UNITED STATES |
SECURITIES AND EXCHANGE COMMISSION |
Washington, D.C. 20549 |
FORM N-CSR |
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT |
INVESTMENT COMPANIES |
Investment Company Act file number 811-3700 |
The Dreyfus/Laurel Tax-Free Municipal Funds |
(Exact name of Registrant as specified in charter) |
c/o The Dreyfus Corporation |
200 Park Avenue |
New York, New York 10166 |
(Address of principal executive offices) (Zip code) |
Mark N. Jacobs, Esq. |
200 Park Avenue |
New York, New York 10166 |
(Name and address of agent for service) |
Registrant's telephone number, including area code: (212) 922-6000 |
Date of fiscal year end: | 6/30 | |
Date of reporting period: | 12/31/2006 |
FORM N-CSR
Item 1. | Reports to Stockholders. |
Dreyfus BASIC California Municipal Money Market Fund |
SEMIANNUAL REPORT December 31, 2006
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The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value
Contents | ||
THE FUND | ||
2 | A Letter from the CEO | |
3 | Discussion of Fund Performance | |
6 | Understanding Your Fund’s Expenses | |
6 | Comparing Your Fund’s Expenses | |
With Those of Other Funds | ||
7 | Statement of Investments | |
17 | Statement of Assets and Liabilities | |
18 | Statement of Operations | |
19 | Statement of Changes in Net Assets | |
20 | Financial Highlights | |
21 | Notes to Financial Statements | |
FOR MORE INFORMATION | ||
Back Cover |
Dreyfus BASIC |
California Municipal |
Money Market Fund |
The Fund
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A LETTER FROM THE CEO
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus BASIC California Municipal Money Market Fund, covering the six-month period from July 1, 2006, through December 31, 2006.
2006 proved to be a good time for the financial markets, with rallies in the second half of the year helping stocks, bonds and money market instruments achieve positive absolute returns.A number of factors contributed to the markets’ gains, including a more moderate economic expansion, strong business conditions, subdued inflation, stabilizing interest rates and robust investor demand for most asset classes.
In our analysis, 2006 provided an excellent reminder of the need for a long-term investment perspective. Adopting too short a time frame proved costly for some investors last year, as reducing allocations to stocks and bonds generally meant missing subsequent rallies. Indeed, history shows that reacting to near-term developments with extreme shifts in strategy rarely is the right decision. We believe that a better course is to set a portfolio mix to meet future goals, while attempting to ignore short term market fluctuations. Money market funds have continued to play an important role in that mix.
For information about how the fund performed during the reporting period, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund’s portfolio manager.
Thank you for your continued confidence and support.We wish you good health and prosperity in 2007.
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Thomas F. Eggers Chief Executive Officer The Dreyfus Corporation January 16, 2007 |
2 |
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DISCUSSION OF FUND PERFORMANCE
Joseph Irace, Portfolio Manager |
How did Dreyfus BASIC California Municipal Money Market Fund perform during the period?
For the six-month period ended December 31, 2006, the fund produced an annualized yield of 3.09% .Taking into account the effects of compounding, the fund also produced an annualized effective yield of 3.14% ..1
Yields of tax-exempt money market securities rose along with short-term interest rates for much of the reporting period before stabilizing when the Federal Reserve Board (the “Fed”) refrained from further rate hikes in the summer and fall of 2006.
What is the fund’s investment approach?
The fund seeks to provide a high level of current income exempt from federal and California state income taxes to the extent consistent with the preservation of capital and the maintenance of liquidity. To pursue this objective, we attempt to add value by selecting the individual tax-exempt money market instruments from high-quality California exempt issuers that we believe are most likely to provide high tax-exempt current income.We also actively manage the fund’s weighted average maturity in anticipation of interest-rate and supply-and-demand changes in California’s short-term municipal marketplace.
Rather than focusing on economic or market trends, we search for securities that, in our opinion, will help us enhance the fund’s yield.
The management of the fund’s weighted average maturity uses a more tactical approach. If we expect the supply of securities to increase temporarily, we may reduce the fund’s weighted average maturity to make cash available for the purchase of higher yielding securities.This is due to the fact that yields tend to rise if issuers are competing for investor interest. If we expect demand to surge at a time when we anticipate
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued) |
little issuance and therefore lower yields, we may increase the fund’s average weighted maturity to maintain current yields for as long as we deem practical. At other times, we try to maintain a neutral average weighted maturity.
What other factors influenced the fund’s performance?
Just days before the start of the reporting period, the Fed increased short-term interest rates for the seventeenth time since June 2004.The Fed’s moves toward a less accommodative monetary policy were designed to forestall potential inflationary pressures as evidenced by resurgent energy prices and tight labor markets over the first half of 2006. The Fed’s June 2006 rate hike drove the overnight federal funds rate to 5.25%, its highest level in several years.
However, investors’ concerns regarding higher inflation waned during the summer when U.S. housing markets softened and employment gains moderated.As a result, investors looked forward to a possible end to the Fed’s tightening campaign. The Fed obliged when it held the federal funds rate steady at the August meeting of its Federal Open Market Committee (FOMC), the first pause in more than two years. Energy prices fell significantly in the late summer and fall, and GDP growth moderated to a 2.0% annualized rate in the third quarter, helping to ease investors’ inflation fears.The Fed continued to lend credence to a more benign inflation outlook by keeping short-term rates unchanged at its FOMC meetings over the remainder of the year.As a result, tax-exempt money market yields generally stabilized, particularly at the shorter end of the market’s maturity range.
Despite signs of an economic slowdown, including declining housing prices in some previously high-flying California real estate markets, the growing U.S. economy benefited California’s fiscal condition. Tax receipts came in higher than originally projected, reducing the state’s borrowing needs. Consequently, the supply of newly issued California money market instruments fell sharply compared to the same period one year earlier, while investor demand remained robust, putting downward pressure on yields.
4 |
As inflation-related concerns ebbed over the summer and fall, yields of longer-term municipal securities fell while those of shorter-dated municipal money market securities remained stable.This left little difference in the yields of tax-exempt securities with maturities between six months and four years. Investors therefore focused mainly on instruments maturing in six months or less, which put additional downward pressure on yields at the short end of the maturity range.
In this environment, we generally maintained the fund’s weighted average maturity in a range we considered to be slightly longer than industry averages.With yields relatively low from municipal notes and variable-rate demand notes at the long and short ends of the fund’s maturity spectrum, respectively, we continued to focus on tax-exempt commercial paper with maturities in the three- to five-month range.
What is the fund’s current strategy?
Recent Fed comments, mixed economic data and signs of subdued inflation suggest to us that the Fed is unlikely either to raise or lower short-term interest rates over the foreseeable future. While we have maintained the fund’s slightly longer-than-average duration position, we may lengthen its weighted average maturity further to take advantage of seasonal opportunities for higher yields that usually arise around the time income tax payments come due.
January 16, 2007 |
An investment in the fund is not insured or guaranteed by the FDIC or any other government | ||
agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is | ||
possible to lose money by investing in the fund. | ||
1 | Annualized effective yield is based upon dividends declared daily and reinvested monthly. Past | |
performance is no guarantee of future results.Yields fluctuate. Income may be subject to state and | ||
local taxes for non-California residents, and some income may be subject to the federal alternative | ||
minimum tax (AMT) for certain investors. |
The Fund 5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses |
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus BASIC California Municipal Money Market Fund from July 1, 2006 to December 31, 2006. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment assuming actual returns for the six months ended December 31, 2006
Expenses paid per $1,000 † | $ 2.29 | |
Ending value (after expenses) | $1,015.70 |
COMPARING YOUR FUND’S EXPENSES WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment assuming a hypothetical 5% annualized return for the six months ended December 31, 2006
Expenses paid per $1,000 † | $ 2.29 | |
Ending value (after expenses) | $1,022.94 |
† Expenses are equal to the fund’s annualized expense ratio of .45%; multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
6 |
STATEMENT OF INVESTMENTS December 31, 2006 (Unaudited) |
Short-Term | Coupon | Maturity | Principal | |||||
Investments—100.0% | Rate (%) | Date | Amount ($) | Value ($) | ||||
California—94.1% | ||||||||
ABAG Finance Authority for | ||||||||
Non-Profit Corporations, | ||||||||
Revenue (Grauer Foundation for | ||||||||
Education Project) (LOC; | ||||||||
Comerica Bank) | 3.92 | 1/7/07 | 4,000,000 a | 4,000,000 | ||||
California, | ||||||||
CP (Liquidity Facility: Bank | ||||||||
of Nova Scotia, KBC Bank, | ||||||||
Lloyds TSB Bank PLC, National | ||||||||
Australia Bank, Royal Bank of | ||||||||
Scotland PLC and Societe | ||||||||
Generale) | 3.50 | 1/16/07 | 3,100,000 | 3,100,000 | ||||
California, | ||||||||
CP (Liquidity Facility: Bank | ||||||||
of Nova Scotia, KBC Bank, | ||||||||
Lloyds TSB Bank PLC, National | ||||||||
Australia Bank, Royal Bank of | ||||||||
Scotland PLC and Societe | ||||||||
Generale) | 3.45 | 3/6/07 | 3,750,000 | 3,750,000 | ||||
California, | ||||||||
CP (Liquidity Facility: Bank | ||||||||
of Nova Scotia, KBC Bank, | ||||||||
Lloyds TSB Bank PLC, National | ||||||||
Australia Bank, Royal Bank of | ||||||||
Scotland PLC and Societe | ||||||||
Generale) | 3.45 | 3/6/07 | 4,300,000 | 4,300,000 | ||||
California, | ||||||||
Economic Recovery Bonds | 4.50 | 1/1/07 | 100,000 | 100,003 | ||||
California, | ||||||||
GO Notes | 4.75 | 3/1/07 | 200,000 | 200,390 | ||||
California, | ||||||||
GO Notes | 5.25 | 3/1/07 | 500,000 | 501,350 | ||||
California, | ||||||||
GO Notes | 5.50 | 10/1/07 | 100,000 | 101,419 | ||||
California, | ||||||||
GO Notes | 6.30 | 10/1/07 | 125,000 | 127,532 | ||||
California, | ||||||||
GO Notes, Refunding | 5.50 | 2/1/07 | 200,000 | 200,303 | ||||
California, | ||||||||
GO Notes, Refunding | 5.00 | 10/1/07 | 400,000 | 404,364 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
California Community College | ||||||||
Financing Authority, GO Notes, | ||||||||
TRAN (Insured; FSA) | 4.50 | 6/29/07 | 150,000 | 150,559 | ||||
California Department of Water | ||||||||
Resources, Power Supply | ||||||||
Revenue (Insured; MBIA) | 5.25 | 5/1/07 | 200,000 | 201,092 | ||||
California Department of Water | ||||||||
Resources, Water Revenue, CP | ||||||||
(Liquidity Facility; | ||||||||
Landesbank Hessen-Thuringen | ||||||||
Girozentrale) | 3.60 | 1/9/07 | 2,000,000 | 2,000,000 | ||||
California Educational Facilities | ||||||||
Authority, Revenue, Refunding | ||||||||
(Art Center College of Design) | ||||||||
(LOC; Allied Irish Bank) | 3.83 | 1/7/07 | 3,950,000 a | 3,950,000 | ||||
California Health Facilities | ||||||||
Financing Authority, Revenue | ||||||||
(Kaiser Permanente) | 3.77 | 1/7/07 | 1,000,000 a | 1,000,000 | ||||
California Infrastructure and | ||||||||
Economic Development Bank, IDR | ||||||||
(Starter and Alternator | ||||||||
Exchange, Inc. Project) (LOC; | ||||||||
California State Teachers | ||||||||
Retirement System) | 3.95 | 1/7/07 | 1,100,000 a | 1,100,000 | ||||
California Infrastucture and | ||||||||
Economic Development Bank, | ||||||||
Industrial Revenue (Nature | ||||||||
Kist Snacks Project) (LOC; | ||||||||
Wells Fargo Bank) | 3.95 | 1/7/07 | 1,500,000 a | 1,500,000 | ||||
California Pollution Control | ||||||||
Financing Authority, PCR | ||||||||
(Evergreen Oil Incorporated | ||||||||
Project) (LOC; Bank of | ||||||||
The West) | 3.97 | 1/7/07 | 1,000,000 a | 1,000,000 | ||||
California Pollution Control | ||||||||
Financing Authority, PCR, | ||||||||
Refunding (Pacific Gas and | ||||||||
Electric Company) (LOC; | ||||||||
Bank One) | 3.92 | 1/1/07 | 3,400,000 a | 3,400,000 |
8 |
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
California Pollution Control | ||||||||
Financing Authority, PCR, | ||||||||
Refunding (Pacific Gas and | ||||||||
Electric Company) (LOC; | ||||||||
JPMorgan Chase Bank) | 3.92 | 1/1/07 | 1,200,000 a | 1,200,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(Marborg Industries Project) | ||||||||
(LOC; Wachovia Bank) | 3.94 | 1/7/07 | 1,500,000 a | 1,500,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(Rainbow Disposal Co. Inc. | ||||||||
Project) (LOC; Union Bank of | ||||||||
California) | 3.99 | 1/7/07 | 3,910,000 a | 3,910,000 | ||||
California Statewide Communities | ||||||||
Development Authority, MFHR | ||||||||
(Copeland Creek Apartments) | ||||||||
(Liquidity Facility; Goldman | ||||||||
Sachs Group Inc. and LOC; | ||||||||
Goldman Sachs Group Inc.) | 4.01 | 1/7/07 | 1,000,000 a,b | 1,000,000 | ||||
California Statewide Communities | ||||||||
Development Authority, MFHR | ||||||||
(Varenna Assisted Living | ||||||||
Apartments Project) | ||||||||
(LOC; HSH Nordbank) | 3.90 | 1/7/07 | 1,000,000 a | 1,000,000 | ||||
California Statewide Communities | ||||||||
Development Authority, | ||||||||
MFHR (Vista Montana | ||||||||
Apartments) (Liquidity | ||||||||
Facility; Merrill Lynch | ||||||||
Capital Services and | ||||||||
LOC; Merrill Lynch) | 4.00 | 1/7/07 | 2,460,000 a,b | 2,460,000 | ||||
California Statewide Communities | ||||||||
Development Authority, | ||||||||
Multi-Family Revenue (Cedar | ||||||||
Springs) (Liquidity Facility; | ||||||||
Merrill Lynch Capital Services | ||||||||
and LOC; Merrill Lynch) | 4.00 | 1/7/07 | 2,000,000 a,b | 2,000,000 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
California Statewide Communities | ||||||||
Development Authority, Revenue | ||||||||
(Concordia University Irvine | ||||||||
Project) (LOC; U.S. Bank NA) | 3.92 | 1/1/07 | 3,700,000 a | 3,700,000 | ||||
California Statewide Communities | ||||||||
Development Authority, Revenue | ||||||||
(Kaiser Permanente) | 3.82 | 1/7/07 | 3,200,000 a | 3,200,000 | ||||
California Statewide Communities | ||||||||
Development Authority, | ||||||||
Revenue, Refunding (University | ||||||||
Retirement Community at Davis | ||||||||
Project) (Insured; Radian Bank | ||||||||
and Liquidity Facility; Bank | ||||||||
of America) | 3.97 | 1/1/07 | 12,355,000 a | 12,355,000 | ||||
California Statewide Communities | ||||||||
Development Authority, TRAN | ||||||||
(Pooled Local Agencies) | 4.50 | 6/29/07 | 240,000 | 241,010 | ||||
Chaffey Community College | ||||||||
District, GO Notes (Insured; | ||||||||
MBIA and Liquidity Facility; | ||||||||
JPMorgan Chase Bank) | 3.91 | 1/7/07 | 2,985,000 a,b | 2,985,000 | ||||
Conejo Valley Unified School | ||||||||
District, GO Notes, TRAN | 4.25 | 6/29/07 | 1,090,000 | 1,092,766 | ||||
Goldman Sachs Pool Trust, | ||||||||
Revenue (Liquidity Facility; | ||||||||
Goldman Sachs Group and LOC; | ||||||||
IXIS Corporate and | ||||||||
Investment Bank) | 4.01 | 1/7/07 | 4,000,000 a,b | 4,000,000 | ||||
Grossmont Union High School | ||||||||
District, GO Notes | ||||||||
(Insured; MBIA) | 4.00 | 8/1/07 | 750,000 | 752,026 | ||||
Hughson Unified School District, | ||||||||
GO Notes (Insured; FSA) | 10.00 | 8/1/07 | 120,000 | 124,235 | ||||
Long Beach, | ||||||||
Harbor Revenue | 5.50 | 5/15/07 | 420,000 | 422,706 | ||||
Long Beach, | ||||||||
Harbor Revenue, Refunding | ||||||||
(Insured; MBIA) | 5.00 | 5/15/07 | 120,000 | 120,470 | ||||
Los Angeles, | ||||||||
Wastewater System Revenue, | ||||||||
Refunding (Insured; FGIC and | ||||||||
Liquidity Facility; FGIC) | 3.76 | 1/7/07 | 2,935,000 a | 2,935,000 |
10 |
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
Los Angeles County, | ||||||||
GO Notes, TRAN | 4.50 | 6/29/07 | 100,000 | 100,450 | ||||
Los Angeles County Metropolitan | ||||||||
Transportation Authority, | ||||||||
Proposition C Sales Tax Revenue, | ||||||||
Refunding (Insured; MBIA) | 5.00 | 7/1/07 | 180,000 | 181,317 | ||||
Los Angeles County Schools Pooled | ||||||||
Financing Program, Pooled | ||||||||
TRANS Participation | ||||||||
Certificates (Los Angeles | ||||||||
County School and Community | ||||||||
College Districts) (Insured; FSA) | 4.50 | 6/29/07 | 150,000 | 150,632 | ||||
Los Angeles Department of | ||||||||
Airports, Revenue, Refunding | ||||||||
(Ontario International | ||||||||
Airport) (Insured; MBIA) | 4.50 | 5/15/07 | 1,000,000 | 1,003,603 | ||||
Los Angeles Industrial Development | ||||||||
Authority, Empowerment Zone | ||||||||
Facility Revenue (Calko Steel | ||||||||
Incorporated Project) (LOC; | ||||||||
Comerica Bank) | 3.95 | 1/7/07 | 2,150,000 a | 2,150,000 | ||||
Los Angeles Municipal Improvement | ||||||||
Corporation, CP | ||||||||
(LOC; Bank of America) | 3.55 | 1/9/07 | 4,000,000 | 4,000,000 | ||||
Los Angeles Municipal Improvement | ||||||||
Corporation, Sanitation | ||||||||
Equipment Charge Revenue | ||||||||
(Insured; FSA) | 6.00 | 2/1/07 | 500,000 | 500,979 | ||||
Madera County, | ||||||||
COP (Valley Children’s | ||||||||
Hospital Project) | ||||||||
(Insured; MBIA) | 6.25 | 3/15/07 | 175,000 | 175,947 | ||||
North Orange County, Regional | ||||||||
Occupational Program, COP | ||||||||
(Educational Center Funding | ||||||||
Program) (Insured; Assured | ||||||||
Guaranty and Liquidity | ||||||||
Facility; Dexia Credit Locale) | 3.76 | 1/7/07 | 2,950,000 a | 2,950,000 | ||||
Oakland, | ||||||||
COP (Capital Equipment | ||||||||
Project) (LOC; Landesbank | ||||||||
Hessen-Thuringen Girozentrale) | 3.82 | 1/7/07 | 2,200,000 a | 2,200,000 |
The Fund 11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
Orange County, | ||||||||
Airport Revenue, Refunding | ||||||||
(Insured; MBIA) | 6.00 | 7/1/07 | 100,000 | 101,035 | ||||
Oxnard Financing Authority, | ||||||||
Solid Waste Revenue, Refunding | ||||||||
(Insured; AMBAC) | 4.00 | 5/1/07 | 600,000 | 600,322 | ||||
Palomar Pomerado Health | ||||||||
(Insured; AMBAC and Liquidity | ||||||||
Facility; Merrill Lynch) | 3.92 | 1/7/07 | 7,540,000 a,b | 7,540,000 | ||||
Pittsburg Redevelopment Agency, | ||||||||
Subordinate Tax Allocation | ||||||||
Revenue, Refunding (Los | ||||||||
Medanos Community Development | ||||||||
Project) (Insured; AMBAC) | 4.00 | 9/1/07 | 535,000 | 536,649 | ||||
Sacramento County, | ||||||||
GO Notes, TRAN | 4.50 | 7/17/07 | 130,000 | 130,535 | ||||
Salinas Valley Solid Waste | ||||||||
Authority, Revenue | ||||||||
(Insured; AMBAC) | 5.00 | 8/1/07 | 535,000 | 539,229 | ||||
San Diego, | ||||||||
Water Utility Fund Net System | ||||||||
Revenue (Certificates of | ||||||||
Undivided Interest) (Insured; | ||||||||
FGIC and Liquidity Facility; | ||||||||
Citibank NA) | 3.91 | 1/7/07 | 5,000,000 a,b | 5,000,000 | ||||
San Diego County Water Authority, | ||||||||
CP (Liquidity Facility; Dexia | ||||||||
Credit Locale) | 3.51 | 2/7/07 | 4,500,000 | 4,500,000 | ||||
San Diego County Water Authority, | ||||||||
CP (Liquidity Facility; Dexia | ||||||||
Credit Locale) | 3.50 | 3/8/07 | 1,000,000 | 1,000,000 | ||||
Santa Ana Financing Authority, | ||||||||
LR, Refunding (Police | ||||||||
Administration and Holding | ||||||||
Facility) (Insured; MBIA) | 4.00 | 7/1/07 | 940,000 | 942,201 |
12 |
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
South Coast Local Education | ||||||||
Agencies, TRAN (Pooled Tax | ||||||||
and Revenue Anticipation | ||||||||
Note Program) | 4.50 | 6/29/07 | 800,000 | 803,615 | ||||
South Orange County Public | ||||||||
Financing Authority, Special | ||||||||
Tax Revenue (Foothill Area) | ||||||||
(Insured; FGIC) | 7.50 | 8/15/07 | 300,000 | 307,178 | ||||
Southern California Public Power | ||||||||
Authority, San Juan Power | ||||||||
Project Revenue, Refunding | ||||||||
(San Juan Unit 3) (Insured; FSA) | 5.00 | 1/1/07 | 100,000 | 100,000 | ||||
Stockton Community Facilities | ||||||||
District, Special Tax Revenue | ||||||||
(Arch Road East Community | ||||||||
Facilities District Number | ||||||||
99-02) (LOC; Wells Fargo Bank) | 3.76 | 1/7/07 | 2,335,000 a | 2,335,000 | ||||
Turlock Irrigation District, | ||||||||
Revenue, CP (LOC; Citibank NA) | 3.52 | 2/8/07 | 3,000,000 | 3,000,000 | ||||
University of California, | ||||||||
Revenue, CP | 3.50 | 3/8/07 | 1,500,000 | 1,500,000 | ||||
University of California Regents, | ||||||||
General Revenue (Putters | ||||||||
Program) (Insured; MBIA and | ||||||||
Liquidity Facility; PB Finance Inc.) | 3.93 | 1/7/07 | 1,995,000 a,b | 1,995,000 | ||||
University of California Regents, | ||||||||
Revenue, CP | 3.50 | 1/12/07 | 1,000,000 | 1,000,000 | ||||
Vallejo, | ||||||||
Water Revenue, COP (LOC; | ||||||||
KBC Bank) | 3.92 | 1/7/07 | 2,000,000 a | 2,000,000 | ||||
West Covina Public Financing | ||||||||
Authority, LR, Refunding | ||||||||
(Public Facilities Project) | ||||||||
(LOC; California State | ||||||||
Teachers Retirement System) | 3.85 | 1/7/07 | 2,695,000 a | 2,695,000 |
The Fund 13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
U.S. Related—5.9% | ||||||||
Puerto Rico Aqueduct and Sewage | ||||||||
Authority, Revenue, Refunding | ||||||||
(Insured; MBIA) | 6.00 | 7/1/07 | 165,000 | 167,012 | ||||
Puerto Rico Aqueduct and Sewer | ||||||||
Authority, Revenue (Liquidity | ||||||||
Facility; Citigroup Global | ||||||||
Market Holding and LOC; | ||||||||
Citigroup Global Market Holding) | 3.97 | 1/7/07 | 2,000,000 a,b | 2,000,000 | ||||
Puerto Rico Commonwealth, | ||||||||
Public Improvement GO Notes | ||||||||
(Insured; MBIA) | 6.50 | 7/1/07 | 175,000 | 177,549 | ||||
Puerto Rico Commonwealth, | ||||||||
Public Improvement GO Notes, | ||||||||
Refunding (Insured; FGIC) | 5.00 | 7/1/07 | 260,000 | 261,859 | ||||
Puerto Rico Commonwealth, | ||||||||
TRAN (LOC: Banco Bilboa | ||||||||
Vizcaya, Banco Santander, Bank | ||||||||
of Nova Scotia, BNP Paribas, | ||||||||
Dexia Credit Locale and | ||||||||
Fortis Bank) | 4.50 | 7/30/07 | 4,500,000 | 4,525,280 | ||||
Puerto Rico Electric Power | ||||||||
Authority, Power Revenue, | ||||||||
Refunding (Insured; MBIA) | 4.50 | 7/1/07 | 350,000 | 351,695 | ||||
Puerto Rico Municipal Finance | ||||||||
Agency (Insured; FSA) | 4.00 | 8/1/07 | 435,000 | 436,100 | ||||
Total Investments (cost $134,043,412) | 100.0% | 134,043,412 | ||||||
Cash and Receivables (Net) | .0% | 42,255 | ||||||
Net Assets | 100.0% | 134,085,667 |
a Securities payable on demand.Variable interest rate—subject to periodic change. |
b Securities exempt from registration under Rule 144A of the Securities Act of 1933.These securities may be resold in |
transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2006, these |
securities amounted to $28,980,000 or 21.6% of net assets. |
14 |
Summary of Abbreviations | ||||||
ACA | American Capital Access | AGC | ACE Guaranty Corporation | |||
AGIC | Asset Guaranty Insurance | AMBAC | American Municipal Bond | |||
Company | Assurance Corporation | |||||
ARRN | Adjustable Rate Receipt Notes | BAN | Bond Anticipation Notes | |||
BIGI | Bond Investors Guaranty Insurance | BPA | Bond Purchase Agreement | |||
CGIC | Capital Guaranty Insurance | CIC | Continental Insurance | |||
Company | Company | |||||
CIFG | CDC Ixis Financial Guaranty | CMAC | Capital Market Assurance | |||
Corporation | ||||||
COP | Certificate of Participation | CP | Commercial Paper | |||
EDR | Economic Development Revenue | EIR | Environmental Improvement | |||
Revenue | ||||||
FGIC | Financial Guaranty Insurance | |||||
Company | FHA | Federal Housing Administration | ||||
FHLB | Federal Home Loan Bank | FHLMC | Federal Home Loan Mortgage | |||
Corporation | ||||||
FNMA | Federal National | |||||
Mortgage Association | FSA | Financial Security Assurance | ||||
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 | |||
LOC | Letter of Credit | LOR | Limited Obligation Revenue | |||
LR | Lease Revenue | MBIA | Municipal Bond Investors Assurance | |||
Insurance Corporation | ||||||
MFHR | Multi-Family Housing Revenue | MFMR | Multi-Family Mortgage Revenue | |||
PCR | Pollution Control Revenue | PILOT | Payment in Lieu of Taxes | |||
RAC | Revenue Anticipation Certificates | RAN | Revenue Anticipation Notes | |||
RAW | Revenue Anticipation Warrants | RRR | Resources Recovery Revenue | |||
SAAN | State Aid Anticipation Notes | SBPA | Standby Bond Purchase Agreement | |||
SFHR | Single Family Housing Revenue | SFMR | Single Family Mortgage Revenue | |||
SONYMA | State of New York Mortgage Agency | SWDR | Solid Waste Disposal Revenue | |||
TAN | Tax Anticipation Notes | TAW | Tax Anticipation Warrants | |||
TRAN | Tax and Revenue Anticipation Notes | XLCA | XL Capital Assurance |
The Fund 15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Summary of Combined Ratings (Unaudited) | ||||||||
Fitch | or Moody’s or | Standard & Poor’s | Value (%) † | |||||
F1+,F1 | VMIG1,MIG1,P1 | SP1+,SP1,A1+,A1 | 90.4 | |||||
AAA,AA,A c | Aaa,Aa,A c | AAA,AA,A c | 9.6 | |||||
100.0 | ||||||||
† | Based on total investments. | |||||||
c | Notes which are not F, MIG and SP rated are represented by bond ratings of the issuers. | |||||||
See notes to financial statements. |
16 |
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2006 (Unaudited)
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments | 134,043,412 | 134,043,412 | ||
Cash | 1,134,214 | |||
Interest receivable | 764,484 | |||
135,942,110 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 2 | 39,762 | |||
Payable for investment securities purchased | 1,471,075 | |||
Dividends payable | 345,606 | |||
1,856,443 | ||||
Net Assets ($) | 134,085,667 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 134,061,435 | |||
Accumulated net realized gain (loss) on investments | 24,232 | |||
Net Assets ($) | 134,085,667 | |||
Shares Outstanding | ||||
(unlimited number of shares of Beneficial Interest authorized) | 134,061,435 | |||
Net Asset Value, offering and redemption price per share ($) | 1.00 |
See notes to financial statements. |
The Fund 17
STATEMENT OF OPERATIONS Six Months Ended December 31, 2006 (Unaudited) |
Investment Income ($): | ||
Interest Income | 2,072,786 | |
Expenses: | ||
Management fee—Note 2 | 264,479 | |
Total Expenses | 264,479 | |
Investment Income—Net | 1,808,307 | |
Realized Gain (Loss) on Investment—Note 1(b) ($) | 194 | |
Net Increase in Net Assets Resulting from Operations | 1,808,501 |
See notes to financial statements. |
18 |
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
December 31, 2006 | Year Ended | |||
(Unaudited) | June 30, 2006 | |||
Operations ($): | ||||
Investment income—net | 1,808,307 | 1,826,370 | ||
Net realized gain (loss) on investments | 194 | 25,009 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 1,808,501 | 1,851,379 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net | (1,808,307) | (1,826,370) | ||
Beneficial Interest Transactions ($1.00 per share): | ||||
Net proceeds from shares sold | 285,840,429 | 337,774,914 | ||
Dividends reinvested | 745,375 | 981,586 | ||
Cost of shares redeemed | (224,567,461) | (338,855,401) | ||
Increase (Decrease) in Net Assets | ||||
from Beneficial Interest Transactions | 62,018,343 | (98,901) | ||
Total Increase (Decrease) in Net Assets | 62,018,537 | (73,892) | ||
Net Assets ($): | ||||
Beginning of Period | 72,067,130 | 72,141,022 | ||
End of Period | 134,085,667 | 72,067,130 |
See notes to financial statements. |
The Fund 19
FINANCIAL HIGHLIGHTS |
The following table describes the performance for the fiscal periods indicated. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||||
December 31, 2006 | Year Ended June 30, | |||||||||||
(Unaudited) | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||||
Investment Operations: | ||||||||||||
Investment income—net | .016 | .025 | .014 | .005 | .008 | .013 | ||||||
Distributions: | ||||||||||||
Dividends from investment | ||||||||||||
income—net | (.016) | (.025) | (.014) | (.005) | (.008) | (.013) | ||||||
Net asset value, end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||||
Total Return (%) | 3.11a | 2.50 | 1.34 | .53 | .84 | 1.36 | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .45a | .45 | .46 | .45 | .45 | .46 | ||||||
Ratio of net investment income | ||||||||||||
to average net assets | 3.08a | 2.49 | 1.37 | .52 | .83 | 1.36 | ||||||
Net Assets, end of period | ||||||||||||
($ X 1,000) | 134,086 | 72,067 | 72,141 | 57,791 | 75,393 | 81,494 | ||||||
a Annualized. | ||||||||||||
See notes to financial statements. |
20 |
NOTES TO FINANCIAL STATEMENTS ( U n a u d i t e d )
NOTE 1—Significant Accounting Policies:
Dreyfus BASIC California Municipal Money Market Fund (the “fund”) is a separate non-diversified series of The Dreyfus/Laurel Tax-Free Municipal Funds (the “Trust”) 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 provide a high level of current income exempt from federal and California state income taxes to the extent consistent with the preservation of capital and the maintenance of liq-uidity.The Dreyfus Corporation (the “Manager’’ or “Dreyfus”) serves as the fund’s investment adviser.The Manager is a wholly-owned subsidiary of Mellon Financial Corporation (“Mellon Financial”). Dreyfus Service Corporation (the “Distributor”), a wholly-owned subsidiary of the Manager, is the distributor of the fund’s shares, which are sold to the public without a sales charge.
On December 4, 2006, Mellon Financial and The Bank of New York Company, Inc. announced that they had entered into a definitive agreement to merge. The new company will be called The Bank of New York Mellon Corporation. As part of this transaction, Dreyfus would become a wholly-owned subsidiary of The Bank of New York Mellon Corporation.The transaction is subject to certain regulatory approvals and the approval of The Bank of New York Company, Inc.’s and Mellon Financial’s shareholders, as well as other customary conditions to closing. Subject to such approvals and the satisfaction of the other conditions, Mellon Financial and The Bank of New York Company, Inc. expect the transaction to be completed in the third quarter of 2007.
The fund’s financial statements are prepared in accordance with U.S. generally accepted accounting principles, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(a) Portfolio valuation: Investments in securities are valued at amortized cost in accordance with Rule 2a-7 of the Act, which has been determined by the Board of Trustees to represent the fair value of the fund’s investments.
It is the fund’s policy to maintain a continuous net asset value per share of $1.00 for the fund; the fund has adopted certain investment, portfolio valuation and dividend and distribution policies to enable it to do so. There is no assurance, however, that the fund will be able to maintain a stable net asset value per share of $1.00.
On September 20, 2006, the Financial Accounting Standards Board (FASB) released Statement of Financial Accounting Standards No. 157 “Fair Value Measurements” (“FAS 157”). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Management does not believe that the application of this standard will have a material impact on the financial statements of the fund.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date 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. Realized gain and loss from securities transactions are recorded on the identified cost basis. Cost of investments represents amortized cost.
(c) Concentration of risk: 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.
All cash balances were maintained with the Custodian, Mellon Bank, N.A.
(d) Dividends to shareholders: It is the policy of the fund to declare dividends daily from investment income-net; such dividends are paid
22 |
monthly. Dividends from net realized capital gain, 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 gain can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gain.
(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, if any, sufficient to relieve it from substantially all federal income and excise taxes.
On July 13, 2006, the FASB released FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority.Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Management does not believe that the application of this standard will have a material impact on the financial statements of the fund.
The tax character of distributions paid to shareholders during the fiscal year ended June 30, 2006, were all tax exempt income. The tax character of current year distributions will be determined at the end of the current fiscal year.
At December 31, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 2—Investment Management Fee and Other Transactions with Affiliates:
Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund.The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .45% of the value of the fund’s average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, fees and expenses of non-interested Trustees (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund’s allocable portion of fees and expenses of the non-interested Trustees (including counsel fees). Each Trustee receives $45,000 per year, plus $6,000 for each joint Board meeting of The Dreyfus/Laurel Funds, Inc., the Trust and The Dreyfus/Laurel Funds Trust (collectively, the “Dreyfus/Laurel Funds”) attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts). With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund.
24 |
These fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Trust directly to the non-interested Trustees, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Trustees.
The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $39,762.
NOTE 3—Bank Line of Credit: |
The fund participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 2006, the fund did not borrow under the Facility.
The Fund 25
For More | Information | |
Dreyfus BASIC | Transfer Agent & | |
California Municipal | Dividend Disbursing Agent | |
Money Market Fund | ||
Dreyfus Transfer, Inc. | ||
200 Park Avenue | ||
200 Park Avenue | ||
New York, NY 10166 | ||
New York, NY 10166 | ||
Manager | Distributor | |
The Dreyfus Corporation | ||
Dreyfus Service Corporation | ||
200 Park Avenue | ||
200 Park Avenue | ||
New York, NY 10166 | ||
New York, NY 10166 | ||
Custodian | ||
Mellon Bank, N.A. | ||
One Mellon Bank Center | ||
Pittsburgh, PA 15258 |
Telephone 1-800-645-6561
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 E-mail Send your request to info@dreyfus.com Internet Information can be viewed online or downloaded at: http://www.dreyfus.com
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-202-551-8090.
Information regarding how the fund voted proxies relating to portfolio securities for the 12-month period ended June 30, 2006, is available on the SEC’s website at http://www.sec.gov and without charge, upon request, by calling 1-800-645-6561.
© 2007 Dreyfus Service Corporation
Dreyfus BASIC Massachusetts Municipal Money Market Fund |
SEMIANNUAL REPORT December 31, 2006
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Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes.
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value
Contents | ||
THE FUND | ||
2 | A Letter from the CEO | |
3 | Discussion of Fund Performance | |
6 | Understanding Your Fund’s Expenses | |
6 | Comparing Your Fund’s Expenses | |
With Those of Other Funds | ||
7 | Statement of Investments | |
14 | Statement of Assets and Liabilities | |
15 | Statement of Operations | |
16 | Statement of Changes in Net Assets | |
17 | Financial Highlights | |
18 | Notes to Financial Statements | |
FOR MORE INFORMATION | ||
Back Cover |
Dreyfus BASIC Massachusetts Municipal Money Market Fund |
The Fund
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A LETTER FROM THE CEO
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus BASIC Massachusetts Municipal Money Market Fund covering the 6-month period from July 1, 2006, through December 31, 2006.
2006 proved to be a good time for the financial markets, with rallies in the second half of the year helping stocks, bonds and money market instruments achieve positive absolute returns.A number of factors contributed to the markets’ gains, including a more moderate economic expansion, strong business conditions, subdued inflation, stabilizing interest rates and robust investor demand for most asset classes.
In our analysis, 2006 provided an excellent reminder of the need for a long-term investment perspective. Adopting too short a time frame proved costly for some investors last year, as reducing allocations to stocks and bonds generally meant missing subsequent rallies. Indeed, history shows that reacting to near-term developments with extreme shifts in strategy rarely is the right decision. We believe that a better course is to set a portfolio mix to meet future goals, while attempting to ignore short term market fluctuations. Money market funds have continued to play an important role in that mix.
For information about how the fund performed during the reporting period, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund’s portfolio manager.
Thank you for your continued confidence and support.We wish you good health and prosperity in 2007.
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Thomas F. Eggers Chief Executive Officer The Dreyfus Corporation January 16, 2007 |
2 |
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DISCUSSION OF FUND PERFORMANCE
J. Christopher Nicholl, Portfolio Manager
How did Dreyfus BASIC Massachusetts Municipal Money Market Fund perform during the period?
For the six-month period ended December 31, 2006, the fund’s shares provided an annualized yield of 3.09% and, after taking into account the effects of compounding, an annualized effective yield of 3.13% ..1
Tax-exempt money market yields generally stabilized over the second half of 2006 as economic growth moderated and the Federal Reserve Board (the “Fed”) refrained from further rate hikes between July and December, its first pauses in more than two years.
What is the fund’s investment approach?
The fund seeks to provide a high level of current income exempt from federal and Massachusetts state income taxes to the extent consistent with the preservation of capital and the maintenance of liquidity.To pursue this objective, we attempt to add value by selecting the individual tax-exempt money market instruments from Massachusetts issuers that we believe are most likely to provide high tax-exempt current income, while focusing on credit risk. We also actively manage the fund’s weighted average maturity in anticipation of interest-rate and supply-and-demand changes in Massachusetts’ short-term municipal marketplace.
Rather than focusing on economic or market trends, we search for securities that, in our opinion, will help us enhance the fund’s yield.
The management of the fund’s weighted average maturity uses a more tactical approach. If we expect the supply of securities to increase temporarily, we may reduce the fund’s weighted average maturity to make cash available for the purchase of higher yielding securities.This is due to the fact that yields tend to rise temporarily if issuers are competing for investor interest. If we expect demand to surge at a time when we anticipate little issuance and therefore lower yields, we may increase
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued) |
the fund’s average weighted maturity to maintain current yields for as long as practical. At other times, we try to maintain a neutral average weighted maturity.
What other factors influenced the fund’s performance?
After posting robust growth earlier in 2006, the rate of U.S. economic expansion moderated over the second half of the year. Softening housing markets and declining energy prices suggested that investors’ previous economic and inflation fears might have been overblown, and that a gradual slowdown in the U.S. economy was likely to relieve inflationary pressures.The Fed lent credence to a more benign inflation outlook when it held the overnight federal funds rate steady at 5.25% over the second half of the year. The Fed’s pause represented the first meetings of its Federal Open Market Committee without a rate hike since June 2004.
Expectations of slower economy were confirmed when it later was announced that the GDP growth rate had fallen to 2.0% during the third quarter of 2005, down from 2.6% in the second quarter.Yet, U.S. labor markets remained persistently strong and declining housing prices apparently failed to affect other areas of the economy, helping to reassure investors that the U.S. economy was heading for a “soft landing.”
Despite signs of an economic slowdown, the fiscal conditions of Massachusetts and its municipalities remained sound. Massachusetts took in more tax revenue than originally projected in 2006, reducing its need to borrow.Yet, even as the supply of newly issued municipal securities fell compared to the same period one year ago, investor demand remained robust from individuals and institutions seeking competitive levels of tax-exempt income.
In this environment, short-term tax-exempt money market instruments traded in a fairly tight range, while yields at the longer end of the maturity range fell modestly. As a result, yield differences along the money market spectrum narrowed. Indeed, at times near the end of 2006, yields of variable rate demand notes (VRDNs), on which
4 |
yields are reset weekly, were higher than those of fixed-rate securities with slightly longer maturities, a phenomenon known as an “inverted yield curve.” Investors therefore continued to focus mainly on short-term instruments.
During much of the reporting period, we maintained the fund’s weighted average maturity in a range that was longer than industry averages to take advantage of higher yields among longer-term instruments. However, with yield differences so narrow along its maturity range, the fund’s emphasis on longer-term instruments had little effect on overall performance. Later in the reporting period, we slightly reduced the fund’s weighted average maturity, and we placed greater emphasis on VRDNs.
What is the fund’s current strategy?
As of year-end, mixed economic and inflation data suggest to us that the Fed is unlikely to raise or reduce short-term interest rates over the foreseeable future.Therefore, we have continued to maintain a modestly long weighted average maturity compared to industry averages. At the same time, with the yield curve inverted at the short end of its range, we have retained our focus on VRDNs over longer-term municipal notes or commercial paper. Of course, we are prepared to adjust our strategies as market conditions evolve.
January 16, 2007 |
An investment in the fund is not insured or guaranteed by the FDIC or any other government | ||
agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is | ||
possible to lose money by investing in the fund. | ||
1 | Annualized effective yield is based upon dividends declared daily and reinvested monthly. Past | |
performance is no guarantee of future results.Yields fluctuate. Income may be subject to state and | ||
local taxes for non-Massachusetts residents, and some income may be subject to the federal | ||
alternative minimum tax (AMT) for certain investors. |
The Fund 5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses |
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus BASIC Massachusetts Municipal Money Market Fund from July 1, 2006 to December 31, 2006. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment assuming actual returns for the six months ended December 31, 2006
Expenses paid per $1,000 † | $ 2.34 | |
Ending value (after expenses) | $1,015.70 |
COMPARING YOUR FUND’S EXPENSES WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment assuming a hypothetical 5% annualized return for the six months ended December 31, 2006
Expenses paid per $1,000 † | $ 2.35 | |
Ending value (after expenses) | $1,022.89 |
† Expenses are equal to the fund’s annualized expense ratio of .46%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
6 |
STATEMENT OF INVESTMENTS December 31, 2006 (Unaudited) |
Short-Term | Coupon | Maturity | Principal | |||||
Investments—99.1% | Rate (%) | Date | Amount ($) | Value ($) | ||||
Ayer, | ||||||||
GO Notes, BAN | 4.50 | 6/1/07 | 1,150,600 | 1,154,360 | ||||
Boston Industrial Development | ||||||||
Financing Authority, Revenue | ||||||||
(Fenway Community Health | ||||||||
Center Project) (LOC; Fifth | ||||||||
Third Bank) | 3.88 | 1/7/07 | 3,240,000 a | 3,240,000 | ||||
Braintree, | ||||||||
GO Notes, BAN | 4.00 | 11/14/07 | 4,500,000 | 4,518,877 | ||||
Canton Housing Authority, | ||||||||
MFHR, Refunding (Canton | ||||||||
Arboretum Apartments) | ||||||||
(Insured; FNMA) | 3.96 | 1/7/07 | 6,665,000 a | 6,665,000 | ||||
Eclipse Funding Trust, | ||||||||
Revenue (Massachusetts Water | ||||||||
Resources Authority) (Insured; | ||||||||
MBIA and Liquidity Facility; | ||||||||
U.S. Bank) | 3.93 | 1/7/07 | 6,000,000 a | 6,000,000 | ||||
Lexington, | ||||||||
GO Notes, BAN | 4.25 | 2/1/07 | 2,165,000 | 2,166,067 | ||||
Marblehead, | ||||||||
GO Notes, BAN | 4.25 | 8/17/07 | 2,226,500 | 2,235,216 | ||||
Massachusetts, | ||||||||
Consolidated Loan | 3.96 | 1/1/07 | 1,200,000 a | 1,200,000 | ||||
Massachusetts, | ||||||||
CP (LOC; Bank of Nova Scotia) | 3.55 | 1/5/07 | 1,500,000 | 1,500,000 | ||||
Massachusetts, | ||||||||
GO (Central Artery/Ted | ||||||||
Williams Tunnel Infrastructure | ||||||||
Loan Act of 2000) (Liquidity | ||||||||
Facility; State Street Bank | ||||||||
and Trust Co.) | 3.95 | 1/1/07 | 1,400,000 a | 1,400,000 | ||||
Massachusetts, | ||||||||
GO, Refunding (Liquidity | ||||||||
Facility; Landesbank | ||||||||
Hessen-Thuringen Girozentrale) | 3.90 | 1/7/07 | 2,850,000 a | 2,850,000 | ||||
Massachusetts Bay Transportation | ||||||||
Authority, General | ||||||||
Transportation Systems, GO | ||||||||
Notes (Liquidity Facility; | ||||||||
Westdeutsche Landesbank) | 3.88 | 1/7/07 | 3,500,000 a | 3,500,000 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Brandon | ||||||||
Residential Treatment Center, | ||||||||
Inc. Project) (LOC; SunTrust Bank) | 3.91 | 1/7/07 | 1,025,000 a | 1,025,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Dexter School | ||||||||
Project) (Insured; MBIA and | ||||||||
Liquidity Facility; Wachovia Bank) | 3.94 | 1/7/07 | 1,000,000 a | 1,000,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Holy Cross | ||||||||
College Issue) (Insured; AMBAC | ||||||||
and Liquidity Facility; Morgan | ||||||||
Stanley Bank) | 3.94 | 1/7/07 | 1,600,000 a,b | 1,600,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Meadowbrook | ||||||||
School Project) (LOC; Allied | ||||||||
Irish Banks) | 3.91 | 1/7/07 | 1,370,000 a | 1,370,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (WGBH | ||||||||
Educational Foundation Issue) | ||||||||
(Insured; AMBAC and Liquidity | ||||||||
Facility; Royal Bank of Canada) | 3.90 | 1/7/07 | 4,650,000 a | 4,650,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Worcester | ||||||||
Academy Issue) (LOC; Allied | ||||||||
Irish Banks) | 3.94 | 1/7/07 | 3,000,000 a | 3,000,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (YOU, Inc.) | ||||||||
(LOC; PNC Bank) | 3.87 | 1/7/07 | 3,200,000 a | 3,200,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, SWDR (Newark Group | ||||||||
Project) (LOC; JPMorgan | ||||||||
Chase Bank) | 3.92 | 1/7/07 | 1,000,000 a | 1,000,000 | ||||
Massachusetts Health and Educational | ||||||||
Facilities Authority, Health Care | ||||||||
Facilities Revenue (Partners | ||||||||
Healthcare Systems) (Insured; | ||||||||
FSA and Liquidity Facility: | ||||||||
Bayerische Landesbank and | ||||||||
JPMorgan Chase Bank) | 3.88 | 1/7/07 | 2,500,000 a | 2,500,000 |
8 |
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Health Care | ||||||||
Facilities Revenue (Partners | ||||||||
Healthcare Systems) (Insured; | ||||||||
FSA and Liquidity Facility: | ||||||||
Bayerische Landesbank and | ||||||||
JPMorgan Chase Bank) | 3.92 | 1/7/07 | 2,000,000 a | 2,000,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue | ||||||||
(Amherst College Issue) | 3.58 | 1/11/07 | 975,000 | 975,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Capital | ||||||||
Asset Program Issue) (Insured; | ||||||||
MBIA and Liquidity Facility; | ||||||||
State Street Bank | ||||||||
and Trust Co.) | 3.88 | 1/1/07 | 1,740,000 a | 1,740,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Capital | ||||||||
Asset Program Issue) | ||||||||
(LOC; Bank of America) | 3.89 | 1/1/07 | 2,000,000 a | 2,000,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Capital | ||||||||
Asset Program Issue) (LOC; | ||||||||
Citizens Bank of Massachusetts) | 3.84 | 1/7/07 | 4,520,000 a | 4,520,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Capital | ||||||||
Asset Program Issue) (LOC; | ||||||||
Citizens Bank of Massachusetts) | 3.84 | 1/7/07 | 7,800,000 a | 7,800,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Childrens | ||||||||
Hospital Issue) (Insured; | ||||||||
AMBAC and Liquidity Facility; | ||||||||
Bank of America) | 3.95 | 1/1/07 | 2,700,000 a | 2,700,000 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Emmanuel | ||||||||
College Issue) (LOC; Allied | ||||||||
Irish Banks) | 3.92 | 1/7/07 | 4,450,000 a | 4,450,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Harvard | ||||||||
University Issue) | 3.83 | 1/7/07 | 4,000,000 a | 4,000,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Peabody | ||||||||
Essex Museum Issue) (LOC; | ||||||||
Royal Bank of Scotland) | 3.86 | 1/7/07 | 4,000,000 a | 4,000,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Putters | ||||||||
Program) (Insured; FGIC and | ||||||||
Liquidity Facility; JPMorgan | ||||||||
Chase Bank) | 3.94 | 1/7/07 | 5,365,000 a | 5,365,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (University | ||||||||
of Massachusetts Issue) (LOC; | ||||||||
Dexia Credit Locale) | 3.86 | 1/7/07 | 2,500,000 a | 2,500,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Wellesley | ||||||||
College Issue) | 3.92 | 1/7/07 | 4,675,000 a | 4,675,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Williams | ||||||||
College Issue) | 3.85 | 1/7/07 | 2,600,000 a | 2,600,000 | ||||
Massachusetts Industrial Finance | ||||||||
Agency, First Mortgage Revenue | ||||||||
(Orchard Cove Inc.) (LOC; Bank | ||||||||
of America) | 3.86 | 1/7/07 | 1,300,000 a | 1,300,000 | ||||
Massachusetts Port Authority, | ||||||||
Revenue, CP (LOC; Westdeutsche | ||||||||
Landesbank) | 3.55 | 1/22/07 | 5,000,000 | 5,000,000 |
10 |
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
Massachusetts School Building | ||||||||
Authority, Dedicated Sales Tax | ||||||||
Revenue (Insured; FSA and | ||||||||
Liquidity Facility; Morgan | ||||||||
Stanley Bank) | 3.94 | 1/7/07 | 3,500,000 a,b | 3,500,000 | ||||
Massachusetts Water Resources | ||||||||
Authority, CP (LOC; Bayerische | ||||||||
Landesbank) | 3.52 | 1/3/07 | 3,500,000 | 3,499,963 | ||||
Massachusetts Water Resources | ||||||||
Authority, Multi-Modal | ||||||||
Subordinated General Revenue, | ||||||||
Refunding (Insured; FGIC and | ||||||||
Liquidity Facility; Bayerische | ||||||||
Landesbank) | 3.88 | 1/7/07 | 4,200,000 a | 4,200,000 | ||||
Massachusetts Water Resources | ||||||||
Authority, Multi-Modal | ||||||||
Subordinated General Revenue, | ||||||||
Refunding (LOC; Landesbank | ||||||||
Hessen-Thuringen Girozentrale) | 3.96 | 1/1/07 | 9,745,000 a | 9,745,000 | ||||
Northborough-Southborough Regional | ||||||||
School District, GO Notes, BAN | 4.00 | 10/25/07 | 2,500,000 | 2,509,419 | ||||
Raynham, | ||||||||
GO Notes, BAN | 4.35 | 8/24/07 | 1,900,000 | 1,909,444 | ||||
Total Investments (cost $136,762,333) | 99.1% | 136,763,346 | ||||||
Cash and Receivables (Net) | .9% | 1,260,812 | ||||||
Net Assets | 100.0% | 138,024,158 |
a Securities payable on demand.Variable interest rate—subject to periodic change. |
b Securities exempt from registration under Rule 144A of the Securities Act of 1933.These securities may be resold in |
transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2006, these |
securities amounted to $5,100,000 or 3.7% of net assets. |
The Fund 11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Summary of Abbreviations | ||||||
ACA | American Capital Access | AGC | ACE Guaranty Corporation | |||
AGIC | Asset Guaranty Insurance | AMBAC | American Municipal Bond | |||
Company | Assurance Corporation | |||||
ARRN | Adjustable Rate Receipt Notes | BAN | Bond Anticipation Notes | |||
BIGI | Bond Investors Guaranty Insurance | BPA | Bond Purchase Agreement | |||
CGIC | Capital Guaranty Insurance | CIC | Continental Insurance | |||
Company | Company | |||||
CIFG | CDC Ixis Financial Guaranty | CMAC | Capital Market Assurance | |||
Corporation | ||||||
COP | Certificate of Participation | CP | Commercial Paper | |||
EDR | Economic Development Revenue | EIR | Environmental Improvement | |||
Revenue | ||||||
FGIC | Financial Guaranty Insurance | |||||
Company | FHA | Federal Housing Administration | ||||
FHLB | Federal Home Loan Bank | FHLMC | Federal Home Loan Mortgage | |||
Corporation | ||||||
FNMA | Federal National | |||||
Mortgage Association | FSA | Financial Security Assurance | ||||
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 | |||
LOC | Letter of Credit | LOR | Limited Obligation Revenue | |||
LR | Lease Revenue | MBIA | Municipal Bond Investors Assurance | |||
Insurance Corporation | ||||||
MFHR | Multi-Family Housing Revenue | MFMR | Multi-Family Mortgage Revenue | |||
PCR | Pollution Control Revenue | PILOT | Payment in Lieu of Taxes | |||
RAC | Revenue Anticipation Certificates | RAN | Revenue Anticipation Notes | |||
RAW | Revenue Anticipation Warrants | RRR | Resources Recovery Revenue | |||
SAAN | State Aid Anticipation Notes | SBPA | Standby Bond Purchase Agreement | |||
SFHR | Single Family Housing Revenue | SFMR | Single Family Mortgage Revenue | |||
SONYMA | State of New York Mortgage Agency | SWDR | Solid Waste Disposal Revenue | |||
TAN | Tax Anticipation Notes | TAW | Tax Anticipation Warrants | |||
TRAN | Tax and Revenue Anticipation Notes | XLCA | XL Capital Assurance |
12 |
Summary of Combined Ratings (Unaudited) | ||||||||
Fitch | or Moody’s or | Standard & Poor’s | Value (%) † | |||||
F1+,F1 | VMIG1,MIG1,P1 | SP1+,SP1,A1+,A1 | 96.1 | |||||
AAA,AA,A c | Aaa,Aa,A c | AAA,AA,A c | 3.1 | |||||
Not Rated d | Not Rated d | Not Rated d | .8 | |||||
100.0 | ||||||||
† | Based on total investments. | |||||||
c | Notes which are not F, MIG and SP rated are represented by bond ratings of the issuers. | |||||||
d | Securities which, while not rated by Fitch, Moody’s and Standard & Poor’s, have been determined by the Manager to | |||||||
be of comparable quality to those rated securities in which the fund may invest. | ||||||||
See notes to financial statements. |
The Fund 13
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2006 (Unaudited)
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments | 136,762,333 | 136,763,346 | ||
Cash | 853,241 | |||
Interest receivable | 856,428 | |||
138,473,015 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 2 | 77,583 | |||
Dividends payable | 368,913 | |||
Interest payable—Note 3 | 1,541 | |||
Payable for shares of Beneficial Interest redeemed | 820 | |||
448,857 | ||||
Net Assets ($) | 138,024,158 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 138,023,145 | |||
Accumulated gross unrealized appreciation on investments | 1,013 | |||
Net Assets ($) | 138,024,158 | |||
Shares Outstanding | ||||
(unlimited number of shares of Beneficial Interest authorized) | 138,034,230 | |||
Net Asset Value, offering and redemption price per share ($) | 1.00 |
See notes to financial statements. |
14 |
STATEMENT OF OPERATIONS Six Months Ended December 31, 2006 (Unaudited) |
Investment Income ($): | ||
Interest Income | 2,319,159 | |
Expenses: | ||
Management fee—Note 2 | 294,526 | |
Interest expense—Note 3 | 3,853 | |
Total Expenses | 298,379 | |
Investment Income—Net | 2,020,780 | |
Net Unrealized Appreciation on Investments | 1,013 | |
Net Increase in Net Assets Resulting from Operations | 2,021,793 |
See notes to financial statements. |
The Fund 15
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
December 31, 2006 | Year Ended | |||
(Unaudited) | June 30, 2006 | |||
Operations ($): | ||||
Investment income—net | 2,020,780 | 3,280,762 | ||
Net unrealized appreciation on investments | 1,013 | — | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 2,021,793 | 3,280,762 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net | (2,020,780) | (3,280,762) | ||
Beneficial Interest Transactions ($1.00 per share): | ||||
Net proceeds from shares sold | 171,154,301 | 423,751,536 | ||
Dividends reinvested | 362,394 | 605,282 | ||
Cost of shares redeemed | (163,779,807) | (425,233,021) | ||
Increase (Decrease) in Net Assets | ||||
from Beneficial Interest Transactions | 7,736,888 | (876,203) | ||
Total Increase (Decrease) in Net Assets | 7,737,901 | (876,203) | ||
Net Assets ($): | ||||
Beginning of Period | 130,286,257 | 131,162,460 | ||
End of Period | 138,024,158 | 130,286,257 |
See notes to financial statements. |
16 |
FINANCIAL HIGHLIGHTS |
The following table describe the performance for the fiscal periods indicated. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||||
December 31, 2006 | Year Ended June 30, | |||||||||||
(Unaudited) | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||
Per Share Data ($): | ||||||||||||
Net asset value | ||||||||||||
beginning of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||||
Investment Operations: | ||||||||||||
Investment income—net | .016 | .024 | .013 | .005 | .009 | .014 | ||||||
Distributions: | ||||||||||||
Dividends from investment | ||||||||||||
income—net | (.016) | (.024) | (.013) | (.005) | (.009) | (.014) | ||||||
Net asset value, end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||||
Total Return (%) | 3.11a | 2.48 | 1.34 | .53 | .87 | 1.41 | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .46a | .46 | .45 | .45 | .45 | .45 | ||||||
Ratio of net investment income | ||||||||||||
to average net assets | 3.09a | 2.46 | 1.33 | .53 | .87 | 1.38 | ||||||
Net Assets, end of period | ||||||||||||
($ X 1,000) | 138,024 | 130,286 | 131,162 | 141,930 | 162,730 | 168,601 | ||||||
a Annualized. | ||||||||||||
See notes to financial statements. |
The Fund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus BASIC Massachusetts Municipal Money Market Fund (the “fund”) is a separate non-diversified series of The Dreyfus/Laurel Tax-Free Municipal Funds (the “Trust”) 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 provide a high level of current income exempt from federal and Massachusetts state income taxes to the extent consistent with the preservation of capital and the maintenance of liq-uidity.The Dreyfus Corporation (the “Manager” or “Dreyfus”) serves as the fund’s investment adviser. The Manager is a wholly-owned subsidiary of Mellon Financial Corporation (“Mellon Financial”). Dreyfus Service Corporation (the “Distributor”), a wholly-owned subsidiary of the Manager, is the distributor of the fund’s shares, which are sold to the public without a sales charge.
On December 4, 2006, Mellon Financial and The Bank of New York Company, Inc. announced that they had entered into a definitive agreement to merge. The new company will be called The Bank of New York Mellon Corporation. As part of this transaction, Dreyfus would become a wholly-owned subsidiary of The Bank of New York Mellon Corporation.The transaction is subject to certain regulatory approvals and the approval of The Bank of New York Company, Inc.’s and Mellon Financial’s shareholders, as well as other customary conditions to closing. Subject to such approvals and the satisfaction of the other conditions, Mellon Financial and The Bank of New York Company, Inc. expect the transaction to be completed in the third quarter of 2007.
The fund’s financial statements are prepared in accordance with U.S. generally accepted accounting principles, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
18 |
(a) Portfolio valuation: Investments in securities are valued at amortized cost in accordance with Rule 2a-7 of the Act, which has been determined by the Board of Trustees to represent the fair value of the fund’s investments.
It is the fund’s policy to maintain a continuous net asset value per share of $1.00 for the fund; the fund has adopted certain investment, portfolio valuation and dividend and distribution policies to enable it to do so. There is no assurance, however, that the fund will be able to maintain a stable net asset value per share of $1.00.
On September 20, 2006, the Financial Accounting Standards Board (FASB) released Statement of Financial Accounting Standards No. 157 “Fair Value Measurements” (“FAS 157”). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Management does not believe that the application of this standard will have a material impact on the financial statements of the fund.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date 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. Realized gain and loss from securities transactions are recorded on the identified cost basis. Cost of investments represents amortized cost.
(c) Concentration of risk: The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the commonwealth 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.
The Fund 19
NOTES TO FINANCIAL STATEMENTS) (Unaudited) (continued)
All cash balances were maintained with the Custodian,Mellon Bank,N.A.
(d) Dividends to shareholders: It is the policy of the fund to declare dividends daily from investment income-net; such dividends are paid monthly. Dividends from net realized capital gain, 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 gain can be offset by capital loss carryovers, if any, it is the policy of the fund not to distribute such gain.
(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.
On July 13, 2006, the FASB released FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the fund’s tax returns to determine whether the tax positions are more-likely-than-not of being sustained by the applicable tax authority.Tax positions not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Management does not believe that the application of this standard will have a material impact on the financial statements of the fund.
The tax character of distributions paid to shareholders during the fiscal year ended June 30, 2006 were all tax exempt income.The tax character of current year distributions will be determined at the end of the current fiscal year.
20 |
At December 31, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
NOTE 2—Investment Management Fee And Other Transactions With Affiliates:
Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund.The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .45% of the value of the fund’s average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, fees and expenses of non-interested Trustees (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund’s allocable portion of fees and expenses of the non-interested Trustees (including counsel fees). Each Trustee receives $45,000 per year, plus $6,000 for each joint Board meeting of The Dreyfus/Laurel Funds, Inc., the Trust and The Dreyfus/Laurel Funds Trust (collectively, the “Dreyfus/Laurel Funds”) attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts). With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone
The Fund 21
NOTES TO FINANCIAL STATEMENTS) (Unaudited) (continued)
meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund. These fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Trust directly to the non-interested Trustees, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Trustees.
The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $77,583.
NOTE 3—Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $100 million line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings.
The average daily amount of borrowings outstanding under the line of credit during the period ended December 31, 2006 was approximately $131,000 with a related weighted average annualized interest rate of 5.84% .
22 |
NOTES
For More | Information | |
Dreyfus BASIC | Transfer Agent & | |
Massachusetts Municipal | Dividend Disbursing Agent | |
Money Market Fund | Dreyfus Transfer, Inc. | |
200 Park Avenue | 200 Park Avenue | |
New York, NY 10166 | New York, NY 10166 | |
Manager | Distributor | |
The Dreyfus Corporation | Dreyfus Service Corporation | |
200 Park Avenue | 200 Park Avenue | |
New York, NY 10166 | New York, NY 10166 | |
Custodian | ||
Mellon Bank, N.A. | ||
One Mellon Bank Center | ||
Pittsburgh, PA 15258 |
Telephone 1-800-645-6561
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 E-mail Send your request to info@dreyfus.com Internet Information can be viewed online or downloaded at: http://www.dreyfus.com
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-202-551-8090.
Information regarding how the fund voted proxies relating to portfolio securities for the 12-month period ended June 30, 2006, is available on the SEC’s website at http://www.sec.gov and without charge, upon request, by calling 1-800-645-6561.
© 2007 Dreyfus Service Corporation
Dreyfus BASIC New York Municipal Money Market Fund |
SEMIANNUAL REPORT December 31, 2006
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The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value
Contents | ||
THE FUND | ||
2 | A Letter from the CEO | |
3 | Discussion of Fund Performance | |
6 | Understanding Your Fund’s Expenses | |
6 | Comparing Your Fund’s Expenses | |
With Those of Other Funds | ||
7 | Statement of Investments | |
17 | Statement of Assets and Liabilities | |
18 | Statement of Operations | |
19 | Statement of Changes in Net Assets | |
20 | Financial Highlights | |
21 | Notes to Financial Statements | |
FOR MORE INFORMATION | ||
Back Cover |
Dreyfus BASIC New York Municipal Money Market Fund |
The Fund
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A LETTER FROM THE CEO
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus BASIC New York Municipal Money Market Fund, covering the six-month period from July 1, 2006, through December 31, 2006.
2006 proved to be a good time for the financial markets, with rallies in the second half of the year helping stocks, bonds and money market instruments achieve positive absolute returns.A number of factors contributed to the markets’ gains, including a more moderate economic expansion, strong business conditions, subdued inflation, stabilizing interest rates and robust investor demand for most asset classes.
In our analysis, 2006 provided an excellent reminder of the need for a long-term investment perspective. Adopting too short a time frame proved costly for some investors last year, as reducing allocations to stocks and bonds generally meant missing subsequent rallies. Indeed, history shows that reacting to near-term developments with extreme shifts in strategy rarely is the right decision. We believe that a better course is to set a portfolio mix to meet future goals, while attempting to ignore short term market fluctuations. Money market funds have continued to play an important role in that mix.
For information about how the fund performed during the reporting period, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund’s portfolio manager.
Thank you for your continued confidence and support.We wish you good health and prosperity in 2007.
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Thomas F. Eggers Chief Executive Officer The Dreyfus Corporation January 16, 2007 |
2 |
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DISCUSSION OF FUND PERFORMANCE
Joseph Irace, Portfolio Manager |
How did Dreyfus BASIC New York Municipal Money Market Fund perform during the period?
For the six-month period ended December 31, 2006, the fund produced an annualized yield of 3.15% . Taking into account the effects of compounding, the fund also produced an annualized effective yield of 3.19% ..1
Yields of tax-exempt money market securities rose along with short-term interest rates for much of the reporting period before stabilizing when the Federal Reserve Board (the “Fed”) refrained from further rate hikes in the summer and fall of 2006.
What is the fund’s investment approach?
The fund seeks to provide a high level of current income exempt from federal, New York state and New York city income taxes to the extent consistent with the preservation of capital and the maintenance of liq-uidity.To pursue this objective, we attempt to add value by selecting the individual tax-exempt money market instruments from high-quality New York-exempt issuers that we believe are most likely to provide high tax-exempt current income. We also actively manage the fund’s weighted average maturity in anticipation of interest-rate and supply-and-demand changes in New York’s short-term municipal marketplace.
Rather than focusing on economic or market trends, we search for securities that, in our opinion, will help us enhance the fund’s yield.
The management of the fund’s weighted average maturity uses a more tactical approach. If we expect the supply of securities to increase temporarily, we may reduce the fund’s weighted average maturity to make cash available for the purchase of higher yielding securities.This is due to the fact that yields tend to rise temporarily if issuers are competing for investor interest. If we expect demand to surge at a time when we anticipate little issuance and therefore lower yields, we may increase
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued) |
the fund’s weighted average maturity to maintain current yields for as long as we deem practical. At other times, we try to maintain a neutral weighted average maturity.
What other factors influenced the fund’s performance?
Just days before the start of the reporting period, the Fed increased short-term interest rates for the seventeenth time since June 2004. The Fed’s moves toward a less accommodative monetary policy were designed to forestall potential inflationary pressures as evidenced by resurgent energy prices and tight labor markets over the first half of 2006.The Fed’s June 2006 rate hike drove the overnight federal funds rate to 5.25%, its highest level in several years.
However, investors’ concerns regarding higher inflation waned during the summer when U.S. housing markets softened and employment gains moderated.As a result, investors looked forward to a possible end to the Fed’s tightening campaign. The Fed obliged when it held the federal funds rate steady at the August meeting of its Federal Open Market Committee (FOMC), the first pause in more than two years. Energy prices fell significantly in the late summer and fall, and GDP growth moderated to a 2.0% annualized rate in the third quarter, helping to ease investors’ inflation fears.The Fed continued to lend credence to a more benign inflation outlook by keeping short-term rates unchanged at its FOMC meetings over the remainder of the year.As a result, tax-exempt money market yields generally stabilized, particularly at the shorter end of the market’s maturity range.
Despite signs of an economic slowdown, including declining housing prices in some previously high-flying real estate markets, the growing U.S. economy benefited the fiscal conditions of both New York state and New York city.Tax receipts came in higher than originally projected for both entities, reducing their borrowing needs. Consequently, the supply of newly issued New York money market instruments fell compared to the same period one year earlier, while investor demand remained robust, putting downward pressure on yields.
4 |
As inflation-related concerns ebbed over the summer and fall, yields of longer-term municipal securities fell while those of shorter-dated municipal money market securities remained stable.This left little difference in the yields of tax-exempt securities with maturities between six months and four years. Investors therefore focused mainly on instruments maturing in six months or less, which put additional downward pressure on yields at the short end of the maturity range.
In this environment, we generally maintained the fund’s weighted average maturity in a range we considered to be in line with industry averages. However, with yields relatively low from municipal notes and variable-rate demand notes at the long and short ends of the fund’s maturity spectrum, respectively, we increased our focus on tax-exempt commercial paper with maturities in the three- to five-month range.
What is the fund’s current strategy?
Recent Fed comments, mixed economic data and signs of subdued inflation suggest to us that the Fed is unlikely either to raise or lower short-term interest rates over the foreseeable future. While we have maintained the fund’s market neutral position, we may lengthen its weighted average maturity to take advantage of seasonal opportunities for higher yields that typically arise around the time income tax payments are due.
January 16, 2007 |
An investment in the fund is not insured or guaranteed by the FDIC or any other government | ||
agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is | ||
possible to lose money by investing in the fund. | ||
1 | Annualized effective yield is based upon dividends declared daily and reinvested monthly. Past | |
performance is no guarantee of future results.Yields fluctuate. Income may be subject to state and | ||
local taxes for non-New York residents, and some income may be subject to the federal alternative | ||
minimum tax (AMT) for certain investors. |
The Fund 5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses |
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus BASIC New York Municipal Money Market Fund from July 1, 2006 to December 31, 2006. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment assuming actual returns for the six months ended December 31, 2006
Expenses paid per $1,000 † | $ 2.29 | |
Ending value (after expenses) | $1,016.00 |
COMPARING YOUR FUND’S EXPENSES WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment assuming a hypothetical 5% annualized return for the six months ended December 31, 2006
Expenses paid per $1,000 † | $ 2.29 | |
Ending value (after expenses) | $1,022.94 |
† Expenses are equal to the fund’s annualized expense ratio of .45%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
6 |
STATEMENT OF INVESTMENTS December 31, 2006 (Unaudited) |
Short-Term | Coupon | Maturity | Principal | |||||
Investments—99.0% | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York—96.5% | ||||||||
ABN AMRO Munitops Certificate | ||||||||
Trust, Revenue, Refunding | ||||||||
(Cornell University) | ||||||||
(Liquidity Facility; ABN-AMRO) | 3.94 | 1/7/07 | 6,710,000 a,b | 6,710,000 | ||||
Albany Housing Authority, | ||||||||
Revenue (Nutgrove Garden | ||||||||
Apartments Project) (LOC; | ||||||||
Citizens Bank of Massachusetts) | 3.95 | 1/7/07 | 1,600,000 a | 1,600,000 | ||||
Albany Industrial Development | ||||||||
Agency, Civic Facility Revenue | ||||||||
(Albany Medical Center | ||||||||
Hospital Project) (LOC; | ||||||||
Citizens Bank of Rhode Island) | 3.91 | 1/7/07 | 5,855,000 a | 5,855,000 | ||||
Albany Industrial Development | ||||||||
Agency, Civic Facility Revenue | ||||||||
(Corning Preserve/Hudson | ||||||||
Riverfront Development | ||||||||
Project) (LOC; Key Bank) | 3.94 | 1/7/07 | 1,360,000 a | 1,360,000 | ||||
Auburn Industrial Development | ||||||||
Authority, IDR (Fat Tire LLC | ||||||||
Project) (LOC; Citizens Bank | ||||||||
of Pennsylvania) | 4.06 | 1/7/07 | 675,000 a | 675,000 | ||||
Binghamton, | ||||||||
GO Notes, BAN | 4.00 | 2/2/07 | 4,400,000 | 4,401,618 | ||||
Brewster, | ||||||||
GO Notes, BAN | 4.80 | 5/18/07 | 2,700,000 | 2,706,415 | ||||
Broome County Industrial | ||||||||
Development Agency, IDR | ||||||||
(Parlor City Paper Box Co., | ||||||||
Inc. Facility) (LOC; The Bank | ||||||||
of New York) | 3.99 | 1/7/07 | 3,060,000 a | 3,060,000 | ||||
Burnt Hills-Ballston Lake Central | ||||||||
School District, GO Notes, TAN | 4.50 | 7/6/07 | 1,500,000 | 1,504,769 | ||||
Cohoes Industrial Development | ||||||||
Agency, Civic Facility Revenue | ||||||||
(Columbia Crest Senior Housing | ||||||||
Project) (LOC; Key Bank) | 3.94 | 1/7/07 | 2,780,000 a | 2,780,000 | ||||
Colonie, | ||||||||
GO Notes, BAN | 4.25 | 4/5/07 | 2,000,000 | 2,002,533 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
Dutchess County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Marist | ||||||||
College Civic Facility) | ||||||||
(LOC; Key Bank) | 3.92 | 1/7/07 | 2,000,000 a | 2,000,000 | ||||
Dutchess County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Marist | ||||||||
College Civic Facility) (LOC; | ||||||||
The Bank of New York) | 3.92 | 1/7/07 | 1,900,000 a | 1,900,000 | ||||
East Syracuse-Minoa Central School | ||||||||
District, GO Notes, BAN | 4.65 | 7/20/07 | 1,220,000 | 1,225,126 | ||||
Erie County Industrial Development | ||||||||
Agency, Civic Facility Revenue | ||||||||
(Every Person Influences | ||||||||
Children, Inc. Project) (LOC; | ||||||||
Fifth Third Bank) | 3.92 | 1/7/07 | 1,265,000 a | 1,265,000 | ||||
Lancaster Industrial Development | ||||||||
Agency, IDR (Jiffy-Tite Co., | ||||||||
Inc. Project) (LOC; Key Bank) | 4.06 | 1/7/07 | 1,135,000 a | 1,135,000 | ||||
Metropolitan Transportation | ||||||||
Authority, Dedicated Tax Fund, | ||||||||
Refunding (Insured; XLCA and | ||||||||
Liquidity Facility; Citibank NA) | 3.91 | 1/7/07 | 15,600,000 a | 15,600,000 | ||||
Metropolitan Transportation | ||||||||
Authority, Transportation | ||||||||
Revenue (Insured; AMBAC and | ||||||||
Liquidity Facility; PB Finance Inc.) | 3.96 | 1/7/07 | 6,795,000 a,b | 6,795,000 | ||||
Metropolitan Transportation | ||||||||
Authority, Transportation | ||||||||
Revenue (Insured; AMBAC and | ||||||||
Liquidity Facility; The Bank | ||||||||
of New York) | 3.94 | 1/7/07 | 5,660,000 a,b | 5,660,000 | ||||
Monroe County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (YMCA of | ||||||||
Greater Rochester Project) | ||||||||
(LOC; M&T Bank) | 3.96 | 1/7/07 | 2,500,000 a | 2,500,000 |
8 |
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
Nassau County, | ||||||||
GO Notes, TAN | 4.25 | 9/30/07 | 5,000,000 | 5,026,365 | ||||
Nassau County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (North Shore | ||||||||
Hebrew Academy High School | ||||||||
Project) (LOC; Comerica Bank) | 3.93 | 1/7/07 | 11,730,000 a | 11,730,000 | ||||
New York City | ||||||||
(Putters Program) (Insured; | ||||||||
XLCA and Liquidity Facility; | ||||||||
JPMorgan Chase Bank) | 3.95 | 1/7/07 | 2,100,000 a,b | 2,100,000 | ||||
New York City, | ||||||||
GO Notes | 5.00 | 8/1/07 | 3,000,000 | 3,023,807 | ||||
New York City, | ||||||||
GO Notes | 5.00 | 8/1/07 | 3,835,000 | 3,865,656 | ||||
New York City Housing Development | ||||||||
Corporation, Multi-Family | ||||||||
Rental Housing Revenue (West | ||||||||
89th Street Development) | ||||||||
(Insured; FNMA) | 3.93 | 1/7/07 | 13,000,000 a | 13,000,000 | ||||
New York City Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Birch Wathen | ||||||||
Lenox School Project) (LOC; | ||||||||
Allied Irish Bank) | 3.93 | 1/7/07 | 5,250,000 a | 5,250,000 | ||||
New York City Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Ethical | ||||||||
Culture Fieldston School | ||||||||
Project) (Insured; XLCA and | ||||||||
Liquidity Facility; Dexia | ||||||||
Credit Locale) | 3.90 | 1/7/07 | 8,335,000 a | 8,335,000 | ||||
New York City Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue | ||||||||
(Hewitt School Project) | ||||||||
(LOC; Allied Irish Bank) | 3.93 | 1/7/07 | 1,570,000 a | 1,570,000 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
New York City Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Sephardic | ||||||||
Community Youth Center, Inc. | ||||||||
Project) (LOC; M&T Bank) | 3.96 | 1/7/07 | 5,000,000 a | 5,000,000 | ||||
New York City Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue | ||||||||
(Spence-Chapin, Services to | ||||||||
Families and Children Project) | ||||||||
(LOC; Allied Irish Bank) | 3.93 | 1/7/07 | 4,000,000 a | 4,000,000 | ||||
New York City Industrial | ||||||||
Development Agency, Liberty | ||||||||
Revenue (FC Hanson Office | ||||||||
Associates LLC Project) (LOC; | ||||||||
Lloyds TSB Bank PLC) | 3.92 | 1/7/07 | 9,000,000 a | 9,000,000 | ||||
New York City Municipal Water | ||||||||
Finance Authority, CP | ||||||||
(Liquidity Facility: Dexia | ||||||||
Credit Locale and JPMorgan | ||||||||
Chase Bank) | 3.60 | 2/15/07 | 3,350,000 | 3,350,000 | ||||
New York Counties Tobacco Trust | ||||||||
IV, Tobacco Settlement | ||||||||
Pass-Through Bonds (Liquidity | ||||||||
Facility; Merrill Lynch | ||||||||
Capital Services and LOC; | ||||||||
Merrill Lynch) | 3.96 | 1/7/07 | 18,080,000 a,b | 18,080,000 | ||||
New York State Dormitory | ||||||||
Authority, Revenue (Park Ridge | ||||||||
Hospital Inc.) (LOC; JPMorgan | ||||||||
Chase Bank) | 3.92 | 1/7/07 | 4,500,000 a | 4,500,000 | ||||
New York State Energy Research and | ||||||||
Development Authority, Revenue | ||||||||
(Consolidated Edison Company | ||||||||
of New York, Inc. Project) | ||||||||
(LOC; Citibank NA) | 3.91 | 1/7/07 | 9,700,000 a | 9,700,000 |
10 |
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
New York State Housing Finance | ||||||||
Agency, Housing Revenue (Rip | ||||||||
Van Winkle House) (Insured; | ||||||||
FHLMC and Liquidity | ||||||||
Facility; FHLMC) | 3.94 | 1/7/07 | 4,700,000 a | 4,700,000 | ||||
New York State Housing Finance | ||||||||
Agency, Revenue (Hospital for | ||||||||
Special Surgery Staff Housing) | ||||||||
(LOC; JPMorgan Chase Bank) | 3.85 | 1/7/07 | 6,100,000 a | 6,100,000 | ||||
New York State Housing Finance | ||||||||
Agency, Revenue (Worth Street) | ||||||||
(LOC; FNMA) | 3.90 | 1/7/07 | 12,000,000 a | 12,000,000 | ||||
New York State Urban Development | ||||||||
Corporation, Correctional and | ||||||||
Youth Facilities Service Contract | ||||||||
Revenue (Liquidity Facility; Merrill | ||||||||
Lynch Capital Services and | ||||||||
LOC; Merrill Lynch) | 3.96 | 1/7/07 | 7,375,000 a,b | 7,375,000 | ||||
Newburgh Industrial Development | ||||||||
Agency, Civic Facility Revenue | ||||||||
(Community Development | ||||||||
Properties Dubois Street II, | ||||||||
Inc. Project) (LOC; Key Bank) | 3.94 | 1/7/07 | 6,000,000 a | 6,000,000 | ||||
Newburgh Industrial Development | ||||||||
Agency, MFHR (Belvedere | ||||||||
Housing Project) (Liquidity | ||||||||
Facility; Merrill Lynch) | 4.02 | 1/7/07 | 3,100,000 a,b | 3,100,000 | ||||
Olean, | ||||||||
GO Notes, RAN | 4.50 | 8/30/07 | 1,300,000 | 1,305,820 | ||||
Onondaga County Industrial | ||||||||
Development Agency, Civic Facility | ||||||||
Revenue (Onondaga Community | ||||||||
College Housing Development | ||||||||
Corporation Project) (LOC; Citizens | ||||||||
Bank of Massachusetts) | 3.91 | 1/7/07 | 3,825,000 a | 3,825,000 |
The Fund 11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
Otsego County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Noonan | ||||||||
Community Service Corporation | ||||||||
Project) (LOC; FHLB) | 3.92 | 1/7/07 | 1,490,000 a | 1,490,000 | ||||
Patchogue-Medford Union Free | ||||||||
School District, GO Notes, TAN | 4.50 | 6/29/07 | 5,400,000 | 5,416,320 | ||||
Pearl River Union Free School | ||||||||
District, GO Notes, TAN | 4.50 | 6/28/07 | 2,300,000 | 2,306,793 | ||||
Port Authority of New York and | ||||||||
New Jersey, CP (Liquidity | ||||||||
Facility; Landesbank | ||||||||
Hessen-Thuringen Girozentrale) | 3.55 | 3/5/07 | 1,000,000 | 1,000,000 | ||||
Putnam County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (United | ||||||||
Cerebral Palsy of Putnam and | ||||||||
Southern Dutchess Project) | ||||||||
(LOC; Commerce Bank N.A.) | 3.97 | 1/7/07 | 8,025,000 a | 8,025,000 | ||||
Rensselaer County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Rensselaer | ||||||||
Polytechic Institute Project) | 4.05 | 1/7/07 | 6,485,000 a | 6,485,000 | ||||
Rockland County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Dominican | ||||||||
College of Blauvelt Project) | ||||||||
(LOC; Commerce Bank NA) | 3.94 | 1/7/07 | 2,000,000 a | 2,000,000 | ||||
Saint Lawrence County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue | ||||||||
(Canton-Potsdam Hospital | ||||||||
Project) (LOC; Key Bank) | 3.94 | 1/7/07 | 10,910,000 a | 10,910,000 | ||||
Shenendehowa Central School | ||||||||
District, GO Notes, BAN | 4.50 | 6/29/07 | 3,000,000 | 3,000,071 |
12 |
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
Spencerport, | ||||||||
GO Notes, BAN | 4.50 | 3/1/07 | 1,495,000 | 1,497,334 | ||||
Tobacco Settlement Financing | ||||||||
Corporation of New York, | ||||||||
Asset-Backed Revenue Bonds | ||||||||
(State Contingency | ||||||||
Contract Secured) | 5.00 | 6/1/07 | 1,305,000 | 1,312,106 | ||||
Tompkins County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Tompkins | ||||||||
Cortland Community College | ||||||||
Foundation, Inc. Project) | ||||||||
(LOC; Citizens Bank of | ||||||||
Massachusetts) | 3.93 | 1/7/07 | 3,400,000 a | 3,400,000 | ||||
Tompkins County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Tompkins | ||||||||
Cortland Community College | ||||||||
Foundation, Inc. Project) | ||||||||
(LOC; HSBC Bank USA) | 3.93 | 1/7/07 | 3,605,000 a | 3,605,000 | ||||
TSASC Inc. of New York, | ||||||||
Tobacco Settlement | ||||||||
Asset-Backed Bonds (Liquidity | ||||||||
Facility; Merrill Lynch) | 3.97 | 1/7/07 | 4,750,000 a,b | 4,750,000 | ||||
Westchester County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Banksville | ||||||||
Independent Fire Co., Inc. | ||||||||
Civic Facility) (LOC; The Bank | ||||||||
of New York) | 3.97 | 1/7/07 | 900,000 a | 900,000 | ||||
Westchester County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Mercy College | ||||||||
Project) (LOC; Key Bank) | 3.94 | 1/7/07 | 3,100,000 a | 3,100,000 |
The Fund 13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
Westchester County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Northern | ||||||||
Westchester Hospital | ||||||||
Association Civic Facility) | ||||||||
(LOC; Commerce Bank) | 3.94 | 1/7/07 | 6,800,000 a | 6,800,000 | ||||
Westchester Tobacco Asset | ||||||||
Securitization Corporation, | ||||||||
Tobacco Settlement | ||||||||
Asset-Backed Bonds (Liquidity | ||||||||
Facility; Merrill Lynch | ||||||||
Capital Services and LOC; | ||||||||
Merrill Lynch) | 3.96 | 1/7/07 | 8,030,000 a,b | 8,030,000 | ||||
U.S. Related—2.5% | ||||||||
Puerto Rico Aqueduct and Sewer | ||||||||
Authority, Revenue (Liquidity | ||||||||
Facility; Citigroup Global | ||||||||
Market Holding and LOC; | ||||||||
Citigroup Global Market Holding) | 3.97 | 1/7/07 | 3,400,000 a,b | 3,400,000 | ||||
Puerto Rico Industrial Tourist | ||||||||
Educational Medical and | ||||||||
Environmental Control | ||||||||
Facilities Financing Authority, | ||||||||
Environmental Control Facilities | ||||||||
Revenue (Bristol-Myers Squibb | ||||||||
Company Project) | 3.96 | 1/7/07 | 4,400,000 a | 4,400,000 | ||||
Total Investments (cost $304,499,733) | 99.0% | 304,499,733 | ||||||
Cash and Receivables (Net) | 1.0% | 3,156,244 | ||||||
Net Assets | 100.0% | 307,655,977 |
a Securities payable on demand.Variable interest rate—subject to periodic change. |
b Securities exempt from registration under Rule 144A of the Securities Act of 1933.These securities may be resold in |
transactions exempt from registration, normally to qualified institutional buyers. At December 31, 2006, these |
securities amounted to $66,000,000 or 21.5% of net assets. |
14 |
Summary of Abbreviations | ||||||
ACA | American Capital Access | AGC | ACE Guaranty Corporation | |||
AGIC | Asset Guaranty Insurance | AMBAC | American Municipal Bond | |||
Company | Assurance Corporation | |||||
ARRN | Adjustable Rate Receipt Notes | BAN | Bond Anticipation Notes | |||
BIGI | Bond Investors Guaranty Insurance | BPA | Bond Purchase Agreement | |||
CGIC | Capital Guaranty Insurance | CIC | Continental Insurance | |||
Company | Company | |||||
CIFG | CDC Ixis Financial Guaranty | CMAC | Capital Market Assurance | |||
Corporation | ||||||
COP | Certificate of Participation | CP | Commercial Paper | |||
EDR | Economic Development Revenue | EIR | Environmental Improvement | |||
Revenue | ||||||
FGIC | Financial Guaranty Insurance | |||||
Company | FHA | Federal Housing Administration | ||||
FHLB | Federal Home Loan Bank | FHLMC | Federal Home Loan Mortgage | |||
Corporation | ||||||
FNMA | Federal National | |||||
Mortgage Association | FSA | Financial Security Assurance | ||||
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 | |||
LOC | Letter of Credit | LOR | Limited Obligation Revenue | |||
LR | Lease Revenue | MBIA | Municipal Bond Investors Assurance | |||
Insurance Corporation | ||||||
MFHR | Multi-Family Housing Revenue | MFMR | Multi-Family Mortgage Revenue | |||
PCR | Pollution Control Revenue | PILOT | Payment in Lieu of Taxes | |||
RAC | Revenue Anticipation Certificates | RAN | Revenue Anticipation Notes | |||
RAW | Revenue Anticipation Warrants | RRR | Resources Recovery Revenue | |||
SAAN | State Aid Anticipation Notes | SBPA | Standby Bond Purchase Agreement | |||
SFHR | Single Family Housing Revenue | SFMR | Single Family Mortgage Revenue | |||
SONYMA | State of New York Mortgage Agency | SWDR | Solid Waste Disposal Revenue | |||
TAN | Tax Anticipation Notes | TAW | Tax Anticipation Warrants | |||
TRAN | Tax and Revenue Anticipation Notes | XLCA | XL Capital Assurance |
The Fund 15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Summary of Combined Ratings (Unaudited) | ||||||||
Fitch | or Moody’s or | Standard & Poor’s | Value (%) † | |||||
F1+,F1 | VMIG1,MIG1,P1 | SP1+,SP1,A1+,A1 | 86.4 | |||||
AAA,AA,Ac | Aaa,Aa,Ac | AAA,AA,Ac | 2.7 | |||||
Not Ratedd | Not Ratedd | Not Ratedd | 10.9 | |||||
100.0 | ||||||||
† | Based on total investments. | |||||||
c | Notes which are not F, MIG and SP rated are represented by bond ratings of the issuers. | |||||||
d | Securities which, while not rated by Fitch, Moody’s and Standard & Poor’s, have been determined by the Manager to | |||||||
be of comparable quality to those rated securities in which the fund may invest. | ||||||||
See notes to financial statements. |
16 |
STATEMENT OF ASSETS AND LIABILITIES December 31, 2006 (Unaudited) |
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments | 304,499,733 | 304,499,733 | ||
Cash | 2,453,784 | |||
Interest receivable | 1,649,472 | |||
308,602,989 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 2 | 103,089 | |||
Dividends payable | 820,950 | |||
Payable for shares of Beneficial Interest redeemed | 22,973 | |||
947,012 | ||||
Net Assets ($) | 307,655,977 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 307,651,476 | |||
Accumulated net realized gain (loss) on investments | 4,501 | |||
Net Assets ($) | 307,655,977 | |||
Shares Outstanding | ||||
(unlimited number of shares of Beneficial Interest authorized) | 307,651,476 | |||
Net Asset Value, offering and redemption price per share ($) | 1.00 |
See notes to financial statements. |
The Fund 17
STATEMENT OF OPERATIONS Six Months Ended December 31, 2006 (Unaudited) |
Investment Income ($): | ||
Interest Income | 5,386,571 | |
Expenses: | ||
Management fee—Note 2 | 673,298 | |
Total Expenses | 673,298 | |
Investment Income—Net | 4,713,273 | |
Net Realized Gain (Loss) on Investments—Note 1(b) ($) | 4,501 | |
Net Increase in Net Assets Resulting from Operations | 4,717,774 |
See notes to financial statements. |
18 |
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
December 31, 2006 | Year Ended | |||
(Unaudited) | June 30, 2006 | |||
Operations ($): | ||||
Investment income—net | 4,713,273 | 6,950,020 | ||
Net realized gain (loss) on investments | 4,501 | — | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 4,717,774 | 6,950,020 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net | (4,713,273) | (6,950,020) | ||
Beneficial Interest Transactions ($1.00 per share): | ||||
Net proceeds from shares sold | 127,759,427 | 197,373,427 | ||
Dividends reinvested | 4,154,316 | 6,258,560 | ||
Cost of shares redeemed | (111,255,749) | (224,960,449) | ||
Increase (Decrease) in Net Assets | ||||
from Beneficial Interest Transactions | 20,657,994 | (21,328,462) | ||
Total Increase (Decrease) in Net Assets | 20,662,495 | (21,328,462) | ||
Net Assets ($): | ||||
Beginning of Period | 286,993,482 | 308,321,944 | ||
End of Period | 307,655,977 | 286,993,482 |
See notes to financial statements. |
The Fund 19
FINANCIAL HIGHLIGHTS |
The following table describe the performance for the fiscal periods indicated.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 dis-tributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||||
December 31, 2006 | Year Ended June 30, | |||||||||||
(Unaudited) | 2006 | 2005 | 2004 | 2003 | 2002 | |||||||
Per Share Data ($): | ||||||||||||
Net asset value | ||||||||||||
beginning of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||||
Investment Operations: | ||||||||||||
Investment income—net | .016 | .025 | .013 | .005 | .009 | .014 | ||||||
Distributions: | ||||||||||||
Dividends from investment | ||||||||||||
income—net | (.016) | (.025) | (.013) | (.005) | (.009) | (.014) | ||||||
Net asset value, end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||||
Total Return (%) | 3.17a | 2.52 | 1.34 | .52 | .86 | 1.36 | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .45a | .45 | .45 | .45 | .45 | .45 | ||||||
Ratio of net investment income | ||||||||||||
to average net assets | 3.15a | 2.49 | 1.33 | .52 | .86 | 1.36 | ||||||
Net Assets, end of period | ||||||||||||
($ X 1,000) | 307,656 | 286,993 | 308,322 | 302,652 | 340,089 | 343,032 | ||||||
a Annualized. | ||||||||||||
See notes to financial statements. |
20 |
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus BASIC New York Municipal Money Market Fund (the “fund”) is a separate non-diversified series of The Dreyfus/Laurel Tax-Free Municipal Funds (the “Trust”) 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 provide a high level of current income exempt from federal, New York state and New York city income taxes to the extent consistent with the preservation of capital and the maintenance of liq-uidity.The Dreyfus Corporation (the “Manager” or “Dreyfus”) serves as the fund’s investment adviser. The Manager is a wholly-owned subsidiary of Mellon Financial Corporation (“Mellon Financial”). Dreyfus Service Corporation (the “Distributor”), a wholly-owned subsidiary of the Manager, is the distributor of the fund’s shares, which are sold to the public without a sales charge.
On December 4, 2006, Mellon Financial and The Bank of New York Company, Inc. announced that they had entered into a definitive agreement to merge. The new company will be called The Bank of New York Mellon Corporation. As part of this transaction, Dreyfus would become a wholly-owned subsidiary of The Bank of New York Mellon Corporation. The transaction is subject to certain regulatory approvals and the approval of The Bank of New York Company, Inc.’s and Mellon Financial’s shareholders, as well as other customary conditions to closing. Subject to such approvals and the satisfaction of the other conditions, Mellon Financial and The Bank of New York Company, Inc. expect the transaction to be completed in the third quarter of 2007.
The fund’s financial statements are prepared in accordance with U.S. generally accepted accounting principles, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(a) Portfolio valuation: Investments in securities are valued at amortized cost in accordance with Rule 2a-7 of the Act, which has been determined by the Board of Trustees to represent the fair value of the fund’s investments.
It is the fund’s policy to maintain a continuous net asset value per share of $1.00 for the fund; the fund has adopted certain investment, portfolio valuation and dividend and distribution policies to enable it to do so. There is no assurance, however, that the fund will be able to maintain a stable net asset value per share of $1.00.
On September 20, 2006, the Financial Accounting Standards Board (FASB) released Statement of Financial Accounting Standards No. 157 “Fair Value Measurements” (“FAS 157”). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Management does not believe that the application of this standard will have a material impact on the financial statements of the fund.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date 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. Realized gain and loss from securities transactions are recorded on the identified cost basis. Cost of investments represents amortized cost.
(c) Concentration of risk: 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.
All cash balances were maintained with the Custodian,Mellon Bank,N.A.
(d) Dividends to shareholders: It is the policy of the fund to declare dividends daily from investment income-net; such dividends are paid monthly. Dividends from net realized capital gain, if any, are normally
22 |
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 gain can be offset by capital loss carryovers, if any, it is the policy of the fund not to distribute such gain.
(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, if any, sufficient to relieve it from substantially all federal income and excise taxes.
On July 13, 2006, the FASB released FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the fund’s tax returns to determine whether the tax positions are more-likely-than-not of being sustained by the applicable tax authority.Tax positions not deemed to meet the “more-likely-than-not” threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Management does not believe that the application of this standard will have a material impact on the financial statements of the fund.
The tax character of distributions paid to shareholders during the fiscal year ended June 30, 2006 were all tax exempt income.The tax character of current year distributions will be determined at the end of the current fiscal year.
At December 31, 2006, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 2—Investment Management Fee and Other Transactions with Affiliates:
Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund.The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .45% of the value of the fund’s average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, fees and expenses of non-interested Trustees (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund’s allocable portion of fees and expenses of the non-interested Trustees (including counsel fees). Each Trustee receives $45,000 per year, plus $6,000 for each joint Board meeting of The Dreyfus/Laurel Funds, Inc., the Trust and The Dreyfus/Laurel Funds Trust (collectively the “Dreyfus/Laurel Funds”) attended, $2,000 for separate in-person committee meetings attended which are not held in conjunction with a regularly scheduled Board meeting and $1,500 for Board meetings and separate committee meetings attended that are conducted by telephone and is reimbursed for travel and out-of-pocket expenses.With respect to Board meetings, the Chairman of the Board receives an additional 25% of such compensation (with the exception of reimbursable amounts). With respect to compensation committee meetings, the Chair of the compensation committee receives $900 per meeting and, with respect to audit committee meetings, the Chair of the audit committee receives $1,350 per meeting. In the event that there is an in-person joint committee meeting or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000 or $1,500 fee, as applicable, will be allocated between
24 |
the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund. These fees and expenses are charged and allocated to each series based on net assets. Amounts required to be paid by the Trust directly to the non-interested Trustees, that would be applied to offset a portion of the management fee payable to the Manager, are in fact paid directly by the Manager to the non-interested Trustees.
The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $103,089.
NOTE 3—Bank Line of Credit: |
The fund participates with other Dreyfus-managed funds in a $100 million unsecured line of credit primarily to be utilized for temporary or emergency purposes, including the financing of redemptions. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowings. During the period ended December 31, 2006, the fund did not borrow under the Facility.
The Fund 25
For More | Information | |
Dreyfus BASIC | Transfer Agent & | |
New York Municipal | Dividend Disbursing Agent | |
Money Market Fund | Dreyfus Transfer, Inc. | |
200 Park Avenue | 200 Park Avenue | |
New York, NY 10166 | New York, NY 10166 | |
Manager | Distributor | |
The Dreyfus Corporation | Dreyfus Service Corporation | |
200 Park Avenue | 200 Park Avenue | |
New York, NY 10166 | New York, NY 10166 | |
Custodian | ||
Mellon Bank, N.A. | ||
One Mellon Bank Center | ||
Pittsburgh, PA 15258 |
Telephone 1-800-645-6561
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 E-mail Send your request to info@dreyfus.com Internet Information can be viewed online or downloaded at: http://www.dreyfus.com
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-202-551-8090.
Information regarding how the fund voted proxies relating to portfolio securities for the 12-month period ended June 30, 2006, is available on the SEC’s website at http://www.sec.gov and without charge, upon request, by calling 1-800-645-6561.
© 2007 Dreyfus Service Corporation
Item 2. | Code of Ethics. | |
Not applicable. | ||
Item 3. | Audit Committee Financial Expert. | |
Not applicable. | ||
Item 4. | Principal Accountant Fees and Services. | |
Not applicable. | ||
Item 5. | Audit Committee of Listed Registrants. | |
Not applicable. | ||
Item 6. | Schedule of Investments. | |
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. |
The Registrant has a Nominating Committee (the “Committee”), which is responsible for selecting and nominating persons for election or appointment by the Registrant’s Board as Board members. The Committee has adopted a Nominating Committee Charter (the “Charter”). Pursuant to the Charter, the Committee will consider recommendations for nominees from shareholders submitted to the Secretary of the Registrant, c/o The Dreyfus Corporation Legal Department, 200 Park Avenue, 8th Floor East, New York, New York 10166. A nomination submission must include information regarding the recommended nominee as specified in the Charter. This information includes all information relating to a recommended nominee that is required to be disclosed in solicitations or proxy statements for the election of Board members, as well as information sufficient to evaluate the factors to be considered by the Committee, including character and integrity, business and professional experience, and whether the person has the ability to apply sound and independent business judgment and would act in the interests of the Registrant and its shareholders.
Nomination submissions are required to be accompanied by a written consent of the individual to stand for election if nominated by the Board and to serve if elected by the shareholders, and such additional information must be provided regarding the recommended nominee as reasonably requested by the Committee.
Item 11. | Controls and Procedures. |
(a) The Registrant’s principal executive and principal financial officers have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant’s disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes to the Registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12. | Exhibits. |
(a)(1) | Not applicable. | |
(a)(2) | Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) | |
under the Investment Company Act of 1940. | ||
(a)(3) | Not applicable. | |
(b) | Certification of principal executive and principal financial officers as required by Rule 30a-2(b) | |
under the Investment Company Act of 1940. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
The Dreyfus/Laurel Tax-Free Municipal Funds |
By: | /s/ J. David Officer | |
J. David Officer | ||
President | ||
Date: | February 27, 2007 |
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/ J. David Officer | |
J. David Officer | ||
President | ||
Date: | February 27, 2007 | |
By: | /s/ James Windels | |
James Windels | ||
Treasurer | ||
Date: | February 27, 2007 |
EXHIBIT INDEX
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940. (EX-99.CERT)
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940. (EX-99.906CERT)