeks to invest in several of these sectors.
COVID-19 Concerns and Supply-Demand Factors Drove Municipal Bonds
Through most of the reporting period, the municipal bond market benefited from strong demand resulting from concerns about domestic economic growth. Demand was also driven by investors in states with high income tax rates. These investors moved into municipal bonds as a way to reduce their federal income tax liability, which rose as a result of the cap on the federal deductibility of state and local taxes in the Tax Cuts and Jobs Act of 2017.
Actions by the Federal Reserve (the “Fed”) midway through the period, including three rate cuts, also helped performance in the municipal bond market. This contributed to a decline in
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
yields across the municipal bond yield curve, though investors largely favored longer-term issues, causing the municipal bond yield curve to flatten.
Performance of the market was also assisted by a manageable supply of new bonds. Supply increased somewhat during the reporting period as low interest rates led issuers to seek to capture favorable financing.
The municipal bond market continued to perform well early in 2020, until the emergence of the COVID-19 crisis, which resulted in turmoil and hindered returns, particularly in March 2020. Actions by the Fed, including two emergency rate cuts in March 2020, provided some support to the municipal bond market, but technical supply and demand factors became the predominant drivers.
Though the municipal bond market often benefits from economic uncertainty, in this environment that was not the case. Fears of widespread economic damage due to COVID-19 caused investors to shift out of the municipal bond market, resulting in large outflows from municipal bond mutual funds. In a normal market, broker-dealers would step in to buy municipal bonds. But a decline in the municipal bond market, combined with a rally in the Treasury market, prevented the broker-dealers from hedging their municipal bond purchases by shorting Treasuries, as they normally do.
In addition, the municipal bond market was hurt by the inability of large investors to capitalize on the volatility. As municipal bond yields rose, insurance companies and other large investors were expected to step in, but since there was also a lack of liquidity in corporate bonds, which normally would have financed their municipal bond purchases, these investors were hindered by their inability to act. As a result, the municipal market yield spreads rose significantly, weakening performance.
Fundamentals in the municipal bond market generally remained healthy during the reporting period. Steady but slower economic growth through most of the period supported tax revenues, fiscal balances and “rainy day” funds.
The state of Massachusetts was in strong fiscal health before the emergence of the COVID-19 pandemic and remains in relatively good condition. The state’s health care sector may experience some difficulties due to the virus, but the state government has provided some financial support, and as patients return for elective surgeries and other forms of care, the sector’s fiscal condition should rebound. Other sectors that may experience difficulties in the near term are education and transportation. The commercial real estate sector of the economy could also experience a downturn.
Sector Allocation and Security Selection Dampened Fund Results
Sector allocation decisions and security selection hindered the fund’s results. In particular, an overweight to revenue bonds and an underweight to general obligation bonds contributed negatively to returns. In addition, security selection, especially in the education and health care segments, was disadvantageous.
On a more positive note, the fund’s relative performance was bolstered by its slightly longer duration versus the benchmark. Although municipal bond yield spreads widened versus Treasury yields, municipal bond yields were generally down, indicating that prices increased,
4
and this benefited the fund because of its longer duration. The fund did not use derivatives during the reporting period.
An Emphasis on Quality
We anticipate that the municipal bond market to remain challenged, but the Coronavirus Aid Relief and Security (CARES) Act may provide some relief to the economy, and the Fed’s bond purchasing program may help the market return to normal. However, uncertainty about the economic impact of COVID-19 is likely to continue over the near term. Additional support from Congress in the form of a Phase 4 relief package may boost investor confidence in the municipal bond market and also encourage broker-dealers to return as intermediaries. We will continue to emphasize revenue bonds with sound fundamentals, and we expect to keep the fund’s duration modestly long relative to the benchmark.
May 15, 2020
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, 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. — The Bloomberg Barclays U.S. Municipal Bond Index covers the U.S. dollar-denominated, long-term, tax-exempt bond market. Investors cannot invest directly in any index.
Bonds are subject generally to interest-rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
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.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund's exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
5
FUND PERFORMANCE (Unaudited)
Comparison of change in value of $10,000 investment in Class A shares, Class C shares and Class Z shares of BNY Mellon State Municipal Bond Funds, BNY Mellon Massachusetts Fund with a hypothetical investment of $10,000 in the Bloomberg Barclays U.S. Municipal Bond Index (the “Index”).
† Source: Lipper Inc.
Past performance is not predictive of future performance.
The above graph compares a hypothetical $10,000 investment made in each of the Class A, Class C and Class Z shares of BNY Mellon State Municipal Bond Funds, BNY Mellon Massachusetts Fund on 4/30/10 to a hypothetical investment of $10,000 made in the Index on that date. All dividends and capital gain distributions are reinvested.
The fund’s 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. The Index is not limited to investments principally in Massachusetts municipal obligations. The Index, unlike the fund, covers the U.S. dollar-denominated long-term tax-exempt bond market. 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
† The maximum contingent deferred sales charge for Class C shares is 1% for shares redeemed within one year of the date of purchase.
The performance data quoted represents past performance, which is no guarantee of future results. Share price and investment return fluctuate and an investor’s shares may be worth more or less than original cost upon redemption. Current performance may be lower or higher than the performance quoted. Go to www.bnymellonim.com/us for the fund’s most recent month-end returns.
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. In addition to the performance of Class A shares shown with and without a maximum sales charge, the fund’s performance shown in the table takes into account all other applicable fees and expenses on all classes.
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 BNY Mellon State Municipal Bond Funds, BNY Mellon Massachusetts Fund from November 1, 2019 to April 30, 2020. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
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 $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
8
STATEMENT OF INVESTMENTS
April 30, 2020
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Description |
Coupon
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Maturity
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Principal
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Value ($) |
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Long-Term Municipal Investments - 98.6% |
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Massachusetts - 97.2% |
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Boston Housing Authority, Revenue Bonds (Insured; Assured Guaranty Municipal Corp.) |
5.00 |
4/1/2024 |
1,885,000 |
1,890,825 |
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Collegiate Charter School of Lowell, Revenue Bonds |
5.00 |
6/15/2039 |
1,000,000 |
900,990 |
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Martha's Vineyard Land Bank, Revenue Bonds, Refunding (Green Bond) (Insured; Build America Mutual) |
5.00 |
5/1/2033 |
500,000 |
596,290 |
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Massachusetts, GO, Refunding (Insured; American Municipal Bond Assurance Corp.) Ser. A |
5.50 |
8/1/2030 |
1,750,000 |
2,341,483 |
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Massachusetts, GO, Refunding, Ser. A, 3 Month LIBOR x.67 +.55% |
1.73 |
11/1/2025 |
5,000,000 |
a |
4,973,000 |
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Massachusetts, GO, Refunding, Ser. C |
5.00 |
5/1/2030 |
2,500,000 |
3,278,600 |
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Massachusetts, GO, Ser. A |
5.00 |
4/1/2047 |
3,250,000 |
3,783,780 |
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Massachusetts, GO, Ser. C |
3.00 |
3/1/2047 |
1,350,000 |
1,362,217 |
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Massachusetts, GO, Ser. D |
4.00 |
5/1/2034 |
1,000,000 |
1,161,780 |
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Massachusetts Bay Transportation Authority, Revenue Bonds |
7.00 |
3/1/2021 |
145,000 |
152,325 |
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Massachusetts Bay Transportation Authority, Revenue Bonds, Refunding (Insured; National Public Finance Guarantee Corp.) Ser. B |
5.50 |
7/1/2027 |
3,000,000 |
3,840,420 |
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Massachusetts Bay Transportation Authority, Revenue Bonds, Ser. A |
5.00 |
7/1/2040 |
2,000,000 |
2,260,440 |
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Massachusetts Clean Energy Cooperative Corp., Revenue Bonds |
5.00 |
7/1/2024 |
2,580,000 |
2,864,600 |
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Massachusetts College Building Authority, Revenue Bonds (Insured; National Public Finance Guarantee Corp.) Ser. A |
0.00 |
5/1/2026 |
5,385,000 |
b |
5,006,542 |
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Massachusetts College Building Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Corp.) Ser. B |
5.50 |
5/1/2028 |
1,450,000 |
1,793,302 |
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Massachusetts Development Finance Agency, Revenue Bonds (Baystate Medical Center Obligated Group) Ser. N |
5.00 |
7/1/2034 |
1,475,000 |
1,602,484 |
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Massachusetts Development Finance Agency, Revenue Bonds (Boston University) Ser. BB1 |
4.00 |
10/1/2046 |
2,000,000 |
2,111,740 |
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9
STATEMENT OF INVESTMENTS (continued)
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Description |
Coupon
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Maturity
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Principal
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Value ($) |
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Long-Term Municipal Investments - 98.6% (continued) |
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Massachusetts - 97.2% (continued) |
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Massachusetts Development Finance Agency, Revenue Bonds (Caregroup) Ser. J1 |
5.00 |
7/1/2043 |
1,295,000 |
1,422,454 |
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Massachusetts Development Finance Agency, Revenue Bonds (Dana-Farber Cancer Institute Obligated Group) Ser. N |
5.00 |
12/1/2041 |
1,000,000 |
1,096,000 |
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Massachusetts Development Finance Agency, Revenue Bonds (Dana-Farber Cancer Institute Obligated Group) Ser. N |
5.00 |
12/1/2046 |
2,000,000 |
2,170,200 |
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Massachusetts Development Finance Agency, Revenue Bonds (Linden Ponds Obligated Group) |
5.13 |
11/15/2046 |
1,500,000 |
c |
1,270,770 |
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Massachusetts Development Finance Agency, Revenue Bonds (North Hill Communities Obligated Group) Ser. A |
6.50 |
11/15/2023 |
2,000,000 |
c,d |
2,391,420 |
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Massachusetts Development Finance Agency, Revenue Bonds (Seven Hills Foundation & Affiliates Obligated Group) Ser. A |
5.00 |
9/1/2045 |
1,500,000 |
1,421,550 |
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Massachusetts Development Finance Agency, Revenue Bonds (Suffolk University) |
5.00 |
7/1/2030 |
1,000,000 |
1,005,750 |
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Massachusetts Development Finance Agency, Revenue Bonds (The Children's Hospital Corp. Obligated Group) Ser. P |
5.00 |
10/1/2033 |
4,000,000 |
4,441,560 |
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Massachusetts Development Finance Agency, Revenue Bonds (UMass Boston Student Housing Project) |
5.00 |
10/1/2048 |
1,000,000 |
1,000,070 |
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Massachusetts Development Finance Agency, Revenue Bonds (Worcester Polytechnic Institute) |
5.00 |
9/1/2049 |
1,500,000 |
1,630,260 |
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Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Atrius Health Obligated Group) Ser. A |
4.00 |
6/1/2049 |
1,500,000 |
1,444,890 |
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Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Berklee College of Music) |
5.00 |
10/1/2046 |
750,000 |
805,432 |
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Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Beth Israel Lahey Health Obligated Group) |
5.00 |
7/1/2032 |
500,000 |
584,390 |
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10
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Description |
Coupon
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Maturity
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Principal
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Value ($) |
|||||
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Long-Term Municipal Investments - 98.6% (continued) |
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Massachusetts - 97.2% (continued) |
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Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Boston College) Ser. T |
5.00 |
7/1/2042 |
1,000,000 |
1,159,540 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Boston Medical Center Obligated Group) Ser. E |
5.00 |
7/1/2037 |
1,000,000 |
1,082,410 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Brandeis University) Ser. S1 |
5.00 |
10/1/2035 |
1,000,000 |
1,188,750 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Caregroup) Ser. I |
5.00 |
7/1/2037 |
1,500,000 |
1,649,775 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (College of the Holy Cross) Ser. A |
5.00 |
9/1/2041 |
800,000 |
915,168 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Lahey Clinic Obligated Group) Ser. F |
5.00 |
8/15/2040 |
2,000,000 |
2,172,280 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (NewBridge Charles) |
5.00 |
10/1/2057 |
1,500,000 |
c |
1,359,570 |
||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (NewBridge Charles) |
5.00 |
10/1/2047 |
1,000,000 |
c |
929,590 |
||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Orchard Cove Obligated Group) |
5.00 |
10/1/2049 |
700,000 |
696,759 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Partners Healthcare System) |
5.00 |
7/1/2047 |
1,500,000 |
1,658,850 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Partners Healthcare System) Ser. O2 |
5.00 |
7/1/2025 |
4,070,000 |
d |
4,895,518 |
||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (South Shore Hospital) Ser. I |
5.00 |
7/1/2041 |
1,000,000 |
1,071,100 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Suffolk University Project) |
5.00 |
7/1/2036 |
450,000 |
472,775 |
|||||
11
STATEMENT OF INVESTMENTS (continued)
|
Description |
Coupon
|
Maturity
|
Principal
|
Value ($) |
|||||
|
Long-Term Municipal Investments - 98.6% (continued) |
|||||||||
|
Massachusetts - 97.2% (continued) |
|||||||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Suffolk University) |
5.00 |
7/1/2035 |
1,000,000 |
1,045,440 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Suffolk University) |
5.00 |
7/1/2036 |
755,000 |
786,091 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Suffolk University) Ser. A |
4.00 |
7/1/2045 |
1,250,000 |
1,097,600 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (The Broad Institute) |
5.00 |
4/1/2037 |
1,000,000 |
1,183,750 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Umass Memorial Health Care Obligated Group) |
5.00 |
7/1/2031 |
1,000,000 |
1,078,590 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Umass Memorial Health Care Obligated Group) Ser. H |
5.50 |
7/1/2031 |
25,000 |
25,718 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Umass Memorial Health Care Obligated Group) Ser. I |
5.00 |
7/1/2046 |
1,000,000 |
1,022,910 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (WGBH Educational Foundation) |
5.00 |
1/1/2040 |
1,000,000 |
1,157,820 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding, Ser. A |
5.00 |
7/1/2044 |
1,000,000 |
1,077,020 |
|||||
|
Massachusetts Development Finance Agency, Revenue Bonds, Refunding, Ser. H1 |
5.00 |
7/1/2033 |
500,000 |
547,735 |
|||||
|
Massachusetts Educational Financing Authority, Revenue Bonds, Issue I |
5.00 |
1/1/2025 |
1,500,000 |
1,655,190 |
|||||
|
Massachusetts Educational Financing Authority, Revenue Bonds, Refunding, Ser. K |
5.25 |
7/1/2029 |
865,000 |
909,582 |
|||||
|
Massachusetts Port Authority, Revenue Bonds, Refunding, Ser. A |
5.00 |
7/1/2042 |
1,000,000 |
1,129,500 |
|||||
|
Massachusetts Port Authority, Revenue Bonds, Refunding, Ser. A |
5.00 |
7/1/2035 |
2,055,000 |
2,378,745 |
|||||
|
Massachusetts Port Authority, Revenue Bonds, Refunding, Ser. B |
4.00 |
7/1/2046 |
2,500,000 |
2,550,825 |
|||||
12
|
Description |
Coupon
|
Maturity
|
Principal
|
Value ($) |
|||||
|
Long-Term Municipal Investments - 98.6% (continued) |
|||||||||
|
Massachusetts - 97.2% (continued) |
|||||||||
|
Massachusetts Port Authority, Revenue Bonds, Refunding, Ser. B |
5.00 |
7/1/2027 |
4,475,000 |
4,505,788 |
|||||
|
Massachusetts Port Authority, Revenue Bonds, Refunding, Ser. B |
5.00 |
7/1/2025 |
1,500,000 |
1,617,645 |
|||||
|
Massachusetts Port Authority, Revenue Bonds, Refunding, Ser. C |
5.00 |
7/1/2025 |
1,000,000 |
1,143,800 |
|||||
|
Massachusetts Port Authority, Revenue Bonds, Refunding, Ser. C |
5.00 |
7/1/2044 |
2,000,000 |
2,311,120 |
|||||
|
Massachusetts Port Authority, Revenue Bonds, Ser. B |
5.00 |
7/1/2045 |
1,000,000 |
1,089,230 |
|||||
|
Massachusetts School Building Authority, Revenue Bonds, Refunding, Ser. C |
5.00 |
8/15/2037 |
3,000,000 |
3,477,300 |
|||||
|
Massachusetts Transportation Fund, Revenue Bonds, Ser. A |
5.00 |
6/1/2041 |
1,500,000 |
1,726,065 |
|||||
|
Massachusetts Transportation Trust Fund Metropolitan Highway System, Revenue Bonds, Refunding, Ser. A |
5.00 |
1/1/2034 |
2,000,000 |
2,434,100 |
|||||
|
Metropolitan Boston Transit Parking Corp., Revenue Bonds, Refunding |
5.00 |
7/1/2024 |
1,320,000 |
1,378,714 |
|||||
|
Springfield Water & Sewer Commission, Revenue Bonds, Ser. C |
5.00 |
4/15/2037 |
650,000 |
769,359 |
|||||
|
University of Massachusetts Building Authority, Revenue Bonds, Ser. 1 |
5.00 |
11/1/2050 |
1,220,000 |
1,473,321 |
|||||
|
119,430,607 |
|||||||||
|
U.S. Related - 1.4% |
|||||||||
|
Children's Trust Fund, Revenue Bonds, Refunding, Ser. A |
0.00 |
5/15/2050 |
5,000,000 |
b |
686,650 |
||||
13
STATEMENT OF INVESTMENTS (continued)
|
Description |
Coupon
|
Maturity
|
Principal
|
Value ($) |
|||||
|
Long-Term Municipal Investments - 98.6% (continued) |
|||||||||
|
U.S. Related - 1.4% (continued) |
|||||||||
|
Puerto Rico Highway & Transportation Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. CC |
5.25 |
7/1/2033 |
1,000,000 |
1,073,980 |
|||||
|
1,760,630 |
|||||||||
|
Total Investments (cost $118,942,987) |
98.6% |
121,191,237 |
|||||||
|
Cash and Receivables (Net) |
1.4% |
1,688,308 |
|||||||
|
Net Assets |
100.0% |
122,879,545 |
|||||||
a Variable rate security—rate shown is the interest rate in effect at period end.
b Security issued with a zero coupon. Income is recognized through the accretion of discount.
c Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2020, these securities were valued at $5,951,350 or 4.84% of net assets.
d 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.
† Based on net assets.
See notes to financial statements.
14
STATEMENT OF INVESTMENTS
|
Summary of Abbreviations (Unaudited) |
|||
|
ABAG |
Association of Bay Area Governments |
ACA |
American Capital Access |
|
AGC |
ACE Guaranty Corporation |
AGIC |
Asset Guaranty Insurance Company |
|
AMBAC |
American Municipal Bond Assurance Corporation |
ARRN |
Adjustable Rate Receipt Notes |
|
BAN |
Bond Anticipation Notes |
BPA |
Bond Purchase Agreement |
|
CIFG |
CDC Ixis Financial Guaranty |
COP |
Certificate of Participation |
|
CP |
Commercial Paper |
DRIVERS |
Derivative Inverse Tax-Exempt Receipts |
|
EDR |
Economic Development Revenue |
EIR |
Environmental Improvement Revenue |
|
EFFE |
Effective Federal Funds Rate |
EURIBOR |
Euro Interbank Offered Rate |
|
FCPR |
Farm Credit Prime Rate |
FGIC |
Financial Guaranty Insurance Company |
|
FHA |
Federal Housing Administration |
FHLB |
Federal Home Loan Bank |
|
FHLMC |
Federal Home Loan Mortgage Corporation |
FNMA |
Federal National Mortgage Association |
|
GAN |
Grant Anticipation Notes |
GIC |
Guaranteed Investment Contract |
|
GNMA |
Government National Mortgage Association |
GO |
General Obligation |
|
HR |
Hospital Revenue |
IDB |
Industrial Development Board |
|
IDC |
Industrial Development Corporation |
IDR |
Industrial Development Revenue |
|
LIBOR |
London Interbank Offered Rate |
LIFERS |
Long Inverse Floating Exempt Receipts |
|
LOC |
Letter of Credit |
LOR |
Limited Obligation Revenue |
|
LR |
Lease Revenue |
NAN |
Note Anticipation Notes |
|
MERLOTS |
Municipal Exempt Receipts Liquidity Option Tender |
MFHR |
Multi-Family Housing Revenue |
|
MFMR |
Multi-Family Mortgage Revenue |
MUNIPSA |
Securities Industry and Financial Markets Association Municipal Swap Index Yield |
|
PCR |
Pollution Control Revenue |
P-FLOATS |
Puttable Floating Option Tax-Exempt Receipts |
|
PILOT |
Payment in Lieu of Taxes |
PRIME |
Prime Lending Rate |
|
PUTTERS |
Puttable Tax-Exempt Receipts |
OBFR |
Overnight Bank Funding Rate |
|
RAC |
Revenue Anticipation Certificates |
RAN |
Revenue Anticipation Notes |
|
RAW |
Revenue Anticipation Warrants |
RIB |
Residual Interest Bonds |
|
ROCS |
Reset Options Certificates |
RRR |
Resources Recovery Revenue |
|
SAAN |
State Aid Anticipation Notes |
SBPA |
Standby Bond Purchase Agreement |
|
SFHR |
Single Family Housing Revenue |
SFMR |
Single Family Mortgage Revenue |
|
SOFR |
Secured Overnight Financing Rate |
SONYMA |
State of New York Mortgage Agency |
|
SPEARS |
Short Puttable Exempt Adjustable Receipts |
SWDR |
Solid Waste Disposal Revenue |
|
TAN |
Tax Anticipation Notes |
TAW |
Tax Anticipation Warrants |
|
TRAN |
Tax and Revenue Anticipation Notes |
XLCA |
XL Capital Assurance |
See notes to financial statements.
15
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
Value |
|
|
Assets ($): |
|
|
|
|
||
|
Investments in securities—See Statement of Investments |
118,942,987 |
|
121,191,237 |
|
||
|
Cash |
|
|
|
|
332,045 |
|
|
Interest receivable |
|
1,444,188 |
|
|||
|
Receivable for shares of Beneficial Interest subscribed |
|
54,375 |
|
|||
|
Prepaid expenses |
|
|
|
|
27,391 |
|
|
|
|
|
|
|
123,049,236 |
|
|
Liabilities ($): |
|
|
|
|
||
|
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
|
71,591 |
|
|||
|
Payable for shares of Beneficial Interest redeemed |
|
26,055 |
|
|||
|
Trustees’ fees and expenses payable |
|
1,036 |
|
|||
|
Other accrued expenses |
|
|
|
|
71,009 |
|
|
|
|
|
|
|
169,691 |
|
|
Net Assets ($) |
|
|
122,879,545 |
|
||
|
Composition of Net Assets ($): |
|
|
|
|
||
|
Paid-in capital |
|
|
|
|
120,270,046 |
|
|
Total distributable earnings (loss) |
|
|
|
|
2,609,499 |
|
|
Net Assets ($) |
|
|
122,879,545 |
|
||
|
Net Asset Value Per Share |
Class A |
Class C |
Class Z |
|
|
Net Assets ($) |
21,847,356 |
109,060 |
100,923,129 |
|
|
Shares Outstanding |
1,931,815 |
9,639 |
8,924,060 |
|
|
Net Asset Value Per Share ($) |
11.31 |
11.31 |
11.31 |
|
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
16
STATEMENT OF OPERATIONS
Year Ended April 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
|
||
|
Interest Income |
|
|
4,370,582 |
|
||
|
Expenses: |
|
|
|
|
||
|
Management fee—Note 3(a) |
|
|
745,428 |
|
||
|
Shareholder servicing costs—Note 3(c) |
|
|
148,766 |
|
||
|
Professional fees |
|
|
99,105 |
|
||
|
Registration fees |
|
|
44,060 |
|
||
|
Chief Compliance Officer fees—Note 3(c) |
|
|
12,994 |
|
||
|
Trustees’ fees and expenses—Note 3(d) |
|
|
10,882 |
|
||
|
Prospectus and shareholders’ reports |
|
|
9,537 |
|
||
|
Loan commitment fees—Note 2 |
|
|
3,738 |
|
||
|
Custodian fees—Note 3(c) |
|
|
3,329 |
|
||
|
Distribution fees—Note 3(b) |
|
|
1,944 |
|
||
|
Miscellaneous |
|
|
31,353 |
|
||
|
Total Expenses |
|
|
1,111,136 |
|
||
|
Less—reduction in fees due to earnings credits—Note 3(c) |
|
|
(3,329) |
|
||
|
Net Expenses |
|
|
1,107,807 |
|
||
|
Investment Income—Net |
|
|
3,262,775 |
|
||
|
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
|
||||
|
Net realized gain (loss) on investments |
977,067 |
|
||||
|
Net change in unrealized appreciation (depreciation) on investments |
(3,363,706) |
|
||||
|
Net Realized and Unrealized Gain (Loss) on Investments |
|
|
(2,386,639) |
|
||
|
Net Increase in Net Assets Resulting from Operations |
|
876,136 |
|
|||
|
|
|
|
|
|
|
|
|
See notes to financial statements. |
||||||
17
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
Year Ended April 30, |
|||||
|
|
|
|
|
2020 |
|
2019 |
|
||
|
Operations ($): |
|
|
|
|
|
|
|
|
|
|
Investment income—net |
|
|
3,262,775 |
|
|
|
3,749,865 |
|
|
|
Net realized gain (loss) on investments |
|
977,067 |
|
|
|
518,380 |
|
||
|
Net change in unrealized appreciation
|
|
(3,363,706) |
|
|
|
2,386,712 |
|
||
|
Net Increase (Decrease) in Net Assets
|
876,136 |
|
|
|
6,654,957 |
|
|||
|
Distributions ($): |
|
||||||||
|
Distributions to shareholders: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
(520,159) |
|
|
|
(601,610) |
|
|
|
Class C |
|
|
(3,281) |
|
|
|
(5,456) |
|
|
|
Class Z |
|
|
(2,731,151) |
|
|
|
(3,141,509) |
|
|
|
Total Distributions |
|
|
(3,254,591) |
|
|
|
(3,748,575) |
|
|
|
Beneficial Interest Transactions ($): |
|
||||||||
|
Net proceeds from shares sold: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
1,819,045 |
|
|
|
1,379,916 |
|
|
|
Class C |
|
|
466 |
|
|
|
10,947 |
|
|
|
Class Z |
|
|
2,801,669 |
|
|
|
3,034,223 |
|
|
|
Distributions reinvested: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
404,275 |
|
|
|
470,957 |
|
|
|
Class C |
|
|
2,325 |
|
|
|
3,944 |
|
|
|
Class Z |
|
|
2,103,068 |
|
|
|
2,351,421 |
|
|
|
Cost of shares redeemed: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
(3,351,971) |
|
|
|
(3,527,970) |
|
|
|
Class C |
|
|
(228,603) |
|
|
|
(58,468) |
|
|
|
Class Z |
|
|
(14,975,594) |
|
|
|
(12,944,439) |
|
|
|
Increase (Decrease) in Net Assets
|
(11,425,320) |
|
|
|
(9,279,469) |
|
|||
|
Total Increase (Decrease) in Net Assets |
(13,803,775) |
|
|
|
(6,373,087) |
|
|||
|
Net Assets ($): |
|
||||||||
|
Beginning of Period |
|
|
136,683,320 |
|
|
|
143,056,407 |
|
|
|
End of Period |
|
|
122,879,545 |
|
|
|
136,683,320 |
|
|
|
Capital Share Transactions (Shares): |
|
||||||||
|
Class A |
|
|
|
|
|
|
|
|
|
|
Shares sold |
|
|
154,933 |
|
|
|
121,701 |
|
|
|
Shares issued for distributions reinvested |
|
|
34,456 |
|
|
|
41,589 |
|
|
|
Shares redeemed |
|
|
(289,989) |
|
|
|
(311,084) |
|
|
|
Net Increase (Decrease) in Shares Outstanding |
(100,600) |
|
|
|
(147,794) |
|
|||
|
Class C |
|
|
|
|
|
|
|
|
|
|
Shares sold |
|
|
40 |
|
|
|
965 |
|
|
|
Shares issued for distributions reinvested |
|
|
198 |
|
|
|
348 |
|
|
|
Shares redeemed |
|
|
(19,234) |
|
|
|
(5,251) |
|
|
|
Net Increase (Decrease) in Shares Outstanding |
(18,996) |
|
|
|
(3,938) |
|
|||
|
Class Z |
|
|
|
|
|
|
|
|
|
|
Shares sold |
|
|
238,401 |
|
|
|
268,045 |
|
|
|
Shares issued for distributions reinvested |
|
|
179,226 |
|
|
|
207,655 |
|
|
|
Shares redeemed |
|
|
(1,307,159) |
|
|
|
(1,144,565) |
|
|
|
Net Increase (Decrease) in Shares Outstanding |
(889,532) |
|
|
|
(668,865) |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
See notes to financial statements. |
|||||||||
18
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 |
2020 |
2019 |
2018 |
2017 |
2016 |
|||||
|
Per Share Data ($): |
||||||||||
|
Net asset value, beginning of period |
11.51 |
11.27 |
11.48 |
11.94 |
11.69 |
|||||
|
Investment Operations: |
||||||||||
|
Investment income—neta |
.26 |
.28 |
.29 |
.29 |
.31 |
|||||
|
Net realized and unrealized
|
(.20) |
.24 |
(.21) |
(.46) |
.25 |
|||||
|
Total from Investment Operations |
.06 |
.52 |
.08 |
(.17) |
.56 |
|||||
|
Distributions: |
||||||||||
|
Dividends from investment
|
(.26) |
(.28) |
(.29) |
(.29) |
(.31) |
|||||
|
Dividends from net realized
|
− |
− |
− |
(.00)b |
− |
|||||
|
Total Distributions |
(.26) |
(.28) |
(.29) |
(.29) |
(.31) |
|||||
|
Net asset value, end of period |
11.31 |
11.51 |
11.27 |
11.48 |
11.94 |
|||||
|
Total Return (%)c |
.46 |
4.72 |
.65 |
(1.40) |
4.84 |
|||||
|
Ratios/Supplemental Data (%): |
||||||||||
|
Ratio of total expenses to
|
1.01 |
.99 |
1.00 |
.96 |
.95 |
|||||
|
Ratio of net expenses to
|
1.01 |
.99 |
.99 |
.96 |
.95 |
|||||
|
Ratio of net investment income to
|
2.22 |
2.51 |
2.47 |
2.48 |
2.64 |
|||||
|
Portfolio Turnover Rate |
16.48 |
4.67 |
10.68 |
11.70 |
12.60 |
|||||
|
Net Assets, end of period ($ x 1,000) |
21,847 |
23,396 |
24,569 |
26,487 |
34,121 |
|||||
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
See notes to financial statements.
19
FINANCIAL HIGHLIGHTS (continued)
|
Year Ended April 30, |
||||||||||
|
Class C Shares |
2020 |
2019 |
2018 |
2017 |
2016 |
|||||
|
Per Share Data ($): |
||||||||||
|
Net asset value, beginning of period |
11.52 |
11.27 |
11.49 |
11.95 |
11.70 |
|||||
|
Investment Operations: |
||||||||||
|
Investment income—neta |
.15 |
.18 |
.19 |
.20 |
.22 |
|||||
|
Net realized and unrealized
|
(.22) |
.25 |
(.22) |
(.46) |
.24 |
|||||
|
Total from Investment Operations |
(.07) |
.43 |
(.03) |
(.26) |
.46 |
|||||
|
Distributions: |
||||||||||
|
Dividends from investment
|
(.14) |
(.18) |
(.19) |
(.20) |
(.21) |
|||||
|
Dividends from net realized
|
− |
− |
− |
(.00)b |
− |
|||||
|
Total Distributions |
(.14) |
(.18) |
(.19) |
(.20) |
(.21) |
|||||
|
Net asset value, end of period |
11.31 |
11.52 |
11.27 |
11.49 |
11.95 |
|||||
|
Total Return (%)c |
(.64) |
3.83 |
(.22) |
(2.27) |
4.01 |
|||||
|
Ratios/Supplemental Data (%): |
||||||||||
|
Ratio of total expenses to
|
1.99 |
1.93 |
1.81 |
1.76 |
1.75 |
|||||
|
Ratio of net expenses to
|
1.99 |
1.93 |
1.80 |
1.76 |
1.75 |
|||||
|
Ratio of net investment income to
|
1.27 |
1.57 |
1.63 |
1.69 |
1.84 |
|||||
|
Portfolio Turnover Rate |
16.48 |
4.67 |
10.68 |
11.70 |
12.60 |
|||||
|
Net Assets, end of period ($ x 1,000) |
109 |
330 |
367 |
1,472 |
1,478 |
|||||
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
See notes to financial statements.
20
|
Year Ended April 30, |
||||||||||
|
Class Z Shares |
2020 |
2019 |
2018 |
2017 |
2016 |
|||||
|
Per Share Data ($): |
||||||||||
|
Net asset value, beginning of period |
11.51 |
11.27 |
11.48 |
11.94 |
11.69 |
|||||
|
Investment Operations: |
||||||||||
|
Investment income—neta |
.29 |
.31 |
.31 |
.32 |
.33 |
|||||
|
Net realized and unrealized
|
(.20) |
.24 |
(.21) |
(.46) |
.25 |
|||||
|
Total from Investment Operations |
.09 |
.55 |
.10 |
(.14) |
.58 |
|||||
|
Distributions: |
||||||||||
|
Dividends from investment
|
(.29) |
(.31) |
(.31) |
(.32) |
(.33) |
|||||
|
Dividends from net realized
|
− |
− |
− |
(.00)b |
− |
|||||
|
Total Distributions |
(.29) |
(.31) |
(.31) |
(.32) |
(.33) |
|||||
|
Net asset value, end of period |
11.31 |
11.51 |
11.27 |
11.48 |
11.94 |
|||||
|
Total Return (%) |
.69 |
4.96 |
.95 |
(1.26) |
5.07 |
|||||
|
Ratios/Supplemental Data (%): |
||||||||||
|
Ratio of total expenses to
|
.78 |
.76 |
.78 |
.73 |
.73 |
|||||
|
Ratio of net expenses to
|
.78 |
.76 |
.77 |
.72 |
.73 |
|||||
|
Ratio of net investment income to
|
2.45 |
2.74 |
2.69 |
2.72 |
2.85 |
|||||
|
Portfolio Turnover Rate |
16.48 |
4.67 |
10.68 |
11.70 |
12.60 |
|||||
|
Net Assets, end of period ($ x 1,000) |
100,923 |
112,958 |
118,120 |
125,381 |
143,453 |
|||||
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
See notes to financial statements.
21
NOTES TO FINANCIAL STATEMENTS
NOTE 1—Significant Accounting Policies:
BNY Mellon Massachusetts Fund (the “fund”) is a separate non-diversified series of BNY Mellon State Municipal Bond Funds (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering three series, including the fund. The fund’s investment objective is to seek to maximize current income exempt from federal income tax and from Massachusetts state income tax, without undue risk. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
The Company’s Board of Trustees (the “Board”) approved, effective December 31, 2019 (the “Effective Date”), the termination of the fund’s authorized Class T shares. Prior to the Effective Date, the fund did not offer such Class T shares for purchase.
Effective June 3, 2019, the fund changed its name from Dreyfus Massachusetts Fund to BNY Mellon Massachusetts Fund and the Company changed its name from Dreyfus State Municipal Bond Funds to BNY Mellon State Municipal Bond Funds. In addition, The Dreyfus Corporation, the fund’s investment adviser, changed its name to “BNY Mellon Investment Adviser, Inc.”, MBSC Securities Corporation, the fund’s distributor, changed its name to “BNY Mellon Securities Corporation” and Dreyfus Transfer, Inc., the fund’s transfer agent, changed its name to “BNY Mellon Transfer, Inc.”
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, 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 C shares automatically convert to Class A shares ten years after the date of purchase, without the imposition of a sales charge. Class Z shares are sold at net asset value per share to certain shareholders of the fund. Class Z shares generally are not available for new accounts. 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.
22
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 (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. 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.
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:
23
NOTES TO FINANCIAL STATEMENTS (continued)
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued each business day by an independent pricing service (the “Service”) approved by the Board. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Debt investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of the following: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. All of the preceding securities are generally categorized within Level 2 of the fair value hierarchy.
The Service is engaged under the general oversight of the Board.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers.
24
These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of April 30, 2020 in valuing the fund’s investments:
|
Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 -Significant Unobservable Inputs |
Total |
||
|
Assets ($) |
|||||
|
Investments in Securities;† |
|||||
|
Municipal Securities |
- |
121,191,237 |
- |
121,191,237 |
|
† See Statement of Investments for additional detailed categorizations, if any.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when issued or delayed delivery basis may be settled a month or more after the trade date.
The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund.
(c) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments,
25
NOTES TO FINANCIAL STATEMENTS (continued)
including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
(d) Dividends and distributions to shareholders: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(e) 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, 2020, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended April 30, 2020, the fund did not incur any interest or penalties.
Each tax year in the four-year period ended April 30, 2020 remains subject to examination by the Internal Revenue Service and state taxing authorities.
At April 30, 2020, the components of accumulated earnings on a tax basis were as follows: undistributed tax-exempt income $141,497, undistributed capital gains $351,777 and unrealized appreciation $2,251,241.
The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2020 and April 30, 2019 were as follows: tax-exempt income $3,254,591 and $3,748,575 respectively.
(f) New Accounting Pronouncements: Effective June 1, 2019, the fund adopted Accounting Standards Update 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium
26
Amortization On Purchased Callable Debt Securities (“ASU 2017-08”). The update shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date.
Also effective June 1, 2019, the fund adopted Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The update provides guidance that modifies certain disclosure requirements for fair value measurements. The adoption of ASU 2017-08 and ASU 2018-13 had no impact on the operations of the fund for the period ended April 30, 2020.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $927 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), a subsidiary of BNY Mellon and an affiliate of the Adviser, each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $747 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $180 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. Prior to March 11, 2020, the Citibank Credit Facility was $1.030 billion with Tranche A available in an amount equal to $830 million and Tranche B available in an amount equal to $200 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit 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, 2020, 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 Adviser, 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, 2020, the Distributor retained $5 from commissions earned on sales of the fund’s Class A shares.
27
NOTES TO FINANCIAL STATEMENTS (continued)
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended April 30, 2020, Class C shares were charged $1,944 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, 2020, Class A and Class C shares were charged $58,702 and $648, respectively, pursuant to the Shareholder Services Plan.
Under the Shareholder Services Plan, Class Z shares reimburse the Distributor at an amount not to exceed an annual rate of .25% of the value of Class Z shares’ average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding Class Z shares and providing reports and other information, and services related to the maintenance of shareholder accounts. During the period ended April 30, 2020, Class Z shares were charged $38,537 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, if any, as an expense offset in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended April 30, 2020, the fund was charged $30,512 for transfer agency services. These fees are included in Shareholder servicing costs in the Statement of Operations.
28
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended April 30, 2020, the fund was charged $3,329 pursuant to the custody agreement. These fees were offset by earnings credits of $3,329.
The fund compensates The Bank of New York Mellon under a shareholder redemption draft processing agreement for providing certain services related to the fund’s check writing privilege. During the period ended April 30, 2020, the fund was charged $1,576 pursuant to the agreement, which is included in Shareholder servicing costs in the Statement of Operations.
During the period ended April 30, 2020, the fund was charged $12,994 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: management fees of $56,322, Distribution Plan fees of $68, Shareholder Services Plan fees of $4,533, custodian fees of $1,103, Chief Compliance Officer fees of $4,438 and transfer agency fees of $5,127.
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds 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, 2020, amounted to $22,053,557 and $32,500,463, respectively.
At April 30, 2020, the cost of investments for federal income tax purposes was $118,939,996; accordingly, accumulated net unrealized appreciation on investments was $2,251,241, consisting of $4,850,343 gross unrealized appreciation and $2,599,102 gross unrealized depreciation.
29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of BNY Mellon Massachusetts Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of BNY Mellon Massachusetts Fund (the “Fund”) (one of the funds constituting BNY Mellon State Municipal Bond Funds), including the statement of investments, as of April 30, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting BNY Mellon State Municipal Bond Funds) at April 30, 2020, 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 its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of April 30, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the BNY Mellon Family of Funds since at least 1957, but we are unable to determine the specific year.
New York, New York
June 25, 2020
30
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, 2020 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 2020 calendar year on Form 1099-DIV which will be mailed in early 2021.
31
BOARD MEMBERS INFORMATION (Unaudited)
INDEPENDENT BOARD MEMBERS
Joseph S. DiMartino (76)
Chairman of the Board (1995)
Principal Occupation During Past 5 Years:
· Director or Trustee of funds in the BNY Mellon Family of Funds and certain other entities (as described in the fund’s Statement of Additional Information) (1995-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ, Inc., a public company providing professional business services, products and solutions, Director (1997-Present)
No. of Portfolios for which Board Member Serves: 114
———————
Francine J. Bovich (68)
Board Member (2012)
Principal Occupation During Past 5 Years:
· Trustee, The Bradley Trusts, private trust funds (2011-Present)
Other Public Company Board Memberships During Past 5 Years:
· Annaly Capital Management, Inc., a real estate investment trust, Director (2014-Present)
No. of Portfolios for which Board Member Serves: 68
———————
Peggy C. Davis (77)
Board Member (1990)
Principal Occupation During Past 5 Years:
· Shad Professor of Law, New York University School of Law (1983-present)
No. of Portfolios for which Board Member Serves: 40
———————
Nathan Leventhal (77)
Board Member (1989)
Principal Occupation During Past 5 Years:
· President Emeritus of Lincoln Center for the Performing Arts (2001-Present)
· President of the Palm Beach Opera (2016-Present)
Other Public Company Board Memberships During Past 5 Years:
· Movado Group, Inc., a public company that designs, markets and distributes watches, Director (2003-Present)
No. of Portfolios for which Board Member Serves: 46
———————
32
Robin A. Melvin (56)
Board Member (2012)
Principal Occupation During Past 5 Years:
· Co-chairman, Mentor Illinois, a non-profit organization dedicated to increasing the quantity and quality of mentoring services in Illinois (2014-Present); Board member (2013-Present)
No. of Portfolios for which Board Member Serves: 92
———————
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 BNY Mellon Investment Adviser, Inc. 240 Greenwich Street, New York, New York 10286. Additional information about the Board Member is available in the fund’s Statement of Additional Information which can be obtained from the Adviser free of charge by calling this toll free number: 1-800-373-9387.
Clifford L. Alexander, Jr., Emeritus Board Member
Diane Dunst, Emeritus Board Member
Ernest Kafka, Emeritus Board Member
33
OFFICERS OF THE FUND (Unaudited)
RENEE LAROCHE-MORRIS, President since May 2019.
President and a director of BNY Mellon Investment Adviser, Inc. since January 2018. She is an officer of 62 investment companies (comprised of 114 portfolios) managed by the Adviser. She is 48 years old and has been an employee of BNY Mellon since 2003.
JAMES WINDELS, Treasurer since November 2001.
Director-BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 61 years old and has been an employee of the Adviser since April 1985.
BENNETT A. MACDOUGALL, Chief Legal Officer since October 2015.
Chief Legal Officer of the Adviser and Associate General Counsel and Managing Director of BNY Mellon since June 2015; Director and Associate General Counsel of Deutsche Bank–Asset & Wealth Management Division from June 2005 to June 2015, and as Chief Legal Officer of Deutsche Investment Management Americas Inc. from June 2012 to May 2015. He is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 48 years old and has been an employee of the Adviser since June 2015.
DAVID DIPETRILLO, Vice President since May 2019.
Head of North America Product, BNY Mellon Investment Management since January 2018, Director of Product Strategy, BNY Mellon Investment Management from January 2016 to December 2017; Head of US Retail Product and Channel Marketing, BNY Mellon Investment Management from January 2014 to December 2015. He is an officer of 63 investment companies (comprised of 122 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 42 years old and has been an employee of BNY Mellon since 2005.
JAMES BITETTO, Vice President since August 2005 and Secretary since February 2018.
Senior Managing Counsel of BNY Mellon since December 2019; Managing Counsel of BNY Mellon from April 2014 to December 2019; Secretary of the Adviser, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of the Adviser since December 1996.
SONALEE CROSS, Vice President and Assistant Secretary since March 2018.
Counsel of BNY Mellon since October 2016; Associate at Proskauer Rose LLP from April 2016 to September 2016; Attorney at EnTrust Capital from August 2015 to February 2016; Associate at Sidley Austin LLP from September 2013 to August 2015. She is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 32 years old and has been an employee of the Adviser since October 2016.
DEIRDRE CUNNANE, Vice President and Assistant Secretary since March 2019.
Counsel of BNY Mellon since August 2018; Senior Regulatory Specialist at BNY Mellon Investment Management Services from February 2016 to August 2018; Trustee Associate at BNY Mellon Trust Company (Ireland) Limited from August 2013 to February 2016. She is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 29 years old and has been an employee of the Adviser since August 2018.
SARAH S. KELLEHER, Vice President and Assistant Secretary since April 2014.
Managing Counsel of BNY Mellon since December 2017, Senior Counsel of BNY Mellon from March 2013 to December 2017. She is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 44 years old and has been an employee of the Adviser since March 2013.
JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.
Senior Managing Counsel of BNY Mellon, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 54 years old and has been an employee of the Adviser since October 1990.
PETER M. SULLIVAN, Vice President and Assistant Secretary since March 2019.
Managing Counsel of BNY Mellon, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 52 years old and has been an employee of the Adviser since April 2004.
34
AMANDA QUINN, Vice President and Assistant Secretary since March 2020.
Counsel of BNY Mellon since June 2019; Regulatory Administration Manager at BNY Mellon Investment Management Services from September 2018 to May 2019; Senior Regulatory Specialist at BNY Mellon Investment Management Services from April 2015 to August 2018. She is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 35 years old and has been an employee of the Adviser since June 2019.
NATALYA ZELENSKY, Vice President and Assistant Secretary since March 2017.
Managing Counsel of BNY Mellon since December 2019; Counsel of BNY Mellon from May 2016 to December 2019; Attorney at Wildermuth Endowment Strategy Fund/Wildermuth Advisory, LLC from November 2015 to May 2016 and Assistant General Counsel at RCS Advisory Services from July 2014 to November 2015. She is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 34 years old and has been an employee of the Adviser since May 2016.
GAVIN C. REILLY, Assistant Treasurer since December 2005.
Tax Manager-BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 51 years old and has been an employee of the Adviser since April 1991.
ROBERT S. ROBOL, Assistant Treasurer since August 2005.
Senior Accounting Manager-BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 56 years old and has been an employee of the Adviser since October 1988.
ROBERT SALVIOLO, Assistant Treasurer since July 2007.
Senior Accounting Manager–BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of the Adviser since June 1989.
ROBERT SVAGNA, Assistant Treasurer since August 2005.
Senior Accounting Manager–BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of the Adviser since November 1990.
JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.
Chief Compliance Officer of the Adviser, the BNY Mellon Family of Funds and BNY Mellon Funds Trust (63 investment companies, comprised of 137 portfolios). He is 62 years old and has served in various capacities with the Adviser since 1980, including manager of the firm’s Fund Accounting Department from 1997 through October 2001.
CARIDAD M. CAROSELLA, Anti-Money Laundering Compliance Officer since January 2016.
Anti-Money Laundering Compliance Officer of the BNY Mellon Family of Funds and BNY Mellon Funds Trust since January 2016; from May 2015 to December 2015, Interim Anti-Money Laundering Compliance Officer of the BNY Mellon Family of Funds and BNY Mellon Funds Trust and the Distributor; from January 2012 to May 2015, AML Surveillance Officer of the Distributor. She is an officer of 57 investment companies (comprised of 138 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 51 years old and has been an employee of the Distributor since 1997.
35
NOTES
36
NOTES
37
BNY Mellon State Municipal Bond Funds, BNY Mellon Massachusetts Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
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Ticker Symbols: |
Class A: PSMAX Class C: PCMAX Class Z: PMAZX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@bnymellon.com
Internet Information can be viewed online or downloaded at www.bnymellonim.com/us
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-PORT. The fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
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© 2020 BNY Mellon Securities Corporation
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BNY Mellon State Municipal Bond Funds, BNY Mellon Pennsylvania Fund
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ANNUAL REPORT April 30, 2020 |
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Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.bnymellonim.com/us and sign up for eCommunications. It’s simple and only takes a few minutes. |
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The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
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Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
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BNY Mellon Investment Adviser, Inc. |
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With Those of Other Funds |
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Public Accounting Firm |
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FOR MORE INFORMATION
Back Cover
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The Fund |
A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.
Dear Shareholder:
We are pleased to present this annual report for BNY Mellon Pennsylvania Fund (formerly, Dreyfus Pennsylvania Fund), covering the 12-month period from May 1, 2019 through April 30, 2020. 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.
Early in the reporting period, equity markets benefited from the U.S. Federal Reserve’s (the “Fed”) accommodative interest rate policy. Trade tensions between the U.S. and China flared periodically, disrupting markets, but the pace of U.S. economic growth remained steady, and stocks rose in mid-2019. Volatility returned in the later summer and early fall, when investors grew concerned about slowing global growth, leading the Fed to cut the federal funds rate in July, September and October 2019. The rate cuts helped to support stock prices, which rallied through the end of the calendar year. The announcement of a “phase one” trade deal between the U.S. and China also worked to bolster valuations. Early in 2020, concerns about COVID-19 roiled markets, compounded by an oil price war between Saudi Arabia and Russia. Stocks posted historic losses in March 2020 but regained some ground in April.
Fixed-income markets benefited from Fed interest rate cuts and from investor concerns about an economic slowdown. Responding to global sluggishness, the Fed reduced rates three times in 2019, which worked to bolster valuations of some fixed income instruments. However, as stocks subsequently rallied, Treasury prices declined, and rates across much of the yield curve rose until early in 2020, when the threat posed by COVID-19 began to emerge. A flight to quality ensued, and rates fell significantly. March 2020 brought high volatility and risk-asset spreads widened. The Fed cut rates twice in March, and the government launched a large stimulus package. In April 2020, bond prices began to recover some of their prior losses.
The near-term outlook for the U.S. will be challenging, as the country continues to face COVID-19. However, we believe that once the economic effects have been mitigated, the economy will rebound. As always, we will monitor relevant data for any signs of a change. We encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
May 15, 2020
2
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from May 1, 2019 through April 30, 2020, as provided by Daniel Rabasco and Thomas Casey, Portfolio Managers
Market and Fund Performance Overview
For the 12-month period ended April 30, 2020, Class A shares of BNY Mellon Pennsylvania Fund (formerly, Dreyfus Pennsylvania Fund), a series of BNY Mellon State Municipal Bond Funds, produced a total return of 0.55%, Class C shares returned -0.22% and Class Z shares returned 0.82%.1 In comparison, the Bloomberg Barclays U.S. Municipal Bond Index (the “Index”), the fund’s benchmark index, which is comprised of bonds issued nationally and not solely within Pennsylvania, achieved a total return of 2.16% for the same period.2
Municipal bonds encountered turmoil during the reporting period due to the spread of the COVID-19 virus and efforts to contain it. The fund underperformed the Index, mainly due to sector allocation and security selection.
The Fund’s Investment Approach
The fund seeks to maximize current income exempt from federal income tax and from Pennsylvania state income tax, without undue risk. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in municipal bonds that provide income exempt from federal and Pennsylvania state income taxes. The fund invests at least 70% of its assets in municipal bonds rated, at the time of purchase, investment grade (i.e., Baa/BBB or higher) or the unrated equivalent as determined by BNY Mellon Investment Adviser, Inc. For additional yield, the fund may invest up to 30% of its assets in municipal bonds rated below investment grade (“high yield” or “junk” bonds) or the unrated equivalent as determined by BNY Mellon Investment Adviser, Inc. The dollar-weighted average maturity of the fund’s portfolio normally exceeds ten years, but the fund may invest without regard to maturity.
The fund’s portfolio managers focus on identifying undervalued sectors and securities and minimize the use of interest rate forecasting. The portfolio managers select municipal bonds for the fund’s portfolio by using fundamental credit analysis to estimate the relative value and attractiveness of various sectors and securities and to exploit pricing inefficiencies in the municipal bond market, and by actively trading among various sectors, such as pre-refunded, general obligation and revenue, based on their apparent relative values. The fund seeks to invest in several of these sectors.
COVID-19 Concerns and Supply-Demand Factors Drove Municipal Bonds
Through most of the reporting period, the municipal bond market benefited from strong demand resulting from concerns about domestic economic growth. Demand was also driven by investors in states with high income tax rates. These investors moved into municipal bonds as a way to reduce their federal income tax liability, which rose as a result of the cap on the federal deductibility of state and local taxes in the Tax Cuts and Jobs Act of 2017.
Actions by the Federal Reserve (the “Fed”) midway through the period, including three rate cuts, also helped performance in the municipal bond market. This contributed to a decline in yields across the municipal bond yield curve, though investors largely favored longer-term issues, causing the municipal bond yield curve to flatten.
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
Performance of the market was also assisted by a manageable supply of new bonds. Supply increased somewhat during the reporting period as low interest rates led issuers to seek to capture favorable financing.
The municipal bond market continued to perform well early in 2020, until the emergence of the COVID-19 crisis, which resulted in turmoil and hindered returns, particularly in March 2020. Actions by the Fed, including two emergency rate cuts in March 2020, provided some support to the municipal bond market, but technical supply and demand factors became the predominant drivers.
Though the municipal bond market often benefits from economic uncertainty, in this environment that was not the case. Fears of widespread economic damage due to COVID-19 caused investors to shift out of the municipal bond market, resulting in large outflows from municipal bond mutual funds. In a normal market, broker-dealers would step in to buy municipal bonds. But a decline in the municipal bond market, combined with a rally in the Treasury market, prevented broker-dealers from hedging their municipal bond purchases by shorting Treasuries, as they normally do.
In addition, the municipal bond market was hurt by the inability of large investors to capitalize on the volatility. As municipal bond yields rose, insurance companies and other large investors were expected to step in, but since there was also a lack of liquidity in corporate bonds, which normally would have financed their municipal bond purchases, these investors were hindered by their inability to act. As a result, the municipal market yield spreads rose significantly, weakening performance.
Fundamentals in the municipal bond market generally remained healthy during the reporting period. Steady but slower economic growth through most of the period supported tax revenues, fiscal balances and “rainy day” funds.
Pennsylvania has addressed its budget problems though under pension obligations remain a longer term challenge. While the state has not been hit as hard by COVID-19 as some other states in the Northeast, the health care and education sectors could be areas of credit concern.
Sector Allocation and Security Selection Drove Fund Results
The fund’s relative performance was hindered by its asset allocation and securities selection strategies. An overweight to revenue bonds, and to health care and special tax in particular, detracted from results. An overweight to BBB rated bonds also contributed negatively to returns. Security selection, especially in education, health care and special tax segments, was disadvantageous as well.
On the other hand, the fund’s performance was aided by its longer duration versus the benchmark. Although municipal bond yield spreads widened versus Treasury yields, municipal bond yields were generally down, indicating that prices increased, and this benefited the fund because of its longer duration. The fund did not use derivatives during the reporting period.
Focused on Quality
We anticipate that the municipal bond market will remain challenged, but the Coronavirus Aid Relief and Security (CARES) Act may provide some relief to the economy, and the Fed’s
4
bond purchasing program may help the market return to normal. However, uncertainty about the economic impact of COVID-19 is likely to continue over the near term. Additional support from Congress in the form of a Phase 4 relief package may boost investor confidence in the municipal bond market and also encourage broker-dealers to return as intermediaries. In the current environment, credit analysis will remain more important than ever. We will continue to emphasize higher-quality bonds, and in the revenue bond sector, we will continue to look for bonds with sound fundamentals and ample liquidity.
May 15, 2020
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, and some income may be subject to the federal alternative minimum tax (AMT) for certain investors. Capital gains, if any, are taxable. The fund’s returns reflect the absorption of certain fund expenses by BNY Mellon Investment Advisor, Inc. pursuant to an agreement in effect through August 30, 2020, at which time it may be extended, terminated, or modified. The fund performance returns stated reflect the fee waiver, without which, the returns would have been lower.
2 Source: Lipper Inc. — The Bloomberg Barclays U.S. Municipal Bond Index covers the U.S. dollar-denominated, long-term, tax-exempt bond market. Investors cannot invest directly in any index.
Bonds are subject generally to interest-rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
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.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund's exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
5
FUND PERFORMANCE (Unaudited)
Comparison of change in value of $10,000 investment in Class A shares, Class C shares and Class Z shares of BNY Mellon State Municipal Bond Funds, BNY Mellon Pennsylvania Fund with a hypothetical investment of $10,000 in the Bloomberg Barclays U.S. Municipal Bond Index (the “Index”).
† Source: Lipper Inc.
Past performance is not predictive of future performance.
The above graph compares a hypothetical $10,000 investment made in each of the Class A, Class C and Class Z shares of BNY Mellon State Municipal Bond Funds, BNY Mellon Pennsylvania Fund on 4/30/10 to a hypothetical investment of $10,000 made in the Index on that date. All dividends and capital gain distributions are reinvested.
The fund’s 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. The Index is not limited to investments principally in Pennsylvania municipal obligations. The Index, unlike the fund, covers the U.S. dollar-denominated long-term tax-exempt bond market. 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
† The maximum contingent deferred sales charge for Class C shares is 1% for shares redeemed within one year of the date of purchase.
The performance data quoted represents past performance, which is no guarantee of future results. Share price and investment return fluctuate and an investor’s shares may be worth more or less than original cost upon redemption. Current performance may be lower or higher than the performance quoted. Go to www.bnymellonim.com/us for the fund’s most recent month-end returns.
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. In addition to the performance of Class A shares shown with and without a maximum sales charge, the fund’s performance shown in the table takes into account all other applicable fees and expenses on all classes.
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 BNY Mellon State Municipal Bond Funds, BNY Mellon Pennsylvania Fund from November 1, 2019 to April 30, 2020. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
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 $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
8
STATEMENT OF INVESTMENTS
April 30, 2020
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Description |
Coupon
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Maturity
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Principal
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Value ($) |
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Long-Term Municipal Investments - 98.6% |
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Pennsylvania - 97.7% |
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Allegheny County, GO, Refunding, Ser. C70 |
5.00 |
12/1/2034 |
2,000,000 |
2,185,800 |
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Allegheny County, GO, Ser. C74 |
5.00 |
12/1/2031 |
1,040,000 |
1,198,350 |
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Allegheny County, GO, Ser. C74 |
5.00 |
12/1/2034 |
1,000,000 |
1,147,970 |
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Allegheny County Hospital Development Authority, Revenue Bonds, Refunding (Allegheny Health Network Obligated Group) Ser. A |
5.00 |
4/1/2031 |
2,000,000 |
2,312,620 |
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Allegheny County Hospital Development Authority, Revenue Bonds, Refunding (UPMC Obligated Group) Ser. A |
4.00 |
7/15/2035 |
1,000,000 |
1,061,750 |
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Allentown Neighborhood Improvement Zone Development Authority, Revenue Bonds (City Center Project) |
5.00 |
5/1/2033 |
500,000 |
a |
495,290 |
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Allentown Neighborhood Improvement Zone Development Authority, Revenue Bonds (City Center Project) |
5.00 |
5/1/2042 |
1,000,000 |
a |
966,350 |
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Allentown School District, GO (Insured; Build America Mutual) Ser. C |
5.00 |
2/1/2037 |
1,600,000 |
1,922,144 |
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Berks County Industrial Development Authority, Revenue Bonds, Refunding (Highlands at Wyomissing Obligated Group) |
5.00 |
5/15/2038 |
415,000 |
413,041 |
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Berks County Industrial Development Authority, Revenue Bonds, Refunding (Highlands at Wyomissing Obligated Group) |
5.00 |
5/15/2043 |
500,000 |
485,350 |
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Berks County Industrial Development Authority, Revenue Bonds, Refunding (Highlands at Wyomissing Obligated Group) |
5.00 |
5/15/2042 |
500,000 |
487,605 |
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Berks County Industrial Development Authority, Revenue Bonds, Refunding (Highlands at Wyomissing Obligated Group) |
5.00 |
5/15/2047 |
600,000 |
575,118 |
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Boyertown Area School District, GO (Insured; State Aid Withholding) |
5.00 |
10/1/2037 |
2,050,000 |
2,249,875 |
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Centre County Hospital Authority, Revenue Bonds, Refunding (Mount Nittany Medical Center Project) Ser. A |
5.00 |
11/15/2041 |
750,000 |
819,562 |
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9
STATEMENT OF INVESTMENTS (continued)
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Description |
Coupon
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Maturity
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Principal
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Value ($) |
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Long-Term Municipal Investments - 98.6% (continued) |
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Pennsylvania - 97.7% (continued) |
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Charleroi Area School District, Revenue Bonds, Refunding (Insured; National Public Finance Guarantee Corp.) Ser. C |
0.00 |
10/1/2020 |
2,000,000 |
b |
1,986,860 |
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Chester County Health & Education Facilities Authority, Revenue Bonds (Main Line Health System Obligated Group) Ser. A |
4.00 |
9/1/2050 |
1,000,000 |
1,070,350 |
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Clairton Municipal Authority, Revenue Bonds, Refunding, Ser. B |
5.00 |
12/1/2037 |
2,000,000 |
2,130,720 |
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Commonwealth Financing Authority, Revenue Bonds |
5.00 |
6/1/2034 |
1,000,000 |
1,131,860 |
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Cumberland County Municipal Authority, Revenue Bonds, Refunding (Diakon Lutheran Social Ministries Project) |
5.00 |
1/1/2038 |
1,000,000 |
1,012,080 |
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Dauphin County General Authority, Revenue Bonds (Pinnacle Health System Project) |
5.00 |
6/1/2042 |
3,030,000 |
3,124,718 |
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Delaware County Authority, Revenue Bonds (Villanova University) |
5.00 |
8/1/2040 |
1,000,000 |
1,152,820 |
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Delaware County Authority, Revenue Bonds, Refunding (Cabrini University) |
5.00 |
7/1/2042 |
1,000,000 |
1,028,570 |
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Delaware River Joint Toll Bridge Commission, Revenue Bonds |
5.00 |
7/1/2032 |
1,000,000 |
1,213,340 |
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Delaware River Port Authority, Revenue Bonds |
5.00 |
1/1/2037 |
3,000,000 |
3,245,730 |
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Delaware Valley Regional Finance Authority, Revenue Bonds, Ser. B, 1 Month MUNIPSA +.42% |
0.64 |
9/1/2022 |
2,000,000 |
c |
1,982,420 |
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Dover Area School District, GO (Insured; Build America Mutual) |
5.00 |
4/1/2035 |
1,000,000 |
1,190,470 |
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Dover Area School District, GO (Insured; Build America Mutual) |
5.00 |
4/1/2036 |
800,000 |
946,120 |
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East Hempfield Township Industrial Development Authority, Revenue Bonds, Refunding (Willow Valley Communities Project) |
5.00 |
12/1/2039 |
600,000 |
640,200 |
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Franklin County Industrial Development Authority, Revenue Bonds (Menno-Haven Project) |
5.00 |
12/1/2049 |
500,000 |
421,470 |
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Franklin County Industrial Development Authority, Revenue Bonds, Refunding (Menno-Haven Project) |
5.00 |
12/1/2048 |
1,000,000 |
846,080 |
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10
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Description |
Coupon
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Maturity
|
Principal
|
Value ($) |
|||||
|
Long-Term Municipal Investments - 98.6% (continued) |
|||||||||
|
Pennsylvania - 97.7% (continued) |
|||||||||
|
Geisinger Authority, Revenue Bonds, Refunding (Geisinger Health System Obligated Group) Ser. A |
5.00 |
6/1/2041 |
2,500,000 |
2,710,850 |
|||||
|
Lancaster County Hospital Authority, Revenue Bonds, Refunding (Brethren Village Project) |
5.13 |
7/1/2037 |
1,000,000 |
897,090 |
|||||
|
Lancaster County Hospital Authority, Revenue Bonds, Refunding (Masonic Villages of the Grand Lodge) |
5.00 |
11/1/2035 |
1,000,000 |
1,070,700 |
|||||
|
Lancaster County Hospital Authority, Revenue Bonds, Refunding (The University of Pennsylvania Health System Obligated Group) |
5.00 |
8/15/2042 |
1,800,000 |
2,023,146 |
|||||
|
Luzerne County Industrial Development Authority, Revenue Bonds, Refunding (Pennsylvania-American Water Co.) |
2.45 |
12/3/2029 |
1,750,000 |
1,798,387 |
|||||
|
Montgomery County Higher Education & Health Authority, Revenue Bonds, Refunding (Philadelphia Presbytery Homes Project) |
5.00 |
12/1/2047 |
1,000,000 |
962,340 |
|||||
|
Montgomery County Higher Education & Health Authority, Revenue Bonds, Refunding (Thomas Jefferson University Project) |
4.00 |
9/1/2034 |
1,000,000 |
1,043,170 |
|||||
|
Montgomery County Industrial Development Authority, Revenue Bonds, Refunding (ACTS Retirement-Life Communities Obligated Group) |
5.00 |
11/15/2036 |
3,200,000 |
3,320,768 |
|||||
|
Montgomery County Industrial Development Authority, Revenue Bonds, Refunding (Meadowood Senior Living Project) Ser. A |
5.00 |
12/1/2048 |
1,000,000 |
913,600 |
|||||
|
Montgomery County Industrial Development Authority, Revenue Bonds, Refunding (Waverly Heights Project) |
5.00 |
12/1/2049 |
500,000 |
512,750 |
|||||
|
Pennsylvania, COP, Refunding, Ser. A |
5.00 |
7/1/2034 |
1,000,000 |
1,198,720 |
|||||
|
Pennsylvania, GO |
4.00 |
3/1/2037 |
1,525,000 |
1,669,006 |
|||||
|
Pennsylvania Economic Development Financing Authority, Revenue Bonds (Greed Bond) (Covanta Project) |
3.25 |
8/1/2039 |
850,000 |
a |
624,640 |
||||
11
STATEMENT OF INVESTMENTS (continued)
|
Description |
Coupon
|
Maturity
|
Principal
|
Value ($) |
|||||
|
Long-Term Municipal Investments - 98.6% (continued) |
|||||||||
|
Pennsylvania - 97.7% (continued) |
|||||||||
|
Pennsylvania Economic Development Financing Authority, Revenue Bonds (Philadelphia Biosolids Facility Project) Ser. B |
6.25 |
1/1/2032 |
945,000 |
960,829 |
|||||
|
Pennsylvania Higher Educational Facilities Authority, Revenue Bonds, Refunding (Drexel University) |
5.00 |
5/1/2035 |
1,750,000 |
1,908,952 |
|||||
|
Pennsylvania Higher Educational Facilities Authority, Revenue Bonds, Refunding (Drexel University) |
5.00 |
5/1/2041 |
1,000,000 |
1,084,200 |
|||||
|
Pennsylvania Higher Educational Facilities Authority, Revenue Bonds, Refunding (Thomas Jefferson University Obligated Group) Ser. A |
5.00 |
9/1/2045 |
1,500,000 |
1,571,490 |
|||||
|
Pennsylvania Higher Educational Facilities Authority, Revenue Bonds, Refunding (Thomas Jefferson University Obligated Group) Ser. A |
5.00 |
9/1/2030 |
1,170,000 |
1,274,422 |
|||||
|
Pennsylvania Higher Educational Facilities Authority, Revenue Bonds, Refunding (University of Sciences) |
5.00 |
11/1/2031 |
1,000,000 |
984,350 |
|||||
|
Pennsylvania Housing Finance Agency, Revenue Bonds (Insured; Assured Guaranty Municipal Corp.) Ser. A |
5.00 |
12/1/2025 |
1,210,000 |
1,213,739 |
|||||
|
Pennsylvania Turnpike Commission, Revenue Bonds, Refunding |
5.00 |
12/1/2036 |
3,000,000 |
3,452,640 |
|||||
|
Pennsylvania Turnpike Commission, Revenue Bonds, Refunding, Ser. A |
5.00 |
12/1/2032 |
3,000,000 |
3,554,460 |
|||||
|
Pennsylvania Turnpike Commission, Revenue Bonds, Ser. B |
5.00 |
12/1/2036 |
1,605,000 |
1,847,548 |
|||||
|
Pennsylvania Turnpike Commission, Revenue Bonds, Ser. B |
5.25 |
12/1/2048 |
1,000,000 |
1,143,660 |
|||||
|
Pennsylvania Turnpike Commission, Revenue Bonds, Ser. C |
5.00 |
12/1/2043 |
600,000 |
644,166 |
|||||
|
Philadelphia Airport, Revenue Bonds, Refunding, Ser. A |
5.00 |
6/15/2035 |
2,000,000 |
2,192,960 |
|||||
|
Philadelphia Airport, Revenue Bonds, Refunding, Ser. B |
5.00 |
7/1/2047 |
1,500,000 |
1,631,685 |
|||||
|
Philadelphia Gas Works, Revenue Bonds, Refunding |
5.00 |
8/1/2032 |
1,000,000 |
1,153,890 |
|||||
|
Philadelphia Gas Works, Revenue Bonds, Refunding |
5.00 |
8/1/2031 |
1,000,000 |
1,158,220 |
|||||
12
|
Description |
Coupon
|
Maturity
|
Principal
|
Value ($) |
|||||
|
Long-Term Municipal Investments - 98.6% (continued) |
|||||||||
|
Pennsylvania - 97.7% (continued) |
|||||||||
|
Philadelphia Housing Authority, Revenue Bonds (Insured; Assured Guaranty Municipal Corp.) Ser. A |
5.00 |
12/1/2021 |
1,685,000 |
1,690,240 |
|||||
|
Philadelphia Industrial Development Authority, Revenue Bonds (Children's Hospital of Philadelphia Project) Ser. A |
5.00 |
7/1/2042 |
3,000,000 |
3,266,220 |
|||||
|
Philadelphia Industrial Development Authority, Revenue Bonds (Housing-University Square Apartments Project) |
5.00 |
12/1/2037 |
1,250,000 |
1,400,700 |
|||||
|
Philadelphia Industrial Development Authority, Revenue Bonds, Refunding (St. Joseph's University) |
4.00 |
11/1/2045 |
1,000,000 |
1,005,690 |
|||||
|
Philadelphia Industrial Development Authority, Revenue Bonds, Refunding (Thomas Jefferson University Obligated Group) Ser. A |
5.00 |
9/1/2047 |
1,000,000 |
1,062,990 |
|||||
|
Philadelphia Industrial Development Authority, Revenue Bonds, Refunding, Ser. 2015 |
5.00 |
4/1/2045 |
1,500,000 |
1,659,030 |
|||||
|
Pittsburgh, GO (Insured; Build America Mutual) |
5.00 |
9/1/2030 |
1,585,000 |
1,811,750 |
|||||
|
Pittsburgh Urban Redevelopment Authority, Revenue Bonds (West Park Court Housing) (Insured; Government National Mortgage Association) |
4.90 |
11/20/2047 |
1,140,000 |
1,141,425 |
|||||
|
Pittsburgh Water & Sewer Authority, Revenue Bonds, Refunding (Insured: Assured Guaranty Municipal Corp.) Ser. B |
4.00 |
9/1/2034 |
1,305,000 |
1,474,533 |
|||||
|
Pittsburgh Water & Sewer Authority, Revenue Bonds, Refunding (Insured: Assured Guaranty Municipal Corp.) Ser. B |
5.00 |
9/1/2033 |
500,000 |
666,020 |
|||||
|
Quaker Valley School District, GO, Refunding (Insured; State Aid Withholding) |
5.00 |
10/1/2034 |
400,000 |
503,708 |
|||||
|
Quaker Valley School District, GO, Refunding (Insured; State Aid Withholding) |
5.00 |
10/1/2035 |
350,000 |
438,190 |
|||||
|
Quaker Valley School District, GO, Refunding (Insured; State Aid Withholding) |
5.00 |
10/1/2033 |
330,000 |
417,265 |
|||||
13
STATEMENT OF INVESTMENTS (continued)
|
Description |
Coupon
|
Maturity
|
Principal
|
Value ($) |
|||||
|
Long-Term Municipal Investments - 98.6% (continued) |
|||||||||
|
Pennsylvania - 97.7% (continued) |
|||||||||
|
Southcentral Pennsylvania General Authority, Revenue Bonds, Refunding (WellSpan Health Obligated Group) |
5.00 |
6/1/2044 |
1,000,000 |
1,163,130 |
|||||
|
State Public School Building Authority, Revenue Bonds, Refunding (Harrisburg School District Project) (Insured; Assured Guaranty Municipal Corp.) |
5.00 |
12/1/2032 |
2,000,000 |
2,360,200 |
|||||
|
State Public School Building Authority, Revenue Bonds, Refunding (Montgomery County Community College) |
5.00 |
5/1/2038 |
1,115,000 |
1,224,460 |
|||||
|
Susquehanna Area Regional Airport Authority, Revenue Bonds, Refunding, Ser. B |
4.00 |
1/1/2033 |
1,300,000 |
1,230,216 |
|||||
|
The Canonsburg-Houston Joint Authority, Revenue Bonds, Ser. A |
5.00 |
12/1/2040 |
2,000,000 |
2,286,400 |
|||||
|
The Philadelphia School District, GO (Insured; State Aid Withholding) Ser. A |
5.00 |
9/1/2044 |
1,000,000 |
1,181,690 |
|||||
|
The Philadelphia School District, GO (Insured; State Aid Withholding) Ser. B |
5.00 |
9/1/2043 |
1,000,000 |
1,166,960 |
|||||
|
The Philadelphia School District, GO, Refunding (Insured; State Aid Withholding) Ser. F |
5.00 |
9/1/2038 |
1,000,000 |
1,159,660 |
|||||
|
Westmoreland County Municipal Authority, Revenue Bonds, Refunding (Insured; Build America Mutual) |
5.00 |
8/15/2042 |
1,000,000 |
1,145,640 |
|||||
|
Wilkes-Barre Finance Authority, Revenue Bonds, Refunding (University of Scranton) Ser. A |
5.00 |
11/1/2034 |
1,000,000 |
1,020,940 |
|||||
|
114,444,068 |
|||||||||
14
|
Description |
Coupon
|
Maturity
|
Principal
|
Value ($) |
|||||
|
Long-Term Municipal Investments - 98.6% (continued) |
|||||||||
|
U.S. Related - .9% |
|||||||||
|
Puerto Rico Highway & Transportation Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. CC |
5.25 |
7/1/2034 |
1,000,000 |
1,072,570 |
|||||
|
Total Investments (cost $114,895,912) |
98.6% |
115,516,638 |
|||||||
|
Cash and Receivables (Net) |
1.4% |
1,644,823 |
|||||||
|
Net Assets |
100.0% |
117,161,461 |
|||||||
a Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2020, these securities were valued at $2,086,280 or 1.78% of net assets.
b Security issued with a zero coupon. Income is recognized through the accretion of discount.
c Variable rate security—rate shown is the interest rate in effect at period end.
† Based on net assets.
See notes to financial statements.
15
See notes to financial statements.
16
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
Cost |
|
Value |
|
|
Assets ($): |
|
|
|
|
||
|
Investments in securities—See Statement of Investments |
114,895,912 |
|
115,516,638 |
|
||
|
Cash |
|
|
|
|
132,581 |
|
|
Interest receivable |
|
1,693,013 |
|
|||
|
Receivable for shares of Beneficial Interest subscribed |
|
701 |
|
|||
|
Prepaid expenses |
|
|
|
|
24,080 |
|
|
|
|
|
|
|
117,367,013 |
|
|
Liabilities ($): |
|
|
|
|
||
|
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
|
72,272 |
|
|||
|
Payable for shares of Beneficial Interest redeemed |
|
63,260 |
|
|||
|
Trustees’ fees and expenses payable |
|
950 |
|
|||
|
Other accrued expenses |
|
|
|
|
69,070 |
|
|
|
|
|
|
|
205,552 |
|
|
Net Assets ($) |
|
|
117,161,461 |
|
||
|
Composition of Net Assets ($): |
|
|
|
|
||
|
Paid-in capital |
|
|
|
|
115,964,840 |
|
|
Total distributable earnings (loss) |
|
|
|
|
1,196,621 |
|
|
Net Assets ($) |
|
|
117,161,461 |
|
||
|
Net Asset Value Per Share |
Class A |
Class C |
Class Z |
|
|
Net Assets ($) |
83,598,400 |
1,472,109 |
32,090,952 |
|
|
Shares Outstanding |
5,344,956 |
94,080 |
2,052,185 |
|
|
Net Asset Value Per Share ($) |
15.64 |
15.65 |
15.64 |
|
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
17
STATEMENT OF OPERATIONS
Year Ended April 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
|
||
|
Interest Income |
|
|
4,263,045 |
|
||
|
Expenses: |
|
|
|
|
||
|
Management fee—Note 3(a) |
|
|
685,264 |
|
||
|
Shareholder servicing costs—Note 3(c) |
|
|
295,511 |
|
||
|
Professional fees |
|
|
97,572 |
|
||
|
Registration fees |
|
|
35,000 |
|
||
|
Prospectus and shareholders’ reports |
|
|
13,353 |
|
||
|
Chief Compliance Officer fees—Note 3(c) |
|
|
12,994 |
|
||
|
Distribution fees—Note 3(b) |
|
|
12,847 |
|
||
|
Trustees’ fees and expenses—Note 3(d) |
|
|
9,153 |
|
||
|
Loan commitment fees—Note 2 |
|
|
3,421 |
|
||
|
Custodian fees—Note 3(c) |
|
|
3,281 |
|
||
|
Miscellaneous |
|
|
27,733 |
|
||
|
Total Expenses |
|
|
1,196,129 |
|
||
|
Less—reduction in expenses due to undertaking—Note 3(a) |
|
|
(83,133) |
|
||
|
Less—reduction in fees due to earnings credits—Note 3(c) |
|
|
(3,281) |
|
||
|
Net Expenses |
|
|
1,109,715 |
|
||
|
Investment Income—Net |
|
|
3,153,330 |
|
||
|
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
|
||||
|
Net realized gain (loss) on investments |
1,318,515 |
|
||||
|
Net change in unrealized appreciation (depreciation) on investments |
(3,500,382) |
|
||||
|
Net Realized and Unrealized Gain (Loss) on Investments |
|
|
(2,181,867) |
|
||
|
Net Increase in Net Assets Resulting from Operations |
|
971,463 |
|
|||
|
|
|
|
|
|
|
|
|
See notes to financial statements. |
||||||
18
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
Year Ended April 30, |
|||||
|
|
|
|
|
2020 |
|
2019 |
|
||
|
Operations ($): |
|
|
|
|
|
|
|
|
|
|
Investment income—net |
|
|
3,153,330 |
|
|
|
3,398,430 |
|
|
|
Net realized gain (loss) on investments |
|
1,318,515 |
|
|
|
465,867 |
|
||
|
Net change in unrealized appreciation
|
|
(3,500,382) |
|
|
|
2,286,892 |
|
||
|
Net Increase (Decrease) in Net Assets
|
971,463 |
|
|
|
6,151,189 |
|
|||
|
Distributions ($): |
|
||||||||
|
Distributions to shareholders: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
(2,825,729) |
|
|
|
(3,110,457) |
|
|
|
Class C |
|
|
(39,909) |
|
|
|
(56,161) |
|
|
|
Class Z |
|
|
(1,167,331) |
|
|
|
(1,258,858) |
|
|
|
Total Distributions |
|
|
(4,032,969) |
|
|
|
(4,425,476) |
|
|
|
Beneficial Interest Transactions ($): |
|
||||||||
|
Net proceeds from shares sold: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
3,067,668 |
|
|
|
4,447,978 |
|
|
|
Class C |
|
|
11,182 |
|
|
|
43,849 |
|
|
|
Class Z |
|
|
1,878,425 |
|
|
|
1,592,017 |
|
|
|
Distributions reinvested: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
2,456,575 |
|
|
|
2,706,117 |
|
|
|
Class C |
|
|
38,942 |
|
|
|
54,123 |
|
|
|
Class Z |
|
|
956,167 |
|
|
|
1,026,845 |
|
|
|
Cost of shares redeemed: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
(9,277,452) |
|
|
|
(11,826,604) |
|
|
|
Class C |
|
|
(465,212) |
|
|
|
(720,480) |
|
|
|
Class Z |
|
|
(3,787,717) |
|
|
|
(4,856,729) |
|
|
|
Increase (Decrease) in Net Assets
|
(5,121,422) |
|
|
|
(7,532,884) |
|
|||
|
Total Increase (Decrease) in Net Assets |
(8,182,928) |
|
|
|
(5,807,171) |
|
|||
|
Net Assets ($): |
|
||||||||
|
Beginning of Period |
|
|
125,344,389 |
|
|
|
131,151,560 |
|
|
|
End of Period |
|
|
117,161,461 |
|
|
|
125,344,389 |
|
|
19
STATEMENT OF CHANGES IN NET ASSETS (continued)
|
|
|
|
|
Year Ended April 30, |
|||||
|
|
|
|
|
2020 |
|
2019 |
|
||
|
Capital Share Transactions (Shares): |
|
||||||||
|
Class Aa,b |
|
|
|
|
|
|
|
|
|
|
Shares sold |
|
|
186,921 |
|
|
|
280,850 |
|
|
|
Shares issued for distributions reinvested |
|
|
150,345 |
|
|
|
170,983 |
|
|
|
Shares redeemed |
|
|
(567,694) |
|
|
|
(746,267) |
|
|
|
Net Increase (Decrease) in Shares Outstanding |
(230,428) |
|
|
|
(294,434) |
|
|||
|
Class Ca |
|
|
|
|
|
|
|
|
|
|
Shares sold |
|
|
690 |
|
|
|
2,775 |
|
|
|
Shares issued for distributions reinvested |
|
|
2,382 |
|
|
|
3,420 |
|
|
|
Shares redeemed |
|
|
(28,482) |
|
|
|
(45,205) |
|
|
|
Net Increase (Decrease) in Shares Outstanding |
(25,410) |
|
|
|
(39,010) |
|
|||
|
Class Zb |
|
|
|
|
|
|
|
|
|
|
Shares sold |
|
|
115,093 |
|
|
|
100,441 |
|
|
|
Shares issued for distributions reinvested |
|
|
58,528 |
|
|
|
64,900 |
|
|
|
Shares redeemed |
|
|
(232,933) |
|
|
|
(307,017) |
|
|
|
Net Increase (Decrease) in Shares Outstanding |
(59,312) |
|
|
|
(141,676) |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
aDuring the period ended April 30, 2020, 6,340 Class C shares representing $104,538 were automatically converted to 6,346 Class A shares and during the period ended April 30, 2019, 1,471 Class C shares representing $23,342 were automatically converted to 1,472 Class A shares. |
|||||||||
|
bDuring the period ended April 30, 2020, 2,719 Class A shares representing $44,863 were exchanged for 2,722 Class Z shares. |
|||||||||
|
See notes to financial statements. |
|||||||||
20
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
|
Class A Shares |
Year Ended April 30, |
|||||||||
|
2020 |
2019 |
2018 |
2017 |
2016 |
||||||
|
Per Share Data ($): |
||||||||||
|
Net asset value, beginning of period |
16.06 |
15.84 |
16.15 |
16.74 |
16.34 |
|||||
|
Investment Operations: |
||||||||||
|
Investment income—neta |
.41 |
.42 |
.43 |
.47 |
.51 |
|||||
|
Net realized and unrealized
|
(.30) |
.35 |
(.03) |
(.50) |
.40 |
|||||
|
Total from Investment Operations |
.11 |
.77 |
.40 |
(.03) |
.91 |
|||||
|
Distributions: |
||||||||||
|
Dividends from
|
(.41) |
(.42) |
(.43) |
(.46) |
(.51) |
|||||
|
Dividends from net realized
|
(.12) |
(.13) |
(.28) |
(.10) |
- |
|||||
|
Total Distributions |
(.53) |
(.55) |
(.71) |
(.56) |
(.51) |
|||||
|
Net asset value, end of period |
15.64 |
16.06 |
15.84 |
16.15 |
16.74 |
|||||
|
Total Return (%)b |
.55 |
4.97 |
2.44 |
(.16) |
5.66 |
|||||
|
Ratios/Supplemental Data (%): |
||||||||||
|
Ratio of total expenses
|
1.01 |
1.00 |
.98 |
.96 |
.95 |
|||||
|
Ratio of net expenses
|
.94 |
1.00 |
.98 |
.96 |
.95 |
|||||
|
Ratio of net investment income
|
2.48 |
2.65 |
2.62 |
2.82 |
3.13 |
|||||
|
Portfolio Turnover Rate |
14.71 |
8.53 |
15.24 |
20.97 |
12.49 |
|||||
|
Net Assets, end of period ($ x 1,000) |
83,598 |
89,527 |
92,964 |
100,228 |
107,889 |
|||||
a Based on average shares outstanding.
b Exclusive of sales charge.
See notes to financial statements.
21
FINANCIAL HIGHLIGHTS (continued)
|
Class C Shares |
Year Ended April 30, |
|||||||||
|
2020 |
2019 |
2018 |
2017 |
2016 |
||||||
|
Per Share Data ($): |
||||||||||
|
Net asset value, beginning of period |
16.06 |
15.84 |
16.15 |
16.75 |
16.34 |
|||||
|
Investment Operations: |
||||||||||
|
Investment income—neta |
.27 |
.29 |
.30 |
.34 |
.39 |
|||||
|
Net realized and unrealized
|
(.29) |
.35 |
(.03) |
(.51) |
.40 |
|||||
|
Total from Investment Operations |
(.02) |
.64 |
.27 |
(.17) |
.79 |
|||||
|
Distributions: |
||||||||||
|
Dividends from
|
(.27) |
(.29) |
(.30) |
(.33) |
(.38) |
|||||
|
Dividends from net realized
|
(.12) |
(.13) |
(.28) |
(.10) |
- |
|||||
|
Total Distributions |
(.39) |
(.42) |
(.58) |
(.43) |
(.38) |
|||||
|
Net asset value, end of period |
15.65 |
16.06 |
15.84 |
16.15 |
16.75 |
|||||
|
Total Return (%)b |
(.22) |
4.12 |
1.63 |
(.98) |
4.93 |
|||||
|
Ratios/Supplemental Data (%): |
||||||||||
|
Ratio of total expenses
|
1.84 |
1.82 |
1.76 |
1.73 |
1.72 |
|||||
|
Ratio of net expenses
|
1.77 |
1.82 |
1.76 |
1.73 |
1.72 |
|||||
|
Ratio of net investment income
|
1.66 |
1.83 |
1.83 |
2.05 |
2.36 |
|||||
|
Portfolio Turnover Rate |
14.71 |
8.53 |
15.24 |
20.97 |
12.49 |
|||||
|
Net Assets, end of period ($ x 1,000) |
1,472 |
1,920 |
2,511 |
4,445 |
4,913 |
|||||
a Based on average shares outstanding.
b Exclusive of sales charge.
See notes to financial statements.
22
|
Class Z Shares |
Year Ended April 30, |
|||||||||
|
2020 |
2019 |
2018 |
2017 |
2016 |
||||||
|
Per Share Data ($): |
||||||||||
|
Net asset value, beginning of period |
16.05 |
15.83 |
16.15 |
16.74 |
16.33 |
|||||
|
Investment Operations: |
||||||||||
|
Investment income—neta |
.44 |
.45 |
.46 |
.50 |
.55 |
|||||
|
Net realized and unrealized gain
|
(.29) |
.35 |
(.04) |
(.49) |
.40 |
|||||
|
Total from Investment Operations |
.15 |
.80 |
.42 |
.01 |
.95 |
|||||
|
Distributions: |
||||||||||
|
Dividends from
|
(.44) |
(.45) |
(.46) |
(.50) |
(.54) |
|||||
|
Dividends from net realized
|
(.12) |
(.13) |
(.28) |
(.10) |
- |
|||||
|
Total Distributions |
(.56) |
(.58) |
(.74) |
(.60) |
(.54) |
|||||
|
Net asset value, end of period |
15.64 |
16.05 |
15.83 |
16.15 |
16.74 |
|||||
|
Total Return (%) |
.82 |
5.18 |
2.66 |
.01 |
5.95 |
|||||
|
Ratios/Supplemental Data (%): |
||||||||||
|
Ratio of total expenses
|
.80 |
.82 |
.76 |
.73 |
.74 |
|||||
|
Ratio of net expenses
|
.73 |
.82 |
.76 |
.73 |
.74 |
|||||
|
Ratio of net investment income
|
2.69 |
2.85 |
2.83 |
3.05 |
3.34 |
|||||
|
Portfolio Turnover Rate |
14.71 |
8.53 |
15.24 |
20.97 |
12.49 |
|||||
|
Net Assets, end of period ($ x 1,000) |
32,091 |
33,898 |
35,676 |
49,560 |
51,559 |
|||||
a Based on average shares outstanding.
See notes to financial statements.
23
NOTES TO FINANCIAL STATEMENTS
NOTE 1—Significant Accounting Policies:
BNY Mellon Pennsylvania Fund (the “fund”) is a separate non-diversified series of BNY Mellon State Municipal Bond Funds (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering three series, including the fund. The fund’s investment objective is to seek to maximize current income exempt from federal income tax and from Pennsylvania state income tax, without undue risk. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
The Company’s Board of Trustees (the “Board”) approved, effective December 31, 2019 (the “Effective Date”), the termination of the fund’s authorized Class T shares. Prior to the Effective Date, the fund did not offer such Class T shares for purchase.
Effective June 3, 2019, the fund changed its name from Dreyfus Pennsylvania Fund to BNY Mellon Pennsylvania Fund and the Company changed its name from Dreyfus State Municipal Bond Funds to BNY Mellon State Municipal Bond Funds. In addition, The Dreyfus Corporation, the fund’s investment adviser, changed its name to “BNY Mellon Investment Adviser, Inc.”, MBSC Securities Corporation, the fund’s distributor, changed its name to “BNY Mellon Securities Corporation” and Dreyfus Transfer, Inc., the fund’s transfer agent, changed its name to “BNY Mellon Transfer, Inc.”
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, 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 C shares automatically convert to Class A shares ten years after the date of purchase, without the imposition of a sales charge. Class Z shares are sold at net asset value per share to certain shareholders of the fund. Class Z shares generally are not available for new accounts. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
24
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. 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.
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:
25
NOTES TO FINANCIAL STATEMENTS (continued)
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued each business day by an independent pricing service (the “Service”) approved by the Board. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Debt investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of the following: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. All of the preceding securities are generally categorized within Level 2 of the fair value hierarchy.
The Service is engaged under the general oversight of the Board.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers.
26
These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of April 30, 2020 in valuing the fund’s investments:
|
Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 -Significant Unobservable Inputs |
Total |
|
|
Assets ($) |
||||
|
Investments in Securities: † |
||||
|
Municipal Securities |
- |
115,516,638 |
- |
115,516,638 |
† See Statement of Investments for additional detailed categorizations, if any.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when issued or delayed delivery basis may be settled a month or more after the trade date.
The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund.
(c) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments,
27
NOTES TO FINANCIAL STATEMENTS (continued)
including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
(d) Dividends and distributions to shareholders: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(e) 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, 2020, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended April 30, 2020, the fund did not incur any interest or penalties.
Each tax year in the four-year period ended April 30, 2020 remains subject to examination by the Internal Revenue Service and state taxing authorities.
At April 30, 2020, the components of accumulated earnings on a tax basis were as follows: undistributed tax-exempt income $309,933, undistributed capital gains $572,282 and unrealized appreciation $621,248.
The tax character of distributions paid to shareholders during the fiscal periods ended April 30, 2020 and April 30, 2019 were as follows: tax–exempt income $3,149,964 and $3,397,232, ordinary income $0 and $4,497, and long-term capital gains $883,005 and $1,023,747, respectively.
(f) New Accounting Pronouncements: Effective June 1, 2019, the fund adopted Accounting Standards Update 2017-08, Receivables—
28
Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization On Purchased Callable Debt Securities (“ASU 2017-08”). The update shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date.
Also effective June 1, 2019, the fund adopted Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The update provides guidance that modifies certain disclosure requirements for fair value measurements. The adoption of ASU 2017-08 and ASU 2018-13 had no impact on the operations of the fund for the period ended April 30, 2020.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $927 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), a subsidiary of BNY Mellon and an affiliate of the Adviser, each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $747 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $180 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. Prior to March 11, 2020, the Citibank Credit Facility was $1.030 billion with Tranche A available in an amount equal to $830 million and Tranche B available in an amount equal to $200 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit 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, 2020, 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 Adviser, 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 Adviser has contractually agreed, from August 30, 2019 through August 30, 2020, to waive receipt of a portion of its management fee, in the amount of .10% of the value of the fund’s average daily net assets. On or after August 30,
29
NOTES TO FINANCIAL STATEMENTS (continued)
2020, the Adviser may terminate this waiver agreement at any time. The reduction in management fees, pursuant to the undertaking, amounted to $83,133 during the period ended April 30, 2020.
During the period ended April 30, 2020, the Distributor retained $1,815 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, 2020, Class C shares were charged $12,847 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, 2020, Class A and Class C shares were charged $221,466 and $4,283, respectively, pursuant to the Shareholder Services Plan.
Under the Shareholder Services Plan, Class Z shares reimburse the Distributor at an amount not to exceed an annual rate of .25% of the value of Class Z shares’ average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding Class Z shares and providing reports and other information, and services related to the maintenance of shareholder accounts. During the period ended April 30, 2020, Class Z shares were charged $14,209 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, if any, as an expense offset in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended April 30, 2020, the fund was charged $26,333 for transfer agency services. These fees are included in Shareholder servicing costs in the Statement of Operations.
30
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended April 30, 2020, the fund was charged $3,281 pursuant to the custody agreement. These fees were offset by earnings credits of $3,281.
The fund compensates The Bank of New York Mellon under a shareholder redemption draft processing agreement for providing certain services related to the fund’s check writing privilege. During the period ended April 30, 2020, the fund was charged $1,288 pursuant to the agreement, which is included in Shareholder servicing costs in the Statement of Operations.
During the period ended April 30, 2020, the fund was charged $12,994 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: management fees of $53,539, Distribution Plan fees of $922, Shareholder Services Plan fees of $17,631, custodian fees of $1,069, Chief Compliance Officer fees of $4,438 and transfer agency fees of $4,407, which are offset against an expense reimbursement currently in effect in the amount of $9,734.
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds 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, 2020, amounted to $18,138,788 and $23,021,729, respectively.
At April 30, 2020, the cost of investments for federal income tax purposes was $114,895,390; accordingly, accumulated net unrealized appreciation on investments was $621,248, consisting of $3,042,036 gross unrealized appreciation and $2,420,788 gross unrealized depreciation.
31
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of BNY Mellon Pennsylvania Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of BNY Mellon Pennsylvania Fund (the “Fund”) (one of the funds constituting BNY Mellon State Municipal Bond Funds), including the statement of investments, as of April 30, 2020, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting BNY Mellon State Municipal Bond Funds) at April 30, 2020, 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 its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of April 30, 2020, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the BNY Mellon Family of Funds since at least 1957, but we are unable to determine the specific year.
New York, New York
June 25, 2020
32
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, 2020 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 2020 calendar year on Form 1099-DIV which will be mailed in early 2021. The fund also hereby reports $.1170 per share as a long-term capital gain distribution paid on December 27, 2019.
33
BOARD MEMBERS INFORMATION (Unaudited)
INDEPENDENT BOARD MEMBERS
Joseph S. DiMartino (76)
Chairman of the Board (1995)
Principal Occupation During Past 5 Years:
· Director or Trustee of funds in the BNY Mellon Family of Funds and certain other entities (as described in the fund’s Statement of Additional Information) (1995-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ, Inc., a public company providing professional business services, products and solutions, Director (1997-Present)
No. of Portfolios for which Board Member Serves: 114
———————
Francine J. Bovich (68)
Board Member (2012)
Principal Occupation During Past 5 Years:
· Trustee, The Bradley Trusts, private trust funds (2011-Present)
Other Public Company Board Memberships During Past 5 Years:
· Annaly Capital Management, Inc., a real estate investment trust, Director (2014-Present)
No. of Portfolios for which Board Member Serves: 68
———————
Peggy C. Davis (77)
Board Member (1990)
Principal Occupation During Past 5 Years:
· Shad Professor of Law, New York University School of Law (1983-present)
No. of Portfolios for which Board Member Serves: 40
———————
Nathan Leventhal (77)
Board Member (1989)
Principal Occupation During Past 5 Years:
· President Emeritus of Lincoln Center for the Performing Arts (2001-Present)
· President of the Palm Beach Opera (2016-Present)
Other Public Company Board Memberships During Past 5 Years:
· Movado Group, Inc., a public company that designs, markets and distributes watches, Director (2003-Present)
No. of Portfolios for which Board Member Serves: 46
———————
34
Robin A. Melvin (56)
Board Member (2012)
Principal Occupation During Past 5 Years:
· Co-chairman, Mentor Illinois, a non-profit organization dedicated to increasing the quantity and quality of mentoring services in Illinois (2014-Present); Board member (2013-Present)
No. of Portfolios for which Board Member Serves: 92
———————
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 BNY Mellon Investment Adviser, Inc. 240 Greenwich Street, New York, New York 10286. Additional information about the Board Member is available in the fund’s Statement of Additional Information which can be obtained from the Adviser free of charge by calling this toll free number: 1-800-373-9387.
Clifford L. Alexander, Jr., Emeritus Board Member
Diane Dunst, Emeritus Board Member
Ernest Kafka, Emeritus Board Member
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OFFICERS OF THE FUND (Unaudited)
RENEE LAROCHE-MORRIS, President since May 2019.
President and a director of BNY Mellon Investment Adviser, Inc. since January 2018. She is an officer of 62 investment companies (comprised of 114 portfolios) managed by the Adviser. She is 48 years old and has been an employee of BNY Mellon since 2003.
JAMES WINDELS, Treasurer since November 2001.
Director-BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 61 years old and has been an employee of the Adviser since April 1985.
BENNETT A. MACDOUGALL, Chief Legal Officer since October 2015.
Chief Legal Officer of the Adviser and Associate General Counsel and Managing Director of BNY Mellon since June 2015; Director and Associate General Counsel of Deutsche Bank–Asset & Wealth Management Division from June 2005 to June 2015, and as Chief Legal Officer of Deutsche Investment Management Americas Inc. from June 2012 to May 2015. He is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 48 years old and has been an employee of the Adviser since June 2015.
DAVID DIPETRILLO, Vice President since May 2019.
Head of North America Product, BNY Mellon Investment Management since January 2018, Director of Product Strategy, BNY Mellon Investment Management from January 2016 to December 2017; Head of US Retail Product and Channel Marketing, BNY Mellon Investment Management from January 2014 to December 2015. He is an officer of 63 investment companies (comprised of 122 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 42 years old and has been an employee of BNY Mellon since 2005.
JAMES BITETTO, Vice President since August 2005 and Secretary since February 2018.
Senior Managing Counsel of BNY Mellon since December 2019; Managing Counsel of BNY Mellon from April 2014 to December 2019; Secretary of the Adviser, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of the Adviser since December 1996.
SONALEE CROSS, Vice President and Assistant Secretary since March 2018.
Counsel of BNY Mellon since October 2016; Associate at Proskauer Rose LLP from April 2016 to September 2016; Attorney at EnTrust Capital from August 2015 to February 2016; Associate at Sidley Austin LLP from September 2013 to August 2015. She is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 32 years old and has been an employee of the Adviser since October 2016.
DEIRDRE CUNNANE, Vice President and Assistant Secretary since March 2019.
Counsel of BNY Mellon since August 2018; Senior Regulatory Specialist at BNY Mellon Investment Management Services from February 2016 to August 2018; Trustee Associate at BNY Mellon Trust Company (Ireland) Limited from August 2013 to February 2016. She is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 29 years old and has been an employee of the Adviser since August 2018.
SARAH S. KELLEHER, Vice President and Assistant Secretary since April 2014.
Managing Counsel of BNY Mellon since December 2017, Senior Counsel of BNY Mellon from March 2013 to December 2017. She is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 44 years old and has been an employee of the Adviser since March 2013.
JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.
Senior Managing Counsel of BNY Mellon, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 54 years old and has been an employee of the Adviser since October 1990.
PETER M. SULLIVAN, Vice President and Assistant Secretary since March 2019.
Managing Counsel of BNY Mellon, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 52 years old and has been an employee of the Adviser since April 2004.
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AMANDA QUINN, Vice President and Assistant Secretary since March 2020.
Counsel of BNY Mellon since June 2019; Regulatory Administration Manager at BNY Mellon Investment Management Services from September 2018 to May 2019; Senior Regulatory Specialist at BNY Mellon Investment Management Services from April 2015 to August 2018. She is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 35 years old and has been an employee of the Adviser since June 2019.
NATALYA ZELENSKY, Vice President and Assistant Secretary since March 2017.
Managing Counsel of BNY Mellon since December 2019; Counsel of BNY Mellon from May 2016 to December 2019; Attorney at Wildermuth Endowment Strategy Fund/Wildermuth Advisory, LLC from November 2015 to May 2016 and Assistant General Counsel at RCS Advisory Services from July 2014 to November 2015. She is an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 34 years old and has been an employee of the Adviser since May 2016.
GAVIN C. REILLY, Assistant Treasurer since December 2005.
Tax Manager-BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 51 years old and has been an employee of the Adviser since April 1991.
ROBERT S. ROBOL, Assistant Treasurer since August 2005.
Senior Accounting Manager-BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 56 years old and has been an employee of the Adviser since October 1988.
ROBERT SALVIOLO, Assistant Treasurer since July 2007.
Senior Accounting Manager–BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of the Adviser since June 1989.
ROBERT SVAGNA, Assistant Treasurer since December 2002.
Senior Accounting Manager–BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 145 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of the Adviser since November 1990.
JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.
Chief Compliance Officer of the Adviser, the BNY Mellon Family of Funds and BNY Mellon Funds Trust (63 investment companies, comprised of 137 portfolios). He is 62 years old and has served in various capacities with the Adviser since 1980, including manager of the firm’s Fund Accounting Department from 1997 through October 2001.
CARIDAD M. CAROSELLA, Anti-Money Laundering Compliance Officer since January 2016.
Anti-Money Laundering Compliance Officer of the BNY Mellon Family of Funds and BNY Mellon Funds Trust since January 2016; from May 2015 to December 2015, Interim Anti-Money Laundering Compliance Officer of the BNY Mellon Family of Funds and BNY Mellon Funds Trust and the Distributor; from January 2012 to May 2015, AML Surveillance Officer of the Distributor. She is an officer of 57 investment companies (comprised of 138 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 51 years old and has been an employee of the Distributor since 1997.
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BNY Mellon State Municipal Bond Funds, BNY Mellon Pennsylvania Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
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Ticker Symbols: |
Class A: PTPAX Class C: PPACX Class Z: DPENX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@bnymellon.com
Internet Information can be viewed online or downloaded at www.bnymellonim.com/us
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-PORT. The fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
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© 2020 BNY Mellon Securities Corporation
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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 $109,410 in 2019 and $112,482 in 2020.
(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 $20,421 in 2019 and $28,725 in 2020. 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 2019 and $0 in 2020.
(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 $10,435 in 2019 and $9,530 in 2020. 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, and (iv) determination of Passive Foreign Investment Companies. 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 2019 and $0 in 2020.
(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 $1,277 in 2019 and $1,324 in 2020. 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 2019 and $0 in 2020.
(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 accountant'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 $682,514 in 2019 and $807,171 in 2020.
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. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
(a)(1) Code of ethics referred to in Item 2.
(a)(3) Not applicable.
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.
BNY Mellon State Municipal Bond Funds
By: /s/ Renee LaRoche-Morris
Renee LaRoche-Morris
President (Principal Executive Officer)
Date: June 25, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ Renee LaRoche-Morris
Renee LaRoche-Morris
President (Principal Executive Officer)
Date: June 25, 2020
By: /s/ James Windels
James Windels
Treasurer (Principal Financial Officer)
Date: June 25, 2020
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)