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) |
Michael A. Rosenberg, 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: | 12/31/2007 |
FORM N-CSR
Item 1. Reports to Stockholders.
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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 | |
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 |
The Fund
Dreyfus BASIC |
California Municipal |
Money Market 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, 2007, through December 31, 2007.
Looking back, 2007 was a year of significant change for the financial markets.Turmoil in the sub-prime mortgage market, declining housing values and soaring energy prices sparked a “flight to quality” among investors, in which prices of U.S.Treasury securities surged higher while more sophisticated fixed-income assets classes tumbled. Money market instruments proved to be a relatively safe haven from heightened volatility in the stock and bond markets, which led to record levels of assets coming into the money-market industry.
The turbulence of 2007 reinforced a central principle of successful investing: diversification. Investors with broad exposure to the world’s stock and bond markets were better protected from the full impact of market volatility in areas that, earlier in the year, were among the bright spots at the time. As we look ahead, we believe that now is the perfect time to meet with your financial advisor, who can help you plan and diversify your investment portfolio in a way that manages the potential opportunities and risks that may continue to arise in 2008.
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.
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Thomas F. Eggers Chief Executive Officer The Dreyfus Corporation January 15, 2008 |
2 |
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DISCUSSION OF FUND PERFORMANCE
For the period of July 1, 2007, through December 31, 2007, as provided by Joseph Irace, Senior Portfolio Manager
Fund and Market Performance Overview
Yield spreads for money market instruments widened during the reporting period, as the Federal Reserve Board (the “Fed”) reduced key short-term interest rates in an attempt to address an intensifying credit crisis and forestall a potential recession.
For the six-month period ended December 31, 2007, Dreyfus BASIC California Municipal Money Market Fund produced an annualized yield of 3.18% and, taking into account the effects of compounding, an annualized effective yield of 3.22% .1
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.
The Fed Eased Monetary Policy Amid Economic and Credit Concerns
Although tax-exempt money market yields remained relatively stable in the months leading up to the start of the reporting period, market conditions changed dramatically over the summer of 2007, when credit concerns stemming from rising defaults in the bond market’s sub-prime mortgage sector spread to other areas of the financial markets. Even longer-term municipal bonds, which have no direct exposure to sub-prime lending, were affected by selling pressure during a “flight to quality” in which investors flocked to the relative safe haven of U.S.Treasury securities.
As the credit crisis unfolded, the Fed attempted to promote greater market liquidity in August by reducing the discount rate, the interest rate it charges banks for overnight loans. In September, the Fed reduced the federal funds rate, the interest rate banks charge one another for overnight loans, by 50 basis points in order to stimulate the slowing U.S. economy. Additional cuts in the federal funds rate followed in October and December, leaving the benchmark overnight rate at 4.25% by year-end.
The tax-exempt money markets also were influenced by supply-and-demand forces. Investor demand intensified during the flight to quality, and tax-exempt money market assets set new record highs. Rising demand was met with ample supply, as investment banks continued to create a substantial volume of very short-term variable rate demand notes and tender option bonds, which put upward pressure on yields at the short end of the tax-exempt money market’s maturity range.As a result, at times during the reporting period, yields of floating-rate instruments were higher than those of longer-dated municipal notes.
4 |
Although California has felt the impact of weak housing markets, its fiscal condition generally has remained sound, supported by a diverse economy and efforts over the past few years to increase its budget reserves. However, challenges remain for California, as the housing downturn may reduce future tax revenues at a time when the state is struggling with high levels of long-term debt.
A Conservative Investment Posture Warranted in an Uncertain Market
We generally maintained a conservative investment posture amid heightened market turbulence, focusing whenever possible on municipal instruments issued directly by cities, states, school districts and other taxing authorities. We set the fund’s weighted average maturity in a range that was longer than industry averages as we took advantage of higher yields among commercial paper and municipal notes.Whenever it was practical to do so, we “laddered” the fund’s longer-dated holdings to protect the fund from unexpected interest-rate fluctuations. As always, our research staff maintained rigorous credit standards, which, in our judgment, became even more important in the recent credit crisis.
As of the reporting period’s end, the Fed appears likely to implement one or more additional reductions in short-term interest rates. We believe that the fund’s relatively long weighted average maturity positions it to capture incrementally higher yields should short-term interest rates decline further.
January 15, 2008
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, 2007 to December 31, 2007. 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, 2007 | ||
Expenses paid per $1,000 † | $ 2.28 | |
Ending value (after expenses) | $1,016.10 |
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, 2007 | ||
Expenses paid per $1,000 † | $ 2.29 | |
Ending value (after expenses) | $1,022.87 |
† Expenses are equal to the fund’s annualized expense ratio of .45%, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
6 |
STATEMENT OF INVESTMENTS December 31, 2007 (Unaudited) |
Short-Term | Coupon | Maturity | Principal | |||||
Investments—99.4% | Rate (%) | Date | Amount ($) | Value ($) | ||||
California—86.7% | ||||||||
ABAG Finance Authority for | ||||||||
Non-Profit Corporations, | ||||||||
Revenue (Grauer Foundation for | ||||||||
Education Project) (LOC; | ||||||||
Comerica Bank) | 3.43 | 1/7/08 | 3,920,000 a | 3,920,000 | ||||
California, | ||||||||
Economic Recovery Bonds | 5.00 | 1/1/08 | 285,000 | 285,006 | ||||
California, | ||||||||
GO Notes | 7.20 | 5/1/08 | 100,000 | 101,127 | ||||
California, | ||||||||
GO Notes (LOC; Bank of | ||||||||
America, Bank of Nova Scotia | ||||||||
and Landesbank Hessen-Thuringen | ||||||||
Girozentrale) | 3.34 | 1/7/08 | 5,000,000 a | 5,000,000 | ||||
California, | ||||||||
GO Notes (Various Purpose) | 6.25 | 4/1/08 | 750,000 | 754,622 | ||||
California, | ||||||||
GO Notes (Various Purpose) | ||||||||
(Insured; FSA) | 6.50 | 2/1/08 | 245,000 | 245,673 | ||||
California, | ||||||||
GO Notes, Refunding | ||||||||
(Insured; FSA) | 5.50 | 10/1/08 | 100,000 | 101,739 | ||||
California, | ||||||||
RAN | 4.00 | 6/30/08 | 7,000,000 | 7,021,413 | ||||
California Department of | ||||||||
Transportation, Federal | ||||||||
Highway Grant Anticipation | ||||||||
Bonds (Insured; AMBAC) | 5.00 | 2/1/08 | 425,000 | 425,631 | ||||
California Educational Facilities | ||||||||
Authority, Revenue, Refunding | ||||||||
(Art Center College of Design) | ||||||||
(LOC; Allied Irish Banks) | 3.45 | 1/7/08 | 3,850,000 a | 3,850,000 | ||||
California Health Facilities | ||||||||
Financing Authority, Insured | ||||||||
Revenue (Southern California | ||||||||
Presbyterian Homes) (Insured; | ||||||||
MBIA and Liquidity Facility; | ||||||||
Bank of America) | 3.38 | 1/7/08 | 10,460,000 a | 10,460,000 | ||||
California Housing Finance Agency, | ||||||||
Home Mortgage Revenue | ||||||||
(Insured; FGIC) | 3.70 | 8/1/08 | 400,000 | 400,000 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
California Infrastructure and | ||||||||
Economic Development Bank, IDR | ||||||||
(Starter and Alternator | ||||||||
Exchange, Inc. Project) (LOC; | ||||||||
California State Teachers | ||||||||
Retirement System) | 3.49 | 1/7/08 | 1,100,000 a | 1,100,000 | ||||
California Infrastucture and | ||||||||
Economic Development Bank, | ||||||||
Industrial Revenue (Nature | ||||||||
Kist Snacks Project) (LOC; | ||||||||
Wells Fargo Bank) | 3.47 | 1/7/08 | 1,500,000 a | 1,500,000 | ||||
California Pollution Control Financing | ||||||||
Authority, PCR (Evergreen Oil Inc. | ||||||||
Project) (LOC; Bank of The West) | 3.50 | 1/7/08 | 900,000 a | 900,000 | ||||
California Pollution Control | ||||||||
Financing Authority, RRR | ||||||||
(Wadham Energy Project) | ||||||||
(LOC; BNP Paribas) | 3.35 | 1/7/08 | 2,500,000 a | 2,500,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(CR&R Inc. Project) (LOC; Bank | ||||||||
of the West) | 3.50 | 1/7/08 | 6,000,000 a | 6,000,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(GreenWaste Recovery, Inc. | ||||||||
Project) (LOC; Comerica Bank) | 3.52 | 1/7/08 | 2,000,000 a | 2,000,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(Metropolitan Recycling Inc.) | ||||||||
(LOC; Comerica Bank) | 3.52 | 1/7/08 | 3,065,000 a | 3,065,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(Metropolitan Recycling Inc.) | ||||||||
(LOC; Comerica Bank) | 3.52 | 1/7/08 | 1,420,000 a | 1,420,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(Northern Recycling and Waste | ||||||||
Services, LLC Project) (LOC; | ||||||||
Union Bank of California) | 3.52 | 1/7/08 | 3,435,000 a | 3,435,000 |
8 |
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(Rainbow Disposal Company Inc. | ||||||||
Project) (LOC; Union Bank of | ||||||||
California) | 3.52 | 1/7/08 | 3,910,000 a | 3,910,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(Sunset Waste Paper, Inc. | ||||||||
Project) (LOC; Comerica Bank) | 3.52 | 1/7/08 | 4,000,000 a | 4,000,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(Valley Vista Services, Inc. | ||||||||
Project) (LOC; Comerica Bank) | 3.52 | 1/7/08 | 1,700,000 a | 1,700,000 | ||||
California School Boards | ||||||||
Association Finance Corporation, | ||||||||
COP, TRAN (California School | ||||||||
Cash Reserve Program) | ||||||||
(Insured; AMBAC) | 4.25 | 7/1/08 | 3,000,000 | 3,009,060 | ||||
California Statewide Communities | ||||||||
Development Authority, | ||||||||
California Communities TRAN | ||||||||
Program Note Participations | ||||||||
(Certain Local Agencies) | ||||||||
(Insured; FSA) | 4.50 | 6/30/08 | 2,000,000 | 2,008,205 | ||||
California Statewide Communities | ||||||||
Development Authority, MFHR | ||||||||
(Olen Jones Senior Apartments | ||||||||
Project) (LOC; Citibank NA) | 3.55 | 1/7/08 | 860,000 a | 860,000 | ||||
California Statewide Communities | ||||||||
Development Authority, Revenue | ||||||||
(House Ear Institute Project) | ||||||||
(LOC; City National Bank) | 3.51 | 1/7/08 | 5,900,000 a | 5,900,000 | ||||
California Statewide Communities | ||||||||
Development Authority, Revenue | ||||||||
(Kaiser Permanente) | 3.41 | 1/7/08 | 3,600,000 a | 3,600,000 | ||||
Chabot-Las Positas Community | ||||||||
College District, GO Notes, | ||||||||
Refunding (Insured; AMBAC) | 3.50 | 8/1/08 | 210,000 | 210,305 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
Contra Costa County, | ||||||||
MFHR (Pleasant Hill BART | ||||||||
Transit Village Apartments | ||||||||
Project) (Insured; XLCA) | 3.65 | 8/1/08 | 2,500,000 | 2,500,000 | ||||
Fresno Unified School District, | ||||||||
GO Notes, Refunding | ||||||||
(Insured; MBIA) | 5.85 | 2/1/08 | 100,000 | 100,168 | ||||
Golden State Tobacco | ||||||||
Securitization Corporation, | ||||||||
Enhanced Tobacco Settlement | ||||||||
Asset-Backed Bonds (Insured; | ||||||||
FGIC and Liquidity Facility; | ||||||||
Morgan Stanley Bank) | 3.64 | 1/7/08 | 5,000,000 a,b | 5,000,000 | ||||
Imperial Irrigation District, | ||||||||
Electric and Water System | ||||||||
Project Revenue, CP (LOC; | ||||||||
Citibank NA) | 3.45 | 2/7/08 | 10,000,000 | 10,000,000 | ||||
Los Angeles County, | ||||||||
GO Notes, TRAN | 4.50 | 6/30/08 | 1,550,000 | 1,555,912 | ||||
Los Angeles County School and | ||||||||
Community College Districts, | ||||||||
Pooled TRAN Participation | ||||||||
Certificates (Los Angeles | ||||||||
County Schools Pooled | ||||||||
Financing Program) | 4.50 | 6/30/08 | 1,915,000 | 1,922,939 | ||||
Los Angeles Department of | ||||||||
Airports, Revenue, Refunding | ||||||||
(Ontario International | ||||||||
Airport) (Insured; MBIA) | 5.00 | 5/15/08 | 100,000 | 100,490 | ||||
Macon Trust Various Certificates | ||||||||
(Irvine Unified School | ||||||||
District) (Liquidity Facility; | ||||||||
Bank of America and LOC; Bank | ||||||||
of America) | 3.46 | 1/7/08 | 2,700,000 a,b | 2,700,000 | ||||
Manteca Redevelopment Agency, | ||||||||
Subordinate Tax Allocation | ||||||||
Revenue, Refunding (Amended | ||||||||
Merged Project Area) (Insured; | ||||||||
XLCA and Liquidity Facility; | ||||||||
State Street Bank and Trust Co.) | 3.70 | 1/1/08 | 1,000,000 a | 1,000,000 |
10 |
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
Menlo Park Community Development | ||||||||
Agency, Tax Allocation Revenue, | ||||||||
Refunding (Las Pulgas Community | ||||||||
Development Project) (Insured; | ||||||||
AMBAC and Liquidity Facility; | ||||||||
State Street Bank and Trust Co.) | 3.68 | 1/1/08 | 3,500,000 a | 3,500,000 | ||||
Modesto Irrigation District | ||||||||
Financing Authority, Domestic | ||||||||
Water Project Revenue | ||||||||
(Insured; MBIA and Liquidity | ||||||||
Facility; DEPFA Bank PLC) | 3.49 | 1/7/08 | 3,950,000 a,b | 3,950,000 | ||||
Norco Redevelopment Agency, | ||||||||
Tax Allocation Revenue, | ||||||||
Refunding (Norco Redevelopment | ||||||||
Project Area Number One) | ||||||||
(Insured; MBIA) | 3.80 | 3/1/08 | 175,000 | 175,000 | ||||
Oxnard Financing Authority, | ||||||||
Solid Waste Revenue, Refunding | ||||||||
(Insured; AMBAC) | 4.00 | 5/1/08 | 400,000 | 400,448 | ||||
Pittsburg Redevelopment Agency, | ||||||||
Subordinate Tax Allocation | ||||||||
Revenue (Los Medanos Community | ||||||||
Development Project) (Insured; | ||||||||
AMBAC and Liquidity Facility: | ||||||||
California State Teachers | ||||||||
Retirement System and State | ||||||||
Street Bank and Trust Co.) | 3.68 | 1/1/08 | 19,800,000 a | 19,800,000 | ||||
Puttable Floating Option Tax | ||||||||
Exempt Receipts (California | ||||||||
Statewide Communities | ||||||||
Development Authority, MFHR | ||||||||
(La Mision Village Apartments | ||||||||
Project)) (Liquidity Facility; Merrill | ||||||||
Lynch and LOC; Merrill Lynch) | 5.00 | 1/7/08 | 6,205,000 a,b | 6,205,000 | ||||
Ravenswood City School District, | ||||||||
GO Notes, TRAN | 4.00 | 7/1/08 | 2,400,000 | 2,403,447 | ||||
Riverside, | ||||||||
Electric Revenue (Insured; FSA) | 3.63 | 10/1/08 | 160,000 | 160,668 | ||||
Sacramento Metropolitan Fire | ||||||||
District, GO Notes, TRAN | 4.25 | 6/30/08 | 3,000,000 | 3,007,868 |
The Fund 11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
San Bernardino Joint Powers | ||||||||
Financing Authority, Tax | ||||||||
Allocation Revenue, Refunding | ||||||||
(Central City Merged Project) | ||||||||
(Insured; AMBAC) | 5.50 | 7/1/08 | 100,000 | 101,099 | ||||
San Diego County, | ||||||||
COP (Friends of Chabad | ||||||||
Lubavitch) (LOC; Comerica Bank) | 3.45 | 1/7/08 | 1,600,000 a | 1,600,000 | ||||
San Diego County and School | ||||||||
District, TRAN (Note Program | ||||||||
Note Participations) | 4.50 | 6/30/08 | 2,620,000 | 2,631,000 | ||||
San Francisco City and County | ||||||||
Airport Commission, San | ||||||||
Francisco International | ||||||||
Airport Second Series Revenue | ||||||||
(Insured; FGIC) | 5.00 | 5/1/08 | 100,000 | 100,420 | ||||
San Francisco City and County | ||||||||
Airport Commission, San | ||||||||
Francisco International | ||||||||
Airport Second Series Revenue | ||||||||
(Issue 15A) (Insured; FSA) | 5.50 | 5/1/08 | 140,000 | 140,696 | ||||
San Francisco City and County | ||||||||
Public Utilities Commission, | ||||||||
San Francisco Water Revenue | ||||||||
(Insured; FSA and Liquidity | ||||||||
Facility; Morgan Stanley Bank) | 3.47 | 1/7/08 | 8,970,000 a,b | 8,970,000 | ||||
San Francisco City and County | ||||||||
Redevelopment Financing | ||||||||
Authority, Tax Allocation | ||||||||
Revenue, Refunding (San | ||||||||
Francisco Redevelopment | ||||||||
Projects) (Insured; MBIA) | 5.00 | 8/1/08 | 1,930,000 | 1,947,537 | ||||
San Jose Redevelopment Agency, | ||||||||
Tax Allocation Revenue (Merged | ||||||||
Area Redevelopment Project) | ||||||||
(Insured; AMBAC) | 4.75 | 8/1/08 | 200,000 | 201,902 | ||||
Tustin Community Redevelopment | ||||||||
Agency, Revenue (Liquidity Facility; | ||||||||
Citigroup and LOC; Citigroup) | 3.51 | 1/7/08 | 645,000 a,b | 645,000 |
12 |
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
West Covina Public Financing | ||||||||
Authority, LR, Refunding | ||||||||
(Public Facilities Project) | ||||||||
(LOC; California State | ||||||||
Teachers Retirement System) | 3.43 | 1/7/08 | 2,650,000 a | 2,650,000 | ||||
U.S. Related—12.7% | ||||||||
BB&T Municipal Trust | ||||||||
(Puerto Rico Infrastructure | ||||||||
Financing Authority, Special | ||||||||
Tax Revenue) (Insured; AMBAC | ||||||||
and Liquidity Facility; Branch | ||||||||
Banking and Trust Co.) | 3.48 | 1/7/08 | 3,600,000 a,b | 3,600,000 | ||||
Puerto Rico Aqueduct and Sewer | ||||||||
Authority, Revenue (Liquidity | ||||||||
Facility; Citibank NA and LOC; | ||||||||
Citibank NA) | 3.50 | 1/7/08 | 6,000,000 a,b | 6,000,000 | ||||
Puerto Rico Commonwealth, | ||||||||
Public Improvement GO Notes | ||||||||
(Insured; MBIA) | 5.50 | 7/1/08 | 135,000 | 136,173 | ||||
Puerto Rico Commonwealth, | ||||||||
Public Improvement GO Notes | ||||||||
(Insured; MBIA) | 5.75 | 7/1/08 | 240,000 | 242,341 | ||||
Puerto Rico Commonwealth, | ||||||||
TRAN (LOC: Banco Bilbao Vizcaya | ||||||||
Argentaria S.A., Banco Santander | ||||||||
S.A., Bank of Nova Scotia, BNP | ||||||||
Paribas, Dexia Credit Locale, | ||||||||
Fortis Bank and KBC Bank) | 4.25 | 7/30/08 | 7,000,000 | 7,033,613 | ||||
Puerto Rico Electric Power | ||||||||
Authority, Power Revenue | ||||||||
(Insured; FSA) | 5.00 | 7/1/08 | 190,000 | 191,176 | ||||
Puerto Rico Electric Power | ||||||||
Authority, Power Revenue, | ||||||||
Refunding (Insured; MBIA) | 5.50 | 7/1/08 | 500,000 | 507,500 | ||||
Puerto Rico Infrastructure | ||||||||
Financing Authority, Special | ||||||||
Tax Revenue, Refunding | ||||||||
(Insured; AMBAC) | 5.50 | 7/1/08 | 1,500,000 | 1,515,588 |
The Fund 13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
U.S. Related (continued) | ||||||||
Puerto Rico Municipal Finance | ||||||||
Agency, GO Notes (Insured; FSA) | 5.00 | 8/1/08 | 100,000 | 100,987 | ||||
Puerto Rico Public Buildings | ||||||||
Authority, Government | ||||||||
Facilities Revenue | ||||||||
(Insured; AMBAC) | 6.25 | 7/1/08 | 120,000 | 121,819 | ||||
Puttable Floating Option Tax | ||||||||
Exempt Receipts (Puerto Rico | ||||||||
Highways and Transportation | ||||||||
Authority, Highway Revenue) | ||||||||
(Liquidity Facility; Dexia | ||||||||
Credit Locale and LOC; Dexia | ||||||||
Credit Locale) | 3.44 | 1/7/08 | 4,500,000 a,b | 4,500,000 | ||||
Total Investments (cost $187,101,572) | 99.4% | 187,101,572 | ||||||
Cash and Receivables (Net) | .6% | 1,119,223 | ||||||
Net Assets | 100.0% | 188,220,795 |
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, 2007, these |
securities amounted to $41,570,000 or 22.1% of net assets. |
14 |
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The Fund 15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Summary of Combined Ratings (Unaudited) | ||||||||||
Fitch | or | Moody’s | or | Standard & Poor’s | Value (%)† | |||||
F1+,F1 | VMIG1,MIG1,P1 | SP1+,SP1,A1+,A1 | 92.1 | |||||||
AAA,AA,A c | Aaa,Aa,A c | AAA,AA,A c | 7.9 | |||||||
100.0 |
† | Based on total investments. | |
c | Notes which are not F, MIG and SP rated are represented by bond ratings of the issuers. | |
See notes to financial statements. |
16 |
STATEMENT OF ASSETS AND LIABILITIES |
December 31, 2007 (Unaudited) |
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments | 187,101,572 | 187,101,572 | ||
Cash | 390,785 | |||
Interest receivable | 1,228,231 | |||
188,720,588 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 2 | 16,571 | |||
Dividend payable | 483,222 | |||
499,793 | ||||
Net Assets ($) | 188,220,795 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 188,174,656 | |||
Accumulated net realized gain (loss) on investments | 46,139 | |||
Net Assets ($) | 188,220,795 | |||
Shares Outstanding | ||||
(unlimited number of shares of Beneficial Interest authorized) | 188,174,656 | |||
Net Asset Value, offering and redemption price per share ($) | 1.00 |
See notes to financial statements. |
The Fund 17
STATEMENT OF OPERATIONS Six Months Ended December 31, 2007 (Unaudited) |
Investment Income ($): | ||
Interest Income | 2,851,936 | |
Expenses: | ||
Management fee—Note 2 | 354,837 | |
Trustee fees—Note 2 | 6,894 | |
Total Expenses | 361,731 | |
Less—Trustee fees reimbursed by the Manager—Note 2 | (6,894) | |
Net Expenses | 354,837 | |
Investment Income—Net | 2,497,099 | |
Net Realized Gain (Loss) on Investments—Note 1(b) ($) | 6,762 | |
Net Increase in Net Assets Resulting from Operations | 2,503,861 |
See notes to financial statements. |
18 |
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
December 31, 2007 | Year Ended | |||
(Unaudited) | June 30, 2007 | |||
Operations ($): | ||||
Investment income—net | 2,497,099 | 3,608,079 | ||
Net realized gain (loss) on investments | 6,762 | 39,377 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 2,503,861 | 3,647,456 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net | (2,497,099) | (3,632,117) | ||
Beneficial Interest Transactions ($1.00 per share): | ||||
Net proceeds from shares sold | 407,976,635 | 457,305,950 | ||
Dividends reinvested | 720,473 | 1,585,060 | ||
Cost of shares redeemed | (328,475,773) | (422,980,781) | ||
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | 80,221,335 | 35,910,229 | ||
Total Increase (Decrease) in Net Assets | 80,228,097 | 35,925,568 | ||
Net Assets ($): | ||||
Beginning of Period | 107,992,698 | 72,067,130 | ||
End of Period | 188,220,795 | 107,992,698 |
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, 2007 | Year Ended June 30, | |||||||||||
(Unaudited) | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||||
Investment Operations: | ||||||||||||
Investment income—net | .016 | .032 | .025 | .014 | .005 | .008 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.016) | (.032) | (.025) | (.014) | (.005) | (.008) | ||||||
Net asset value, end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||||
Total Return (%) | 3.19a | 3.21 | 2.50 | 1.34 | .53 | .84 | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .46a | .45 | .45 | .46 | .45 | .45 | ||||||
Ratio of net expenses | ||||||||||||
to average net assets | .45a | .45 | .45 | .45 | .45 | .45 | ||||||
Ratio of net investment income | ||||||||||||
to average net assets | 3.16a | 3.16 | 2.49 | 1.37 | .52 | .83 | ||||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 188,221 | 107,993 | 72,067 | 72,141 | 57,791 | 75,393 | ||||||
a Annualized. | ||||||||||||
See notes to financial statements. |
20 |
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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, California income taxes to the extent consistent with the preservation of capital and the maintenance of liquidity.The Dreyfus Corporation (the “Manager” or “Dreyfus”) serves as the fund’s investment adviser. On July
1, 2007, Mellon Financial Corporation and The Bank of New York Company, Inc. merged, forming The Bank of New York Mellon Corporation (“BNY Mellon”). As part of this transaction, Dreyfus became a wholly-owned subsidiary of BNY Mellon. MBSC Securities 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.
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.
(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.
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 gains and losses 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 gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended, (the “Code”).To the extent that net realized capital gains can be offset by capital loss carryovers, if any, it is the policy of the fund not to distribute such gains.
22 |
(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.
During the current year, the fund adopted 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.The adoption of FIN 48 had no impact on the operations of the fund for the period ended December 31, 2007.
The fund is not subject to examination by U.S. Federal, State and City tax authorities for the tax years before 2004.
The tax characters of distributions paid to shareholders during the fiscal year ended June 30, 2007, 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, 2007, 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 (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 Chairman 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 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
24 |
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 $16,571.
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, 2007, the fund did not borrow under the line of credit.
The Fund 25
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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, 2007, is available on the SEC’s website at http://www.sec.gov and without charge, upon request, by calling 1-800-645-6561.
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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 | |
15 | Statement of Assets and Liabilities | |
16 | Statement of Operations | |
17 | Statement of Changes in Net Assets | |
18 | Financial Highlights | |
19 | Notes to Financial Statements | |
FOR MORE INFORMATION | ||
Back Cover |
The Fund
Dreyfus BASIC |
Massachusetts Municipal |
Money Market 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 six-month period from July 1, 2007, through December 31, 2007.
Looking back, 2007 was a year of significant change for the financial markets.Turmoil in the sub-prime mortgage market, declining housing values and soaring energy prices sparked a “flight to quality” among investors, in which prices of U.S.Treasury securities surged higher while more sophisticated fixed-income assets classes tumbled. Money market instruments proved to be a relatively safe haven from heightened volatility in the stock and bond markets, which led to record levels of assets coming into the money-market industry.
The turbulence of 2007 reinforced a central principle of successful investing: diversification. Investors with broad exposure to the world’s stock and bond markets were better protected from the full impact of market volatility in areas that, earlier in the year, were among the bright spots at the time. As we look ahead, we believe that now is the perfect time to meet with your financial advisor, who can help you plan and diversify your investment portfolio in a way that manages the potential opportunities and risks that may continue to arise in 2008.
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.
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Thomas F. Eggers Chief Executive Officer The Dreyfus Corporation January 15, 2008 |
2 |
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DISCUSSION OF FUND PERFORMANCE
For the period of July 1, 2007, through December 31, 2007, as provided by J. Christopher Nicholl, Portfolio Manager
Fund and Market Performance Overview
Tax-exempt money market yields generally declined over the second half of 2007, when an economic slowdown and an intensifying credit crisis sparked a “flight to quality” among investors and convinced the Federal Reserve Board (the “Fed”) to reduce short-term interest rates.
For the six-month period ended December 31, 2007, Dreyfus BASIC Massachusetts Municipal Money Market Fund produced an annualized yield of 3.11% . Taking into account the effects of compounding, the fund produced an annualized effective yield of 3.16% .1
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’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
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
anticipate little issuance and therefore lower yields, we may increase the fund’s weighted average maturity to maintain current yields for as long as practical.At other times, we try to maintain a neutral weighted average maturity.
The Fed Eased Monetary Policy Amid Economic and Credit Concerns
Investor sentiment already had begun to deteriorate when the reporting period began, as credit concerns stemming from rising defaults in the bond market’s sub-prime mortgage sector spread to other areas of the financial markets. As the credit crisis unfolded, the Fed intervened in August by injecting cash into the banking system and reducing the interest rate it charges banks for overnight loans. In September, the Fed reduced the federal funds rate, the interest rate banks charge one another for overnight loans, by 50 basis points in order to stimulate the slowing U.S. economy.Additional cuts of 25 basis points in the federal funds rate followed in October and December, leaving the benchmark overnight rate at 4.25% by year-end.
The tax-exempt money markets also were influenced by supply-and-demand forces. Investor demand intensified during the flight to quality, and tax-exempt money market assets climbed to new record highs. Rising demand was met with ample supply, as investment banks continued to create a substantial volume of very short-term variable rate demand notes and tender option bonds, which put upward pressure on yields at the short end of the tax-exempt money market’s maturity range. As a result, yields of floating-rate instruments were higher at times than those of longer-dated municipal notes.
Massachusetts’s fiscal condition generally has remained sound despite the economic slowdown, as the state budget has been supported by a diverse economy, recently effective financial management practices and growing “rainy day” reserves. Consequently, Massachusetts has retained its double-A credit rating.
4 |
A Conservative Investment Posture Warranted in an Uncertain Market
In this challenging environment, we generally maintained a conservative investment posture. The fund held no structured investment vehicles (SIVs), asset-backed securities or other instruments with direct exposure to sub-prime mortgages at any time during the reporting period. We generally focused on floating-rate securities on which yields are reset either daily or weekly, which we complemented with tax-exempt commercial paper and municipal notes. However, as cash flowed into the fund from risk-averse investors and supply-and-demand factors caused yields of short-term instruments to rise, we steadily increased holdings of variable-rate demand notes and reduced exposure to commercial paper and municipal notes. This strategy caused the fund’s weighted average maturity to decline from a range that was in line with industry averages at the start of the reporting period to one that was substantially shorter than average by year-end.
As 2008 begins, recession concerns have intensified, and many analysts expect the Fed to implement additional reductions in short-term interest rates. Accordingly, we intend to increase the fund’s weighted average maturity back toward a range that is in line with industry averages, which should help us capture current yields for a longer time if short-term interest rates fall further. In our judgment, these are prudent strategies under today’s more volatile market conditions.
January 15, 2008
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, 2007 to December 31, 2007. 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, 2007 | ||
Expenses paid per $1,000 † | $ 2.28 | |
Ending value (after expenses) | $1,015.80 |
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, 2007 | ||
Expenses paid per $1,000 † | $ 2.29 | |
Ending value (after expenses) | $1,022.87 |
† Expenses are equal to the fund’s annualized expense ratio of .45%, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
6 |
STATEMENT OF INVESTMENTS December 31, 2007 (Unaudited) |
Short-Term | Coupon | Maturity | Principal | |||||
Investments—98.7% | Rate (%) | Date | Amount ($) | Value ($) | ||||
ABN AMRO Munitops Certificates | ||||||||
Trust (Massachusetts Water | ||||||||
Resources Authority) (Insured; | ||||||||
FSA and Liquidity Facility; | ||||||||
ABN-AMRO) | 3.47 | 1/7/08 | 5,845,000 a,b | 5,845,000 | ||||
Boston Industrial Development | ||||||||
Financing Authority, Revenue | ||||||||
(Fenway Community Health | ||||||||
Center Project) (LOC; Fifth | ||||||||
Third Bank) | 3.37 | 1/7/08 | 4,240,000 a | 4,240,000 | ||||
Boston Industrial Development | ||||||||
Financing Authority, Revenue | ||||||||
(Fenway Community Health | ||||||||
Center Project) (LOC; Fifth | ||||||||
Third Bank) | 3.37 | 1/7/08 | 6,000,000 a | 6,000,000 | ||||
Canton Housing Authority, | ||||||||
MFHR, Refunding (Canton | ||||||||
Arboretum Apartments) | ||||||||
(Insured; FNMA) | 3.48 | 1/7/08 | 6,665,000 a | 6,665,000 | ||||
Eclipse Funding Trust | ||||||||
(Massachusetts Water Resources | ||||||||
Authority) (Insured; MBIA and | ||||||||
Liquidity Facility; U.S. Bank) | 3.46 | 1/7/08 | 6,000,000 a,b | 6,000,000 | ||||
Falmouth, | ||||||||
GO Notes, BAN | 4.00 | 10/10/08 | 1,000,000 | 1,004,486 | ||||
Grafton, | ||||||||
GO Notes, BAN | 4.00 | 10/30/08 | 2,100,000 | 2,111,113 | ||||
Littleton, | ||||||||
GO Notes, BAN | 4.10 | 1/24/08 | 2,500,000 | 2,500,851 | ||||
Massachusetts | ||||||||
(Putters Program) (Insured; | ||||||||
AMBAC and Liquidity Facility; | ||||||||
JPMorgan Chase Bank) | 3.52 | 1/7/08 | 3,995,000 a,b | 3,995,000 | ||||
Massachusetts, | ||||||||
GO (Central Artery/Ted | ||||||||
Williams Tunnel Infrastructure | ||||||||
Loan Act of 2000) (Liquidity | ||||||||
Facility; Landesbank | ||||||||
Baden-Wurttemberg) | 3.75 | 1/1/08 | 3,000,000 a | 3,000,000 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
Massachusetts, | ||||||||
GO (Central Artery/Ted | ||||||||
Williams Tunnel Infrastructure | ||||||||
Loan Act of 2000) (Liquidity | ||||||||
Facility; State Street Bank | ||||||||
and Trust Co.) | 3.75 | 1/1/08 | 750,000 a | 750,000 | ||||
Massachusetts, | ||||||||
GO Notes, Refunding (Liquidity | ||||||||
Facility; Citibank NA) | 3.46 | 1/7/08 | 4,000,000 a | 4,000,000 | ||||
Massachusetts Bay Transportation | ||||||||
Authority (General | ||||||||
Transportation System) | 3.37 | 1/7/08 | 3,500,000 a | 3,500,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, First Mortgage Revenue | ||||||||
(Brookhaven at Lexington | ||||||||
Project) (LOC; Bank of America) | 3.45 | 1/7/08 | 3,325,000 a | 3,325,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Higher Education | ||||||||
Revenue, Refunding (Smith | ||||||||
College Issue) | 3.35 | 1/7/08 | 5,000,000 a | 5,000,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Beaver | ||||||||
Country Day School Issue) | ||||||||
(LOC; Allied Irish Banks) | 3.45 | 1/7/08 | 4,400,000 a | 4,400,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Boston | ||||||||
Children’s Museum Issue) (LOC; | ||||||||
Royal Bank of Scotland) | 3.45 | 1/7/08 | 3,135,000 a | 3,135,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Brandon | ||||||||
Residential Treatment Center, | ||||||||
Inc. Project) (LOC; SunTrust Bank) | 3.43 | 1/7/08 | 1,700,000 a | 1,700,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Checon | ||||||||
Corporation Issue) (LOC; Bank | ||||||||
of America) | 3.52 | 1/7/08 | 3,250,000 a | 3,250,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Elderhostel, | ||||||||
Inc. Issue) (LOC; Royal Bank | ||||||||
of Scotland PLC) | 3.45 | 1/7/08 | 3,045,000 a | 3,045,000 |
8 |
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Exploration | ||||||||
School, Inc. Issue) (LOC; TD | ||||||||
Banknorth, N.A.) | 3.44 | 1/7/08 | 2,750,000 a | 2,750,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Harvard | ||||||||
University Issue) | 3.60 | 1/1/08 | 3,200,000 a | 3,200,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Hillside | ||||||||
School Issue) (LOC; JPMorgan | ||||||||
Chase Bank) | 3.43 | 1/7/08 | 5,000,000 a | 5,000,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Lasell | ||||||||
College Issue) (LOC; Citizens | ||||||||
Bank of Massachusetts) | 3.44 | 1/7/08 | 3,000,000 a | 3,000,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Meadowbrook | ||||||||
School Project) (LOC; Allied | ||||||||
Irish Banks) | 3.42 | 1/7/08 | 1,330,000 a | 1,330,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (WGBH | ||||||||
Educational Foundation Issue) | ||||||||
(Insured; AMBAC and Liquidity | ||||||||
Facility; Royal Bank of Canada) | 3.45 | 1/7/08 | 4,545,000 a | 4,545,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Worcester | ||||||||
Academy Issue) (LOC; Allied | ||||||||
Irish Banks) | 3.47 | 1/7/08 | 3,000,000 a | 3,000,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Youth | ||||||||
Opportunities Upheld, Inc. | ||||||||
Issue) (LOC; TD Banknorth, N.A.) | 3.44 | 1/7/08 | 1,500,000 a | 1,500,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities Authority, | ||||||||
Revenue (Amherst College Issue) | 3.60 | 1/10/08 | 2,925,000 | 2,925,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Bentley | ||||||||
College Issue) (LOC; JPMorgan | ||||||||
Chase Bank) | 3.40 | 1/7/08 | 4,500,000 a | 4,500,000 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||||
Massachusetts Health and | ||||||||||
Educational Facilities | ||||||||||
Authority, Revenue (Capital | ||||||||||
Asset Program Issue) (Insured; | ||||||||||
MBIA and Liquidity Facility; | ||||||||||
State Street Bank and Trust Co.) | 3.66 | 1/1/08 | 2,100,000 | a | 2,100,000 | |||||
Massachusetts Health and | ||||||||||
Educational Facilities | ||||||||||
Authority, Revenue (Capital | ||||||||||
Asset Program Issue) (Insured; | ||||||||||
MBIA and Liquidity Facility; | ||||||||||
State Street Bank and Trust Co.) | 3.67 | 1/1/08 | 2,500,000 | a | 2,500,000 | |||||
Massachusetts Health and | ||||||||||
Educational Facilities | ||||||||||
Authority, Revenue (Capital | ||||||||||
Asset Program Issue) (LOC; | ||||||||||
Bank of America) | 3.65 | 1/1/08 | 6,700,000 | a | 6,700,000 | |||||
Massachusetts Health and | ||||||||||
Educational Facilities | ||||||||||
Authority, Revenue (Children’s | ||||||||||
Hospital Issue) (Insured; | ||||||||||
AMBAC and Liquidity Facility; | ||||||||||
Bank of America) | 3.70 | 1/1/08 | 300,000 | a | 300,000 | |||||
Massachusetts Health and | ||||||||||
Educational Facilities | ||||||||||
Authority, Revenue (Great | ||||||||||
Brook Valley Health Center) | ||||||||||
(LOC; TD Banknorth, N.A.) | 3.43 | 1/7/08 | 1,600,000 | a | 1,600,000 | |||||
Massachusetts Health and | ||||||||||
Educational Facilities Authority, | ||||||||||
Revenue (Massachusetts Institute | ||||||||||
of Technology Issue) | 3.32 | 1/7/08 | 2,500,000 | a | 2,500,000 | |||||
Massachusetts Health and | ||||||||||
Educational Facilities | ||||||||||
Authority, Revenue (Partners | ||||||||||
HealthCare System—Capital | ||||||||||
Asset Program Issue) (Insured; | ||||||||||
FSA and Liquidity Facility: | ||||||||||
Bayerische Landesbank and | ||||||||||
JPMorgan Chase Bank) | 3.40 | 1/7/08 | 2,500,000 | a | 2,500,000 |
10 |
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Partners | ||||||||
HealthCare System Issue) | 3.65 | 1/1/08 | 1,500,000 a | 1,500,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Partners | ||||||||
HealthCare System Issue) (LOC; | ||||||||
Citibank NA) | 3.42 | 1/7/08 | 6,000,000 a | 6,000,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Putters | ||||||||
Program) (Insured; FGIC and | ||||||||
Liquidity Facility; JPMorgan | ||||||||
Chase Bank) | 3.48 | 1/7/08 | 4,470,000 a,b | 4,470,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (University | ||||||||
of Massachusetts Issue) (LOC; | ||||||||
Dexia Credit Locale) | 3.40 | 1/7/08 | 2,400,000 a | 2,400,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Wellesley | ||||||||
College Issue) | 3.35 | 1/7/08 | 4,475,000 a | 4,475,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Williams | ||||||||
College Issue) | 3.35 | 1/7/08 | 300,000 a | 300,000 | ||||
Massachusetts Housing Finance | ||||||||
Agency, Housing Revenue | ||||||||
(Insured; FSA and Liquidity | ||||||||
Facility; Dexia Credit Locale) | 3.37 | 1/7/08 | 3,000,000 a | 3,000,000 | ||||
Massachusetts Industrial Finance | ||||||||
Agency, IDR, Refunding | ||||||||
(Nova Realty Trust) | ||||||||
(LOC; Bank of America) | 3.50 | 1/7/08 | 3,000,000 a | 3,000,000 | ||||
Massachusetts School Building | ||||||||
Authority, CP (LOC; Bank of | ||||||||
Nova Scotia) | 3.55 | 3/12/08 | 2,000,000 | 2,000,000 |
The Fund 11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
Massachusetts Water Resources | ||||||||
Authority, Multi-Modal | ||||||||
Subordinated General Revenue, | ||||||||
Refunding (Insured; FGIC and | ||||||||
Liquidity Facility; Bayerische | ||||||||
Landesbank) | 3.45 | 1/7/08 | 3,700,000 a | 3,700,000 | ||||
Massachusetts Water Resources | ||||||||
Authority, Multi-Modal | ||||||||
Subordinated General Revenue, | ||||||||
Refunding (Insured; FGIC and | ||||||||
Liquidity Facility; Dexia | ||||||||
Credit Locale) | 3.45 | 1/7/08 | 2,600,000 a | 2,600,000 | ||||
Massachusetts Water Resources | ||||||||
Authority, Multi-Modal | ||||||||
Subordinated General Revenue, | ||||||||
Refunding (LOC; Landesbank | ||||||||
Baden-Wurttemberg) | 3.50 | 1/1/08 | 2,700,000 a | 2,700,000 | ||||
Massachusetts Water Resources | ||||||||
Authority, Multi-Modal | ||||||||
Subordinated General Revenue, | ||||||||
Refunding (LOC; Landesbank | ||||||||
Hessen-Thuringen Girozentrale) | 3.73 | 1/1/08 | 3,295,000 a | 3,295,000 | ||||
Swampscott, | ||||||||
GO Notes, BAN | 4.00 | 10/17/08 | 3,986,000 | 4,004,318 | ||||
University of Massachusetts | ||||||||
Building Authority, Project | ||||||||
and Refunding Revenue | ||||||||
(Insured; AMBAC and Liquidity | ||||||||
Facility; DEPFA Bank PLC) | 3.46 | 1/7/08 | 4,160,000 a | 4,160,000 | ||||
Total Investments (cost $171,020,768) | 98.7% | 171,020,768 | ||||||
Cash and Receivables (Net) | 1.3% | 2,288,387 | ||||||
Net Assets | 100.0% | 173,309,155 |
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, 2007, these |
securities amounted to $20,310,000 or 11.7% of net assets. |
12 |
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 13
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 | 94.0 | |||||||
AAA,AA,A c | Aaa,Aa,A c | AAA,AA,A c | 2.2 | |||||||
Not Rated d | Not Rated d | Not Rated d | 3.8 | |||||||
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. |
14 |
STATEMENT OF ASSETS AND LIABILITIES December 31, 2007 (Unaudited) |
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments | 171,020,768 | 171,020,768 | ||
Cash | 1,825,997 | |||
Interest receivable | 917,111 | |||
173,763,876 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 2 | 48,205 | |||
Dividend payable | 406,485 | |||
Payable for shares of Beneficial Interest redeemed | 31 | |||
454,721 | ||||
Net Assets ($) | 173,309,155 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 173,308,105 | |||
Accumulated net realized gain (loss) on investments | 1,050 | |||
Net Assets ($) | 173,309,155 | |||
Shares Outstanding | ||||
(unlimited number of shares of Beneficial Interest authorized) | 173,319,190 | |||
Net Asset Value, offering and redemption price per share ($) | 1.00 |
See notes to financial statements. |
The Fund 15
STATEMENT OF OPERATIONS Six Months Ended December 31, 2007 (Unaudited) |
Investment Income ($): | ||
Interest Income | 2,842,274 | |
Expenses: | ||
Management fee—Note 2 | 358,783 | |
Trustee fees—Note 2 | 6,351 | |
Total Expenses | 365,134 | |
Less—Trustee fees reimbursed by the Manager—Note 2 | (6,351) | |
Net Expenses | 358,783 | |
Investment Income—Net, representing net | ||
increase in net assets resulting from operations | 2,483,491 |
See notes to financial statements. |
16 |
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
December 31, 2007 | Year Ended | |||
(Unaudited) | June 30, 2007 | |||
Operations ($): | ||||
Investment income—net | 2,483,491 | 4,302,893 | ||
Net realized gain (loss) on investments | — | 1,050 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 2,483,491 | 4,303,943 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net | (2,483,491) | (4,302,893) | ||
Beneficial Interest Transactions ($1.00 per share): | ||||
Net proceeds from shares sold | 228,994,750 | 351,391,108 | ||
Dividends reinvested | 374,783 | 752,420 | ||
Cost of shares redeemed | (218,121,937) | (320,369,276) | ||
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | 11,247,596 | 31,774,252 | ||
Total Increase (Decrease) in Net Assets | 11,247,596 | 31,775,302 | ||
Net Assets ($): | ||||
Beginning of Period | 162,061,559 | 130,286,257 | ||
End of Period | 173,309,155 | 162,061,559 |
See notes to financial statements. |
The Fund 17
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, 2007 | Year Ended June 30, | |||||||||||
(Unaudited) | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||||
Investment Operations: | ||||||||||||
Investment income—net | .016 | .032 | .024 | .013 | .005 | .009 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.016) | (.032) | (.024) | (.013) | (.005) | (.009) | ||||||
Net asset value, end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||||
Total Return (%) | 3.13a | 3.21 | 2.48 | 1.34 | .53 | .87 | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .46a | .46 | .46 | .45 | .45 | .45 | ||||||
Ratio of net expenses | ||||||||||||
to average net assets | .45a | .45 | .45 | .45 | .45 | .45 | ||||||
Ratio of net investment income | ||||||||||||
to average net assets | 3.11a | 3.17 | 2.46 | 1.33 | .53 | .87 | ||||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 173,309 | 162,062 | 130,286 | 131,162 | 141,930 | 162,730 | ||||||
a Annualized. | ||||||||||||
See notes to financial statements. |
18 |
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 liquidity.The Dreyfus Corporation (the “Manager” or “Dreyfus”) serves as the fund’s investment adviser. On July 1, 2007, Mellon Financial Corporation and The Bank of New York Company, Inc. merged, forming The Bank of New York Mellon Corporation (“BNY Mellon”).As part of this transaction, Dreyfus became a wholly-owned subsidiary of BNY Mellon. MBSC Securities 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.
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.
(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.
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 gains and losses 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.
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 gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”).To the extent that net realized capital gains can be offset by capital loss carryovers, if any, it is the policy of the fund not to distribute such gains.
(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
20 |
Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
During the current year, the fund adopted 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.The adoption of FIN 48 had no impact on the operations of the fund for the period ended December 31, 2007.
The fund is not subject to examination by U.S. Federal, State and City tax authorities for the tax years before 2004.
The tax characters of distributions paid to shareholders during the fiscal year ended June 30, 2007, 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, 2007, 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
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 (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 Chairman 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 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. 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.
22 |
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $48,205.
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. During the period ended December 31, 2007, the fund did not borrow under the line of credit.
The Fund 23
NOTES
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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, 2007, is available on the SEC’s website at http://www.sec.gov and without charge, upon request, by calling 1-800-645-6561.
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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 | |
19 | Statement of Assets and Liabilities | |
20 | Statement of Operations | |
21 | Statement of Changes in Net Assets | |
22 | Financial Highlights | |
23 | Notes to Financial Statements | |
FOR MORE INFORMATION | ||
Back Cover |
The Fund
Dreyfus BASIC |
New York Municipal |
Money Market 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, 2007, through December 31, 2007.
Looking back, 2007 was a year of significant change for the financial markets.Turmoil in the sub-prime mortgage market, declining housing values and soaring energy prices sparked a “flight to quality” among investors, in which prices of U.S. Treasury securities surged higher while more sophisticated fixed-income assets classes tumbled. Money market instruments proved to be a relatively safe haven from heightened volatility in the stock and bond markets, which led to record levels of assets coming into the money-market industry.
The turbulence of 2007 reinforced a central principle of successful investing: diversification. Investors with broad exposure to the world’s stock and bond markets were better protected from the full impact of market volatility in areas that, earlier in the year, were among the bright spots at the time. As we look ahead, we believe that now is the perfect time to meet with your financial advisor, who can help you plan and diversify your investment portfolio in a way that manages the potential opportunities and risks that may continue to arise in 2008.
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.
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Thomas F. Eggers Chief Executive Officer The Dreyfus Corporation January 15, 2008 |
2 |
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DISCUSSION OF FUND PERFORMANCE
For the period of July 1, 2007, through December 31, 2007, as provided by Joseph Irace, Senior Portfolio Manager
Fund and Market Performance Overview
Yield spreads for money market instruments widened during the reporting period, as the Federal Reserve Board (the “Fed”) reduced key short-term interest rates in an attempt to address an intensifying credit crisis and forestall a potential recession.
For the six-month period ended December 31, 2007, Dreyfus BASIC New York Municipal Money Market Fund produced an annualized yield of 3.20% and, taking into account the effects of compounding, an annualized effective yield of 3.24% .1
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
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
anticipate little issuance and therefore lower yields, we may increase 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.
The Fed Eased Monetary Policy Amid Economic and Credit Concerns
Although tax-exempt money market yields remained relatively stable in the months leading up to the start of the reporting period, market conditions changed dramatically over the summer of 2007, when credit concerns stemming from rising defaults in the bond market’s sub-prime mortgage sector spread to other areas of the financial markets. Even longer-term municipal bonds, which have no direct exposure to sub-prime lending, were affected by selling pressure during a “flight to quality” in which investors flocked to the relative safe haven of U.S.Treasury securities.
As the credit crisis unfolded, the Fed attempted to promote greater market liquidity in August by reducing the discount rate, the interest rate it charges banks for overnight loans. In September, the Fed reduced the federal funds rate, the interest rate banks charge one another for overnight loans, by 50 basis points in order to stimulate the slowing U.S. economy. Additional cuts in the federal funds rate followed in October and December, leaving the benchmark overnight rate at 4.25% by year-end.
The tax-exempt money markets also were influenced by supply-and-demand forces. Investor demand intensified during the flight to quality, and tax-exempt money market assets set new record highs. Rising demand was met with ample supply, as investment banks continued to create a substantial volume of very short-term variable rate demand notes and tender option bonds, which put upward pressure on yields at the short end of the tax-exempt money market’s maturity range. As a result, at times during the reporting period, yields of floating-rate instruments were higher than those of longer-dated municipal notes.
4 |
New York’s fiscal condition generally has remained sound, supported by a diverse economy and recent efforts to adopt budgetary and spending controls. However, challenges remain for New York, as recent losses among major Wall Street banks and brokerage firms may constrain tax revenues at a time when the state is contending with future budget deficits and a rising debt load.
A Conservative Investment Posture Warranted in an Uncertain Market
We generally maintained a conservative investment posture, focusing whenever possible on municipal instruments issued directly by New York city, New York state, New York school districts and other entities in New York with high credit ratings and ample revenue streams. In anticipation of lower short-term interest rates, we set the fund’s weighted average maturity in a range that was slightly longer than industry averages.Whenever it was practical to do so, we “laddered” the fund’s holdings to protect it from unexpected interest-rate fluctuations. As always, our research staff maintained rigorous credit standards, which, in our judgment, became even more important in the recent credit crisis.
As of the reporting period’s end, the Fed appears likely to implement one or more additional reductions in short-term interest rates. We believe that the fund’s relatively long weighted average maturity positions it to capture incrementally higher yields should short-term interest rates decline further.
January 15, 2008
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, 2007 to December 31, 2007. 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, 2007 | ||
Expenses paid per $1,000 † | $ 2.28 | |
Ending value (after expenses) | $1,016.20 |
COMPARING YOUR FUND’S EXPENSES WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment | ||
assuming a hypothetical 5% annualized return for the six months ended December 31, 2007 | ||
Expenses paid per $1,000 † | $ 2.29 | |
Ending value (after expenses) | $1,022.87 |
† Expenses are equal to the fund’s annualized expense ratio of .45%; multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).
6 |
STATEMENT OF INVESTMENTS December 31, 2007 (Unaudited) |
Short-Term | Coupon | Maturity | Principal | |||||
Investments—101.8% | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York—100.0% | ||||||||
Albany Housing Authority, | ||||||||
Revenue (Nutgrove Garden | ||||||||
Apartments Project) (LOC; | ||||||||
Citizens Bank of Massachusetts) | 3.43 | 1/7/08 | 1,495,000 a | 1,495,000 | ||||
Albany Industrial Development | ||||||||
Agency, Civic Facility Revenue | ||||||||
(Albany College of Pharmacy | ||||||||
Project) (LOC; TD Banknorth, N.A.) | 3.41 | 1/7/08 | 3,700,000 a | 3,700,000 | ||||
Albany Industrial Development | ||||||||
Agency, Civic Facility Revenue | ||||||||
(CHF Holland Suites, L.L.C. | ||||||||
Project) (LOC; TD Banknorth, N.A.) | 3.45 | 1/7/08 | 6,390,000 a | 6,390,000 | ||||
Albany Industrial Development | ||||||||
Agency, Civic Facility Revenue | ||||||||
(Corning Preserve/Hudson | ||||||||
Riverfront Development | ||||||||
Project) (LOC; Key Bank) | 3.41 | 1/7/08 | 1,355,000 a | 1,355,000 | ||||
Albany Industrial Development | ||||||||
Agency, Civic Facility Revenue | ||||||||
(University at Albany | ||||||||
Foundation Student Housing | ||||||||
Corporation—Empire Commons | ||||||||
East Project) (Insured; AMBAC | ||||||||
and Liquidity Facility; Key Bank) | 3.41 | 1/7/08 | 4,130,000 a | 4,130,000 | ||||
Albany Industrial Development | ||||||||
Agency, Civic Facility Revenue | ||||||||
(University at Albany | ||||||||
Foundation Student Housing | ||||||||
Corporation—Empire Commons | ||||||||
South Project) (Insured; AMBAC | ||||||||
and Liquidity Facility; Key Bank) | 3.20 | 1/7/08 | 2,930,000 a,b | 2,930,000 | ||||
Alexandria Bay, | ||||||||
GO Notes, BAN | 4.25 | 9/18/08 | 2,000,000 | 2,006,181 | ||||
Amsterdam Enlarged City School | ||||||||
District, GO Notes, BAN | 4.00 | 7/3/08 | 1,346,000 | 1,347,624 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term Municipal | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
Auburn Industrial Development | ||||||||
Authority, IDR (Fat Tire LLC | ||||||||
Project) (LOC; Citizens Bank | ||||||||
of Pennsylvania) | 3.55 | 1/7/08 | 1,295,000 a | 1,295,000 | ||||
Avoca Central School District, | ||||||||
GO Notes, BAN | 4.00 | 6/26/08 | 2,000,000 | 2,001,862 | ||||
Board of Cooperative Educational | ||||||||
Services for the Sole | ||||||||
Supervisory District in the | ||||||||
Counties of Cattaraugus, | ||||||||
Allegany, Erie and Wyoming, RAN | 4.00 | 12/30/08 | 3,000,000 b | 3,024,030 | ||||
Cincinnatus Central School | ||||||||
District, GO Notes, BAN | 4.00 | 6/18/08 | 3,100,000 | 3,103,435 | ||||
Colonie, | ||||||||
GO Notes, BAN | 4.00 | 4/4/08 | 1,500,000 | 1,500,933 | ||||
Colonie, | ||||||||
GO Notes, BAN | 4.00 | 4/4/08 | 1,100,000 | 1,101,395 | ||||
Colonie, | ||||||||
GO Notes, BAN | 4.25 | 4/4/08 | 7,000,000 | 7,007,779 | ||||
Dutchess County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue, Refunding | ||||||||
(Lutheran Center at | ||||||||
Poughkeepsie, Inc. Project) | ||||||||
(LOC; Key Bank) | 3.41 | 1/7/08 | 2,000,000 a | 2,000,000 | ||||
Erie County Industrial Development | ||||||||
Agency, IDR (Luminescent | ||||||||
System Inc. Project) (LOC; | ||||||||
HSBC Bank USA) | 3.25 | 1/7/08 | 3,645,000 a | 3,645,000 | ||||
Glens Falls City School District, | ||||||||
GO Notes, RAN | 4.25 | 6/18/08 | 1,000,000 | 1,002,221 | ||||
Hamburg Central School District, | ||||||||
GO Notes, BAN | 4.25 | 7/3/08 | 2,400,000 | 2,405,219 | ||||
Hudson Yards Infrastructure | ||||||||
Corporation, Hudson Yards | ||||||||
Senior Revenue (Insured; FGIC | ||||||||
and Liquidity Facility; | ||||||||
Landesbank Hessen-Thuringen | ||||||||
Girozentrale) | 3.49 | 1/7/08 | 21,800,000 a,c | 21,800,000 |
8 |
Short-Term Municipal | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
Hudson Yards Infrastructure | ||||||||
Corporation, Hudson Yards | ||||||||
Senior Revenue (Insured; FGIC | ||||||||
and Liquidity Facility; Morgan | ||||||||
Stanley Bank) | 3.68 | 1/7/08 | 10,000,000 a,c | 10,000,000 | ||||
Lancaster Industrial Development | ||||||||
Agency, IDR (Jiffy-Tite Company, Inc. | ||||||||
Project) (LOC; Key Bank) | 3.55 | 1/7/08 | 1,160,000 a | 1,160,000 | ||||
Long Island Power Authority, | ||||||||
Electric System Subordinated | ||||||||
Revenue (LOC; Bayerische | ||||||||
Landesbank) | 3.45 | 1/1/08 | 4,050,000 a | 4,050,000 | ||||
Long Island Power Authority, | ||||||||
Electric System Subordinated | ||||||||
Revenue (LOC; Westdeutsche | ||||||||
Landesbank) | 3.57 | 1/1/08 | 4,900,000 a | 4,900,000 | ||||
Metropolitan Transportation | ||||||||
Authority, Transportation | ||||||||
Revenue (Insured; AMBAC and | ||||||||
Liquidity Facility; PB Finance Inc.) | 3.50 | 1/7/08 | 6,780,000 a,c | 6,780,000 | ||||
Metropolitan Transportation | ||||||||
Authority, Transportation | ||||||||
Revenue (Insured; XLCA and | ||||||||
LOC; DEPFA Bank PLC) | 3.52 | 1/7/08 | 2,430,000 a | 2,430,000 | ||||
Metropolitan Transportation | ||||||||
Authority, Transportation | ||||||||
Revenue, CP (LOC; ABN-AMRO) | 2.99 | 1/9/08 | 5,000,000 | 5,000,000 | ||||
Metropolitan Transportation | ||||||||
Authority, Transportation | ||||||||
Revenue, Refunding (Insured; | ||||||||
FGIC and Liquidity Facility; | ||||||||
Morgan Stanley Bank) | 3.65 | 1/7/08 | 2,500,000 a,c | 2,500,000 | ||||
Monroe County, | ||||||||
GO Notes, RAN | 4.00 | 4/15/08 | 8,000,000 | 8,009,054 | ||||
Monroe County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (YMCA of | ||||||||
Greater Rochester Project) | ||||||||
(LOC; M&T Bank) | 3.47 | 1/7/08 | 2,500,000 a | 2,500,000 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term Municipal | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
Monroe County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (YMCA of | ||||||||
Greater Rochester Project) | ||||||||
(LOC; M&T Bank) | 3.47 | 1/7/08 | 5,250,000 a | 5,250,000 | ||||
Monroe County Industrial | ||||||||
Development Agency, IDR | ||||||||
(2883 Associates LP) | ||||||||
(LOC; HSBC Bank USA) | 3.25 | 1/7/08 | 895,000 a | 895,000 | ||||
Monroe County Industrial | ||||||||
Development Agency, IDR | ||||||||
(Axelrod Realty Partnership | ||||||||
Facility) (LOC; JPMorgan | ||||||||
Chase Bank) | 4.00 | 6/1/08 | 260,000 | 260,000 | ||||
Monroe County Industrial | ||||||||
Development Agency, IDR | ||||||||
(Mercury Print Productions, | ||||||||
Inc. Facility) (LOC; M&T Bank) | 3.55 | 1/7/08 | 225,000 a | 225,000 | ||||
Nassau County Industrial | ||||||||
Development Agency, Revenue | ||||||||
(Rockville Centre Housing | ||||||||
Project) (LOC; M&T Bank) | 3.52 | 1/7/08 | 8,000,000 a | 8,000,000 | ||||
New York City | ||||||||
(LOC; Westdeutsche Landesbank) | 3.60 | 1/1/08 | 1,875,000 a | 1,875,000 | ||||
New York City | ||||||||
(Putters Program) (Insured; | ||||||||
FSA and Liquidity Facility; | ||||||||
JPMorgan Chase Bank) | 3.47 | 1/7/08 | 17,000,000 a,c | 17,000,000 | ||||
New York City Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Columbia | ||||||||
Grammar and Preparatory School | ||||||||
Project) (LOC; Allied Irish Banks) | 3.45 | 1/7/08 | 4,555,000 a | 4,555,000 | ||||
New York City Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Hewitt | ||||||||
School Project) (LOC; Allied | ||||||||
Irish Banks) | 3.45 | 1/7/08 | 1,570,000 a | 1,570,000 |
10 |
Short-Term Municipal | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
New York City Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Sephardic | ||||||||
Community Youth Center, Inc. | ||||||||
Project) (LOC; M&T Bank) | 3.47 | 1/7/08 | 2,500,000 a | 2,500,000 | ||||
New York City Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue | ||||||||
(Spence-Chapin, Services to | ||||||||
Families and Children Project) | ||||||||
(LOC; Allied Irish Banks) | 3.45 | 1/7/08 | 3,935,000 a | 3,935,000 | ||||
New York City Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (The | ||||||||
Allen-Stevenson School | ||||||||
Project) (LOC; | ||||||||
Allied Irish Banks) | 3.45 | 1/7/08 | 3,005,000 a | 3,005,000 | ||||
New York City Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue, Refunding | ||||||||
(Federation of Protestant | ||||||||
Welfare Agencies Inc. Project) | ||||||||
(LOC; Allied Irish Banks) | 3.45 | 1/7/08 | 2,880,000 a | 2,880,000 | ||||
New York City Industrial | ||||||||
Development Agency, IDR | ||||||||
(Novelty Crystal Corporation | ||||||||
Project) (LOC; | ||||||||
Commerce Bank N.A.) | 3.55 | 1/7/08 | 3,560,000 a | 3,560,000 | ||||
New York City Industrial | ||||||||
Development Agency, IDR | ||||||||
(Super-Tek Products, Inc. | ||||||||
Project) (LOC; Citibank NA) | 3.26 | 1/7/08 | 5,155,000 a | 5,155,000 | ||||
New York City Industrial | ||||||||
Development Agency, Liberty | ||||||||
Revenue (7 World Trade Center, | ||||||||
LLC Project) (LOC; Citibank NA | ||||||||
and Liquidity Facility; | ||||||||
Citibank NA) | 3.49 | 1/7/08 | 700,000 a,c | 700,000 |
The Fund 11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term Municipal | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
New York City Industrial | ||||||||
Development Agency, PILOT | ||||||||
Revenue (Yankee Stadium | ||||||||
Project) (Insured; FGIC and | ||||||||
Liquidity Facility; Morgan | ||||||||
Stanley and Company) | 3.65 | 1/7/08 | 4,836,500 a,c | 4,836,500 | ||||
New York City Industrial | ||||||||
Development Agency, Special | ||||||||
Facility Revenue (Air Express | ||||||||
International Corporation | ||||||||
Project) (LOC; Citibank NA) | 3.50 | 1/7/08 | 5,000,000 a | 5,000,000 | ||||
New York City Municipal Water | ||||||||
Finance Authority, CP (LOC: | ||||||||
Landesbank Baden-Wurttemberg | ||||||||
and Landesbank | ||||||||
Hessen-Thuringen Girozentrale) | 3.35 | 2/15/08 | 3,600,000 | 3,600,000 | ||||
New York City Municipal Water | ||||||||
Finance Authority, Water and | ||||||||
Sewer System Second General | ||||||||
Resolution Revenue (Liquidity | ||||||||
Facility; Dexia Credit Locale) | 3.60 | 1/1/08 | 5,100,000 a | 5,100,000 | ||||
New York City Municipal Water | ||||||||
Finance Authority, Water and | ||||||||
Sewer System Second General | ||||||||
Resolution Revenue (Liquidity | ||||||||
Facility; Fortis Bank) | 3.53 | 1/1/08 | 3,900,000 a | 3,900,000 | ||||
New York City Transitional Finance | ||||||||
Authority, Revenue (New York | ||||||||
City Recovery) (Liquidity | ||||||||
Facility; Landesbank | ||||||||
Baden-Wurttemberg) | 3.70 | 1/1/08 | 1,000,000 a | 1,000,000 | ||||
New York City Transitional Finance | ||||||||
Authority, Revenue (New York | ||||||||
City Recovery) (Liquidity | ||||||||
Facility; Royal Bank of Canada) | 3.73 | 1/1/08 | 3,000,000 a | 3,000,000 | ||||
New York Counties Tobacco Trust | ||||||||
IV, Tobacco Settlement Pass-Through | ||||||||
Bonds (Liquidity Facility; Merrill | ||||||||
Lynch Capital Services and | ||||||||
LOC; Merrill Lynch) | 3.87 | 1/7/08 | 18,080,000 a,c | 18,080,000 |
12 |
Short-Term Municipal | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
New York State, | ||||||||
GO Notes | 4.00 | 3/1/08 | 465,000 | 465,539 | ||||
New York State Dormitory | ||||||||
Authority, Insured Revenue | ||||||||
(Long Island University) | ||||||||
(Insured; CIFG and Liquidity | ||||||||
Facility; Dexia Credit Locale) | 3.73 | 1/1/08 | 4,155,000 a | 4,155,000 | ||||
New York State Dormitory | ||||||||
Authority, Revenue (Park Ridge | ||||||||
Hospital Inc.) (LOC; JPMorgan | ||||||||
Chase Bank) | 3.44 | 1/7/08 | 9,600,000 a | 9,600,000 | ||||
New York State Housing Finance | ||||||||
Agency, Housing Revenue | ||||||||
(Gateway to New Cassel) (LOC; | ||||||||
JPMorgan Chase Bank) | 3.44 | 1/7/08 | 2,300,000 a | 2,300,000 | ||||
New York State Housing Finance | ||||||||
Agency, Revenue (Worth Street) | ||||||||
(LOC; FNMA) | 3.50 | 1/7/08 | 9,400,000 a | 9,400,000 | ||||
New York State Urban Development | ||||||||
Corporation, COP (James A. | ||||||||
Farley Post Office Project) | ||||||||
(Liquidity Facility; Citigroup | ||||||||
and LOC; Citigroup) | 3.51 | 1/7/08 | 5,000,000 a,c | 5,000,000 | ||||
Newburgh Industrial Development | ||||||||
Agency, Civic Facility Revenue | ||||||||
(Community Development | ||||||||
Properties Dubois Street II, | ||||||||
Inc. Project) (LOC; Key Bank) | 3.41 | 1/7/08 | 10,605,000 a | 10,605,000 | ||||
North Syracuse Central School | ||||||||
District, GO Notes, RAN | 4.00 | 6/19/08 | 1,200,000 | 1,201,338 | ||||
Olean, | ||||||||
GO Notes RAN | 4.00 | 8/14/08 | 1,800,000 | 1,802,135 | ||||
Orangetown, | ||||||||
GO Notes, BAN | 4.00 | 10/3/08 | 1,100,000 | 1,104,566 | ||||
Otsego County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Noonan | ||||||||
Community Service Corporation | ||||||||
Project) (LOC; FHLB) | 3.42 | 1/7/08 | 1,365,000 a | 1,365,000 |
The Fund 13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term Municipal | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
Patchogue-Medford Union Free | ||||||||
School District, GO Notes, TAN | 4.25 | 6/27/08 | 1,950,000 | 1,952,733 | ||||
Patchogue-Medford Union Free | ||||||||
School District, GO Notes, TAN | 4.50 | 6/27/08 | 3,900,000 | 3,910,029 | ||||
Port Authority of New York and New | ||||||||
Jersey (Consolidated Bonds, | ||||||||
141st Series) (Insured; CIFG | ||||||||
and Liquidity Facility; Wells | ||||||||
Fargo Bank) | 3.57 | 1/7/08 | 2,345,000 a,c | 2,345,000 | ||||
Port Authority of New York and New | ||||||||
Jersey (Consolidated Bonds, | ||||||||
148th Series) (Insured; FSA | ||||||||
and Liquidity Facility; Morgan | ||||||||
Stanley Bank) | 3.48 | 1/7/08 | 6,875,000 a,c | 6,875,000 | ||||
Port Authority of New York and New | ||||||||
Jersey, CP (Liquidity | ||||||||
Facility; Landesbank | ||||||||
Hessen-Thuringen Girozentrale) | 3.21 | 3/4/08 | 2,000,000 | 2,000,000 | ||||
Putnam County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (United | ||||||||
Cerebral Palsy of Putnam and | ||||||||
Southern Dutchess Project) | ||||||||
(LOC; Commerce Bank N.A.) | 3.47 | 1/7/08 | 8,025,000 a | 8,025,000 | ||||
Rensselaer Industrial Development | ||||||||
Agency, Senior Housing Revenue | ||||||||
(Brunswick Senior Housing | ||||||||
Project) (LOC; FHLB) | 3.62 | 1/1/08 | 1,100,000 a | 1,100,000 | ||||
Rockland County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Dominican | ||||||||
College of Blauvelt Project) | ||||||||
(LOC; Commerce Bank N.A.) | 3.47 | 1/7/08 | 6,340,000 a | 6,340,000 | ||||
Rockland County Industrial | ||||||||
Development Agency, IDR | ||||||||
(Intercos America, Inc. | ||||||||
Project) (LOC; HSBC Bank USA) | 3.25 | 1/7/08 | 3,800,000 a | 3,800,000 |
14 |
Short-Term Municipal | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
Saint Lawrence County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue | ||||||||
(Canton-Potsdam Hospital | ||||||||
Project) (LOC; Key Bank) | 3.41 | 1/7/08 | 9,605,000 a | 9,605,000 | ||||
Salamanca City Central School | ||||||||
District, GO Notes, BAN | 4.00 | 9/26/08 | 1,300,000 | 1,308,189 | ||||
Scio Central School District, | ||||||||
GO Notes, BAN | 4.00 | 6/30/08 | 1,500,000 | 1,505,682 | ||||
South Country Central School | ||||||||
District at Brookhaven, GO | ||||||||
Notes, BAN | 4.25 | 1/18/08 | 1,000,000 | 1,000,202 | ||||
Syracuse, | ||||||||
Public Improvement GO Notes | ||||||||
(Insured; FGIC) | 5.25 | 1/1/08 | 500,000 | 500,000 | ||||
Tompkins County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Cortland | ||||||||
College) (LOC; HSBC Bank USA) | 3.47 | 1/7/08 | 4,150,000 a | 4,150,000 | ||||
TSASC Inc. of New York, | ||||||||
Tobacco Settlement | ||||||||
Asset-Backed Bonds (Liquidity | ||||||||
Facility; Merrill Lynch) | 3.87 | 1/7/08 | 4,565,000 a,c | 4,565,000 | ||||
Watervliet City School District, | ||||||||
GO Notes, BAN | 4.00 | 6/30/08 | 2,000,000 | 2,001,922 | ||||
Westchester County Industrial | ||||||||
Development Agency, | ||||||||
Civic Facility Revenue | ||||||||
(Mercy College Project) | ||||||||
(LOC; Key Bank) | 3.44 | 1/7/08 | 2,900,000 a | 2,900,000 | ||||
Westchester County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Northern | ||||||||
Westchester Hospital | ||||||||
Association Civic Facility) | ||||||||
(LOC; Commerce Bank N.A.) | 3.45 | 1/7/08 | 6,900,000 a | 6,900,000 |
The Fund 15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Short-Term Municipal | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
Westchester Tobacco Asset | ||||||||
Securitization Corporation, | ||||||||
Tobacco Settlement | ||||||||
Asset-Backed Bonds (Liquidity | ||||||||
Facility; Merrill Lynch | ||||||||
Capital Services and LOC; | ||||||||
Merrill Lynch) | 3.87 | 1/7/08 | 8,330,000 a,c | 8,330,000 | ||||
U.S. Related—1.8% | ||||||||
Puerto Rico Aqueduct and Sewer | ||||||||
Authority, Revenue (Liquidity | ||||||||
Facility; Citibank NA and LOC; | ||||||||
Citibank NA) | 3.50 | 1/7/08 | 2,000,000 a,c | 2,000,000 | ||||
Puerto Rico Industrial Tourist | ||||||||
Educational Medical and | ||||||||
Environmental Control Facilities | ||||||||
Financing Authority, Environmental | ||||||||
Control Facilities Revenue | ||||||||
(Bristol-Myers Squibb | ||||||||
Company Project) | 3.47 | 1/7/08 | 4,400,000 a | 4,400,000 | ||||
Total Investments (cost $358,963,568) | 101.8% | 358,963,568 | ||||||
Liabilities, Less Cash and Receivables | (1.8%) | (6,319,040) | ||||||
Net Assets | 100.0% | 352,644,528 |
a Securities payable on demand.Variable interest rate—subject to periodic change. |
b Purchased on a delayed delivery basis. |
c 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, 2007, these |
securities amounted to $110,811,500 or 31.4% of net assets. |
16 |
![](https://capedge.com/proxy/N-CSR/0000717341-08-000002/bnymmmncsrx19x1.jpg)
The Fund 17
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Summary of Combined Ratings (Unaudited) | ||||||||||
Fitch | or | Moody’s | or | Standard & Poor’s | Value (%)† | |||||
F1+,F1 | VMIG1,MIG1,P1 | SP1+,SP1,A1+,A1 | 84.3 | |||||||
AAA,AA,A d | Aaa,Aa,A d | AAA,AA,A d | 1.4 | |||||||
Not Rated e | Not Rated e | Not Rated e | 14.3 | |||||||
100.0 |
† | Based on total investments. | |
d | Notes which are not F, MIG and SP rated are represented by bond ratings of the issuers. | |
e | Securities which, while not rated by Fitch, Moody’s and Standard & Poor’s, have been determined by the Manager to | |
be of comparable quality to those rated securities in which the fund may invest. | ||
See notes to financial statements. |
18 |
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2007 (Unaudited)
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments | 358,963,568 | 358,963,568 | ||
Cash | 1,095,414 | |||
Interest receivable | 2,198,797 | |||
362,257,779 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 2 | 99,073 | |||
Payable for investment securities purchased | 8,384,030 | |||
Dividends payable | 875,670 | |||
Payable for shares of Beneficial Interest redeemed | 254,478 | |||
9,613,251 | ||||
Net Assets ($) | 352,644,528 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 352,637,660 | |||
Accumulated net realized gain (loss) on investments | 6,868 | |||
Net Assets ($) | 352,644,528 | |||
Shares Outstanding | ||||
(unlimited number of shares of Beneficial Interest authorized) | 352,637,670 | |||
Net Asset Value, offering and redemption price per share ($) | 1.00 |
See notes to financial statements. |
The Fund 19
STATEMENT OF OPERATIONS Six Months Ended December 31, 2007 (Unaudited) |
Investment Income ($): | ||
Interest Income | 6,157,227 | |
Expenses: | ||
Management fee—Note 2 | 757,341 | |
Trustee fees—Note 2 | 12,902 | |
Total Expenses | 770,243 | |
Less—Trustee fees reimbursed by the Manager—Note 2 | (12,902) | |
Net Expenses | 757,341 | |
Investment Income—Net | 5,399,886 | |
Net Realized Gain (Loss) on Investments—Note 1(b) ($) | 2,367 | |
Net Increase in Net Assets Resulting from Operations | 5,402,253 |
See notes to financial statements. |
20 |
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
December 31, 2007 | Year Ended | |||
(Unaudited) | June 30, 2007 | |||
Operations ($): | ||||
Investment income—net | 5,399,886 | 9,910,503 | ||
Net realized gain (loss) on investments | 2,367 | 4,501 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 5,402,253 | 9,915,004 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net | (5,399,886) | (9,910,503) | ||
Beneficial Interest Transactions ($1.00 per share): | ||||
Net proceeds from shares sold | 164,309,419 | 294,839,753 | ||
Dividends reinvested | 4,598,590 | 8,588,102 | ||
Cost of shares redeemed | (138,158,777) | (268,532,909) | ||
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | 30,749,232 | 34,894,946 | ||
Total Increase (Decrease) in Net Assets | 30,751,599 | 34,899,447 | ||
Net Assets ($): | ||||
Beginning of Period | 321,892,929 | 286,993,482 | ||
End of Period | 352,644,528 | 321,892,929 |
See notes to financial statements. |
The Fund 21
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, 2007 | Year Ended June 30, | |||||||||||
(Unaudited) | 2007 | 2006 | 2005 | 2004 | 2003 | |||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||||
Investment Operations: | ||||||||||||
Investment income—net | .016 | .032 | .025 | .013 | .005 | .009 | ||||||
Distributions: | ||||||||||||
Dividends from investment | ||||||||||||
income—net | (.016) | (.032) | (.025) | (.013) | (.005) | (.009) | ||||||
Net asset value, end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||||
Total Return (%) | 3.21a | 3.25 | 2.52 | 1.34 | .52 | .86 | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .46a | .45 | .45 | .45 | .45 | .45 | ||||||
Ratio of net expenses | ||||||||||||
to average net assets | .45a | .45 | .45 | .45 | .45 | .45 | ||||||
Ratio of net investment income | ||||||||||||
to average net assets | 3.20a | 3.21 | 2.49 | 1.33 | .52 | .86 | ||||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 352,645 | 321,893 | 286,993 | 308,322 | 302,652 | 340,089 | ||||||
a Annualized. | ||||||||||||
See notes to financial statements. |
22 |
NOTES TO FINANCIAL STATEMENTS ( U n a u d i t e d )
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 liquidity. The Dreyfus Corporation (the “Manager” or “Dreyfus”) serves as the fund’s investment adviser. On July 1, 2007, Mellon Financial Corporation and The Bank of New York Company, Inc. merged, forming The Bank of New York Mellon Corporation (“BNY Mellon”). As part of this transaction, Dreyfus became a wholly-owned subsidiary of BNY Mellon. MBSC Securities 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.
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.
(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.
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 gains and losses 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 gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended, (the “Code”).To the extent that net realized capital gains can be offset by capital loss carryovers, if any, it is the policy of the fund not to distribute such gains.
24 |
(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.
During the current year, the fund adopted 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. The adoption of FIN 48 had no impact on the operations of the fund for the period ended December 31, 2007.
The fund is not subject to examination by U.S. Federal, State and City tax authorities for the tax years before 2004.
The tax characters of distributions paid to shareholders during the fiscal year ended June 30, 2007, 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, 2007, 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 25
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 or a joint telephone meeting of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the
26 |
$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 $99,073.
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, 2007, the fund did not borrow under the line of credit.
The Fund 27
NOTES
![](https://capedge.com/proxy/N-CSR/0000717341-08-000002/bnymmmncsrx32x1.jpg)
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, 2007, is available on the SEC’s website at http://www.sec.gov and without charge, upon request, by calling 1-800-645-6561.
![](https://capedge.com/proxy/N-CSR/0000717341-08-000002/bnymmmncsrx32x2.jpg)
Item 2. | Code of Ethics. | |
Not applicable. | ||
Item 3. | Audit Committee Financial Expert. | |
Not applicable. | ||
Item 4. | Principal Accountant Fees and Services. | |
Not applicable. | ||
Item 5. | Audit Committee of Listed Registrants. | |
Not applicable. | ||
Item 6. | 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 25, 2008 |
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 25, 2008 | |
By: | /s/ James Windels | |
James Windels | ||
Treasurer | ||
Date: | February 25, 2008 | |
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) |