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
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811-6377
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DREYFUS MUNICIPAL FUNDS, INC.
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(Exact name of Registrant as specified in charter)
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c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
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(Address of principal executive offices) (Zip code)
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Janette E. Farragher, Esq.
200 Park Avenue
New York, New York 10166
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(Name and address of agent for service)
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Registrant's telephone number, including area code:
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(212) 922-6000
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Date of fiscal year end:
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8/31
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Date of reporting period:
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2/29/12
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FORM N-CSR
Item 1. Reports to Stockholders.
Save time. Save paper. View your next shareholder report online as soon as its available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. Its simple and only takes a few minutes.
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
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Contents
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THE FUND
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2
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A Letter from the Chairman and CEO
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3
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Discussion of Fund Performance
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6
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Understanding Your Funds Expenses
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6
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Comparing Your Funds Expenses With Those of Other Funds
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7
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Statement of Investments
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15
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Statement of Assets and Liabilities
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16
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Statement of Operations
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17
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Statement of Changes in Net Assets
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18
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Financial Highlights
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19
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Notes to Financial Statements
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26
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Information About the Renewal of the Funds Management Agreement
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FOR MORE INFORMATION
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Back Cover
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Dreyfus BASIC
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Municipal Money
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Market Fund
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The Fund
A LETTER FROM THE CHAIRMAN AND CEO
Dear Shareholder:
We present to you this semiannual report for Dreyfus BASIC Municipal Money Market Fund, covering the six-month period from September 1, 2011, through February 29, 2012. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
U.S. financial markets encountered heightened volatility at the start of the reporting period when investors fled riskier assets due to adverse macroeconomic developments ranging from an unprecedented downgrade of long-term U.S. debt securities to the resurgence of a sovereign debt crisis in Europe.These factors triggered a rally among traditional safe havens, such as U.S. government securities. Better economic news derailed the fixed-income rally in October, but government bond yields continued to trend downward and prices rose over much of the remainder of the reporting period. In the midst of this turmoil affecting longer-term bonds, money market instruments remained stable and anchored near zero percent, as the Federal Reserve Board continued to maintain its target for short-term interest rates at historically low levels.
Our economic forecast calls for faster U.S. GDP growth in 2012 than in 2011, and we expect the United States to continue to post better economic data than most of the rest of the developed world.An aggressively accommodative monetary policy, pent-up demand in several industry groups and gradual improvement in housing prices appear likely to offset risks stemming from the ongoing European debt crisis and volatile energy prices. As always, we encourage you to talk with your financial adviser about how these developments may affect your investments.
Thank you for your continued confidence and support.
Jonathan R. Baum
Chairman and Chief Executive Officer
The Dreyfus Corporation
March 15, 2012
2
DISCUSSION OF FUND PERFORMANCE
For the period of September 1, 2011, through February 29, 2012, as provided by Colleen Meehan, Senior Portfolio Manager
Fund and Market Performance Overview
For the six-month period ended February 29, 2012, Dreyfus BASIC Municipal Money Market Fund produced an annualized yield of 0.00%. Taking into account the effects of compounding, the fund produced an annualized effective yield of 0.00%.
1
Despite heightened volatility among stocks and bonds during the reporting period stemming from changing economic conditions and shifting investor sentiment, tax-exempt money market yields remained stable at historically low levels as short-term interest rates were unchanged despite a stronger U.S. economy.
The Funds Investment Approach
The fund seeks as high a level of current income exempt from federal income taxes as is consistent with the preservation of capital and the maintenance of liquidity.To pursue its goal, the fund normally invests substantially all of its assets in short-term, high-quality municipal obligations that provide income exempt from federal income taxes. The fund may also invest in high-quality, short-term structured notes, which are derivative instruments whose value is tied to underlying municipal obligations.
Although the fund seeks to provide income exempt from federal income taxes, interest from some of its holdings may be subject to the federal alternative minimum tax. In addition, the fund may invest temporarily in high-quality, taxable money market instruments when acceptable municipal obligations are not available for investment.
Yields Steady Despite Shifting Economic Sentiment
The reporting period began in the midst of heightened volatility in most financial markets, as investors responded nervously to several adverse
TheFund
3
DISCUSSION OF FUND PERFORMANCE
(continued)
macroeconomic developments.Worries at the time included an ongoing sovereign debt crisis in Greece, which threatened to spread to other members of the European Union. Meanwhile, in the United States, bond rating agency Standard & Poors just weeks earlier had downgraded its credit rating on long-term U.S. debt securities, a move unprecedented in U.S. history. Finally, investors reacted negatively to disappointing releases of new U.S. economic data, which kindled concerns that the domestic economy might be headed for a double-dip recession.
Fortunately, many of these fears failed to materialize over the remainder of the reporting period.The macroeconomic picture brightened as the European Union took credible steps to address the regions problems, and the United States experienced accelerating GDP growth and declining unemployment. Despite these signs of improvement, the Federal Reserve Board (the Fed) maintained its longstanding policy stance, leaving the overnight federal funds rate in a range between 0% and 0.25%. Consequently, municipal money market yields remained near zero percent.
As was the case earlier in 2011, the supply of newly issued municipal money market instruments remained relatively meager during the reporting period, in part due to a glut of issuance at the end of 2010 in advance of the expiration of federal subsidies. Subsequently, political pressure to reduce government spending and borrowing also dampened issuance volumes. Although the European debt crisis reduced the availability of the bank letters of credit that typically support short-term municipal borrowing, a rising volume of variable rate demand notes (VRDNs) has picked up much of the slack, providing municipalities with long-term financing at short-term rates. Meanwhile, demand remained steady from individuals and institutional investors, enabling yields on tax-exempt money market instruments to remain attractive relative to taxable instruments with comparable maturities. From a credit-quality perspective, state general funds have achieved consecutive quarters of growth in personal income tax and sales tax revenues, and many states and municipalities have reduced spending in order to balance their budgets for the next fiscal year.
4
A Credit-Conscious Investment Posture
In this environment, we continued to maintain a careful and well-researched approach to credit selection. We emphasized state general obligation bonds; essential service revenue bonds issued by water, sewer and electric enterprises; and certain local credits with strong financial positions and stable tax bases.We generally shied away from instruments issued by localities that depend heavily on state aid, and we maintained the funds weighted average maturity in a range that was roughly in line with industry averages.
Outlook Still Clouded by Economic Uncertainty
We are cautiously optimistic regarding the prospects for economic growth in 2012. The U.S. economy appears to have gained some momentum, particularly with respect to a recovering labor market. However, the outlook remains cloudy due to the persistence of the European debt crisis and uncertainty regarding the potential impact of recent international banking agreements on municipal financing costs. In addition, the Fed has signaled that it is prepared to maintain short-term interest rates near current levels through late 2014. With money market yields likely to remain near historical lows, we believe that the prudent course continues to be an emphasis on preservation of capital and liquidity.
March 15, 2012
An investment in the fund is not insured or guaranteed by the FDIC or any other government agency.Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
Short-term municipal securities holdings (as applicable), while rated in the highest rating category by one or more NRSRO (or unrated, if deemed of comparable quality by Dreyfus), involve credit and liquidity risks and risk of principal loss.
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1
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Annualized effective yield is based upon dividends declared daily and reinvested monthly. Past
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performance is no guarantee of future results.Yields fluctuate. Income may be subject to state and
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local taxes, and some income may be subject to the federal alternative minimum tax (AMT) for
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certain investors.Yields provided reflect the absorption of certain fund expenses by The Dreyfus
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Corporation, pursuant to an agreement in effect until such time as shareholders are given at least
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90 days notice and which Dreyfus has committed will remain in place until at least January 1,
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2013. Had these expenses not been absorbed, fund yields would have been lower, and in some
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cases, 7-day yields during the reporting period would have been negative.
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TheFund
5
UNDERSTANDING YOUR FUNDS EXPENSES
(Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your funds prospectus or talk to your financial adviser.
Review your funds expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus BASIC Municipal Money Market Fund from September 1, 2011 to February 29, 2012. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended February 29, 2012
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Expenses paid per $1,000
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$
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1.09
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Ending value (after expenses)
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$
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1,000.00
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COMPARING YOUR FUNDS EXPENSES
WITH THOSE OF OTHER FUNDS
(Unaudited)
Using the SECs method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your funds expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment
assuming a hypothetical 5% annualized return for the six months ended February 29, 2012
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Expenses paid per $1,000
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$
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1.11
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Ending value (after expenses)
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$
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1,023.77
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Expenses are equal to the fund's annualized expense ratio of .22%, multiplied by the average account value over the
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period, multiplied by 182/366 (to reflect the one-half year period).
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6
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STATEMENT OF INVESTMENTS
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February 29, 2012 (Unaudited)
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Short-Term
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Coupon
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Maturity
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Principal
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Investments99.9%
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Rate (%)
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Date
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Amount ($)
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Value ($)
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California7.7%
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California Pollution Control
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Financing Authority, SWDR (Bay
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Counties Waste Services, Inc.
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Project) (LOC; Comerica Bank)
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0.20
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3/7/12
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3,270,000
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a
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3,270,000
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California Pollution Control
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Financing Authority, SWDR
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(Metropolitan Recycling
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Corporation Project)
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(LOC; Comerica Bank)
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0.20
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3/7/12
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2,285,000
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a
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2,285,000
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California Statewide Communities
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Development Authority,
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Revenue, CP (Kaiser Permanente)
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0.23
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3/27/12
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2,000,000
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2,000,000
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California Statewide Communities
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Development Authority,
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Revenue, CP (Kaiser Permanente)
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0.25
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5/24/12
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2,000,000
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2,000,000
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Colorado2.8%
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Colorado,
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Education Loan Program
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Revenue, TRAN
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2.00
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6/29/12
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2,000,000
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2,012,243
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JPMorgan Chase Putters/Drivers
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Trust (Series 4024) (Colorado,
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General Fund TRAN) (Liquidity
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Facility; JPMorgan Chase Bank)
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0.13
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3/1/12
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1,500,000
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a,b,c
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1,500,000
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Florida2.0%
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Hillsborough County School Board,
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COP (Master Lease Purchase
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Agreement) (LOC; Wells Fargo Bank)
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0.15
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3/1/12
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1,520,000
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a
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1,520,000
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Jacksonville,
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Educational Facilities
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Revenue (Edward Waters
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College Project) (LOC;
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Wells Fargo Bank)
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0.30
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3/7/12
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1,000,000
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a
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1,000,000
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Georgia1.6%
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Atlanta,
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Airport Revenue, CP (LOC;
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Wells Fargo Bank)
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0.18
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4/17/12
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2,000,000
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2,000,000
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Illinois.6%
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Illinois Development Finance
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Authority, Revenue (Park Ridge
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Youth Campus Project) (LOC;
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Bank of America)
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1.58
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3/7/12
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800,000
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a
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800,000
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TheFund
7
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
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Short-Term
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Coupon
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Maturity
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Principal
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Investments (continued)
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Rate (%)
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Date
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Amount ($)
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Value ($)
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Indiana4.0%
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Indiana Health Facility Financing
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Authority, Hospital
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Improvement Revenue, Refunding
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(Community Hospitals Projects)
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(P-FLOATS Series MT-662)
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(Liquidity Facility; Bank of America
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and LOC; Bank of America)
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0.47
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3/7/12
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4,960,000
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a,b,c
|
4,960,000
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Iowa4.0%
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Iowa Finance Authority,
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SWDR (MidAmerican
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Energy Project)
|
0.18
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3/7/12
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5,000,000
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a
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5,000,000
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Louisiana11.7%
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Ascension Parish,
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Revenue (BASF
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Corporation Project)
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0.29
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3/7/12
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2,800,000
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a,d
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2,800,000
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Louisiana Public Facilities
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Authority, Revenue (Air Products
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and Chemicals Project)
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0.11
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3/1/12
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3,000,000
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a,d
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3,000,000
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Louisiana Public Facilities
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Authority, Revenue (Air
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Products and Chemicals Project)
|
0.11
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3/1/12
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2,000,000
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a,d
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2,000,000
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Louisiana Public Facilities
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Authority, Revenue (Tiger
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Athletic Foundation Project)
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(LOC; FHLB)
|
0.16
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3/7/12
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4,600,000
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a
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4,600,000
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Saint James Parish,
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PCR, Refunding (Texaco
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Project) (LOC; Chevron Corp.)
|
0.10
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3/1/12
|
2,000,000
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a,d
|
2,000,000
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Maryland1.1%
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|
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Maryland Economic Development
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Corporation, Revenue
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(Chesapeake Advertising
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|
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Facility) (LOC; M&T Trust)
|
0.41
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3/7/12
|
1,330,000
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a
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1,330,000
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Michigan4.8%
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Michigan Finance Authority,
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|
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Unemployment Obligation
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Assessment Revenue
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(LOC; Citibank NA)
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0.16
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3/7/12
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3,000,000
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a
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3,000,000
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University of Michigan,
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CP
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0.15
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3/5/12
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3,000,000
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3,000,000
|
8
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Short-Term
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Coupon
|
Maturity
|
Principal
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Investments (continued)
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Rate (%)
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Date
|
Amount ($)
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Value ($)
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Minnesota4.5%
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University of Minnesota,
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CP
|
0.13
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4/4/12
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2,500,000
|
|
2,500,000
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Waite Park,
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|
|
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IDR (McDowall Company Project)
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|
|
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(LOC; U.S. Bank NA)
|
0.34
|
3/7/12
|
3,020,000
|
a,d
|
3,020,000
|
Mississippi2.4%
|
|
|
|
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|
Mississippi Business Finance
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|
|
|
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|
Corporation, Gulf
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|
|
|
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Opportunity Zone IDR
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|
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|
|
|
(Chevron U.S.A. Inc. Project)
|
0.08
|
3/1/12
|
3,000,000
|
a,d
|
3,000,000
|
Missouri2.5%
|
|
|
|
|
|
Missouri Development Finance
|
|
|
|
|
|
Board, LR, CP (LOC: U.S. Bank NA)
|
0.12
|
4/3/12
|
3,133,000
|
|
3,133,000
|
New Hampshire1.0%
|
|
|
|
|
|
New Hampshire Business Finance
|
|
|
|
|
|
Authority, Industrial Facility
|
|
|
|
|
|
Revenue (Luminescent Systems,
|
|
|
|
|
|
Inc. Issue) (LOC; HSBC Bank USA)
|
0.40
|
3/7/12
|
1,200,000
|
a,d
|
1,200,000
|
New Jersey.8%
|
|
|
|
|
|
Woodbridge Township Board of
|
|
|
|
|
|
Education, Temporary Notes
|
1.00
|
2/6/13
|
1,000,000
|
|
1,004,647
|
New York7.8%
|
|
|
|
|
|
Metropolitan Transportation
|
|
|
|
|
|
Authority, Transportation
|
|
|
|
|
|
Revenue, CP
|
|
|
|
|
|
(LOC; Citibank NA)
|
0.11
|
4/5/12
|
4,000,000
|
|
4,000,000
|
New York State Dormitory
|
|
|
|
|
|
Authority, Revenue (Oxford
|
|
|
|
|
|
University Press, Inc.) (LOC;
|
|
|
|
|
|
Barclays Bank PLC)
|
0.09
|
3/1/12
|
1,500,000
|
a
|
1,500,000
|
Syracuse Industrial Development
|
|
|
|
|
|
Agency, Civic Facility Revenue
|
|
|
|
|
|
(Community Development
|
|
|
|
|
|
PropertiesVanderbilt/Larned
|
|
|
|
|
|
Project) (LOC; M&T Trust)
|
0.21
|
3/7/12
|
2,190,000
|
a
|
2,190,000
|
Triborough Bridge and Tunnel
|
|
|
|
|
|
Authority, General Revenue
|
|
|
|
|
|
(MTA Bridges and Tunnels)
|
|
|
|
|
|
(LOC; U.S. Bank NA)
|
0.08
|
3/1/12
|
2,000,000
|
a
|
2,000,000
|
TheFund
9
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
Short-Term
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
North Carolina6.2%
|
|
|
|
|
|
North Carolina Capital Facilities
|
|
|
|
|
|
Finance Agency, Educational
|
|
|
|
|
|
Facilities Revenue (High Point
|
|
|
|
|
|
University Project) (LOC;
|
|
|
|
|
|
Branch Banking and Trust Co.)
|
0.16
|
3/7/12
|
3,700,000
|
a
|
3,700,000
|
North Carolina Medical Care
|
|
|
|
|
|
Commission, Health Care Facility
|
|
|
|
|
|
Revenue (MERLOTS-Series A39)
|
|
|
|
|
|
(Providence Place Retirement
|
|
|
|
|
|
Community Nursing Home Project)
|
|
|
|
|
|
(Liquidity Facility; Wells Fargo
|
|
|
|
|
|
Bank and LOC; GNMA)
|
0.14
|
3/7/12
|
3,930,000
|
a,b,c
|
3,930,000
|
Ohio3.0%
|
|
|
|
|
|
Clark County,
|
|
|
|
|
|
Solid Waste Facilities Revenue
|
|
|
|
|
|
(Eastwood Dairy LLC Project)
|
|
|
|
|
|
(LOC; Wells Fargo Bank)
|
0.35
|
3/7/12
|
2,750,000
|
a,d
|
2,750,000
|
Union Township,
|
|
|
|
|
|
GO Notes, BAN (Various Purpose)
|
1.13
|
9/12/12
|
1,000,000
|
|
1,002,511
|
Pennsylvania7.7%
|
|
|
|
|
|
Allegheny County,
|
|
|
|
|
|
GO Notes, TRAN
|
2.00
|
7/16/12
|
1,600,000
|
|
1,610,706
|
Jackson Township Industrial
|
|
|
|
|
|
Development Authority, Revenue
|
|
|
|
|
|
(Regupol America LLC Project)
|
|
|
|
|
|
(LOC; PNC Bank NA)
|
0.20
|
3/7/12
|
1,850,000
|
a,d
|
1,850,000
|
Lancaster County Hospital
|
|
|
|
|
|
Authority, Health Center
|
|
|
|
|
|
Revenue (LUTHERCARE Project)
|
|
|
|
|
|
(LOC; M&T Trust)
|
0.16
|
3/7/12
|
1,047,000
|
a
|
1,047,000
|
Pennsylvania Economic Development
|
|
|
|
|
|
Financing Authority, Revenue
|
|
|
|
|
|
(Evergreen Community Power
|
|
|
|
|
|
Facility) (LOC; M&T Trust)
|
0.31
|
3/7/12
|
5,000,000
|
a
|
5,000,000
|
South Carolina1.8%
|
|
|
|
|
|
Charleston County School District,
|
|
|
|
|
|
GO Notes, TAN
|
2.50
|
4/1/12
|
400,000
|
|
400,782
|
South Carolina Association of
|
|
|
|
|
|
Governmental Organizations, COP
|
1.50
|
4/13/12
|
1,800,000
|
|
1,802,673
|
10
|
|
|
|
|
|
Short-Term
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
Tennessee4.3%
|
|
|
|
|
|
Clarksville Public Building
|
|
|
|
|
|
Authority, Pooled Financing
|
|
|
|
|
|
Revenue (Tennessee
|
|
|
|
|
|
Municipal Bond Fund)
|
|
|
|
|
|
(LOC; Bank of America)
|
0.25
|
3/1/12
|
2,000,000
|
a
|
2,000,000
|
Sevier County Public Building
|
|
|
|
|
|
Authority, Local Government
|
|
|
|
|
|
Public Improvement Revenue
|
|
|
|
|
|
(LOC; Bank of America)
|
0.21
|
3/7/12
|
3,315,000
|
a
|
3,315,000
|
Texas8.5%
|
|
|
|
|
|
El Paso Independent School
|
|
|
|
|
|
District, Unlimited Tax School
|
|
|
|
|
|
Building Bonds (Liquidity
|
|
|
|
|
|
Facility; JPMorgan Chase Bank
|
|
|
|
|
|
and LOC; Permanent School Fund
|
|
|
|
|
|
Guarantee Program)
|
0.20
|
3/7/12
|
3,750,000
|
|
3,750,000
|
Greenville Industrial Development
|
|
|
|
|
|
Corporation, IDR (Woodgrain
|
|
|
|
|
|
Project) (LOC; General
|
|
|
|
|
|
Electric Capital Corp.)
|
0.19
|
3/7/12
|
3,225,000
|
a,d
|
3,225,000
|
Jefferson County Industrial
|
|
|
|
|
|
Development Corporation,
|
|
|
|
|
|
Hurricane Ike Disaster Area
|
|
|
|
|
|
Revenue (Jefferson Refinery, L.L.C.
|
|
|
|
|
|
Project) (LOC; Branch Banking
|
|
|
|
|
|
and Trust Co.)
|
0.50
|
3/29/12
|
2,900,000
|
|
2,900,000
|
Northside Independent School
|
|
|
|
|
|
District, GO Notes (LOC;
|
|
|
|
|
|
Permanent School Fund
|
|
|
|
|
|
Guarantee Program)
|
3.50
|
8/15/12
|
500,000
|
|
507,463
|
Virginia1.5%
|
|
|
|
|
|
Hanover County Industrial
|
|
|
|
|
|
Development Authority, IDR
|
|
|
|
|
|
(Virginia Iron and Metal
|
|
|
|
|
|
Company Inc., Project) (LOC;
|
|
|
|
|
|
Branch Banking and Trust Co.)
|
0.23
|
3/7/12
|
1,910,000
|
a,d
|
1,910,000
|
Washington3.1%
|
|
|
|
|
|
King County,
|
|
|
|
|
|
GO Notes, Refunding
|
2.50
|
6/1/12
|
1,655,000
|
|
1,664,144
|
TheFund
11
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
|
Short-Term
|
Coupon
|
Maturity
|
Principal
|
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
|
Value ($)
|
Washington (continued)
|
|
|
|
|
|
|
Port of Chehalis Industrial
|
|
|
|
|
|
|
Development Corporation,
|
|
|
|
|
|
|
Industrial Revenue (JLT
|
|
|
|
|
|
|
Holding, LLC Project)
|
|
|
|
|
|
|
(LOC; Wells Fargo Bank)
|
0.30
|
3/7/12
|
2,215,000
|
|
a,d
|
2,215,000
|
Wisconsin4.5%
|
|
|
|
|
|
|
Waupaca,
|
|
|
|
|
|
|
IDR (Gusmer Enterprises, Inc.
|
|
|
|
|
|
|
Project) (LOC; Wells Fargo Bank)
|
0.35
|
3/7/12
|
2,680,000
|
|
a,d
|
2,680,000
|
Wisconsin Health and Educational
|
|
|
|
|
|
|
Facilities Authority, Revenue
|
|
|
|
|
|
|
(Mequon Jewish Campus, Inc.
|
|
|
|
|
|
|
Project) (LOC; JPMorgan
|
|
|
|
|
|
|
Chase Bank)
|
0.21
|
3/7/12
|
2,955,000
|
|
a
|
2,955,000
|
|
Total Investments
(cost $123,840,169)
|
|
|
99.9
|
%
|
|
123,840,169
|
Cash and Receivables (Net)
|
|
|
.1
|
%
|
|
173,169
|
Net Assets
|
|
|
100.0
|
%
|
|
124,013,338
|
|
a Variable rate demand noterate shown is the interest rate in effect at February 29, 2012. Maturity date represents
|
the next demand date, or the ultimate maturity date if earlier.
|
b Securities exempt from registration under Rule 144A of the Securities Act of 1933.These securities may be resold in
|
transactions exempt from registration, normally to qualified institutional buyers.At February 29, 2012, these
|
securities amounted to $10,390,000 or 8.4% of net assets.
|
c The fund does not directly own the municipal security indicated; the fund owns an interest in a special purpose entity
|
that, in turn, owns the underlying municipal security.The special purpose entity permits the fund to own interests in
|
underlying assets, but in a manner structured to provide certain advantages not inherent in the underlying bonds (e.g.,
|
enhanced liquidity, yields linked to short-term rates).
|
d At February 29, 2012, the fund had $31,650,000 or 25.5% of net assets invested in securities whose payment of
|
principal and interest is dependent upon revenues generated from industrial revenue.
|
12
|
|
|
|
Summary of Abbreviations
|
|
|
|
ABAG
|
Association of Bay Area Governments
|
ACA
|
American Capital Access
|
AGC
|
ACE Guaranty Corporation
|
AGIC
|
Asset Guaranty Insurance Company
|
AMBAC
|
American Municipal Bond
|
ARRN
|
Adjustable Rate
|
|
Assurance Corporation
|
|
Receipt Notes
|
BAN
|
Bond Anticipation Notes
|
BPA
|
Bond Purchase Agreement
|
CIFG
|
CDC Ixis Financial Guaranty
|
COP
|
Certificate of Participation
|
CP
|
Commercial Paper
|
DRIVERS
|
Derivative Inverse
|
|
|
|
Tax-Exempt Receipts
|
EDR
|
Economic Development
|
EIR
|
Environmental Improvement
|
|
Revenue
|
|
Revenue
|
FGIC
|
Financial Guaranty
|
FHA
|
Federal Housing
|
|
Insurance Company
|
|
Administration
|
FHLB
|
Federal Home
|
FHLMC
|
Federal Home Loan Mortgage
|
|
Loan Bank
|
|
Corporation
|
FNMA
|
Federal National
|
GAN
|
Grant Anticipation Notes
|
|
Mortgage Association
|
|
|
GIC
|
Guaranteed Investment
|
GNMA
|
Government National Mortgage
|
|
Contract
|
|
Association
|
GO
|
General Obligation
|
HR
|
Hospital Revenue
|
IDB
|
Industrial Development Board
|
IDC
|
Industrial Development Corporation
|
IDR
|
Industrial Development Revenue
|
LOC
|
Letter of Credit
|
LOR
|
Limited Obligation Revenue
|
LR
|
Lease Revenue
|
MERLOTS
|
Municipal Exempt Receipt
|
MFHR
|
Multi-Family Housing
|
|
Liquidity Option Tender
|
|
Revenue
|
MFMR
|
Multi-Family Mortgage Revenue
|
PCR
|
Pollution Control Revenue
|
PILOT
|
Payment in Lieu of Taxes
|
P-FLOATS
Puttable Floating Option
|
|
|
|
Tax-Exempt Receipts
|
PUTTERS
|
Puttable Tax-Exempt Receipts
|
RAC
|
Revenue Anticipation Certificates
|
RAN
|
Revenue Anticipation Notes
|
RAW
|
Revenue Anticipation Warrants
|
ROCS
|
Reset Options Certificates
|
RRR
|
Resources Recovery Revenue
|
SAAN
|
State Aid Anticipation Notes
|
SBPA
|
Standby Bond Purchase Agreement
|
SFHR
|
Single Family Housing Revenue
|
SFMR
|
Single Family Mortgage Revenue
|
SONYMA
|
State of New York Mortgage Agency
|
SWDR
|
Solid Waste Disposal Revenue
|
TAN
|
Tax Anticipation Notes
|
TAW
|
Tax Anticipation Warrants
|
TRAN
|
Tax and Revenue Anticipation Notes
|
XLCA
|
XL Capital Assurance
|
TheFund
13
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
|
Summary of Combined Ratings (Unaudited)
|
|
|
Fitch
|
|
or
|
Moodys
|
or
|
Standard & Poors
|
Value (%)
|
F1
|
+,F1
|
|
VMIG1,MIG1,P1
|
|
SP1+,SP1,A1+,A1
|
87.8
|
AAA,AA,A
e
|
|
|
Aaa,Aa,A
e
|
|
AAA,AA,A
e
|
3.0
|
Not Rated
f
|
|
|
Not Rated
f
|
|
Not Rated
f
|
9.2
|
|
|
|
|
|
|
100.0
|
|
Based on total investments.
|
e Notes which are not F, MIG and SP rated are represented by bond ratings of the issuers.
|
f Securities which, while not rated by Fitch, Moodys and Standard & Poors, have been determined by the Manager to
|
be of comparable quality to those rated securities in which the fund may invest.
|
See notes to financial statements.
14
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2012 (Unaudited)
|
|
|
|
Cost
|
Value
|
Assets ($):
|
|
|
Investments in securitiesSee Statement of Investments
|
123,840,169
|
123,840,169
|
Cash
|
|
133,234
|
Interest receivable
|
|
80,224
|
Prepaid expenses
|
|
11,432
|
|
|
124,065,059
|
Liabilities ($):
|
|
|
Due to The Dreyfus Corporation and affiliatesNote 2(b)
|
|
10,971
|
Accrued expenses
|
|
40,750
|
|
|
51,721
|
Net Assets ($)
|
|
124,013,338
|
Composition of Net Assets ($):
|
|
|
Paid-in capital
|
|
124,013,338
|
Net Assets ($)
|
|
124,013,338
|
Shares Outstanding
|
|
|
(3 billion shares of $.001 par value Common Stock authorized)
|
|
124,013,338
|
Net Asset Value,
offering and redemption price per share ($)
|
|
1.00
|
|
See notes to financial statements.
|
|
|
TheFund
15
|
|
|
STATEMENT OF OPERATIONS
|
|
Six Months Ended February 29, 2012 (Unaudited)
|
|
|
|
|
|
Investment Income ($):
|
|
Interest Income
|
148,299
|
Expenses:
|
|
Management feeNote 2(a)
|
334,400
|
Shareholder servicing costsNote 2(b)
|
46,663
|
Professional fees
|
28,017
|
Custodian feesNote 2(b)
|
12,989
|
Registration fees
|
9,703
|
Directors fees and expensesNote 2(c)
|
7,522
|
Prospectus and shareholders reports
|
3,955
|
Miscellaneous
|
10,931
|
Total Expenses
|
454,180
|
Lessreduction in management fee due to undertakingNote 2(a)
|
(153,212
)
|
Lessreduction in expenses due to undertakingNote 2(a)
|
(152,669
)
|
Lessreduction in fees due to earnings creditsNote 2(b)
|
(9
)
|
Net Expenses
|
148,290
|
Investment IncomeNet, representing net increase
|
|
in net assets resulting from operations
|
9
|
|
See notes to financial statements.
|
|
16
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
Six Months Ended
|
|
|
February 29, 2012
|
Year Ended
|
|
(Unaudited)
|
August 31, 2011
|
Operations ($):
|
|
|
Investment Income-Net, representing net increase
|
|
|
in net assets resulting from operations
|
9
|
247
|
Dividends to Shareholders from ($):
|
|
|
Investment incomenet
|
(9
)
|
(247
)
|
Capital Stock Transactions
($1.00 per share):
|
|
|
Net proceeds from shares sold
|
8,626,646
|
48,919,901
|
Dividends reinvested
|
9
|
243
|
Cost of shares redeemed
|
(33,339,406
)
|
(86,388,357
)
|
Increase (Decrease) in Net Assets
|
|
|
from Capital Stock Transactions
|
(24,712,751
)
|
(37,468,213
)
|
Total Increase (Decrease) in Net Assets
|
(24,712,751
)
|
(37,468,213
)
|
Net Assets ($):
|
|
|
Beginning of Period
|
148,726,089
|
186,194,302
|
End of Period
|
124,013,338
|
148,726,089
|
|
See notes to financial statements.
|
|
|
TheFund
17
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
February 29, 2012
|
|
|
|
Year Ended August 31,
|
|
|
(Unaudited)
|
|
2011
|
|
2010
|
|
2009
|
2008
|
2007
|
Per Share Data ($):
|
|
|
|
|
|
|
|
|
|
Net asset value,
|
|
|
|
|
|
|
|
|
|
beginning of period
|
1.00
|
|
1.00
|
|
1.00
|
|
1.00
|
1.00
|
1.00
|
Investment Operations:
|
|
|
|
|
|
|
|
|
|
Investment income—net
|
.000
|
a
|
.000
|
a
|
.000
|
a
|
.011
|
.025
|
.033
|
Distributions:
|
|
|
|
|
|
|
|
|
|
Dividends from
|
|
|
|
|
|
|
|
|
|
investment income—net
|
(.000)
|
a
|
(.000)
|
a
|
(.000)
|
a
|
(.011)
|
(.025)
|
(.033)
|
Net asset value, end of period
|
1.00
|
|
1.00
|
|
1.00
|
|
1.00
|
1.00
|
1.00
|
Total Return (%)
|
.00
|
b,c
|
.00
|
b
|
.01
|
|
1.12
|
2.50
|
3.32
|
Ratios/Supplemental Data (%):
|
|
|
|
|
|
|
|
|
|
Ratio of total expenses
|
|
|
|
|
|
|
|
|
|
to average net assets
|
.68
|
c
|
.67
|
|
.62
|
|
.65
|
.60
|
.60
|
Ratio of net expenses
|
|
|
|
|
|
|
|
|
|
to average net assets
|
.22
|
c
|
.36
|
|
.40
|
|
.44
|
.43
|
.45
|
Ratio of net investment income
|
|
|
|
|
|
|
|
|
|
to average net assets
|
.00
|
b,c
|
.00
|
b
|
.02
|
|
1.15
|
2.46
|
3.27
|
Net Assets, end of period
|
|
|
|
|
|
|
|
|
|
($ x 1,000)
|
124,013 148,726
|
|
186,194
|
|
298,064
|
360,651
|
339,372
|
|
|
a
|
Amount represents less than $.001 per share.
|
b
|
Amount represents less than .01%.
|
c
|
Annualized.
|
See notes to financial statements.
18
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus BASIC Municipal Money Market Fund (the “fund”) is a separate non-diversified series of Dreyfus Municipal Funds, Inc. (the “Company”) which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering four series including the fund.The fund’s investment objective is to seek as high a level of current income exempt from federal income tax as is consistent with the preservation of capital and maintenance of liquidity.The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Manager, is the distributor of the fund’s shares, which are sold without a sales charge.
It is the fund’s policy to maintain a continuous net asset value per share of $1.00; the fund has adopted certain investment, portfolio valuation and dividend and distribution policies to enable it to do so.There is no assurance, however, that the fund will be able to maintain a stable net asset value per share of $1.00.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates.
TheFund
19
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
The Company enters into contracts that contain a variety of indemnifications.The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation:
Investments in securities are valued at amortized cost in accordance with Rule 2a-7 of the Act, which has been determined by the Board of Directors to represent the fair value of the fund’s investments.
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value.This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:
Level 1
—unadjusted quoted prices in active markets for identical investments.
Level 2
—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3
—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
20
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, money market securities are valued using amortized cost, in accordance with rules under the Act. Generally, amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of February 29, 2012 in valuing the fund’s investments:
|
|
|
Short-Term
|
Valuation Inputs
|
Investments ($)
†
|
Level 1—Unadjusted Quoted Prices
|
—
|
Level 2—Other Significant Observable Inputs
|
123,840,169
|
Level 3—Significant Unobservable Inputs
|
—
|
Total
|
123,840,169
|
|
† See Statement of Investments for additional detailed categorizations.
|
|
In May 2011, FASB issued Accounting Standards Update (“ASU”) No. 2011-04 “Amendments to Achieve Common FairValue Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards (“IFRS”)” (“ASU 2011-04”). ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between GAAP and IFRS. ASU 2011-04 will require reporting entities to disclose the following information for fair value measurements categorized within Level 3 of the fair value hierarchy: quantitative information about the unobservable inputs used in the fair value measurement, the valuation processes used by the reporting entity and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value
TheFund
21
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
measurements.The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU 2011-04 and its impact on the financial statements.
(b) Securities transactions and investment income:
Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Cost of investments represents amortized cost.
(c) Dividends to shareholders:
It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”).To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains.
(d) Federal income taxes:
It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended February 29, 2012, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period, the fund did not incur any interest or penalties.
Each of the tax years in the three-year period ended August 31, 2011 remains subject to examination by the Internal Revenue Service and state taxing authorities.
22
The tax character of distributions paid to shareholders during the fiscal year ended August 31, 2011 was as follows: tax exempt income $247. The tax character of current year distributions will be determined at the end of the current fiscal year.
At February 29, 2012, 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—Management Fee and Other Transactions With Affiliates:
(a)
Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .50% of the value of the fund’s average daily net assets and is payable monthly.The Manager has agreed to waive receipt of its fees and/or assume the expenses of the fund so that annual fund operating expenses do not exceed .45% of the value of the fund’s average daily net assets.The Manager may terminate this agreement upon at least 90 days notice to shareholders, but has committed not to do so until at least January 1, 2013.The reduction in management fee, pursuant to the undertaking, amounted to $153,212 during the period ended February 29, 2012.
The Manager has undertaken to waive receipt of the management fee and/or reimburse operating expenses in order to facilitate a daily yield at or above a certain level which may change from time to time.This undertaking is voluntary and not contractual, and may be terminated at any time. The reduction in expenses, pursuant to the undertaking, amounted to $152,669 during the period ended February 29, 2012.
(b)
Under the Shareholder Services Plan, the fund reimburses the Distributor an amount not to exceed an annual rate of .25% of the value of the fund’s average daily net assets for certain allocated expenses of providing personal services and/or maintaining shareholder accounts. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the
TheFund
23
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
fund and providing reports and other information, and services related to the maintenance of shareholder accounts. During the period ended February 29, 2012, the fund was charged $34,307 pursuant to the Shareholder Services Plan.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended February 29, 2012, the fund was charged $8,284 pursuant to the transfer agency agreement, which is included in Shareholder servicing costs in the Statement of Operations.
The fund has arrangements with the custodian and cash management bank whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset custody and cash management fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations
The fund compensates The Bank of New York Mellon under a cash management agreement for performing cash management services related to fund subscriptions and redemptions. During the period ended February 29, 2012, the fund was charged $759 pursuant to the cash management agreement, which is included in Shareholder servicing costs in the Statement of Operations.These fees were partially offset by earnings credits of $9.
The fund also compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. During the period ended February 29, 2012, the fund was charged $12,989 pursuant to the custody agreement.
During the period ended February 29, 2012, the fund was charged $3,209 for services performed by the Chief Compliance Officer and his staff.
24
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $49,775, custodian fees $5,053, chief compliance officer fees $1,061 and transfer agency per account fees $3,200, which are offset against an expense reimbursement currently in effect in the amount of $48,118.
(c)
Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 3—Securities Transactions:
The fund is permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board of Directors.The procedures have been designed to ensure that any purchase or sale of securities by the fund from or to another fund or portfolio that are, or could be, considered an affiliate by virtue of having a common investment adviser (or affiliated investment adviser), common Directors and/or common officers, complies with Rule 17a-7 of the Act. During the period ended February 29, 2012, the fund engaged in purchases and sales of securities pursuant to Rule 17a-7 of the Act amounting to $23,695,000 and $36,350,000, respectively.
TheFund
25
INFORMATION ABOUT THE RENEWAL OF THE
FUND’S MANAGEMENT AGREEMENT
(Unaudited)
At a meeting of the fund’s Board of Directors held on November 7-8, 2011, the Board considered the renewal of the fund’s Management Agreement pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the “Agreement”).The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from Dreyfus representatives. In considering the renewal of the Agreement, the Board considered all factors that it believed to be relevant, including those discussed below.The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund.
The Board considered information previously provided to them in presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex, and Dreyfus representatives confirmed that there had been no material changes in this information. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex and Dreyfus’ corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each distribution channel, including the distribution channel(s) for the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements.The Board also considered Dreyfus’ extensive administrative, accounting, and compliance infrastructures.
26
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio.
The Board reviewed reports prepared by Lipper, Inc. (“Lipper”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended September 30, 2011, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Lipper as of September 30, 2011. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds.
The Board discussed the results of the comparisons and noted that the fund’s total return performance was above the Performance Group Median and the Performance Universe median for the various periods, except for the 1-year and 2-year periods. The Board also noted that the fund’s performance was one or two basis points lower than the applicable Performance Group median or Performance Universe median for the 1-year and 2-year periods.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons.They noted that the fund’s contractual management fee was at the Expense Group
TheFund
27
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
MANAGEMENT AGREEMENT (Unaudited)
(continued)
median, the fund’s actual management fee was above the Expense Group median and the Expense Universe median, and the fund’s actual total expenses were above the Expense Group median and the Expense Universe median.
The Board considered the duration and extent of the fee waiver/expense reimbursement undertaking by Dreyfus to support a minimum zero or positive daily yield, as applicable from time to time, in the historically low interest rate environment, and the Board noted the extent to which differences among the returns for the Performance Group funds might be attributable to similar undertakings.
Dreyfus representatives of Dreyfus reviewed with the Board the management or investment advisory fees paid to Dreyfus or its affiliates by funds in the same Lipper category as the fund (the “Similar Accounts”), and explained the nature of the Similar Accounts. Dreyfus representatives of Dreyfus noted that Dreyfus does not advise any separate accounts and/ or other types of client portfolios that are considered to have similar investment strategies and policies as the fund. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Accounts to evaluate the appropriateness and reasonableness of the fund’s management fee.
Analysis of Profitability and Economies of Scale.
Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and the resulting profitability percentage for managing the fund, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus. The Board also noted the expense limitation arrangement and its effect on Dreyfus’ profitability. The Board previously had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex.The
28
consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board’s counsel stated that the Board should consider the profitability analysis (1) as part of their evaluation of whether the fees under the Agreement bear a reasonable relationship to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Dreyfus representatives noted that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level.The Board also considered potential benefits to Dreyfus from acting as investment adviser and noted there were no soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
-
The Board concluded that the nature, extent and quality of the
services provided by Dreyfus are adequate and appropriate.
-
The Board was satisfied with the fund’s performance, in light of the
considerations described above.
-
The Board concluded that the fee paid to Dreyfus was reasonable in
light of the considerations described above.
TheFund
29
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
MANAGEMENT AGREEMENT (Unaudited)
(continued)
-
The Board determined that the economies of scale which may accrue
to Dreyfus and its affiliates in connection with the management of the
fund had been adequately considered by Dreyfus in connection with
the fee rate charged to the fund pursuant to the Agreement and that,
to the extent in the future it were determined that material
economies of scale had not been shared with the fund, the Board
would seek to have those economies of scale shared with the fund.
The Board considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year. In addition, it should be noted that the Board’s consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the same or similar arrangements in prior years.The Board determined that renewal of the Agreement was in the best interests of the fund and its shareholders.
30
Save time. Save paper. View your next shareholder report online as soon as its available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. Its simple and only takes a few minutes.
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
|
Contents
|
|
THE FUND
|
2
|
A Letter from the Chairman and CEO
|
3
|
Discussion of Fund Performance
|
6
|
Understanding Your Funds Expenses
|
6
|
Comparing Your Funds Expenses With Those of Other Funds
|
7
|
Statement of Investments
|
31
|
Statement of Assets and Liabilities
|
32
|
Statement of Operations
|
33
|
Statement of Changes in Net Assets
|
35
|
Financial Highlights
|
40
|
Notes to Financial Statements
|
50
|
Information About the Renewal of the Funds Management Agreement
|
|
FOR MORE INFORMATION
|
|
Back Cover
|
|
Dreyfus
|
AMT-Free Municipal Bond Fund
|
The Fund
A LETTER FROM THE CHAIRMAN AND CEO
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus AMT-Free Municipal Bond Fund, covering the six-month period from September 1, 2011, through February 29, 2012. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
Municipal bonds continued to benefit from positive supply-and-demand factors during the six-month reporting period, which enabled them to avoid some of the volatility affecting their taxable fixed-income counterparts as economic sentiment improved. The supply of newly issued tax-exempt bonds remained muted when issuers responded to political pressure by reducing spending and borrowing, while demand remained robust from individual and institutional investors seeking competitive after-tax yields in a low interest-rate environment. Consequently, municipal bonds produced higher total returns, on average, than most other fixed-income market sectors for the reporting period.
Our economic forecast calls for faster U.S. GDP growth in 2012 than in 2011, and we expect the United States to continue to post better economic data than most of the rest of the developed world.An aggressively accommodative monetary policy, pent-up demand in several industry groups and gradual improvement in housing prices appear likely to offset risks stemming from the ongoing European debt crisis and volatile energy prices. As always, we encourage you to talk with your financial adviser about how these developments may affect your investments.
Thank you for your continued confidence and support.
Jonathan R. Baum
Chairman and Chief Executive Officer
The Dreyfus Corporation
March 15, 2012
2
DISCUSSION OF FUND PERFORMANCE
For the period of September 1, 2011, through February 29, 2012, as provided by Steven Harvey and Daniel Rabasco, Primary Portfolio Managers
Fund and Market Performance Overview
For the six-month period ended February 29, 2012, Dreyfus AMT-Free Municipal Bond Funds Class A shares produced a total return of 6.91%, Class B shares returned 6.57%, Class C shares returned 6.52%, Class I shares returned 6.96% and Class Z shares returned 7.01%.
1
In comparison, the Barclays Municipal Bond Index (the Index), the funds benchmark, produced a total return of 5.67%.
2
Despite bouts of economic uncertainty during the reporting period, municipal bonds fared relatively well as long-term interest rates fell and a reduced supply of newly issued securities was met by robust investor demand.The funds returns were higher than its benchmark, primarily due to an emphasis on longer maturities that rallied when interest rates declined.
The Funds Investment Approach
The fund seeks as high a level of current income exempt from federal income tax as is consistent with the preservation of capital.
To pursue its goal, the fund normally invests substantially all of its assets in municipal bonds that provide income exempt from federal income tax. The fund also seeks to provide income exempt from the federal alternative minimum tax.
The fund invests at least 65% of its assets in municipal bonds with an A or higher credit rating, or the unrated equivalent as determined by Dreyfus.The fund may invest the remaining 35% of its assets in municipal bonds with a credit rating lower than A, including municipal bonds rated below investment grade (high yield or junk bonds), or the unrated equivalent as determined by Dreyfus.
The funds portfolio managers focus on identifying undervalued sectors and securities and minimize the use of interest rate forecasting. The portfolio managers select municipal bonds for the funds portfolio by:
TheFund
3
DISCUSSION OF FUND PERFORMANCE
(continued)
-
Actively trading among various sectors, such as pre-refunded,
general obligation and revenue, based on their apparent relative
values. The fund seeks to invest in several of these sectors.
Municipal Bonds Gained Value Amid Volatility
The reporting period began in the midst of heightened turmoil in the financial markets sparked by several macroeconomic developments. These included an unprecedented downgrade of one agencys credit-rating of long-term U.S. government debt, a sovereign debt crisis in Greece that threatened to spread to other members of the European Union and uncertainties regarding the strength and sustainability of the U.S. economic recovery. Sell-offs in stocks and higher yielding bonds were accompanied by a corresponding increase in demand for traditional safe havens, such as U.S. government securities. As a result, yields of longer-term bonds, including municipal securities, fell sharply and prices climbed.
Supply-and-demand forces also helped buoy municipal bond prices. New issuance volumes fell sharply in 2011 after a flood of new supply in late 2010, while political pressure also led to reduced spending and borrowing.Yet, investor demand remained steadily robust from individual and institutional investors seeking competitive levels of tax-exempt income in a low interest rate environment.
Although many states and municipalities have continued to struggle to bridge future budget shortfalls, tax receipts generally have trended higher, and many governments have cut spending, helping to relieve fiscal pressures.
Duration and Credit Selection Strategies Buoyed Results
The fund benefited during the reporting period from a relatively long average duration, expressed through an emphasis on AMT-free municipal bonds with maturities of 10 years or more.These credits occupied the sweet spot along the markets maturity spectrum during the reporting period. In addition, the fund achieved especially favorable results from revenue bonds, an area of particularly light new issuance. Underweighted exposure to escrowed bonds, which typically feature lower yields and shorter maturities, also bolstered the funds relative performance.
Strength in these areas was partly offset by our decision to sell some of the funds general obligation bonds that had reached richer valuations.
4
This move proved too early, as such credits continued to rally through the reporting periods end.To a lesser extent, the fund was hurt by our ongoing efforts to upgrade the funds overall credit profile, which included the sale of lower rated bonds backed by hospitals and the states settlement of litigation with U.S. tobacco companies.
Adjusting to a Changing Market Environment
We expect the supply of newly issued municipal bonds to rise over the remainder of 2012. To prepare for this likely development, we have reduced the funds average duration to the neutral range, and we have continued to trim holdings at the lower end of the investment-grade spectrum. Instead, we have emphasized higher-quality revenue bonds with strong income characteristics, particularly those backed by essential services facilities. In our judgment, these strategies position the fund well for an environment of continued subpar economic growth.
March 15, 2012
Bond funds are subject generally to interest rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the funds prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
|
|
1
|
Total return includes reinvestment of dividends and any capital gains paid and does not take into
|
|
consideration the maximum initial sales charge in the case of Class A shares or the applicable
|
|
contingent deferred sales charges imposed on redemptions in the case of Class B and Class C
|
|
shares. Had these charges been reflected, returns would have been lower. Neither Class Z nor
|
|
Class I shares are subject to any initial or deferred sales charge. Past performance is no guarantee
|
|
of future results. Share price, yield and investment return fluctuate such that upon redemption,
|
|
fund shares may be worth more or less than their original cost. Income may be subject to state and
|
|
local taxes. Capital gains, if any, are fully taxable.The Dreyfus Corporation has contractually
|
|
agreed to waive receipt of its fees and/or assume the expenses of the fund so that total annual
|
|
fund operating expenses of Class A, B, C, I and Z shares (excluding Rule 12b-1 fees,
|
|
shareholder services fees for Class A, B, C, I and Z shares, taxes, brokerage commissions,
|
|
extraordinary expenses, interest expenses, and commitment fees on borrowings) do not exceed
|
|
0.45%. Dreyfus may terminate this agreement upon at least 90 days prior notice to investors but
|
|
has committed not to do so until at least January 1, 2013.Without this absorption returns would
|
|
have been lower.
|
2
|
SOURCE: LIPPER INC. Reflects reinvestment of dividends and, where applicable, capital
|
|
gain distributions.The Barclays Municipal Bond Index is a widely accepted, unmanaged total
|
|
return performance benchmark for the long-term, investment-grade, tax-exempt bond market.
|
|
Index returns do not reflect fees and expenses associated with operating a mutual fund. Investors
|
|
cannot invest directly in any index.
|
TheFund
5
UNDERSTANDING YOUR FUNDS EXPENSES
(Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your funds prospectus or talk to your financial adviser.
Review your funds expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus AMT-Free Municipal Bond Fund from September 1, 2011 to February 29, 2012. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended February 29, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
Class B
|
|
Class C
|
|
Class I
|
|
Class Z
|
Expenses paid per $1,000
|
$
|
3.60
|
$
|
6.16
|
$
|
7.45
|
$
|
2.62
|
$
|
2.32
|
Ending value (after expenses)
|
$
|
1,069.10
|
$
|
1,065.70
|
$
|
1,065.20
|
$
|
1,069.60
|
$
|
1,070.10
|
COMPARING YOUR FUNDS EXPENSES
WITH THOSE OF OTHER FUNDS
(Unaudited)
Using the SECs method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your funds expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment
assuming a hypothetical 5% annualized return for the six months ended February 29, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
Class B
|
|
Class C
|
|
Class I
|
|
Class Z
|
Expenses paid per $1,000
|
$
|
3.52
|
$
|
6.02
|
$
|
7.27
|
$
|
2.56
|
$
|
2.26
|
Ending value (after expenses)
|
$
|
1,021.38
|
$
|
1,018.90
|
$
|
1,017.65
|
$
|
1,022.33
|
$
|
1,022.63
|
|
Expenses are equal to the funds annualized expense ratio of .70% for Class A, 1.20% for Class B, 1.45% for
|
Class C, .45% for Class I and .51% for Class Z, multiplied by the average account value over the period,
|
multiplied by 182/366 (to reflect the one-half year period).
|
6
|
|
|
|
|
STATEMENT OF INVESTMENTS
|
|
|
|
February 29, 2012 (Unaudited)
|
|
|
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
Investments98.6%
|
Rate (%)
|
Date
|
Amount ($)
|
Value ($)
|
Alabama.5%
|
|
|
|
|
Birmingham Water Works Board,
|
|
|
|
|
Water Revenue
|
5.00
|
1/1/23
|
1,395,000
|
1,629,611
|
Jefferson County,
|
|
|
|
|
Limited Obligation
|
|
|
|
|
School Warrants
|
5.00
|
1/1/24
|
1,000,000
|
933,220
|
Arizona1.6%
|
|
|
|
|
Glendale Western Loop 101 Public
|
|
|
|
|
Facilities Corporation, Third
|
|
|
|
|
Lien Excise Tax Revenue
|
7.00
|
7/1/28
|
2,000,000
|
2,195,840
|
Pima County Industrial Development
|
|
|
|
|
Authority, Education Revenue
|
|
|
|
|
(American Charter Schools
|
|
|
|
|
Foundation Project)
|
5.63
|
7/1/38
|
3,750,000
|
3,347,100
|
Salt River Project Agricultural
|
|
|
|
|
Improvement and Power
|
|
|
|
|
District, COP (Desert Basin
|
|
|
|
|
Independent Trust) (Insured;
|
|
|
|
|
National Public Finance
|
|
|
|
|
Guarantee Corp.)
|
5.00
|
12/1/18
|
2,700,000
|
2,878,254
|
Arkansas.2%
|
|
|
|
|
Arkansas Development Finance
|
|
|
|
|
Authority, Construction Revenue
|
|
|
|
|
(Public Health Laboratory
|
|
|
|
|
Project) (Insured; AMBAC)
|
5.00
|
12/1/17
|
1,025,000
|
1,090,077
|
California10.6%
|
|
|
|
|
California,
|
|
|
|
|
Economic Recovery Bonds
|
5.00
|
7/1/20
|
3,000,000
|
3,675,630
|
California,
|
|
|
|
|
GO
|
5.25
|
10/1/16
|
295,000
|
296,041
|
California,
|
|
|
|
|
GO (Various Purpose)
|
5.25
|
3/1/30
|
2,500,000
|
2,805,950
|
California,
|
|
|
|
|
GO (Various Purpose)
|
5.75
|
4/1/31
|
6,700,000
|
7,819,637
|
California,
|
|
|
|
|
GO (Various Purpose)
|
5.50
|
11/1/35
|
3,575,000
|
4,075,500
|
California,
|
|
|
|
|
GO (Various Purpose)
|
6.00
|
11/1/35
|
3,000,000
|
3,530,460
|
TheFund
7
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
California (continued)
|
|
|
|
|
|
California Educational Facilities
|
|
|
|
|
|
Authority, Revenue
|
|
|
|
|
|
(Pomona College)
|
0.00
|
7/1/30
|
3,005,000
|
a
|
1,329,863
|
California Statewide Communities
|
|
|
|
|
|
Development Authority,
|
|
|
|
|
|
Revenue (The Salk Institute for
|
|
|
|
|
|
Biological Studies) (Insured;
|
|
|
|
|
|
National Public Finance
|
|
|
|
|
|
Guarantee Corp.)
|
5.00
|
7/1/24
|
1,880,000
|
|
2,032,111
|
Glendale Community College
|
|
|
|
|
|
District, GO (Insured;
|
|
|
|
|
|
National Public Finance
|
|
|
|
|
|
Guarantee Corp.)
|
0.00
|
8/1/21
|
1,520,000
|
a
|
1,083,714
|
Glendora Unified School District,
|
|
|
|
|
|
GO (Insured; National Public
|
|
|
|
|
|
Finance Guarantee Corp.)
|
0.00
|
8/1/27
|
2,000,000
|
a
|
1,006,100
|
Los Angeles,
|
|
|
|
|
|
Wastewater System Revenue
|
5.75
|
6/1/34
|
2,500,000
|
|
2,955,350
|
Los Angeles Harbor Department,
|
|
|
|
|
|
Revenue
|
5.25
|
8/1/25
|
3,500,000
|
|
4,135,775
|
Nevada Joint Union High School
|
|
|
|
|
|
District, GO (Insured; Assured
|
|
|
|
|
|
Guaranty Municipal Corp.)
|
|
|
|
|
|
(Prerefunded)
|
5.00
|
8/1/12
|
1,160,000
|
b
|
1,183,826
|
Pajaro Valley Unified School
|
|
|
|
|
|
District, GO (Insured; Assured
|
|
|
|
|
|
Guaranty Municipal Corp.)
|
0.00
|
8/1/26
|
1,500,000
|
a
|
812,685
|
Placer Union High School District,
|
|
|
|
|
|
GO (Insured; Assured Guaranty
|
|
|
|
|
|
Municipal Corp.)
|
0.00
|
8/1/27
|
4,110,000
|
a
|
2,042,752
|
Placer Union High School District,
|
|
|
|
|
|
GO (Insured; Assured Guaranty
|
|
|
|
|
|
Municipal Corp.)
|
0.00
|
8/1/28
|
4,000,000
|
a
|
1,834,080
|
Sacramento County,
|
|
|
|
|
|
Airport System Senior Revenue
|
5.30
|
7/1/27
|
2,000,000
|
|
2,219,180
|
Sacramento County,
|
|
|
|
|
|
Airport System Senior Revenue
|
5.38
|
7/1/28
|
2,000,000
|
|
2,218,040
|
San Francisco City and County
|
|
|
|
|
|
Public Utilities Commission,
|
|
|
|
|
|
San Francisco Water Revenue
|
5.00
|
11/1/27
|
3,280,000
|
|
3,818,510
|
8
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
California (continued)
|
|
|
|
|
|
San Juan Unified School District,
|
|
|
|
|
|
GO (Insured; National Public
|
|
|
|
|
|
Finance Guarantee Corp.)
|
5.25
|
8/1/20
|
1,425,000
|
|
1,512,353
|
Tustin Unified School District
|
|
|
|
|
|
Community Facilities
|
|
|
|
|
|
District Number 97-1,
|
|
|
|
|
|
Senior Lien Special Tax
|
|
|
|
|
|
Bonds (Insured; Assured
|
|
|
|
|
|
Guaranty Municipal Corp.)
|
0.00
|
9/1/21
|
1,615,000
|
a
|
1,115,384
|
University of California Regents,
|
|
|
|
|
|
General Revenue
|
5.75
|
5/15/31
|
2,000,000
|
|
2,396,460
|
Walnut Valley Unified School
|
|
|
|
|
|
District, GO (Insured; FGIC)
|
6.50
|
8/1/19
|
1,765,000
|
|
1,810,908
|
West Sacramento Redevelopment
|
|
|
|
|
|
Agency, Tax Allocation
|
|
|
|
|
|
Revenue (West Sacramento
|
|
|
|
|
|
Redevelopment Project)
|
|
|
|
|
|
(Insured; National Public
|
|
|
|
|
|
Finance Guarantee Corp.)
|
4.75
|
9/1/16
|
800,000
|
|
806,680
|
Colorado1.8%
|
|
|
|
|
|
Black Hawk,
|
|
|
|
|
|
Device Tax Revenue
|
5.00
|
12/1/14
|
500,000
|
|
529,500
|
Black Hawk,
|
|
|
|
|
|
Device Tax Revenue
|
5.00
|
12/1/18
|
600,000
|
|
619,638
|
Colorado Educational and Cultural
|
|
|
|
|
|
Facilities Authority, Charter
|
|
|
|
|
|
School Revenue (American
|
|
|
|
|
|
Academy Project)
|
8.00
|
12/1/40
|
1,000,000
|
|
1,221,570
|
Colorado Health Facilities
|
|
|
|
|
|
Authority, Revenue (Catholic
|
|
|
|
|
|
Health Initiatives)
|
6.25
|
10/1/33
|
1,200,000
|
|
1,394,556
|
E-470 Public Highway Authority,
|
|
|
|
|
|
Senior Revenue
|
5.38
|
9/1/26
|
1,000,000
|
|
1,069,290
|
E-470 Public Highway Authority,
|
|
|
|
|
|
Senior Revenue (Insured;
|
|
|
|
|
|
National Public Finance
|
|
|
|
|
|
Guarantee Corp.)
|
5.50
|
9/1/24
|
2,000,000
|
|
2,161,400
|
Metro Wastewater
|
|
|
|
|
|
Reclamation District, Sewer
|
|
|
|
|
|
Improvement Revenue
|
5.00
|
4/1/17
|
2,000,000
|
|
2,425,280
|
TheFund
9
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
Value ($)
|
Delaware.6%
|
|
|
|
|
Delaware,
|
|
|
|
|
GO
|
5.00
|
10/1/16
|
2,500,000
|
3,005,950
|
District of Columbia1.0%
|
|
|
|
|
Metropolitan Washington
|
|
|
|
|
Airports Authority,
|
|
|
|
|
Airport System Revenue
|
5.00
|
10/1/35
|
4,000,000
|
4,390,320
|
Washington Metropolitan Area
|
|
|
|
|
Transit Authority, Gross
|
|
|
|
|
Revenue Transit Revenue
|
5.13
|
7/1/32
|
1,000,000
|
1,119,770
|
Florida6.4%
|
|
|
|
|
Broward County,
|
|
|
|
|
Airport System Revenue
|
5.38
|
10/1/29
|
2,535,000
|
2,875,501
|
Broward County Educational
|
|
|
|
|
Facilities Authority,
|
|
|
|
|
Educational Facilities Revenue
|
|
|
|
|
(Nova Southeastern University
|
|
|
|
|
Project) (Insured; Assured
|
|
|
|
|
Guaranty Municipal Corp.)
|
5.00
|
4/1/36
|
1,800,000
|
1,857,960
|
Citizens Property Insurance
|
|
|
|
|
Corporation, Coastal Account
|
|
|
|
|
Senior Secured Revenue
|
5.00
|
6/1/19
|
3,000,000
|
3,413,190
|
Citizens Property Insurance
|
|
|
|
|
Corporation, High-Risk Account
|
|
|
|
|
Senior Secured Revenue
|
5.25
|
6/1/17
|
1,255,000
|
1,441,192
|
Citizens Property Insurance
|
|
|
|
|
Corporation, High-Risk Account
|
|
|
|
|
Senior Secured Revenue
|
5.50
|
6/1/17
|
2,000,000
|
2,321,380
|
Florida Department of Corrections,
|
|
|
|
|
COP (Okeechobee Correctional
|
|
|
|
|
Institution) (Insured; AMBAC)
|
5.00
|
3/1/15
|
1,000,000
|
1,097,740
|
Florida Municipal Power Agency,
|
|
|
|
|
All-Requirements Power Supply
|
|
|
|
|
Project Revenue
|
6.25
|
10/1/31
|
3,260,000
|
3,910,533
|
Lee County,
|
|
|
|
|
Transportation Facilities
|
|
|
|
|
Revenue (Sanibel Bridges and
|
|
|
|
|
Causeway Project) (Insured; CIFG)
|
5.00
|
10/1/22
|
1,820,000
|
1,975,355
|
Miami-Dade County,
|
|
|
|
|
Water and Sewer System Revenue
|
5.00
|
10/1/28
|
2,745,000
|
3,132,237
|
10
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
Florida (continued)
|
|
|
|
|
|
Miami-Dade County Educational
|
|
|
|
|
|
Facilities Authority, Revenue
|
|
|
|
|
|
(University of Miami Issue)
|
5.75
|
4/1/28
|
1,250,000
|
|
1,372,975
|
Orlando Utilities Commission,
|
|
|
|
|
|
Utility System Revenue
|
5.00
|
10/1/28
|
2,800,000
|
|
3,180,996
|
Orlando-Orange County Expressway
|
|
|
|
|
|
Authority, Revenue
|
5.00
|
7/1/30
|
2,620,000
|
|
2,906,995
|
Saint Johns County Industrial
|
|
|
|
|
|
Development Authority, Revenue
|
|
|
|
|
|
(Presbyterian Retirement
|
|
|
|
|
|
Communities Project)
|
5.88
|
8/1/40
|
1,000,000
|
|
1,066,220
|
University of Central Florida,
|
|
|
|
|
|
COP (University of
|
|
|
|
|
|
Central Florida Convocation
|
|
|
|
|
|
Corporation Master
|
|
|
|
|
|
Lease Program) (Insured;
|
|
|
|
|
|
National Public Finance
|
|
|
|
|
|
Guarantee Corp.)
|
5.00
|
10/1/18
|
1,765,000
|
|
1,846,225
|
Winter Park,
|
|
|
|
|
|
Water and Sewer
|
|
|
|
|
|
Revenue (Insured; AMBAC)
|
|
|
|
|
|
(Prerefunded)
|
5.38
|
12/1/12
|
1,525,000
|
b
|
1,585,055
|
Georgia5.2%
|
|
|
|
|
|
Atlanta,
|
|
|
|
|
|
Airport General Revenue
|
5.00
|
1/1/20
|
5,000,000
|
|
5,949,300
|
Atlanta,
|
|
|
|
|
|
Water and Wastewater Revenue
|
6.00
|
11/1/26
|
1,640,000
|
|
1,970,132
|
Atlanta,
|
|
|
|
|
|
Water and Wastewater Revenue
|
|
|
|
|
|
(Insured; Assured Guaranty
|
|
|
|
|
|
Municipal Corp.)
|
5.25
|
11/1/34
|
1,000,000
|
|
1,112,890
|
Atlanta,
|
|
|
|
|
|
Water and Wastewater Revenue
|
|
|
|
|
|
(Insured; National Public
|
|
|
|
|
|
Finance Guarantee Corp.)
|
5.50
|
11/1/18
|
1,200,000
|
|
1,476,756
|
Carrollton Payroll Development
|
|
|
|
|
|
Authority, RAC (University of
|
|
|
|
|
|
West Georgia Athletic
|
|
|
|
|
|
Complex, LLC Project)
|
6.25
|
6/15/34
|
3,895,000
|
|
4,419,851
|
TheFund
11
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
Georgia (continued)
|
|
|
|
|
|
Georgia Higher Education
|
|
|
|
|
|
Facilities Authority, Revenue
|
|
|
|
|
|
(USG Real Estate Foundation I,
|
|
|
|
|
|
LLC Project) (Insured; Assured
|
|
|
|
|
|
Guaranty Municipal Corp.)
|
5.63
|
6/15/38
|
2,000,000
|
|
2,179,720
|
Gwinnett County School District,
|
|
|
|
|
|
GO Sales Tax Bonds
|
4.00
|
10/1/16
|
2,875,000
|
|
3,313,955
|
Municipal Electric Authority of
|
|
|
|
|
|
Georgia, GO (Project One
|
|
|
|
|
|
Subordinated Bonds)
|
5.00
|
1/1/21
|
5,000,000
|
|
6,058,500
|
Savannah Economic Development
|
|
|
|
|
|
Authority, Revenue (Armstrong
|
|
|
|
|
|
Atlantic State University
|
|
|
|
|
|
Student Union, LLC Project)
|
|
|
|
|
|
(Insured; Assured Guaranty
|
|
|
|
|
|
Municipal Corp.)
|
5.00
|
6/15/32
|
1,240,000
|
|
1,333,682
|
Idaho1.8%
|
|
|
|
|
|
Boise State University,
|
|
|
|
|
|
Student Union and Housing
|
|
|
|
|
|
System Revenue (Insured;
|
|
|
|
|
|
FGIC) (Prerefunded)
|
5.38
|
4/1/12
|
5,000
|
b
|
5,023
|
Boise-Kuna Irrigation District,
|
|
|
|
|
|
Revenue (Arrowrock
|
|
|
|
|
|
Hydroelectric Project)
|
7.38
|
6/1/40
|
5,600,000
|
|
6,540,240
|
Idaho Health Facilities Authority,
|
|
|
|
|
|
Revenue (Trinity Health
|
|
|
|
|
|
Credit Group)
|
6.13
|
12/1/28
|
2,500,000
|
|
2,981,975
|
Illinois6.6%
|
|
|
|
|
|
Chicago,
|
|
|
|
|
|
General Airport Third Lien
|
|
|
|
|
|
Revenue (Chicago OHare
|
|
|
|
|
|
International Airport)
|
|
|
|
|
|
(Insured; AMBAC)
|
5.00
|
1/1/19
|
2,400,000
|
|
2,667,072
|
Chicago,
|
|
|
|
|
|
General Airport Third Lien
|
|
|
|
|
|
Revenue (Chicago OHare
|
|
|
|
|
|
International Airport)
|
|
|
|
|
|
(Insured; National Public
|
|
|
|
|
|
Finance Guarantee Corp.)
|
5.25
|
1/1/17
|
3,580,000
|
|
4,145,318
|
12
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
Value ($)
|
Illinois (continued)
|
|
|
|
|
Chicago,
|
|
|
|
|
GO (Insured; Assured Guaranty
|
|
|
|
|
Municipal Corp.)
|
5.00
|
1/1/17
|
2,500,000
|
2,751,425
|
Chicago Board of Education,
|
|
|
|
|
Unlimited Tax GO
|
|
|
|
|
(Dedicated Revenues)
|
5.25
|
12/1/25
|
2,500,000
|
2,808,525
|
Huntley,
|
|
|
|
|
Special Service Area Number
|
|
|
|
|
Nine, Special Tax Bonds
|
|
|
|
|
(Insured; Assured Guaranty
|
|
|
|
|
Municipal Corp.)
|
5.10
|
3/1/28
|
3,500,000
|
3,784,305
|
Illinois Finance Authority,
|
|
|
|
|
Revenue (Edward Hospital
|
|
|
|
|
Obligated Group)
|
|
|
|
|
(Insured; AMBAC)
|
6.00
|
2/1/28
|
750,000
|
837,795
|
Illinois Finance Authority,
|
|
|
|
|
Revenue (Edward Hospital
|
|
|
|
|
Obligated Group)
|
|
|
|
|
(Insured; AMBAC)
|
6.25
|
2/1/33
|
500,000
|
554,750
|
Illinois Finance Authority,
|
|
|
|
|
Revenue (Sherman
|
|
|
|
|
Health Systems)
|
5.50
|
8/1/37
|
1,000,000
|
1,016,570
|
Illinois Finance Authority,
|
|
|
|
|
Revenue (The Carle Foundation)
|
5.00
|
8/15/16
|
2,200,000
|
2,445,036
|
Illinois Health Facilities Authority,
|
|
|
|
|
Revenue (Delnor-Community
|
|
|
|
|
Hospital) (Insured; Assured
|
|
|
|
|
Guaranty Municipal Corp.)
|
5.25
|
5/15/27
|
6,000,000
|
6,525,720
|
Railsplitter Tobacco Settlement
|
|
|
|
|
Authority, Tobacco
|
|
|
|
|
Settlement Revenue
|
5.50
|
6/1/23
|
3,100,000
|
3,577,121
|
Railsplitter Tobacco Settlement
|
|
|
|
|
Authority, Tobacco
|
|
|
|
|
Settlement Revenue
|
6.00
|
6/1/28
|
3,600,000
|
4,035,204
|
Kansas.3%
|
|
|
|
|
Kansas Development Finance
|
|
|
|
|
Authority, Revenue (Lifespace
|
|
|
|
|
Communities, Inc.)
|
5.00
|
5/15/30
|
1,500,000
|
1,575,600
|
TheFund
13
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
Value ($)
|
Kentucky.7%
|
|
|
|
|
Barbourville,
|
|
|
|
|
Educational Facilities
|
|
|
|
|
First Mortgage Revenue
|
|
|
|
|
(Union College Energy
|
|
|
|
|
Conservation Project)
|
5.25
|
9/1/26
|
1,000,000
|
1,022,710
|
Ohio County,
|
|
|
|
|
PCR (Big Rivers Electric
|
|
|
|
|
Corporation Project)
|
6.00
|
7/15/31
|
2,500,000
|
2,666,950
|
Louisiana1.0%
|
|
|
|
|
Louisiana Local Government
|
|
|
|
|
Environmental Facilities and
|
|
|
|
|
Community Development
|
|
|
|
|
Authority, Revenue (Westlake
|
|
|
|
|
Chemical Corporation Projects)
|
6.50
|
8/1/29
|
2,500,000
|
2,813,600
|
New Orleans Aviation Board,
|
|
|
|
|
Revenue (Insured; Assured
|
|
|
|
|
Guaranty Municipal Corp.)
|
6.00
|
1/1/23
|
2,000,000
|
2,390,920
|
Maine.3%
|
|
|
|
|
Maine Health and Higher
|
|
|
|
|
Educational Facilities Authority,
|
|
|
|
|
Revenue (MaineGeneral
|
|
|
|
|
Medical Center Issue)
|
7.50
|
7/1/32
|
1,250,000
|
1,442,412
|
Maryland3.3%
|
|
|
|
|
Howard County,
|
|
|
|
|
Consolidated Public
|
|
|
|
|
Improvement Project GO
|
5.00
|
8/15/17
|
2,830,000
|
3,483,447
|
Hyattsville,
|
|
|
|
|
Special Obligation Revenue
|
|
|
|
|
(University Town Center Project)
|
5.60
|
7/1/24
|
1,500,000
|
1,524,090
|
Maryland,
|
|
|
|
|
GO (State and Local
|
|
|
|
|
Facilities Loan)
|
5.00
|
8/1/20
|
2,500,000
|
3,107,050
|
Maryland Community Development
|
|
|
|
|
Administration, Department of
|
|
|
|
|
Housing and Community
|
|
|
|
|
Development, Housing Revenue
|
5.95
|
7/1/23
|
630,000
|
630,882
|
Maryland Economic Development
|
|
|
|
|
Corporation, LR (Montgomery
|
|
|
|
|
County Wayne Avenue Parking
|
|
|
|
|
Garage Project)
|
5.25
|
9/15/14
|
1,295,000
|
1,330,030
|
14
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
Maryland (continued)
|
|
|
|
|
|
Montgomery County,
|
|
|
|
|
|
Consolidated Public
|
|
|
|
|
|
Improvement GO
|
5.00
|
7/1/20
|
4,700,000
|
|
5,978,494
|
Montgomery County,
|
|
|
|
|
|
Consolidated Public
|
|
|
|
|
|
Improvement GO
|
5.00
|
7/1/21
|
1,500,000
|
|
1,841,880
|
Massachusetts2.8%
|
|
|
|
|
|
Massachusetts Department of
|
|
|
|
|
|
Transportation, Metropolitan
|
|
|
|
|
|
Highway System Senior Revenue
|
5.00
|
1/1/27
|
5,000,000
|
|
5,591,850
|
Massachusetts Development Finance
|
|
|
|
|
|
Agency, Revenue (Brandeis
|
|
|
|
|
|
University Issue)
|
5.00
|
10/1/25
|
2,175,000
|
|
2,484,067
|
Massachusetts Development Finance
|
|
|
|
|
|
Agency, Revenue (Tufts Medical
|
|
|
|
|
|
Center Issue)
|
6.25
|
1/1/27
|
2,250,000
|
|
2,570,535
|
Massachusetts School Building
|
|
|
|
|
|
Authority, Senior Dedicated
|
|
|
|
|
|
Sales Tax Revenue
|
5.00
|
10/15/35
|
1,750,000
|
|
2,005,272
|
Metropolitan Boston Transit
|
|
|
|
|
|
Parking Corporation, Systemwide
|
|
|
|
|
|
Senior Lien Parking Revenue
|
5.00
|
7/1/23
|
2,000,000
|
|
2,392,900
|
Michigan9.8%
|
|
|
|
|
|
Brighton Area Schools,
|
|
|
|
|
|
GOUnlimited Tax
|
|
|
|
|
|
(Insured; AMBAC)
|
0.00
|
5/1/14
|
8,000,000
|
a
|
7,801,360
|
Brighton Area Schools,
|
|
|
|
|
|
GOUnlimited Tax
|
|
|
|
|
|
(Insured; AMBAC)
|
0.00
|
5/1/20
|
1,055,000
|
a
|
832,806
|
Detroit,
|
|
|
|
|
|
Sewage Disposal System Senior
|
|
|
|
|
|
Lien Revenue (Insured; Assured
|
|
|
|
|
|
Guaranty Municipal Corp.)
|
7.00
|
7/1/27
|
1,500,000
|
|
1,852,965
|
Detroit,
|
|
|
|
|
|
Sewage Disposal System Senior
|
|
|
|
|
|
Lien Revenue (Insured; Assured
|
|
|
|
|
|
Guaranty Municipal Corp.)
|
7.50
|
7/1/33
|
1,000,000
|
|
1,259,430
|
Detroit Community High School,
|
|
|
|
|
|
Public School Academy Revenue
|
5.65
|
11/1/25
|
1,170,000
|
|
932,174
|
TheFund
15
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
Michigan (continued)
|
|
|
|
|
|
Detroit Community High School,
|
|
|
|
|
|
Public School Academy Revenue
|
5.75
|
11/1/35
|
1,215,000
|
|
890,097
|
Detroit School District,
|
|
|
|
|
|
School Building and Site
|
|
|
|
|
|
Improvement Bonds (GO
|
|
|
|
|
|
Unlimited Tax) (Insured; FGIC)
|
6.00
|
5/1/20
|
1,000,000
|
|
1,190,310
|
Huron Valley School District,
|
|
|
|
|
|
GO Unlimited Tax (Insured;
|
|
|
|
|
|
National Public Finance
|
|
|
|
|
|
Guarantee Corp.)
|
0.00
|
5/1/18
|
6,270,000
|
a
|
5,408,878
|
Kalamazoo Hospital Finance
|
|
|
|
|
|
Authority, HR (Borgess Medical
|
|
|
|
|
|
Center) (Insured; FGIC)
|
6.25
|
6/1/14
|
3,000,000
|
|
3,371,340
|
Kent County,
|
|
|
|
|
|
Airport Revenue (Gerald R.
|
|
|
|
|
|
Ford International Airport)
|
5.00
|
1/1/26
|
4,555,000
|
|
4,965,497
|
Kent Hospital Finance Authority,
|
|
|
|
|
|
Revenue (Spectrum
|
|
|
|
|
|
Health System)
|
5.50
|
11/15/25
|
2,500,000
|
|
2,982,350
|
Lansing Board of Water and Light,
|
|
|
|
|
|
Utility System Revenue
|
5.50
|
7/1/41
|
2,500,000
|
|
2,900,675
|
Michigan Public Educational
|
|
|
|
|
|
Facilities Authority, LOR
|
|
|
|
|
|
(Nataki Talibah Schoolhouse
|
|
|
|
|
|
of Detroit Project)
|
6.50
|
10/1/30
|
3,040,000
|
|
2,757,280
|
Monroe County Economic
|
|
|
|
|
|
Development Corporation,
|
|
|
|
|
|
LOR (Detroit Edison Company
|
|
|
|
|
|
Project) (Insured; National Public
|
|
|
|
|
|
Finance Guarantee Corp.)
|
6.95
|
9/1/22
|
2,000,000
|
|
2,673,780
|
Pontiac Tax Increment Finance
|
|
|
|
|
|
Authority, Revenue (Prerefunded)
|
6.38
|
6/1/12
|
3,170,000
|
b
|
3,252,135
|
Romulus Economic Development
|
|
|
|
|
|
Corporation, Limited
|
|
|
|
|
|
Obligation EDR (Romulus HIR
|
|
|
|
|
|
Limited Partnership Project)
|
|
|
|
|
|
(Insured; ITT Lyndon Property
|
|
|
|
|
|
Insurance Company)
|
7.00
|
11/1/15
|
3,700,000
|
|
4,529,688
|
16
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
Michigan (continued)
|
|
|
|
|
|
Royal Oak Hospital Finance
|
|
|
|
|
|
Authority, HR (William
|
|
|
|
|
|
Beaumont Hospital
|
|
|
|
|
|
Obligated Group)
|
6.25
|
9/1/14
|
1,500,000
|
|
1,654,845
|
Wayne County Airport Authority,
|
|
|
|
|
|
Airport Revenue (Detroit
|
|
|
|
|
|
Metropolitan Wayne
|
|
|
|
|
|
County Airport)
|
5.00
|
12/1/22
|
3,000,000
|
|
3,348,900
|
Mississippi.3%
|
|
|
|
|
|
Mississippi Development Bank,
|
|
|
|
|
|
Special Obligation Revenue
|
|
|
|
|
|
(Waveland, GO Public
|
|
|
|
|
|
Improvement Bond Project)
|
|
|
|
|
|
(Insured; AMBAC)
|
5.00
|
11/1/20
|
1,315,000
|
|
1,370,743
|
Missouri.5%
|
|
|
|
|
|
Missouri Housing Development
|
|
|
|
|
|
Commission, MFHR
|
|
|
|
|
|
(Collateralized; FHA)
|
5.25
|
12/1/16
|
435,000
|
|
436,157
|
Missouri Housing Development
|
|
|
|
|
|
Commission, MFHR
|
|
|
|
|
|
(Collateralized; FHA)
|
5.38
|
12/1/18
|
580,000
|
|
592,650
|
Saint Louis County,
|
|
|
|
|
|
Annual Appropriation-Supported
|
|
|
|
|
|
Tax Increment Revenue (Lambert
|
|
|
|
|
|
Airport Eastern Perimeter
|
|
|
|
|
|
Redevelopment Project)
|
|
|
|
|
|
(Insured; AMBAC) (Prerefunded)
|
5.00
|
2/15/16
|
1,265,000
|
b
|
1,481,467
|
Nebraska.4%
|
|
|
|
|
|
Municipal Energy Agency of
|
|
|
|
|
|
Nebraska, Power Supply System
|
|
|
|
|
|
Revenue (Insured; AMBAC)
|
|
|
|
|
|
(Prerefunded)
|
5.25
|
4/1/12
|
2,305,000
|
b
|
2,315,442
|
Nevada1.4%
|
|
|
|
|
|
Clark County,
|
|
|
|
|
|
Airport System Subordinate
|
|
|
|
|
|
Lien Revenue (Insured; Assured
|
|
|
|
|
|
Guaranty Municipal Corp.)
|
5.00
|
7/1/26
|
2,865,000
|
|
3,182,012
|
TheFund
17
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
Value ($)
|
Nevada (continued)
|
|
|
|
|
Clark County,
|
|
|
|
|
Passenger Facility Charge
|
|
|
|
|
Revenue (Las Vegas-McCarran
|
|
|
|
|
International Airport)
|
5.00
|
7/1/30
|
4,000,000
|
4,335,280
|
New Jersey1.6%
|
|
|
|
|
New Jersey Transportation
|
|
|
|
|
Trust Fund Authority
|
|
|
|
|
(Transportation System)
|
5.25
|
12/15/19
|
3,000,000
|
3,676,080
|
New Jersey Transportation
|
|
|
|
|
Trust Fund Authority
|
|
|
|
|
(Transportation System)
|
5.50
|
6/15/31
|
1,250,000
|
1,469,062
|
New Jersey Turnpike Authority,
|
|
|
|
|
Turnpike Revenue
|
6.50
|
1/1/16
|
65,000
|
79,852
|
New Jersey Turnpike Authority,
|
|
|
|
|
Turnpike Revenue
|
6.50
|
1/1/16
|
185,000
|
220,790
|
Tobacco Settlement Financing
|
|
|
|
|
Corporation of New Jersey,
|
|
|
|
|
Tobacco Settlement
|
|
|
|
|
Asset-Backed Bonds
|
4.50
|
6/1/23
|
1,500,000
|
1,414,935
|
Tobacco Settlement Financing
|
|
|
|
|
Corporation of New Jersey,
|
|
|
|
|
Tobacco Settlement
|
|
|
|
|
Asset-Backed Bonds
|
4.63
|
6/1/26
|
2,140,000
|
1,886,774
|
New York5.8%
|
|
|
|
|
Long Island Power Authority,
|
|
|
|
|
Electric System General Revenue
|
6.00
|
5/1/33
|
5,000,000
|
5,906,450
|
Metropolitan Transportation
|
|
|
|
|
Authority, Dedicated
|
|
|
|
|
Tax Fund Revenue
|
5.00
|
11/15/32
|
1,850,000
|
2,108,574
|
Metropolitan
|
|
|
|
|
Transportation Authority,
|
|
|
|
|
Transportation Revenue
|
5.25
|
11/15/28
|
2,500,000
|
2,871,450
|
New York City,
|
|
|
|
|
GO
|
5.00
|
8/1/28
|
1,000,000
|
1,150,470
|
New York City,
|
|
|
|
|
GO
|
5.00
|
10/1/36
|
2,500,000
|
2,804,250
|
New York City Health and
|
|
|
|
|
Hospitals Corporation,
|
|
|
|
|
Health System Revenue
|
5.00
|
2/15/30
|
3,000,000
|
3,306,990
|
18
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
New York (continued)
|
|
|
|
|
|
New York City Municipal Water
|
|
|
|
|
|
Finance Authority, Water and
|
|
|
|
|
|
Sewer System Second General
|
|
|
|
|
|
Resolution Revenue
|
5.00
|
6/15/34
|
2,500,000
|
|
2,811,050
|
New York City Transitional Finance
|
|
|
|
|
|
Authority, Future Tax Secured
|
|
|
|
|
|
Subordinate Revenue
|
5.00
|
2/1/24
|
3,000,000
|
|
3,626,010
|
New York State Urban Development
|
|
|
|
|
|
Corporation, State Personal
|
|
|
|
|
|
Income Tax Revenue
|
|
|
|
|
|
(General Purpose)
|
5.00
|
3/15/17
|
3,260,000
|
|
3,921,454
|
New York State Urban Develpoment
|
|
|
|
|
|
Corporation, State Personal
|
|
|
|
|
|
Income Tax Revenue
|
|
|
|
|
|
(General Purpose)
|
5.00
|
3/15/17
|
2,135,000
|
|
2,568,192
|
North Carolina4.3%
|
|
|
|
|
|
Charlotte,
|
|
|
|
|
|
GO
|
5.00
|
7/1/21
|
1,525,000
|
|
1,548,058
|
Charlotte,
|
|
|
|
|
|
GO
|
5.00
|
7/1/22
|
2,110,000
|
|
2,141,903
|
Durham,
|
|
|
|
|
|
Water and Sewer Utility
|
|
|
|
|
|
System Revenue
|
5.25
|
6/1/21
|
1,620,000
|
|
2,081,425
|
Durham County,
|
|
|
|
|
|
GO Public Improvement
|
|
|
|
|
|
Bonds (Prerefunded)
|
5.00
|
6/1/16
|
1,000,000
|
b
|
1,187,050
|
Iredell County,
|
|
|
|
|
|
COP (Iredell County School
|
|
|
|
|
|
Projects) (Insured; AMBAC)
|
5.00
|
6/1/26
|
1,000,000
|
|
1,086,840
|
North Carolina Eastern
|
|
|
|
|
|
Municipal Power Agency,
|
|
|
|
|
|
Power System Revenue
|
|
|
|
|
|
(Insured; ACA)
|
6.00
|
1/1/22
|
1,000,000
|
|
1,281,930
|
North Carolina Medical Care
|
|
|
|
|
|
Commission, Health Care
|
|
|
|
|
|
Facilities Revenue
|
|
|
|
|
|
(Cleveland County
|
|
|
|
|
|
HealthCare System
|
|
|
|
|
|
Project) (Insured; AMBAC)
|
5.25
|
7/1/19
|
1,135,000
|
|
1,199,468
|
TheFund
19
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
North Carolina (continued)
|
|
|
|
|
|
North Carolina Medical Care
|
|
|
|
|
|
Commission, Health Care Facilities
|
|
|
|
|
|
Revenue (University Health
|
|
|
|
|
|
Systems of Eastern Carolina)
|
6.25
|
12/1/33
|
1,750,000
|
|
2,029,773
|
North Carolina Medical Care
|
|
|
|
|
|
Commission, HR (Southeastern
|
|
|
|
|
|
Regional Medical Center)
|
6.25
|
6/1/29
|
2,000,000
|
|
2,003,620
|
North Carolina Medical Care
|
|
|
|
|
|
Commission, HR (Wilson
|
|
|
|
|
|
Memorial Hospital Project)
|
|
|
|
|
|
(Insured; AMBAC)
|
0.00
|
11/1/16
|
3,055,000
|
a
|
2,681,190
|
North Carolina Medical Care
|
|
|
|
|
|
Commission, Retirement
|
|
|
|
|
|
Facilities First Mortgage
|
|
|
|
|
|
Revenue (Givens Estates
|
|
|
|
|
|
Project) (Prerefunded)
|
6.50
|
7/1/13
|
1,000,000
|
b
|
1,093,950
|
Oak Island,
|
|
|
|
|
|
Enterprise System Revenue
|
|
|
|
|
|
(Insured; Assured Guaranty
|
|
|
|
|
|
Municipal Corp.)
|
6.00
|
6/1/34
|
1,000,000
|
|
1,146,830
|
Orange Water and Sewer Authority,
|
|
|
|
|
|
Water and Sewer System Revenue
|
5.00
|
7/1/31
|
1,000,000
|
|
1,090,760
|
Raleigh,
|
|
|
|
|
|
Combined Enterprise
|
|
|
|
|
|
System Revenue
|
5.00
|
3/1/31
|
1,175,000
|
|
1,313,168
|
University of North Carolina,
|
|
|
|
|
|
System Pool Revenue
|
|
|
|
|
|
(Pool General Trust
|
|
|
|
|
|
Indenture of the Board of
|
|
|
|
|
|
Governors of The University
|
|
|
|
|
|
of North Carolina)
|
5.00
|
10/1/34
|
1,000,000
|
|
1,129,380
|
Ohio1.6%
|
|
|
|
|
|
Butler County,
|
|
|
|
|
|
Hospital Facilities Revenue
|
|
|
|
|
|
(UC Health)
|
5.50
|
11/1/40
|
1,500,000
|
|
1,580,730
|
Maple Heights City School District
|
|
|
|
|
|
Board of Education, COP (Wylie
|
|
|
|
|
|
Athletic Complex Project)
|
6.00
|
11/1/28
|
1,150,000
|
|
1,257,743
|
Montgomery County,
|
|
|
|
|
|
Revenue (Miami Valley Hospital)
|
6.25
|
11/15/33
|
2,000,000
|
|
2,142,820
|
20
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
Value ($)
|
Ohio (continued)
|
|
|
|
|
Toledo-Lucas County Port
|
|
|
|
|
Authority, Development Revenue
|
|
|
|
|
(Northwest Ohio Bond Fund)
|
|
|
|
|
(Toledo School for the
|
|
|
|
|
Arts Project)
|
5.50
|
5/15/28
|
2,445,000
|
2,286,711
|
University of Akron,
|
|
|
|
|
General Receipts Bonds
|
|
|
|
|
(Insured; Assured Guaranty
|
|
|
|
|
Municipal Corp.)
|
5.00
|
1/1/20
|
1,100,000
|
1,335,180
|
Oklahoma.2%
|
|
|
|
|
Tulsa Industrial Authority,
|
|
|
|
|
Student Housing Revenue (The
|
|
|
|
|
University of Tulsa)
|
5.25
|
10/1/26
|
1,135,000
|
1,242,416
|
Oregon.6%
|
|
|
|
|
Oregon,
|
|
|
|
|
GO (Alternate Energy Project)
|
6.00
|
10/1/26
|
1,400,000
|
1,712,886
|
Oregon Department of
|
|
|
|
|
Administrative Services,
|
|
|
|
|
Lottery Revenue
|
5.00
|
4/1/29
|
1,500,000
|
1,734,285
|
Pennsylvania5.7%
|
|
|
|
|
Allegheny County Port Authority,
|
|
|
|
|
Special Transportation Revenue
|
5.25
|
3/1/23
|
2,600,000
|
3,077,802
|
Chester County Industrial
|
|
|
|
|
Development Authority,
|
|
|
|
|
Revenue (Avon Grove
|
|
|
|
|
Charter School Project)
|
6.38
|
12/15/37
|
2,000,000
|
1,943,140
|
Coatesville Area School District,
|
|
|
|
|
GO (Insured; Assured Guaranty
|
|
|
|
|
Municipal Corp.)
|
5.25
|
8/15/17
|
4,000,000
|
4,426,480
|
Dauphin County General Authority,
|
|
|
|
|
Office and Parking Revenue
|
|
|
|
|
(Riverfront Office Center Project)
|
6.00
|
1/1/25
|
1,820,000
|
1,494,821
|
Harrisburg Authority,
|
|
|
|
|
University Revenue (The
|
|
|
|
|
Harrisburg University of
|
|
|
|
|
Science and Technology Project)
|
6.00
|
9/1/36
|
1,150,000
|
994,543
|
Lancaster Parking Authority,
|
|
|
|
|
Guaranteed Parking Revenue
|
|
|
|
|
(Insured; AMBAC)
|
5.00
|
12/1/32
|
1,000,000
|
1,067,580
|
TheFund
21
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
Value ($)
|
Pennsylvania (continued)
|
|
|
|
|
Pennsylvania Higher Educational
|
|
|
|
|
Facilities Authority, Revenue
|
|
|
|
|
(Edinboro University
|
|
|
|
|
Foundation Student Housing
|
|
|
|
|
Project at Edinboro University
|
|
|
|
|
of Pennsylvania)
|
5.88
|
7/1/38
|
1,500,000
|
1,562,175
|
Pennsylvania Higher Educational
|
|
|
|
|
Facilities Authority, Revenue
|
|
|
|
|
(University of Pennsylvania
|
|
|
|
|
Health System)
|
6.00
|
8/15/26
|
2,500,000
|
2,947,950
|
Pennsylvania Housing Finance
|
|
|
|
|
Agency, Capital Fund
|
|
|
|
|
Securitization Revenue
|
|
|
|
|
(Insured; Assured Guaranty
|
|
|
|
|
Municipal Corp.)
|
5.00
|
12/1/25
|
2,450,000
|
2,602,905
|
Pennsylvania Industrial
|
|
|
|
|
Development Authority, EDR
|
5.50
|
7/1/23
|
2,000,000
|
2,323,540
|
Pennsylvania Turnpike Commission,
|
|
|
|
|
Turnpike Revenue
|
5.00
|
12/1/24
|
3,360,000
|
3,889,469
|
Philadelphia,
|
|
|
|
|
GO (Insured; Assured Guaranty
|
|
|
|
|
Municipal Corp.)
|
5.25
|
12/15/23
|
3,500,000
|
3,954,930
|
South Carolina1.6%
|
|
|
|
|
Columbia,
|
|
|
|
|
Waterworks and Sewer
|
|
|
|
|
System Revenue
|
5.00
|
2/1/36
|
2,500,000
|
2,816,825
|
South Carolina Public Service
|
|
|
|
|
Authority, Revenue Obligations
|
|
|
|
|
(Santee Cooper)
|
5.00
|
12/1/21
|
2,500,000
|
3,129,425
|
South Carolina Public Service
|
|
|
|
|
Authority, Revenue Obligations
|
|
|
|
|
(Santee Cooper)
|
5.00
|
12/1/36
|
2,500,000
|
2,795,475
|
Tennessee.6%
|
|
|
|
|
Metropolitan Government of
|
|
|
|
|
Nashville and Davidson County,
|
|
|
|
|
Subordinate Lien Water and
|
|
|
|
|
Sewer Revenue
|
5.00
|
7/1/17
|
2,500,000
|
3,002,725
|
22
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
Texas7.1%
|
|
|
|
|
|
Coastal Water Authority,
|
|
|
|
|
|
Water Conveyance System
|
|
|
|
|
|
Revenue (Insured; AMBAC)
|
6.25
|
12/15/17
|
2,170,000
|
|
2,265,198
|
Corpus Christi,
|
|
|
|
|
|
Combination Tax and Municipal
|
|
|
|
|
|
Hotel Occupancy Tax Revenue,
|
|
|
|
|
|
Certificates of Obligation
|
|
|
|
|
|
(Insured; Assured Guaranty
|
|
|
|
|
|
Municipal Corp.)
|
5.50
|
9/1/18
|
1,955,000
|
|
2,003,953
|
Del Mar College District,
|
|
|
|
|
|
Limited Tax Bonds (Insured;
|
|
|
|
|
|
FGIC) (Prerefunded)
|
5.25
|
8/15/13
|
1,295,000
|
b
|
1,389,574
|
Denton Independent School
|
|
|
|
|
|
District, Unlimited Tax School
|
|
|
|
|
|
Building Bonds (Permanent
|
|
|
|
|
|
School Fund Guarantee Program)
|
0.00
|
8/15/23
|
135,000
|
a
|
71,636
|
Frisco Independent School
|
|
|
|
|
|
District, Unlimited Tax Bonds
|
|
|
|
|
|
(Permanent School Fund
|
|
|
|
|
|
Guarantee Program)
|
5.00
|
8/15/30
|
2,020,000
|
|
2,393,559
|
Galveston County,
|
|
|
|
|
|
Combination Tax and Revenue
|
|
|
|
|
|
Certificates of Obligation
|
|
|
|
|
|
(Insured; AMBAC) (Prerefunded)
|
5.25
|
2/1/13
|
1,000,000
|
b
|
1,046,580
|
Leander Independent School
|
|
|
|
|
|
District, Unlimited Tax School
|
|
|
|
|
|
Building Bonds (Permanent
|
|
|
|
|
|
School Fund Guarantee Program)
|
0.00
|
8/15/30
|
3,900,000
|
a
|
1,557,621
|
Leander Independent School
|
|
|
|
|
|
District, Unlimited Tax School
|
|
|
|
|
|
Building Bonds (Permanent
|
|
|
|
|
|
School Fund Guarantee Program)
|
0.00
|
8/15/31
|
2,860,000
|
a
|
1,072,672
|
Lubbock Housing Finance
|
|
|
|
|
|
Corporation, MFHR
|
|
|
|
|
|
(Las Colinas, Quail Creek
|
|
|
|
|
|
and Parkridge Place
|
|
|
|
|
|
Apartments Projects)
|
6.00
|
7/1/22
|
1,175,000
|
|
1,052,741
|
TheFund
23
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
Texas (continued)
|
|
|
|
|
|
McKinney,
|
|
|
|
|
|
Tax and Limited Pledge
|
|
|
|
|
|
Waterworks and Sewer System
|
|
|
|
|
|
Revenue, Certificates of
|
|
|
|
|
|
Obligation (Insured; AMBAC)
|
5.00
|
8/15/26
|
1,300,000
|
|
1,402,921
|
Mesquite Independent School
|
|
|
|
|
|
District, Unlimited Tax School
|
|
|
|
|
|
Building Bonds (Permanent
|
|
|
|
|
|
School Fund Guarantee Program)
|
5.50
|
8/15/20
|
1,100,000
|
|
1,124,882
|
Mesquite Independent School
|
|
|
|
|
|
District, Unlimited Tax School
|
|
|
|
|
|
Building Bonds (Permanent
|
|
|
|
|
|
School Fund Guarantee Program)
|
0.00
|
8/15/27
|
1,000,000
|
a
|
504,540
|
Mesquite Independent School
|
|
|
|
|
|
District, Unlimited Tax School
|
|
|
|
|
|
Building Bonds (Permanent
|
|
|
|
|
|
School Fund Guarantee Program)
|
0.00
|
8/15/28
|
4,675,000
|
a
|
2,224,786
|
Montgomery Independent School
|
|
|
|
|
|
District, Unlimited Tax School
|
|
|
|
|
|
Building Bonds (Permanent
|
|
|
|
|
|
School Fund Guarantee Program)
|
5.00
|
2/15/25
|
1,315,000
|
|
1,498,916
|
North Texas Tollway Authority,
|
|
|
|
|
|
First Tier System Revenue
|
|
|
|
|
|
(Insured; Assured Guaranty
|
|
|
|
|
|
Municipal Corp.)
|
5.63
|
1/1/33
|
5,000,000
|
|
5,546,700
|
North Texas Tollway Authority,
|
|
|
|
|
|
First Tier System Revenue
|
|
|
|
|
|
(Insured; Assured Guaranty
|
|
|
|
|
|
Municipal Corp.)
|
5.75
|
1/1/40
|
3,000,000
|
|
3,312,690
|
Pearland Economic Development
|
|
|
|
|
|
Corporation, Sales Tax Revenue
|
|
|
|
|
|
(Insured; AMBAC)
|
5.00
|
9/1/24
|
1,035,000
|
|
1,122,768
|
San Antonio,
|
|
|
|
|
|
Electric and Gas
|
|
|
|
|
|
Systems Revenue
|
5.50
|
2/1/20
|
255,000
|
|
319,385
|
San Antonio,
|
|
|
|
|
|
Water System Revenue
|
5.00
|
5/15/36
|
4,000,000
|
|
4,456,480
|
Schertz-Cibolo Universal City
|
|
|
|
|
|
Independent School District,
|
|
|
|
|
|
Unlimited Tax School Building
|
|
|
|
|
|
Bonds (Permanent School Fund
|
|
|
|
|
|
Guarantee Program)
|
0.00
|
2/1/32
|
5,545,000
|
a
|
2,080,872
|
24
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
Value ($)
|
Texas (continued)
|
|
|
|
|
Sharyland Independent School
|
|
|
|
|
District, Unlimited Tax School
|
|
|
|
|
Building Bonds (Permanent
|
|
|
|
|
School Fund Guarantee Program)
|
5.00
|
2/15/17
|
1,130,000
|
1,177,743
|
Texas National Research Laboratory
|
|
|
|
|
Commission Financing Corporation,
|
|
|
|
|
LR (Superconducting Super
|
|
|
|
|
Collider Project)
|
6.95
|
12/1/12
|
190,000
|
199,008
|
Virginia4.9%
|
|
|
|
|
Albemarle County Industrial
|
|
|
|
|
Development Authority, HR
|
|
|
|
|
(Martha Jefferson Hospital)
|
5.25
|
10/1/15
|
1,445,000
|
1,545,875
|
Chesapeake,
|
|
|
|
|
Chesapeake Expressway Toll
|
|
|
|
|
Road Revenue
|
5.63
|
7/15/19
|
700,000
|
702,100
|
Chesapeake Bay Bridge and Tunnel
|
|
|
|
|
Commission District, General
|
|
|
|
|
Resolution Revenue (Insured;
|
|
|
|
|
Berkshire Hathaway
|
|
|
|
|
Assurance Corporation)
|
5.50
|
7/1/25
|
1,000,000
|
1,252,170
|
Chesterfield County Economic
|
|
|
|
|
Development Authority, PCR
|
|
|
|
|
(Virginia Electric and Power
|
|
|
|
|
Company Project)
|
5.00
|
5/1/23
|
1,000,000
|
1,153,600
|
Danville Industrial Development
|
|
|
|
|
Authority, HR (Danville
|
|
|
|
|
Regional Medical Center)
|
|
|
|
|
(Insured; AMBAC)
|
5.25
|
10/1/28
|
1,500,000
|
1,860,630
|
Dulles Town Center Community
|
|
|
|
|
Development Authority, Special
|
|
|
|
|
Assessment Revenue (Dulles
|
|
|
|
|
Town Center Project)
|
6.25
|
3/1/26
|
2,755,000
|
2,756,956
|
Middle River Regional Jail
|
|
|
|
|
Authority, Jail Facility
|
|
|
|
|
Revenue (Insured; National
|
|
|
|
|
Public Finance Guarantee Corp.)
|
5.00
|
5/15/19
|
1,200,000
|
1,291,956
|
Newport News,
|
|
|
|
|
GO General Improvement Bonds
|
|
|
|
|
and GO Water Bonds
|
5.25
|
7/1/22
|
1,000,000
|
1,292,960
|
Norfolk,
|
|
|
|
|
Water Revenue
|
5.00
|
11/1/25
|
1,000,000
|
1,161,530
|
TheFund
25
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
Virginia (continued)
|
|
|
|
|
|
Prince William County Industrial
|
|
|
|
|
|
Development Authority,
|
|
|
|
|
|
Educational Facilities Revenue
|
|
|
|
|
|
(The Catholic Diocese of Arlington)
|
5.50
|
10/1/33
|
1,000,000
|
|
1,032,930
|
Richmond Metropolitan Authority,
|
|
|
|
|
|
Expressway Revenue (Insured;
|
|
|
|
|
|
National Public Finance
|
|
|
|
|
|
Guarantee Corp.)
|
5.25
|
7/15/17
|
1,600,000
|
|
1,833,520
|
Richmond Metropolitan Authority,
|
|
|
|
|
|
Expressway Revenue (Insured;
|
|
|
|
|
|
National Public Finance
|
|
|
|
|
|
Guarantee Corp.)
|
5.25
|
7/15/17
|
1,300,000
|
|
1,440,205
|
Roanoke Industrial Development
|
|
|
|
|
|
Authority, HR (Carilion Health
|
|
|
|
|
|
System) (Insured; National
|
|
|
|
|
|
Public Finance Guarantee
|
|
|
|
|
|
Corp.) (Prerefunded)
|
5.50
|
7/1/12
|
2,500,000
|
b
|
2,545,150
|
Tobacco Settlement Financing
|
|
|
|
|
|
Corporation of Virginia, Tobacco
|
|
|
|
|
|
Settlement Asset-Backed
|
|
|
|
|
|
Bonds (Prerefunded)
|
5.63
|
6/1/15
|
1,000,000
|
b
|
1,164,820
|
Virginia College Building
|
|
|
|
|
|
Authority, Educational Facilities
|
|
|
|
|
|
Revenue (Regent University
|
|
|
|
|
|
Project) (Prerefunded)
|
5.00
|
6/1/16
|
215,000
|
b
|
254,637
|
Virginia Housing Development
|
|
|
|
|
|
Authority, Commonwealth
|
|
|
|
|
|
Mortgage Revenue
|
6.38
|
1/1/36
|
1,450,000
|
|
1,604,280
|
Virginia Housing Development
|
|
|
|
|
|
Authority, Rental
|
|
|
|
|
|
Housing Revenue
|
5.50
|
6/1/30
|
1,000,000
|
|
1,098,210
|
Washington County Industrial
|
|
|
|
|
|
Development Authority, HR
|
|
|
|
|
|
(Mountain States Health Alliance)
|
7.75
|
7/1/38
|
2,000,000
|
|
2,410,840
|
Washington2.0%
|
|
|
|
|
|
Washington,
|
|
|
|
|
|
GO (Various Purpose)
|
5.00
|
7/1/18
|
2,500,000
|
|
3,080,725
|
Washington,
|
|
|
|
|
|
Motor Vehicle Fuel Tax GO
|
|
|
|
|
|
(State Road 520 Corridor
|
|
|
|
|
|
ProgramToll Revenue)
|
5.00
|
6/1/33
|
2,255,000
|
|
2,600,286
|
26
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
Washington (continued)
|
|
|
|
|
|
Washington Health Care Facilities
|
|
|
|
|
|
Authority, Mortgage Revenue
|
|
|
|
|
|
(Highline Medical Center)
|
|
|
|
|
|
(Collateralized; FHA)
|
6.25
|
8/1/36
|
3,485,000
|
|
4,043,785
|
Washington Health Care Facilities
|
|
|
|
|
|
Authority, Revenue (MultiCare
|
|
|
|
|
|
Health System) (Insured; Assured
|
|
|
|
|
|
Guaranty Municipal Corp.)
|
5.50
|
8/15/24
|
1,000,000
|
|
1,159,050
|
West Virginia.5%
|
|
|
|
|
|
West Virginia University Board of
|
|
|
|
|
|
Governors, University
|
|
|
|
|
|
Improvement Revenue (West
|
|
|
|
|
|
Virginia University Projects)
|
5.00
|
10/1/36
|
2,500,000
|
|
2,830,375
|
Wisconsin1.1%
|
|
|
|
|
|
Milwaukee Housing Authority,
|
|
|
|
|
|
MFHR (Veterans Housing
|
|
|
|
|
|
Projects) (Collateralized; FNMA)
|
5.10
|
7/1/22
|
1,000,000
|
|
1,014,940
|
Wisconsin,
|
|
|
|
|
|
General Fund Annual
|
|
|
|
|
|
Appropriation Bonds
|
5.75
|
5/1/33
|
2,000,000
|
|
2,358,820
|
Wisconsin,
|
|
|
|
|
|
GO
|
4.00
|
5/1/15
|
2,500,000
|
|
2,776,875
|
U.S. Related3.9%
|
|
|
|
|
|
Guam Waterworks Authority,
|
|
|
|
|
|
Water and Wastewater
|
|
|
|
|
|
System Revenue
|
5.88
|
7/1/35
|
2,000,000
|
|
2,014,540
|
Puerto Rico Commonwealth,
|
|
|
|
|
|
Public Improvement GO
|
|
|
|
|
|
(Insured; FGIC)
|
5.50
|
7/1/29
|
1,315,000
|
|
1,498,574
|
Puerto Rico Electric Power
|
|
|
|
|
|
Authority, Power Revenue
|
5.50
|
7/1/38
|
1,750,000
|
|
1,856,855
|
Puerto Rico Electric Power
|
|
|
|
|
|
Authority, Power Revenue
|
|
|
|
|
|
(Insured; FGIC) (Prerefunded)
|
5.00
|
7/1/15
|
1,000,000
|
b
|
1,154,040
|
Puerto Rico Infrastructure
|
|
|
|
|
|
Financing Authority, Special
|
|
|
|
|
|
Tax Revenue (Insured; AMBAC)
|
5.50
|
7/1/26
|
1,000,000
|
|
1,124,520
|
Puerto Rico Public Buildings
|
|
|
|
|
|
Authority, Government
|
|
|
|
|
|
Facilities Revenue
|
6.25
|
7/1/22
|
1,000,000
|
|
1,197,380
|
TheFund
27
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
|
Value ($)
|
U.S. Related (continued)
|
|
|
|
|
|
|
Puerto Rico Public Finance
|
|
|
|
|
|
|
Corporation, Revenue (Insured;
|
|
|
|
|
|
|
Assured Guaranty Municipal Corp.)
|
6.00
|
8/1/26
|
1,500,000
|
|
|
2,147,265
|
Puerto Rico Sales Tax Financing
|
|
|
|
|
|
|
Corporation, Sales Tax Revenue
|
|
|
|
|
|
|
(First Subordinate Series)
|
6.00
|
8/1/42
|
7,860,000
|
|
|
8,922,751
|
Puerto Rico Sales Tax Financing
|
|
|
|
|
|
|
Corporation, Sales Tax Revenue
|
|
|
|
|
|
|
(First Subordinate Series)
|
6.50
|
8/1/44
|
1,000,000
|
|
|
1,177,760
|
Total Long-Term Municipal Investments
|
|
|
|
|
|
(cost $481,763,345)
|
|
|
|
|
|
527,520,153
|
|
Short-Term Municipal
|
|
|
|
|
|
|
Investments1.0%
|
|
|
|
|
|
|
California.5%
|
|
|
|
|
|
|
California,
|
|
|
|
|
|
|
Economic Recovery Bonds
|
|
|
|
|
|
|
(LOC; JPMorgan Chase Bank)
|
0.08
|
3/1/12
|
500,000
|
|
c
|
500,000
|
California,
|
|
|
|
|
|
|
GO Notes
|
|
|
|
|
|
|
(Kindergarten-University)
|
|
|
|
|
|
|
(LOC: California State
|
|
|
|
|
|
|
Teachers Retirement
|
|
|
|
|
|
|
System and Citibank NA)
|
0.15
|
3/1/12
|
2,400,000
|
|
c
|
2,400,000
|
New York.5%
|
|
|
|
|
|
|
New York City,
|
|
|
|
|
|
|
GO Notes (LOC; JPMorgan
|
|
|
|
|
|
|
Chase Bank)
|
0.14
|
3/1/12
|
2,500,000
|
|
c
|
2,500,000
|
Total Short-Term Municipal Investments
|
|
|
|
|
|
(cost $5,400,000)
|
|
|
|
|
|
5,400,000
|
|
Total Investments
(cost $487,163,345)
|
|
|
99.6
|
%
|
|
532,920,153
|
Cash and Receivables (Net)
|
|
|
.4
|
%
|
|
2,179,343
|
Net Assets
|
|
|
100.0
|
%
|
|
535,099,496
|
|
a Security issued with a zero coupon. Income is recognized through the accretion of discount.
|
b These securities are prerefunded; the date shown represents the prerefunded date. Bonds which are prerefunded are
|
collateralized by U.S. Government securities which are held in escrow and are used to pay principal and interest on
|
the municipal issue and to retire the bonds in full at the earliest refunding date.
|
c Variable rate demand noterate shown is the interest rate in effect at February 29, 2012. Maturity date represents
|
the next demand date, or the ultimate maturity date if earlier.
|
28
|
|
|
|
Summary of Abbreviations
|
|
|
|
ABAG
|
Association of Bay Area Governments
|
ACA
|
American Capital Access
|
AGC
|
ACE Guaranty Corporation
|
AGIC
|
Asset Guaranty Insurance Company
|
AMBAC
|
American Municipal Bond
|
ARRN
|
Adjustable Rate
|
|
Assurance Corporation
|
|
Receipt Notes
|
BAN
|
Bond Anticipation Notes
|
BPA
|
Bond Purchase Agreement
|
CIFG
|
CDC Ixis Financial Guaranty
|
COP
|
Certificate of Participation
|
CP
|
Commercial Paper
|
DRIVERS
|
Derivative Inverse
|
|
|
|
Tax-Exempt Receipts
|
EDR
|
Economic Development
|
EIR
|
Environmental Improvement
|
|
Revenue
|
|
Revenue
|
FGIC
|
Financial Guaranty
|
FHA
|
Federal Housing
|
|
Insurance Company
|
|
Administration
|
FHLB
|
Federal Home
|
FHLMC
|
Federal Home Loan Mortgage
|
|
Loan Bank
|
|
Corporation
|
FNMA
|
Federal National
|
GAN
|
Grant Anticipation Notes
|
|
Mortgage Association
|
|
|
GIC
|
Guaranteed Investment
|
GNMA
|
Government National Mortgage
|
|
Contract
|
|
Association
|
GO
|
General Obligation
|
HR
|
Hospital Revenue
|
IDB
|
Industrial Development Board
|
IDC
|
Industrial Development Corporation
|
IDR
|
Industrial Development Revenue
|
LOC
|
Letter of Credit
|
LOR
|
Limited Obligation Revenue
|
LR
|
Lease Revenue
|
MERLOTS
|
Municipal Exempt Receipt
|
MFHR
|
Multi-Family Housing
|
|
Liquidity Option Tender
|
|
Revenue
|
MFMR
|
Multi-Family Mortgage Revenue
|
PCR
|
Pollution Control Revenue
|
PILOT
|
Payment in Lieu of Taxes
|
P-FLOATS
Puttable Floating Option
|
|
|
|
Tax-Exempt Receipts
|
PUTTERS
|
Puttable Tax-Exempt Receipts
|
RAC
|
Revenue Anticipation Certificates
|
RAN
|
Revenue Anticipation Notes
|
RAW
|
Revenue Anticipation Warrants
|
ROCS
|
Reset Options Certificates
|
RRR
|
Resources Recovery Revenue
|
SAAN
|
State Aid Anticipation Notes
|
SBPA
|
Standby Bond Purchase Agreement
|
SFHR
|
Single Family Housing Revenue
|
SFMR
|
Single Family Mortgage Revenue
|
SONYMA
|
State of New York Mortgage Agency
|
SWDR
|
Solid Waste Disposal Revenue
|
TAN
|
Tax Anticipation Notes
|
TAW
|
Tax Anticipation Warrants
|
TRAN
|
Tax and Revenue Anticipation Notes
|
XLCA
|
XL Capital Assurance
|
TheFund
29
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
Summary of Combined Ratings (Unaudited)
|
|
|
Fitch
|
or
|
Moodys
|
or
|
Standard & Poors
|
Value (%)
|
AAA
|
|
Aaa
|
|
AAA
|
21.7
|
AA
|
|
Aa
|
|
AA
|
36.2
|
A
|
|
A
|
|
A
|
28.8
|
BBB
|
|
Baa
|
|
BBB
|
7.0
|
BB
|
|
Ba
|
|
BB
|
.9
|
B
|
|
B
|
|
B
|
1.1
|
F1
|
|
MIG1/P1
|
|
SP1/A1
|
.5
|
Not Rated
d
|
|
Not Rated
d
|
|
Not Rated
d
|
3.8
|
|
|
|
|
|
100.0
|
|
Based on total investments.
|
d Securities which, while not rated by Fitch, Moodys and Standard & Poors, 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.
30
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2012 (Unaudited)
|
|
|
|
|
Cost
|
Value
|
Assets ($):
|
|
|
Investments in securities—See Statement of Investments
|
487,163,345
|
532,920,153
|
Interest receivable
|
|
5,759,265
|
Receivable for shares of Common Stock subscribed
|
|
370,097
|
Prepaid expenses
|
|
55,041
|
|
|
539,104,556
|
Liabilities ($):
|
|
|
Due to The Dreyfus Corporation and affiliates—Note 3(c)
|
|
265,186
|
Cash overdraft due to Custodian
|
|
289,200
|
Payable for investment securities purchased
|
|
2,768,350
|
Payable for shares of Common Stock redeemed
|
|
598,387
|
Accrued expenses
|
|
83,937
|
|
|
4,005,060
|
Net Assets ($)
|
|
535,099,496
|
Composition of Net Assets ($):
|
|
|
Paid-in capital
|
|
504,415,753
|
Accumulated undistributed investment income—net
|
|
44,723
|
Accumulated net realized gain (loss) on investments
|
|
(15,117,788
)
|
Accumulated net unrealized appreciation
|
|
|
(depreciation) on investments
|
|
45,756,808
|
Net Assets ($)
|
|
535,099,496
|
|
|
|
|
|
|
Net Asset Value Per Share
|
|
|
|
|
|
Class A
|
Class B
|
Class C
|
Class I
|
Class Z
|
Net Assets ($)
|
268,939,098
|
347,789
|
21,262,122
|
7,884,339
|
236,666,148
|
Shares Outstanding
|
19,102,278
|
24,698
|
1,510,231
|
559,838
|
16,802,461
|
Net Asset Value
|
|
|
|
|
|
Per Share ($)
|
14.08
|
14.08
|
14.08
|
14.08
|
14.09
|
See notes to financial statements.
TheFund
31
STATEMENT OF OPERATIONS
Six Months Ended February 29, 2012 (Unaudited)
|
|
|
Investment Income ($):
|
|
Interest Income
|
12,004,405
|
Expenses:
|
|
Management feeNote 3(a)
|
1,542,846
|
Shareholder servicing costsNote 3(c)
|
521,966
|
Distribution feesNote 3(b)
|
75,221
|
Professional fees
|
66,671
|
Registration fees
|
34,765
|
Directors fees and expensesNote 3(d)
|
31,116
|
Custodian feesNote 3(c)
|
22,249
|
Prospectus and shareholders reports
|
10,003
|
Loan commitment feesNote 2
|
3,106
|
Miscellaneous
|
35,093
|
Total Expenses
|
2,343,036
|
Lessreduction in management fee due to undertakingNote 3(a)
|
(691,950
)
|
Lessreduction in fees due to earnings creditsNote 3(c)
|
(52
)
|
Net Expenses
|
1,651,034
|
Investment IncomeNet
|
10,353,371
|
Realized and Unrealized Gain (Loss) on InvestmentsNote 4 ($):
|
|
Net realized gain (loss) on investments
|
1,130,170
|
Net unrealized appreciation (depreciation) on investments
|
23,194,539
|
Net Realized and Unrealized Gain (Loss) on Investments
|
24,324,709
|
Net Increase in Net Assets Resulting from Operations
|
34,678,080
|
|
See notes to financial statements.
|
|
32
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
Six Months Ended
|
|
|
February 29, 2012
|
Year Ended
|
|
(Unaudited)
|
August 31, 2011
|
Operations ($):
|
|
|
Investment incomenet
|
10,353,371
|
23,369,922
|
Net realized gain (loss) on investments
|
1,130,170
|
(5,698,003
)
|
Net unrealized appreciation
|
|
|
(depreciation) on investments
|
23,194,539
|
(12,047,152
)
|
Net Increase (Decrease) in Net Assets
|
|
|
Resulting from Operations
|
34,678,080
|
5,624,767
|
Dividends to Shareholders from ($):
|
|
|
Investment incomenet:
|
|
|
Class A Shares
|
(5,125,315
)
|
(11,665,767
)
|
Class B Shares
|
(7,773
)
|
(46,498
)
|
Class C Shares
|
(315,703
)
|
(772,847
)
|
Class I Shares
|
(128,967
)
|
(288,363
)
|
Class Z Shares
|
(4,730,890
)
|
(10,497,541
)
|
Total Dividends
|
(10,308,648
)
|
(23,271,016
)
|
Capital Stock Transactions ($):
|
|
|
Net proceeds from shares sold:
|
|
|
Class A Shares
|
13,383,923
|
27,449,378
|
Class B Shares
|
15,185
|
8,312
|
Class C Shares
|
1,998,725
|
2,679,769
|
Class I Shares
|
3,141,233
|
3,085,689
|
Class Z Shares
|
4,391,573
|
7,527,571
|
Dividends reinvested:
|
|
|
Class A Shares
|
3,692,689
|
8,305,932
|
Class B Shares
|
7,169
|
37,077
|
Class C Shares
|
207,553
|
488,434
|
Class I Shares
|
60,101
|
165,880
|
Class Z Shares
|
3,304,315
|
7,363,471
|
Cost of shares redeemed:
|
|
|
Class A Shares
|
(16,646,021
)
|
(65,605,022
)
|
Class B Shares
|
(365,962
)
|
(1,208,121
)
|
Class C Shares
|
(1,444,377
)
|
(8,313,898
)
|
Class I Shares
|
(1,106,709
)
|
(5,559,923
)
|
Class Z Shares
|
(7,408,201
)
|
(28,833,498
)
|
Increase (Decrease) in Net Assets
|
|
|
from Capital Stock Transactions
|
3,231,196
|
(52,408,949
)
|
Total Increase (Decrease) in Net Assets
|
27,600,628
|
(70,055,198
)
|
Net Assets ($):
|
|
|
Beginning of Period
|
507,498,868
|
577,554,066
|
End of Period
|
535,099,496
|
507,498,868
|
Undistributed investment incomenet
|
44,723
|
|
TheFund
33
STATEMENT OF CHANGES IN NET ASSETS
(continued)
|
|
|
|
|
|
Six Months Ended
|
|
|
February 29, 2012
|
Year Ended
|
|
(Unaudited)
|
August 31, 2011
|
Capital Share Transactions:
|
|
|
Class A
a
|
|
|
Shares sold
|
973,513
|
2,069,357
|
Shares issued for dividends reinvested
|
268,901
|
630,371
|
Shares redeemed
|
(1,208,435
)
|
(5,008,350
)
|
Net Increase (Decrease) in Shares Outstanding
|
33,979
|
(2,308,622
)
|
Class B
a
|
|
|
Shares sold
|
1,112
|
624
|
Shares issued for dividends reinvested
|
524
|
2,808
|
Shares redeemed
|
(26,896
)
|
(91,782
)
|
Net Increase (Decrease) in Shares Outstanding
|
(25,260
)
|
(88,350
)
|
Class C
|
|
|
Shares sold
|
144,575
|
201,953
|
Shares issued for dividends reinvested
|
15,117
|
37,065
|
Shares redeemed
|
(106,095
)
|
(637,058
)
|
Net Increase (Decrease) in Shares Outstanding
|
53,597
|
(398,040
)
|
Class I
|
|
|
Shares sold
|
228,031
|
232,582
|
Shares issued for dividends reinvested
|
4,378
|
12,579
|
Shares redeemed
|
(81,444
)
|
(426,019
)
|
Net Increase (Decrease) in Shares Outstanding
|
150,965
|
(180,858
)
|
Class Z
|
|
|
Shares sold
|
319,694
|
567,378
|
Shares issued for dividends reinvested
|
240,452
|
558,627
|
Shares redeemed
|
(541,124
)
|
(2,199,748
)
|
Net Increase (Decrease) in Shares Outstanding
|
19,022
|
(1,073,743
)
|
|
a During the period ended February 29, 2012, 10,075 Class B shares representing $137,677 were automatically
|
converted to 10,076 Class A shares and during the period ended August 31, 2011, 37,794 Class B shares
|
representing $498,444 were automatically converted to 37,794 Class A shares.
|
See notes to financial statements.
34
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the funds financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
February 29, 2012
|
|
Year Ended August 31,
|
|
Class A Shares
|
(Unaudited)
|
2011
|
2010
|
2009
|
2008
|
2007
|
Per Share Data ($):
|
|
|
|
|
|
|
Net asset value,
|
|
|
|
|
|
|
beginning of period
|
13.43
|
13.81
|
13.10
|
13.23
|
13.50
|
13.81
|
Investment Operations:
|
|
|
|
|
|
|
Investment incomenet
a
|
.27
|
.58
|
.58
|
.59
|
.58
|
.55
|
Net realized and unrealized
|
|
|
|
|
|
|
gain (loss) on investments
|
.65
|
(.38
)
|
.71
|
(.13
)
|
(.27
)
|
(.30
)
|
Total from Investment Operations
|
.92
|
.20
|
1.29
|
.46
|
.31
|
.25
|
Distributions:
|
|
|
|
|
|
|
Dividends from
|
|
|
|
|
|
|
investment incomenet
|
(.27
)
|
(.58
)
|
(.58
)
|
(.59
)
|
(.58
)
|
(.56
)
|
Net asset value, end of period
|
14.08
|
13.43
|
13.81
|
13.10
|
13.23
|
13.50
|
Total Return (%)
b
|
6.91
c
|
1.60
|
10.10
|
3.78
|
2.35
|
1.79
|
Ratios/Supplemental Data (%):
|
|
|
|
|
|
|
Ratio of total expenses
|
|
|
|
|
|
|
to average net assets
|
.98
d
|
.97
|
.97
|
.99
|
.98
|
.99
|
Ratio of net expenses
|
|
|
|
|
|
|
to average net assets
|
.70
d
|
.70
|
.70
|
.70
|
.70
|
.69
|
Ratio of interest and expense
|
|
|
|
|
|
|
related to floating rate notes
|
|
|
|
|
|
|
issued to average net assets
|
|
|
.00
e
|
|
|
|
Ratio of net investment income
|
|
|
|
|
|
|
to average net assets
|
3.97
d
|
4.40
|
4.37
|
4.70
|
4.33
|
4.05
|
Portfolio Turnover Rate
|
11.96
c
|
22.31
|
20.53
|
31.77
|
49.59
|
43.08
|
Net Assets, end of period
|
|
|
|
|
|
|
($ x 1,000)
|
268,939
|
256,180
|
295,189
|
95,477
|
81,428
|
74,676
|
|
|
a
|
Based on average shares outstanding at each month end.
|
b
|
Exclusive of sales charge.
|
c
|
Not annualized.
|
d
|
Annualized.
|
e
|
Amount represents less than .01%.
|
See notes to financial statements.
TheFund
35
FINANCIAL HIGHLIGHTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
February 29, 2012
|
|
Year Ended August 31,
|
|
Class B Shares
|
(Unaudited)
|
2011
|
2010
|
2009
|
2008
|
2007
|
Per Share Data ($):
|
|
|
|
|
|
|
Net asset value,
|
|
|
|
|
|
|
beginning of period
|
13.44
|
13.81
|
13.11
|
13.23
|
13.51
|
13.81
|
Investment Operations:
|
|
|
|
|
|
|
Investment incomenet
a
|
.22
|
.50
|
.50
|
.52
|
.51
|
.49
|
Net realized and unrealized
|
|
|
|
|
|
|
gain (loss) on investments
|
.65
|
(.36
)
|
.72
|
(.11
)
|
(.27
)
|
(.30
)
|
Total from Investment Operations
|
.87
|
.14
|
1.22
|
.41
|
.24
|
.19
|
Distributions:
|
|
|
|
|
|
|
Dividends from
|
|
|
|
|
|
|
investment incomenet
|
(.23
)
|
(.51
)
|
(.52
)
|
(.53
)
|
(.52
)
|
(.49
)
|
Net asset value, end of period
|
14.08
|
13.44
|
13.81
|
13.11
|
13.23
|
13.51
|
Total Return (%)
b
|
6.57
c
|
1.18
|
9.48
|
3.35
|
1.77
|
1.36
|
Ratios/Supplemental Data (%):
|
|
|
|
|
|
|
Ratio of total expenses
|
|
|
|
|
|
|
to average net assets
|
1.80
d
|
1.55
|
1.60
|
1.61
|
1.54
|
1.57
|
Ratio of net expenses
|
|
|
|
|
|
|
to average net assets
|
1.20
d
|
1.20
|
1.20
|
1.20
|
1.20
|
1.19
|
Ratio of interest and expense
|
|
|
|
|
|
|
related to floating rate notes
|
|
|
|
|
|
|
issued to average net assets
|
|
|
.00
e
|
|
|
|
Ratio of net investment income
|
|
|
|
|
|
|
to average net assets
|
3.51
d
|
3.90
|
3.89
|
4.22
|
3.84
|
3.57
|
Portfolio Turnover Rate
|
11.96
c
|
22.31
|
20.53
|
31.77
|
49.59
|
43.08
|
Net Assets, end of period
|
|
|
|
|
|
|
($ x 1,000)
|
348
|
671
|
1,910
|
1,413
|
2,385
|
3,260
|
|
|
a
|
Based on average shares outstanding at each month end.
|
b
|
Exclusive of sales charge.
|
c
|
Not annualized.
|
d
|
Annualized.
|
e
|
Amount represents less than .01%.
|
See notes to financial statements.
36
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
February 29, 2012
|
|
Year Ended August 31,
|
|
Class C Shares
|
(Unaudited)
|
2011
|
2010
|
2009
|
2008
|
2007
|
Per Share Data ($):
|
|
|
|
|
|
|
Net asset value,
|
|
|
|
|
|
|
beginning of period
|
13.43
|
13.81
|
13.10
|
13.23
|
13.50
|
13.81
|
Investment Operations:
|
|
|
|
|
|
|
Investment incomenet
a
|
.22
|
.48
|
.48
|
.50
|
.48
|
.44
|
Net realized and unrealized
|
|
|
|
|
|
|
gain (loss) on investments
|
.65
|
(.38
)
|
.71
|
(.13
)
|
(.27
)
|
(.30
)
|
Total from Investment Operations
|
.87
|
.10
|
1.19
|
.37
|
.21
|
.14
|
Distributions:
|
|
|
|
|
|
|
Dividends from
|
|
|
|
|
|
|
investment incomenet
|
(.22
)
|
(.48
)
|
(.48
)
|
(.50
)
|
(.48
)
|
(.45
)
|
Net asset value, end of period
|
14.08
|
13.43
|
13.81
|
13.10
|
13.23
|
13.50
|
Total Return (%)
b
|
6.52
c
|
.85
|
9.27
|
3.00
|
1.59
|
1.02
|
Ratios/Supplemental Data (%):
|
|
|
|
|
|
|
Ratio of total expenses
|
|
|
|
|
|
|
to average net assets
|
1.73
d
|
1.71
|
1.72
|
1.74
|
1.73
|
1.74
|
Ratio of net expenses
|
|
|
|
|
|
|
to average net assets
|
1.45
d
|
1.45
|
1.45
|
1.45
|
1.45
|
1.44
|
Ratio of interest and expense
|
|
|
|
|
|
|
related to floating rate notes
|
|
|
|
|
|
|
issued to average net assets
|
|
|
.00
e
|
|
|
|
Ratio of net investment income
|
|
|
|
|
|
|
to average net assets
|
3.21
d
|
3.65
|
3.62
|
3.93
|
3.58
|
3.32
|
Portfolio Turnover Rate
|
11.96
c
|
22.31
|
20.53
|
31.77
|
49.59
|
43.08
|
Net Assets, end of period
|
|
|
|
|
|
|
($ x 1,000)
|
21,262
|
19,569
|
25,610
|
13,220
|
8,364
|
7,549
|
|
|
a
|
Based on average shares outstanding at each month end.
|
b
|
Exclusive of sales charge.
|
c
|
Not annualized.
|
d
|
Annualized.
|
e
|
Amount represents less than .01%.
|
See notes to financial statements.
TheFund
37
FINANCIAL HIGHLIGHTS
(continued)
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
February 29, 2012
|
Year Ended August 31,
|
Class I Shares
|
(Unaudited)
|
2011
|
2010
|
2009
a
|
Per Share Data ($):
|
|
|
|
|
Net asset value, beginning of period
|
13.44
|
13.81
|
13.10
|
11.65
|
Investment Operations:
|
|
|
|
|
Investment incomenet
b
|
.28
|
.61
|
.61
|
.45
|
Net realized and unrealized
|
|
|
|
|
gain (loss) on investments
|
.65
|
(.37
)
|
.72
|
1.45
|
Total from Investment Operations
|
.93
|
.24
|
1.33
|
1.90
|
Distributions:
|
|
|
|
|
Dividends from investment incomenet
|
(.29
)
|
(.61
)
|
(.62
)
|
(.45
)
|
Net asset value, end of period
|
14.08
|
13.44
|
13.81
|
13.10
|
Total Return (%)
|
6.96
c
|
1.93
|
10.35
|
16.46
d
|
Ratios/Supplemental Data (%):
|
|
|
|
|
Ratio of total expenses to average net assets
|
.73
d
|
.71
|
.71
|
.96
e
|
Ratio of net expenses to average net assets
|
.45
d
|
.45
|
.46
|
.45
e
|
Ratio of interest and expense related
|
|
|
|
|
to floating rate notes issued
|
|
|
|
|
to average net assets
|
|
|
.00
e
|
|
Ratio of net investment income
|
|
|
|
|
to average net assets
|
4.18
d
|
4.63
|
4.56
|
4.91
e
|
Portfolio Turnover Rate
|
11.96
c
|
22.31
|
20.53
|
31.77
d
|
Net Assets, end of period ($ x 1,000)
|
7,884
|
5,495
|
8,146
|
86
|
|
|
a
|
From December 15, 2008 (commencement of initial offering) to August 31, 2009.
|
b
|
Based on average shares outstanding at each month end.
|
c
|
Not annualized.
|
d
|
Annualized.
|
e
|
Amount represents less than .01%.
|
See notes to financial statements.
38
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
February 29, 2012
|
|
Year Ended August 31,
|
|
Class Z Shares
|
(Unaudited)
|
2011
|
2010
|
2009
|
2008
|
2007
|
Per Share Data ($):
|
|
|
|
|
|
|
Net asset value,
|
|
|
|
|
|
|
beginning of period
|
13.44
|
13.82
|
13.11
|
13.23
|
13.51
|
13.81
|
Investment Operations:
|
|
|
|
|
|
|
Investment incomenet
a
|
.28
|
.61
|
.62
|
.62
|
.62
|
.59
|
Net realized and unrealized
|
|
|
|
|
|
|
gain (loss) on investments
|
.65
|
(.39
)
|
.70
|
(.12
)
|
(.28
)
|
(.30
)
|
Total from Investment Operations
|
.93
|
.22
|
1.32
|
.50
|
.34
|
.29
|
Distributions:
|
|
|
|
|
|
|
Dividends from
|
|
|
|
|
|
|
investment incomenet
|
(.28
)
|
(.60
)
|
(.61
)
|
(.62
)
|
(.62
)
|
(.59
)
|
Net asset value, end of period
|
14.09
|
13.44
|
13.82
|
13.11
|
13.23
|
13.51
|
Total Return (%)
|
7.01
b
|
1.80
|
10.34
|
4.12
|
2.53
|
2.11
|
Ratios/Supplemental Data (%):
|
|
|
|
|
|
|
Ratio of total expenses
|
|
|
|
|
|
|
to average net assets
|
.76
c
|
.75
|
.74
|
.77
|
.76
|
.76
|
Ratio of net expenses
|
|
|
|
|
|
|
to average net assets
|
.51
c
|
.50
|
.48
|
.45
|
.45
|
.44
|
Ratio of interest and expense
|
|
|
|
|
|
|
related to floating rate notes
|
|
|
|
|
|
|
issued to average net assets
|
|
|
.00
d
|
|
|
|
Ratio of net investment income
|
|
|
|
|
|
|
to average net assets
|
4.16
c
|
4.60
|
4.60
|
4.97
|
4.58
|
4.31
|
Portfolio Turnover Rate
|
11.96
b
|
22.31
|
20.53
|
31.77
|
49.59
|
43.08
|
Net Assets, end of period
|
|
|
|
|
|
|
($ x 1,000)
|
236,666
|
225,584
|
246,699
|
232,390
|
252,246
|
268,420
|
|
|
a
|
Based on average shares outstanding at each month end.
|
b
|
Not annualized.
|
c
|
Annualized.
|
d
|
Amount represents less than .01%.
|
See notes to financial statements.
TheFund
39
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1Significant Accounting Policies:
Dreyfus AMT-Free Municipal Bond Fund (the fund) is a separate non-diversified series of Dreyfus Municipal Funds, Inc. (the Company), which is registered under the Investment Company Act of 1940, as amended (the Act), as an open-end management investment company and operates as a series company currently offering four series, including the fund.The funds investment objective is to seek as high a level of current income exempt from federal income tax as is consistent with the preservation of capital. The Dreyfus Corporation (the Manager or Dreyfus), a wholly-owned subsidiary ofThe Bank of New York Mellon Corporation (BNY Mellon), serves as the funds investment adviser.
MBSC Securities Corporation (the Distributor), a wholly-owned subsidiary of the Manager, is the distributor of the funds shares. The fund is authorized to issue 600 million shares of $.001 par value Common Stock. At the end of the reporting period, the fund offered five classes of shares: Class A (100 million shares authorized), Class B (100 million shares authorized), Class C (100 million shares authorized), Class I (100 million shares authorized) and Class Z (200 million shares authorized). Class A shares are subject to a sales charge imposed at the time of purchase. Class B shares were subject to a contingent deferred sales charge (CDSC) imposed on Class B share redemptions made within six years of purchase and automatically converted to Class A shares after six years.The fund no longer offers Class B shares. Effective March 13, 2012, all outstanding Class B shares were automatically converted to Class A shares. Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class I shares are sold at net asset value per share only to institutional investors. Class Z shares are closed to new investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
40
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (FASB) Accounting Standards Codification is the exclusive reference of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The funds financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates.
The Company enters into contracts that contain a variety of indemnifications.The funds maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation:
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value.This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
TheFund
41
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
Various inputs are used in determining the value of the funds investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:
Level 1
unadjusted quoted prices in active markets for identical investments.
Level 2
other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3
significant unobservable inputs (including the funds own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the funds investments are as follows:
Investments in securities are valued each business day by an independent pricing service (the Service) approved by the Board of Directors. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions.All of the preceding securities are categorized within Level 2 of the fair value hierarchy.
The Services procedures are reviewed by Dreyfus under the general supervision of the Board of Directors.
42
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board of Directors. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized as Level 2 or 3 depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of February 29, 2012 in valuing the funds investments:
|
|
|
|
|
|
|
Level 2Other
|
Level 3
|
|
|
Level 1
|
Significant
|
Significant
|
|
|
Unadjusted
|
Observable
|
Unobservable
|
|
|
Quoted Prices
|
Inputs
|
Inputs
|
Total
|
Assets ($)
|
|
|
|
|
Investments in Securities:
|
|
|
|
Municipal Bonds
|
|
532,920,153
|
|
532,920,153
|
In May 2011, FASB issued ASU No. 2011-04 Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards (IFRS) (ASU 2011-04). ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between GAAP and IFRS. ASU 2011-04 will require reporting entities to disclose the
TheFund
43
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
following information for fair value measurements categorized within Level 3 of the fair value hierarchy: quantitative information about the unobservable inputs used in the fair value measurement, the valuation processes used by the reporting entity and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements.The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU 2011-04 and its impact on the financial statements.
(b) Securities transactions and investment income:
Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date.
(c) Dividends to shareholders:
It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the Code).To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(d) Federal income taxes:
It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax
44
exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended February 29, 2012, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period, the fund did not incur any interest or penalties.
Each of the tax years in the three-year period ended August 31, 2011 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010 (the 2010 Act), the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 (post-enactment losses) for an unlimited period. Furthermore, post-enactment capital loss carryovers retain their character as either short-term or long-term capital losses rather than short-term as they were under previous statute. The 2010 Act requires post-enactment losses to be utilized before the utilization of losses incurred in taxable years prior to the effective date of the 2010 Act (pre-enactment losses).As a result of this ordering rule, pre-enactment losses may be more likely to expire unused.
The fund has an unused capital loss carryover of $10,667,343 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to August 31, 2011. If not applied, $150,775 of the carryover expires in fiscal 2012, $7,447 expires in fiscal 2013, $820,185 expires in fiscal 2016, $2,063,006 expires in fiscal 2017, $5,287,194 expires in fiscal 2018 and $2,338,736 expires in fiscal 2019.
TheFund
45
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
The tax character of distributions paid to shareholders during the fiscal year ended August 31, 2011 was as follows: tax exempt income $23,243,191 and ordinary income $27,825.The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $225 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus (each, a Facility), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended February 29, 2012, the fund did not borrow under the facilities.
NOTE 3Management Fee and Other Transactions With Affiliates:
(a)
Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .60% of the value of the funds average daily net assets and is payable monthly.The Manager has contractually agreed to waive receipt of its fees and/or assume the expenses of the fund so that fund expenses (exclusive of shareholder services plan fees, Rule 12b-1 distribution plan fees, taxes, brokerage fees, interest and commitment fees on borrowings and extraordinary expenses) do not exceed .45% of the value of the funds average daily net assets.The Manager may terminate this agreement upon at least 90 days notice to shareholders, but has committed not to do so until at least January 1, 2013. The reduction in management fee, pursuant to the agreement, amounted to $691,950 during the period ended February 29, 2012.
46
During the period ended February 29, 2012, the Distributor retained $6,695 from commissions earned on sales of the funds Class A shares, and $40 and $328 from CDSCs on redemptions of the funds Class B and Class C shares, respectively.
(b)
Under the Distribution Plan (the Plan) adopted pursuant to Rule 12b-1 under the Act, Class B and Class C shares pay the Distributor for distributing their shares at an annual rate of .50% of the value of the average daily net assets of Class B shares and .75% of the value of the average daily net assets of Class C shares. During the period ended February 29, 2012, Class B and Class C shares were charged $1,114 and $74,107, respectively, pursuant to the Plan.
(c)
Under the Shareholder Services Plan, Class A, Class B and Class C shares pay the Distributor at an annual rate of .25% of the value of the average daily net assets of Class A, Class B and Class C shares for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (a securities dealer, financial institution or other industry professional) in respect of these services.The Distributor determines the amounts to be paid to Service Agents. During the period ended February 29, 2012, Class A, Class B and Class C shares were charged $324,398, $557 and $24,702 respectively, pursuant to the Shareholder Services Plan.
Under the Shareholder Services Plan with respect to Class Z (Class Z Shareholder Services Plan), Class Z shares reimburse the Distributor an amount not to exceed an annual rate of .25% of the value of Class Z shares average daily net assets for certain allocated expenses of providing personal services and/or maintaining shareholder accounts.The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding Class Z
TheFund
47
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
shares, providing reports and other information, and services related to the maintenance of Class Z shareholder accounts. During the period ended February 29, 2012, Class Z shares were charged $65,915 pursuant to the Class Z Shareholder Services Plan.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended February 29, 2012, the fund was charged $56,573 pursuant to the transfer agency agreement, which is included in Shareholder servicing costs in the Statement of Operations.
The fund has arrangements with the custodian and cash management bank whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset custody and cash management fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a cash management agreement for performing cash management services related to fund subscriptions and redemptions. During the period ended February 29, 2012, the fund was charged $4,228 pursuant to the cash management agreement, which is included in Shareholder servicing costs in the Statement of Operations.These fees were partially offset by earnings credits of $52.
The fund also compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. During the period ended February 29, 2012, the fund was charged $22,249 pursuant to the custody agreement.
48
During the period ended February 29, 2012, the fund was charged $3,209 for services performed by the Chief Compliance Officer and his staff.
The components of Due toThe Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $253,866, Rule 12b-1 distribution plan fees $12,704, shareholder services plan fees $58,521, custodian fees $15,147, chief compliance officer fees $1,061 and transfer agency per account fees $24,031, which are offset against an expense reimbursement currently in effect in the amount of $100,144.
(d)
Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended February 29, 2012, amounted to $65,670,065 and $60,786,558, respectively.
At February 29, 2012, accumulated net unrealized appreciation on investments was $45,756,808, consisting of $47,426,965 gross unrealized appreciation and $1,670,157 gross unrealized depreciation.
INFORMATION ABOUT THE RENEWAL OF THE
FUNDS MANAGEMENT AGREEMENT
(Unaudited)
At a meeting of the funds Board of Directors held on November 7-8, 2011, the Board considered the renewal of the funds Management Agreement pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the Agreement).The Board members, none of whom are interested persons (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from Dreyfus representatives. In considering the renewal of the Agreement, the Board considered all factors that it believed to be relevant, including those discussed below.The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund.
The Board considered information previously provided to them in presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex, and Dreyfus representatives confirmed that there had been no material changes in this information. Dreyfus provided the number of open accounts in the fund, the funds asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex and Dreyfus corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each distribution channel, including the distribution channel(s) for the fund.
The Board also considered research support available to, and portfolio management capabilities of, the funds portfolio management personnel and that Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements.The Board also considered Dreyfus extensive administrative, accounting, and compliance infrastructures.
50
Comparative Analysis of the Funds Performance and Management Fee and Expense Ratio.
The Board reviewed reports prepared by Lipper, Inc. (Lipper), an independent provider of investment company data, which included information comparing (1) the funds performance with the performance of a group of comparable funds (the Performance Group) and with a broader group of funds (the Performance Universe), all for various periods ended September 30, 2011, and (2) the funds actual and contractual management fees and total expenses with those of a group of comparable funds (the Expense Group) and with a broader group of funds (the Expense Universe), the information for which was derived in part from fund financial statements available to Lipper as of September 30, 2011. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds.They also noted that performance generally should be considered over longer periods of time, although it is possible that long-term performance can be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect disproportionately long-term performance.
The Board members discussed the results of the comparisons and noted that the funds total return performance was variously at, above, or below the Performance Group median for the various time periods, and at or above the Performance Universe median, for the various time periods.
The Board also noted that the funds yield performance was above the Performance Group median and the Performance Universe median for the various time periods. Dreyfus also provided a comparison of
TheFund
51
INFORMATION ABOUT THE RENEWAL OF THE FUNDS
MANAGEMENT AGREEMENT (Unaudited)
(continued)
the funds calendar year total returns to the returns of the funds Lipper category average, noting that the funds return was higher than the return of the index in eight of the past ten calendar years.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group median and the Expense Universe funds and discussed the results of the comparisons. They noted that the funds contractual management fee was above the Expense Group median, the funds actual management fee was below the Expense Group median and the Expense Universe median, and the funds actual total expenses were below the Expense Group median and the Expense Universe median.The Board noted the expense limitation arrangement undertaken by Dreyfus.
Dreyfus representatives reviewed with the Board members the management or investment advisory fees paid to Dreyfus or its affiliates by funds in the same Lipper category as the fund, or by separate accounts and/or other types of client portfolios managed by Dreyfus or Standish considered to have similar investment strategies and policies as the fund (the Similar Accounts), and explained the nature of the Similar Accounts. Dreyfus representatives noted that neither Dreyfus nor Standish advises any separate accounts and/or other types of client portfolios considered to have similar investment strategies and policies as the fund.They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Accounts to evaluate the appropriateness and reasonableness of the funds management fee.
Analysis of Profitability and Economies of Scale.
Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and the resulting profitability percentage for managing the fund, and the method used to determine the expenses and profit. The Board
52
concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus. The Board also noted the expense limitation arrangement and its effect on Dreyfus profitability. The Board previously had been provided with information prepared by an independent consulting firm regarding Dreyfus approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex.The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Boards counsel stated that the Board should consider the profitability analysis (1) as part of their evaluation of whether the fees under the Agreement bear a reasonable relationship to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Dreyfus representatives noted that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a funds assets had been stable or decreasing, the possibility that Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the funds asset level. The Board also considered potential benefits to Dreyfus from acting as investment adviser and noted that there were no soft dollar arrangements in effect for trading the funds investments.
TheFund
53
INFORMATION ABOUT THE RENEWAL OF THE FUNDS
MANAGEMENT AGREEMENT (Unaudited)
(continued)
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
-
The Board concluded that the nature, extent, and quality of the
services provided by Dreyfus are adequate and appropriate.
-
The Board was satisfied with the funds performance, in light of the
considerations described above.
-
The Board concluded that the fees paid to Dreyfus were reasonable
in light of the considerations described above.
-
The Board determined that the economies of scale which may
accrue to Dreyfus and its affiliates in connection with the manage-
ment of the fund had been adequately considered by Dreyfus in
connection with the fee rate charged to the fund pursuant to the
Management Agreement and that, to the extent in the future it were
determined that material economies of scale had not been shared
with the fund, the Board would seek to have those economies of
scale shared with the fund.
The Board considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year. In addition, it should be noted that the Boards consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Boards conclusions may be based, in part, on their consideration of the same or similar arrangements in prior years.The Board determined that renewal of the Agreement was in the best interests of the fund and its shareholders.
54
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The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
|
Contents
|
|
THE FUND
|
2
|
A Letter from the Chairman and CEO
|
3
|
Discussion of Fund Performance
|
6
|
Understanding Your Funds Expenses
|
6
|
Comparing Your Funds Expenses With Those of Other Funds
|
7
|
Statement of Investments
|
15
|
Statement of Assets and Liabilities
|
16
|
Statement of Operations
|
17
|
Statement of Changes in Net Assets
|
18
|
Financial Highlights
|
19
|
Notes to Financial Statements
|
27
|
Information About the Renewal of the Funds Management Agreement
|
|
FOR MORE INFORMATION
|
|
Back Cover
|
|
Dreyfus BASIC
|
New Jersey Municipal
|
Money Market Fund
|
The Fund
A LETTER FROM THE CHAIRMAN AND CEO
Dear Shareholder:
We present to you this semiannual report for Dreyfus BASIC New Jersey Municipal Money Market Fund, covering the six-month period from September 1, 2011, through February 29, 2012. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
U.S. financial markets encountered heightened volatility at the start of the reporting period when investors fled riskier assets due to adverse macroeconomic developments ranging from an unprecedented downgrade of long-term U.S. debt securities to the resurgence of a sovereign debt crisis in Europe.These factors triggered a rally among traditional safe havens, such as U.S. government securities. Better economic news derailed the fixed-income rally in October, but government bond yields continued to trend downward and prices rose over much of the remainder of the reporting period. In the midst of this turmoil affecting longer-term bonds, money market instruments remained stable and anchored near zero percent, as the Federal Reserve Board continued to maintain its target for short-term interest rates at historically low levels.
Our economic forecast calls for faster U.S. GDP growth in 2012 than in 2011, and we expect the United States to continue to post better economic data than most of the rest of the developed world.An aggressively accommodative monetary policy, pent-up demand in several industry groups and gradual improvement in housing prices appear likely to offset risks stemming from the ongoing European debt crisis and volatile energy prices. As always, we encourage you to talk with your financial adviser about how these developments may affect your investments.
Thank you for your continued confidence and support.
Jonathan R. Baum
Chairman and Chief Executive Officer
The Dreyfus Corporation
March 15, 2012
2
DISCUSSION OF FUND PERFORMANCE
For the period of September 1, 2011, through February 29, 2012, as provided by Joseph Irace, Senior Portfolio Manager
Fund and Market Performance Overview
For the six-month period ended February 29, 2012, Dreyfus BASIC New Jersey Municipal Money Market Fund produced an annualized yield of 0.01%. Taking into account the effects of compounding, the fund produced an annualized effective yield of 0.01%.
1
Despite heightened volatility among stocks and bonds during the reporting period stemming from changing economic conditions and shifting investor sentiment, tax-exempt money market yields remained stable at historically low levels as short-term interest rates were unchanged despite a stronger U.S. economy.
The Funds Investment Approach
The fund seeks as high a level of current income exempt from federal and New Jersey state income taxes as is consistent with the preservation of capital and the maintenance of liquidity.To pursue its goal, the fund normally invests substantially all of its assets in short-term, high-quality municipal obligations that provide income exempt from federal and New Jersey state personal income taxes. The fund may also invest in high-quality, short-term structured notes, which are derivative instruments whose value is tied to underlying municipal obligations.
Although the fund seeks to provide income exempt from federal and New Jersey state income taxes, interest from some of its holdings may be subject to the federal alternative minimum tax. In addition, the fund may invest temporarily in high-quality, taxable money market instruments when acceptable municipal obligations are not available for investment.
Yields Steady Despite Shifting Economic Sentiment
The reporting period began in the midst of heightened volatility in most financial markets, as investors responded nervously to several adverse macroeconomic developments.Worries at the time included an ongoing sovereign debt crisis in Greece, which threatened to spread to other
TheFund
3
DISCUSSION OF FUND PERFORMANCE
(continued)
members of the European Union. Meanwhile, in the United States, bond rating agency Standard & Poors just weeks earlier had downgraded its credit rating on long-term U.S. debt securities, a move unprecedented in U.S. history. Finally, investors reacted negatively to disappointing releases of new U.S. economic data, which kindled concerns that the domestic economy might be headed for a double-dip recession.
Fortunately, many of these fears failed to materialize over the remainder of the reporting period.The macroeconomic picture brightened as the European Union took credible steps to address the regions problems, and the United States experienced accelerating GDP growth and declining unemployment. Despite these signs of improvement, the Federal Reserve Board (the Fed) maintained its longstanding policy stance, leaving the overnight federal funds rate in a range between 0% and 0.25%. Consequently, municipal money market yields remained near zero percent.
As was the case earlier in 2011, the supply of newly issued municipal money market instruments remained relatively meager during the reporting period, in part due to a glut of issuance at the end of 2010 in advance of the expiration of federal subsidies. Subsequently, political pressure to reduce government spending and borrowing also dampened issuance volumes. Although the European debt crisis reduced the availability of the bank letters of credit that typically support short-term municipal borrowing, a rising volume of variable rate demand notes (VRDNs) has picked up much of the slack, providing municipalities with long-term financing at short-term rates. Meanwhile, demand remained steady from individuals and institutional investors, enabling yields on tax-exempt money market instruments to remain attractive relative to taxable instruments with comparable maturities.
From a credit-quality perspective, New Jersey has continued to struggle to bridge future budget shortfalls. However, the state has cut spending, and tax revenues have exceeded projections, helping to relieve some fiscal pressures.
A Credit-Conscious Investment Posture
In this environment, we continued to maintain a careful and well-researched approach to credit selection. We emphasized instruments
4
backed by pledged tax appropriations or dedicated revenues, including essential service revenue bonds issued by water, sewer and electric enterprises; and certain local credits with strong financial positions and stable tax bases. We generally shied away from instruments issued by localities that depend heavily on state aid, and we maintained the funds weighted average maturity in a range that was modestly longer than industry averages.
Outlook Still Clouded by Economic Uncertainty
We are cautiously optimistic regarding the prospects for economic growth in 2012. The U.S. economy appears to have gained some momentum, particularly with respect to a recovering labor market. However, the outlook remains cloudy due to the persistence of the European debt crisis and uncertainty regarding the potential impact of recent international banking agreements on municipal financing costs. In addition, the Fed has signaled that it is prepared to maintain short-term interest rates near current levels through late 2014. With money market yields likely to remain near historical lows, we believe that the prudent course continues to be an emphasis on preservation of capital and liquidity.
March 15, 2012
An investment in the fund is not insured or guaranteed by the FDIC or any other government agency.Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
Short-term corporate, asset-backed securities holdings and municipal securities holdings (as applicable), while rated in the highest rating category by one or more NRSRO (or unrated, if deemed of comparable quality by Dreyfus), involve credit and liquidity risks and risk of principal loss.
|
|
1
|
Annualized effective yield is based upon dividends declared daily and reinvested monthly. Past
|
|
performance is no guarantee of future results. Yields fluctuate. Income may be subject to state and
|
|
local taxes for non-New Jersey residents, and some income may be subject to the federal
|
|
alternative minimum tax (AMT) for certain investors. Yields provided reflect the absorption of
|
|
certain fund expenses by The Dreyfus Corporation, pursuant to an agreement in effect until such
|
|
time as shareholders are given at least 90 days notice and which Dreyfus has committed will
|
|
remain in place until at least January 1, 2013. Had these expenses not been absorbed, fund
|
|
yields would have been lower, and in some cases, 7-day yields during the reporting period would
|
|
have been negative.
|
TheFund
5
UNDERSTANDING YOUR FUNDS EXPENSES
(Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your funds prospectus or talk to your financial adviser.
Review your funds expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus BASIC New Jersey Municipal Money Market Fund from September 1, 2011 to February 29, 2012. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended February 29, 2012
|
|
|
Expenses paid per $1,000
|
$
|
2.04
|
Ending value (after expenses)
|
$
|
1,000.00
|
COMPARING YOUR FUNDS EXPENSES
WITH THOSE OF OTHER FUNDS
(Unaudited)
Using the SECs method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your funds expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment
assuming a hypothetical 5% annualized return for the six months ended February 29, 2012
|
|
|
Expenses paid per $1,000
|
$
|
2.06
|
Ending value (after expenses)
|
$
|
1,022.82
|
|
Expenses are equal to the funds annualized expense ratio of .41%, multiplied by the average account value over the
|
period, multiplied by 182/366 (to reflect the one-half year period).
|
6
|
|
|
|
|
|
STATEMENT OF INVESTMENTS
|
|
|
|
|
February 29, 2012 (Unaudited)
|
|
|
|
|
|
|
|
|
|
Short-Term
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments99.7%
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
New Jersey87.8%
|
|
|
|
|
|
Avalon Borough,
|
|
|
|
|
|
GO Notes (General Improvement
|
|
|
|
|
|
Bonds and Water/Sewer Utility)
|
5.00
|
5/15/12
|
300,000
|
|
302,672
|
Berkeley Heights Township Board of
|
|
|
|
|
|
Education, GO Notes
|
4.13
|
3/1/12
|
130,000
|
|
130,000
|
Bloomfield Township,
|
|
|
|
|
|
GO Notes, BAN
|
1.50
|
1/18/13
|
1,420,000
|
|
1,429,335
|
Branch Banking and Trust Municipal
|
|
|
|
|
|
Trust (Series 2044) (Port Authority-
|
|
|
|
|
|
Port Newark, Marine Termimal
|
|
|
|
|
|
Rent-Backed Revenue (Newark
|
|
|
|
|
|
Redevelopment Projects)) (LOC;
|
|
|
|
|
|
Branch Banking and Trust Co.)
|
0.16
|
3/7/12
|
6,000,000
|
a,b,c
|
6,000,000
|
Bridgewater-Raritan Regional
|
|
|
|
|
|
School District, GO
|
|
|
|
|
|
Notes, Refunding
|
3.00
|
5/1/12
|
100,000
|
|
100,388
|
Camden County Improvement
|
|
|
|
|
|
Authority, County Guaranteed
|
|
|
|
|
|
Loan Revenue (County
|
|
|
|
|
|
Capital Program)
|
5.00
|
1/15/13
|
150,000
|
|
155,540
|
Camden County Improvement
|
|
|
|
|
|
Authority, Special Revenue
|
|
|
|
|
|
(Congregation Beth El Project)
|
|
|
|
|
|
(LOC; TD Bank)
|
0.20
|
3/7/12
|
1,600,000
|
a
|
1,600,000
|
Camden County Municipal Utilities
|
|
|
|
|
|
Authority, County Agreement
|
|
|
|
|
|
Sewer Revenue, Refunding
|
5.00
|
7/15/12
|
150,000
|
|
152,402
|
Carteret Borough Redevelopment
|
|
|
|
|
|
Agency, Revenue (Project Note)
|
1.00
|
9/28/12
|
587,000
|
|
587,501
|
Commercial Township Board of
|
|
|
|
|
|
Education, GO Notes, Refunding
|
|
|
|
|
|
(School Bonds)
|
2.00
|
8/1/12
|
125,000
|
|
125,572
|
East Brunswick Township,
|
|
|
|
|
|
GO Notes, BAN
|
1.00
|
9/28/12
|
692,000
|
|
692,392
|
East Orange,
|
|
|
|
|
|
GO Notes, Refunding
|
|
|
|
|
|
(Water Utility)
|
3.70
|
7/1/12
|
100,000
|
|
100,942
|
Elizabeth,
|
|
|
|
|
|
GO Notes, BAN (Sewer Utility)
|
1.25
|
4/13/12
|
1,000,000
|
|
1,000,290
|
TheFund
7
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
Short-Term
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
New Jersey (continued)
|
|
|
|
|
|
Elizabeth,
|
|
|
|
|
|
GO Notes, Refunding
|
4.25
|
4/15/12
|
895,000
|
|
898,390
|
Essex County Improvement
|
|
|
|
|
|
Authority, Revenue (The
|
|
|
|
|
|
Childrens Institute Project)
|
|
|
|
|
|
(LOC; Wells Fargo Bank)
|
0.25
|
3/7/12
|
200,000
|
a
|
200,000
|
Glassboro Borough,
|
|
|
|
|
|
GO Notes, BAN
|
2.00
|
4/26/12
|
500,000
|
|
500,600
|
Gloucester City,
|
|
|
|
|
|
GO Notes (General Improvement
|
|
|
|
|
|
and Sewer Utility)
|
2.00
|
9/1/12
|
540,000
|
|
543,537
|
Green Brook Township Board of
|
|
|
|
|
|
Education, GO Notes, Refunding
|
|
|
|
|
|
(School Bonds)
|
3.00
|
5/15/12
|
115,000
|
|
115,450
|
Hunterdon Central Regional
|
|
|
|
|
|
High School District
|
|
|
|
|
|
Board of Education,
|
|
|
|
|
|
GO Notes, Refunding
|
4.75
|
5/1/12
|
150,000
|
|
150,970
|
Irvington Township,
|
|
|
|
|
|
GO Notes, BAN
|
2.00
|
6/21/12
|
827,800
|
|
829,299
|
Jersey City,
|
|
|
|
|
|
GO Notes, Refunding
|
|
|
|
|
|
(General Improvement)
|
5.00
|
3/1/12
|
435,000
|
|
435,000
|
Jersey City,
|
|
|
|
|
|
GO Notes, Refunding
|
|
|
|
|
|
(School Improvement)
|
5.00
|
3/1/12
|
350,000
|
|
350,000
|
Kearny Board of Education,
|
|
|
|
|
|
GO Notes, GAN
|
1.50
|
10/12/12
|
500,000
|
|
501,519
|
Leonia Borough Board of Education,
|
|
|
|
|
|
GO Notes, Refunding
|
3.00
|
8/15/12
|
100,000
|
|
100,907
|
Long Hill Township,
|
|
|
|
|
|
GO Notes, BAN
|
2.00
|
7/15/12
|
100,000
|
|
100,464
|
Mansfield Township Board of
|
|
|
|
|
|
Education, GO Notes
|
3.63
|
3/1/12
|
100,000
|
|
100,000
|
Mercer County Improvement
|
|
|
|
|
|
Authority, Revenue, Refunding
|
|
|
|
|
|
(The Atlantic Foundation
|
|
|
|
|
|
Project) (LOC; Bank of America)
|
0.21
|
3/1/12
|
1,570,000
|
a
|
1,570,000
|
Moonachie Borough Board of
|
|
|
|
|
|
Education, GO Notes
|
4.25
|
3/1/12
|
100,000
|
|
100,000
|
8
|
|
|
|
|
|
Short-Term
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
New Jersey (continued)
|
|
|
|
|
|
New Jersey Building Authority,
|
|
|
|
|
|
State Building Revenue, Refunding
|
5.00
|
6/15/12
|
700,000
|
|
708,563
|
New Jersey Economic Development
|
|
|
|
|
|
Authority, Economic Growth
|
|
|
|
|
|
Revenue (Greater Mercer County
|
|
|
|
|
|
Composite Issue) (LOC; Wells
|
|
|
|
|
|
Fargo Bank)
|
0.74
|
3/7/12
|
260,000
|
a
|
260,000
|
New Jersey Economic Development
|
|
|
|
|
|
Authority, EDR (AJV Holdings
|
|
|
|
|
|
LLC Project) (LOC; JPMorgan
|
|
|
|
|
|
Chase Bank)
|
0.58
|
3/7/12
|
225,000
|
a
|
225,000
|
New Jersey Economic Development
|
|
|
|
|
|
Authority, EDR (Paddock
|
|
|
|
|
|
Realty, LLC Project) (LOC;
|
|
|
|
|
|
Wells Fargo Bank)
|
0.30
|
3/7/12
|
1,925,000
|
a
|
1,925,000
|
New Jersey Economic Development
|
|
|
|
|
|
Authority, EDR (The Center School
|
|
|
|
|
|
Project) (LOC; Bank of America)
|
0.47
|
3/7/12
|
300,000
|
a
|
300,000
|
New Jersey Economic Development
|
|
|
|
|
|
Authority, EDR, Refunding (RDR
|
|
|
|
|
|
Investment Company LLC) (LOC;
|
|
|
|
|
|
JPMorgan Chase Bank)
|
0.30
|
3/7/12
|
1,095,000
|
a
|
1,095,000
|
New Jersey Economic Development
|
|
|
|
|
|
Authority, IDR (CST Products,
|
|
|
|
|
|
LLC Project) (LOC; National
|
|
|
|
|
|
Bank of Canada)
|
0.29
|
3/7/12
|
4,800,000
|
a
|
4,800,000
|
New Jersey Economic Development
|
|
|
|
|
|
Authority, LR (Liberty State
|
|
|
|
|
|
Park Project)
|
5.00
|
3/1/12
|
150,000
|
|
150,000
|
New Jersey Economic Development
|
|
|
|
|
|
Authority, Revenue (CPC
|
|
|
|
|
|
Behavioral Healthcare Project)
|
|
|
|
|
|
(LOC; Wells Fargo Bank)
|
0.25
|
3/7/12
|
1,000,000
|
a
|
1,000,000
|
New Jersey Economic Development
|
|
|
|
|
|
Authority, Revenue (ESARC, Inc.)
|
|
|
|
|
|
(Liquidity Facility; TD Bank)
|
0.26
|
3/7/12
|
2,275,000
|
a
|
2,275,000
|
New Jersey Economic Development
|
|
|
|
|
|
Authority, Revenue (Melrich
|
|
|
|
|
|
Road Development Company, LLC
|
|
|
|
|
|
Project) (LOC; Wells Fargo Bank)
|
0.30
|
3/7/12
|
2,075,000
|
a
|
2,075,000
|
TheFund
9
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
Short-Term
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
New Jersey (continued)
|
|
|
|
|
|
New Jersey Economic Development
|
|
|
|
|
|
Authority, Revenue (MZR Real
|
|
|
|
|
|
Estate, L.P. Project) (LOC;
|
|
|
|
|
|
Wells Fargo Bank)
|
0.30
|
3/7/12
|
845,000
|
a
|
845,000
|
New Jersey Economic Development
|
|
|
|
|
|
Authority, Revenue (Richmond
|
|
|
|
|
|
Industries, Inc. and Richmond
|
|
|
|
|
|
Realty, LLC Projects)
|
|
|
|
|
|
(LOC; TD Bank)
|
0.30
|
3/7/12
|
380,000
|
a
|
380,000
|
New Jersey Economic Development
|
|
|
|
|
|
Authority, Revenue (Somerset Hills
|
|
|
|
|
|
YMCA Project) (LOC; TD Bank)
|
0.20
|
3/7/12
|
1,860,000
|
a
|
1,860,000
|
New Jersey Economic Development
|
|
|
|
|
|
Authority, Transportation
|
|
|
|
|
|
Project Sublease Revenue,
|
|
|
|
|
|
Refunding (New Jersey Transit
|
|
|
|
|
|
Corporation Light Rail Transit
|
|
|
|
|
|
System Project)
|
4.00
|
5/1/12
|
150,000
|
|
150,824
|
New Jersey Economic Development
|
|
|
|
|
|
Authority, Transportation
|
|
|
|
|
|
Project Sublease Revenue,
|
|
|
|
|
|
Refunding (New Jersey Transit
|
|
|
|
|
|
Corporation Light Rail Transit
|
|
|
|
|
|
System Project)
|
5.00
|
5/1/12
|
390,000
|
|
392,723
|
New Jersey Educational Facilities
|
|
|
|
|
|
Authority, Revenue (Higher
|
|
|
|
|
|
Education Capital Improvement
|
|
|
|
|
|
Fund Issue)
|
5.00
|
9/1/12
|
100,000
|
|
102,058
|
New Jersey Educational Facilities
|
|
|
|
|
|
Authority, Revenue (Public Library
|
|
|
|
|
|
Project Grant Program Issue)
|
4.00
|
9/1/12
|
100,000
|
|
101,402
|
New Jersey Educational Facilities
|
|
|
|
|
|
Authority, Revenue, Refunding
|
|
|
|
|
|
(Higher Education Capital
|
|
|
|
|
|
Improvement Fund Issue)
|
4.00
|
9/1/12
|
100,000
|
|
101,710
|
New Jersey Educational Facilities
|
|
|
|
|
|
Authority, Revenue, Refunding
|
|
|
|
|
|
(The College of Saint Elizabeth
|
|
|
|
|
|
Issue) (LOC; RBS Citizens NA)
|
0.24
|
3/7/12
|
6,690,000
|
a
|
6,690,000
|
10
|
|
|
|
|
|
Short-Term
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
New Jersey (continued)
|
|
|
|
|
|
New Jersey Environmental
|
|
|
|
|
|
Infrastructure Trust, Revenue,
|
|
|
|
|
|
Refunding (Financing Program)
|
3.00
|
9/1/12
|
100,000
|
|
101,105
|
New Jersey Environmental
|
|
|
|
|
|
Infrastructure Trust, Revenue,
|
|
|
|
|
|
Refunding (Financing Program)
|
3.00
|
9/1/12
|
200,000
|
|
202,210
|
New Jersey Health Care Facilities
|
|
|
|
|
|
Financing Authority,
|
|
|
|
|
|
Department of Human Services
|
|
|
|
|
|
Lease Revenue (Greystone Park
|
|
|
|
|
|
Psychiatric Hospital Project)
|
5.00
|
9/15/12
|
200,000
|
|
204,193
|
New Jersey Health Care Facilities
|
|
|
|
|
|
Financing Authority, Revenue
|
|
|
|
|
|
(AHS Hospital Corporation
|
|
|
|
|
|
Issue) (LOC; Bank of America)
|
0.20
|
3/7/12
|
4,200,000
|
a
|
4,200,000
|
New Jersey Transportation
|
|
|
|
|
|
Trust Fund Authority
|
|
|
|
|
|
(Transportation System)
|
5.25
|
6/15/12
|
100,000
|
|
101,293
|
North Bergen Municipal Utilities
|
|
|
|
|
|
Authority, Sewer Revenue
|
|
|
|
|
|
Subordinated Project Notes
|
1.00
|
9/28/12
|
155,000
|
|
155,265
|
North Brunswick Township,
|
|
|
|
|
|
GO Notes, Refunding
|
4.00
|
5/15/12
|
100,000
|
|
100,653
|
Port Authority of New York and
|
|
|
|
|
|
New Jersey, Equipment Notes
|
0.30
|
3/7/12
|
1,615,000
|
a
|
1,615,000
|
Rahway,
|
|
|
|
|
|
GO Notes, BAN
|
1.50
|
8/10/12
|
275,000
|
|
275,602
|
Roselle Borough,
|
|
|
|
|
|
GO Notes, Refunding
|
2.00
|
3/15/12
|
255,000
|
|
255,097
|
Scotch Plains Township,
|
|
|
|
|
|
GO Notes, BAN
|
1.50
|
1/18/13
|
850,000
|
|
855,431
|
Somers Point Board of Education,
|
|
|
|
|
|
GO Notes
|
2.00
|
3/1/12
|
155,000
|
|
155,000
|
Union County,
|
|
|
|
|
|
GO Notes
|
4.13
|
3/1/13
|
500,000
|
|
500,123
|
Union County,
|
|
|
|
|
|
GO Notes, Refunding
|
|
|
|
|
|
(General Improvement)
|
4.00
|
3/1/12
|
225,000
|
|
225,000
|
TheFund
11
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
|
Short-Term
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
U.S. Related11.9%
|
|
|
|
|
|
Puerto Rico Industrial, Tourist,
|
|
|
|
|
|
Educational, Medical and
|
|
|
|
|
|
Environmental Control Facilities
|
|
|
|
|
|
Financing Authority, Environmental
|
|
|
|
|
|
Control Facilities Revenue
|
|
|
|
|
|
(Bristol-Myers Squibb
|
|
|
|
|
|
Company Project)
|
0.26
|
3/7/12
|
3,700,000
|
a
|
3,700,000
|
Puerto Rico Sales Tax Financing
|
|
|
|
|
|
Corporation, Sales Tax Revenue
|
|
|
|
|
|
(Citigroup ROCS, Series RR II
|
|
|
|
|
|
R-11765) (Liquidity Facility;
|
|
|
|
|
|
Citibank NA)
|
0.16
|
3/7/12
|
3,500,000
|
a,b,c
|
3,500,000
|
|
Total Investments
(cost $60,456,422)
|
|
|
99.7
%
|
|
60,456,422
|
|
Cash and Receivables (Net)
|
|
|
.3
%
|
|
186,107
|
|
Net Assets
|
|
|
100.0
%
|
|
60,642,529
|
|
a Variable rate demand noterate shown is the interest rate in effect at February 29, 2012. Maturity date represents
|
the next demand date, or the ultimate maturity date if earlier.
|
b Securities exempt from registration under Rule 144A of the Securities Act of 1933.These securities may be resold in
|
transactions exempt from registration, normally to qualified institutional buyers.At February 29, 2012, these
|
securities amounted to $9,500,000 or 15.7% of net assets.
|
c The fund does not directly own the municipal security indicated; the fund owns an interest in a special purpose entity
|
that, in turn, owns the underlying municipal security.The special purpose entity permits the fund to own interests in
|
underlying assets, but in a manner structured to provide certain advantages not inherent in the underlying bonds (e.g.,
|
enhanced liquidity, yields linked to short-term rates).
|
12
|
|
|
|
Summary of Abbreviations
|
|
|
|
ABAG
|
Association of Bay Area Governments
|
ACA
|
American Capital Access
|
AGC
|
ACE Guaranty Corporation
|
AGIC
|
Asset Guaranty Insurance Company
|
AMBAC
|
American Municipal Bond
|
ARRN
|
Adjustable Rate
|
|
Assurance Corporation
|
|
Receipt Notes
|
BAN
|
Bond Anticipation Notes
|
BPA
|
Bond Purchase Agreement
|
CIFG
|
CDC Ixis Financial Guaranty
|
COP
|
Certificate of Participation
|
CP
|
Commercial Paper
|
DRIVERS
|
Derivative Inverse
|
|
|
|
Tax-Exempt Receipts
|
EDR
|
Economic Development
|
EIR
|
Environmental Improvement
|
|
Revenue
|
|
Revenue
|
FGIC
|
Financial Guaranty
|
FHA
|
Federal Housing
|
|
Insurance Company
|
|
Administration
|
FHLB
|
Federal Home
|
FHLMC
|
Federal Home Loan Mortgage
|
|
Loan Bank
|
|
Corporation
|
FNMA
|
Federal National
|
GAN
|
Grant Anticipation Notes
|
|
Mortgage Association
|
|
|
GIC
|
Guaranteed Investment
|
GNMA
|
Government National Mortgage
|
|
Contract
|
|
Association
|
GO
|
General Obligation
|
HR
|
Hospital Revenue
|
IDB
|
Industrial Development Board
|
IDC
|
Industrial Development Corporation
|
IDR
|
Industrial Development Revenue
|
LOC
|
Letter of Credit
|
LOR
|
Limited Obligation Revenue
|
LR
|
Lease Revenue
|
MERLOTS
|
Municipal Exempt Receipt
|
MFHR
|
Multi-Family Housing
|
|
Liquidity Option Tender
|
|
Revenue
|
MFMR
|
Multi-Family Mortgage Revenue
|
PCR
|
Pollution Control Revenue
|
PILOT
|
Payment in Lieu of Taxes
|
P-FLOATS
Puttable Floating Option
|
|
|
|
Tax-Exempt Receipts
|
PUTTERS
|
Puttable Tax-Exempt Receipts
|
RAC
|
Revenue Anticipation Certificates
|
RAN
|
Revenue Anticipation Notes
|
RAW
|
Revenue Anticipation Warrants
|
ROCS
|
Reset Options Certificates
|
RRR
|
Resources Recovery Revenue
|
SAAN
|
State Aid Anticipation Notes
|
SBPA
|
Standby Bond Purchase Agreement
|
SFHR
|
Single Family Housing Revenue
|
SFMR
|
Single Family Mortgage Revenue
|
SONYMA
|
State of New York Mortgage Agency
|
SWDR
|
Solid Waste Disposal Revenue
|
TAN
|
Tax Anticipation Notes
|
TAW
|
Tax Anticipation Warrants
|
TRAN
|
Tax and Revenue Anticipation Notes
|
XLCA
|
XL Capital Assurance
|
TheFund
13
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
|
Summary of Combined Ratings (Unaudited)
|
|
|
Fitch
|
|
or
|
Moodys
|
or
|
Standard & Poors
|
Value (%)
|
F1
|
+,F1
|
|
VMIG1,MIG1,P1
|
|
SP1+,SP1,A1+,A1
|
53.9
|
AAA,AA,A
d
|
|
|
Aaa,Aa,A
d
|
|
AAA,AA,A
d
|
12.4
|
Not Rated
e
|
|
|
Not Rated
e
|
|
Not Rated
e
|
33.7
|
|
|
|
|
|
|
100.0
|
|
Based on total investments.
|
d Notes which are not F, MIG and SP rated are represented by bond ratings of the issuers.
|
e Securities which, while not rated by Fitch, Moodys and Standard & Poors, have been determined by the Manager to
|
be of comparable quality to those rated securities in which the fund may invest.
|
See notes to financial statements.
14
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2012 (Unaudited)
|
|
|
|
|
Cost
|
Value
|
Assets ($):
|
|
|
Investments in securitiesSee Statement of Investments
|
60,456,422
|
60,456,422
|
Cash
|
|
173,331
|
Interest receivable
|
|
164,104
|
Prepaid expenses
|
|
6,005
|
|
|
60,799,862
|
Liabilities ($):
|
|
|
Due to The Dreyfus Corporation and affiliatesNote 2(b)
|
|
12,399
|
Payable for investment securities purchased
|
|
115,449
|
Payable for shares of Common Stock redeemed
|
|
4
|
Accrued expenses
|
|
29,481
|
|
|
157,333
|
Net Assets ($)
|
|
60,642,529
|
Composition of Net Assets ($):
|
|
|
Paid-in capital
|
|
60,644,070
|
Accumulated net realized gain (loss) on investments
|
|
(1,541
)
|
Net Assets ($)
|
|
60,642,529
|
Shares Outstanding
|
|
|
(1 billion shares of $.001 par value Common Stock authorized)
|
|
60,644,070
|
Net Asset Value,
offering and redemption price per share ($)
|
|
1.00
|
|
See notes to financial statements.
|
|
|
TheFund
15
|
|
|
STATEMENT OF OPERATIONS
|
|
Six Months Ended February 29, 2012 (Unaudited)
|
|
|
|
|
|
Investment Income ($):
|
|
Interest Income
|
133,265
|
Expenses:
|
|
Management feeNote 2(a)
|
158,657
|
Shareholder servicing costsNote 2(b)
|
27,018
|
Auditing fees
|
18,353
|
Custodian feesNote 2(b)
|
5,296
|
Registration fees
|
4,848
|
Legal fees
|
4,584
|
Prospectus and shareholders reports
|
3,860
|
Directors fees and expensesNote 2(c)
|
2,204
|
Miscellaneous
|
11,580
|
Total Expenses
|
236,400
|
Lessreduction in management fee due to undertakingNote 2(a)
|
(93,605
)
|
Lessreduction in expenses due to undertakingNote 2(a)
|
(11,860
)
|
Lessreduction in fees due to earnings creditsNote 2(b)
|
(4
)
|
Net Expenses
|
130,931
|
Investment IncomeNet, representing net increase
|
|
in net assets resulting from operations
|
2,334
|
|
See notes to financial statements.
|
|
16
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
Six Months Ended
|
|
|
February 29, 2012
|
Year Ended
|
|
(Unaudited)
|
August 31, 2011
|
Operations ($):
|
|
|
Investment incomenet
|
2,334
|
95,615
|
Net realized gain (loss) on investments
|
|
18
|
Net Increase (Decrease) in Net Assets
|
|
|
Resulting from Operations
|
2,334
|
95,633
|
Dividends to Shareholders from ($):
|
|
|
Investment incomenet
|
(2,334
)
|
(95,615
)
|
Capital Stock Transactions
($1.00 per share):
|
|
|
Net proceeds from shares sold
|
14,100,959
|
19,100,920
|
Dividends reinvested
|
2,313
|
94,140
|
Cost of shares redeemed
|
(19,737,074
)
|
(32,714,681
)
|
Increase (Decrease) in Net Assets
|
|
|
from Capital Stock Transactions
|
(5,633,802
)
|
(13,519,621
)
|
Total Increase (Decrease) in Net Assets
|
(5,633,802
)
|
(13,519,603
)
|
Net Assets ($):
|
|
|
Beginning of Period
|
66,276,331
|
79,795,934
|
End of Period
|
60,642,529
|
66,276,331
|
|
See notes to financial statements.
|
|
|
TheFund
17
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the funds financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
February 29, 2012
|
|
Year Ended August 31,
|
|
|
(Unaudited)
|
2011
|
2010
|
2009
|
2008
|
2007
|
Per Share Data ($):
|
|
|
|
|
|
|
Net asset value,
|
|
|
|
|
|
|
beginning of period
|
1.00
|
1.00
|
1.00
|
1.00
|
1.00
|
1.00
|
Investment Operations:
|
|
|
|
|
|
|
Investment incomenet
|
.000
a
|
.001
|
.002
|
.013
|
.026
|
.033
|
Net realized and unrealized
|
|
|
|
|
|
|
gain(loss) on investments
|
|
|
|
|
.001
|
|
Total from Investment Operations
|
.000
a
|
.001
|
.002
|
.013
|
.027
|
.033
|
Distributions:
|
|
|
|
|
|
|
Dividends from
|
|
|
|
|
|
|
investment incomenet
|
(.000
)
a
|
(.001
)
|
(.002
)
|
(.013
)
|
(.026
)
|
(.033
)
|
Dividends from net realized
|
|
|
|
|
|
|
gain on investments
|
|
|
|
|
(.001
)
|
|
Total Distributions
|
(.000
)
a
|
(.001
)
|
(.002
)
|
(.013
)
|
(.027
)
|
(.033
)
|
Net asset value, end of period
|
1.00
|
1.00
|
1.00
|
1.00
|
1.00
|
1.00
|
Total Return (%)
|
.00
b,c
|
.13
|
.17
|
1.36
|
2.70
|
3.30
|
Ratios/Supplemental Data (%):
|
|
|
|
|
|
|
Ratio of total expenses
|
|
|
|
|
|
|
to average net assets
|
.75
b
|
.74
|
.69
|
.73
|
.68
|
.65
|
Ratio of net expenses
|
|
|
|
|
|
|
to average net assets
|
.41
b
|
.45
|
.45
|
.44
|
.44
|
.45
|
Ratio of net investment income
|
|
|
|
|
|
|
to average net assets
|
.01
b
|
.13
|
.17
|
1.33
|
2.58
|
3.25
|
Net Assets, end of period
|
|
|
|
|
|
|
($ x 1,000)
|
60,643
|
66,276
|
79,796
|
110,242
|
110,655
|
103,147
|
|
|
a
|
Amount represents less than $.001 per share.
|
b
|
Annualized.
|
c
|
Amount represents less than .01%.
|
See notes to financial statements.
18
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1Significant Accounting Policies:
Dreyfus BASIC New Jersey Municipal Money Market Fund (the fund) is a separate non-diversified series of Dreyfus Municipal Funds, Inc. (the Company), which is registered under the Investment Company Act of 1940, as amended (the Act), as an open-end management investment company and operates as a series company currently offering four series including the fund. The funds investment objective is to seek as high a level of current income exempt from federal and New Jersey state income taxes as is consistent with the preservation of capital and the maintenance of liquidity. The Dreyfus Corporation (the Manager or Dreyfus), a wholly-owned subsidiary of The Bank of NewYork Mellon Corporation (BNY Mellon), serves as the funds investment adviser. MBSC Securities Corporation (the Distributor), a wholly-owned subsidiary of the Manager, is the distributor of the funds shares, which are sold without a sales charge.
It is the funds policy to maintain a continuous net asset value per share of $1.00; the fund has adopted certain investment, portfolio valuation and dividend and distribution policies to enable it to do so.There is no assurance, however, that the fund will be able to maintain a stable net asset value per share of $1.00
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (FASB) Accounting Standards Codification is the exclusive reference of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The funds financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates.
TheFund
19
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
The Company enters into contracts that contain a variety of indemnifications.The funds maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation:
Investments in securities are valued at amortized cost in accordance with Rule 2a-7 of the Act, which has been determined by the Board of Directors to represent the fair value of the funds investments.
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value.This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the funds investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:
Level 1
unadjusted quoted prices in active markets for identical investments.
Level 2
other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3
significant unobservable inputs (including the funds own assumptions in determining the fair value of investments).
20
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, money market securities are valued using amortized cost, in accordance with rules under the Act. Generally, amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of February 29, 2012 in valuing the funds investments:
|
|
|
Short-Term
|
Valuation Inputs
|
Investments ($)
|
Level 1Unadjusted Quoted Prices
|
|
Level 2Other Significant Observable Inputs
|
60,456,422
|
Level 3Significant Unobservable Inputs
|
|
Total
|
60,456,422
|
See Statement of Investments for additional detailed categorizations.
|
|
In May 2011, FASB issued Accounting Standards Update (ASU) No. 2011-04 Amendments to Achieve Common FairValue Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards (IFRS) (ASU 2011-04). ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between GAAP and IFRS. ASU 2011-04 will require reporting entities to disclose the following information for fair value measurements categorized within Level 3 of the fair value hierarchy: quantitative information about the unobservable inputs used in the fair value measurement, the valuation processes used by the reporting entity and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value
TheFund
21
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
measurements.The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU 2011-04 and its impact on the financial statements.
(b) Securities transactions and investment income:
Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Cost of investments represents amortized cost.
The fund follows an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the fund.
(c) Dividends to shareholders:
It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the Code).To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains.
(d) Federal income taxes:
It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended February 29, 2012, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions
22
as income tax expense in the Statements of Operations. During the period, the fund did not incur any interest or penalties.
Each of the tax years in the three-year period ended August 31, 2011 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010 (the 2010 Act), the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 (post-enactment losses) for an unlimited period. Furthermore, post-enactment capital loss carryovers retain their character as either short-term or long-term capital losses rather than short-term as they were under previous statute.The 2010 Act requires post-enactment losses to be utilized before the utilization of losses incurred in taxable years prior to the effective date of the 2010 Act (pre-enactment losses).As a result of this ordering rule, pre-enactment losses may be more likely to expire unused.
The fund has an unused capital loss carryover of $1,541 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to August 31, 2011. If not applied, the carryover expires in fiscal 2017.
The tax character of distributions paid to shareholders during the fiscal year ended August 31, 2011 was as follows: tax exempt income $95,615.The tax character of current year distributions will be determined at the end of the current fiscal year.
At February 29, 2012, 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 2Management Fee and Other Transactions With Affiliates:
(a)
Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .50% of the value of the funds average daily net assets and is payable monthly.The Manager has
TheFund
23
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
agreed, to waive receipt of its fees and/or assume the expenses of the fund so that annual fund operating expenses do not exceed .45% of the value of the funds average daily net assets.The Manager may terminate this agreement upon at least 90 days notice to shareholders, but has committed not to do so until at least January 1, 2013.The reduction in management fee, pursuant to the undertaking, amounted to $93,605 during the period ended February 29, 2012.
The Manager has undertaken to waive receipt of the management fee and/or reimburse operating expenses in order to facilitate a daily yield at or above a certain level which may change from time to time.This undertaking is voluntary and not contractual, and may be terminated at any time. The reduction in expenses, pursuant to the undertaking, amounted to $11,860 during the period ended February 29, 2012.
(b)
Under the Shareholder Services Plan, the fund reimburses the Distributor an amount not to exceed an annual rate of .25% of the value of the funds average daily net assets for certain allocated expenses of providing personal services and/or maintaining shareholder accounts.The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. During the period ended February 29, 2012, the fund was charged $21,263 pursuant to the Shareholder Services Plan.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended February 29, 2012, the fund was charged $3,842 pursuant to the transfer agency agreement, which is included in Shareholder servicing costs in the Statement of Operations.
24
The fund has arrangements with the custodian and cash management bank whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset custody and cash management fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, under a cash management agreement for performing cash management services related to fund subscriptions and redemptions. During the period ended February 29, 2012, the fund was charged $325 pursuant to the cash management agreement, which is included in Shareholder servicing costs in the Statement of Operations.These fees were partially offset by earnings credits of $4.
The fund also compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. During the period ended February 29, 2012, the fund was charged $5,296 pursuant to the custody agreement.
During the period ended February 29, 2012, the fund was charged $3,209 for services performed by the Chief Compliance Officer and his staff.
The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $24,306, custodian fees $3,766, chief compliance officer fees $1,061 and transfer agency per account fees $1,300, which are offset against an expense reimbursement currently in effect in the amount of $18,034.
(c)
Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
TheFund
25
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
NOTE 3Securities Transactions:
The fund is permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board of Directors.The procedures have been designed to ensure that any purchase or sale of securities by the fund from or to another fund or portfolio that are, or could be, considered an affiliate by virtue of having a common investment adviser (or affiliated investment adviser), common Directors and/or common officers, complies with Rule 17a-7 of the Act. During the period ended February 29, 2012, the fund engaged in purchases and sales of securities pursuant to Rule 17a-7 of the Act amounting to $20,820,000 and $34,210,000, respectively.
26
INFORMATION ABOUT THE RENEWAL OF THE
FUNDS MANAGEMENT AGREEMENT
(Unaudited)
At a meeting of the funds Board of Directors held on November 7-8, 2011, the Board considered the renewal of the funds Management Agreement pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the Agreement).The Board members, none of whom are interested persons (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from Dreyfus representatives. In considering the renewal of the Agreement, the Board considered all factors that it believed to be relevant, including those discussed below.The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund.
The Board considered information previously provided to them in presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex, and Dreyfus representatives confirmed that there had been no material changes in this information. Dreyfus provided the number of open accounts in the fund, the funds asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex and Dreyfus corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each distribution channel, including the distribution channel(s) for the fund.
The Board also considered research support available to, and portfolio management capabilities of, the funds portfolio management personnel and that Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements.The Board also considered Dreyfus extensive administrative, accounting, and compliance infrastructures.
TheFund
27
INFORMATION ABOUT THE RENEWAL OF THE FUNDS
MANAGEMENT AGREEMENT (Unaudited)
(continued)
Comparative Analysis of the Funds Performance and Management Fee and Expense Ratio.
The Board reviewed reports prepared by Lipper, Inc. (Lipper), an independent provider of investment company data, which included information comparing (1) the funds performance with the performance of a group of comparable funds (the Performance Group) and with a broader group of funds (the Performance Universe), all for various periods ended September 30, 2011, and (2) the funds actual and contractual management fees and total expenses with those of a group of comparable funds (the Expense Group) and with a broader group of funds (the Expense Universe), the information for which was derived in part from fund financial statements available to Lipper as of September 30, 2011. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds.
The Board discussed the results of the comparisons and noted that the fund achieved the number one total return ranking in the Performance Group for the various time periods, and the number one total return ranking in the Performance Universe for the various periods except for the 1-year period (achieving the number two ranking in the Universe).
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. They noted that the funds contractual management fee was above the Expense Group median, the funds actual management fee was below the Expense Group median and the Expense Universe median, and the funds actual total expenses were above the Expense Group median and the Expense Universe median.
28
The Board considered the duration and extent of the fee waiver/expense reimbursement undertaking by Dreyfus to support a minimum zero or positive daily yield, as applicable from time to time, in the historically low interest rate environment, and the Board noted the extent to which differences among the returns for the Performance Group funds might be attributable to similar undertakings.
Dreyfus representatives of Dreyfus reviewed with the Board the management or investment advisory fees paid to Dreyfus or its affiliates by funds in the same Lipper category as the fund (the Similar Accounts), and explained the nature of the Similar Accounts. Dreyfus representatives of Dreyfus noted that Dreyfus does not advise any separate accounts and/ or other types of client portfolios that are considered to have similar investment strategies and policies as the fund.They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Accounts to evaluate the appropriateness and reasonableness of the funds management fee.
Analysis of Profitability and Economies of Scale.
Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and the resulting profitability percentage for managing the fund, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus. The Board also noted the expense limitation arrangement and its effect on Dreyfus profitability. The Board previously had been provided with information prepared by an independent consulting firm regarding Dreyfus approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex.The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
TheFund
29
INFORMATION ABOUT THE RENEWAL OF THE FUNDS
MANAGEMENT AGREEMENT (Unaudited)
(continued)
The Boards counsel stated that the Board should consider the profitability analysis (1) as part of their evaluation of whether the fees under the Agreement bear a reasonable relationship to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Dreyfus representatives noted that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a funds assets had been stable or decreasing, the possibility that Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the funds asset level. The Board also considered potential benefits to Dreyfus from acting as investment adviser and noted there were no soft dollar arrangements in effect for trading the funds investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
-
The Board concluded that the nature, extent and quality of the
services provided by Dreyfus are adequate and appropriate.
-
The Board was satisfied with the funds performance, in light of the
considerations described above.
-
The Board concluded that the fee paid to Dreyfus was reasonable in
light of the considerations described above.
30
-
The Board determined that the economies of scale which may accrue
to Dreyfus and its affiliates in connection with the management of the
fund had been adequately considered by Dreyfus in connection with
the fee rate charged to the fund pursuant to the Agreement and that,
to the extent in the future it were determined that material
economies of scale had not been shared with the fund, the Board
would seek to have those economies of scale shared with the fund.
The Board considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year. In addition, it should be noted that the Boards consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Boards conclusions may be based, in part, on their consideration of the same or similar arrangements in prior years.The Board determined that renewal of the Agreement was in the best interests of the fund and its shareholders.
TheFund
31
Save time. Save paper. View your next shareholder report online as soon as its available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. Its simple and only takes a few minutes.
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
|
Contents
|
|
THE FUND
|
2
|
A Letter from the Chairman and CEO
|
3
|
Discussion of Fund Performance
|
6
|
Understanding Your Funds Expenses
|
6
|
Comparing Your Funds Expenses With Those of Other Funds
|
7
|
Statement of Investments
|
20
|
Statement of Assets and Liabilities
|
21
|
Statement of Operations
|
22
|
Statement of Changes in Net Assets
|
25
|
Financial Highlights
|
29
|
Notes to Financial Statements
|
40
|
Information About the Renewal of the Funds Management Agreement
|
|
FOR MORE INFORMATION
|
|
Back Cover
|
|
Dreyfus
|
High Yield Municipal
|
Bond Fund
|
The Fund
A LETTER FROM THE CHAIRMAN AND CEO
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus HighYield Municipal Bond Fund, covering the six-month period from September 1, 2011, through February 29, 2012. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
U.S. bond markets encountered heightened volatility at the start of the reporting period when investors fled riskier assets due to adverse macroeconomic developments ranging from an unprecedented downgrade of long-term U.S. debt securities to the resurgence of a sovereign debt crisis in Europe.These factors triggered a rally among traditional safe havens, such as U.S. government securities, while high yield bonds and other lower-rated assets declined sharply in September. However, better economic data in October cheered investors, triggering rallies among higher yielding securities. In addition, high yield bond prices were buoyed as investors searched for competitive yields in a low interest-rate environment.
Our economic forecast calls for faster U.S. GDP growth in 2012 than in 2011, and we expect the United States to continue to post better economic data than most of the rest of the developed world.An aggressively accommodative monetary policy, pent-up demand in several industry groups and gradual improvement in housing prices appear likely to offset risks stemming from the ongoing European debt crisis and volatile energy prices. As always, we encourage you to talk with your financial adviser about how these developments may affect your investments.
Thank you for your continued confidence and support.
Jonathan R. Baum
Chairman and Chief Executive Officer
The Dreyfus Corporation
March 15, 2012
2
DISCUSSION OF FUND PERFORMANCE
For the period of September 1, 2011, through February 29, 2012, as provided by Daniel Barton, and Jeffrey Burger, Co-Primary Portfolio Managers
Fund and Market Performance Overview
For the six-month period ended February 29, 2012, Dreyfus High Yield Municipal Bond Funds Class A shares produced a 7.10% total return, Class C shares returned 6.70%, Class I shares returned 7.24% and Class Z shares returned 7.14%.
1
The funds benchmark, the Barclays Municipal Bond Index (the Index), which, unlike the fund, does not include securities rated below investment grade, produced a total return of 5.67%.
2
Investors risk appetite more than offset economic uncertainty during the reporting period boosting returns for lower-rated securities, which benefited the fund relative to its benchmark. Longer duration securities were also beneficial as long-term interest rates fell and a reduced supply of newly issued securities was met by robust investor demand.
The Funds Investment Approach
The fund primarily seeks high current income exempt from federal income tax. Secondarily, the fund may seek capital appreciation to the extent consistent with its primary goal. To pursue its goals, the fund normally invests at least 80% of its assets in municipal bonds that provide income exempt from federal income tax. The fund normally invests at least 50% of its assets in municipal bonds rated BBB/Baa or lower by independent rating agencies or the unrated equivalent as determined by Dreyfus. Municipal bonds rated below investment grade (BB/Ba or lower) are commonly known as high yield or junk bonds.The fund may invest up to 50% of its assets in higher-quality municipal bonds rated AAA/Aaa to A, or the unrated equivalent as determined by Dreyfus.
We focus on identifying undervalued sectors and securities and minimize the use of interest rate forecasting.The portfolio managers select municipal bonds for the funds portfolio by:
TheFund
3
DISCUSSION OF FUND PERFORMANCE
(continued)
-
Actively trading among various sectors, such as pre-refunded,
general obligation and revenue, based on their apparent relative
values.The fund seeks to invest in several of these sectors.
High Yield Municipal Bonds Rallied Despite Uncertain Economic Environment
The reporting period began in the midst of heightened turmoil in the financial markets sparked by several macroeconomic developments.These included the fallout from an unprecedented downgrade of one agencys credit-rating of long-term U.S. government debt, a sovereign debt crisis in Greece that threatened to spread to other members of the European Union and uncertainties regarding the strength and sustainability of the U.S. economic recovery.
Low nominal rates encouraged investors to seek more yield via risky assets during the reporting period despite the uncertain economic environment.
Moreover, supply-and-demand forces also helped support municipal bond prices. New issuance volumes fell sharply in 2011 after a flood of new supply in late 2010, while political pressure also led to reduced borrowing. In addition, tax receipts generally have trended higher, and many governments have cut spending, helping to relieve fiscal pressures.
Duration and Credit Selection Strategies Proved Effective
The funds relative performance was buoyed by a relatively long average duration, which we expressed through an emphasis on maturities between 15 and 20 years. These securities occupied the sweet spot along the markets maturity spectrum when interest-rates declined over the reporting period. In addition, the fund achieved favorable results from bonds rated BBB and below, a range in which securities backed by industrial development projects and the states settlement of litigation with U.S. tobacco companies fared especially well. Bonds issued by Puerto Rico, which earn income that is exempt from most state taxes, also advanced during the reporting period.
Detractors from relative performance included underweighted exposure to California general obligation bonds, which rebounded from previous
4
weakness as credit concerns eased. Bonds issued on behalf of airlines also lagged market averages, primarily due to the bankruptcy of a major carrier.
Adjusting to a Changing Market Environment
While we are encouraged by recently improved data, U.S. economic growth remains sluggish and vulnerable to unexpected shocks. Consequently, we have attempted to focus mainly on municipal bonds with strong liquidity characteristics. In addition, we recently have added to the funds positions in some previously hard-hit sectors that we regard as fundamentally sound, including tobacco bonds.To reduce the funds sensitivity to interest rate volatility, we have trimmed its exposure to bonds with provisions for early redemption over the next few years, redeploying the proceeds to bonds with longer call dates. Finally, we have maintained the funds average duration in a range that is modestly longer than the benchmark.
March 15, 2012
Bond funds are subject generally to interest rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the funds prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
High yield bonds are subject to increased credit risk and are considered speculative in terms of the issuers perceived ability to continue making interest payments on a timely basis and to repay principal upon maturity.
|
|
1
|
Total return includes reinvestment of dividends and any capital gains paid. It does not include the
|
|
maximum initial sales charges in the case of Class A shares, and the applicable contingent deferred
|
|
sales charges imposed on redemptions in the case of Class C shares. Class Z and Class I shares
|
|
are not subject to any initial or deferred sales charge. Past performance is no guarantee of future
|
|
results. Share price, yield and investment return fluctuate such that upon redemption, fund shares
|
|
may be worth more or less than their original cost. Income may be subject to state and local taxes,
|
|
and some income may be subject to the federal alternative minimum tax (AMT) for certain
|
|
investors. Capital gains, if any, are fully taxable.
|
2
|
SOURCE: LIPPER INC. Reflects reinvestment of dividends and, where applicable, capital
|
|
gain distributions.The Barclays Municipal Bond Index is a widely accepted, unmanaged total
|
|
return performance benchmark for the long-term, investment-grade, tax-exempt bond market.
|
|
Index returns do not reflect fees and expenses associated with operating a mutual fund. Investors
|
|
cannot invest directly in any index.
|
TheFund
5
UNDERSTANDING YOUR FUNDS EXPENSES
(Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your funds prospectus or talk to your financial adviser.
Review your funds expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus HighYield Municipal Bond Fund from September 1, 2011 to February 29, 2012. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended February 29, 2012
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
Class C
|
|
Class I
|
|
Class Z
|
Expenses paid per $1,000
|
$
|
5.25
|
$
|
9.15
|
$
|
4.12
|
$
|
4.89
|
Ending value (after expenses)
|
$
|
1,071.00
|
$
|
1,067.00
|
$
|
1,072.40
|
$
|
1,071.40
|
COMPARING YOUR FUNDS EXPENSES
WITH THOSE OF OTHER FUNDS
(Unaudited)
Using the SECs method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your funds expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment
assuming a hypothetical 5% annualized return for the six months ended February 29, 2012
|
|
|
|
|
|
|
|
|
|
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Class A
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Class C
|
|
Class I
|
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Class Z
|
Expenses paid per $1,000
|
$
|
5.12
|
$
|
8.92
|
$
|
4.02
|
$
|
4.77
|
Ending value (after expenses)
|
$
|
1,019.79
|
$
|
1,016.01
|
$
|
1,020.89
|
$
|
1,020.14
|
|
Expenses are equal to the funds annualized expense ratio of 1.02% for Class A, 1.78% for Class C, .80% for
|
Class I and 95% for Class Z, multiplied by the average account value over the period, multiplied by 182/366 (to
|
reflect the one-half year period).
|
6
|
|
|
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STATEMENT OF INVESTMENTS
|
|
|
|
February 29, 2012 (Unaudited)
|
|
|
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
Investments98.0%
|
Rate (%)
|
Date
|
Amount ($)
|
Value ($)
|
Alabama2.2%
|
|
|
|
|
Birmingham Water Works Board,
|
|
|
|
|
Water Revenue
|
5.00
|
1/1/23
|
1,500,000
|
1,752,270
|
Jefferson County,
|
|
|
|
|
Limited Obligation
|
|
|
|
|
School Warrants
|
5.25
|
1/1/20
|
2,500,000
|
2,393,525
|
Alaska1.2%
|
|
|
|
|
Northern Tobacco Securitization
|
|
|
|
|
Corporation of Alaska, Tobacco
|
|
|
|
|
Settlement Asset-Backed Bonds
|
5.00
|
6/1/32
|
1,000,000
|
828,370
|
Northern Tobacco Securitization
|
|
|
|
|
Corporation of Alaska, Tobacco
|
|
|
|
|
Settlement Asset-Backed Bonds
|
5.00
|
6/1/46
|
2,000,000
|
1,468,400
|
Arizona5.5%
|
|
|
|
|
Mohave County Industrial
|
|
|
|
|
Development Authority,
|
|
|
|
|
Correctional Facilities
|
|
|
|
|
Contract Revenue (Mohave
|
|
|
|
|
Prison, LLC Expansion Project)
|
8.00
|
5/1/25
|
3,000,000
|
3,362,790
|
Pima County Industrial Development
|
|
|
|
|
Authority, Education Facilities
|
|
|
|
|
Revenue (Sonoran Science
|
|
|
|
|
Academy Tucson Project)
|
5.75
|
12/1/37
|
2,750,000
|
2,279,860
|
Pima County Industrial Development
|
|
|
|
|
Authority, Education Revenue
|
|
|
|
|
(American Charter Schools
|
|
|
|
|
Foundation Project)
|
5.63
|
7/1/38
|
3,000,000
|
2,677,680
|
Salt Verde Financial Corporation,
|
|
|
|
|
Senior Gas Revenue
|
5.00
|
12/1/37
|
2,000,000
|
2,002,840
|
California7.5%
|
|
|
|
|
California,
|
|
|
|
|
GO (Various Purpose)
|
6.50
|
4/1/33
|
2,000,000
|
2,463,340
|
California Municipal Finance
|
|
|
|
|
Authority, Revenue
|
|
|
|
|
(Southwestern Law School)
|
6.50
|
11/1/31
|
1,000,000
|
1,078,030
|
California State Public Works
|
|
|
|
|
Board, LR (Various
|
|
|
|
|
Capital Projects)
|
5.13
|
10/1/31
|
1,000,000
|
1,081,790
|
California Statewide Communities
|
|
|
|
|
Development Authority, Revenue
|
|
|
|
|
(Bentley School)
|
7.00
|
7/1/40
|
1,075,000
|
1,035,225
|
TheFund
7
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
California (continued)
|
|
|
|
|
|
California Statewide Communities
|
|
|
|
|
|
Development Authority, Revenue
|
|
|
|
|
|
(Bentley School)
|
0.00
|
7/1/50
|
3,105,000
|
a
|
110,196
|
Chula Vista,
|
|
|
|
|
|
IDR (San Diego Gas and
|
|
|
|
|
|
Electric Company)
|
5.88
|
2/15/34
|
1,000,000
|
|
1,154,070
|
Golden State Tobacco
|
|
|
|
|
|
Securitization Corporation,
|
|
|
|
|
|
Tobacco Settlement
|
|
|
|
|
|
Asset-Backed Bonds
|
5.00
|
6/1/33
|
2,150,000
|
|
1,646,577
|
San Buenaventura,
|
|
|
|
|
|
Revenue (Community Memorial
|
|
|
|
|
|
Health System)
|
7.50
|
12/1/41
|
1,500,000
|
|
1,691,340
|
San Francisco City and County
|
|
|
|
|
|
Redevelopment Financing
|
|
|
|
|
|
Authority, Tax Allocation
|
|
|
|
|
|
Revenue (Mission Bay South
|
|
|
|
|
|
Redevelopment Project)
|
6.63
|
8/1/39
|
2,000,000
|
|
2,176,620
|
Tobacco Securitization Authority
|
|
|
|
|
|
of Southern California, Tobacco
|
|
|
|
|
|
Settlement Asset-Backed Bonds
|
|
|
|
|
|
(San Diego County Tobacco Asset
|
|
|
|
|
|
Securitization Corporation)
|
5.00
|
6/1/37
|
2,200,000
|
|
1,679,656
|
Connecticut1.6%
|
|
|
|
|
|
Connecticut Development Authority,
|
|
|
|
|
|
Water Facilities Revenue
|
|
|
|
|
|
(Aquarion Water Company of
|
|
|
|
|
|
Connecticut Project)
|
5.50
|
4/1/21
|
1,500,000
|
|
1,684,320
|
Connecticut Resources Recovery
|
|
|
|
|
|
Authority, Special Obligation
|
|
|
|
|
|
Revenue (American REF-FUEL
|
|
|
|
|
|
Company of Southeastern
|
|
|
|
|
|
Connecticut Project)
|
6.45
|
11/15/22
|
1,235,000
|
|
1,235,840
|
District of Columbia.9%
|
|
|
|
|
|
District of Columbia Housing
|
|
|
|
|
|
Finance Agency, SFMR
|
|
|
|
|
|
(Collateralized: FHA, FNMA
|
|
|
|
|
|
and GNMA)
|
6.65
|
6/1/30
|
1,430,000
|
|
1,544,000
|
8
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
District of Columbia (continued)
|
|
|
|
|
|
District of Columbia Housing
|
|
|
|
|
|
Finance Agency, SFMR
|
|
|
|
|
|
(Collateralized: FHA, FNMA
|
|
|
|
|
|
and GNMA)
|
7.50
|
12/1/30
|
100,000
|
|
101,193
|
Florida4.1%
|
|
|
|
|
|
Jacksonville Economic Development
|
|
|
|
|
|
Commission, Health Care
|
|
|
|
|
|
Facilities Revenue
|
|
|
|
|
|
(Florida Proton Therapy
|
|
|
|
|
|
Institute Project)
|
6.25
|
9/1/27
|
1,000,000
|
b
|
1,043,640
|
Mid-Bay Bridge Authority,
|
|
|
|
|
|
Springing Lien Revenue
|
7.25
|
10/1/34
|
1,500,000
|
|
1,652,355
|
Orlando Utilities Commission,
|
|
|
|
|
|
Utility System Revenue
|
5.00
|
10/1/20
|
1,000,000
|
|
1,238,770
|
Palm Bay,
|
|
|
|
|
|
Educational Facilities
|
|
|
|
|
|
Revenue (Patriot Charter
|
|
|
|
|
|
School Project)
|
7.00
|
7/1/36
|
4,000,000
|
c
|
1,080,080
|
Saint Johns County Industrial
|
|
|
|
|
|
Development Authority, Revenue
|
|
|
|
|
|
(Presbyterian Retirement
|
|
|
|
|
|
Communities Project)
|
5.88
|
8/1/40
|
2,500,000
|
|
2,665,550
|
Georgia2.1%
|
|
|
|
|
|
Atlanta,
|
|
|
|
|
|
Airport General Revenue
|
5.00
|
1/1/27
|
2,000,000
|
|
2,179,440
|
Atlanta,
|
|
|
|
|
|
Water and Wastewater Revenue
|
6.00
|
11/1/27
|
1,500,000
|
|
1,794,690
|
Hawaii.8%
|
|
|
|
|
|
Kuakini Health System,
|
|
|
|
|
|
Special Purpose Revenue
|
6.38
|
7/1/32
|
1,500,000
|
|
1,500,945
|
Illinois7.2%
|
|
|
|
|
|
Chicago,
|
|
|
|
|
|
General Airport Third Lien
|
|
|
|
|
|
Revenue (Chicago OHare
|
|
|
|
|
|
International Airport)
|
5.63
|
1/1/35
|
1,240,000
|
|
1,422,020
|
Harvey,
|
|
|
|
|
|
GO
|
5.63
|
12/1/32
|
4,000,000
|
|
3,629,160
|
TheFund
9
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
Illinois (continued)
|
|
|
|
|
|
Illinois Finance Authority,
|
|
|
|
|
|
Recovery Zone Facility Revenue
|
|
|
|
|
|
(Navistar International
|
|
|
|
|
|
Corporation Project)
|
6.50
|
10/15/40
|
2,000,000
|
|
2,149,980
|
Illinois Finance Authority,
|
|
|
|
|
|
Revenue (Sherman
|
|
|
|
|
|
Health Systems)
|
5.50
|
8/1/37
|
1,500,000
|
|
1,524,855
|
Illinois Finance Authority,
|
|
|
|
|
|
Revenue (The Carle Foundation)
|
5.00
|
8/15/20
|
2,215,000
|
|
2,471,586
|
Railsplitter Tobacco Settlement
|
|
|
|
|
|
Authority, Tobacco
|
|
|
|
|
|
Settlement Revenue
|
6.00
|
6/1/28
|
1,000,000
|
|
1,120,890
|
University of Illinois Board of
|
|
|
|
|
|
Trustees, Auxiliary Facilities
|
|
|
|
|
|
System Revenue
|
5.50
|
4/1/31
|
1,000,000
|
|
1,139,900
|
Iowa.5%
|
|
|
|
|
|
Tobacco Settlement Authority of
|
|
|
|
|
|
Iowa, Tobacco Settlement
|
|
|
|
|
|
Asset-Backed Bonds
|
5.60
|
6/1/34
|
1,000,000
|
|
883,030
|
Kansas.9%
|
|
|
|
|
|
Sedgwick and Shawnee Counties,
|
|
|
|
|
|
SFMR (Mortgage-Backed Securities
|
|
|
|
|
|
Program) (Collateralized:
|
|
|
|
|
|
FNMA and GNMA)
|
5.70
|
12/1/35
|
480,000
|
|
508,584
|
Sedgwick and Shawnee Counties,
|
|
|
|
|
|
SFMR (Mortgage-Backed Securities
|
|
|
|
|
|
Program) (Collateralized:
|
|
|
|
|
|
FNMA and GNMA)
|
6.25
|
12/1/35
|
1,105,000
|
|
1,192,560
|
Kentucky1.7%
|
|
|
|
|
|
Kentucky Area Development
|
|
|
|
|
|
Districts Financing Trust, COP
|
|
|
|
|
|
(Lease Acquisition Program)
|
5.50
|
5/1/27
|
1,070,000
|
|
1,083,214
|
Ohio County,
|
|
|
|
|
|
PCR (Big Rivers Electric
|
|
|
|
|
|
Corporation Project)
|
6.00
|
7/15/31
|
2,000,000
|
|
2,133,560
|
Louisiana3.7%
|
|
|
|
|
|
Lakeshore Villages Master
|
|
|
|
|
|
Community Development District,
|
|
|
|
|
|
Special Assessment Revenue
|
5.25
|
7/1/17
|
4,867,000
|
c
|
1,946,508
|
10
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
Louisiana (continued)
|
|
|
|
|
|
Louisiana Local Government
|
|
|
|
|
|
Environmental Facilities and
|
|
|
|
|
|
Community Development
|
|
|
|
|
|
Authority, Revenue (Westlake
|
|
|
|
|
|
Chemical Corporation Projects)
|
6.75
|
11/1/32
|
1,500,000
|
|
1,649,070
|
Louisiana Public Facilities
|
|
|
|
|
|
Authority, Revenue (SUSLA
|
|
|
|
|
|
Facilities, Inc. Project)
|
5.75
|
7/1/39
|
4,000,000
|
b
|
3,294,120
|
Maine.9%
|
|
|
|
|
|
Maine Health and Higher
|
|
|
|
|
|
Educational Facilities Authority,
|
|
|
|
|
|
Revenue (MaineGeneral Medical
|
|
|
|
|
|
Center Issue)
|
7.50
|
7/1/32
|
1,500,000
|
|
1,730,895
|
Maryland2.7%
|
|
|
|
|
|
Maryland Economic Development
|
|
|
|
|
|
Corporation, Port Facilities
|
|
|
|
|
|
Revenue (CNX Marine Terminals
|
|
|
|
|
|
Inc. Port of Baltimore Facility)
|
5.75
|
9/1/25
|
3,000,000
|
|
3,123,540
|
Montgomery County,
|
|
|
|
|
|
Consolidated Public
|
|
|
|
|
|
Improvement GO
|
5.00
|
7/1/20
|
1,525,000
|
|
1,939,830
|
Massachusetts.6%
|
|
|
|
|
|
Massachusetts Water Resources
|
|
|
|
|
|
Authority, General Revenue
|
5.00
|
8/1/27
|
1,000,000
|
|
1,203,020
|
Michigan9.6%
|
|
|
|
|
|
Charyl Stockwell Academy,
|
|
|
|
|
|
COP
|
5.90
|
10/1/35
|
2,080,000
|
|
1,758,536
|
Detroit,
|
|
|
|
|
|
Sewage Disposal System Senior
|
|
|
|
|
|
Lien Revenue (Insured; Assured
|
|
|
|
|
|
Guaranty Municipal Corp.)
|
7.50
|
7/1/33
|
1,500,000
|
|
1,889,145
|
Detroit,
|
|
|
|
|
|
Water Supply System Senior
|
|
|
|
|
|
Lien Revenue
|
5.00
|
7/1/31
|
1,000,000
|
|
1,047,440
|
Kent Hospital Finance Authority,
|
|
|
|
|
|
Revenue (Metropolitan
|
|
|
|
|
|
Hospital Project)
|
6.00
|
7/1/35
|
2,000,000
|
|
2,044,000
|
Lansing Board of Water and Light,
|
|
|
|
|
|
Utility System Revenue
|
5.50
|
7/1/41
|
1,500,000
|
|
1,740,405
|
TheFund
11
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
Value ($)
|
Michigan (continued)
|
|
|
|
|
Michigan Finance Authority,
|
|
|
|
|
Clean Water Revolving
|
|
|
|
|
Fund Revenue
|
5.00
|
10/1/17
|
1,800,000
|
2,213,496
|
Michigan Strategic Fund,
|
|
|
|
|
LOR (State of Michigan
|
|
|
|
|
Cadillac Place Office
|
|
|
|
|
Building Project)
|
5.00
|
10/15/19
|
1,300,000
|
1,514,968
|
Michigan Strategic Fund,
|
|
|
|
|
SWDR (Genesee Power
|
|
|
|
|
Station Project)
|
7.50
|
1/1/21
|
3,485,000
|
3,398,677
|
Royal Oak Hospital Finance
|
|
|
|
|
Authority, HR (William Beaumont
|
|
|
|
|
Hospital Obligated Group)
|
8.25
|
9/1/39
|
2,000,000
|
2,523,860
|
Minnesota1.0%
|
|
|
|
|
Saint Paul Housing and
|
|
|
|
|
Redevelopment Authority,
|
|
|
|
|
Hospital Facility Revenue
|
|
|
|
|
(HealthEast Project)
|
5.75
|
11/15/21
|
1,750,000
|
1,798,580
|
Mississippi.7%
|
|
|
|
|
Mississippi Home Corporation,
|
|
|
|
|
SFMR (Collateralized: FNMA
|
|
|
|
|
and GNMA)
|
6.25
|
12/1/32
|
1,195,000
|
1,276,284
|
Nebraska1.2%
|
|
|
|
|
Nebraska Public Power District,
|
|
|
|
|
General Revenue
|
5.00
|
1/1/33
|
2,000,000
|
2,275,480
|
New Jersey5.6%
|
|
|
|
|
Burlington County Bridge
|
|
|
|
|
Commission, EDR (The
|
|
|
|
|
Evergreens Project)
|
5.63
|
1/1/38
|
1,000,000
|
993,850
|
New Jersey Economic Development
|
|
|
|
|
Authority, IDR (Newark Airport
|
|
|
|
|
Marriott Hotel Project)
|
7.00
|
10/1/14
|
1,510,000
|
1,517,067
|
New Jersey Transportation Trust
|
|
|
|
|
Fund Authority (Transportation
|
|
|
|
|
System) (Insured; AMBAC)
|
5.25
|
12/15/22
|
1,545,000
|
1,914,657
|
Tobacco Settlement Financing
|
|
|
|
|
Corporation of New Jersey,
|
|
|
|
|
Tobacco Settlement
|
|
|
|
|
Asset-Backed Bonds
|
4.50
|
6/1/23
|
1,000,000
|
943,290
|
12
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
New Jersey (continued)
|
|
|
|
|
|
Tobacco Settlement Financing
|
|
|
|
|
|
Corporation of New Jersey,
|
|
|
|
|
|
Tobacco Settlement
|
|
|
|
|
|
Asset-Backed Bonds
|
0.00
|
6/1/41
|
4,000,000
|
a
|
206,600
|
Tobacco Settlement Financing
|
|
|
|
|
|
Corporation of New Jersey,
|
|
|
|
|
|
Tobacco Settlement
|
|
|
|
|
|
Asset-Backed Bonds
|
5.00
|
6/1/41
|
6,360,000
|
|
4,842,250
|
New Mexico1.5%
|
|
|
|
|
|
Farmington,
|
|
|
|
|
|
PCR (Public Service Company of
|
|
|
|
|
|
New Mexico San Juan Project)
|
6.25
|
6/1/40
|
2,200,000
|
|
2,296,954
|
New Mexico Mortgage Finance
|
|
|
|
|
|
Authority, Single Family
|
|
|
|
|
|
Mortgage Program Revenue
|
|
|
|
|
|
(Collateralized: FHLMC,
|
|
|
|
|
|
FNMA and GNMA)
|
6.15
|
7/1/35
|
405,000
|
|
431,851
|
New York4.5%
|
|
|
|
|
|
New York City,
|
|
|
|
|
|
GO
|
5.00
|
8/1/20
|
1,500,000
|
|
1,854,255
|
New York City Industrial
|
|
|
|
|
|
Development Agency, Liberty
|
|
|
|
|
|
Revenue (7 World Trade
|
|
|
|
|
|
Center Project)
|
6.25
|
3/1/15
|
1,400,000
|
|
1,403,696
|
New York City Industrial
|
|
|
|
|
|
Development Agency, Special
|
|
|
|
|
|
Facility Revenue (American
|
|
|
|
|
|
Airlines, Inc. John F. Kennedy
|
|
|
|
|
|
International Airport Project)
|
8.00
|
8/1/28
|
1,000,000
|
c
|
948,380
|
New York State Dormitory
|
|
|
|
|
|
Authority, Revenue (Orange
|
|
|
|
|
|
Regional Medical Center
|
|
|
|
|
|
Obligated Group)
|
6.25
|
12/1/37
|
4,000,000
|
|
4,124,880
|
North Carolina.6%
|
|
|
|
|
|
North Carolina Medical Care
|
|
|
|
|
|
Commission, Health Care
|
|
|
|
|
|
Facilities First Mortgage
|
|
|
|
|
|
Revenue (Deerfield Episcopal
|
|
|
|
|
|
Retirement Community)
|
6.13
|
11/1/38
|
1,000,000
|
|
1,068,630
|
TheFund
13
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
Ohio1.5%
|
|
|
|
|
|
Buckeye Tobacco Settlement
|
|
|
|
|
|
Financing Authority, Tobacco
|
|
|
|
|
|
Settlement Asset-Backed Bonds
|
5.88
|
6/1/47
|
3,635,000
|
|
2,713,128
|
Oregon.6%
|
|
|
|
|
|
Warm Springs Reservation
|
|
|
|
|
|
Confederated Tribes,
|
|
|
|
|
|
Hydroelectric Revenue
|
|
|
|
|
|
(Pelton Round Butte Project)
|
6.38
|
11/1/33
|
1,000,000
|
|
1,039,240
|
Pennsylvania5.6%
|
|
|
|
|
|
Allegheny County Hospital
|
|
|
|
|
|
Development Authority, Health
|
|
|
|
|
|
System Revenue (West Penn
|
|
|
|
|
|
Allegheny Health System)
|
5.38
|
11/15/40
|
2,000,000
|
|
1,661,680
|
Chester County Industrial
|
|
|
|
|
|
Development Authority,
|
|
|
|
|
|
Revenue (Avon Grove
|
|
|
|
|
|
Charter School Project)
|
6.38
|
12/15/37
|
1,020,000
|
|
991,001
|
Harrisburg Authority,
|
|
|
|
|
|
University Revenue (The
|
|
|
|
|
|
Harrisburg University of
|
|
|
|
|
|
Science and Technology Project)
|
6.00
|
9/1/36
|
3,000,000
|
|
2,594,460
|
JPMorgan Chase Putters/Drivers
|
|
|
|
|
|
Trust (Geisinger Authority,
|
|
|
|
|
|
Health System Revenue
|
|
|
|
|
|
(Geisinger Health System))
|
5.13
|
6/1/35
|
2,000,000
|
b,d
|
2,181,400
|
Montgomery County Higher Education
|
|
|
|
|
|
and Health Authority, First
|
|
|
|
|
|
Mortgage Improvement Revenue
|
|
|
|
|
|
(American Health Foundation/
|
|
|
|
|
|
Montgomery, Inc. Project)
|
6.88
|
4/1/36
|
2,000,000
|
|
2,016,100
|
Pennsylvania Economic Development
|
|
|
|
|
|
Financing Authority, Sewage
|
|
|
|
|
|
Sludge Disposal Revenue
|
|
|
|
|
|
(Philadelphia Biosolids
|
|
|
|
|
|
Facility Project)
|
6.25
|
1/1/32
|
1,000,000
|
|
1,101,960
|
Texas9.0%
|
|
|
|
|
|
Austin Convention Enterprises,
|
|
|
|
|
|
Inc., Convention Center Hotel
|
|
|
|
|
|
First Tier Revenue (Insured; XLCA)
|
5.25
|
1/1/18
|
1,000,000
|
|
1,038,830
|
14
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
Value ($)
|
Texas (continued)
|
|
|
|
|
Clifton Higher Education Finance
|
|
|
|
|
Corporation, Education Revenue
|
|
|
|
|
(Uplift Education)
|
6.00
|
12/1/30
|
1,000,000
|
1,096,860
|
Dallas-Fort Worth International
|
|
|
|
|
Airport Facility Improvement
|
|
|
|
|
Corporation, Revenue
|
|
|
|
|
(Learjet Inc. Project)
|
6.15
|
1/1/16
|
1,000,000
|
1,001,370
|
Houston,
|
|
|
|
|
Airport System Special Facilities
|
|
|
|
|
Revenue (Continental Airlines, Inc.
|
|
|
|
|
Terminal Improvement Projects)
|
6.50
|
7/15/30
|
1,500,000
|
1,547,640
|
Houston,
|
|
|
|
|
Combined Utility System First
|
|
|
|
|
Lien Revenue
|
5.00
|
11/15/19
|
1,000,000
|
1,245,540
|
Houston Convention and
|
|
|
|
|
Entertainment Facilities
|
|
|
|
|
Department, Hotel Occupancy
|
|
|
|
|
Tax and Special Revenue
|
5.00
|
9/1/31
|
1,000,000
|
1,060,960
|
La Vernia Higher Education Finance
|
|
|
|
|
Corporation, Education
|
|
|
|
|
Revenue (Knowledge is
|
|
|
|
|
Power Program, Inc.)
|
6.25
|
8/15/39
|
2,250,000
|
2,474,730
|
North Texas Tollway Authority,
|
|
|
|
|
First Tier System Revenue
|
|
|
|
|
(Insured; Assured Guaranty
|
|
|
|
|
Municipal Corp.)
|
5.75
|
1/1/40
|
1,175,000
|
1,297,470
|
North Texas Tollway Authority,
|
|
|
|
|
Second Tier System Revenue
|
6.13
|
1/1/31
|
3,700,000
|
4,104,077
|
Texas Public Finance Authority,
|
|
|
|
|
Charter School Finance
|
|
|
|
|
Corporation, Education
|
|
|
|
|
Revenue (Burnham Wood
|
|
|
|
|
Charter School Project)
|
6.25
|
9/1/36
|
2,250,000
|
2,118,645
|
Virginia3.5%
|
|
|
|
|
Henrico County,
|
|
|
|
|
Public Improvement GO
|
5.00
|
7/15/17
|
2,500,000
|
3,071,125
|
Washington County Industrial
|
|
|
|
|
Development Authority, HR
|
|
|
|
|
(Mountain States Health Alliance)
|
7.25
|
7/1/19
|
3,000,000
|
3,420,810
|
TheFund
15
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
|
|
Long-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
|
Investments (continued)
|
Rate (%)
|
Date
|
Amount ($)
|
|
Value ($)
|
Washington2.8%
|
|
|
|
|
|
Kitsap County Consolidated Housing
|
|
|
|
|
|
Authority, Housing Revenue
|
|
|
|
|
|
(Pooled Tax Credit Projects)
|
5.50
|
6/1/27
|
1,480,000
|
|
1,305,301
|
Kitsap County Consolidated Housing
|
|
|
|
|
|
Authority, Housing Revenue
|
|
|
|
|
|
(Pooled Tax Credit Projects)
|
5.60
|
6/1/37
|
1,500,000
|
|
1,296,915
|
Snohomish County Housing
|
|
|
|
|
|
Authority, Revenue (Whispering
|
|
|
|
|
|
Pines Apartments Project)
|
5.60
|
9/1/25
|
1,675,000
|
|
1,532,390
|
Snohomish County Housing
|
|
|
|
|
|
Authority, Revenue (Whispering
|
|
|
|
|
|
Pines Apartments Project)
|
5.75
|
9/1/30
|
1,250,000
|
|
1,115,388
|
West Virginia1.5%
|
|
|
|
|
|
West Virginia University Board of
|
|
|
|
|
|
Governors, University
|
|
|
|
|
|
Improvement Revenue (West
|
|
|
|
|
|
Virginia University Projects)
|
5.00
|
10/1/36
|
2,500,000
|
|
2,830,375
|
Wisconsin.7%
|
|
|
|
|
|
Wisconsin,
|
|
|
|
|
|
GO
|
5.00
|
5/1/22
|
1,000,000
|
|
1,238,140
|
Multi State.6%
|
|
|
|
|
|
Munimae Tax Exempt Subsidiary LLC
|
5.90
|
9/30/20
|
2,000,000
|
b
|
1,120,020
|
U.S. Related3.4%
|
|
|
|
|
|
Guam Waterworks Authority,
|
|
|
|
|
|
Water and Wastewater
|
|
|
|
|
|
System Revenue
|
5.63
|
7/1/40
|
1,765,000
|
|
1,772,431
|
Puerto Rico Public Buildings
|
|
|
|
|
|
Authority, Government
|
|
|
|
|
|
Facilities Revenue
|
6.25
|
7/1/22
|
2,000,000
|
|
2,394,760
|
Puerto Rico Sales Tax Financing
|
|
|
|
|
|
Corporation, Sales Tax Revenue
|
|
|
|
|
|
(First Subordinate Series)
|
6.00
|
8/1/42
|
2,000,000
|
|
2,270,420
|
Total Long-Term Municipal Investments
|
|
|
|
|
(cost $181,278,518)
|
|
|
|
|
183,430,121
|
16
|
|
|
|
|
|
Short-Term Municipal
|
Coupon
|
Maturity
|
Principal
|
|
Investment1.1%
|
Rate (%)
|
Date
|
Amount ($)
|
Value ($)
|
New York;
|
|
|
|
|
New York City,
|
|
|
|
|
GO Notes (LOC;
|
|
|
|
|
JPMorgan Chase Bank)
|
|
|
|
|
(cost $2,000,000)
|
0.14
|
3/1/12
|
2,000,000
e
|
2,000,000
|
|
Total Investments
(cost $183,278,518)
|
|
|
99.1
%
|
185,430,121
|
Cash and Receivables (Net)
|
|
|
.9
%
|
1,681,696
|
Net Assets
|
|
|
100.0
%
|
187,111,817
|
|
a Security issued with a zero coupon. Income is recognized through the accretion of discount.
|
b Securities exempt from registration under Rule 144A of the Securities Act of 1933.These securities may be resold in
|
transactions exempt from registration, normally to qualified institutional buyers.At February 29, 2012, these
|
securities were valued at $7,639,180 or 4.1% of net assets.
|
c Non-income producingsecurity in default.
|
d Collateral for floating rate borrowings.
|
e Variable rate demand noterate shown is the interest rate in effect at February 29, 2012. Maturity date represents
|
the next demand date, or the ultimate maturity date if earlier.
|
TheFund
17
STATEMENT OF INVESTMENTS (Unaudited)
(continued)
|
|
|
|
Summary of Abbreviations
|
|
|
|
ABAG
|
Association of Bay Area Governments
|
ACA
|
American Capital Access
|
AGC
|
ACE Guaranty Corporation
|
AGIC
|
Asset Guaranty Insurance Company
|
AMBAC
|
American Municipal Bond
|
ARRN
|
Adjustable Rate
|
|
Assurance Corporation
|
|
Receipt Notes
|
BAN
|
Bond Anticipation Notes
|
BPA
|
Bond Purchase Agreement
|
CIFG
|
CDC Ixis Financial Guaranty
|
COP
|
Certificate of Participation
|
CP
|
Commercial Paper
|
DRIVERS
|
Derivative Inverse
|
|
|
|
Tax-Exempt Receipts
|
EDR
|
Economic Development
|
EIR
|
Environmental Improvement
|
|
Revenue
|
|
Revenue
|
FGIC
|
Financial Guaranty
|
FHA
|
Federal Housing
|
|
Insurance Company
|
|
Administration
|
FHLB
|
Federal Home
|
FHLMC
|
Federal Home Loan Mortgage
|
|
Loan Bank
|
|
Corporation
|
FNMA
|
Federal National
|
GAN
|
Grant Anticipation Notes
|
|
Mortgage Association
|
|
|
GIC
|
Guaranteed Investment
|
GNMA
|
Government National Mortgage
|
|
Contract
|
|
Association
|
GO
|
General Obligation
|
HR
|
Hospital Revenue
|
IDB
|
Industrial Development Board
|
IDC
|
Industrial Development Corporation
|
IDR
|
Industrial Development Revenue
|
LOC
|
Letter of Credit
|
LOR
|
Limited Obligation Revenue
|
LR
|
Lease Revenue
|
MERLOTS
|
Municipal Exempt Receipt
|
MFHR
|
Multi-Family Housing
|
|
Liquidity Option Tender
|
|
Revenue
|
MFMR
|
Multi-Family Mortgage Revenue
|
PCR
|
Pollution Control Revenue
|
PILOT
|
Payment in Lieu of Taxes
|
P-FLOATS
Puttable Floating Option
|
|
|
|
Tax-Exempt Receipts
|
PUTTERS
|
Puttable Tax-Exempt Receipts
|
RAC
|
Revenue Anticipation Certificates
|
RAN
|
Revenue Anticipation Notes
|
RAW
|
Revenue Anticipation Warrants
|
ROCS
|
Reset Options Certificates
|
RRR
|
Resources Recovery Revenue
|
SAAN
|
State Aid Anticipation Notes
|
SBPA
|
Standby Bond Purchase Agreement
|
SFHR
|
Single Family Housing Revenue
|
SFMR
|
Single Family Mortgage Revenue
|
SONYMA
|
State of New York Mortgage Agency
|
SWDR
|
Solid Waste Disposal Revenue
|
TAN
|
Tax Anticipation Notes
|
TAW
|
Tax Anticipation Warrants
|
TRAN
|
Tax and Revenue Anticipation Notes
|
XLCA
|
XL Capital Assurance
|
18
|
|
|
|
|
|
Summary of Combined Ratings (Unaudited)
|
|
|
Fitch
|
or
|
Moodys
|
or
|
Standard & Poors
|
Value (%)
|
AAA
|
|
Aaa
|
|
AAA
|
6.4
|
AA
|
|
Aa
|
|
AA
|
14.4
|
A
|
|
A
|
|
A
|
16.6
|
BBB
|
|
Baa
|
|
BBB
|
17.7
|
BB
|
|
Ba
|
|
BB
|
19.7
|
B
|
|
B
|
|
B
|
5.7
|
Not Rated
f
|
|
Not Rated
f
|
|
Not Rated
f
|
19.5
|
|
|
|
|
|
100.0
|
|
Based on total investments.
|
f Securities which, while not rated by Fitch, Moodys and Standard & Poors, 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.
TheFund
19
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2012 (Unaudited)
|
|
|
|
|
Cost
|
Value
|
Assets ($):
|
|
|
Investments in securitiesSee Statement of Investments
|
183,278,518
|
185,430,121
|
Cash
|
|
10,719
|
Interest receivable
|
|
2,652,098
|
Receivable for shares of Common Stock subscribed
|
|
282,174
|
Prepaid expenses and other assets
|
|
156,289
|
|
|
188,531,401
|
Liabilities ($):
|
|
|
Due to The Dreyfus Corporation and affiliatesNote 3(c)
|
|
144,546
|
Payable for floating rate notes issuedNote 4
|
|
1,000,000
|
Payable for shares of Common Stock redeemed
|
|
229,926
|
Interest and expense payable related
|
|
|
to floating rate notes issuedNote 4
|
|
1,690
|
Accrued expenses
|
|
43,422
|
|
|
1,419,584
|
Net Assets ($)
|
|
187,111,817
|
Composition of Net Assets ($):
|
|
|
Paid-in capital
|
|
216,766,380
|
Accumulated undistributed investment incomenet
|
|
93,181
|
Accumulated net realized gain (loss) on investments
|
|
(31,899,347
)
|
Accumulated net unrealized appreciation
|
|
|
(depreciation) on investments
|
|
2,151,603
|
Net Assets ($)
|
|
187,111,817
|
|
|
|
|
|
Net Asset Value Per Share
|
|
|
|
|
|
Class A
|
Class C
|
Class I
|
Class Z
|
Net Assets ($)
|
54,862,492
|
27,677,113
|
17,071,318
|
87,500,894
|
Shares Outstanding
|
4,714,316
|
2,375,754
|
1,469,115
|
7,514,701
|
Net Asset Value Per Share ($)
|
11.64
|
11.65
|
11.62
|
11.64
|
See notes to financial statements.
20
STATEMENT OF OPERATIONS
Six Months Ended February 29, 2012 (Unaudited)
|
|
|
Investment Income ($):
|
|
Interest Income
|
5,210,672
|
Expenses:
|
|
Management feeNote 3(a)
|
537,893
|
Distribution/Service Plan feesNote 3(b)
|
175,256
|
Shareholder servicing costsNote 3(c)
|
150,922
|
Professional fees
|
33,051
|
Registration fees
|
28,138
|
Directors fees and expensesNote 3(d)
|
11,214
|
Custodian feesNote 3(c)
|
7,620
|
Prospectus and shareholders reports
|
6,966
|
Interest and expense related to floating rate notes issuedNote 4
|
3,402
|
Loan commitment feesNote 2
|
1,092
|
Miscellaneous
|
15,872
|
Total Expenses
|
971,426
|
Lessreduction in fees due to earnings creditsNote 3(c)
|
(15
)
|
Net Expenses
|
971,411
|
Investment IncomeNet
|
4,239,261
|
Realized and Unrealized Gain (Loss) on InvestmentsNote 4 ($):
|
|
Net realized gain (loss) on investments
|
(3,030,026
)
|
Net unrealized appreciation (depreciation) on investments
|
11,199,474
|
Net Realized and Unrealized Gain (Loss) on Investments
|
8,169,448
|
Net Increase in Net Assets Resulting from Operations
|
12,408,709
|
|
See notes to financial statements.
|
|
TheFund
21
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
Six Months Ended
|
|
|
February 29, 2012
|
Year Ended
|
|
(Unaudited)
|
August 31, 2011
|
Operations ($):
|
|
|
Investment incomenet
|
4,239,261
|
10,006,649
|
Net realized gain (loss) on investments
|
(3,030,026
)
|
(4,224,982
)
|
Net unrealized appreciation
|
|
|
(depreciation) on investments
|
11,199,474
|
(7,650,630
)
|
Net Increase (Decrease) in Net Assets
|
|
|
Resulting from Operations
|
12,408,709
|
(1,868,963
)
|
Dividends to Shareholders from ($):
|
|
|
Investment incomenet:
|
|
|
Class A Shares
|
(1,253,385
)
|
(2,875,078
)
|
Class C Shares
|
(518,678
)
|
(1,255,068
)
|
Class I Shares
|
(352,562
)
|
(568,264
)
|
Class Z Shares
|
(2,021,455
)
|
(5,027,663
)
|
Net realized gain on investments:
|
|
|
Class A Shares
|
(80,376
)
|
(49,405
)
|
Class C Shares
|
(38,794
)
|
(26,483
)
|
Class I Shares
|
(21,710
)
|
(8,627
)
|
Class Z Shares
|
(127,629
)
|
(89,405
)
|
Total Dividends
|
(4,414,589
)
|
(9,899,993
)
|
Capital Stock Transactions ($):
|
|
|
Net proceeds from shares sold:
|
|
|
Class A Shares
|
10,395,922
|
17,824,938
|
Class C Shares
|
2,378,986
|
5,356,561
|
Class I Shares
|
6,592,758
|
9,864,620
|
Class Z Shares
|
1,975,730
|
5,481,315
|
22
|
|
|
|
|
|
Six Months Ended
|
|
|
February 29, 2012
|
Year Ended
|
|
(Unaudited)
|
August 31, 2011
|
Capital Stock Transactions ($) (continued):
|
|
|
Dividends reinvested:
|
|
|
Class A Shares
|
1,084,430
|
2,328,781
|
Class C Shares
|
322,147
|
719,544
|
Class I Shares
|
84,973
|
144,230
|
Class Z Shares
|
1,701,709
|
4,103,430
|
Cost of shares redeemed:
|
|
|
Class A Shares
|
(12,796,371
)
|
(33,557,604
)
|
Class C Shares
|
(2,554,841
)
|
(10,580,834
)
|
Class I Shares
|
(2,727,363
)
|
(5,692,587
)
|
Class Z Shares
|
(5,817,754
)
|
(31,123,395
)
|
Increase (Decrease) in Net Assets
|
|
|
from Capital Stock Transactions
|
640,326
|
(35,131,001
)
|
Total Increase (Decrease) in Net Assets
|
8,634,446
|
(46,899,957
)
|
Net Assets ($):
|
|
|
Beginning of Period
|
178,477,371
|
225,377,328
|
End of Period
|
187,111,817
|
178,477,371
|
Undistributed investment incomenet
|
93,181
|
|
TheFund
23
STATEMENT OF CHANGES IN NET ASSETS
(continued)
|
|
|
|
|
|
Six Months Ended
|
|
|
February 29, 2012
|
Year Ended
|
|
(Unaudited)
|
August 31, 2011
|
Capital Share Transactions:
|
|
|
Class A
|
|
|
Shares sold
|
911,831
|
1,610,735
|
Shares issued for dividends reinvested
|
95,772
|
209,716
|
Shares redeemed
|
(1,123,114
)
|
(3,004,564
)
|
Net Increase (Decrease) in Shares Outstanding
|
(115,511
)
|
(1,184,113
)
|
Class C
|
|
|
Shares sold
|
209,206
|
479,993
|
Shares issued for dividends reinvested
|
28,413
|
64,858
|
Shares redeemed
|
(226,914
)
|
(957,255
)
|
Net Increase (Decrease) in Shares Outstanding
|
10,705
|
(412,404
)
|
Class I
|
|
|
Shares sold
|
580,730
|
896,288
|
Shares issued for dividends reinvested
|
7,481
|
13,024
|
Shares redeemed
|
(239,696
)
|
(520,276
)
|
Net Increase (Decrease) in Shares Outstanding
|
348,515
|
389,036
|
Class Z
|
|
|
Shares sold
|
173,966
|
492,582
|
Shares issued for dividends reinvested
|
150,136
|
369,690
|
Shares redeemed
|
(515,986
)
|
(2,820,416
)
|
Net Increase (Decrease) in Shares Outstanding
|
(191,884
)
|
(1,958,144
)
|
|
See notes to financial statements.
|
|
|
24
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the funds financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
February 29, 2012
|
|
Year Ended August 31,
|
|
Class A Shares
|
(Unaudited)
|
2011
|
2010
|
2009
|
2008
|
2007
a
|
Per Share Data ($):
|
|
|
|
|
|
|
Net asset value,
|
|
|
|
|
|
|
beginning of period
|
11.14
|
11.74
|
10.64
|
12.05
|
12.90
|
13.63
|
Investment Operations:
|
|
|
|
|
|
|
Investment incomenet
b
|
.27
|
.59
|
.61
|
.65
|
.66
|
.28
|
Net realized and unrealized
|
|
|
|
|
|
|
gain (loss) on investments
|
.51
|
(.60
)
|
1.08
|
(1.41
)
|
(.86
)
|
(.72
)
|
Total from Investment Operations
|
.78
|
(.01
)
|
1.69
|
(.76
)
|
(.20
)
|
(.44
)
|
Distributions:
|
|
|
|
|
|
|
Dividends from
|
|
|
|
|
|
|
investment incomenet
|
(.26
)
|
(.58
)
|
(.59
)
|
(.65
)
|
(.65
)
|
(.29
)
|
Dividends from net realized
|
|
|
|
|
|
|
gain on investments
|
(.02
)
|
(.01
)
|
|
|
|
|
Total Distributions
|
(.28
)
|
(.59
)
|
(.59
)
|
(.65
)
|
(.65
)
|
(.29
)
|
Net asset value, end of period
|
11.64
|
11.14
|
11.74
|
10.64
|
12.05
|
12.90
|
Total Return (%)
c
|
7.10
d
|
(.03
)
|
16.31
|
(5.80
)
|
(1.67
)
|
1.57
d
|
Ratios/Supplemental Data (%):
|
|
|
|
|
|
|
Ratio of total expenses
|
|
|
|
|
|
|
to average net assets
|
1.02
e
|
1.00
|
.99
|
1.02
|
1.02
|
1.27
e
|
Ratio of net expenses
|
|
|
|
|
|
|
to average net assets
|
1.02
e
|
1.00
|
.99
|
1.02
|
1.02
|
1.27
e
|
Ratio of interest and expense
|
|
|
|
|
|
|
related to floating rate notes
|
|
|
|
|
|
|
issued to average net assets
|
.00
e,f
|
.00
f
|
|
.00
f
|
.05
|
.23
e
|
Ratio of net investment income
|
|
|
|
|
|
|
to average net assets
|
4.79
e
|
5.35
|
5.37
|
6.40
|
5.28
|
4.51
e
|
Portfolio Turnover Rate
|
14.46
d
|
41.05
|
25.26
|
28.94
|
76.05
|
55.80
|
Net Assets, end of period
|
|
|
|
|
|
|
($ x 1,000)
|
54,862
|
53,785
|
70,607
|
58,931
|
59,169
|
27,948
|
|
|
a
|
From March 15, 2007 (commencement of initial offering) to August 31, 2007.
|
b
|
Based on average shares outstanding at each month end.
|
c
|
Exclusive of sales charge.
|
d
|
Not annualized.
|
e
|
Annualized.
|
f
|
Amount represents less than .01%.
|
See notes to financial statements.
TheFund
25
FINANCIAL HIGHLIGHTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
February 29, 2012
|
|
Year Ended August 31,
|
|
Class C Shares
|
(Unaudited)
|
2011
|
2010
|
2009
|
2008
|
2007
a
|
Per Share Data ($):
|
|
|
|
|
|
|
Net asset value,
|
|
|
|
|
|
|
beginning of period
|
11.15
|
11.75
|
10.66
|
12.06
|
12.91
|
13.63
|
Investment Operations:
|
|
|
|
|
|
|
Investment incomenet
b
|
.23
|
.51
|
.52
|
.57
|
.57
|
.23
|
Net realized and unrealized
|
|
|
|
|
|
|
gain (loss) on investments
|
.51
|
(.60
)
|
1.08
|
(1.41
)
|
(.87
)
|
(.71
)
|
Total from Investment Operations
|
.74
|
(.09
)
|
1.60
|
(.84
)
|
(.30
)
|
(.48
)
|
Distributions:
|
|
|
|
|
|
|
Dividends from
|
|
|
|
|
|
|
investment incomenet
|
(.22
)
|
(.50
)
|
(.51
)
|
(.56
)
|
(.55
)
|
(.24
)
|
Dividends from net realized
|
|
|
|
|
|
|
gain on investments
|
(.02
)
|
(.01
)
|
|
|
|
|
Total Distributions
|
(.24
)
|
(.51
)
|
(.51
)
|
(.56
)
|
(.55
)
|
(.24
)
|
Net asset value, end of period
|
11.65
|
11.15
|
11.75
|
10.66
|
12.06
|
12.91
|
Total Return (%)
c
|
6.70
d
|
(.77
)
|
15.31
|
(6.45
)
|
(2.43
)
|
1.27
d
|
Ratios/Supplemental Data (%):
|
|
|
|
|
|
|
Ratio of total expenses
|
|
|
|
|
|
|
to average net assets
|
1.78
e
|
1.75
|
1.76
|
1.80
|
1.80
|
1.99
e
|
Ratio of net expenses
|
|
|
|
|
|
|
to average net assets
|
1.78
e
|
1.75
|
1.76
|
1.80
|
1.80
|
1.99
e
|
Ratio of interest and expense
|
|
|
|
|
|
|
related to floating rate notes
|
|
|
|
|
|
|
issued to average net assets
|
.00
e,f
|
.00
f
|
|
.00
f
|
.05
|
.23
e
|
Ratio of net investment income
|
|
|
|
|
|
|
to average net assets
|
4.04
e
|
4.62
|
4.60
|
5.63
|
4.53
|
3.69
e
|
Portfolio Turnover Rate
|
14.46
d
|
41.05
|
25.26
|
28.94
|
76.05
|
55.80
|
Net Assets, end of period
|
|
|
|
|
|
|
($ x 1,000)
|
27,677
|
26,365
|
32,647
|
29,579
|
30,730
|
9,397
|
|
|
a
|
From March 15, 2007 (commencement of initial offering) to August 31, 2007.
|
b
|
Based on average shares outstanding at each month end.
|
c
|
Exclusive of sales charge.
|
d
|
Not annualized.
|
e
|
Annualized.
|
f
|
Amount represents less than .01%.
|
See notes to financial statements.
26
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
February 29, 2012
|
Year Ended August 31,
|
Class I Shares
|
(Unaudited)
|
2011
|
2010
|
2009
a
|
Per Share Data ($):
|
|
|
|
|
Net asset value, beginning of period
|
11.12
|
11.72
|
10.63
|
9.15
|
Investment Operations:
|
|
|
|
|
Investment incomenet
b
|
.28
|
.63
|
.66
|
.49
|
Net realized and unrealized
|
|
|
|
|
gain (loss) on investments
|
.52
|
(.61
)
|
1.05
|
1.46
|
Total from Investment Operations
|
.80
|
.02
|
1.71
|
1.95
|
Distributions:
|
|
|
|
|
Dividends from investment incomenet
|
(.28
)
|
(.61
)
|
(.62
)
|
(.47
)
|
Dividends from net realized
|
|
|
|
|
gain on investments
|
(.02
)
|
(.01
)
|
|
|
Total Distributions
|
(.30
)
|
(.62
)
|
(.62
)
|
(.47
)
|
Net asset value, end of period
|
11.62
|
11.12
|
11.72
|
10.63
|
Total Return (%)
|
7.24
c
|
.22
|
16.50
|
21.80
c
|
Ratios/Supplemental Data (%):
|
|
|
|
|
Ratio of total expenses to average net assets
|
.80
d
|
.74
|
.73
|
1.17
d
|
Ratio of net expenses to average net assets
|
.80
d
|
.74
|
.72
|
.75
d
|
Ratio of interest and expense related
|
|
|
|
|
to floating rate notes issued
|
|
|
|
|
to average net assets
|
.00
d,e
|
.00
e
|
|
|
Ratio of net investment income
|
|
|
|
|
to average net assets
|
5.03
d
|
5.62
|
5.57
|
6.69
d
|
Portfolio Turnover Rate
|
14.46
c
|
41.05
|
25.26
|
28.94
|
Net Assets, end of period ($ x 1,000)
|
17,071
|
12,460
|
8,577
|
21
|
|
|
a
|
From December 15, 2008 (commencement of initial offering) to August 31, 2009.
|
b
|
Based on average shares outstanding at each month end.
|
c
|
Not annualized.
|
d
|
Annualized.
|
e
|
Amount represents less than .01%.
|
See notes to financial statements.
TheFund
27
FINANCIAL HIGHLIGHTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
February 29, 2012
|
|
Year Ended August 31,
|
|
Class Z Shares
|
(Unaudited)
|
2011
|
2010
|
2009
|
2008
|
2007
a
|
Per Share Data ($):
|
|
|
|
|
|
|
Net asset value,
|
|
|
|
|
|
|
beginning of period
|
11.14
|
11.75
|
10.65
|
12.05
|
12.91
|
13.34
|
Investment Operations:
|
|
|
|
|
|
|
Investment incomenet
b
|
.27
|
.60
|
.63
|
.67
|
.67
|
.63
|
Net realized and unrealized
|
|
|
|
|
|
|
gain (loss) on investments
|
.52
|
(.61
)
|
1.09
|
(1.41
)
|
(.87
)
|
(.39
)
|
Total from Investment Operations
|
.79
|
(.01
)
|
1.72
|
(.74
)
|
(.20
)
|
.24
|
Distributions:
|
|
|
|
|
|
|
Dividends from
|
|
|
|
|
|
|
investment incomenet
|
(.27
)
|
(.59
)
|
(.62
)
|
(.66
)
|
(.66
)
|
(.63
)
|
Dividends from net realized
|
|
|
|
|
|
|
gain on investments
|
(.02
)
|
(.01
)
|
|
|
|
(.04
)
|
Total Distributions
|
(.29
)
|
(.60
)
|
(.62
)
|
(.66
)
|
(.66
)
|
(.67
)
|
Net asset value, end of period
|
11.64
|
11.14
|
11.75
|
10.65
|
12.05
|
12.91
|
Total Return (%)
|
7.14
c
|
.05
|
16.44
|
(5.64
)
|
(1.59
)
|
1.65
|
Ratios/Supplemental Data (%):
|
|
|
|
|
|
|
Ratio of total expenses
|
|
|
|
|
|
|
to average net assets
|
.95
d
|
.95
|
.82
|
.85
|
.97
|
1.24
|
Ratio of net expenses
|
|
|
|
|
|
|
to average net assets
|
.95
d
|
.95
|
.82
|
.84
|
.97
|
1.24
|
Ratio of interest and expense
|
|
|
|
|
|
|
related to floating rate notes
|
|
|
|
|
|
|
issued to average net assets
|
.00
d,e
|
.00
e
|
|
.00
e
|
.05
|
.23
|
Ratio of net investment income
|
|
|
|
|
|
|
to average net assets
|
4.85
d
|
5.45
|
5.58
|
6.59
|
5.32
|
4.62
|
Portfolio Turnover Rate
|
14.46
c
|
41.05
|
25.26
|
28.94
|
76.05
|
55.80
|
Net Assets, end of period
|
|
|
|
|
|
|
($ x 1,000)
|
87,501
|
85,868
|
113,547
|
122,871
|
152,058
|
126,390
|
|
a The fund commenced offering three classes of shares on March 15, 2007. The existing shares were redesignated
|
Class Z and the fund added Class A and Class C shares.
|
b Based on average shares outstanding at each month end.
|
c Not annualized.
|
d Annualized.
|
e Amount represents less than .01%.
|
See notes to financial statements.
28
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1Significant Accounting Policies:
Dreyfus High Yield Municipal Bond Fund (the fund) is a separate non-diversified series of Dreyfus Municipal Funds, Inc. (the Company), which is registered under the Investment Company Act of 1940, as amended (the Act), as an open-end management investment company and operates as a series company currently offering four series, including the fund. The funds investment objective is to seek high current income exempt from federal income tax. The Dreyfus Corporation (the Manager or Dreyfus), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (BNY Mellon), serves as the funds investment adviser.
MBSC Securities Corporation (the Distributor), a wholly-owned subsidiary of the Manager, is the distributor of the funds shares.The fund is authorized to issue 100 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class C, Class I and Class Z. Class A shares are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (CDSC) imposed on Class C shares redeemed within one year of purchase. Class I shares are sold at net asset value per share only to institutional investors. Class Z shares are closed to new investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are
TheFund
29
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
charged to that series operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (FASB) Accounting Standards Codification is the exclusive reference of authoritative U.S. generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (SEC) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The funds financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates.
The Company enters into contracts that contain a variety of indemnifications.The funds maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation:
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value.This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
30
Various inputs are used in determining the value of the funds investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:
Level 1
unadjusted quoted prices in active markets for identical investments.
Level 2
other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3
significant unobservable inputs (including the funds own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the funds investments are as follows:
Investments in securities are valued each business day by an independent pricing service (the Service) approved by the Board of Directors. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are carried at fair value as determined by the Service, based on methods which include consideration of: yields or prices of municipal securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market con-ditions.All of the preceding securities are categorized within Level 2 of the fair value hierarchy.
TheFund
31
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
The Services procedures are reviewed by Dreyfus under the general supervision of the Board of Directors.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board of Directors. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized as Level 2 or 3 depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of February 29, 2012 in valuing the funds investments:
|
|
|
|
|
|
|
Level 2Other
|
Level 3
|
|
|
Level 1
|
Significant
|
Significant
|
|
|
Unadjusted
|
Observable
|
Unobservable
|
|
|
Quoted Prices
|
Inputs
|
Inputs
|
Total
|
Assets ($)
|
|
|
|
|
Investments in Securities:
|
|
|
|
Municipal Bonds
|
|
184,350,041
|
1,080,080
|
185,430,121
|
32
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:
|
|
|
|
Municipal Bonds ($)
|
Balance as of 8/31/2011
|
1,199,760
|
Realized gain (loss)
|
|
Change in unrealized appreciation (depreciation)
|
(119,680
)
|
Purchases
|
|
Sales
|
|
Transfers into Level 3
|
|
Transfers out of Level 3
|
|
Balance as of 2/29/2012
|
1,080,080
|
The amount of total gains (losses) for the period
|
|
included in earnings attributable to the change in
|
|
unrealized gains (losses) relating to investments
|
|
still held at 2/29/2012
|
(119,680
)
|
In May 2011, FASB issued Accounting Standards Update (ASU) No. 2011-04 Amendments to Achieve Common FairValue Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards (IFRS) (ASU 2011-04). ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between GAAP and IFRS. ASU 2011-04 will require reporting entities to disclose the following information for fair value measurements categorized within Level 3 of the fair value hierarchy: quantitative information about the unobservable inputs used in the fair value measurement, the valuation processes used by the reporting entity and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and
TheFund
33
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
reasons for all transfers in and out of Level 1 and Level 2 fair value measurements.The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU 2011-04 and its impact on the financial statements.
(b) Securities transactions and investment income:
Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when-issued or delayed-delivery basis may be settled a month or more after the trade date.
(c) Dividends to shareholders:
It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the Code).To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(d) Federal income taxes:
It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended February 29, 2012, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period, the fund did not incur any interest or penalties.
34
Each of the tax years in the three-year period ended August 31, 2011 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010 (the 2010 Act), the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 (post-enactment losses) for an unlimited period. Furthermore, post-enactment capital loss carryovers retain their character as either short-term or long-term capital losses rather than short-term as they were under previous statute. The 2010 Act requires post-enactment losses to be utilized before the utilization of losses incurred in taxable years prior to the effective date of the 2010 Act (pre-enactment losses).As a result of this ordering rule, pre-enactment losses may be more likely to expire unused.
The fund has an unused capital loss carryover of $24,191,880 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to August 31, 2011. If not applied, $715,251 of the carryover expires in fiscal 2016, $7,033,387 expires in fiscal 2017, $10,523,962 expires in fiscal 2018 and $5,919,280 expires in fiscal 2019.
The tax character of distributions paid to shareholders during the fiscal year ended August 31, 2011 was as follows: tax exempt income $9,726,073 and ordinary income $173,920.The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $225 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus (each, a Facility), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection
TheFund
35
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended February 29, 2012, the fund did not borrow under the Facilities.
NOTE 3Management Fee and Other Transactions With Affiliates:
(a)
Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of .60% of the value of the funds average daily net assets and is payable monthly.
During the period ended February 29, 2012, the Distributor retained $2,588 from commissions earned on sales of the funds Class A shares and $10,636 from CDSCs on redemptions of the funds Class C shares.
(b)
Under the Distribution Plan (the Plan) adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of the average daily net assets of Class C shares. During the period ended February 29, 2012, Class C shares were charged $98,881, pursuant to the Plan.
Under the Service Plan (the Service Plan) adopted pursuant to Rule 12b-1 under the Act, Class Z shares reimburse the Distributor for distributing its shares and servicing shareholder accounts at an amount not to exceed an annual rate of .25% of the value of the average daily net assets of Class Z shares. During the period ended February 29, 2012, Class Z shares were charged $76,375 pursuant to the Service Plan.
(c)
Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of the average daily net assets of Class A and Class C shares for the provision of certain services.The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor
36
may make payments to Service Agents (a securities dealer, financial institution or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended February 29, 2012, Class A and Class C shares were charged $66,835 and $32,960, respectively, pursuant to the Shareholder Services Plan.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended February 29, 2012, the fund was charged $15,452 pursuant to the transfer agency agreement, which is included in Shareholder servicing costs in the Statement of Operations.
The fund has arrangements with the custodian and cash management bank whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset custody and cash management fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a cash management agreement for performing cash management services related to fund subscriptions and redemptions. During the period ended February 29, 2012, the fund was charged $1,260 pursuant to the cash management agreement, which is included in Shareholder servicing costs in the Statement of Operations.These fees were partially offset by earnings credits of $15.
The fund also compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. During the period ended February 29, 2012, the fund was charged $7,620 pursuant to the custody agreement.
During the period ended February 29, 2012, the fund was charged $3,209 for services performed by the Chief Compliance Officer and his staff.
TheFund
37
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
The components of Due to The Dreyfus Corporation and affiliates in the Statement of Assets and Liabilities consist of: management fees $88,088, Rule 12b-1 distribution plan fees $27,300, shareholder services plan fees $16,131, custodian fees $6,431, chief compliance officer fees $1,061 and transfer agency per account fees $5,535.
(d)
Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
(e)
A 2% redemption fee is charged and retained by the fund on certain shares redeemed within sixty days following the date of issuance subject to exceptions, including redemptions made through the use of the funds exchange privilege. During the period ended February 29, 2012, redemption fees charged and retained by the fund amounted to $211.
NOTE 4Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended February 29, 2012, amounted to $25,775,508 and $25,485,548, respectively.
Inverse Floater Securities:
The fund participates in secondary inverse floater structures in which fixed-rate, tax-exempt municipal bonds are transferred to a trust.The trust subsequently issues two or more variable rate securities that are collateralized by the cash flows of the fixed-rate, tax-exempt municipal bonds. One or more of these variable rate securities pays interest based on a short-term floating rate set by a remarketing agent at predetermined intervals.A residual interest tax-exempt security is also created by the trust, which is transferred to the fund, and is paid interest based on the remaining cash flow of the trust, after payment of interest on the other securities and various expenses of the trust.
38
The fund accounts for the transfer of bonds to the trust as secured borrowings, with the securities transferred remaining in the funds investments, and the related floating rate certificate securities reflected as fund liabilities in the Statement of Assets and Liabilities.
The average amount of borrowings outstanding under the inverse floater structure during the period ended February 29, 2012, was approximately $1,000,000 with a related weighted average annualized interest rate of .68%.
At February 29, 2012, accumulated net unrealized appreciation on investments was $2,151,603, consisting of $12,869,294 gross unrealized appreciation and $10,717,691 gross unrealized depreciation.
At February 29, 2012, 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).
TheFund
39
INFORMATION ABOUT THE RENEWAL OF THE
FUNDS MANAGEMENT AGREEMENT
(Unaudited)
At a meeting of the funds Board of Directors held on November 7-8, 2011, the Board considered the renewal of the funds Management Agreement pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the Agreement).The Board members, none of whom are interested persons (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from Dreyfus representatives. In considering the renewal of the Agreement, the Board considered all factors that it believed to be relevant, including those discussed below.The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund.
The Board considered information previously provided to them in presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex, and Dreyfus representatives confirmed that there had been no material changes in this information. Dreyfus provided the number of open accounts in the fund, the funds asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex and Dreyfus corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each distribution channel, including the distribution channel(s) for the fund.
The Board also considered research support available to, and portfolio management capabilities of, the funds portfolio management personnel and that Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements.The Board also considered Dreyfus extensive administrative, accounting, and compliance infrastructures.
40
Comparative Analysis of the Funds Performance and Management Fee and Expense Ratio.
The Board reviewed reports prepared by Lipper, Inc. (Lipper), an independent provider of investment company data, which included information comparing (1) the funds performance with the performance of a group of comparable funds (the Performance Group) and with a broader group of funds (the Performance Universe), all for various periods ended September 30, 2011, and (2) the funds actual and contractual management fees and total expenses with those of a group of comparable funds (the Expense Group) and with a broader group of funds (the Expense Universe), the information for which was derived in part from fund financial statements available to Lipper as of September 30, 2011. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds.They also noted that performance generally should be considered over longer periods of time, although it is possible that long-term performance can be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect disproportionately long-term performance.
The Board discussed the results of the comparisons and noted that the funds total return performance was below the Performance Group median and the Performance Universe median for the various periods. The Board also noted that the funds yield performance was variously at, above, or below the Performance Group median and the Performance Universe median for the various time periods. Dreyfus also provided a comparison of the funds calendar year total returns to the returns of the funds Lipper category average.
TheFund
41
INFORMATION ABOUT THE RENEWAL OF THE FUNDS
MANAGEMENT AGREEMENT (Unaudited)
(continued)
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. They noted that the funds contractual management fee was above the Expense Group median, the funds actual management fee was above the Expense Group median and the Expense Universe median, and the funds actual total expenses were above the Expense Group median and the Expense Universe median.
The Board received a presentation from the funds portfolio managers, who described how the dramatic changes to the municipal bond market over the prior several years, evidenced by historically high priced volatility and liquidity challenges suggest an increased focus on downside risk in the funds portfolio.The portfolio manager also discussed the strategy implemented for the fund in 2009, quantitative risk management tools applied to overseeing the fund, the funds current structure to defend against interest rate volatility, and credit review policies and strategies that seek to mitigate credit risk.The portfolio managers then explained the funds performance relative to its duration structure, credit structure, and the market and economic environment.The Board also noted the funds generally more competitive yield performance results agreed to continue to closely monitor the implementation of portfolio strategy and its impact on relative return results.
Dreyfus representatives noted that there were no funds in the same Lipper category as the fund managed by Dreyfus or Standish, nor separate accounts and/or other types of client portfolios managed by Dreyfus or Standish considered to have similar investment strategies and policies as the fund.
Analysis of Profitability and Economies of Scale.
Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and the resulting profitability percentage for managing the fund, and
42
the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus. The Board previously had been provided with information prepared by an independent consulting firm regarding Dreyfus approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Boards counsel stated that the Board should consider the profitability analysis (1) as part of their evaluation of whether the fees under the Agreement bear a reasonable relationship to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Dreyfus representatives noted that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a funds assets had been stable or decreasing, the possibility that Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the funds asset level.The Board also considered potential benefits to Dreyfus from acting as investment adviser and noted that there were no soft dollar arrangements in effect for trading the funds investments.
TheFund
43
INFORMATION ABOUT THE RENEWAL OF THE FUNDS
MANAGEMENT AGREEMENT (Unaudited)
(continued)
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
-
The Board concluded that the nature, extent, and quality of the
services provided by Dreyfus are adequate and appropriate.
-
The Board agreed to closely monitor performance and determined
to approve renewal of the Agreement only through May 31, 2012.
-
The Board concluded that the fees paid to Dreyfus were reasonable
in light of the considerations described above.
-
The Board determined that the economies of scale which may
accrue to Dreyfus and its affiliates in connection with the manage-
ment of the fund had been adequately considered by Dreyfus in
connection with the fee rate charged to the fund pursuant to the
Management Agreement and that, to the extent in the future it were
determined that material economies of scale had not been shared
with the fund, the Board would seek to have those economies of
scale shared with the fund.
The Board considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year. In addition, it should be noted that the Boards consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Boards conclusions may be based, in part, on their consideration of the same or similar arrangements in prior years. The Board determined that renewal of the Agreement through May 31, 2012 was in the best interests of the fund and its shareholders.
44
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. Investments.
(a)
Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.
Not applicable. [CLOSED END FUNDS ONLY]
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures applicable to Item 10.
Item 11. Controls and Procedures.
(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes to the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable.
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.
(a)(3) Not applicable.
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
DREYFUS MUNICIPAL FUNDS, INC.
By:
/s/ Bradley J. Skapyak
|
Bradley J. Skapyak,
President
|
Date:
|
April 23, 2012
|
|
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/ Bradley J. Skapyak
|
Bradley J. Skapyak,
President
|
Date:
|
April 23, 2012
|
|
By:
/s/ James Windels
|
James Windels,
Treasurer
|
Date:
|
April 23, 2012
|
|
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)
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