UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-3700
THE DREYFUS/LAUREL TAX-FREE MUNICIPAL FUNDS
(Exact name of Registrant as specified in charter)
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
(Address of principal executive offices) (Zip code)
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 922-6000
Date of fiscal year end: 6/30
Date of reporting period: 6/30/03
FORM N-CSR
ITEM 1. REPORTS TO STOCKHOLDERS.
DREYFUS BASIC
CALIFORNIA MUNICIPAL
MONEY MARKET FUND
ANNUAL REPORT June 30, 2003
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
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2 Letter from the Chairman
3 Discussion of Fund Performance
6 Statement of Investments
10 Statement of Assets and Liabilities
11 Statement of Operations
12 Statement of Changes in Net Assets
13 Financial Highlights
14 Notes to Financial Statements
18 Independent Auditors' Report
19 Important Tax Information
20 Board Members Information
22 Officers of the Fund
FOR MORE INFORMATION
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Back Cover
The Fund
Dreyfus BASIC
California Municipal
Money Market Fund
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This annual report for Dreyfus BASIC California Municipal Money Market Fund
covers the 12-month period from July 1, 2002, through June 30, 2003. Inside,
you' ll find valuable information about how the fund was managed during the
reporting period, including a discussion with the fund's portfolio manager, John
Flahive.
The past year has been a challenging time for tax-exempt money market funds. In
its ongoing attempts to stimulate renewed economic growth, the Federal Reserve
Board reduced a key short-term interest rate twice during the reporting period,
and yields of money market funds fell to historical lows. As a result,
maintaining a steady stream of current, tax-exempt income from investments in
money market securities has become a challenge for many investors.
Nonetheless, we believe that it is important for investors to remember that
money market funds have continued to achieve their objective of preserving
shareholders' capital, although the preservation of capital is not guaranteed.
For emergency reserves and money earmarked for near-term needs, we believe money
market funds can play an important role in creating a diversified portfolio.
However, if you seek to maximize current income from your long-term savings,
your financial advisor may be able to recommend higher-yielding alternatives
that are right for you in today's low interest-rate environment.
Thank you for your continued confidence and support.
Sincerely,
/s/ Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
July 15, 2003
DISCUSSION OF FUND PERFORMANCE
John Flahive, Portfolio Manager
How did Dreyfus BASIC California Municipal Money Market Fund perform during the
period?
For the 12-month period ended June 30, 2003, the fund's shares provided a yield
of 0.83% and, after taking into account the effects of compounding, an effective
yield of 0.83%.(1)
We attribute the fund' s performance to low interest rates, which resulted in
lower yields on tax-exempt money market securities during the reporting period.
What is the fund's investment approach?
The fund seeks to provide a high level of current income exempt from federal and
California state income taxes to the extent consistent with the preservation of
capital and the maintenance of liquidity. To pursue this objective, we attempt
to add value by selecting the individual tax-exempt money market instruments
from California 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 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 without sacrificing
quality.
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
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
yields, we may increase the fund's average weighted maturity to maintain current
yields for as long as practical. At other times, we try to maintain a neutral
average weighted maturity.
What other factors influenced the fund's performance?
The weak U.S. economy represented the most significant influence on the fund's
performance, particularly during the first half of the reporting period. In its
ongoing attempts to stimulate renewed economic growth, the Federal Reserve Board
reduced short-term interest rates twice during the reporting period, including a
reduction of 25 basis points in late June, which drove the federal funds rate to
a 45-year low of just 1%.
In addition, investor demand for relatively stable, short-term securities
remained robust. Mounting concerns regarding a possible war with Iraq,
questionable accounting practices at several large, well-known corporations and
a volatile stock market created a "flight to quality" among investors, putting
additional downward pressure on money market yields.
The fund also was affected by the deteriorating fiscal condition of many issuers
during the reporting period. While many other states also grappled with budget
woes, California's difficulties were more severe than most. Some of the state's
fiscal problems stem from its 2001 energy crisis. However, another major factor
has been the decline of the technology industry. In their heyday, a number of
technology companies located in California' s Silicon Valley drove the stock
market' s gains in the late 1990s, pumping record amounts of capital gains tax
revenues into state coffers. Now that the stocks of many of these companies have
plummeted, capital gains tax revenues have fallen sharply, leaving the state
with a record budget gap.
In an attempt to partially offset its revenue shortfalls, California has set new
records for the highest volume of overall note issuance, including the issuance
of $11 billion of revenue-anticipation warrants, also known as RAWs, toward the
end of the reporting period. This record supply was easily absorbed by robust
demand from investors who traditionally have invested in taxable money market
funds. Because nominal yields of taxable and tax-exempt money market funds were
similar during the reporting period, many investors in California, a high-tax
state, have preferred the after-tax returns provided by the tax-exempt
marketplace.
What is the fund's current strategy?
While we made few major changes to the fund's asset allocation during the
reporting period, we have modestly trimmed the fund's exposure to longer-dated
one-year notes, which we do not believe are as beneficial to shareholders while
interest rates remain so low. Instead, we have invested those assets primarily
in commercial paper holdings, where we have focused on securities in the three-
to six-month range. As of June 30, 2003, variable-rate demand notes, on which
yields are reset daily or weekly, constituted approximately 75% of the fund's
total assets, commercial paper comprised approximately 4% and municipal notes
accounted for approximately 21%. These percentages generally are in line with
other municipal money market funds. In addition, the fund's weighted average
maturity was 36 days as of the reporting period's end, which we consider to be
modestly shorter than that of other municipal money market funds. As always, we
are prepared to modify the fund's asset allocation strategy as market conditions
change.
July 15, 2003
(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. AN INVESTMENT IN THE
FUND IS NOT INSURED OR GUARANTEED BY THE FDIC OR THE U.S. GOVERNMENT.
ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00
PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
The Fund
STATEMENT OF INVESTMENTS
June 30, 2003
Principal
TAX EXEMPT INVESTMENTS--101.7% Amount ($) Value ($)
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Alameda Union School District, GO Notes
TRAN 3%, 7/1/2003 2,000,000 2,000,000
Berkeley, GO Notes, TRAN
2%, 12/3/2003 2,500,000 2,507,856
California Educational Facilities Authority, College and
University Revenue (University of Southern California)
1.05%, 3/19/2004 1,000,000 1,000,000
California Infrastructure and Economic Development Bank
Revenues:
CP (Salvation Army West) 1.08%, 1/28/2004
(LOC; Bank of America) 1,700,000 1,700,000
(J Paul Getty Trust) 1%, 5/13/2004 1,300,000 1,300,000
California Pollution Control Financing Authority, PCR
Refunding, VRDN (Pacific Gas and Electric Corp.):
.97% (LOC; Bank of America) 1,600,000 (a) 1,600,000
1.03% (LOC; J.P. Morgan Chase & Co.) 1,400,000 (a) 1,400,000
California Statewide Communities Development Authority
VRDN:
MFHR (Oakmont Senior Living)
.95% (LOC; East West Bank and FHLB) 5,340,000 (a) 5,340,000
Private Schools Revenue (St. Mary and
All Angels School) 1.05% (LOC; Allied Irish Bank) 1,300,000 (a) 1,300,000
Charter Mac Low Floater Certificates Trust, VRDN
1.06% (Insured; MBIA and LOC: Bayerische Landesbank,
Dexia Credit Locale and Toronto Dominion Bank) 4,000,000 (a) 4,000,000
Concord, MFMR (Arcadian) .90% (LOC; FNMA) 1,350,000 (a) 1,350,000
Cupertino Union School District, GO Notes
TRAN 2.75%, 7/1/2003 2,000,000 2,000,000
Davis Joint Union School District
Yolo and Solano Counties
GO Notes, TRAN 2.50%, 12/10/2003 800,000 804,312
Fresno Union School District, GO Notes, TRAN
2.50%, 8/27/2003 2,100,000 2,103,818
Golden Empire Schools Financing Authority, LR, VRDN
(Kern High School District Projects)
1% (LOC: California State Teachers Retirement
System and The Bank of New York) 2,500,000 (a) 2,500,000
Irvine Improvement Bond Act of 1915
Assessment District-85-7-I, VRDN
1.05% (Insured; FSA and Liquidity Facility;
Dexia Credit Locale) 1,600,000 (a) 1,600,000
Principal
TAX EXEMPT INVESTMENTS (CONTINUED) Amount ($) Value ($)
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Las Virgenes Union School District, COP
.875%, 7/1/2004 (Insured; FSA and Liquidity Facility;
Dexia Credit Locale) 1,600,000 1,600,000
Los Angeles Community Redevelopment Agency, MFHR
VRDN (Rental Academy Village Apartments)
.90% (Liquidity Facility; FNMA) 3,000,000 (a) 3,000,000
Los Angeles County Community Development Commission
COP, VRDN (Willowbrook Project)
.97% (LOC; Wells Fargo Bank) 200,000 (a) 200,000
Los Angeles County Housing Authority, MFHR, Refunding
VRDN (Lincoln Malibu Meadows Project)
.87% (Insured; FNMA) 3,800,000 (a) 3,800,000
Metropolitan Water District of Southern California
Water Works Revenue, VRDN:
.85% (Liquidity Facility;
Landesbank Hessen-Thuringen) 1,400,000 (a) 1,400,000
1.20% (Liquidity Facility;
Bayerische Hypo-und Vereinsbank) 2,500,000 (a) 2,500,000
Moreno Valley Union School District, GO Notes
TRAN 3%, 7/24/2003 2,250,000 2,252,179
M-S-R Public Power Agency, Industrial Revenue, VRDN
(San Juan Project) .95% (Insured; MBIA and
Liquidity Facility; Bank One Chicago) 900,000 (a) 900,000
Oakland, COP, VRDN (Capital Equipment Project)
1% (LOC; Landesbank Hessen-Thuringen) 3,400,000 (a) 3,400,000
Orange County, Apartment Development Revenue
Refunding, VRDN (Aliso Creek Project)
.85% (LOC; FHLMC) 2,500,000 (a) 2,500,000
Rancho Mirage Joint Powers Financing Authority, Revenue
VRDN (Eisenhower Medical Center)
.95% (LOC; Allied Irish Bank) 1,900,000 (a) 1,900,000
Riverside County Housing Authority, MFMR, Refunding
VRDN (Mountain View Apartments) .98% (LOC: FHLB
and Redlands Federal Savings and Loans) 1,900,000 (a) 1,900,000
San Francisco City and County Finance Corporation
LR, VRDN (Moscone Center Expansion Project)
.85% (Insured; AMBAC and Liquidity Facility: J.P. Morgan
Chase & Co. and State Street Bank and Trust Co.) 4,300,000 (a) 4,300,000
San Francisco City and County Redevelopment Agency
MFHR, Refunding, VRDN
(Fillmore) .95% (LOC; Credit Suisse First Boston) 4,000,000 (a) 4,000,000
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
TAX EXEMPT INVESTMENTS (CONTINUED) Amount ($) Value ($)
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San Gabriel Valley Council of Government, CP
(Alameda Corridor-East Construction Project)
1.05%, 7/14/2003 (LOC; Toronto Dominion Bank) 1,700,000 1,700,000
San Jose Union School District
Santa Clara County, GO Notes
4%, 8/1/2003 (Insured; FSA) 1,400,000 1,403,058
Stockton, MFHR, VRDN (Mariners Pointe Association)
.98% (LOC; Credit Suisse First Boston) 2,500,000 (a) 2,500,000
Sweetwater Union High School District, COP, VRDN
.90% (Insured; FSA and Liquidity Facility;
Wachovia Bank) 3,720,000 (a) 3,720,000
Union City, MFHR, VRDN, Refunding
(Mission Sierra) .89% (Insured; FNMA) 1,200,000 (a) 1,200,000
TOTAL INVESTMENTS (cost $76,681,223) 101.7% 76,681,223
LIABILITIES, LESS CASH AND RECEIVABLES (1.7%) (1,288,358)
NET ASSETS 100.0% 75,392,865
Summary of Abbreviations
AMBAC American Municipal Bond Assurance
Corporation
COP Certificate of Participation
CP Commercial Paper
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage
Corporation
FNMA Federal National Mortgage
Association
FSA Financial Security Assurance
GO General Obligation
LOC Letter of Credit
LR Lease Revenue
MBIA Municipal Bond Investors Assurance
Insurance Corporation
MFHR Multi-Family Housing Revenue
MFMR Multi-Family Mortgage Revenue
PCR Pollution Control Revenue
TRAN Tax and Revenue Anticipation Notes
VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
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F1+, F1 VMIG1, MIG1, P1 SP1+, SP1, A1+, A1 98.2
AAA, AA, A (b) Aaa, Aa, A (b) AAA, AA, A (b) 1.8
100.0
(A) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC CHANGE.
(B) NOTES WHICH ARE NOT F, MIG AND SP RATED ARE REPRESENTED BY BOND RATINGS OF THE ISSUERS.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003
Cost Value
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ASSETS ($):
Investments in securities--See Statement of Investments 76,681,223 76,681,223
Cash 37,960
Interest receivable 349,033
77,068,216
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates--Note 2 30,936
Payable for investment securities purchased 1,600,000
Dividend payable 44,221
Interest payable--Note 3 194
1,675,351
NET ASSETS ($) 75,392,865
COMPOSITION OF NET ASSETS ($):
Paid-in capital 75,393,836
Accumulated net realized gain (loss) on investments (971)
NET ASSETS ($) 75,392,865
SHARES OUTSTANDING
(unlimited number of shares of Beneficial Interest authorized) 75,393,836
NET ASSET VALUE, offering and redemption price per share ($) 1.00
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Year Ended June 30, 2003
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INVESTMENT INCOME ($):
INTEREST INCOME 1,069,974
EXPENSES:
Management fee--Note 2 374,288
Interest expense--Note 3 3,620
TOTAL EXPENSES 377,908
INVESTMENT INCOME--NET 692,066
NET REALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 1(B) ($) (668)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 691,398
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Year Ended June 30,
-----------------------------------
2003 2002
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OPERATIONS ($):
Investment income--net 692,066 1,169,205
Net realized gain (loss) on investments (668) --
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 691,398 1,169,205
DIVIDENDS TO SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (692,066) (1,169,205)
BENEFICIAL INTEREST TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold 181,314,843 211,305,873
Dividends reinvested 413,281 709,046
Cost of shares redeemed (187,828,822) (219,020,550)
INCREASE (DECREASE) IN NET ASSETS
FROM BENEFICIAL INTEREST TRANSACTIONS (6,100,698) (7,005,631)
TOTAL INCREASE (DECREASE) IN NET ASSETS (6,101,366) (7,005,631)
NET ASSETS ($):
Beginning of Period 81,494,231 88,499,862
END OF PERIOD 75,392,865 81,494,231
SEE NOTES TO FINANCIAL STATEMENTS.
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,
-------------------------------------------------------------------
2003 2002 2001 2000 1999
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PER SHARE DATA ($):
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment Operations:
Investment income--net .008 .013 .030 .028 .026
Distributions:
Dividends from investment income--net (.008) (.013) (.030) (.028) (.026)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
TOTAL RETURN (%) .84 1.36 3.03 2.85 2.62
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses
to average net assets .45 .45 .45 .45 .45
Ratio of interest expense
to average net assets .00(a) .01 .02 .01 .01
Ratio of net investment income
to average net assets .83 1.36 2.97 2.80 2.58
Net Assets, end of period ($ x 1,000) 75,393 81,494 88,500 119,486 109,392
(A) AMOUNT REPRESENTS LESS THAN .01%.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
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 state income taxes to the extent consistent with the
preservation of capital and the maintenance of liquidity. The Dreyfus
Corporation (the "Manager") serves as the fund's investment adviser. The Manager
is a wholly-owned subsidiary of Mellon Bank, N.A, which is a wholly-owned
subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the
" Distributor"), a wholly-owned subsidiary of the Manager, is the distributor of
the fund' s shares, which are sold to the public without a sales charge.
The fund' s financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, which may require
the use of management estimates. 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 fund's
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.
(b) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Interest income, adjusted for amortization of
discount and premium on investments, is earned from settlement date and
recognized on the accrual basis. Realized gain and
loss from securities transactions are recorded on the identified cost basis.
Cost of investments represents amortized cost.
(c) Concentration of risk: The fund follows an investment policy of investing
primarily in municipal obligations of one state. Economic changes affecting the
state and certain of its public bodies and municipalities may affect the ability
of issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the fund.
All cash balances were maintained with the Custodian, Mellon Bank, N.A.
(d) Dividends to shareholders: It is the policy of the fund to declare dividends
daily from investment income-net; such dividends are paid monthly. Dividends
from net realized capital gain, if any, are normally declared and paid annually,
but the fund may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code of 1986, as amended, (the
" Code" ). To the extent that net realized capital gain can be offset by capital
loss carryovers, it is the policy of the fund not to distribute such gain.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, which can distribute tax exempt dividends, by
complying with the applicable provisions of the Code, and to make distributions
of income and net realized capital gain sufficient to relieve it from
substantially all federal income and excise taxes.
At June 30, 2003, the components of accumulated earnings on a tax basis was
substantially the same as for financial reporting purposes.
The accumulated capital loss carryover of $971 is available to be applied
against future net securities profits, if any, realized subsequent to June 30,
2003. If not applied, $303 of the carryover expires in fiscal 2008 and $668
expires in fiscal 2011.
The tax character of distributions paid to shareholders during the fiscal
periods ended June 30, 2003 and June 30, 2002, respectively, were all tax exempt
income.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At June 30, 2003, 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:
Investment management fee: 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
$40,000 per year, plus $5,000 for each joint Board meeting of The Dreyfus/Laurel
Funds, Inc., the Trust and The Dreyfus/Laurel Funds Trust (the "Dreyfus/Laurel
Funds" ) attended, $2,000 for separate committee meetings attended which are not
held in conjunction with a regularly scheduled board meeting and $500 for Board
meetings and separate committee meetings attended that are conducted by
telephone and is reimbursed for travel and out-of-pocket expenses. The Chairman
of the Board receives an additional 25% of such compensation (with the exception
of reimbursable amounts). In the event that there is a joint committee meeting
of the Dreyfus/Laurel Funds and the Dreyfus High Yield Strategies Fund, the
$2,000 fee will be allocated between the Dreyfus/Laurel Funds and the 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.
NOTE 3--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes, including the financing of redemptions. Interest is charged to the
fund based on prevailing market rates in effect at the time of borrowings.
The average daily amount of borrowings outstanding under the line of credit
during the period ended June 30, 2003 was approximately $171,400 with a related
weighted average annualized interest rate of 2.11%.
The Fund
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
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,
2003, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the 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 auditing standards generally accepted
in the United States of America. 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, 2003, by correspondence with the custodian. As
to securities purchased but not yet received, we performed other appropriate
auditing procedures. 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, 2003, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
/s/ KPMG LLP
New York, New York
July 30, 2003
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, 2003 as
"exempt-interest dividends" (not subject to regular federal and, for individuals
who are California residents, California personal income taxes).
The Fund
BOARD MEMBERS INFORMATION (Unaudited)
JOSEPH S. DIMARTINO (59)
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
* Levcor International, Inc., an apparel fabric processor, 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
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191
--------------
JAMES FITZGIBBONS (68)
BOARD MEMBER (1994)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Chairman of the Board, Davidson Cotton Company (1998-2001)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* Howes Leather Corporation, Director
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
J. TOMLINSON FORT (75)
BOARD MEMBER (1987)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Of Counsel, Reed Smith LLP (1998-present)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* Allegheny College, Trustee
* Pittsburgh Ballet Theatre, Trustee
* American College of Trial Lawyers, Fellow
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
KENNETH A. HIMMEL (57)
BOARD MEMBER (1994)
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 (56)
BOARD MEMBER (1994)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Chairman of the Board, Stephen J. Lockwood and Company LLC, an investment
company (2000-present)
* Chairman of the Board and CEO, LDG Reinsurance Corporation (1977-2000)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* BDML Holdings, an insurance company, Chairman of the Board
* Affiliated Managers Group, an investment management company, Director
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
ROSLYN WATSON (53)
BOARD MEMBER (1994)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Principal, Watson Ventures, Inc., a real estate investment company
(1993-present)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* American Express Centurion Bank, Director
* The Hyams Foundation Inc., a Massachusetts Charitable Foundation, Trustee
* National Osteoporosis Foundation, Trustee
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
BENAREE PRATT WILEY (57)
BOARD MEMBER (1998)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* 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-present)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* Boston College, Trustee
* The Greater Boston Chamber of Commerce, Director
* The First Albany Companies, Inc., an investment bank, Director
* Mass Development, Director
* Commonwealth Institute, Director
* Efficacy Institute, Director
* PepsiCo Africa-America, Advisory Board
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL
INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS 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.
RUTH MARIE ADAMS, EMERITUS BOARD MEMBER
FRANCIS P. BRENNAN, EMERITUS BOARD MEMBER
The Fund
OFFICERS OF THE FUND (Unaudited)
STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000.
Chairman of the Board, Chief Executive Officer and Chief Operating Officer of
the Manager, and an officer of 95 investment companies (comprised of 189
portfolios) managed by the Manager. Mr. Canter also is a Board member and, where
applicable, an Executive Committee Member of the other investment management
subsidiaries of Mellon Financial Corporation, each of which is an affiliate of
the Manager. He is 57 years old and has been an employee of the Manager since
May 1995.
STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002.
Chief Investment Officer, Vice Chairman and a Director of the Manager, and an
officer of 95 investment companies (comprised of 189 portfolios) managed by the
Manager. Mr. Byers also is an Officer, Director or an Executive Committee Member
of certain other investment management subsidiaries of Mellon Financial
Corporation, each of which is an affiliate of the Manager. He is 49 years old
and has been an employee of the Manager since January 2000. Prior to joining the
Manager, he served as an Executive Vice President-Capital Markets, Chief
Financial Officer and Treasurer at Gruntal & Co., L.L.C.
MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000.
Executive Vice President, Secretary and General Counsel of the Manager, and an
officer of 96 investment companies (comprised of 205 portfolios) managed by the
Manager. He is 57 years old and has been an employee of the Manager since June
1977.
STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000.
Associate General Counsel and Assistant Secretary of the Manager, and an officer
of 96 investment companies (comprised of 205 portfolios) managed by the Manager.
He is 53 years old and has been an employee of the Manager since July 1980.
JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000.
Associate General Counsel of the Manager, and an officer of 24 investment
companies (comprised of 84 portfolios) managed by the Manager. He is 38 years
old and has been an employee of the Manager since October 1990.
MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000.
Associate General Counsel of the Manager, and an officer of 93 investment
companies (comprised of 198 portfolios) managed by the Manager. He is 43 years
old and has been an employee of the Manager since October 1991.
JAMES WINDELS, TREASURER SINCE NOVEMBER 2001.
Director - Mutual Fund Accounting of the Manager, and an officer of 96
investment companies (comprised of 205 portfolios) managed by the Manager. He is
44 years old and has been an employee of the Manager since April 1985.
MICHAEL CONDON, ASSISTANT TREASURER SINCE MARCH 2000.
Senior Treasury Manager of the Manager, and an officer of 37 investment
companies (comprised of 78 portfolios) managed by the Manager. He is 41 years
old and has been an employee of the Manager since August 1984.
KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001.
Mutual Funds Tax Director of the Manager, and an officer of 96 investment
companies (comprised of 205 portfolios) managed by the Manager. He is 48 years
old and has been an employee of the Manager since June 1993.
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 91 investment companies
(comprised of 200 portfolios) managed by the Manager. He is 32 years old and has
been an employee of the Distributor since October 1998. Prior to joining the
Distributor, he was a Vice President of Compliance Data Center, Inc
The Fund
NOTES
For More Information
Dreyfus BASIC
California Municipal
Money Market Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE
Call 1-800-645-6561
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request
to info@dreyfus.com
ON THE INTERNET Information
can be viewed online or
downloaded from:
http://www.dreyfus.com
(c) 2003 Dreyfus Service Corporation 307AR0603
================================================================================
DREYFUS BASIC
NEW YORK
MUNICIPAL MONEY
MARKET FUND
ANNUAL REPORT June 30, 2003
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 Letter from the Chairman
3 Discussion of Fund Performance
6 Statement of Investments
10 Statement of Assets and Liabilities
11 Statement of Operations
12 Statement of Changes in Net Assets
13 Financial Highlights
14 Notes to Financial Statements
18 Independent Auditors' Report
19 Important Tax Information
20 Board Members Information
22 Officers of the Fund
FOR MORE INFORMATION
- ---------------------------------------------------------------------------
Back Cover
The Fund
Dreyfus BASIC
New York Municipal
Money Market Fund
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This annual report for Dreyfus BASIC New York Municipal Money Market Fund covers
the 12-month period from July 1, 2002, through June 30, 2003. Inside, you'll
find valuable information about how the fund was managed during the reporting
period, including a discussion with the fund's portfolio manager, John Flahive.
The past year has been a challenging time for tax-exempt money market funds. In
its ongoing attempts to stimulate renewed economic growth, the Federal Reserve
Board reduced a key short-term interest rate twice during the reporting period,
and yields of money market funds fell to historical lows. As a result,
maintaining a steady stream of current, tax-exempt income from investments in
money market securities has become a challenge for many investors.
Nonetheless, we believe that it is important for investors to remember that
money market funds have continued to achieve their objective of preserving
shareholders' capital, although the preservation of capital is not guaranteed.
For emergency reserves and money earmarked for near-term needs, we believe money
market funds can play an important role in creating a diversified portfolio.
However, if you seek to maximize current income from your long-term savings,
your financial advisor may be able to recommend higher-yielding alternatives
that are right for you in today's low interest-rate environment.
Thank you for your continued confidence and support.
Sincerely,
/s/ Stephen E. Canter
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
July 15, 2003
DISCUSSION OF FUND PERFORMANCE
John Flahive, Portfolio Manager
How did Dreyfus BASIC New York Municipal Money Market Fund perform during the
period?
For the 12-month period ended June 30, 2003, the fund provided a yield of 0.86%
and, after taking into account the effects of compounding, an effective yield of
0.86%.(1)
We attribute the fund's modest returns to continued low interest rates, which
have resulted in low yields for tax-exempt money market securities during the
reporting period.
What is the fund's investment approach?
The fund seeks to provide a high level of current income exempt from federal,
New York state and New York city income taxes 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 New York 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 New York' s short-term municipal marketplace.
Rather than focusing on economic or market trends, we search for securities
that, in our opinion, will help us enhance the fund's yield without sacrificing
quality.
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
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
yields, we may increase the fund's weighted average maturity to maintain current
yields for as long as practical. At other times, we try to maintain a neutral
weighted average maturity.
What other factors influenced the fund's performance?
The fund' s performance was most influenced during the reporting period by
declining interest rates, including the Federal Reserve Board's two short-term
rate cuts in November 2002 and June 2003, which drove the federal funds rate to
just 1.00% by the reporting period's end. As short-term interest rates fell, so
did tax-exempt money market yields.
The primary reason for lower interest rates was a weaker than expected U.S.
economy. The economic recovery has progressed in fits and starts for some time
now, as it has grappled with inconsistent growth, low levels of corporate
spending and the increasing likelihood of war with Iraq. What's more, the
lingering effects of the September 11 terrorist attacks and a persistently
volatile stock market have continued to create especially difficult fiscal
challenges for New York state and, especially, New York City.
Like many other states, New York has received fewer revenues than it forecast
from state income, sales and capital gains taxes. During the reporting period,
the state balanced its fiscal 2003 budget primarily through spending cutbacks.
The state' s fiscal 2004 budget, which was passed despite Governor Pataki's
objections, also included tax hikes for both New York state and New York City
residents.
In addition, to fund its operating expenses in the challenging fiscal climate,
New York state issued more short-term debt during the reporting period than
during the same period one year earlier. While an increase in the supply of new
securities generally causes yields to rise, New York's increased issuance was
quickly absorbed as investors from the taxable marketplace shifted assets into
tax-exempt money market funds to capture tax benefits at a time in which nominal
yields between the two markets were similar.
What is the fund's current strategy?
As of the reporting period's end, the fund's weighted average maturity was 38
days, which we consider neutral relative to other municipal money market funds.
This position has not changed substantially during the reporting period.
The fund' s variable-rate demand notes (VRDNs), on which yields are reset daily
or weekly, comprised approximately 79% of the fund's total assets as of June 30,
2003; municipal notes represented approximately 18% of assets and commercial
paper made up the balance. While we have not made any major changes to the fund'
s asset allocation, we have been adding modestly to its commercial paper
exposure, primarily among securities with maturities in the three- to six-month
range. We believe that by doing so, we are attempting to boost the fund's yield
as much as we deem practical without locking in today's low rates on one-year
municipal notes.
Finally, because of the ongoing fiscal difficulties of New York state and New
York City, we continue to adopt a relatively cautious approach to credit
analysis. More specifically, we are carefully scrutinizing issuers' projected
revenues to ensure that they are, in our view, realistic and attainable under
current and expected economic and fiscal conditions.
July 15, 2003
(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-NEW YORK
RESIDENTS, AND SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE
MINIMUM TAX (AMT) FOR CERTAIN INVESTORS. AN INVESTMENT IN THE FUND IS NOT
INSURED OR GUARANTEED BY THE FDIC OR THE U.S. GOVERNMENT. ALTHOUGH THE
FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00 PER SHARE, IT
IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
The Fund
STATEMENT OF INVESTMENTS
June 30, 2003
Principal
TAX EXEMPT INVESTMENTS--93.7% Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Albany Industrial Development Agency, IDR, VRDN
(Newkirk Products Project)
1.05% (LOC; Fleet National Bank) 1,300,000 (a) 1,300,000
Great Neck North Water Authority, Water System Revenue
VRDN 1% (Insured; FGIC and Liquidity Facility; FGIC) 7,400,000 (a) 7,400,000
Herricks Union Free School District, GO Notes, BAN
2%, 12/3/2003 10,000,000 10,026,796
Jay Street Development Corporation
LR, VRDN (Jay Street Project):
.95% (LOC; J.P. Morgan Chase & Co.) 10,900,000 (a) 10,900,000
.95% (LOC; Landesbank Hessen-Thuringen
Girozentrale) 11,450,000 (a) 11,450,000
Lancaster Central School District, GO Notes, BAN
2%, 7/30/2003 9,903,479 9,907,203
Long Island Power Authority, Electric System Revenue
VRDN .93% (Insured; MBIA and Liquidity
Facility; Credit Suisse First Boston) 17,900,000 (a) 17,900,000
Metropolitan Transportation Authority, Transit Revenue
Refunding, VRDN .96% (Insured; AMBAC and
Liquidity Facility; Bank of Nova Scotia) 10,200,000 (a) 10,200,000
Monroe County Airport Authority, Airport Revenue
VRDN 1.01% (Insured; MBIA and Liquidity
Facility; Merrill Lynch) 4,900,000 (a) 4,900,000
Monroe County Industrial Development Agency
Civic Facility Revenue, VRDN
(St. Ann's Home for the Aged Project)
.96% (LOC; HSBC Bank USA) 11,800,000 (a) 11,800,000
Nassau County Interim Finance Authority
Sales Tax Revenue, VRDN
.90% (Insured; FSA and Liquidity Facility; BNP Paribas) 20,400,000 (a) 20,400,000
New York City, GO Notes, VRDN:
.90%, Series B-8 (LOC; Bayerische Landesbank) 5,505,000 (a) 5,505,000
.90%, Series F-5 (LOC; Bayerische Landesbank) 5,385,000 (a) 5,385,000
.95% (Insured; AMBAC and Liquidity Facility;
Bank of Nova Scotia) 3,500,000 (a) 3,500,000
.95% (LOC; Landesbank Hessen-Thuringen Girozentrale) 2,530,000 (a) 2,530,000
New York City Housing Development Corporation, VRDN:
Mortgage Revenue
(Residential East 17th Street)
.92% (LOC; J.P. Morgan Chase & Co.) 1,600,000 (a) 1,600,000
Multi-Family Rental Housing Revenue:
(Carnegie Park) .95% (Insured; FNMA) 1,950,000 (a) 1,950,000
(Monterey) .95% (Insured; FNMA) 13,400,000 (a) 13,400,000
(West 89th Street Development) 1% (LOC; FNMA) 14,000,000 (a) 14,000,000
Principal
TAX EXEMPT INVESTMENTS (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
New York City Industrial Development Agency
Civic Facility Revenue, VRDN (Casa Project)
1.10% (LOC; J.P. Morgan Chase & Co.) 3,000,000 (a) 3,000,000
New York City Municipal Water Finance Authority
Water and Sewer System Revenue:
CP 1%, 8/11/2003 (LOC: Bank of Nova Scotia and
Toronto Dominion Bank) 10,200,000 10,200,000
VRDN:
.88% (Liquidity Facility: Bank of Nova Scotia
and Toronto Dominion Bank) 13,200,000 (a) 13,200,000
.95%, Series C (Liquidity Facility;
Dexia Credit Locale) 6,900,000 (a) 6,900,000
.95%, Series F (Liquidity Facility;
Bayerische Landesbank) 1,400,000 (a) 1,400,000
New York State Dormitory Authority, Revenue
VRDN:
(New York Foundling Charitable Corp.)
.96% (LOC; Allied Irish Bank) 4,940,000 (a) 4,940,000
(Rochester Institute of Technology)
.95% (Insured; AMBAC and Liquidity Facility;
Fleet National Bank) 10,000,000 (a) 10,000,000
New York State Energy Research and Development
Authority, PCR (New York State Electric and Gas):
1.10%, 9/15/2003 (LOC; J.P. Morgan Chase & Co.) 3,000,000 3,000,000
1.80%, 12/1/2003 (LOC; Fleet National Bank) 8,000,000 8,000,000
New York State Housing Finance Agency, Revenue
VRDN (Normandie Court I Project)
.92% (LOC; Landesbank Hessen-
Thuringen Girozentrale) 11,050,000 (a) 11,050,000
New York State Local Government Assistance
Corporation, Sales Tax Revenue, VRDN:
.90% (LOC: Bayerische Landesbank and
Westdeutsche Landesbank) 16,215,000 (a) 16,215,000
.90% (LOC; Societe Generale) 16,500,000 (a) 16,500,000
New York State Thruway Authority, Highway
and Bridge Trust Fund, Revenue
5.25%, 4/1/2004 (Insured; AMBAC) 5,000,000 5,157,347
Oneida Indian Nation, Revenue, VRDN
1% (LOC; Bank of America) 10,200,000 (a) 10,200,000
Orange County Industrial Development Agency
Civic Facility Revenue, VRDN
(Horton Medical Center Project)
.95% (Insured; FSA and Liquidity Facility;
Fleet National Bank) 10,000,000 (a) 10,000,000
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
TAX EXEMPT INVESTMENTS (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Rensselaer County Industrial Development Agency
Civic Facility Revenue, VRDN
(Polytech Institute Project) 1% 3,500,000 (a) 3,500,000
Rochester, GO Notes
5.125%, 10/1/2003 (Insured; MBIA) 7,610,000 7,680,826
Wayne County, GO Notes, BAN
1.50%, 6/10/2004 13,600,000 13,663,457
TOTAL INVESTMENTS (cost $318,660,629) 93.7% 318,660,629
CASH AND RECEIVABLES (NET) 6.3% 21,427,897
NET ASSETS 100.0% 340,088,526
Summary of Abbreviations
AMBAC American Municipal Bond
Assurance Corporation
BAN Bond Anticipation Notes
CP Commercial Paper
FGIC Financial Guaranty Insurance
Company
FNMA Federal National Mortgage
Association
FSA Financial Security Assurance
GO General Obligation
IDR Industrial Development Revenue
LOC Letter of Credit
LR Lease Revenue
MBIA Municipal Bond Investors
Assurance Insurance
Corporation
PCR Pollution Control Revenue
VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
- ------------------------------------------------------------------------------------------------------------------------------------
F1+, F1 VMIG1, MIG1, P1 SP1+, SP1, A1+, A1 85.4
AAA, AA, A (b) Aaa, Aa, A (b) AAA, AA, A (b) 4.0
Not Rated (c) Not Rated (c) Not Rated (c) 10.6
100.0
(A) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC
CHANGE.
(B) NOTES WHICH ARE NOT F, MIG, OR SP RATED ARE REPRESENTED BY BOND RATINGS OF
THE ISSUERS.
(C) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S,
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE
RATED SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 318,660,629 318,660,629
Cash 21,152,239
Interest receivable 706,743
340,519,611
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates--Note 2 122,424
Dividend payable 183,451
Payable for shares of Beneficial Interest redeemed 125,007
Interest payable--Note 3 203
431,085
NET ASSETS ($) 340,088,526
COMPOSITION OF NET ASSETS ($):
Paid-in capital 340,088,536
Accumulated net realized gain (loss) on investments (10)
NET ASSETS ($) 340,088,526
SHARES OUTSTANDING
(unlimited number of shares of Beneficial Interest authorized) 340,088,536
NET ASSET VALUE, offering and redemption price per share ($) 1.00
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Year Ended June 30, 2003
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 4,538,955
EXPENSES:
Management fee--Note 2 1,560,162
Interest expense--Note 3 4,379
TOTAL EXPENSES 1,564,541
INVESTMENT INCOME--NET, REPRESENTING NET INCREASE
IN NET ASSETS RESULTING FROM OPERATIONS 2,974,414
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Year Ended June 30,
-----------------------------------
2003 2002
- --------------------------------------------------------------------------------
OPERATIONS ($):
INVESTMENT INCOME--NET, REPRESENTING NET INCREASE
IN NET ASSETS RESULTING FROM OPERATIONS 2,974,414 5,024,190
DIVIDENDS TO SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (2,974,414) (5,024,190)
BENEFICIAL INTEREST TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold 276,074,163 278,533,896
Dividends reinvested 2,614,249 4,370,309
Cost of shares redeemed (281,631,916) (304,138,835)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (2,943,504) (21,234,630)
TOTAL INCREASE (DECREASE) IN NET ASSETS (2,943,504) (21,234,630)
NET ASSETS ($):
Beginning of Period 343,032,030 364,266,660
END OF PERIOD 340,088,526 343,032,030
SEE NOTES TO FINANCIAL STATEMENTS.
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,
--------------------------------------------------------------------
2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment Operations:
Investment income--net .009 .014 .032 .032 .027
Distributions:
Dividends from investment income--net (.009) (.014) (.032) (.032) (.027)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
TOTAL RETURN (%) .86 1.36 3.26 3.20 2.69
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses
to average net assets .45 .45 .45 .45 .45
Ratio of interest expense
to average net assets .00(a) .00(a) .01 -- --
Ratio of net investment income
to average net assets .86 1.36 3.21 3.17 2.65
Net Assets, end of period ($ x 1,000) 340,089 343,032 364,267 358,095 314,095
(A) AMOUNT REPRESENTS LESS THAN .01%.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
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, New York state and New York city income taxes to the extent
consistent with the preservation of capital and the maintenance of liquidity.
The Dreyfus Corporation (the "Manager") serves as the fund's investment adviser.
The Manager is a wholly-owned subsidiary of Mellon Bank, N.A., which is a
wholly-owned subsidiary of Mellon Financial Corporation. Dreyfus Service
Corporation (the "Distributor" ), a wholly-owned subsidiary of the Manager, is
the distributor of the fund's shares, which are sold to the public without a
sales charge.
The fund' s financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, 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 fund's
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.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of discount and premium on invest-
ments, is earned from settlement date and recognized on the accrual basis. Cost
of investments represents amortized cost.
(C) CONCENTRATION OF RISK: The fund follows an investment policy of investing
primarily in municipal obligations of one state. Economic changes affecting the
state and certain of its public bodies and municipalities may affect the ability
of issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the fund.
All cash balances were maintained with the Custodian, Mellon Bank, N.A.
(D) DIVIDENDS TO SHAREHOLDERS: It is the policy of the fund to declare dividends
daily from investment income-net; such dividends are paid monthly. Dividends
from net realized capital gain, if any, are normally declared and paid annually,
but the fund may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code of 1986, as amended, (the
" Code" ). To the extent that net realized capital gain can be offset by capital
loss carryovers, if any, it is the policy of the fund not to distribute such
gain.
(E) FEDERAL INCOME TAXES: It is the policy of the fund to continue to qualify as
a regulated investment company, which can distribute tax exempt dividends, by
complying with the applicable provisions of the Code, and to make distributions
of income and net realized capital gain, if any, sufficient to relieve it from
substantially all federal income and excise taxes.
At June 30, 2003, the components of accumulated earnings on a tax basis was
substantially the same as for financial reporting purposes.
The tax character of distributions paid to shareholders during the fiscal
periods ended June 30, 2003 and June 30, 2002, respectively, were all tax exempt
income.
At June 30, 2003, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--Investment Management Fee and Other Transactions with Affiliates:
INVESTMENT MANAGEMENT FEE: 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
$40,000 per year, plus $5,000 for each joint Board meeting of The Dreyfus/Laurel
Funds, Inc., the Trust and The Dreyfus/Laurel Funds Trust (the "Dreyfus/Laurel
Funds" ) attended, $2,000 for separate committee meetings attended which are not
held in conjunction with a regularly scheduled board meeting and $500 for Board
meetings and separate committee meetings attended that are conducted by
telephone and is reimbursed for travel and out-of-pocket expenses. The Chairman
of the Board receives an additional 25% of such compensation (with the exception
of reimbursable amounts). In the event that there is a joint committee meeting
of the Dreyfus/Laurel Funds and Dreyfus High Yield Strategies Fund, the $2,000
fee will be allocated between the Dreyfus/Laurel Funds and the 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.
NOTE 3--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes, including the financing of redemptions. Interest is charged to the
fund based on prevailing market rates in effect at the time of borrowings.
The average daily amount of borrowings outstanding under the line of credit
during the period ended June 30, 2003, was approximately $227,700 with a related
weighted average annualized interest rate of 1.92%.
The Fund
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
The Dreyfus/Laurel Tax-Free Municipal Funds
We have audited the accompanying statement of assets and liabilities of Dreyfus
BASIC New York Municipal Money Market Fund (the "Fund") of The Dreyfus/Laurel
Tax-Free Municipal Funds, including the statement of investments, as of June 30,
2003, and the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the 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 auditing standards generally
accepted in the United States of America. 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, 2003, 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 New York Municipal Money Market Fund of The Dreyfus/Laurel
Tax-Free Municipal Funds as of June 30, 2003, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
/S/KPMG LLP
New York, New York
July 30, 2003
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, 2003 as
"exempt-interest dividends" (not subject to regular federal and, for individuals
who are New York residents, New York state and New York city personal income
taxes).
The Fund
BOARD MEMBERS INFORMATION (Unaudited)
JOSEPH S. DIMARTINO (59)
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
* Levcor International, Inc., an apparel fabric processor, 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
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191
--------------
JAMES FITZGIBBONS (68)
BOARD MEMBER (1994)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Chairman of the Board, Davidson Cotton Company (1998-2001)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* Howes Leather Corporation, Director
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
J. TOMLINSON FORT (75)
BOARD MEMBER (1987)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Of Counsel, Reed Smith LLP (1998-present)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* Allegheny College, Trustee
* Pittsburgh Ballet Theatre, Trustee
* American College of Trial Lawyers, Fellow
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
KENNETH A. HIMMEL (57)
BOARD MEMBER (1994)
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 (56)
BOARD MEMBER (1994)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Chairman of the Board, Stephen J. Lockwood and Company LLC, an investment
company (2000-present)
* Chairman of the Board and CEO, LDG Reinsurance Corporation (1977-2000)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* BDML Holdings, an insurance company, Chairman of the Board
* Affiliated Managers Group, an investment management company, Director
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
ROSLYN WATSON (53)
BOARD MEMBER (1994)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Principal, Watson Ventures, Inc., a real estate investment company
(1993-present)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* American Express Centurion Bank, Director
* The Hyams Foundation Inc., a Massachusetts Charitable Foundation, Trustee
* National Osteoporosis Foundation, Trustee
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
BENAREE PRATT WILEY (57)
BOARD MEMBER (1998)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* 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-present)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* Boston College, Trustee
* The Greater Boston Chamber of Commerce, Director
* The First Albany Companies, Inc., an investment bank, Director
* Mass Development, Director
* Commonwealth Institute, Director
* Efficacy Institute, Director
* PepsiCo Africa-America, Advisory Board
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL
INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS 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.
RUTH MARIE ADAMS, EMERITUS BOARD MEMBER
FRANCIS P. BRENNAN, EMERITUS BOARD MEMBER
The Fund
OFFICERS OF THE FUND (Unaudited)
STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000.
Chairman of the Board, Chief Executive Officer and Chief Operating Officer
of the Manager, and an officer of 95 investment companies (comprised of 189
portfolios) managed by the Manager. Mr. Canter also is a Board member and, where
applicable, an Executive Committee Member of the other investment management
subsidiaries of Mellon Financial Corporation, each of which is an affiliate of
the Manager. He is 57 years old and has been an employee of the Manager since
May 1995.
STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002.
Chief Investment Officer, Vice Chairman and a Director of the Manager, and
an officer of 95 investment companies (comprised of 189 portfolios) managed by
the Manager. Mr. Byers also is an Officer, Director or an Executive Committee
Member of certain other investment management subsidiaries of Mellon Financial
Corporation, each of which is an affiliate of the Manager. He is 49 years old
and has been an employee of the Manager since January 2000. Prior to joining the
Manager, he served as an Executive Vice President-Capital Markets, Chief
Financial Officer and Treasurer at Gruntal & Co., L.L.C.
MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000.
Executive Vice President, Secretary and General Counsel of the Manager, and
an officer of 96 investment companies (comprised of 205 portfolios) managed by
the Manager. He is 57 years old and has been an employee of the Manager since
June 1977.
STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000.
Associate General Counsel and Assistant Secretary of the Manager, and an
officer of 96 investment companies (comprised of 205 portfolios) managed by the
Manager. He is 53 years old and has been an employee of the Manager since July
1980.
JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000.
Associate General Counsel of the Manager, and an officer of 24 investment
companies (comprised of 84 portfolios) managed by the Manager. He is 38 years
old and has been an employee of the Manager since October 1990.
MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000.
Associate General Counsel of the Manager, and an officer of 93 investment
companies (comprised of 198 portfolios) managed by the Manager. He is 43 years
old and has been an employee of the Manager since October 1991.
JAMES WINDELS, TREASURER SINCE NOVEMBER 2001.
Director - Mutual Fund Accounting of the Manager, and an officer of 96
investment companies (comprised of 205 portfolios) managed by the Manager. He is
44 years old and has been an employee of the Manager since April 1985.
MICHAEL CONDON, ASSISTANT TREASURER SINCE MARCH 2000.
Senior Treasury Manager of the Manager, and an officer of 37 investment
companies (comprised of 78 portfolios) managed by the Manager. He is 41 years
old and has been an employee of the Manager since August 1984.
KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001.
Mutual Funds Tax Director of the Manager, and an officer of 96 investment
companies (comprised of 205 portfolios) managed by the Manager. He is 48 years
old and has been an employee of the Manager since June 1993.
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 91 investment
companies (comprised of 200 portfolios) managed by the Manager. He is 32 years
old and has been an employee of the Distributor since October 1998. Prior to
joining the Distributor, he was a Vice President of Compliance Data Center, Inc.
The Fund
NOTES
For More Information
Dreyfus BASIC
New York Municipal
Money Market Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE
Call 1-800-645-6561
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request
to info@dreyfus.com
ON THE INTERNET Information
can be viewed online or
downloaded from:
http://www.dreyfus.com
(c) 2003 Dreyfus Service Corporation 316AR0603
================================================================================
DREYFUS BASIC
MASSACHUSETTS
MUNICIPAL MONEY
MARKET FUND
ANNUAL REPORT June 30, 2003
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 Letter from the Chairman
3 Discussion of Fund Performance
6 Statement of Investments
10 Statement of Assets and Liabilities
11 Statement of Operations
12 Statement of Changes in Net Assets
13 Financial Highlights
14 Notes to Financial Statements
18 Independent Auditors' Report
19 Important Tax Information
20 Board Members Information
22 Officers of the Fund
FOR MORE INFORMATION
- ---------------------------------------------------------------------------
Back Cover
The Fund
Dreyfus BASIC
Massachusetts Municipal
Money Market Fund
LETTER FROM THE CHAIRMAN
Dear Shareholder:
This annual report for Dreyfus BASIC Massachusetts Municipal Money Market Fund
covers the 12-month period from July 1, 2002, through June 30, 2003. Inside,
you' ll find valuable information about how the fund was managed during the
reporting period, including a discussion with the fund's portfolio manager, John
Flahive.
The past year has been a challenging time for tax-exempt money market funds. In
its ongoing attempts to stimulate renewed economic growth, the Federal Reserve
Board reduced a key short-term interest rate twice during the reporting period,
and yields of money market funds fell to historical lows. As a result,
maintaining a steady stream of current, tax-exempt income from investments in
money market securities has become a challenge for many investors.
Nonetheless, we believe that it is important for investors to remember that
money market funds have continued to achieve their objective of preserving
shareholders' capital, although the preservation of capital is not guaranteed.
For emergency reserves and money earmarked for near-term needs, we believe money
market funds can play an important role in creating a diversified portfolio.
However, if you seek to maximize current income from your long-term savings,
your financial advisor may be able to recommend higher-yielding alternatives
that are right for you in today's low interest-rate environment.
Thank you for your continued confidence and support.
Sincerely,
/S/STEPHEN E. CANTER
Stephen E. Canter
Chairman and Chief Executive Officer
The Dreyfus Corporation
July 15, 2003
DISCUSSION OF FUND PERFORMANCE
John Flahive, Portfolio Manager
How did Dreyfus BASIC Massachusetts Municipal Money Market Fund perform during
the period?
For the 12-month period ended June 30, 2003, the fund's shares provided a yield
of 0.87% and, after taking into account the effects of compounding, an effective
yield of 0.87%.(1)
We attribute the fund's performance to lower interest rates, which resulted in
lower yields for tax-exempt money market securities during the reporting period.
What is the fund's investment approach?
The fund seeks to provide a high level of current income exempt from federal and
Massachusetts state income taxes to the extent consistent with the preservation
of capital and the maintenance of liquidity. To pursue this objective, we
attempt to add value by selecting the individual tax-exempt money market
instruments from Massachusetts's 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 without sacrificing
quality.
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
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
yields, we may increase the fund's average weighted maturity to maintain current
yields for as long as practical. At other times, we try to maintain a neutral
average weighted maturity.
What other factors influenced the fund's performance?
The weak U.S. economy represented the most significant influence on the fund's
performance, particularly during the first half of the reporting period. In its
ongoing attempts to stimulate renewed economic growth, the Federal Reserve Board
reduced short-term interest rates twice during the reporting period, including
reductions of 50 basis points in November 2002 and 25 basis points in June 2003,
which drove the federal funds rate to a 45-year low of just 1%.
In addition, investor demand for relatively stable, short-term securities
remained robust. Mounting concerns regarding a possible war with Iraq,
questionable accounting practices at several large, well-known corporations and
a volatile stock market created a "flight to quality" among investors, putting
additional downward pressure on money market yields.
The fund also was affected by the deteriorating fiscal condition of many issuers
during the reporting period. Like many other states, Massachusetts grappled with
rising fiscal pressures as reduced revenues from income, sales and capital gains
taxes led to budget gaps. The state tapped into its "rainy day" reserves, which
had been established during previous years. In addition, some state-funded
programs and services were cut back, and some taxes and fees were raised to
cover revenue shortfalls.
In this challenging investment environment, we responded by generally avoiding
issuers that depend more on state aid than local revenue sources. That's because
we believe those issuers are likely to be more vulnerable to state cutbacks
during these troubled economic times. In our experience, states tend to push
their budget pressures downward onto cities and localities, where state aid is
especially crucial to fiscal solvency. Accordingly, we tended to favor issuers
in municipalities where revenues are derived primarily through property taxes,
which we consider a more stable source of funds.
What is the fund's current strategy?
As of the end of the reporting period, approximately 67% of the fund's total
assets was invested in variable-rate demand notes, with 25% invested in
municipal notes and 8% in commercial paper. These percentages are generally in
line with other municipal money market funds. While we made relatively few major
changes to the fund's composition during the reporting period, we have modestly
trimmed its exposure to longer-dated one-year notes, primarily because we
believe it makes little sense to lock in today's low yields for so long.
Instead, we have invested those assets primarily in commercial paper, where we
have focused on securities in the three- to six-month range.
The fund' s weighted average maturity was 48 days on June 30, 2003, which we
consider neutral relative to other municipal money market funds. This position
represents a small change from the fund's 50-day posture when the reporting
period began. As always, we are prepared to modify the fund's asset allocation
and maturity management strategies as market conditions change.
July 15, 2003
(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. AN INVESTMENT IN THE
FUND IS NOT INSURED OR GUARANTEED BY THE FDIC OR THE U.S. GOVERNMENT.
ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT $1.00
PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
The Fund
STATEMENT OF INVESTMENTS
June 30, 2003
Principal
TAX EXEMPT INVESTMENTS--101.4% Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Canton, GO Notes, BAN 2%, 3/19/2004 3,000,000 3,020,075
Cohasset, GO Notes, BAN 2.50%, 7/25/2003 8,000,000 8,005,285
Edgartown, GO Notes, BAN 2.50%, 8/1/2003 3,238,078 3,240,786
Leominster, GO Notes, BAN 2.25%, 11/14/2003 4,276,000 4,285,394
Littleton, GO Notes 2.25%, 1/15/2004 (Insured; FGIC) 1,721,000 1,731,641
Marion, GO Notes, BAN 2%, 9/26/2003 3,500,000 3,504,517
State of Massachusetts, GO Notes, VRDN:
.96% (Insured; FGIC and Liquidity Facility;
Merrill Lynch & Co.) 5,210,000 (a) 5,210,000
Refunding:
.90% (Liquidity Facility; WestLB AG) 5,200,000 (a) 5,200,000
.95% (Liquidity Facility; Landesbank Hessen
Thuringen Girozentrale) 4,600,000 (a) 4,600,000
1.10% (Liquidity Facility; Landesbank Hessen
Thuringen Girozentrale) 2,600,000 (a) 2,600,000
Massachusetts Bay Transportation Authority
General Transportation Systems, GO Notes, VRDN
.95% (Liquidity Facility; WestLB AG) 6,000,000 (a) 6,000,000
Massachusetts Development Finance Agency:
Revenue, CP 1.05%, 8/7/2003 (LOC; Wachovia Bank) 5,000,000 5,000,000
VRDN:
College and University Revenue, Refunding
(Smith College) .95% 5,900,000 (a) 5,900,000
Revenue:
(Dexter School Project)
.99% (Insured; MBIA and Liquidity Facility;
Wachovia Bank) 1,000,000 (a) 1,000,000
(Loomis Communities)
1.06% (LOC; ABN-AMRO) 4,300,000 (a) 4,300,000
(Meadowbrook School)
.94% (LOC; Allied Irish Banks) 3,000,000 (a) 3,000,000
(Worcester Academy)
.99% (LOC; Allied Irish Banks) 3,000,000 (a) 3,000,000
Massachusetts Health and Educational Facilities Authority:
College and University Revenue:
(Amherst College) .88%, 6/9/2004 3,800,000 3,800,000
(Williams College):
2%, 7/1/2003 510,000 510,000
1.10%, 4/1/2004 2,500,000 2,500,000
VRDN, .90% 2,695,000 (a) 2,695,000
Principal
TAX EXEMPT INVESTMENTS (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Massachusetts Health and Educational Facilities
Authority (continued):
VRDN:
College and University Revenue:
(Boston University) .97%
(LOC; State Street Bank and Trust Co.) 5,200,000 (a) 5,200,000
(Harvard University) 1.05% 6,500,000 (a) 6,500,000
(Simmons College) 1% (Insured; AMBAC and
Liquidity Facility; Fleet National Bank) 2,500,000 (a) 2,500,000
(University of Massachusetts) .90%
(LOC; Dexia Credit Locale) 3,200,000 (a) 3,200,000
Revenue:
Capital Asset Program
1.06% (LOC; Fleet National Bank) 5,600,000 (a) 5,600,000
(Cil Realty of Massachusetts Inc.)
1% (LOC; Dexia Credit Locale) 1,000,000 (a) 1,000,000
(Falmouth Assisted Living)
.95% (LOC; Fleet National Bank) 300,000 (a) 300,000
(Hallmark Health Systems)
1% (Insured; FSA and Liquidity Facility;
Fleet National Bank) 2,900,000 (a) 2,900,000
(Partners Healthcare Systems):
.90% (Insured; FSA and Liquidity Facility;
Bayerische Landesbank and LOC;
J.P. Morgan Chase & Co.) 6,000,000 (a) 6,000,000
1% (Insured; FSA and Liquidity Facility;
Bayerische Landesbank and LOC;
J.P. Morgan Chase & Co.) 2,600,000 (a) 2,600,000
Refunding (Fairview Extended) .95% (LOC;
Fleet National Bank) 800,000 (a) 800,000
(Wellesley College) .95% 1,000,000 (a) 1,000,000
Massachusetts Housing Finance Agency
MFHR, Refunding, VRDN
(Housing Project) .95% (Insured; FNMA) 800,000 (a) 800,000
Massachusetts Industrial Finance Agency
College and University Revenue, VRDN:
(Milton Academy) .95% (Insured; MBIA
and Liquidity Facility; Fleet National Bank) 1,700,000 (a) 1,700,000
Refunding (Showa Women's Institute)
1.10% (LOC; The Bank of New York) 2,500,000 (a) 2,500,000
The Fund
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
TAX EXEMPT INVESTMENTS (CONTINUED) Amount ($) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------------
Massachusetts Water Resource Authority, Water Revenue:
CP:
.95%, 8/12/2003 (Liquidity Facility; Bayerische
Landesbank) 6,800,000 6,800,000
1%, 9/8/2003 (Liquidity Facility; Bayerische
Landesbank) 1,600,000 1,600,000
VRDN (Multi-Modal):
.90% (LOC; Landesbank Hessen Thuringen Girozentrale) 3,500,000 (a) 3,500,000
.92% (Insured; AMBAC and Liquidity Facility:
Bank of Nova Scotia, Commerzbank
and Dexia Credit Locale) 5,500,000 (a) 5,500,000
Refunding .90% (Insured; FGIC and
Liquidity Facility; FGIC) 7,550,000 (a) 7,550,000
Maynard, GO Notes 2.50%, 2/1/2004 (Insured; MBIA) 1,073,000 1,081,785
Milton, GO Notes, BAN 2%, 3/12/2004 4,000,000 4,024,856
North Andover, GO Notes, BAN 1.25%, 10/10/2003 4,500,000 4,504,931
Route 3 North Transit Improvement Association, LR, VRDN
.90% (Insured; AMBAC and Liquidity Facility;
Dexia Credit Locale) 6,400,000 (a) 6,400,000
Seekonk, GO Notes, BAN 2.25%, 8/29/2003 1,000,000 1,001,274
Wrentham, GO Notes, BAN 2%, 6/3/2004 1,400,000 1,410,860
TOTAL INVESTMENTS (cost $165,076,404) 101.4% 165,076,404
LIABILITIES, LESS CASH AND RECEIVABLES (1.4%) (2,345,961)
NET ASSETS 100.0% 162,730,443
Summary of Abbreviations
AMBAC American Municipal Bond Assurance
Corporation
BAN Bond Anticipation Notes
CP Commercial Paper
FGIC Financial Guaranty Insurance
Company
FNMA Federal National Mortgage
Association
FSA Financial Security Assurance
GO General Obligation
LOC Letter of Credit
LR Lease Revenue
MBIA Municipal Bond Investors Assurance
Insurance Corporation
MFHR Multi-Family Housing Revenue
VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
- ------------------------------------------------------------------------------------------------------------------------------------
F1+, F1 VMIG1, MIG1, P1 SP1+, SP1, A1+, A1 85.2
AAA, AA, A (b) Aaa, Aa, A (b) AAA, AA, A (b) 2.0
Not Rated (c) Not Rated (c) Not Rated (c) 12.8
100.0
(A) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE--SUBJECT TO PERIODIC
CHANGE.
(B) NOTES WHICH ARE NOT F, MIG AND SP RATED ARE REPRESENTED BY BOND RATINGS OF
THE ISSUERS.
(C) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S,
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE
RATED SECURITIES IN WHICH THE FUND MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2003
Cost Value
- --------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 165,076,404 165,076,404
Cash 40,858
Interest receivable 590,296
165,707,558
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates--Note 2 64,851
Bank loan payable--Note 3 2,820,000
Dividend payable 91,189
Interest payable--Note 3 1,075
2,977,115
NET ASSETS ($) 162,730,443
COMPOSITION OF NET ASSETS ($):
Paid-in capital 162,730,443
NET ASSETS ($) 162,730,443
SHARES OUTSTANDING
(unlimited number of shares of Beneficial Interest authorized) 162,741,528
NET ASSET VALUE, offering and redemption price per share ($) 1.00
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Year Ended June 30, 2003
- --------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 2,500,547
EXPENSES:
Management fee--Note 2 851,636
Interest expense--Note 3 6,262
TOTAL EXPENSES 857,898
INVESTMENT INCOME--NET, REPRESENTING NET
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 1,642,649
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Year Ended June 30,
-----------------------------------
2003 2002
- --------------------------------------------------------------------------------
OPERATIONS ($):
INVESTMENT INCOME--NET, REPRESENTING NET
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS 1,642,649 2,280,789
DIVIDENDS TO SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (1,642,649) (2,280,789)
BENEFICIAL INTEREST TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold 286,907,221 313,615,972
Dividends reinvested 316,849 514,241
Cost of shares redeemed (293,094,809) (283,576,304)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (5,870,739) 30,553,909
TOTAL INCREASE (DECREASE) IN NET ASSETS (5,870,739) 30,553,909
NET ASSETS ($):
Beginning of Period 168,601,182 138,047,273
END OF PERIOD 162,730,443 168,601,182
SEE NOTES TO FINANCIAL STATEMENTS.
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,
-----------------------------------------------------------------------
2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment Operations:
Investment income--net .009 .014 .032 .032 .027
Distributions:
Dividends from investment income--net (.009) (.014) (.032) (.032) (.027)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
TOTAL RETURN (%) .87 1.41 3.29 3.21 2.76
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of operating expenses
to average net assets .45 .45 .45 .45 .45
Ratio of interest expense
to average net assets .00(a) .00(a) .01 .01 --
Ratio of net investment income
to average net assets .87 1.38 3.22 3.18 2.71
Net Assets, end of period ($ x 1,000) 162,730 168,601 138,047 123,027 122,751
(A) AMOUNT REPRESENTS LESS THAN .01%.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
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") serves as the fund's investment adviser. The Manager
is a wholly-owned subsidiary of Mellon Bank, N.A., which is a wholly-owned
subsidiary of Mellon Financial Corporation. Dreyfus Service Corporation (the
"Distributor"), a wholly-owned subsidiary of the Manager, is the distributor of
the fund's shares, which are sold to the public without a sales charge.
The fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, 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 fund's
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.
(b) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Interest income, adjusted for amortization of
discount and premium on investments, is earned from settlement date and
recognized on the accrual basis. Realized gain and
loss from securities transactions are recorded on the identified cost basis.
Cost of investments represents amortized cost.
(c) Concentration of risk: The fund follows an investment policy of investing
primarily in municipal obligations of one state. Economic changes affecting the
commonwealth and certain of its public bodies and municipalities may affect the
ability of issuers within the state to pay interest on, or repay principal of,
municipal obligations held by the fund.
All cash balances were maintained with the Custodian, Mellon Bank, N.A.
(d) Dividends to shareholders: It is the policy of the fund to declare dividends
daily from investment income-net; such dividends are paid monthly. Dividends
from net realized capital gain, if any, are normally declared and paid annually,
but the fund may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code of 1986, as amended (the
" Code" ). To the extent that net realized capital gain can be offset by capital
loss carryovers, if any, it is the policy of the fund not to distribute such
gain.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, which can distribute tax exempt dividends, by
complying with the applicable provisions of the Code, and to make distributions
of income and net realized capital gain sufficient to relieve it from
substantially all federal income and excise taxes.
At June 30, 2003, the components of accumulated earnings on a tax basis was
substantially the same as for financial reporting purposes.
The tax character of distributions paid to shareholders during the fiscal
periods ended June 30, 2003 and June 30, 2002, respectively, were all tax exempt
income.
At June 30, 2003, the cost of investments for federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--Investment Management Fee And Other Transactions With Affiliates:
Investment management fee: 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
$40,000 per year, plus $5,000 for each joint Board meeting of The Dreyfus/Laurel
Funds, Inc., the Trust and The Dreyfus/Laurel Funds Trust (the "Dreyfus/Laurel
Funds" ) attended, $2,000 for separate committee meetings attended which are not
held in conjunction with a regularly scheduled board meeting and $500 for Board
meetings and separate committee meetings attended that are conducted by
telephone and is reimbursed for travel and out-of-pocket expenses. The Chairman
of the Board receives an additional 25% of such compensation (with the exception
of reimbursable amounts). In the event that there is a joint committee meeting
of the Dreyfus/Laurels Funds and the Dreyfus High Yield Strategies Fund, the
$2,000 fee will be allocated between the Dreyfus/Laurel Funds and the 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.
NOTE 3--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes, including the financing of redemptions. Interest is charged to the
fund based on prevailing market rates in effect at the time of borrowings.
The average daily amount of borrowings outstanding under the line of credit
during the period ended June 30, 2003 was approximately $325,100 with a related
weighted average annualized interest rate of 1.93%.
The Fund
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders
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, 2003, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the five years in the
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 auditing standards generally accepted
in the United States of America. 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, 2003, 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, 2003, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States of America.
/S/KPMG LLP
New York, New York
July 30, 2003
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, 2003 as
"exempt-interest dividends" (not subject to regular federal and, for individuals
who are Massachusetts residents, Massachusetts personal income taxes).
The Fund
BOARD MEMBERS INFORMATION (Unaudited)
JOSEPH S. DIMARTINO (59)
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
* Levcor International, Inc., an apparel fabric processor, 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
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 191
--------------
JAMES FITZGIBBONS (68)
BOARD MEMBER (1994)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Chairman of the Board, Davidson Cotton Company (1998-2001)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* Howes Leather Corporation, Director
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
J. TOMLINSON FORT (75)
BOARD MEMBER (1987)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Of Counsel, Reed Smith LLP (1998-present)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* Allegheny College, Trustee
* Pittsburgh Ballet Theatre, Trustee
* American College of Trial Lawyers, Fellow
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
KENNETH A. HIMMEL (57)
BOARD MEMBER (1994)
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 (56)
BOARD MEMBER (1994)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Chairman of the Board, Stephen J. Lockwood and Company LLC, an investment
company (2000-present)
* Chairman of the Board and CEO, LDG Reinsurance Corporation (1977-2000)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* BDML Holdings, an insurance company, Chairman of the Board
* Affiliated Managers Group, an investment management company, Director
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
ROSLYN WATSON (53)
BOARD MEMBER (1994)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* Principal, Watson Ventures, Inc., a real estate investment company
(1993-present)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* American Express Centurion Bank, Director
* The Hyams Foundation Inc., a Massachusetts Charitable Foundation, Trustee
* National Osteoporosis Foundation, Trustee
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
BENAREE PRATT WILEY (57)
BOARD MEMBER (1998)
PRINCIPAL OCCUPATION DURING PAST 5 YEARS:
* 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-present)
OTHER BOARD MEMBERSHIPS AND AFFILIATIONS:
* Boston College, Trustee
* The Greater Boston Chamber of Commerce, Director
* The First Albany Companies, Inc., an investment bank, Director
* Mass Development, Director
* Commonwealth Institute, Director
* Efficacy Institute, Director
* PepsiCo Africa-America, Advisory Board
NO. OF PORTFOLIOS FOR WHICH BOARD MEMBER SERVES: 25
--------------
ONCE ELECTED ALL BOARD MEMBERS SERVE FOR AN INDEFINITE TERM. ADDITIONAL
INFORMATION ABOUT THE BOARD MEMBERS, INCLUDING THEIR ADDRESS 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.
RUTH MARIE ADAMS, EMERITUS BOARD MEMBER
FRANCIS P. BRENNAN, EMERITUS BOARD MEMBER
The Fund
OFFICERS OF THE FUND (Unaudited)
STEPHEN E. CANTER, PRESIDENT SINCE MARCH 2000.
Chairman of the Board, Chief Executive Officer and Chief Operating Officer
of the Manager, and an officer of 95 investment companies (comprised of 189
portfolios) managed by the Manager. Mr. Canter also is a Board member and, where
applicable, an Executive Committee Member of the other investment management
subsidiaries of Mellon Financial Corporation, each of which is an affiliate of
the Manager. He is 57 years old and has been an employee of the Manager since
May 1995.
STEPHEN R. BYERS, EXECUTIVE VICE PRESIDENT SINCE NOVEMBER 2002.
Chief Investment Officer, Vice Chairman and a Director of the Manager, and
an officer of 95 investment companies (comprised of 189 portfolios) managed by
the Manager. Mr. Byers also is an Officer, Director or an Executive Committee
Member of certain other investment management subsidiaries of Mellon Financial
Corporation, each of which is an affiliate of the Manager. He is 49 years old
and has been an employee of the Manager since January 2000. Prior to joining the
Manager, he served as an Executive Vice President-Capital Markets, Chief
Financial Officer and Treasurer at Gruntal & Co., L.L.C.
MARK N. JACOBS, VICE PRESIDENT SINCE MARCH 2000.
Executive Vice President, Secretary and General Counsel of the Manager, and
an officer of 96 investment companies (comprised of 205 portfolios) managed by
the Manager. He is 57 years old and has been an employee of the Manager since
June 1977.
STEVEN F. NEWMAN, SECRETARY SINCE MARCH 2000.
Associate General Counsel and Assistant Secretary of the Manager, and an
officer of 96 investment companies (comprised of 205 portfolios) managed by the
Manager. He is 53 years old and has been an employee of the Manager since July
1980.
JEFF PRUSNOFSKY, ASSISTANT SECRETARY SINCE MARCH 2000.
Associate General Counsel of the Manager, and an officer of 24 investment
companies (comprised of 84 portfolios) managed by the Manager. He is 38 years
old and has been an employee of the Manager since October 1990.
MICHAEL A. ROSENBERG, ASSISTANT SECRETARY SINCE MARCH 2000.
Associate General Counsel of the Manager, and an officer of 93 investment
companies (comprised of 198 portfolios) managed by the Manager. He is 43 years
old and has been an employee of the Manager since October 1991.
JAMES WINDELS, TREASURER SINCE NOVEMBER 2001.
Director - Mutual Fund Accounting of the Manager, and an officer of 96
investment companies (comprised of 205 portfolios) managed by the Manager. He is
44 years old and has been an employee of the Manager since April 1985.
MICHAEL CONDON, ASSISTANT TREASURER SINCE MARCH 2000.
Senior Treasury Manager of the Manager, and an officer of 37 investment
companies (comprised of 78 portfolios) managed by the Manager. He is 41 years
old and has been an employee of the Manager since August 1984.
KENNETH J. SANDGREN, ASSISTANT TREASURER SINCE NOVEMBER 2001.
Mutual Funds Tax Director of the Manager, and an officer of 96 investment
companies (comprised of 205 portfolios) managed by the Manager. He is 48 years
old and has been an employee of the Manager since June 1993.
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 91 investment
companies (comprised of 200 portfolios) managed by the Manager. He is 32 years
old and has been an employee of the Distributor since October 1998. Prior to
joining the Distributor, he was a Vice President of Compliance Data Center, Inc.
The Fund
NOTES
For More Information
Dreyfus BASIC
Massachusetts Municipal
Money Market Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
To obtain information:
BY TELEPHONE
Call 1-800-645-6561
BY MAIL Write to:
The Dreyfus Family of Funds
144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request
to info@dreyfus.com
ON THE INTERNET Information
can be viewed online or
downloaded from:
http://www.dreyfus.com
(c) 2003 Dreyfus Service Corporation 715AR0603
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. 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 controls over
financial reporting that occurred during the Registrant's most recently ended
fiscal half-year that has materially affected, or is reasonably likely to
materially affect, the Registrant's internal control over financial
reporting.
ITEM 10. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications of principal executive and principal financial
officers as required by Rule 30a-2(a) under the Investment Company Act of
1940.
(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.
[NAME OF FUND]
By: /S/STEPHEN E. CANTER
-----------------------
Stephen E. Canter
Chief Executive Officer
Date: September 3, 2003
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/STEPHEN E. CANTER
-----------------------
Stephen E. Canter
Chief Executive Officer
Date: September 3, 2003
By: /S/JAMES WINDELS
-----------------------
James Windels
Chief Financial Officer
Date: September 3, 2003
EXHIBIT INDEX
(a)(2) Certifications of principal executive and principal
financial officers as required by Rule 30a-2(a) under the
Investment Company Act of 1940. (EX-99.CERT)
(b) Certification of principal executive and principal
financial officers as required by Rule 30a-2(b) under the
Investment Company Act of 1940. (EX-99.906CERT)