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: | 06/30 | |
Date of reporting period: | 06/30/08 |
FORM N-CSR
Item 1. Reports to Stockholders.
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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 | |
29 | Report of Independent Registered | |
Public Accounting Firm | ||
30 | Important Tax Information | |
31 | Information About the Review and | |
Approval of the Fund’s Investment | ||
Management Agreement | ||
35 | Board Members Information | |
37 | Officers of the Fund | |
FOR MORE INFORMATION | ||
Back Cover |
Dreyfus BASIC |
California Municipal |
Money Market Fund |
The | Fund |
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A LETTER FROM THE CEO
Dear Shareholder:
We are pleased to present this annual report for Dreyfus BASIC California Municipal Money Market Fund, covering the 12-month period from July 1, 2007, through June 30, 2008.
Although the U.S. economy has teetered on the brink of recession and the financial markets have encountered heightened volatility in an ongoing credit crisis, the Federal Reserve Board’s accommodative monetary policy and innovative measures to inject liquidity into the banking system have helped to mitigate some of the market instability directly caused by the ongoing credit situation.But a degree of economic uncertainty still remains throughout other long-term asset classes,and the result has been record asset flows into the money markets from investors seeking a relatively safe haven.
While the FOMC continued to reduce the overnight rate through to its meeting on April 30, it maintained the current level of 2% at its latest meeting on June 25. Statements from that meeting suggested that it intends on remaining in a holding pattern in an attempt to help alleviate inflationary pressure. So now, money market asset managers continue to monitor future economic data and the federal futures markets for indications of what to expect with regards to current yields and interest rates. In times like these, your financial advisor can help you assess current risks and your need for liquidity, and take advantage of potential long-term opportunities in other asset classes, given your individual needs and financial goals.
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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2
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DISCUSSION OF FUND PERFORMANCE
For the period of July 1, 2007, through June 30, 2008, as provided by Joseph Irace, Senior Portfolio Manager
Fund and Market Performance Overview
For the 12-month period ended June 30, 2008, Dreyfus BASIC California Municipal Money Market Fund produced a yield of 2.68% . Taking into account the effects of compounding, the fund produced an effective yield of 2.72% ..1
Tax-exempt money market instruments were primarily influenced by lower short-term interest rates during the reporting period, as the Federal Reserve Board (the “Fed”) took aggressive action to stimulate economic growth and promote liquidity in the midst of a credit crisis.
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 little issuance and therefore lower yields, we may increase the fund’s
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
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.
Credit and Economic Woes Hurt Investor Sentiment
Economic conditions in California deteriorated over the reporting period as a result of sustained weakness in U.S. housing markets and soaring food and energy costs. Moreover, a credit crisis that originated in the sub-prime mortgage market caused newly risk-averse investors to flock to the relative safety of U.S.Treasury securities and money market funds, sparking price dislocations in longer-term fixed-income markets.
The Fed attempted to address the downturn in the economy and credit markets by injecting liquidity into the banking system and, in September 2007, cutting the federal funds rate from 5.25% to 4.75%, the first such reduction in more than four years. However, more disappointing economic data and news of massive sub-prime related losses by major financial institutions led to renewed fixed-income market turbulence,and the Fed responded with additional rate cuts in October and December.
Additional evidence of economic weakness accumulated over the first several months of 2008, including the first monthly job losses in more than four years.The Fed took particularly aggressive action in late January, easing the federal funds rate by 125 basis points in two moves.Additional reductions of 75 basis points in March and 25 basis points in April left the federal funds rate at just 2.00% by the end of the reporting period.
Assets Flowed into Tax-Exempt Money Market Funds
Although tax-exempt money market yields declined along with short-term interest rates, a record level of assets flowed into municipal money market funds from risk-averse investors. Early in the reporting period, rising demand was met with an ample supply of short-term variable-rate demand notes and tender option bonds driving yields higher, at times, than those of longer-dated municipal notes. However, unrelenting investor demand later began to overwhelm supply, putting downward pressure on short-term yields.
4
The fiscal conditions of most California issuers remained sound during the reporting period, but the economic downturn and housing slump are widely expected to result in renewed budget shortfalls for California and its municipalities.
Maintaining a Conservative Investment Posture
We generally maintained a cautious investment approach, as always, investing exclusively in instruments that have been reviewed and approved by our credit analysts. In some cases, these research efforts identified municipal money market instruments that, in our judgment, were punished too severely in the downturn and represented attractive values.We have attempted to stagger the maturities of the fund’s holdings to help cushion market volatility and guard against unexpected changes in interest rates.
Over much of the reporting period, we set the fund’s weighted average maturity in a range that was longer than industry averages to capture higher yields for as long as we deemed practical while interest rates fell. However, due to intensifying inflation concerns, it appears that the Fed’s interest-rate reductions may be complete for now.Therefore, we recently reduced the fund’s weighted average maturity to a range that is in line with industry averages.
July 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 | 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 January 1, 2008 to June 30, 2008. 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 June 30, 2008 | ||
Expenses paid per $1,000 † | $ 2.25 | |
Ending value (after expenses) | $1,011.00 |
COMPARING YOUR FUND’S EXPENSES |
WITH THOSE OF OTHER FUNDS (Unaudited) |
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment | ||
assuming a hypothetical 5% annualized return for the six months ended June 30, 2008 | ||
Expenses paid per $1,000 † | $ 2.26 | |
Ending value (after expenses) | $1,022.63 |
† Expenses are equal to the fund’s annualized expense ratio of .45%, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
6
STATEMENT OF INVESTMENTS |
June 30, 2008 |
Short-Term | Coupon | Maturity | Principal | |||||
Investments—106.3% | Rate (%) | Date | Amount ($) | Value ($) | ||||
California—90.3% | ||||||||
ABAG Finance Authority for | ||||||||
Non-Profit Corporations, | ||||||||
Revenue (Grauer Foundation for | ||||||||
Education Project) (LOC; | ||||||||
Comerica Bank) | 1.57 | 7/7/08 | 3,840,000 a | 3,840,000 | ||||
ABAG Finance Authority for | ||||||||
Nonprofit Corporations, | ||||||||
Revenue (Northbay Healthcare | ||||||||
Group) (LOC; JPMorgan Chase | ||||||||
Bank) | 1.45 | 7/7/08 | 7,000,000 a | 7,000,000 | ||||
California, | ||||||||
CP (Liquidity Facility: | ||||||||
Bayerische Landesbank, | ||||||||
California Public Employees | ||||||||
Retirement System, California | ||||||||
State Teachers Retirement | ||||||||
System, Calyon NA, DEPFA Bank | ||||||||
PLC, Dexia Credit Locale, | ||||||||
Landesbank Hessen-Thuringen | ||||||||
Girozentrale, Royal Bank of | ||||||||
Canada and Wells Fargo Bank) | 1.55 | 9/3/08 | 7,500,000 | 7,500,000 | ||||
California, | ||||||||
CP (Liquidity Facility: | ||||||||
Bayerische Landesbank, | ||||||||
California Public Employees | ||||||||
Retirement System, California | ||||||||
State Teachers Retirement | ||||||||
System, Calyon NA, DEPFA Bank | ||||||||
PLC, Dexia Credit Locale, | ||||||||
Landesbank Hessen-Thuringen | ||||||||
Girozentrale, Royal Bank of | ||||||||
Canada and Wells Fargo Bank) | 1.60 | 9/9/08 | 7,500,000 | 7,500,000 | ||||
California, | ||||||||
CP (Liquidity Facility: | ||||||||
Bayerische Landesbank, | ||||||||
California State Teachers | ||||||||
Retirement System, Calyon NA, | ||||||||
DEPFA Bank PLC, Dexia Credit | ||||||||
Locale, Landesbank Hessen- | ||||||||
Thuringen Girozentrale, Royal Bank | ||||||||
of Canada and Wells Fargo Bank) | 1.55 | 9/2/08 | 7,500,000 | 7,500,000 |
The Fund 7
STATEMENT OF INVESTMENTS (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
California, | ||||||||
Economic Recovery Bonds | 3.00 | 7/1/08 | 14,400,000 | 14,400,000 | ||||
California, | ||||||||
Economic Recovery Bonds | 5.00 | 7/1/08 | 950,000 | 950,000 | ||||
California, | ||||||||
Economic Recovery Bonds | 5.00 | 1/1/09 | 2,440,000 | 2,475,308 | ||||
California, | ||||||||
Economic Recovery Bonds | 5.00 | 7/1/09 | 1,000,000 | 1,032,694 | ||||
California, | ||||||||
Economic Recovery Bonds | 5.00 | 7/1/09 | 250,000 | 257,512 | ||||
California, | ||||||||
GO Notes | 4.50 | 8/1/08 | 150,000 | 150,301 | ||||
California, | ||||||||
GO Notes | 4.00 | 10/1/08 | 500,000 | 502,651 | ||||
California, | ||||||||
GO Notes | 4.75 | 10/1/08 | 100,000 | 100,418 | ||||
California, | ||||||||
GO Notes | 10.00 | 10/1/08 | 100,000 | 101,810 | ||||
California, | ||||||||
GO Notes | 4.00 | 12/1/08 | 400,000 | 402,750 | ||||
California, | ||||||||
GO Notes | 5.00 | 3/1/09 | 250,000 | 254,421 | ||||
California, | ||||||||
GO Notes | ||||||||
(Kindergarten-University) | ||||||||
(LOC: Citibank NA, National | ||||||||
Australia Bank and State | ||||||||
Street Bank and Trust Co.) | 1.33 | 7/7/08 | 5,500,000 a | 5,500,000 | ||||
California, | ||||||||
GO Notes (Various Purpose) | 7.00 | 8/1/08 | 100,000 | 100,332 | ||||
California, | ||||||||
GO Notes (Various Purpose) | 6.25 | 9/1/08 | 140,000 | 140,848 | ||||
California, | ||||||||
GO Notes (Various Purpose) | 6.30 | 9/1/08 | 150,000 | 151,025 | ||||
California, | ||||||||
GO Notes (Various Purpose) | 6.40 | 9/1/08 | 100,000 | 100,554 | ||||
California, | ||||||||
GO Notes (Various Purpose) | 3.00 | 11/1/08 | 300,000 | 300,575 |
8
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
California, | ||||||||
GO Notes (Various Purpose) | 4.00 | 2/1/09 | 300,000 | 303,811 | ||||
California, | ||||||||
GO Notes (Various Purpose) | 4.50 | 2/1/09 | 150,000 | 151,851 | ||||
California, | ||||||||
GO Notes (Various Purpose) | 5.00 | 2/1/09 | 700,000 | 711,675 | ||||
California, | ||||||||
GO Notes (Various Purpose) | ||||||||
(Liquidity Facility; Goldman | ||||||||
Sachs Group Inc. and LOC; | ||||||||
Goldman Sachs Group Inc.) | 1.55 | 7/7/08 | 9,495,000 a,b | 9,495,000 | ||||
California, | ||||||||
GO Notes, Refunding | 5.00 | 10/1/08 | 150,000 | 150,832 | ||||
California, | ||||||||
GO Notes, Refunding (Insured; | ||||||||
FSA) | 5.50 | 10/1/08 | 100,000 | 100,584 | ||||
California Department of Veteran | ||||||||
Affairs, Home Purchase Revenue | 4.65 | 12/1/08 | 330,000 | 331,816 | ||||
California Department of Water | ||||||||
Resources, Power Supply | ||||||||
Revenue (LOC: JPMorgan Chase | ||||||||
Bank and Societe Generale) | 1.75 | 7/1/08 | 4,600,000 a | 4,600,000 | ||||
California Department of Water | ||||||||
Resources, Power Supply | ||||||||
Revenue (LOC; Landesbank | ||||||||
Hessen-Thuringen Girozentrale) | 1.45 | 7/1/08 | 10,000,000 a | 10,000,000 | ||||
California Department of Water | ||||||||
Resources, Power Supply | ||||||||
Revenue (LOC; State Street | ||||||||
Bank and Trust Co.) | 1.60 | 7/1/08 | 2,100,000 a | 2,100,000 | ||||
California Department of Water | ||||||||
Resources, Water Revenue, CP | ||||||||
(Liquidity Facility; | ||||||||
Landesbank Hessen-Thuringen | ||||||||
Girozentrale) | 1.62 | 11/12/08 | 992,000 | 992,000 | ||||
California Educational Facilities | ||||||||
Authority, Revenue, Refunding | ||||||||
(Art Center College of Design) | ||||||||
(LOC; Allied Irish Banks) | 1.45 | 7/7/08 | 3,850,000 a | 3,850,000 |
The Fund 9
STATEMENT OF INVESTMENTS (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
California Health Facilities | ||||||||
Financing Authority, Health | ||||||||
Facility Revenue (Catholic | ||||||||
Healthcare West) (LOC; Bank of | ||||||||
America) | 1.28 | 7/7/08 | 6,000,000 a | 6,000,000 | ||||
California Housing Finance Agency, | ||||||||
Home Mortgage Revenue | 3.15 | 2/1/09 | 100,000 | 100,000 | ||||
California Housing Finance Agency, | ||||||||
Home Mortgage Revenue | ||||||||
(Insured; FGIC) | 3.70 | 8/1/08 | 400,000 | 400,000 | ||||
California Housing Finance Agency, | ||||||||
Home Mortgage Revenue | ||||||||
(Insured; FSA) | 3.75 | 2/1/09 | 125,000 | 125,310 | ||||
California Infrastructure and | ||||||||
Economic Development Bank, IDR | ||||||||
(Starter and Alternator | ||||||||
Exchange, Inc. Project) (LOC; | ||||||||
California State Teachers | ||||||||
Retirement System) | 1.69 | 7/7/08 | 1,100,000 a | 1,100,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(CR&R Inc. Project) (LOC; Bank | ||||||||
of the West) | 1.73 | 7/7/08 | 6,000,000 a | 6,000,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(GreenWaste Recovery, Inc. | ||||||||
Project) (LOC; Comerica Bank) | 1.75 | 7/7/08 | 6,800,000 a | 6,800,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(Metropolitan Recycling Inc.) | ||||||||
(LOC; Comerica Bank) | 1.75 | 7/7/08 | 2,885,000 a | 2,885,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(Metropolitan Recycling Inc.) | ||||||||
(LOC; Comerica Bank) | 1.75 | 7/7/08 | 970,000 a | 970,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(Northern Recycling and Waste | ||||||||
Services, LLC Project) (LOC; | ||||||||
Union Bank of California) | 1.75 | 7/7/08 | 3,435,000 a | 3,435,000 |
10
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(Pena’s Disposal, Inc. | ||||||||
Project) (LOC; Comerica Bank) | 1.75 | 7/7/08 | 1,255,000 a | 1,255,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(Rainbow Disposal Company Inc. | ||||||||
Project) (LOC; Union Bank of | ||||||||
California) | 1.75 | 7/7/08 | 3,910,000 a | 3,910,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(South Tahoe Refuse Company | ||||||||
Project) (LOC; Union Bank of | ||||||||
California) | 1.75 | 7/7/08 | 5,540,000 a | 5,540,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(Sunset Waste Paper, Inc. | ||||||||
Project) (LOC; Comerica Bank) | 1.75 | 7/7/08 | 4,000,000 a | 4,000,000 | ||||
California Pollution Control | ||||||||
Financing Authority, SWDR | ||||||||
(Valley Vista Services, Inc. | ||||||||
Project) (LOC; Comerica Bank) | 1.75 | 7/7/08 | 2,000,000 a | 2,000,000 | ||||
California School Boards | ||||||||
Association Finance | ||||||||
Corporation, COP, TRAN | ||||||||
(California School Cash | ||||||||
Reserve Program) | ||||||||
(Insured; AMBAC) | 4.25 | 7/1/08 | 3,000,000 | 3,000,000 | ||||
California School Cash Reserve | ||||||||
Program, COP, TRAN (LOC; U.S. | ||||||||
Bank NA) | 3.00 | 7/6/09 | 6,000,000 c | 6,081,060 | ||||
California State University | ||||||||
Trustees, Systemwide Revenue | ||||||||
(Liquidity Facility; Morgan | ||||||||
Stanley Bank and LOC; Morgan | ||||||||
Stanley Bank) | 1.75 | 7/7/08 | 4,000,000 a,b | 4,000,000 | ||||
California Statewide Communities | ||||||||
Development Authority, Revenue | ||||||||
(House Ear Institute Project) | ||||||||
(LOC; City National Bank) | 1.65 | 7/7/08 | 5,900,000 a | 5,900,000 |
The Fund 11
STATEMENT OF INVESTMENTS (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
California Statewide Communities | ||||||||
Development Authority, Revenue | ||||||||
(Kaiser Permanente) | 1.33 | 7/7/08 | 2,950,000 a | 2,950,000 | ||||
California Statewide Communities | ||||||||
Development Authority, Revenue | ||||||||
(Kaiser Permanente) | 1.33 | 7/7/08 | 6,200,000 a | 6,200,000 | ||||
California Statewide Communities | ||||||||
Development Authority, | ||||||||
Revenue, Refunding (University | ||||||||
Retirement Community at Davis | ||||||||
Project) (LOC; Bank of America) | 1.50 | 7/1/08 | 3,470,000 a | 3,470,000 | ||||
Chabot-Las Positas Community | ||||||||
College District, GO Notes, | ||||||||
Refunding (Insured; AMBAC) | 3.50 | 8/1/08 | 210,000 | 210,044 | ||||
Contra Costa County, | ||||||||
MFHR (Pleasant Hill BART | ||||||||
Transit Village Apartments | ||||||||
Project) (Insured; XLCA) | 3.65 | 8/1/08 | 2,500,000 | 2,500,000 | ||||
Golden State Tobacco | ||||||||
Securitization Corporation, | ||||||||
Enhanced Tobacco Settlement | ||||||||
Asset-Backed Bonds (Insured; | ||||||||
FGIC and Liquidity Facility; | ||||||||
Morgan Stanley Bank) | 1.75 | 7/7/08 | 5,000,000 a,b | 5,000,000 | ||||
Irvine Reassessment District | ||||||||
Number 85-7, Limited | ||||||||
Obligation Improvement Bonds | ||||||||
(Insured; FSA and Liquidity | ||||||||
Facility; Dexia Credit Locale) | 2.30 | 7/1/08 | 1,000,000 a | 1,000,000 | ||||
Los Angeles County Housing | ||||||||
Authority, MFHR, Refunding | ||||||||
(Meadowridge Apartments | ||||||||
Project) (LOC; FNMA) | 1.40 | 7/7/08 | 1,760,000 a | 1,760,000 | ||||
Los Angeles County School and | ||||||||
Community College Districts, | ||||||||
COP, TRAN (Los Angeles County | ||||||||
Schools Pooled Financing | ||||||||
Program) (Insured; FSA) | 3.50 | 6/30/09 | 2,860,000 c | 2,911,880 |
12
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
Macon Trust Various Certificates | ||||||||
(Irvine Unified School | ||||||||
District) (Liquidity Facility; | ||||||||
Bank of America and LOC; Bank | ||||||||
of America) | 1.58 | 7/7/08 | 2,700,000 a,b | 2,700,000 | ||||
Menlo Park Community Development | ||||||||
Agency, Tax Allocation | ||||||||
Revenue, Refunding (Las Pulgas | ||||||||
Community Development Project) | ||||||||
(LOC; State Street Bank and | ||||||||
Trust Co.) | 2.25 | 7/1/08 | 10,800,000 a | 10,800,000 | ||||
Metropolitan Water District of | ||||||||
Southern California, Water | ||||||||
Revenue, Refunding | 3.00 | 7/1/09 | 1,000,000 c | 1,012,830 | ||||
Metropolitan Water District of | ||||||||
Southern California, | ||||||||
Waterworks GO Notes, | ||||||||
Refunding | 8.00 | 3/1/09 | 2,000,000 | 2,082,847 | ||||
Modesto Irrigation District | ||||||||
Financing Authority, Revenue | ||||||||
(Domestic Water Project) | ||||||||
(Liquidity Facility; DEPFA | ||||||||
Bank PLC) | 1.65 | 7/7/08 | 7,165,000 a,b | 7,165,000 | ||||
Orange County Sanitation District, | ||||||||
COP (Liquidity Facility; Dexia | ||||||||
Credit Locale) | 1.60 | 7/1/08 | 2,950,000 a | 2,950,000 | ||||
Puttable Floating Option Tax | ||||||||
Exempt Receipts (California | ||||||||
Statewide Communities | ||||||||
Development Authority, MFHR | ||||||||
(La Mision Village Apartments | ||||||||
Project)) (Liquidity Facility; | ||||||||
FHLMC and LOC; FHLMC) | 1.72 | 7/7/08 | 6,205,000 a,b | 6,205,000 | ||||
Ravenswood City School District, | ||||||||
GO Notes, TRAN | 4.00 | 7/1/08 | 2,400,000 | 2,400,000 | ||||
Riverside, | ||||||||
Electric Revenue (Insured; FSA) | 3.63 | 10/1/08 | 160,000 | 160,224 |
The Fund 13
STATEMENT OF INVESTMENTS (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
California (continued) | ||||||||
San Bernardino Joint Powers | ||||||||
Financing Authority, Tax | ||||||||
Allocation Revenue, Refunding | ||||||||
(Central City Merged Project) | ||||||||
(Insured; AMBAC) | 5.50 | 7/1/08 | 100,000 | 100,000 | ||||
San Diego County, | ||||||||
COP (Friends of Chabad | ||||||||
Lubavitch) (LOC; Comerica Bank) | 1.31 | 7/7/08 | 1,600,000 a | 1,600,000 | ||||
San Francisco City and County | ||||||||
Redevelopment Financing | ||||||||
Authority, Tax Allocation | ||||||||
Revenue, Refunding (San | ||||||||
Francisco Redevelopment | ||||||||
Projects) (Insured; MBIA, Inc.) | 5.00 | 8/1/08 | 1,930,000 | 1,932,552 | ||||
San Jose Redevelopment Agency, | ||||||||
Tax Allocation Revenue (Merged | ||||||||
Area Redevelopment Project) | ||||||||
(Insured; AMBAC) | 4.75 | 8/1/08 | 200,000 | 200,277 | ||||
Santa Clara Unified School | ||||||||
District, TRAN | 2.00 | 6/29/09 | 1,800,000 c | 1,806,156 | ||||
Sequoia Union High School | ||||||||
District, GO Notes | 3.00 | 7/1/09 | 1,900,000 | 1,924,381 | ||||
Tustin Community Redevelopment | ||||||||
Agency, Revenue (Liquidity | ||||||||
Facility; Citigroup and LOC; | ||||||||
Citigroup) | 1.57 | 7/7/08 | 645,000 a,b | 645,000 | ||||
University of California Regents, | ||||||||
General Revenue (Insured; FSA) | 4.00 | 5/15/09 | 500,000 | 508,582 | ||||
University of California Regents, | ||||||||
Limited Project Revenue | ||||||||
(Liquidity Facility; Wells | ||||||||
Fargo Bank and LOC; Wells | ||||||||
Fargo Bank) | 1.61 | 7/7/08 | 5,000,000 a,b | 5,000,000 | ||||
West Covina Public Financing | ||||||||
Authority, LR, Refunding | ||||||||
(Public Facilities Project) | ||||||||
(LOC; California State | ||||||||
Teachers Retirement System) | 1.51 | 7/7/08 | 2,650,000 a | 2,650,000 |
14
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
U.S. Related—16.0% | ||||||||
BB&T Municipal Trust | ||||||||
(Puerto Rico Infrastructure | ||||||||
Financing Authority, Special | ||||||||
Tax Revenue) (Liquidity Facility; | ||||||||
Branch Banking and Trust Co.) | 1.57 | 7/7/08 | 4,000,000 a,b | 4,000,000 | ||||
Puerto Rico Commonwealth, | ||||||||
Public Improvement GO Notes | ||||||||
(Insured; MBIA, Inc.) | 5.50 | 7/1/08 | 125,000 | 125,000 | ||||
Puerto Rico Commonwealth, | ||||||||
Public Improvement GO Notes | ||||||||
(Insured; MBIA, Inc.) | 5.50 | 7/1/08 | 10,000 | 10,000 | ||||
Puerto Rico Commonwealth, | ||||||||
Public Improvement GO Notes | ||||||||
(Insured; MBIA, Inc.) | 5.75 | 7/1/08 | 240,000 | 240,000 | ||||
Puerto Rico Commomwealth, | ||||||||
Public Improvement GO Notes, | ||||||||
Refunding (Insured; FSA and | ||||||||
Liquidity Facility; Dexia | ||||||||
Credit Locale) | 1.80 | 7/1/08 | 14,325,000 a | 14,325,000 | ||||
Puerto Rico Commonwealth, | ||||||||
Public Improvement GO Notes, | ||||||||
Refunding (LOC; Wachovia Bank) | 1.32 | 7/7/08 | 5,000,000 a | 5,000,000 | ||||
Puerto Rico Commonwealth, | ||||||||
Public Improvement GO Notes, | ||||||||
Refunding (LOC; Wachovia Bank) | 1.32 | 7/7/08 | 4,000,000 a | 4,000,000 | ||||
Puerto Rico Commonwealth, | ||||||||
TRAN (LOC: Banco Bilbao | �� | |||||||
Vizcaya Argentaria S.A., Banco | ||||||||
Santander S.A., Bank of Nova | ||||||||
Scotia, BNP Paribas, Dexia | ||||||||
Credit Locale, Fortis Bank and | ||||||||
KBC Bank) | 4.25 | 7/30/08 | 7,000,000 | 7,004,620 | ||||
Puerto Rico Electric Power | ||||||||
Authority, Power Revenue | ||||||||
(Insured; FSA) | 5.00 | 7/1/08 | 190,000 | 190,000 | ||||
Puerto Rico Electric Power | ||||||||
Authority, Power Revenue, | ||||||||
Refunding (Insured; MBIA, Inc.) | 5.50 | 7/1/08 | 500,000 | 507,500 |
The Fund 15
STATEMENT OF INVESTMENTS (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
U.S. Related (continued) | ||||||||
Puerto Rico Infrastructure | ||||||||
Financing Authority, Special | ||||||||
Tax Revenue, Refunding | ||||||||
(Insured; AMBAC) | 5.50 | 7/1/08 | 1,500,000 | 1,500,000 | ||||
Puerto Rico Municipal Finance | ||||||||
Agency, GO Notes (Insured; FSA) | 5.50 | 8/1/08 | 100,000 | 100,144 | ||||
Puerto Rico Public Buildings | ||||||||
Authority, Government | ||||||||
Facilities Revenue (Insured; | ||||||||
AMBAC) | 6.25 | 7/1/08 | 120,000 | 120,000 | ||||
Puttable Floating Option Tax | ||||||||
Exempt Receipts (Puerto Rico | ||||||||
Highways and Transportation | ||||||||
Authority, Highway Revenue) | ||||||||
(Liquidity Facility; Dexia | ||||||||
Credit Locale and LOC; Dexia | ||||||||
Credit Locale) | 1.65 | 7/7/08 | 4,500,000 a,b | 4,500,000 | ||||
Total Investments (cost $276,017,175) | 106.3% | 276,017,175 | ||||||
Liabilities, Less Cash and Receivables | (6.3%) | (16,334,443) | ||||||
Net Assets | 100.0% | 259,682,732 |
a Variable rate demand note — rate shown is the interest rate in effect at June 30, 2008. Maturity date represents the |
next demand date, not the ultimate maturity date. |
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 June 30, 2008, these securities |
amounted to $48,710,000 or 18.8% of net assets. |
c Purchased on a delayed delivery basis. |
16
Summary of Abbreviations | ||||||
ABAG | Association of Bay Area Governments | ACA | American Capital Access | |||
AGC | ACE Guaranty Corporation | AGIC | Asset Guaranty Insurance Company | |||
AMBAC | American Municipal Bond | |||||
Assurance Corporation | ARRN | Adjustable Rate Receipt Notes | ||||
BAN | Bond Anticipation Notes | BIGI | Bond Investors Guaranty Insurance | |||
BPA | Bond Purchase Agreement | CGIC | Capital Guaranty Insurance Company | |||
CIC | Continental Insurance 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 | FNMA | Federal National | |||
Corporation | 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 | |||
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 17
STATEMENT OF INVESTMENTS (continued)
Summary of Combined Ratings (Unaudited) | ||||||||||
Fitch | or | Moody’s | or | Standard & Poor’s | Value (%)† | |||||
F1+,F1 | VMIG1,MIG1,P1 | SP1+,SP1,A1+,A1 | 81.2 | |||||||
AAA,AA,A d | Aaa,Aa,A d | AAA,AA,A d | 18.8 | |||||||
100.0 |
† | Based on total investments. | |
d | Notes which are not F, MIG and SP rated are represented by bond ratings of the issuers. | |
See notes to financial statements. |
18
STATEMENT OF ASSETS AND LIABILITIES |
June 30, 2008 |
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments | 276,017,175 | 276,017,175 | ||
Cash | 3,507,062 | |||
Interest receivable | 1,357,793 | |||
280,882,030 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 2 | 72,561 | |||
Payable for investment securities purchased | 20,804,842 | |||
Dividend payable | 321,895 | |||
21,199,298 | ||||
Net Assets ($) | 259,682,732 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 259,675,970 | |||
Accumulated net realized gain (loss) on investments | 6,762 | |||
Net Assets ($) | 259,682,732 | |||
Shares Outstanding | ||||
(unlimited number of shares of Beneficial Interest authorized) | 259,675,970 | |||
Net Asset Value, offering and redemption price per share ($) | 1.00 |
See notes to financial statements.
The Fund 19
STATEMENT OF OPERATIONS |
Year Ended June 30, 2008 |
Investment Income ($): | ||
Interest Income | 6,174,352 | |
Expenses: | ||
Management fee—Note 2 | 921,350 | |
Trustees’ fees—Note 2 | 19,796 | |
Total Expenses | 941,146 | |
Less—Trustees’ fees reimbursed by the Manager—Note 2 | (19,796) | |
Net Expenses | 921,350 | |
Investment Income—Net | 5,253,002 | |
Net Realized Gain (Loss) on Investments—Note 1(b) ($) | 6,762 | |
Net Increase in Net Assets Resulting from Operations | 5,259,764 |
See notes to financial statements.
20
STATEMENT OF CHANGES IN NET ASSETS
Year Ended June 30, | ||||
2008 | 2007 | |||
Operations ($): | ||||
Investment income—net | 5,253,002 | 3,608,079 | ||
Net realized gain (loss) on investments | 6,762 | 39,377 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 5,259,764 | 3,647,456 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net | (5,292,379) | (3,632,117) | ||
Beneficial Interest Transactions ($1.00 per share): | ||||
Net proceeds from shares sold | 785,737,822 | 457,305,950 | ||
Dividends reinvested | 1,230,486 | 1,585,060 | ||
Cost of shares redeemed | (635,245,659) | (422,980,781) | ||
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | 151,722,649 | 35,910,229 | ||
Total Increase (Decrease) in Net Assets | 151,690,034 | 35,925,568 | ||
Net Assets ($): | ||||
Beginning of Period | 107,992,698 | 72,067,130 | ||
End of Period | 259,682,732 | 107,992,698 |
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.
Year Ended June 30, | ||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | |||||
Investment Operations: | ||||||||||
Investment income—net | .027 | .032 | .025 | .014 | .005 | |||||
Distributions: | ||||||||||
Dividends from investment income—net | (.027) | (.032) | (.025) | (.014) | (.005) | |||||
Net asset value, end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | |||||
Total Return (%) | 2.72 | 3.21 | 2.50 | 1.34 | .53 | |||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | ||||||||||
to average net assets | .46 | .45 | .45 | .46 | .45 | |||||
Ratio of net expenses | ||||||||||
to average net assets | .45 | .45 | .45 | .45 | .45 | |||||
Ratio of net investment income | ||||||||||
to average net assets | 2.57 | 3.16 | 2.49 | 1.37 | .52 | |||||
Net Assets, end of period ($ x 1,000) | 259,683 | 107,993 | 72,067 | 72,141 | 57,791 |
See notes to financial statements.
22
NOTES TO FINANCIAL STATEMENTS
NOTE 1—Significant Accounting Policies:
Dreyfus BASIC California Municipal Money Market Fund (the “fund”) is a separate non-diversified series of The Dreyfus/Laurel Tax-Free Municipal Funds (the “Trust”) which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company, currently offering three series including the fund.The fund’s investment objective is to provide a high level of current income exempt from federal and California income taxes to the extent consistent with the preservation of capital and the maintenance of liquidity. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Manager, is the distributor of the fund’s shares, 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 Financial Accounting Standards Board (“FASB”) released Statement of Financial Accounting Standards No. 157 “Fair Value Measurements” (“FAS 157”). FAS 157 establishes an authoritative def-
The Fund 23
NOTES TO FINANCIAL STATEMENTS (continued)
inition 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.
In March 2008, the FASB released Statement of Financial Accounting Standards No. 161 “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements.The application of FAS 161 is required for fiscal years beginning after November 15, 2008 and interim periods within those fiscal years.At this time, management is evaluating the implications of FAS 161 and its impact on the financial statements and the accompanying notes has not yet been determined.
(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., a subsidiary of BNY Mellon and a Dreyfus affiliate.
(d) Dividends to shareholders: It is the policy of the fund to declare dividends daily from investment income-net; such dividends are paid
24
monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended, (the “Code”).To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain, sufficient to relieve it from substantially all federal income and excise taxes.
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 expense in the current year. The adoption of FIN 48 had no impact on the operations of the fund for the period ended June 30, 2008.
As of and during the period ended June 30, 2008, the fund did not have any liabilities for any unrecognized tax benefits.The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period, the fund did not incur any interest or penalties.
Each of the tax years in the four-year period ended June 30, 2008, remains subject to examination by the Internal Revenue Service and state taxing authorities.
The Fund 25
NOTES TO FINANCIAL STATEMENTS (continued)
At June 30, 2008, the components of accumulated earnings on a tax basis were substantially the same as for financial reporting purposes.
The tax character of distributions paid to shareholders during the fiscal periods ended June 30, 2008 and June 30, 2007, were all tax exempt income.
During the period ended June 30, 2008, as a result of permanent book to tax differences, primarily due to dividend reclassification, the fund increased accumulated undistributed investment income-net by $39,377 and decreased accumulated net realized gain (loss) on investments by the same amount. Net assets and net asset value per share were not affected by this reclassification.
At June 30, 2008, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
NOTE 2—Investment Management Fee and Other Transactions with Affiliates:
Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund.The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .45% of the value of the fund’s average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, fees and expenses of non-interested Trustees (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund’s allocable portion of fees and expenses of the non-interested Trustees (including counsel fees). Each Trustee receives $45,000 per year, plus $6,000 for each joint Board meeting of The Dreyfus/Laurel Funds, Inc., the Trust and The Dreyfus/Laurel Funds Trust (collectively, the “Dreyfus/Laurel Funds”) attended, $2,000 for
26
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 prior to April 12, 2008, the Chair of the audit committee received $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.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $72,561.
NOTE 3—Bank Line of Credit:
Effective May 1, 2008, the fund participates with other Dreyfus-managed funds in a $300 million unsecured line of credit primarily to be utilized for temporary or emergency purposes. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowing. Prior to May 1, 2008, the fund participated with other Dreyfus-managed funds in a $100 million unsecured line of credit. During the period ended June 30, 2008, the fund did not borrow under the line of credit.
The Fund 27
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 4—Subsequent Event:
Effective July 1, 2008, BNY Mellon has reorganized and consolidated a number of its banking and trust company subsidiaries. As a result of the reorganization, any services previously provided to the fund by Mellon Bank, N.A. or Mellon Trust of New England, N.A. are now provided by The Bank of New York, which has changed its name to The Bank of New York Mellon.
28
REPORT OF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM |
The Board of Trustees and Shareholders of |
The Dreyfus/Laurel Tax-Free Municipal Funds: |
We have audited the accompanying statement of assets and liabilities of Dreyfus BASIC California Municipal Money Market Fund (the “Fund”) of The Dreyfus/Laurel Tax-Free Municipal Funds, including the statement of investments, as of June 30, 2008, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the years in two-year period then ended, and the financial highlights for each of the years in the five-year period then ended.These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement.An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2008, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received.An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus BASIC California Municipal Money Market Fund of The Dreyfus/Laurel Tax-Free Municipal Funds as of June 30, 2008, and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York |
August 20, 2008 |
The Fund 29
IMPORTANT TAX INFORMATION ( U n a u d i t e d )
In accordance with federal tax law, the fund hereby designates all the dividends paid from investment income-net during the fiscal year ended June 30, 2008 as “exempt-interest dividends” (not subject to regular federal and, for individuals who are California residents, California personal income taxes).As required by federal tax law rules, shareholders will receive notification of their portion of the fund’s exempt-interest dividends paid for the 2008 calendar year on Form 1099-INT, which will be mailed by January 31, 2009.
30
INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE |
FUND’S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) |
At a meeting of the fund’s Board of Trustees held on February 12 and 13, 2008, the Board considered the re-approval of the fund’s Investment Management Agreement (“Management Agreement”), pursuant to which the Manager provides the fund with investment advisory and administrative services. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.
Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members considered information previously provided to them in a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and representatives of the Manager confirmed that there had been no material changes in this information. The Board also discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager’s representatives reviewed the fund’s distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each.The Manager’s representatives noted the distribution channels for the fund as well as the diversity of distribution among the funds in the Dreyfus fund complex, and the Manager’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each distribution channel, including those of the fund. The Manager provided the number of shareholder accounts in the fund, as well as the fund’s asset size.
The Board members also considered the Manager’s research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager’s extensive administrative, accounting and compliance infrastructure.
The Fund 31
INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE |
FUND’S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued) |
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board members reviewed the fund’s performance and comparisons to a group of retail, no-load California tax-exempt money market funds (the “Performance Group”) and to a larger universe of funds, consisting of all retail and institutional California tax-exempt money market funds (the “Performance Universe”) selected and provided by Lipper, Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below). The Board members discussed the results of the comparisons for various periods ended December 31, 2007, and noted that the fund’s total return performance was above the Performance Group and Performance Universe medians for each of the periods.The Board also noted that the fund was the top performer in the Performance Group for each of the periods, except the 10-year period ended December 31, 2007, when the fund was ranked second among its Performance Group.
The Board members also discussed the fund’s management fee and expense ratio and reviewed the range of management fees and expense ratios of a comparable group of funds (the “Expense Group”) and a broader group of funds (the “Expense Universe”), each selected and provided by Lipper. Noting the fund’s “unitary fee” structure, the Board noted that the fund’s management fee was at and above the Expense Group and Expense Universe medians, respectively, and the expense ratio was below the Expense Group and Expense Universe medians.
Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included in the same Lipper category as the fund (the “Similar Funds”).They also noted that there were no other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund.The Manager’s rep-
32
resentatives also reviewed the costs associated with distribution through intermediaries.The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the services provided, noting the fund’s “unitary fee” structure. The Board members considered the relevance of the fee information provided for the Similar Funds to evaluate the appropriateness and reasonableness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. The Manager’s representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit. The Board previously had been provided with information prepared by an independent consulting firm regarding the Manager’s approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex.The Board also was informed that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable. The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund.The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. The Board members also considered potential benefits to the Manager from acting as investment adviser and noted that there were no soft dollar arrangements with respect to trading the fund’s portfolio.
It was noted that the Board members should consider the Manager’s profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund’s
The Fund 33
INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE |
FUND’S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued) |
assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within the range determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund’s Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.
- The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate.
- The Board was satisfied with the fund’s performance.
- The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative perfor- mance, expense and advisory fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.
- The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund’s Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2009.
34
BOARD MEMBERS INFORMATION ( U n a u d i t e d )
Joseph S. DiMartino (64) |
Chairman of the Board (1999) |
Principal Occupation During Past 5 Years: |
• Corporate Director and Trustee |
Other Board Memberships and Affiliations: |
• The Muscular Dystrophy Association, Director |
• Century Business Services, Inc., a provider of outsourcing functions for small and medium size |
companies, Director |
• The Newark Group, a provider of a national market of paper recovery facilities, paperboard |
mills and paperboard converting plants, Director |
• Sunair Services Corporation, a provider of certain outdoor-related services to homes and |
businesses, Director |
No. of Portfolios for which Board Member Serves: 160 |
James M. Fitzgibbons (73) |
Board Member (1983) |
Principal Occupation During Past 5 Years: |
• Corporate Director, Davidson Cotton Company (1998-2002) |
Other Board Memberships and Affiliations: |
• Bill Barrett Company, an oil and gas exploration company, Director |
No. of Portfolios for which Board Member Serves: 25 |
Kenneth A. Himmel (62) |
Board Member (1998) |
Principal Occupation During Past 5 Years: |
• President and CEO, Related Urban Development, a real estate development company |
(1996-present) |
• President and CEO, Himmel & Company, a real estate development company (1980-present) |
• CEO, American Food Management, a restaurant company (1983-present) |
No. of Portfolios for which Board Member Serves: 25 |
Stephen J. Lockwood (61) |
Board Member (1993) |
Principal Occupation During Past 5 Years: |
• Chairman of the Board, Stephen J. Lockwood and Company LLC, an investment company |
(2000-present) |
No. of Portfolios for which Board Member Serves: 25 |
The Fund 35
BOARD MEMBERS INFORMATION (Unaudited) (continued)
Roslyn M. Watson (58) |
Board Member (1992) |
Principal Occupation During Past 5 Years: |
• Principal,Watson Ventures, Inc., a real estate investment company (1993-present) |
Other Board Memberships and Affiliations: |
• American Express Bank, Director |
• The Hyams Foundation Inc., a Massachusetts Charitable Foundation,Trustee |
• National Osteoporosis Foundation,Trustee |
• SBLI-USA, Director |
No. of Portfolios for which Board Member Serves: 25 |
Benaree Pratt Wiley (62) |
Board Member (1998) |
Principal Occupation During Past 5 Years: |
• Principal,The Wiley Group, a firm specializing in strategy and business development |
(2005-present) |
• President and CEO,The Partnership, an organization dedicated to increasing the representation |
of African Americans in positions of leadership, influence and decision-making in Boston, MA |
(1991-2005) |
Other Board Memberships and Affiliations: |
• Boston College,Trustee Associate |
• Blue Cross Blue Shield of Massachusetts, Director |
• CBIZ, professional support consultants and service providers for small, midsized and corporate |
businesses, Director |
• Commonwealth Institute, Director |
• Efficacy Institute, Director |
• PepsiCo African-American, Chair of Advisory Board |
• The Boston Foundation, Director |
• Century Business Services, Inc., a provider of outsourcing functions for small and medium size |
companies, Director |
No. of Portfolios for which Board Member Serves: 35 |
Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80.The address of the Board Members and Officers is in c/o The Dreyfus Corporation, 200 Park Avenue, New York, New York 10166. Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from Dreyfus free of charge by calling this toll free number: 1-800-554-4611.
Francis P. Brennan, Emeritus Board Member J.Tomlinson Fort, Emeritus Board Member
36
OFFICERS OF THE FUND ( U n a u d i t e d )
J. DAVID OFFICER, President since |
December 2006. |
Chief Operating Officer,Vice Chairman and a Director of the Manager, and an officer of 76 investment companies (comprised of 160 portfolios) managed by the Manager. He is 59 years old and has been an employee of the Manager since April 1998.
PHILLIP N. MAISANO, Executive Vice |
President since July 2007. |
Chief Investment Officer,Vice Chair and a director of the Manager, and an officer of 76 investment companies (comprised of 160 portfolios) managed by the Manager. Mr. Maisano also is an officer and/or Board member of certain other investment management subsidiaries of The Bank of New York Mellon Corporation, each of which is an affiliate of the Manager. He is 61 years old and has been an employee of the Manager since November 2006. Prior to joining the Manager, Mr. Maisano served as Chairman and Chief Executive Officer of EACM Advisors, an affiliate of the Manager, since August 2004, and served as Chief Executive Officer of Evaluation Associates, a leading institutional investment consulting firm, from 1988 until 2004.
MICHAEL A. ROSENBERG, Vice President |
and Secretary since August 2005. |
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 48 years old and has been an employee of the Manager since October 1991.
JAMES BITETTO, Vice President and |
Assistant Secretary since August 2005. |
Associate General Counsel and Secretary of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 41 years old and has been an employee of the Manager since December 1996.
JONI LACKS CHARATAN, Vice President |
and Assistant Secretary since |
August 2005. |
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. She is 52 years old and has been an employee of the Manager since October 1988.
JOSEPH M. CHIOFFI, Vice President and |
Assistant Secretary since August 2005. |
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 46 years old and has been an employee of the Manager since June 2000.
JANETTE E. FARRAGHER, Vice President |
and Assistant Secretary since |
August 2005. |
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. She is 45 years old and has been an employee of the Manager since February 1984.
JOHN B. HAMMALIAN, Vice President and |
Assistant Secretary since August 2005. |
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since February 1991.
ROBERT R. MULLERY, Vice President and |
Assistant Secretary since August 2005. |
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 56 years old and has been an employee of the Manager since May 1986.
The Fund 37
OFFICERS OF THE FUND (Unaudited) (continued)
JEFF PRUSNOFSKY, Vice President and |
Assistant Secretary since August 2005. |
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 43 years old and has been an employee of the Manager since October 1990.
JAMES WINDELS, Treasurer since |
November 2001. |
Director – Mutual Fund Accounting of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since April 1985.
RICHARD CASSARO, Assistant Treasurer |
since September 2007. |
Senior Accounting Manager – Money Market and Municipal Bond Funds of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since September 1982.
GAVIN C. REILLY, Assistant Treasurer |
since December 2005. |
Tax Manager of the Investment Accounting and Support Department of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 39 years old and has been an employee of the Manager since April 1991.
ROBERT ROBOL, Assistant Treasurer |
since December 2002. |
Senior Accounting Manager – Fixed Income Funds of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since October 1988.
ROBERT SALVIOLO, Assistant Treasurer |
since July 2007. |
Senior Accounting Manager – Equity Funds of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 41 years old and has been an employee of the Manager since June 1989.
ROBERT SVAGNA, Assistant Treasurer |
since August 2005. |
Senior Accounting Manager – Equity Funds of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 41 years old and has been an employee of the Manager since November 1990.
JOSEPH W. CONNOLLY, Chief Compliance |
Officer since October 2004. |
Chief Compliance Officer of the Manager and The Dreyfus Family of Funds (77 investment companies, comprised of 177 portfolios). From November 2001 through March 2004, Mr. Connolly was first Vice-President, Mutual Fund Servicing for Mellon Global Securities Services. In that capacity, Mr. Connolly was responsible for managing Mellon’s Custody, Fund Accounting and Fund Administration services to third-party mutual fund clients. He is 51 years old and has served in various capacities with the Manager since 1980, including manager of the firm’s Fund Accounting Department from 1997 through October 2001.
WILLIAM GERMENIS, Anti-Money |
Laundering Compliance Officer since |
July 2002. |
Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 73 investment companies (comprised of 173 portfolios) managed by the Manager. He is 37 years old and has been an employee of the Distributor since October 1998.
38
NOTES
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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 | |
14 | Statement of Assets and Liabilities | |
15 | Statement of Operations | |
16 | Statement of Changes in Net Assets | |
17 | Financial Highlights | |
18 | Notes to Financial Statements | |
24 | Report of Independent Registered | |
Public Accounting Firm | ||
25 | Important Tax Information | |
26 | Information About the Review and | |
Approval of the Fund’s Investment | ||
Management Agreement | ||
30 | Board Members Information | |
32 | Officers of the Fund | |
FOR MORE INFORMATION | ||
Back Cover |
Dreyfus BASIC |
Massachusetts Municipal |
Money Market Fund |
The | Fund |
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A LETTER FROM THE CEO
Dear Shareholder:
We are pleased to present this annual report for Dreyfus BASIC Massachusetts Municipal Money Market Fund, covering the 12-month period from July 1, 2007, through June 30, 2008.
Although the U.S. economy has teetered on the brink of recession and the financial markets have encountered heightened volatility in an ongoing credit crisis, the Federal Reserve Board’s accommodative monetary policy and innovative measures to inject liquidity into the banking system have helped to mitigate some of the market instability directly caused by the ongoing credit situation. But a degree of economic uncertainty still remains throughout other long-term asset classes, and the result has been record asset flows into the money markets from investors seeking a relatively safe haven.
While the FOMC continued to reduce the overnight rate through to its meeting on April 30, it maintained the current level of 2% at its latest meeting on June 25. Statements from that meeting suggested that it intends on remaining in a holding pattern in an attempt to help alleviate inflationary pressure. So now, money market asset managers continue to monitor future economic data and the federal futures markets for indications of what to expect with regards to current yields and interest rates. In times like these, your financial advisor can help you assess current risks and your need for liquidity, and take advantage of potential long-term opportunities in other asset classes, given your individual needs and financial goals.
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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2
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DISCUSSION OF FUND PERFORMANCE
For the period of July 1, 2007, through June 30, 2008, as provided by J. Christopher Nicholl, Portfolio Manager
Fund and Market Performance Overview
For the 12-month period ended June 30, 2008, Dreyfus BASIC Massachusetts Municipal Money Market Fund produced a yield of 2.56% .Taking into account the effects of compounding, the fund also produced an effective yield of 2.59% .1
Yields of tax-exempt money market instruments declined along with short-term interest rates as the Federal Reserve Board (the “Fed”) attempted to address an economic downturn and an intensifying credit crisis.
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 anticipate little issuance and therefore lower yields, we may increase
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
the fund’s weighted average maturity to maintain current yields for as long as practical.At other times, we try to maintain a neutral weighted average maturity.
Economic and Credit Woes Dampened Investor Sentiment
Economic conditions deteriorated over the reporting period as U.S. housing markets slumped, food and energy costs soared and, in 2008, the labor market posted six consecutive months of job losses. Moreover, a credit crisis that originated in the sub-prime mortgage market spread to other asset classes, creating difficult liquidity conditions in some fixed-income markets and causing investors to flock to the relative safety of U.S.Treasury securities and money market funds.The credit crisis also produced massive losses for major commercial banks, investment banks and bond insurers.
The Fed attempted to address the downturns in the economy and credit markets by injecting liquidity into the banking system and,in September 2007, cutting the federal funds rate from 5.25% to 4.75%, the first such reduction in more than four years. However, more disappointing economic data led to renewed fixed-income market turbulence, and the Fed responded with additional rate cuts in October and December.
Additional evidence of economic weakness accumulated over the first several months of 2008, including the first monthly job losses in more than four years. The Fed took particularly aggressive action in late January, easing the federal funds rate by 125 basis points in two moves. Additional reductions in March and April left the federal funds rate at just 2.00% by the end of the reporting period.
Assets Flowed into Tax-Exempt Money Market Funds
Although tax-exempt money market yields declined along with short-term interest rates, a record level of assets flowed into municipal money market funds from risk-averse investors. Early in the reporting period, rising demand was met with ample supply of short-term variable-rate demand notes (“VRDNs”) and tender option bonds, driving their yields higher, at times, than yields of longer-dated municipal notes.
4
However, unrelenting investor demand later began to overwhelm supply, putting downward pressure on short-term yields. As a result, yields of one-year municipal notes declined less, on average, than yields of floating-rate instruments.
Meanwhile, Massachusetts’ fiscal condition has remained sound, but the housing slump and recent health care reforms are expected to result in future budget shortfalls. Still, robust “rainy day” reserves and the state’s track record of strong financial management should help it meet these challenges.
Maintaining a Conservative Investment Posture
We have maintained a cautious investment approach in this unsettled environment. For most of the reporting period, we set the fund’s weighted average maturity in a range that was modestly shorter than industry averages to capture higher yields among VRDNs. In May 2008, when the money-market yield curve returned to a positive slope, we increased the fund’s weighted average maturity to a range we considered in line with industry averages.The fund’s composition remained relatively constant over the reporting period, as we complemented VRDNs with municipal notes and, at times, tax-exempt commercial paper.
As of mid-year, the U.S. economy has continued to falter, and the credit crisis has persisted.We intend to maintain a conservative credit posture and a neutral weighted average maturity until we see convincing evidence that the Fed is ready to alter monetary policy one way or the other.
July 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 | 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 January 1, 2008 to June 30, 2008. 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 June 30, 2008 | ||
Expenses paid per $1,000 † | $ 2.25 | |
Ending value (after expenses) | $1,010.00 |
COMPARING YOUR FUND’S EXPENSES |
WITH THOSE OF OTHER FUNDS (Unaudited) |
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment | ||
assuming a hypothetical 5% annualized return for the six months ended June 30, 2008 | ||
Expenses paid per $1,000 † | $ 2.26 | |
Ending value (after expenses) | $1,022.63 |
† Expenses are equal to the fund’s annualized expense ratio of .45%, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
6
STATEMENT OF INVESTMENTS |
June 30, 2008 |
Short-Term | Coupon | Maturity | Principal | |||||
Investments—97.9% | Rate (%) | Date | Amount ($) | Value ($) | ||||
ABN AMRO Munitops Certificates | ||||||||
Trust (Massachusetts Water | ||||||||
Resources Authority) (Insured; | ||||||||
FSA and Liquidity Facility; | ||||||||
ABN-AMRO) | 1.57 | 7/7/08 | 5,845,000 a,b | 5,845,000 | ||||
Boston, | ||||||||
GO Notes | 5.00 | 4/1/09 | 6,360,000 | 6,498,764 | ||||
Boston Industrial Development | ||||||||
Financing Authority, Revenue | ||||||||
(Fenway Community Health | ||||||||
Center Project) (LOC; Fifth | ||||||||
Third Bank) | 1.65 | 7/7/08 | 5,625,000 a | 5,625,000 | ||||
Boston Industrial Development | ||||||||
Financing Authority, Revenue | ||||||||
(Fenway Community Health | ||||||||
Center Project) (LOC; Fifth | ||||||||
Third Bank) | 1.65 | 7/7/08 | 4,240,000 a | 4,240,000 | ||||
Boston Industrial Development | ||||||||
Financing Authority, Revenue | ||||||||
(Fenway Community Health | ||||||||
Center Project) (LOC; Fifth | ||||||||
Third Bank) | 1.65 | 7/7/08 | 6,000,000 a | 6,000,000 | ||||
Canton Housing Authority, | ||||||||
MFHR, Refunding (Canton | ||||||||
Arboretum Apartments) | ||||||||
(LOC; FNMA) | 1.80 | 7/7/08 | 6,665,000 a | 6,665,000 | ||||
Falmouth, | ||||||||
GO Notes, BAN | 4.00 | 10/10/08 | 1,000,000 | 1,001,601 | ||||
Grafton, | ||||||||
GO Notes, BAN | 4.00 | 10/30/08 | 2,100,000 | 2,104,438 | ||||
Massachusetts, | ||||||||
Consolidated Loan (Liquidity | ||||||||
Facility; Dexia Credit Locale) | 2.85 | 7/1/08 | 1,200,000 a | 1,200,000 | ||||
Massachusetts, | ||||||||
GO Notes, Refunding (Liquidity | ||||||||
Facility; Citibank NA) | 1.53 | 7/7/08 | 3,995,000 a | 3,995,000 | ||||
Massachusetts Bay Transportation | ||||||||
Authority (General | ||||||||
Transportation System) | 1.60 | 7/7/08 | 3,500,000 a | 3,500,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, First Mortgage Revenue | ||||||||
(Brookhaven at Lexington | ||||||||
Project) (LOC; Bank of America) | 1.45 | 7/7/08 | 3,230,000 a | 3,230,000 |
The Fund 7
STATEMENT OF INVESTMENTS (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
Massachusetts Development Finance | ||||||||
Agency, Higher Education | ||||||||
Revenue, Refunding (Smith | ||||||||
College Issue) | 1.25 | 7/7/08 | 5,000,000 a | 5,000,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Babson | ||||||||
College Issue) (LOC; Royal | ||||||||
Bank of Scotland) | 1.45 | 7/7/08 | 4,075,000 a | 4,075,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Beaver | ||||||||
Country Day School Issue) | ||||||||
(LOC; Allied Irish Banks) | 1.58 | 7/7/08 | 4,400,000 a | 4,400,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Boston | ||||||||
Children’s Museum Issue) (LOC; | ||||||||
Royal Bank of Scotland) | 1.45 | 7/7/08 | 3,565,000 a | 3,565,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Boston | ||||||||
University Issue) (LOC; Allied | ||||||||
Irish Banks) | 2.85 | 7/1/08 | 1,900,000 a | 1,900,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Boston University | ||||||||
Issue) (LOC; BNP Paribas) | 1.45 | 7/7/08 | 5,000,000 a | 5,000,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Elderhostel, | ||||||||
Inc. Issue) (LOC; Royal Bank | ||||||||
of Scotland PLC) | 1.58 | 7/7/08 | 3,045,000 a | 3,045,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Exploration | ||||||||
School, Inc. Issue) (LOC; TD | ||||||||
Banknorth NA) | 1.57 | 7/7/08 | 2,750,000 a | 2,750,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Fay School | ||||||||
Issue) (LOC; TD Banknorth NA) | 1.55 | 7/7/08 | 4,300,000 a | 4,300,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Harvard | ||||||||
University Issue) | 1.25 | 7/7/08 | 6,000,000 a | 6,000,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Hillside School | ||||||||
Issue) (LOC; JPMorgan Chase Bank) | 1.56 | 7/7/08 | 5,000,000 a | 5,000,000 |
8
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Lasell | ||||||||
College Issue) (LOC; Citizens | ||||||||
Bank of Massachusetts) | 1.57 | 7/7/08 | 4,000,000 a | 4,000,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Meadowbrook | ||||||||
School Project) (LOC; Allied | ||||||||
Irish Banks) | 1.55 | 7/7/08 | 1,330,000 a | 1,330,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Smith College | ||||||||
Issue) (Liquidity Facility; | ||||||||
JPMorgan Chase Bank) | 1.34 | 7/7/08 | 1,800,000 a | 1,800,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Worcester | ||||||||
Academy Issue) (LOC; Allied | ||||||||
Irish Banks) | 1.63 | 7/7/08 | 3,000,000 a | 3,000,000 | ||||
Massachusetts Development Finance | ||||||||
Agency, Revenue (Youth | ||||||||
Opportunities Upheld, Inc. | ||||||||
Issue) (LOC; TD Banknorth NA) | 1.58 | 7/7/08 | 5,000,000 a | 5,000,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Bentley | ||||||||
College Issue) (LOC; JPMorgan | ||||||||
Chase Bank) | 1.55 | 7/7/08 | 4,500,000 a | 4,500,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Falmouth | ||||||||
Assisted Living Issue) (LOC; | ||||||||
Bank of America) | 1.59 | 7/7/08 | 2,200,000 a | 2,200,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Great | ||||||||
Brook Valley Health Center | ||||||||
Issue) (LOC; TD Banknorth NA) | 1.57 | 7/7/08 | 1,600,000 a | 1,600,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue | ||||||||
(Massachusetts Institute of | ||||||||
Technology Issue) | 1.45 | 7/7/08 | 2,500,000 a | 2,500,000 |
The Fund 9
STATEMENT OF INVESTMENTS (continued)
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Partners | ||||||||
HealthCare System—Capital | ||||||||
Asset Program Issue) (Insured; | ||||||||
FSA and Liquidity Facility: | ||||||||
Bayerische Landesbank and | ||||||||
JPMorgan Chase Bank) | 1.45 | 7/7/08 | 2,500,000 a | 2,500,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Partners | ||||||||
HealthCare System Issue) | ||||||||
(LOC; Citibank NA) | 1.47 | 7/7/08 | 6,000,000 a | 6,000,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Peabody | ||||||||
Essex Museum Issue) (LOC; | ||||||||
Royal Bank of Scotland) | 1.45 | 7/7/08 | 2,900,000 a | 2,900,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Pool Loan | ||||||||
Program Issue) (LOC; TD | ||||||||
Banknorth NA) | 2.40 | 7/1/08 | 3,300,000 a | 3,300,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (South | ||||||||
Shore Property Issue) (LOC; | ||||||||
Wachovia Bank) | 1.45 | 7/7/08 | 5,000,000 a | 5,000,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Tufts | ||||||||
University Issue) | 1.45 | 7/7/08 | 1,400,000 a | 1,400,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Tufts | ||||||||
University Issue) | 1.45 | 7/7/08 | 1,500,000 a | 1,500,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (University | ||||||||
of Massachusetts Issue) (LOC; | ||||||||
Dexia Credit Locale) | 1.43 | 7/7/08 | 2,400,000 a | 2,400,000 |
10
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
Massachusetts Health and | ||||||||
Educational Facilities Authority, | ||||||||
Revenue (Wellesley College Issue) | 1.30 | 7/7/08 | 1,000,000 a | 1,000,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities Authority, | ||||||||
Revenue (Wellesley College Issue) | 1.40 | 7/7/08 | 4,475,000 a | 4,475,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities Authority, | ||||||||
Revenue (Williams College Issue) | 1.25 | 7/7/08 | 1,800,000 a | 1,800,000 | ||||
Massachusetts Health and | ||||||||
Educational Facilities | ||||||||
Authority, Revenue (Williams | ||||||||
College Issue) | 1.25 | 7/7/08 | 3,490,000 a | 3,490,000 | ||||
Massachusetts Housing Finance | ||||||||
Agency, Housing Revenue | ||||||||
(Insured; FSA and Liquidity | ||||||||
Facility; Dexia Credit Locale) | 1.70 | 7/7/08 | 3,000,000 a | 3,000,000 | ||||
Massachusetts Industrial Finance | ||||||||
Agency, IDR, Refunding | ||||||||
(Nova Realty Trust) | ||||||||
(LOC; Bank of America) | 1.57 | 7/7/08 | 3,000,000 a | 3,000,000 | ||||
Massachusetts School Building | ||||||||
Authority, CP (LOC; Bank of | ||||||||
Nova Scotia) | 1.35 | 7/7/08 | 2,000,000 | 2,000,000 | ||||
Massachusetts Water Resources | ||||||||
Authority, Multi-Modal | ||||||||
Subordinated General Revenue, | ||||||||
Refunding (LOC; Landesbank | ||||||||
Hessen-Thuringen Girozentrale) | 2.97 | 7/1/08 | 1,415,000 a | 1,415,000 | ||||
Nantucket, | ||||||||
GO Notes, BAN | 2.25 | 2/27/09 | 5,500,000 | 5,503,532 | ||||
Swampscott, | ||||||||
GO Notes, BAN | 4.00 | 10/17/08 | 3,986,000 | 3,992,822 | ||||
Total Investments (cost $175,546,157) | 97.9% | 175,546,157 | ||||||
Cash and Receivables (Net) | 2.1% | 3,684,913 | ||||||
Net Assets | 100.0% | 179,231,070 |
a Variable rate demand note — rate shown is the interest rate in effect at June 30, 2008. Maturity date represents the |
next demand date, not the ultimate maturity date. |
b Security exempt from registration under Rule 144A of the Securities Act of 1933.This security may be resold in |
transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2008, this security |
amounted to $5,845,000 or 3.3% of net assets. |
The Fund 11
STATEMENT OF INVESTMENTS (continued)
Summary of Abbreviations | ||||||
ABAG | Association of Bay Area Governments | ACA | American Capital Access | |||
AGC | ACE Guaranty Corporation | AGIC | Asset Guaranty Insurance Company | |||
AMBAC | American Municipal Bond | |||||
Assurance Corporation | ARRN | Adjustable Rate Receipt Notes | ||||
BAN | Bond Anticipation Notes | BIGI | Bond Investors Guaranty Insurance | |||
BPA | Bond Purchase Agreement | CGIC | Capital Guaranty Insurance Company | |||
CIC | Continental Insurance 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 | FNMA | Federal National | |||
Corporation | 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 | |||
MFHR | Multi-Family Housing Revenue | MFMR | Multi-Family Mortgage Revenue | |||
PCR | Pollution Control Revenue | PILOT | Payment in Lieu of Taxes | |||
RAC | Revenue Anticipation Certificates | RAN | Revenue Anticipation Notes | |||
RAW | Revenue Anticipation Warrants | RRR | Resources Recovery Revenue | |||
SAAN | State Aid Anticipation Notes | SBPA | Standby Bond Purchase Agreement | |||
SFHR | Single Family Housing Revenue | SFMR | Single Family Mortgage Revenue | |||
SONYMA | State of New York Mortgage Agency | SWDR | Solid Waste Disposal Revenue | |||
TAN | Tax Anticipation Notes | TAW | Tax Anticipation Warrants | |||
TRAN | Tax and Revenue Anticipation Notes | XLCA | XL Capital Assurance |
12
Summary of Combined Ratings (Unaudited) | ||||||||||
Fitch | or | Moody’s | or | Standard & Poor’s | Value (%)† | |||||
F1+,F1 | VMIG1,MIG1,P1 | SP1+,SP1,A1+,A1 | 90.2 | |||||||
AAA,AA,A c | Aaa,Aa,A c | AAA,AA,A c | 4.7 | |||||||
Not Rated d | Not Rated d | Not Rated d | 5.1 | |||||||
100.0 |
† | Based on total investments. | |
c | Notes which are not F, MIG and SP rated are represented by bond ratings of the issuers. | |
d | Securities which, while not rated by Fitch, Moody’s and Standard & Poor’s, have been determined by the Manager to | |
be of comparable quality to those rated securities in which the fund may invest. | ||
See notes to financial statements. |
The Fund 13
STATEMENT OF ASSETS AND LIABILITIES |
June 30, 2008 |
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments | 175,546,157 | 175,546,157 | ||
Cash | 3,336,312 | |||
Interest receivable | 577,692 | |||
179,460,161 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 2 | 25,357 | |||
Dividend payable | 184,397 | |||
Payable for shares of Beneficial Interest redeemed | 19,337 | |||
229,091 | ||||
Net Assets ($) | 179,231,070 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 179,198,080 | |||
Accumulated net realized gain (loss) on investments | 32,990 | |||
Net Assets ($) | 179,231,070 | |||
Shares Outstanding | ||||
(unlimited number of shares of Beneficial Interest authorized) | 179,209,165 | |||
Net Asset Value, offering and redemption price per share ($) | 1.00 |
See notes to financial statements.
14
STATEMENT OF OPERATIONS |
Year Ended June 30, 2008 |
Investment Income ($): | ||
Interest Income | 5,160,433 | |
Expenses: | ||
Management fee—Note 2 | 784,348 | |
Trustees’ fees—Note 2 | 13,666 | |
Total Expenses | 798,014 | |
Less—Trustees’ fees reimbursed by the Manager—Note 2 | (13,666) | |
Net Expenses | 784,348 | |
Investment Income—Net | 4,376,085 | |
Net Realized Gain (Loss) on Investments—Note 1(b) ($) | 32,990 | |
Net Increase in Net Assets Resulting from Operations | 4,409,075 |
See notes to financial statements.
The Fund 15
STATEMENT OF CHANGES IN NET ASSETS
Year Ended June 30, | ||||
2008 | 2007 | |||
Operations ($): | ||||
Investment income—net | 4,376,085 | 4,302,893 | ||
Net realized gain (loss) on investments | 32,990 | 1,050 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 4,409,075 | 4,303,943 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net | (4,377,135) | (4,302,893) | ||
Beneficial Interest Transactions ($1.00 per share): | ||||
Net proceeds from shares sold | 464,381,058 | 351,391,108 | ||
Dividends reinvested | 622,358 | 752,420 | ||
Cost of shares redeemed | (447,865,845) | (320,369,276) | ||
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | 17,137,571 | 31,774,252 | ||
Total Increase (Decrease) in Net Assets | 17,169,511 | 31,775,302 | ||
Net Assets ($): | ||||
Beginning of Period | 162,061,559 | 130,286,257 | ||
End of Period | 179,231,070 | 162,061,559 |
See notes to financial statements.
16
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.
Year Ended June 30, | ||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | |||||
Investment Operations: | ||||||||||
Investment income—net | .026 | .032 | .024 | .013 | .005 | |||||
Distributions: | ||||||||||
Dividends from | ||||||||||
investment income—net | (.026) | (.032) | (.024) | (.013) | (.005) | |||||
Net asset value, end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | |||||
Total Return (%) | 2.59 | 3.21 | 2.48 | 1.34 | .53 | |||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | ||||||||||
to average net assets | .46 | .46 | .46 | .45 | .45 | |||||
Ratio of net expenses | ||||||||||
to average net assets | .45 | .45 | .45 | .45 | .45 | |||||
Ratio of net investment income | ||||||||||
to average net assets | 2.51 | 3.17 | 2.46 | 1.33 | .53 | |||||
Net Assets, end of period ($ x 1,000) | 179,231 | 162,062 | 130,286 | 131,162 | 141,930 |
See notes to financial statements.
The Fund 17
NOTES TO FINANCIAL STATEMENTS
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”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Manager, is the distributor of the fund’s shares, 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 Financial Accounting Standards Board (“FASB”) released Statement of Financial Accounting Standards No. 157 “Fair Value Measurements”
18
(“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.
In March 2008, the FASB released Statement of Financial Accounting Standards No. 161 “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements.The application of FAS 161 is required for fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. At this time, management is evaluating the implications of FAS 161 and its impact on the financial statements and the accompanying notes has not yet been determined.
(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., a subsidiary of BNY Mellon and a Dreyfus affiliate.
The Fund 19
NOTES TO FINANCIAL STATEMENTS (continued)
(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, 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 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 expense in the current year. The adoption of FIN 48 had no impact on the operations of the fund for the period ended June 30, 2008.
As of and during the period ended June 30, 2008, the fund did not have any liabilities for any unrecognized tax benefits.The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period, the fund did not incur any interest or penalties.
Each of the tax years in the four-year period ended June 30, 2008, remains subject to examination by the Internal Revenue Service and state taxing authorities.
20
At June 30, 2008, the components of accumulated earnings on a tax basis were substantially the same as for financial reporting purposes.
The tax character of distributions paid to shareholders during the fiscal periods ended June 30, 2008 and June 30, 2007, were all tax exempt income.
During the period ended June 30, 2008, as a result of permanent book to tax differences, primarily due to dividend reclassification, the fund increased accumulated undistributed investment income-net by $1,050 and decreased accumulated net realized gain (loss) on investments by the same amount. Net assets and net asset value per share were not affected by this reclassification.
At June 30, 2008, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
NOTE 2—Investment Management Fee And Other Transactions With Affiliates:
Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund.The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .45% of the value of the fund’s average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, fees and expenses of non-interested Trustees (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund’s allocable portion of fees and expenses of the non-interested Trustees (including counsel fees). Each Trustee receives $45,000 per year, plus $6,000 for each joint Board meeting of The Dreyfus/Laurel Funds, Inc., the Trust and The
The Fund 21
NOTES TO FINANCIAL STATEMENTS (continued)
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 Chairman of the compensation committee receives $900 per meeting and, with respect to audit committee meetings prior to April 12, 2008, the Chair of the audit committee received $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.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $25,357.
NOTE 3—Bank Line of Credit:
Effective May 1, 2008, the fund participates with other Dreyfus-managed funds in a $300 million unsecured line of credit primarily to be utilized for temporary or emergency purposes. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowing. Prior to May 1, 2008, the fund participated with other Dreyfus-managed funds in a $100 million unsecured line of credit. During the period ended June 30, 2008, the fund did not borrow under the line of credit.
22
NOTE 4—Subsequent Event:
Effective July 1, 2008, BNY Mellon has reorganized and consolidated a number of its banking and trust company subsidiaries. As a result of the reorganization, any services previously provided to the fund by Mellon Bank, N.A. or Mellon Trust of New England, N.A. are now provided by The Bank of New York, which has changed its name to The Bank of New York Mellon.
The Fund 23
REPORT OF INDEPENDENT REGISTERED |
PUBLIC ACCOUNTING FIRM |
The Board of Trustees and Shareholders of |
The Dreyfus/Laurel Tax-Free Municipal Funds: |
We have audited the accompanying statement of assets and liabilities of Dreyfus BASIC Massachusetts Municipal Money Market Fund (the “Fund”) of The Dreyfus/Laurel Tax-Free Municipal Funds, including the statement of investments, as of June 30, 2008, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended.These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement.An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2008, by correspondence with the custodian.An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus BASIC Massachusetts Municipal Money Market Fund of The Dreyfus/Laurel Tax-Free Municipal Funds as of June 30, 2008, and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York August 20, 2008 |
24
IMPORTANT TAX INFORMATION (Unaudited)
In accordance with federal tax law, the fund hereby designates all the dividends paid from investment income-net during the fiscal year ended June 30, 2008 as “exempt-interest dividends” (not subject to regular federal and, for individuals who are Massachusetts residents, Massachusetts personal income taxes). As required by federal tax law rules, shareholders will receive notification of their portion of the fund’s exempt-interest dividends paid for the 2008 calendar year on Form 1099-INT, which will be mailed by January 31, 2009.
The Fund 25
INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE |
FUND’S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) |
At a meeting of the fund’s Board of Trustees held on February 12 and 13, 2008, the Board considered the re-approval of the fund’s Investment Management Agreement (“Management Agreement”), pursuant to which the Manager provides the fund with investment advisory and administrative services. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.
Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members considered information previously provided to them in a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and representatives of the Manager confirmed that there had been no material changes in this information. The Board also discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager’s representatives reviewed the fund’s distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager’s representatives noted the distribution channels for the fund as well as the diversity of distribution among the funds in the Dreyfus fund complex, and the Manager’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each distribution channel, including those of the fund. The Manager provided the number of shareholder accounts in the fund, as well as the fund’s asset size.
The Board members also considered the Manager’s research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements.The Board members also considered the Manager’s extensive administrative, accounting and compliance infrastructure.
26
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board members reviewed the fund’s performance and comparisons to a group of retail, no-load Massachusetts tax-exempt money market funds (the “Performance Group”) and to a larger universe of funds, consisting of all retail and institutional Massachusetts tax-exempt money market funds (the “Performance Universe”) selected and provided by Lipper, Inc., an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below).The Board members discussed the results of the comparisons for various periods ended December 31, 2007, and noted that the fund’s total return performance was above the Performance Group and Performance Universe medians for each of the periods.
The Board members also discussed the fund’s management fee and expense ratio and reviewed the range of management fees and expense ratios of a comparable group of funds (the “Expense Group”) and a broader group of funds (the “Expense Universe”), each selected and provided by Lipper. Noting that the fund was the only fund in the Expense Group with a “unitary fee” structure, the Board noted that the fund’s management fee was above the Expense Group and Expense Universe medians and the expense ratio was below the Expense Group and Expense Universe medians.
Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included in the same Lipper category as the fund (the “Similar Funds”). They also noted that there were no other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund.The Manager’s representatives
The Fund 27
INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE |
FUND’S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued) |
also reviewed the costs associated with distribution through intermediaries. The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager’s performance and the services provided, noting the fund’s “unitary fee” structure.The Board members considered the relevance of the fee information provided for the Similar Funds to evaluate the appropriateness and reasonableness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. The Manager’s representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit. The Board previously had been provided with information prepared by an independent consulting firm regarding the Manager’s approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex.The Board also was informed that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable. The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund.The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. The Board members also considered potential benefits to the Manager from acting as investment adviser and noted that there were no soft dollar arrangements with respect to trading the fund’s portfolio.
It was noted that the Board members should consider the Manager’s profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund’s assets had been decreasing, the possibility that the Manager may have
28
realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within the range determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund’s Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.
- The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate.
- The Board was satisfied with the fund’s performance.
- The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative perfor- mance, expense and advisory fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.
- The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund’s Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2009.
The Fund 29
BOARD MEMBERS INFORMATION (Unaudited)
Joseph S. DiMartino (64) |
Chairman of the Board (1999) |
Principal Occupation During Past 5 Years: |
• Corporate Director and Trustee |
Other Board Memberships and Affiliations: |
• The Muscular Dystrophy Association, Director |
• Century Business Services, Inc., a provider of outsourcing functions for small and medium size |
companies, Director |
• The Newark Group, a provider of a national market of paper recovery facilities, paperboard |
mills and paperboard converting plants, Director |
• Sunair Services Corporation, a provider of certain outdoor-related services to homes and |
businesses, Director |
No. of Portfolios for which Board Member Serves: 160 |
James M. Fitzgibbons (73) |
Board Member (1983) |
Principal Occupation During Past 5 Years: |
• Corporate Director, Davidson Cotton Company (1998-2002) |
Other Board Memberships and Affiliations: |
• Bill Barrett Company, an oil and gas exploration company, Director |
No. of Portfolios for which Board Member Serves: 25 |
Kenneth A. Himmel (62) |
Board Member (1998) |
Principal Occupation During Past 5 Years: |
• President and CEO,Related Urban Development,a real estate development company (1996-present) |
• President and CEO, Himmel & Company, a real estate development company (1980-present) |
• CEO, American Food Management, a restaurant company (1983-present) |
No. of Portfolios for which Board Member Serves: 25 |
Stephen J. Lockwood (61) |
Board Member (1993) |
Principal Occupation During Past 5 Years: |
• Chairman of the Board, Stephen J. Lockwood and Company LLC, an investment company |
(2000-present) |
No. of Portfolios for which Board Member Serves: 25 |
30
Roslyn M. Watson (58) |
Board Member (1992) |
Principal Occupation During Past 5 Years: |
• Principal,Watson Ventures, Inc., a real estate investment company (1993-present) |
Other Board Memberships and Affiliations: |
• American Express Bank, Director |
• The Hyams Foundation Inc., a Massachusetts Charitable Foundation,Trustee |
• National Osteoporosis Foundation,Trustee |
• SBLI-USA, Director |
No. of Portfolios for which Board Member Serves: 25 |
Benaree Pratt Wiley (62) |
Board Member (1998) |
Principal Occupation During Past 5 Years: |
• Principal,The Wiley Group, a firm specializing in strategy and business development (2005-present) |
• President and CEO,The Partnership, an organization dedicated to increasing the |
representation of African Americans in positions of leadership, influence and |
decision-making in Boston, MA (1991-2005) |
Other Board Memberships and Affiliations: |
• Boston College,Trustee Associate |
• Blue Cross Blue Shield of Massachusetts, Director |
• CBIZ, professional support consultants and service providers for small, midsized and corporate |
businesses, Director |
• Commonwealth Institute, Director |
• Efficacy Institute, Director |
• PepsiCo African-American, Chair of Advisory Board |
• The Boston Foundation, Director |
• Century Business Services, Inc., a provider of outsourcing functions for small and medium |
size companies, Director |
No. of Portfolios for which Board Member Serves: 35 |
Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80.The address of the Board Members and Officers is in c/o The Dreyfus Corporation, 200 Park Avenue, New York, New York 10166. Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from Dreyfus free of charge by calling this toll free number: 1-800-554-4611.
Francis P. Brennan, Emeritus Board Member J.Tomlinson Fort, Emeritus Board Member
The Fund 31
OFFICERS OF THE FUND (Unaudited)
J. DAVID OFFICER, President since |
December 2006. |
Chief Operating Officer,Vice Chairman and a Director of the Manager, and an officer of 76 investment companies (comprised of 160 portfolios) managed by the Manager. He is 59 years old and has been an employee of the Manager since April 1998.
PHILLIP N. MAISANO, Executive Vice |
President since July 2007. |
Chief Investment Officer,Vice Chair and a director of the Manager, and an officer of 76 investment companies (comprised of 160 portfolios) managed by the Manager. Mr. Maisano also is an officer and/or Board member of certain other investment management subsidiaries of The Bank of New York Mellon Corporation, each of which is an affiliate of the Manager. He is 61 years old and has been an employee of the Manager since November 2006. Prior to joining the Manager, Mr. Maisano served as Chairman and Chief Executive Officer of EACM Advisors, an affiliate of the Manager, since August 2004, and served as Chief Executive Officer of Evaluation Associates, a leading institutional investment consulting firm, from 1988 until 2004.
MICHAEL A. ROSENBERG, Vice President |
and Secretary since August 2005. |
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 48 years old and has been an employee of the Manager since October 1991.
JAMES BITETTO, Vice President and |
Assistant Secretary since August 2005. |
Associate General Counsel and Secretary of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 41 years old and has been an employee of the Manager since December 1996.
JONI LACKS CHARATAN, Vice President |
and Assistant Secretary since |
August 2005. |
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. She is 52 years old and has been an employee of the Manager since October 1988.
JOSEPH M. CHIOFFI, Vice President and |
Assistant Secretary since August 2005. |
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 46 years old and has been an employee of the Manager since June 2000.
JANETTE E. FARRAGHER, Vice President |
and Assistant Secretary since |
August 2005. |
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. She is 45 years old and has been an employee of the Manager since February 1984.
JOHN B. HAMMALIAN, Vice President and |
Assistant Secretary since August 2005. |
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since February 1991.
ROBERT R. MULLERY, Vice President and |
Assistant Secretary since August 2005. |
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 56 years old and has been an employee of the Manager since May 1986.
32
JEFF PRUSNOFSKY, Vice President and |
Assistant Secretary since August 2005. |
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 43 years old and has been an employee of the Manager since October 1990.
JAMES WINDELS, Treasurer since |
November 2001. |
Director – Mutual Fund Accounting of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since April 1985.
RICHARD CASSARO, Assistant Treasurer |
since September 2007. |
Senior Accounting Manager – Money Market and Municipal Bond Funds of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since September 1982.
GAVIN C. REILLY, Assistant Treasurer |
since December 2005. |
Tax Manager of the Investment Accounting and Support Department of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 39 years old and has been an employee of the Manager since April 1991.
ROBERT ROBOL, Assistant Treasurer |
since December 2002. |
Senior Accounting Manager – Fixed Income Funds of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since October 1988.
ROBERT SALVIOLO, Assistant Treasurer |
since July 2007. |
Senior Accounting Manager – Equity Funds of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 41 years old and has been an employee of the Manager since June 1989.
ROBERT SVAGNA, Assistant Treasurer |
since August 2005. |
Senior Accounting Manager – Equity Funds of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 41 years old and has been an employee of the Manager since November 1990.
JOSEPH W. CONNOLLY, Chief Compliance |
Officer since October 2004. |
Chief Compliance Officer of the Manager and The Dreyfus Family of Funds (77 investment companies, comprised of 177 portfolios). From November 2001 through March 2004, Mr. Connolly was first Vice-President, Mutual Fund Servicing for Mellon Global Securities Services. In that capacity, Mr. Connolly was responsible for managing Mellon’s Custody, Fund Accounting and Fund Administration services to third-party mutual fund clients. He is 51 years old and has served in various capacities with the Manager since 1980, including manager of the firm’s Fund Accounting Department from 1997 through October 2001.
WILLIAM GERMENIS, Anti-Money |
Laundering Compliance Officer since |
July 2002. |
Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 73 investment companies (comprised of 173 portfolios) managed by the Manager. He is 37 years old and has been an employee of the Distributor since October 1998.
The Fund 33
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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 | |
18 | Statement of Assets and Liabilities | |
19 | Statement of Operations | |
20 | Statement of Changes in Net Assets | |
21 | Financial Highlights | |
22 | Notes to Financial Statements | |
28 | Report of Independent Registered | |
Public Accounting Firm | ||
29 | Important Tax Information | |
30 | Information About the Review and | |
Approval of the Fund’s Investment | ||
Management Agreement | ||
35 | Board Members Information | |
37 | Officers of the Fund | |
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 annual report for Dreyfus BASIC New York Municipal Money Market Fund, covering the 12-month period from July 1, 2007, through June 30, 2008.
Although the U.S. economy has teetered on the brink of recession and the financial markets have encountered heightened volatility in an ongoing credit crisis, the Federal Reserve Board’s accommodative monetary policy and innovative measures to inject liquidity into the banking system have helped to mitigate some of the market instability directly caused by the ongoing credit situation.But a degree of economic uncertainty still remains throughout other long-term asset classes,and the result has been record asset flows into the money markets from investors seeking a relatively safe haven.
While the FOMC continued to reduce the overnight rate through to its meeting on April 30, it maintained the current level of 2% at its latest meeting on June 25. Statements from that meeting suggested that it intends on remaining in a holding pattern in an attempt to help alleviate inflationary pressure. So now, money market asset managers continue to monitor future economic data and the federal futures markets for indications of what to expect with regards to current yields and interest rates. In times like these, your financial advisor can help you assess current risks and your need for liquidity, and take advantage of potential long-term opportunities in other asset classes, given your individual needs and financial goals.
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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Jonathan R. Baum Chief Executive Officer The Dreyfus Corporation July 15, 2008 |
2
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DISCUSSION OF FUND PERFORMANCE
For the period of July 1, 2007, through June 30, 2008, as provided by Joseph Irace, Senior Portfolio Manager
Fund and Market Performance Overview
For the 12-month period ended June 30, 2008, Dreyfus BASIC New York Municipal Money Market Fund produced a yield of 2.63% . Taking into account the effects of compounding, the fund produced an effective yield of 2.66% ..1
Tax-exempt money market instruments were primarily influenced by lower short-term interest rates during the reporting period, as the Federal Reserve Board (the “Fed”) took aggressive action to stimulate economic growth and promote liquidity in the midst of a credit crisis.
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 NewYork-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 NewYork’s short-term municipal marketplace.
Rather than focusing on economic or market trends, we search for securities that, in our opinion, will help us enhance the fund’s yield.
The management of the fund’s weighted average maturity uses a more tactical approach. If we expect the supply of securities to increase temporarily, we may reduce the fund’s weighted average maturity to make cash available for the purchase of higher yielding securities.This is due to the fact that yields tend to rise temporarily if issuers are competing for investor interest. If we expect demand to surge at a time when we anticipate little issuance and therefore lower yields, we may increase
The Fund |
3 |
DISCUSSION OF FUND PERFORMANCE (continued) |
the fund’s weighted average maturity to maintain current yields for as long as we deem practical. At other times, we try to maintain a neutral weighted average maturity.
Credit and Economic Woes Hurt Investor Sentiment
Economic conditions deteriorated during much of the reporting period as a result of sustained weakness in U.S.housing markets and soaring food and energy costs. Moreover, a credit crisis originating in the sub-prime mortgage market spread to other asset classes, causing investors to flock to the relative safety of U.S.Treasury securities and money market funds, and sparking price dislocations in longer-term fixed-income markets.
The Fed attempted to address the downturn in the economy and credit markets by injecting liquidity into the banking system and, in September 2007, cutting the federal funds rate from 5.25% to 4.75%, the first such reduction in more than four years. However, more disappointing economic data and news of massive sub-prime related losses by major financial institutions led to renewed fixed-income market turbulence,and the Fed responded with additional rate cuts in October and December.
Additional evidence of economic weakness accumulated over the first several months of 2008, including the first monthly job losses in more than four years.The Fed took particularly aggressive action in late January, easing the federal funds rate by 125 basis points in two moves.Additional reductions of 75 basis points in March and 25 basis points in April left the federal funds rate at just 2.00% by the end of the reporting period.
Assets Flowed into Tax-Exempt Money Market Funds
Although tax-exempt money market yields declined along with short-term interest rates, a record level of assets flowed into municipal money market funds from risk-averse investors. Early in the reporting period, rising demand was met with an ample supply of short-term variable-rate demand notes and tender option bonds driving yields higher, at times, than those of longer-dated municipal notes. However, unrelenting investor demand later began to overwhelm supply, putting downward pressure on short-term yields.
4
The fiscal conditions of most NewYork issuers remained sound during the reporting period, but the economic downturn and layoffs on Wall Street are widely expected to result in renewed budget pressures for NewYork state and NewYork city.
Maintaining a Conservative Investment Posture
We generally maintained a cautious investment approach, as always, investing exclusively in instruments that have been reviewed and approved by our credit analysts. In some cases, these research efforts identified municipal money market instruments that, in our judgment, were punished too severely in the downturn and represented attractive values.We have attempted to stagger the maturities of the fund’s holdings to help cushion market volatility and guard against unexpected changes in interest rates.
Over much of the reporting period, we set the fund’s weighted average maturity in a range that was longer than industry averages to capture higher yields for as long as we deemed practical while interest rates fell. However, due to intensifying inflation concerns, it appears that the Fed’s interest-rate reductions may be complete for now.Therefore, we recently reduced the fund’s weighted average maturity to a range that is in line with industry averages.
July 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 | 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-NewYork 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 January 1, 2008 to June 30, 2008. 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 June 30, 2008
Expenses paid per $1,000† | $ 2.25 | |
Ending value (after expenses) | $1,010.30 |
COMPARING YOUR FUND’S EXPENSES WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment assuming a hypothetical 5% annualized return for the six months ended June 30, 2008
Expenses paid per $1,000† | $ 2.26 | |
Ending value (after expenses) | $1,022.63 |
- Expenses are equal to the fund’s annualized expense ratio of .45%, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
6
STATEMENT OF INVESTMENTS | ||||||||||
June 30, 2008 | ||||||||||
Short-Term | Coupon | Maturity | Principal | |||||||
Investments—101.5% | Rate (%) | Date | Amount ($) | Value ($) | ||||||
New York—100.3% | ||||||||||
Albany Housing Authority, | ||||||||||
Revenue (Nutgrove Garden | ||||||||||
Apartments Project) (LOC; | ||||||||||
Citizens Bank of Massachusetts) | 1.69 | 7/7/08 | 1,495,000 | a | 1,495,000 | |||||
Albany Industrial Development | ||||||||||
Agency, Civic Facility Revenue | ||||||||||
(Albany College of Pharmacy | ||||||||||
Project) (LOC; TD Banknorth NA) | 1.52 | 7/7/08 | 6,000,000 | a | 6,000,000 | |||||
Albany Industrial Development | ||||||||||
Agency, Civic Facility Revenue | ||||||||||
(CHF Holland Suites, L.L.C. | ||||||||||
Project) (LOC; TD Banknorth NA) | 1.58 | 7/7/08 | 6,390,000 | a | 6,390,000 | |||||
Albany Industrial Development | ||||||||||
Agency, Civic Facility Revenue | ||||||||||
(CHF-Holland Suites II, L.L.C. | ||||||||||
Project) (LOC; TD Banknorth NA) | 1.52 | 7/7/08 | 3,000,000 | a | 3,000,000 | |||||
Albany Industrial Development | ||||||||||
Agency, Civic Facility Revenue | ||||||||||
(Corning Preserve/Hudson | ||||||||||
Riverfront Development | ||||||||||
Project) (LOC; Key Bank) | 1.59 | 7/7/08 | 1,245,000 | a | 1,245,000 | |||||
Alexandria Bay, | ||||||||||
GO Notes, BAN | 4.25 | 9/18/08 | 2,000,000 | 2,001,871 | ||||||
Amsterdam Enlarged City School | ||||||||||
District, GO Notes, BAN | 4.00 | 7/3/08 | 1,346,000 | 1,346,018 | ||||||
Auburn Industrial Development | ||||||||||
Authority, IDR (Fat Tire LLC | ||||||||||
Project) (LOC; Citizens Bank | ||||||||||
of Pennsylvania) | 1.76 | 7/7/08 | 1,350,000 | a | 1,350,000 | |||||
Avoca Central School District, | ||||||||||
GO Notes, BAN | 3.00 | 6/26/09 | 4,000,000 | 4,032,824 | ||||||
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 | 3,012,320 | ||||||
Dutchess County Industrial | ||||||||||
Development Agency, Civic | ||||||||||
Facility Revenue, Refunding | ||||||||||
(Lutheran Center at | ||||||||||
Poughkeepsie, Inc. Project) | ||||||||||
(LOC; Key Bank) | 1.59 | 7/7/08 | 1,900,000 | a | 1,900,000 |
The Fund |
7 |
STATEMENT OF INVESTMENTS (continued) |
Short-Term | Coupon | Maturity | Principal | |||||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||||
New York (continued) | ||||||||||
East Hampton, | ||||||||||
GO Notes, BAN | 2.00 | 6/4/09 | 1,600,000 | 1,602,904 | ||||||
Erie County Industrial Development | ||||||||||
Agency, IDR (Luminescent | ||||||||||
System Inc. Project) (LOC; | ||||||||||
HSBC Bank USA) | 1.70 | 7/7/08 | 3,645,000 | a | 3,645,000 | |||||
Hamburg Central School District, | ||||||||||
GO Notes, BAN | 4.25 | 7/3/08 | 2,400,000 | 2,400,057 | ||||||
Hamburg Central School District, | ||||||||||
GO Notes, BAN | 3.35 | 7/2/09 | 4,400,000 | b | 4,448,048 | |||||
Hudson Yards Infrastructure | ||||||||||
Corporation, Hudson Yards | ||||||||||
Senior Revenue (Insured; FGIC | ||||||||||
and Liquidity Facility; | ||||||||||
Landesbank Hessen-Thuringen | ||||||||||
Girozentrale) | 1.59 | 7/7/08 | 21,800,000 | a,c | 21,800,000 | |||||
Hudson Yards Infrastructure | ||||||||||
Corporation, Hudson Yards | ||||||||||
Senior Revenue (Insured; FGIC | ||||||||||
and Liquidity Facility; Morgan | ||||||||||
Stanley Bank) | 1.75 | 7/7/08 | 10,000,000 | a,c | 10,000,000 | |||||
Lancaster Industrial Development | ||||||||||
Agency, IDR (Jiffy-Tite | ||||||||||
Company, Inc. Project) (LOC; | ||||||||||
Key Bank) | 1.76 | 7/7/08 | 1,120,000 | a | 1,120,000 | |||||
Laurens Central School District, | ||||||||||
GO Notes, BAN | 2.10 | 6/25/09 | 1,446,475 | 1,447,869 | ||||||
Long Island Power Authority, | ||||||||||
Electric System Subordinated | ||||||||||
Revenue (LOC; Bayerische | ||||||||||
Landesbank) | 1.70 | 7/1/08 | 1,000,000 | a | 1,000,000 | |||||
Metropolitan Transportation | ||||||||||
Authority, Transportation | ||||||||||
Revenue (Insured; Assured | ||||||||||
Guaranty and Liquidity | ||||||||||
Facility; PB Finance Inc.) | 1.56 | 7/7/08 | 9,310,000 | a,c | 9,310,000 | |||||
Metropolitan Transportation | ||||||||||
Authority, Transportation | ||||||||||
Revenue, CP (LOC; ABN AMRO) | 1.40 | 7/8/08 | 3,000,000 | 3,000,000 |
8
Short-Term | 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) | 1.60 | 7/7/08 | 2,500,000 | a | 2,500,000 | |||||
Monroe County Industrial | ||||||||||
Development Agency, Civic | ||||||||||
Facility Revenue (YMCA of | ||||||||||
Greater Rochester Project) | ||||||||||
(LOC; M&T Bank) | 1.60 | 7/7/08 | 5,250,000 | a | 5,250,000 | |||||
Monroe County Industrial | ||||||||||
Development Agency, IDR (2883 | ||||||||||
Associates LP) (LOC; HSBC Bank | ||||||||||
USA) | 1.70 | 7/7/08 | 625,000 | a | 625,000 | |||||
Monroe County Industrial | ||||||||||
Development Agency, IDR (Axelrod | ||||||||||
Realty Partnership Facility) | ||||||||||
(LOC; JPMorgan Chase Bank) | 3.00 | 12/1/09 | 260,000 | 260,000 | ||||||
Monroe County Industrial | ||||||||||
Development Agency, IDR | ||||||||||
(Mercury Print Productions, | ||||||||||
Inc. Facility) (LOC; M&T Bank) | 1.74 | 7/7/08 | 225,000 | a | 225,000 | |||||
Naples Central School District, | ||||||||||
GO Notes, BAN | 2.25 | 6/16/09 | 1,700,000 | 1,705,591 | ||||||
Nassau County Industrial | ||||||||||
Development Agency, Revenue | ||||||||||
(Rockville Centre Housing | ||||||||||
Project) (LOC; M&T Bank) | 1.26 | 7/7/08 | 8,000,000 | a | 8,000,000 | |||||
New York City | ||||||||||
(Insured; FSA and Liquidity | ||||||||||
Facility; Dexia Credit Locale) | 1.60 | 7/1/08 | 13,625,000 | a | 13,625,000 | |||||
New York City | ||||||||||
(Insured; FSA and Liquidity | ||||||||||
Facility; State Street Bank | ||||||||||
and Trust Co.) | 1.70 | 7/1/08 | 2,000,000 | a | 2,000,000 | |||||
New York City | ||||||||||
(Insured; FSA and Liquidity | ||||||||||
Facility; State Street Bank | ||||||||||
and Trust Co.) | 1.70 | 7/1/08 | 1,575,000 | a | 1,575,000 |
The Fund |
9 |
STATEMENT OF INVESTMENTS (continued) |
Short-Term | Coupon | Maturity | Principal | |||||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||||
New York (continued) | ||||||||||
New York City | ||||||||||
(Insured; FSA and Liquidity | ||||||||||
Facility; State Street Bank | ||||||||||
and Trust Co.) | 1.70 | 7/1/08 | 5,000,000 | a | 5,000,000 | |||||
New York City | ||||||||||
(Liquidity Facility; Allied | ||||||||||
Irish Banks) | 1.60 | 7/1/08 | 9,600,000 | a | 9,600,000 | |||||
New York City | ||||||||||
(LOC; Bank of America) | 2.35 | 7/1/08 | 6,500,000 | a | 6,500,000 | |||||
New York City | ||||||||||
(LOC; Bayerische Landesbank) | 1.60 | 7/1/08 | 3,750,000 | a | 3,750,000 | |||||
New York City | ||||||||||
(LOC; JPMorgan Chase Bank) | 1.70 | 7/1/08 | 2,400,000 | a | 2,400,000 | |||||
New York City | ||||||||||
(LOC; Westdeutsche Landesbank) | 1.60 | 7/1/08 | 1,100,000 | a | 1,100,000 | |||||
New York City, | ||||||||||
GO Notes | 4.88 | 8/1/08 | 300,000 | 300,418 | ||||||
New York City, | ||||||||||
GO Notes | 5.00 | 8/1/08 | 175,000 | 175,415 | ||||||
New York City, | ||||||||||
GO Notes | 5.25 | 8/1/08 | 4,460,000 | 4,472,858 | ||||||
New York City, | ||||||||||
GO Notes | 5.25 | 8/1/08 | 950,000 | 952,007 | ||||||
New York City, | ||||||||||
GO Notes | 3.65 | 4/1/09 | 100,000 | 100,475 | ||||||
New York City Housing Development | ||||||||||
Corporation, MFMR (Cook Street | ||||||||||
Apartments) (LOC; JPMorgan | ||||||||||
Chase Bank) | 1.45 | 7/7/08 | 7,000,000 | a | 7,000,000 | |||||
New York City Industrial | ||||||||||
Development Agency, Civic | ||||||||||
Facility Revenue (Abraham | ||||||||||
Joshua Heschel High School | ||||||||||
Project) (LOC; Allied Irish | ||||||||||
Banks) | 1.54 | 7/7/08 | 3,850,000 | a | 3,850,000 |
New York City Industrial Development Agency, Civic Facility Revenue (Columbia Grammar and Preparatory School Project) (LOC; Allied Irish Banks) |
1.58 7/7/08 4,630,000 a |
4,630,000 |
10
Short-Term | Coupon | Maturity | Principal | |||||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||||
New York (continued) | ||||||||||
New York City Industrial | ||||||||||
Development Agency, Civic | ||||||||||
Facility Revenue (Hewitt | ||||||||||
School Project) (LOC; Allied | ||||||||||
Irish Banks) | 1.58 | 7/7/08 | 1,570,000 | a | 1,570,000 | |||||
New York City Industrial | ||||||||||
Development Agency, Civic | ||||||||||
Facility Revenue (Sephardic | ||||||||||
Community Youth Center, Inc. | ||||||||||
Project) (LOC; M&T Bank) | 1.21 | 7/7/08 | 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) | 1.58 | 7/7/08 | 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) | 1.58 | 7/7/08 | 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) | 1.58 | 7/7/08 | 2,880,000 | a | 2,880,000 | |||||
New York City Industrial | ||||||||||
Development Agency, IDR | ||||||||||
(Novelty Crystal Corporation | ||||||||||
Project) (LOC; Commerce Bank | ||||||||||
N.A.) | 1.68 | 7/7/08 | 3,560,000 | a | 3,560,000 | |||||
New York City Industrial | ||||||||||
Development Agency, IDR | ||||||||||
(Super-Tek Products, Inc. | ||||||||||
Project) (LOC; Citibank NA) | 1.63 | 7/7/08 | 5,155,000 | a | 5,155,000 | |||||
New York City Industrial | ||||||||||
Development Agency, Special | ||||||||||
Facility Revenue (Air Express | ||||||||||
International Corporation | ||||||||||
Project) (LOC; Citibank NA) | 1.57 | 7/7/08 | 5,000,000 | a | 5,000,000 |
The Fund |
11 |
STATEMENT OF INVESTMENTS (continued) |
Short-Term | Coupon | Maturity | Principal | |||||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||||
New York (continued) | ||||||||||
New York City Municipal Water | ||||||||||
Finance Authority, CP | ||||||||||
(Liquidity Facility: Dexia | ||||||||||
Credit Locale and JPMorgan | ||||||||||
Chase Bank) | 1.68 | 8/11/08 | 7,300,000 | 7,300,000 | ||||||
New York City Municipal Water | ||||||||||
Finance Authority, Water and | ||||||||||
Sewer System Revenue | ||||||||||
(Liquidity Facility; Depfa | ||||||||||
Bank PLC) | 1.70 | 7/1/08 | 5,400,000 | a | 5,400,000 | |||||
New York City Transitional Finance | ||||||||||
Authority, Future Tax Secured | ||||||||||
Revenue | 5.50 | 2/1/09 | 500,000 | 509,361 | ||||||
New York City Transitional Finance | ||||||||||
Authority, Future Tax Secured | ||||||||||
Revenue (Liquidity Facility; | ||||||||||
Landesbank Baden-Wurttemberg) | 1.60 | 7/1/08 | 11,265,000 | a | 11,265,000 | |||||
New York City Transitional Finance | ||||||||||
Authority, Revenue (New York | ||||||||||
City Recovery) (Liquidity | ||||||||||
Facility; Landesbank | ||||||||||
Baden-Wurttemberg) | 1.60 | 7/1/08 | 9,350,000 | a | 9,350,000 | |||||
New York Counties Tobacco Trust | ||||||||||
IV, Tobacco Settlement | ||||||||||
Pass-Through Bonds (Liquidity | ||||||||||
Facility; Merrill Lynch | ||||||||||
Capital Services and LOC; | ||||||||||
Merrill Lynch) | 1.67 | 7/7/08 | 17,000,000 | a,c | 17,000,000 | |||||
New York State Dormitory | ||||||||||
Authority, Revenue (Mount | ||||||||||
Saint Mary College) (LOC; | ||||||||||
JPMorgan Chase Bank) | 1.63 | 7/7/08 | 4,300,000 | a | 4,300,000 | |||||
New York State Dormitory | ||||||||||
Authority, Revenue (Park Ridge | ||||||||||
Hospital Inc.) (LOC; JPMorgan | ||||||||||
Chase Bank) | 1.54 | 7/7/08 | 13,100,000 | a | 13,100,000 | |||||
New York State Dormitory | ||||||||||
Authority, State Personal | ||||||||||
Income Tax Revenue (Education) | 5.00 | 3/15/09 | 220,000 | 224,586 |
12
Short-Term | Coupon | Maturity | Principal | |||||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||||
New York (continued) | ||||||||||
New York State Housing Finance | ||||||||||
Agency, Revenue (Worth Street) | ||||||||||
(LOC; FNMA) | 1.55 | 7/7/08 | 9,400,000 | a | 9,400,000 | |||||
New York State Urban Development | ||||||||||
Corporation, COP (James A. | ||||||||||
Farley Post Office Project) | ||||||||||
(Liquidity Facility; Citigroup | ||||||||||
and LOC; Citigroup) | 1.60 | 7/7/08 | 5,000,000 | a,c | 5,000,000 | |||||
Newburgh Industrial Development | ||||||||||
Agency, Civic Facility Revenue | ||||||||||
(Community Development | ||||||||||
Properties Dubois Street II, | ||||||||||
Inc. Project) (LOC; Key Bank) | 1.59 | 7/7/08 | 10,605,000 | a | 10,605,000 | |||||
North Greenbush, | ||||||||||
GO Notes, BAN | 2.75 | 4/17/09 | 2,000,000 | 2,005,382 | ||||||
Olean, | ||||||||||
GO Notes, RAN | 4.00 | 8/14/08 | 1,800,000 | 1,800,416 | ||||||
Orangetown, | ||||||||||
GO Notes, BAN | 4.00 | 10/3/08 | 1,100,000 | 1,101,555 | ||||||
Otsego County Industrial | ||||||||||
Development Agency, Civic | ||||||||||
Facility Revenue (Noonan | ||||||||||
Community Service Corporation | ||||||||||
Project) (LOC; FHLB) | 1.57 | 7/7/08 | 1,235,000 | a | 1,235,000 | |||||
Plattsburgh, | ||||||||||
BAN (Municipal Lighting) | 2.50 | 6/19/09 | 2,100,000 | 2,110,947 | ||||||
Port Authority of New York | ||||||||||
and New Jersey, | ||||||||||
Equipment Notes | 1.61 | 7/7/08 | 4,000,000 | a | 4,000,000 | |||||
Port Byron School District, | ||||||||||
GO Notes, BAN | 2.75 | 6/26/09 | 2,000,000 | 2,009,626 | ||||||
Putnam County Industrial | ||||||||||
Development Agency, Civic | ||||||||||
Facility Revenue (United | ||||||||||
Cerebral Palsy of Putnam and | ||||||||||
Southern Dutchess Project) | ||||||||||
(LOC; Commerce Bank N.A.) | 1.60 | 7/7/08 | 8,025,000 | a | 8,025,000 |
The Fund |
13 |
STATEMENT OF INVESTMENTS (continued) |
Short-Term | Coupon | Maturity | Principal | |||||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||||
New York (continued) | ||||||||||
Rensselaer County Industrial | ||||||||||
Development Agency, Civic | ||||||||||
Facility Revenue (The Sage | ||||||||||
Colleges Project) (LOC; M&T | ||||||||||
Bank) | 1.66 | 7/7/08 | 2,300,000 | a | 2,300,000 | |||||
Rockland County Industrial | ||||||||||
Development Agency, Civic | ||||||||||
Facility Revenue (Dominican | ||||||||||
College of Blauvelt Project) | ||||||||||
(LOC; Commerce Bank N.A.) | 1.63 | 7/7/08 | 6,230,000 | a | 6,230,000 | |||||
Rockland County Industrial | ||||||||||
Development Agency, IDR | ||||||||||
(Intercos America, Inc. | ||||||||||
Project) (LOC; HSBC Bank USA) | 1.70 | 7/7/08 | 3,600,000 | a | 3,600,000 | |||||
Rome City School District, | ||||||||||
RAN | 2.25 | 6/25/09 | 3,900,000 | 3,913,157 | ||||||
Sackets Harbor Central School | ||||||||||
District, GO Notes, BAN | 3.00 | 7/2/09 | 2,594,437 | b | 2,612,131 | |||||
Saint Lawrence County Industrial | ||||||||||
Development Agency, Civic | ||||||||||
Facility Revenue | ||||||||||
(Canton-Potsdam Hospital | ||||||||||
Project) (LOC; Key Bank) | 1.59 | 7/7/08 | 10,605,000 | a | 10,605,000 | |||||
Salamanca City Central School | ||||||||||
District, GO Notes, BAN | 4.00 | 9/26/08 | 1,300,000 | 1,302,648 | ||||||
Tobacco Settlement Financing | ||||||||||
Corporation, Asset-Backed | ||||||||||
Revenue Bonds (State | ||||||||||
Contingency Contract Secured) | 5.00 | 6/1/09 | 350,000 | 357,535 | ||||||
Tompkins County Industrial | ||||||||||
Development Agency, Civic | ||||||||||
Facility Revenue (Cortland | ||||||||||
College) (LOC; HSBC Bank USA) | 1.63 | 7/7/08 | 3,945,000 | a | 3,945,000 | |||||
Triborough Bridge and Tunnel | ||||||||||
Authority, General Revenue | ||||||||||
(LOC; Dexia Credit Locale) | 1.44 | 7/7/08 | 2,905,000 | a | 2,905,000 |
14
Short-Term | Coupon | Maturity | Principal | |||||
Investments (continued) | Rate (%) | Date | Amount ($) | Value ($) | ||||
New York (continued) | ||||||||
Westchester County Industrial | ||||||||
Development Agency, Civic | ||||||||
Facility Revenue (Northern | ||||||||
Westchester Hospital | ||||||||
Association Civic Facility) | ||||||||
(LOC; Commerce Bank N.A.) | 1.53 | 7/7/08 | 6,900,000 a | 6,900,000 | ||||
U.S. Related—1.2% | ||||||||
Puerto Rico Industrial Tourist | ||||||||
Educational Medical and | ||||||||
Environmental Control | ||||||||
Facilities Financing | ||||||||
Authority, Environmental | ||||||||
Control Facilities Revenue | ||||||||
(Bristol-Myers Squibb Company | ||||||||
Project) | 1.60 | 7/7/08 | 4,400,000 a | 4,400,000 | ||||
Total Investments (cost $369,561,019) | 101.5% | 369,561,019 | ||||||
Liabilities, Less Cash and Receivables | (1.5%) | (5,440,194) | ||||||
Net Assets | 100.0% | 364,120,825 |
a | Variable rate demand note — rate shown is the interest rate in effect at June 30, 2008. Maturity date represents the next demand date, not the ultimate maturity date. |
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 June 30, 2008, these securities amounted to $63,110,000 or 17.3% of net assets. |
The Fund |
15 |
STATEMENT OF INVESTMENTS (continued) |
Summary of Abbreviations | ||||||
ABAG | Association of Bay Area Governments | ACA | American Capital Access | |||
AGC | ACE Guaranty Corporation | AGIC | Asset Guaranty Insurance Company | |||
AMBAC | American Municipal Bond | |||||
Assurance Corporation | ARRN | Adjustable Rate Receipt Notes | ||||
BAN | Bond Anticipation Notes | BIGI | Bond Investors Guaranty Insurance | |||
BPA | Bond Purchase Agreement | CGIC | Capital Guaranty Insurance Company | |||
CIC | Continental Insurance 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 | FNMA | Federal National | |||
Corporation | 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 | |||
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 |
16
Summary of Combined Ratings (Unaudited) | ||||||||||
Fitch | or | Moody’s | or | Standard & Poor’s | Value (%)† | |||||
F1+,F1 | VMIG1,MIG1,P1 | SP1+,SP1,A1+,A1 | 86.1 | |||||||
AAA,AA,A d | Aaa,Aa,A d | AAA,AA,A d | 3.8 | |||||||
Not Rated e | Not Rated e | Not Rated e | 10.1 | |||||||
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. |
The Fund |
17 |
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2008
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments | 369,561,019 | 369,561,019 | ||
Cash | 871,225 | |||
Interest receivable | 1,275,740 | |||
371,707,984 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 2 | 122,438 | |||
Payable for investment securities purchased | 7,060,179 | |||
Dividend payable | 398,613 | |||
Payable for shares of Beneficial Interest redeemed | 5,929 | |||
7,587,159 | ||||
Net Assets ($) | 364,120,825 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 364,096,336 | |||
Accumulated net realized gain (loss) on investments | 24,489 | |||
Net Assets ($) | 364,120,825 | |||
Shares Outstanding | ||||
(unlimited number of shares of Beneficial Interest authorized) | 364,096,346 | |||
Net Asset Value, offering and redemption price per share ($) | 1.00 | |||
See notes to financial statements. |
18
STATEMENT OF OPERATIONS Year Ended June 30, 2008 |
Investment Income ($): | ||
Interest Income | 10,653,306 | |
Expenses: | ||
Management fee—Note 2 | 1,564,504 | |
Trustees’ fees—Note 2 | 27,737 | |
Total Expenses | 1,592,241 | |
Less—Trustees’ fees reimbursed by the Manager—Note 2 | (27,737) | |
Net Expenses | 1,564,504 | |
Investment Income—Net | 9,088,802 | |
Net Realized Gain (Loss) on Investments—Note 1(b) ($) | 24,489 | |
Net Increase in Net Assets Resulting from Operations | 9,113,291 | |
See notes to financial statements. |
The Fund |
19 |
STATEMENT OF CHANGES IN NET ASSETS
Year Ended June 30, | ||||
2008 | 2007 | |||
Operations ($): | ||||
Investment income—net | 9,088,802 | 9,910,503 | ||
Net realized gain (loss) on investments | 24,489 | 4,501 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 9,113,291 | 9,915,004 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net | (9,093,303) | (9,910,503) | ||
Beneficial Interest Transactions ($1.00 per share): | ||||
Net proceeds from shares sold | 382,586,890 | 294,839,753 | ||
Dividends reinvested | 7,621,024 | 8,588,102 | ||
Cost of shares redeemed | (348,000,006) | (268,532,909) | ||
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | 42,207,908 | 34,894,946 | ||
Total Increase (Decrease) in Net Assets | 42,227,896 | 34,899,447 | ||
Net Assets ($): | ||||
Beginning of Period | 321,892,929 | 286,993,482 | ||
End of Period | 364,120,825 | 321,892,929 | ||
See notes to financial statements. |
20
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.
Year Ended June 30, | ||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | |||||
Investment Operations: | ||||||||||
Investment income—net | .026 | .032 | .025 | .013 | .005 | |||||
Distributions: | ||||||||||
Dividends from investment income—net | (.026) | (.032) | (.025) | (.013) | (.005) | |||||
Net asset value, end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | |||||
Total Return (%) | 2.67 | 3.25 | 2.52 | 1.34 | .52 | |||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | ||||||||||
to average net assets | .46 | .45 | .45 | .45 | .45 | |||||
Ratio of net expenses | ||||||||||
to average net assets | .45 | .45 | .45 | .45 | .45 | |||||
Ratio of net investment income | ||||||||||
to average net assets | 2.61 | 3.21 | 2.49 | 1.33 | .52 | |||||
Net Assets, end of period ($ x 1,000) | 364,121 | 321,893 | 286,993 | 308,322 | 302,652 | |||||
See notes to financial statements. |
The Fund |
21 |
NOTES TO FINANCIAL STATEMENTS
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, NewYork state and NewYork city income taxes to the extent consistent with the preservation of capital and the maintenance of liquidity. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Manager, is the distributor of the fund’s shares, 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 Financial Accounting Standards Board (“FASB”) released Statement of Financial Accounting Standards No. 157 “Fair Value Measurements” (“FAS 157”). FAS 157 establishes an authoritative def-
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inition 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.
In March 2008, the FASB released Statement of Financial Accounting Standards No. 161 “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agreements.The application of FAS 161 is required for fiscal years beginning after November 15, 2008 and interim periods within those fiscal years.At this time, management is evaluating the implications of FAS 161 and its impact on the financial statements and the accompanying notes has not yet been determined.
(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., a subsidiary of BNY Mellon and a Dreyfus affiliate.
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NOTES TO FINANCIAL STATEMENTS (continued) |
(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, 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 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 IncomeTaxes” (“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 expense in the current year. The adoption of FIN 48 had no impact on the operations of the fund for the period ended June 30, 2008.
As of and during the period ended June 30, 2008, the fund did not have any liabilities for any unrecognized tax benefits.The fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period, the fund did not incur any interest or penalties.
Each of the tax years in the four-year period ended June 30, 2008, remains subject to examination by the Internal Revenue Service and state taxing authorities.
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At June 30, 2008, the components of accumulated earnings on a tax basis were substantially the same as for financial reporting purposes.
The tax character of distributions paid to shareholders during the fiscal periods ended June 30, 2008 and June 30, 2007, were all tax exempt income.
During the period ended June 30, 2008, as a result of permanent book to tax differences, primarily due to dividend reclassification, the fund increased accumulated undistributed investment income-net by $4,501 and decreased accumulated net realized gain (loss) on investments by the same amount. Net assets and net asset value per share were not affected by this reclassification.
At June 30, 2008, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
NOTE 2—Investment Management Fee and Other Transactions with Affiliates:
Pursuant to an Investment Management Agreement with the Manager, the Manager provides or arranges for one or more third parties and/or affiliates to provide investment advisory, administrative, custody, fund accounting and transfer agency services to the fund.The Manager also directs the investments of the fund in accordance with its investment objective, policies and limitations. For these services, the fund is contractually obligated to pay the Manager a fee, calculated daily and paid monthly, at the annual rate of .45% of the value of the fund’s average daily net assets. Out of its fee, the Manager pays all of the expenses of the fund except brokerage fees, taxes, interest, fees and expenses of non-interested Trustees (including counsel fees) and extraordinary expenses. In addition, the Manager is required to reduce its fee in an amount equal to the fund’s allocable portion of fees and expenses of the non-interested Trustees (including counsel fees). Each Trustee receives $45,000 per year, plus $6,000 for each joint Board meeting of The Dreyfus/Laurel Funds, Inc., the Trust and The
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NOTES TO FINANCIAL STATEMENTS (continued) |
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 prior to April 12, 2008, the Chair of the audit committee received $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.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $122,438.
NOTE 3—Bank Line of Credit:
Effective May 1, 2008, the fund participates with other Dreyfus-managed funds in a $300 million unsecured line of credit primarily to be utilized for temporary or emergency purposes. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowing. Prior to May 1, 2008, the fund participated with other Dreyfus-managed funds in a $100 million unsecured line of credit. During the period ended June 30, 2008, the fund did not borrow under the line of credit.
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NOTE 4—Subsequent Event:
Effective July 1, 2008, BNY Mellon has reorganized and consolidated a number of its banking and trust company subsidiaries. As a result of the reorganization, any services previously provided to the fund by Mellon Bank, N.A. or Mellon Trust of New England, N.A. are now provided by The Bank of New York, which has changed its name to The Bank of New York Mellon.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Trustees and Shareholders of The Dreyfus/Laurel Tax-Free Municipal Funds
We have audited the accompanying statement of assets and liabilities of Dreyfus BASIC NewYork Municipal Money Market Fund (the “Fund”) of The Dreyfus/Laurel Tax-Free Municipal Funds, including the statement of investments, as of June 30, 2008, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement.An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2008, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received.An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus BASIC New York Municipal Money Market Fund of The Dreyfus/Laurel Tax-Free Municipal Funds as of June 30, 2008, and the results of its operations for the year then ended, changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the five-year period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York August 20, 2008 |
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IMPORTANT TAX INFORMATION ( U n a u d i t e d )
In accordance with federal tax law, the fund hereby designates all the dividends paid from investment income-net during the fiscal year ended June 30, 2008 as “exempt-interest dividends” (not subject to regular federal and, for individuals who are NewYork residents, NewYork State and New York City personal income taxes). As required by federal tax law rules, shareholders will receive notification of their portion of the fund’s exempt-interest dividends paid for the 2008 calendar year on Form 1099-INT, which will be mailed by January 31, 2009.
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INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND’S INVESTMENT MANAGEMENT AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 12 and 13, 2008, the Board considered the re-approval of the fund’s Investment Management Agreement (“Management Agreement”), pursuant to which the Manager provides the fund with investment advisory and administrative services.The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.
Analysis of Nature, Extent and Quality of Services Provided to the Fund.The Board members considered information previously provided to them in a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and representatives of the Manager confirmed that there had been no material changes in this information.The Board also discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement. The Manager’s representatives reviewed the fund’s distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each.The Manager’s representatives noted the distribution channels for the fund as well as the diversity of distribution among the funds in the Dreyfus fund complex, and the Manager’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each distribution channel, including those of the fund.The Manager provided the number of shareholder accounts in the fund, as well as the fund’s asset size.
The Board members also considered the Manager’s research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager’s extensive administrative, accounting and compliance infrastructure.
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Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board members reviewed the fund’s performance and comparisons to a group of retail, no-load New York tax-exempt money market funds (the “Performance Group”) and to a larger universe of funds, consisting of all retail and institutional New York tax-exempt money market funds (the “Performance Universe”) selected and provided by Lipper, Inc., an independent provider of investment company data. The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below). The Board members discussed the results of the comparisons for various periods ended December 31, 2007, and noted that the fund’s total return performance was above the Performance Group and Performance Universe medians for each of the periods.
The Board members also discussed the fund’s management fee and expense ratio and reviewed the range of management fees and expense ratios of a comparable group of funds (the “Expense Group”) and a broader group of funds (the “Expense Universe”), each selected and provided by Lipper. Noting the fund’s “unitary fee” structure, the Board noted that the fund’s management fee was above the Expense Group and Expense Universe medians and the expense ratio was below the Expense Group and Expense Universe medians.
Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by mutual funds managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included in the same Lipper category as the fund (the “Similar Funds”). They also noted that there were no other accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund. The Manager’s representatives also reviewed the costs associated with distribution through intermedi-
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INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
FUND’S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)
aries. The Board analyzed differences in fees paid to the Manager and discussed the relationship of the fees paid in light of the Manager’s performance and the services provided, noting the fund’s “unitary fee” structure.The Board members considered the relevance of the fee information provided for the Similar Funds to evaluate the appropriateness and reasonableness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. The Manager’s representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit. The Board previously had been provided with information prepared by an independent consulting firm regarding the Manager’s approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex.The Board also was informed that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable. The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund.The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. The Board members also considered potential benefits to the Manager from acting as investment adviser and noted that there were no soft dollar arrangements with respect to trading the fund’s portfolio.
It was noted that the Board members should consider the Manager’s profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including
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the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund’s assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It also was noted that the profitability percentage for managing the fund was within the range determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund’s Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.
- The Board concluded that the nature, extent and quality of the ser- vices provided by the Manager are adequate and appropriate.
- The Board was satisfied with the fund’s performance.
- The Board concluded that the fee paid by the fund to the Manager was reasonable in light of the services provided, comparative perfor- mance, expense and advisory fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.
- The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the man- agement of the fund had been adequately considered by the Manager in connection with the management fee rate charged to the fund and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
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INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
FUND’S INVESTMENT MANAGEMENT AGREEMENT (Unaudited) (continued)
The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund’s Management Agreement was in the best interests of the fund and its shareholders and that the Management Agreement would be renewed through April 4, 2009.
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BOARD MEMBERS INFORMATION ( U n a u d i t e d )
Joseph S. DiMartino (64) Chairman of the Board (1999) Principal Occupation During Past 5Years: • Corporate Director and Trustee Other Board Memberships and Affiliations: |
- The Muscular Dystrophy Association, Director
- Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director
- The Newark Group, a provider of a national market of paper recovery facilities, paperboard mills and paperboard converting plants, Director
- Sunair Services Corporation, a provider of certain outdoor-related services to homes and businesses, Director
No. of Portfolios for which Board Member Serves: 160
——————— |
James M. Fitzgibbons (73) Board Member (1983) |
Principal Occupation During Past 5Years:
• Corporate Director, Davidson Cotton Company (1998-2002)
Other Board Memberships and Affiliations:
• Bill Barrett Company, an oil and gas exploration company, Director
No. of Portfolios for which Board Member Serves: 25
——————— |
Kenneth A. Himmel (62) Board Member (1998) Principal Occupation During Past 5Years: |
- President and CEO, Related Urban Development, a real estate development company (1996-present)
- President and CEO, Himmel & Company, a real estate development company (1980-present)
- CEO, American Food Management, a restaurant company (1983-present)
No. of Portfolios for which Board Member Serves: 25 |
——————— |
Stephen J. Lockwood (61) Board Member (1993) Principal Occupation During Past 5Years: |
- Chairman of the Board, Stephen J. Lockwood and Company LLC, an investment company (2000-present)
No. of Portfolios for which Board Member Serves: 25 |
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BOARD MEMBERS INFORMATION ( U n a u d i t e d ) (continued)
Roslyn M. Watson (58) Board Member (1992) |
Principal Occupation During Past 5Years:
• Principal,Watson Ventures, Inc., a real estate investment company (1993-present)
Other Board Memberships and Affiliations:
- American Express Bank, Director
- The Hyams Foundation Inc., a Massachusetts Charitable Foundation,Trustee
- National Osteoporosis Foundation,Trustee
- SBLI-USA, Director
No. of Portfolios for which Board Member Serves: 25 |
——————— |
Benaree Pratt Wiley (62) Board Member (1998) Principal Occupation During Past 5Years: |
- Principal,The Wiley Group, a firm specializing in strategy and business development (2005-present)
- President and CEO,The Partnership, an organization dedicated to increasing the representation of African Americans in positions of leadership, influence and decision-making in Boston, MA
(1991-2005)
Other Board Memberships and Affiliations: |
- Boston College,Trustee Associate
- Blue Cross Blue Shield of Massachusetts, Director
- CBIZ, professional support consultants and service providers for small, midsized and corporate businesses, Director
- Commonwealth Institute, Director
- Efficacy Institute, Director
- PepsiCo African-American, Chair of Advisory Board
- The Boston Foundation, Director
- Century Business Services, Inc., a provider of outsourcing functions for small and medium size companies, Director
No. of Portfolios for which Board Member Serves: 35 |
——————— |
Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80.The address of the Board Members and Officers is in c/o The Dreyfus Corporation, 200 Park Avenue, NewYork, NewYork 10166. Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from Dreyfus free of charge by calling this toll free number: 1-800-554-4611.
Francis P. Brennan, Emeritus Board Member J.Tomlinson Fort, Emeritus Board Member |
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OFFICERS OF THE FUND ( U n a u d i t e d )
J. DAVID OFFICER, President since December 2006.
Chief Operating Officer,Vice Chairman and a Director of the Manager, and an officer of 76 investment companies (comprised of 160 portfolios) managed by the Manager. He is 59 years old and has been an employee of the Manager since April 1998.
PHILLIP N. MAISANO, Executive Vice President since July 2007.
Chief Investment Officer,Vice Chair and a director of the Manager, and an officer of 76 investment companies (comprised of 160 portfolios) managed by the Manager. Mr. Maisano also is an officer and/or Board member of certain other investment management subsidiaries of The Bank of New York Mellon Corporation, each of which is an affiliate of the Manager. He is 61 years old and has been an employee of the Manager since November 2006. Prior to joining the Manager, Mr. Maisano served as Chairman and Chief Executive Officer of EACM Advisors, an affiliate of the Manager, since August 2004, and served as Chief Executive Officer of Evaluation Associates, a leading institutional investment consulting firm, from 1988 until 2004.
MICHAEL A. ROSENBERG, Vice President and Secretary since August 2005.
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 48 years old and has been an employee of the Manager since October 1991.
JAMES BITETTO, Vice President and Assistant Secretary since August 2005.
Associate General Counsel and Secretary of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 41 years old and has been an employee of the Manager since December 1996.
JONI LACKS CHARATAN, Vice President and Assistant Secretary since August 2005.
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. She is 52 years old and has been an employee of the Manager since October 1988.
JOSEPH M. CHIOFFI, Vice President and Assistant Secretary since August 2005.
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 46 years old and has been an employee of the Manager since June 2000.
JANETTE E. FARRAGHER, Vice President and Assistant Secretary since August 2005.
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. She is 45 years old and has been an employee of the Manager since February 1984.
JOHN B. HAMMALIAN, Vice President and Assistant Secretary since August 2005.
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since February 1991.
ROBERT R. MULLERY, Vice President and Assistant Secretary since August 2005.
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 56 years old and has been an employee of the Manager since May 1986.
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OFFICERS OF THE FUND ( U n a u d i t e d ) (continued)
JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.
Associate General Counsel of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 43 years old and has been an employee of the Manager since October 1990.
JAMES WINDELS, Treasurer since November 2001.
Director-Mutual Fund Accounting of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since April 1985.
RICHARD CASSARO, Assistant Treasurer since September 2007.
Senior Accounting Manager — Money Market and Municipal Bond Funds of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since September 1982.
GAVIN C. REILLY, Assistant Treasurer since December 2005.
Tax Manager of the Investment Accounting and Support Department of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 39 years old and has been an employee of the Manager since April 1991.
ROBERT ROBOL, Assistant Treasurer since December 2002.
Senior Accounting Manager - Fixed Income Funds of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 44 years old and has been an employee of the Manager since October 1988.
ROBERT SALVIOLO, Assistant Treasurer since July 2007.
Senior Accounting Manager - Equity Funds of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 41 years old and has been an employee of the Manager since June 1989.
ROBERT SVAGNA, Assistant Treasurer since August 2005.
Senior Accounting Manager - Equity Funds of the Manager, and an officer of 77 investment companies (comprised of 177 portfolios) managed by the Manager. He is 41 years old and has been an employee of the Manager since November 1990.
JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.
Chief Compliance Officer of the Manager and The Dreyfus Family of Funds (77 investment companies, comprised of 177 portfolios). From November 2001 through March 2004, Mr. Connolly was first Vice-President, Mutual Fund Servicing for Mellon Global Securities Services. In that capacity, Mr. Connolly was responsible for managing Mellon’s Custody, Fund Accounting and Fund Administration services to third-party mutual fund clients. He is 51 years old and has served in various capacities with the Manager since 1980, including manager of the firm’s Fund Accounting Department from 1997 through October 2001.
WILLIAM GERMENIS, Anti-Money Laundering Compliance Officer since July 2002.
Vice President and Anti-Money Laundering Compliance Officer of the Distributor, and the Anti-Money Laundering Compliance Officer of 73 investment companies (comprised of 173 portfolios) managed by the Manager. He is 37 years old and has been an employee of the Distributor since October 1998.
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NOTES
![](https://capedge.com/proxy/N-CSR/0000717341-08-000008/bnymmmncsrx44x1.jpg)
The fund will disclose daily, on www.dreyfus.com, the fund’s complete schedule of holdings as of the end of the previous business day. The schedule of holdings will remain on the website until the fund files its Form N-Q or Form N-CSR for the period that includes the date of the posted holdings.
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund's Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Information regarding how the fund voted proxies relating to portfolio securities for the 12-month period ended June 30, 2008, 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/0000717341-08-000008/bnymmmncsrx44x2.jpg)
Ticker Symbol: DNIXX |
Telephone 1-800-645-6561 |
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 |
E-mail Send your request to info@dreyfus.com |
Internet Information can be viewed online or downloaded at: http://www.dreyfus.com |
Item 2. Code of Ethics.
The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions There have been no amendments to, or waivers in connection with, the Code of Ethics during the period covered by this Report.
Item 3. Audit Committee Financial Expert.
The Registrant's Board has determined that Joseph S. DiMartino, a member of the Audit Committee of Board, is an audit committee financial expert as defined by the Securities and Exchange Commission (the "SEC"). Joseph S. DiMartino is "independent" as defined by the SEC for purposes of audit committee financial expert determinations.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees. The aggregate fees billed for each of the last two fiscal years (the "Reporting Periods") for professional services rendered by the Registrant's principal accountant (the "Auditor") for the audit of the Registrant's annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $74,550 in 2007 and $76,800 in 2008.
(b) Audit-Related Fees. The aggregate fees billed in the Reporting Periods for assurance and related services by the Auditor that are reasonably related to the performance of the audit of the Registrant's financial statements and are not reported under paragraph (a) of this Item 4 were $6,150 in 2007 and $6,450 in 2008.
The aggregate fees billed in the Reporting Periods for non-audit assurance and related services by the Auditor to the Registrant's investment adviser (not including any sub-investment adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant ("Service Affiliates"), that were reasonably related to the performance of the annual audit of the Service Affiliate, which required pre-approval by the Audit Committee were $0 in 2007 and $0 in 2008.
Note: For the second paragraph in each of (b) through (d) of this Item 4, certain of such services were not pre-approved prior to May 6, 2003, when such services were required to be pre-approved. On and after May 6, 2003, 100% of all services provided by the Auditor were pre-approved as required. For comparative purposes, the fees shown assume that all such services were pre-approved, including services that were not pre-approved prior to the compliance date of the pre-approval requirement.
(c) Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning ("Tax Services") were $6,270 in 2007 and $6,450 in 2008. These services consisted of review or preparation of U.S. federal, state, local and excise tax returns.
The aggregate fees billed in the Reporting Periods for Tax Services by the Auditor to Service Affiliates which required pre-approval by the Audit Committee were $0 in 2007 and $0 in 2008.
(d) All Other Fees. The aggregate fees billed in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) of this Item, were $0 in 2007 and $0 in 2008.
The aggregate fees billed in the Reporting Periods for Non-Audit Services by the Auditor to Service Affiliates, other than the services reported in paragraphs (b) through (c) of this Item, which required pre-approval by the Audit Committee were $0 in 2007 and $0 in 2008.
Audit Committee Pre-Approval Policies and Procedures. The Registrant's Audit Committee has established policies and procedures (the "Policy") for pre-approval (within specified fee limits) of the Auditor's engagements for non-audit services to the Registrant and Service Affiliates without specific case-by-case consideration. Pre-approval considerations include whether the proposed services are compatible with maintaining the Auditor's independence. Pre-approvals pursuant to the Policy are considered annually.
Non-Audit Fees. The aggregate non-audit fees billed by the Auditor for services rendered to the Registrant, and rendered to Service Affiliates, for the Reporting Periods were $3,669,000 in 2007 and $3,951,740 in 2008.
Auditor Independence. The Registrant's Audit Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates which were not pre-approved (not requiring pre-approval) is compatible with maintaining the Auditor's independence.
Item 5. | Audit Committee of Listed Registrants. | |
Not applicable. | ||
Item 6. | Investments. | |
(a) | Not applicable. | |
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management | |
Investment Companies. | ||
Not applicable. | ||
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. | |
Not applicable. | ||
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Companies and | |
Affiliated Purchasers. | ||
Not applicable. |
Item 10. Submission of Matters to a Vote of Security Holders.
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) Code of ethics referred to in Item 2.
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.
(a)(3) Not applicable.
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
The Dreyfus/Laurel Tax-Free Municipal Funds | ||
By: | /s/ J. David Officer | |
J. David Officer | ||
President | ||
Date: | August 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: | August 25, 2008 | |
By: | /s/ James Windels | |
James Windels | ||
Treasurer | ||
Date: | August 25, 2008 |
EXHIBIT INDEX
(a)(1) Code of ethics referred to in Item 2.
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940. (EX-99.CERT)
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940. (EX-99.906CERT)