File No. 811-6377
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 8 [X]
(Check appropriate box or boxes.)
DREYFUS BASIC MUNICIPAL FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Daniel C. Maclean III, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
----
on (date) pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
X on December 1, 1995 pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----
Registrant has registered an indefinite number of shares of its common
stock under the Securities Act of 1933 pursuant to Section 24(f) of the
Investment Company Act of 1940. Registrant's Rule 24f-2 Notice for the
fiscal year ended August 31, 1995 was filed on October ___, 1995.
DREYFUS BASIC MUNICIPAL FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(a)
Items in Page in the
Part A of National Portfolios
Form N-1A Caption Prospectus
_________ _______ ___________________
1 Cover Page Cover
2 Synopsis 3
3 Condensed Financial Information 4
4 General Description of Registrant 6
5 Management of the Fund 18
5(a) Management's Discussion of Fund's *
Performance
6 Capital Stock and Other Securities 27
7 Purchase of Securities Being Offered 19
8 Redemption or Repurchase 22
9 Pending Legal Proceedings *
Items in Page in the
Portfolio New Jersey Portfolio
Form N-1A Caption Prospectus
_________ _______ ____________________
1 Cover Page Cover
2 Synopsis 3
3 Condensed Financial Information *
4 General Description of Registrant 4
5 Management of the Fund 10
5(a) Management's Discussion of Fund's *
Performance
6 Capital Stock and Other Securities 19
7 Purchase of Securities Being Offered 11
8 Redemption or Repurchase 14
9 Pending Legal Proceedings *
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
DREYFUS BASIC MUNICIPAL FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(a) (continued)
Items in
Part B of
Form N-1A Caption Page
_________ _______ ____
10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History *
13 Investment Objectives and Policies B-2
14 Management of the Fund B-12
15 Control Persons and Principal B-16
Holders of Securities
16 Investment Advisory and Other B-16
Services
Items in
Part B of
Form N-1A Caption Page
_________ _______ _____
17 Brokerage Allocation B-28
18 Capital Stock and Other Securities B-29
19 Purchase, Redemption and Pricing B-18, B-20,
of Securities Being Offered B-23
20 Tax Status B-25
21 Underwriters B-18
22 Calculations of Performance Data B-26
23 Financial Statements B-41
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
DREYFUS BASIC MUNICIPAL FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(a) (continued)
Items in
Part C of
Form N-1A Caption Page
_________ _______ _____
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-3
Common Control with Registrant
26 Number of Holders of Securities C-3
27 Indemnification C-3
28 Business and Other Connections of C-4
Investment Adviser
29 Principal Underwriters C-11
30 Location of Accounts and Records C-14
31 Management Services C-14
32 Undertakings C-14
_____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
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PROSPECTUS _________ __, 1995
DREYFUS BASIC MUNICIPAL FUND, INC.
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DREYFUS BASIC MUNICIPAL FUND, INC. (THE "FUND") IS AN OPEN-END,
MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MUTUAL FUND. THE FUND PERMITS YOU
TO INVEST IN FOUR SEPARATE NON-DIVERSIFIED SERIES. THE FOLLOWING THREE SERIES
OF THE FUND ARE DESCRIBED IN THIS PROSPECTUS (EACH, A "PORTFOLIO"): DREYFUS
BASIC MUNICIPAL MONEY MARKET PORTFOLIO (THE "MONEY MARKET PORTFOLIO");
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO (THE "INTERMEDIATE BOND
PORTFOLIO"); AND DREYFUS BASIC MUNICIPAL BOND PORTFOLIO (THE "BOND
PORTFOLIO"). THE GOAL OF EACH PORTFOLIO IS TO PROVIDE YOU WITH AS HIGH A
LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAX AS IS CONSISTENT WITH
THE PRESERVATION OF CAPITAL AND, FOR THE MONEY MARKET PORTFOLIO ONLY, THE
MAINTENANCE OF LIQUIDITY.
EACH PORTFOLIO IS DESIGNED TO BENEFIT INVESTORS WHO DO NOT ENGAGE IN
FREQUENT TRANSACTIONS IN PORTFOLIO SHARES.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES EACH PORTFOLIO.
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE MONEY
MARKET PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED ________ __, 1995,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AND IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY, WRITE TO
THE FUND AT 144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK 11556-0144, OR
CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 666.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. THE NET ASSET VALUE OF ALL BOND MUTUAL FUNDS WILL FLUCTUATE FROM TIME
TO TIME.
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TABLE OF CONTENTS
Page
Annual Operating Expenses of the Portfolios....... 3
Condensed Financial Information................... 4
Performance Information........................... 5
Description of the Portfolios..................... 6
Management of the Fund............................ 18
How to Buy Shares................................. 19
Fund Exchanges.................................... 21
How to Redeem Shares.............................. 22
Shareholder Services Plan......................... 25
Dividends, Distributions and Taxes................ 25
General Information............................... 27
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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This Page Intentionally Left Blank
Page 2
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES OF THE PORTFOLIOS
MONEY INTERMEDIATE
MARKET BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO
---------- ------------ ----------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Exchange Fee ............................................. $5.00 $5.00 $5.00
Account Closeout Fee...................................... $5.00 $5.00 $5.00
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees (after expense reimbursement)............. ._-% ._-% ._-%
Other Expenses (after expense reimbursement).............. ._-% ._-% ._-%
Total Portfolio Operating Expenses (after expense reimbursement) .45% .45% .45%
EXAMPLE
You would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period:
1 YEAR...................................................... $10 $10 $10
3 YEARS..................................................... $19 $19 $19
5 YEARS..................................................... $30 $30 $30
10 YEARS.................................................... $62 $62 $62
</TABLE>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, EACH PORTFOLIO'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN
ACTUAL RETURN GREATER OR LESS THAN 5%.
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The purpose of the foregoing table is to assist you in understanding
the various costs and expenses borne by the Fund, and therefore indirectly by
investors, the payment of which will reduce investors' annual return. The
expenses noted above, without reimbursement, would be: Management Fees_.50%
with respect to the MONEY MARKET PORTFOLIO and .60% with respect to the
INTERMEDIATE BOND PORTFOLIO and BOND PORTFOLIO; Other Expenses_ .__% with
respect to THE MONEY MARKET PORTFOLIO, .__% with respect to the INTERMEDIATE
BOND PORTFOLIO and _% with respect to the BOND PORTFOLIO; and Total Fund
Operating Expenses_._% with respect to the MONEY MARKET PORTFOLIO, _% with
respect to the INTERMEDIATE BOND PORTFOLIO and .__% with respect to the BOND
PORTFOLIO; and the amount of expenses that an investor would pay, assuming
redemption after one, three, five and ten years, would be $_, $_, $_ and
$_ with respect to the MONEY MARKET PORTFOLIO, $_, $_, $_ and $_ with
respect to the INTERMEDIATE BOND PORTFOLIO and $_, $_, $_ and $_ with
respect to the BOND PORTFOLIO. In addition, unlike certain other funds in the
Dreyfus Family of Funds, the Fund will charge your account $2.00 for each
redemption check you write; you also will be charged $5.00 for each exchange
made, for each redemption you make by wire and pursuant to the Dreyfus
TELETRANSFER Privilege, and you will be charged a $5.00 account closeout fee
except if the account is closed out by a method to which a nominal charge
otherwise applies. These charges will be paid to the Fund's transfer agent
and will reduce the transfer agency charges otherwise payable by the Fund.
See "Fund Exchanges" and "How to Redeem Shares." The Dreyfus Corporation has
agreed until June 30, 1996, in the case of the MONEY MARKET PORTFOLIO, and
until June 30, 1998, in the case of the INTERMEDIATE BOND PORTFOLIO and BOND
PORTFOLIO, that if in any fiscal year certain expenses of a Portfolio,
including the management fee, exceed .45% of the value of such Portfolios'
average net assets for the fiscal year, the Fund may deduct from the payment
to be made to The Dreyfus Corporation under the Management Agreement, or The
Dreyfus Corporation will bear, such excess expense. The foregoing table does
not reflect any other fee waivers or expense reimbursement arrangements that
may be in effect. See "Management of the Fund" and "Shareholder Services
Plan."
Page 3
CONDENSED FINANCIAL INFORMATION
The information in the following tables has been audited, except
where noted, by Ernst & Young LLP, the Fund's independent auditors, whose
reports thereon appear in the Statement of Additional Information. Further
financial data and related notes are included in the Statement of Additional
Information, available upon request.
FINANCIAL HIGHLIGHTS
MONEY MARKET PORTFOLIO _ Contained below is per share operating
performance data for a share of Common Stock outstanding, total investment
return, ratios to average net assets and other supplemental data for each
year indicated. This information has been derived from the MONEY MARKET
PORTFOLIO'S financial statements.
<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
YEAR ENDED AUGUST 31,
PER SHARE DATA:
1992(1) 1993 1994 1995
------ ---- ---- ----
<S> <C> <C> <C> <C>
Net asset value, beginning of year................................ $1.0000 $1.0000 $1.0000
------- ------- -------- ------
INVESTMENT OPERATIONS:
Investment income - net........................................... .0240 .0270 .0257
Net realized (loss) on investments................................ _ _ (.0001)
------- ------- --------- ------
TOTAL FROM INVESTMENT OPERATIONS.................................. .0240 .0270 .0256
------- ------- -------- ------
DISTRIBUTIONS:
Dividends from investment income - net............................ (.0240) (.0270) (.0257)
------- ------- -------- ------
Net asset value, end of year...................................... $1.0000 $1.0000 $ .9999
======= ======= ====== ======
TOTAL INVESTMENT RETURN........................................... 3.41%(2) 2.73% 2.60%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets........................... ._- .02% .09%
Ratio of net investment income to average net assets.............. 3.22%(2) 2.64% 2.58%
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation.......................... .77%(2) .64% .50%
Net Assets, end of year (000's omitted)....................... $228,708 $685,540 $1,027,377
------------------
(1) From December 16, 1991 (commencement of operations) to August 31, 1992.
(2) Annualized.
</TABLE>
FINANCIAL HIGHLIGHTS
INTERMEDIATE BOND PORTFOLIO _ Contained below is per share operating
performance data for a share of Common Stock outstanding, total investment
return, ratios to average net assets and other supplemental data for each
year indicated. This information has been derived from the INTERMEDIATE BOND
PORTFOLIO'S financial statements.
<TABLE>
<CAPTION>
INTERMEDIATE BOND PORTFOLIO
PER SHARE DATA: YEAR ENDED AUGUST 31,
1994(1) 1995
------ ----
<S> <C> <C>
Net asset value, beginning of year............................... $12.50
------ ----
INVESTMENT OPERATIONS:
Investment income-net............................................ .24
Net realized and unrealized gain (loss) on investments........... .15
------ ----
TOTAL FROM INVESTMENT OPERATIONS................................. .39
------ ----
DISTRIBUTIONS:
Dividends from investment income - net........................... (.24)
------ ----
Net asset value, end of year..................................... $12.65
====== ========
TOTAL INVESTMENT RETURN.......................................... 3.11%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.......................... -
Ratio of net investment income to average net assets............. 5.53%(3)
Decrease reflected in above expense ratios due to
undertaking by The Dreyfus Corporation.......................... 1.54%(3)
Portfolio Turnover Rate.......................................... 41.15%(2)
Net Assets, end of year (000's omitted).......................... $28,275
----------------
(1) From May 5, 1994 (commencement of operations) to August 31, 1994.
(2) Not annualized.
(3) Annualized.
</TABLE>
Page 4
FINANCIAL HIGHLIGHTS
BOND PORTFOLIO _ Contained below is per share operating performance
data for a share of Common Stock outstanding, total investment return, ratios
to average net assets and other supplemental data for each year indicated.
This information has been derived from the BOND PORTFOLIO'S financial
statements.
<TABLE>
<CAPTION>
BOND PORTFOLIO
PER SHARE DATA: YEAR ENDED AUGUST 31,
1994(1) 1995
------ ------
<S> <C> <C>
Net asset value, beginning of year............................... $12.50
------ ------
INVESTMENT OPERATIONS:
Investment income-net............................................ .19
Net realized and unrealized gain (loss) on investments........... .26
------ ------
TOTAL FROM INVESTMENT OPERATIONS................................. .45
------ ------
DISTRIBUTIONS:
Dividends from investment income - net........................... (.19)
------ ------
Net asset value, end of year..................................... $12.76
======== ========
TOTAL INVESTMENT RETURN.......................................... 4.13%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.......................... -_
Ratio of net investment income to average net assets............. 6.03%(3)
Decrease reflected in above expense ratios due to undertaking by The Dreyfus
Corporation........................................................ 2.06%(3)
Portfolio Turnover Rate.......................................... 8.82%(2)
Net Assets, end of year (000's omitted).......................... $15,334
------------
(1) From May 6, 1994 (commencement of operations) to August 31, 1994.
(2) Not annualized.
(3) Annualized.
</TABLE>
Further information about the performance of the INTERMEDIATE BOND
PORTFOLIO and BOND PORTFOLIO is contained in each Portfolio's respective
annual report, which may be obtained without charge by writing to the address
or calling the number set forth on the cover of this Prospectus.
PERFORMANCE INFORMATION
MONEY MARKET PORTFOLIO _ From time to time, the MONEY MARKET PORTFOLIO
advertises its yield and effective yield. Both yield figures are based on
historical earnings and are not intended to indicate future performance. It
can be expected that these yields will fluctuate substantially. The yield of
the MONEY MARKET PORTFOLIO refers to the income generated by an investment in
the Portfolio over a seven-day period (which period will be stated in the
advertisement). This income is then annualized. That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment.
The effective yield is calculated similarly, but, when annualized, the income
earned by an investment in the Portfolio is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment. The MONEY MARKET PORTFOLIO'S
yield and effective yield may reflect absorbed expenses pursuant to any
undertakings that may be in effect. See "Management of the Fund."
Tax equivalent yield is calculated by determining the pre-tax yield
which, after being taxed at a stated rate, would be equivalent to a stated
yield or effective yield calculated as described above.
Yield information is useful in reviewing the MONEY MARKET PORTFOLIO'S
performance, but because yields will fluctuate, such information under
certain conditions may not provide a basis for comparison with domestic bank
deposits, other investments which pay a fixed yield for a stated period of
time, or other investment companies which may use a different method of
computing yield.
Comparative performance information may be used from time to time in
advertising or marketing the MONEY MARKET PORTFOLIO'S shares, including data
from Lipper Analytical Services, Inc., Bank Rate Monitortrademark, N. Palm
Beach, Fla. 33408, IBC/Donoghue's Money Fund Report, Morningstar, Inc. and
other industry publications.
Page 5
INTERMEDIATE BOND PORTFOLIO AND BOND PORTFOLIO _ For purposes of
advertising, performance of the INTERMEDIATE BOND PORTFOLIO and the BOND
PORTFOLIO (each, a "LONGER TERM PORTFOLIO") may be calculated on several
bases, including current yield, tax equivalent yield, average annual total
return and/or total return.
Current yield of a LONGER TERM PORTFOLIO refers to its annualized net
investment income per share over a 30-day period, expressed as a percentage
of the net asset value per share at the end of the period. For purposes of
calculating current yield, the amount of net investment income per share
during that 30-day period, computed in accordance with regulatory
requirements, is compounded by assuming it is reinvested at a constant rate
over a six-month period. An identical result is then assumed to have occurred
during a second six-month period which, when added to the result for the
first six months, provides an "annualized" yield for an entire one-year
period. Calculations of a LONGER TERM PORTFOLIO'S current yield may reflect
absorbed expenses pursuant to any undertakings that may be in effect. See
"Management of the Fund."
Tax equivalent yield is calculated as described above.
Average annual total return for each LONGER TERM PORTFOLIO is
calculated pursuant to a standardized formula which assumes that an
investment in such Portfolio was purchased with an initial payment of $1,000
and that the investment was redeemed at the end of a stated period of time,
after giving effect to the reinvestment of dividends and distributions during
the period. The return is expressed as a percentage rate which, if applied on
a compounded annual basis, would result in the redeemable value of the
investment at the end of the period. Advertisements of a LONGER TERM
PORTFOLIO'S performance will include its average annual total return for one,
five and ten year periods, or for shorter time periods depending upon the
length of time during which it has operated. Computations of average annual
total return for periods of less than one year represent an annualization of
the Portfolio's actual total return for the applicable period.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Comparative performance information may be used from time to time in
advertising or marketing shares of each LONGER TERM PORTFOLIO, including data
from CDA Investment Technologies, Inc., Lipper Analytical Services, Inc.,
Moody's Bond Survey Bond Index, Lehman Brothers Municipal Bond Index,
Morningstar, Inc. and other industry publications.
ALL PORTFOLIOS _ Performance will vary from time to time and past results
are not necessarily representative of future results. You should remember
that performance is a function of portfolio management in selecting the type
and quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
DESCRIPTION OF THE PORTFOLIOS
GENERAL _ The Fund is a "series fund," which is a mutual fund divided into
separate portfolios. Each Portfolio is treated as a separate entity for
certain matters under the Investment Company Act of 1940 and for other
purposes, and a shareholder of one Portfolio is not deemed to be a
shareholder of any other Portfolio. As described below, for certain matters
Fund shareholders vote together as a group; as to others they vote separately
by Portfolio.
Page 6
INVESTMENT OBJECTIVE _ Each Portfolio's goal is to provide you with as high
a level of current income exempt from Federal income tax as is consistent
with the preservation of capital and, for the MONEY MARKET PORTFOLIO only,
the maintenance of liquidity. To accomplish this goal, each Portfolio invests
primarily in Municipal Obligations (described below). The MONEY MARKET
PORTFOLIO invests primarily in high-quality, short-term instruments. These
securities may not earn as high a level of current income as long-term or
lower quality securities which generally have less liquidity, greater market
risk and more fluctuation in market value. The dollar-weighted average
maturity of the INTERMEDIATE BOND PORTFOLIO'S investments will range between
three and ten years. The BOND PORTFOLIO will invest without regard to
maturity. Each Portfolio's investment objective cannot be changed without
approval by the holders of a majority (as defined in the Investment Company
Act of 1940) of such Portfolio's outstanding voting shares. There can be no
assurance that a Portfolio's investment objective will be achieved.
MUNICIPAL OBLIGATIONS _ Municipal Obligations are debt obligations issued by
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, or
multistate agencies or authorities, the interest from which is, in the
opinion of bond counsel to the issuer, exempt from Federal income tax.
Municipal Obligations generally include debt obligations issued to obtain
funds for various public purposes as well as certain industrial development
bonds issued by or on behalf of public authorities. Municipal Obligations are
classified as general obligation bonds, revenue bonds or notes. General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Tax exempt
industrial development bonds, in most cases, are revenue bonds that generally
do not carry the pledge of the credit of the issuing municipality, but
generally are guaranteed by the corporate entity on whose behalf they are
issued. Notes are short-term instruments which are obligations of the issuing
municipalities or agencies and are sold in anticipation of a bond sale,
collection of taxes or receipt of other revenues. Municipal Obligations
include municipal lease/purchase agreements which are similar to installment
purchase contracts for property or equipment issued by municipalities.
Municipal Obligations bear fixed, floating or variable rates of interest.
Each LONGER TERM PORTFOLIO may purchase Municipal Obligations with interest
rates that are determined by formulas under which the rate will change
directly or inversely to changes in interest rates or an index, or multiples
thereof, in many cases subject to a maximum and minimum. Certain Municipal
Obligations purchased by a LONGER TERM PORTFOLIO are subject to redemption at
a date earlier than their stated maturity pursuant to call options, which may
be separated from the related Municipal Obligation and purchased and sold
separately.
MANAGEMENT POLICIES _ It is a fundamental policy of each Portfolio that it
will invest at least 80% of the value of its respective net assets (except
when maintaining a temporary defensive position) in Municipal Obligations.
Additionally, with respect to each LONGER TERM PORTFOLIO, at least 65% of the
value of each Portfolio's net assets (except when maintaining a temporary
defensive position) will be invested in bonds, debentures and other debt
instruments.
MONEY MARKET PORTFOLIO _ The MONEY MARKET PORTFOLIO seeks to maintain a net
asset value of $1.00 per share for purchases and redemptions. To do so, the
MONEY MARKET PORTFOLIO uses the amortized cost method of valuing its
securities pursuant to Rule 2a-7 under the Investment Company Act of 1940,
certain requirements of which are summarized as follows. In accordance with
Rule 2a-7, the MONEY MARKET PORTFOLIO is required to maintain a
dollar-weighted average portfolio maturity of 90 days or less, purchase only
instruments having remaining maturities of 13 months or less and invest only
in U.S. dollar denominated securities determined in accordance with procedures
established by the Fund's Board of Directors to present minimal credit risks
and which are rated in one of the two highest rating categories for debt
obligations by at least two nationally recognized statistical rating
organizations
Page 7
(or one rating organization if the instrument was rated only by one such
organization) or, if unrated, are of comparable quality as determined in
accordance with procedures established by the Fund's Board of Directors. The
nationally recognized statistical rating organizations currently rating
investments of the type the MONEY MARKET PORTFOLIO may purchase are Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation ("S&P")
and Fitch Investors Service, Inc. ("Fitch") and their rating criteria are
described in the "Appendix" to the Statement of Additional Information. For
further information regarding the amortized cost method of valuing securities,
see "Determination of Net Asset Value" in the Statement of Additional
Information. There can be no assurance that the MONEY MARKET PORTFOLIO will
be able to maintain a stable net asset value of $1.00 per share.
INTERMEDIATE BOND PORTFOLIO AND BOND PORTFOLIO _ For each LONGER
TERM PORTFOLIO, at least 65% of the value of its net assets must consist of
Municipal Obligations which, in the case of bonds, are rated no lower than A
by Moody's, S&P or Fitch or, if unrated, deemed to be of comparable quality
by The Dreyfus Corporation. Each LONGER TERM PORTFOLIO may invest up to 35%
of the value of its net assets in Municipal Obligations which, in the case of
bonds, are rated lower than A by Moody's, S&P and Fitch and as low as the
lowest rating assigned by Moody's, S&P or Fitch. Each LONGER TERM PORTFOLIO
may invest in short-term Municipal Obligations which are rated in the two
highest rating categories by Moody's, S&P or Fitch. See the "Appendix" in the
Statement of Additional Information. Municipal Obligations rated BBB by S&P
or Fitch or Baa by Moody's are considered investment grade obligations; those
rated BBB by S&P and Fitch are regarded as having an adequate capacity to pay
principal and interest, while those rated Baa by Moody's are considered
medium grade obligations which lack outstanding investment characteristics
and have speculative characteristics. Investments rated Ba or lower by
Moody's and BB or lower by S&P and Fitch ordinarily provide higher yields but
involve greater risk because of their speculative characteristics. Each LONGER
TERM PORTFOLIO may invest in Municipal Obligations rated C by Moody's or D
by S&P or Fitch, which is the lowest rating assigned by such rating
organizations and indicates that the Municipal Obligation is in default and
interest and/or repayment of principal is in arrears. See "Risk Factors_Lower
Rated Bonds" below for a further discussion of certain risks. Each LONGER
TERM PORTFOLIO also may invest in Taxable Investments of the quality
described below.
Each LONGER TERM PORTFOLIO may invest in zero coupon securities which
are debt securities issued or sold at a discount from their face value which
do not entitle the holder to any periodic payment of interest prior to
maturity or a specified redemption date (or cash payment date). The amount of
the discount varies depending on the time remaining until maturity or cash
payment date, prevailing interest rates, liquidity of the security and
perceived credit quality of the issuer. Zero coupon securities also may take
the form of debt securities that have been stripped of their unmatured
interest coupons, the coupons themselves and receipts or certificates
representing interest in such stripped debt obligations and coupons. The
market prices of zero coupon securities generally are more volatile than the
market prices of interest-bearing securities and are likely to respond to a
greater degree to changes in interest rates than interest-bearing securities
having similar maturities and credit qualities. Each LONGER TERM PORTFOLIO
may invest up to 5% of its assets in zero coupon bonds which are rated below
investment grade. See "Risk Factors_Lower Rated Bonds" and "Other Investment
Considerations" below, and "Investment Objective and Management
Policies_Risk Factors_Lower Rated Bonds" and "Dividends, Distributions and
Taxes" in the Statement of Additional Information.
Each LONGER TERM PORTFOLIO may purchase custodial receipts
representing the right to receive certain future principal and interest
payments on Municipal Obligations which underlie the custodial receipts. A
number of different arrangements are possible. In a typical custodial receipt
arrangement, an issuer or a third party owner of Municipal Obligations
deposits such obligations with a custodian in exchange for two classes of
custodial receipts. The two classes have different characteristics, but, in
each
Page 8
case, payments on the two classes are based on payments received on the
underlying Municipal Obligations. One class has the characteristics of a
typical auction rate security, where at specified intervals its interest rate
is adjusted, and ownership changes, based on an auction mechanism. This
class's interest rate generally is expected to be below the coupon rate of
the underlying Municipal Obligations and generally is at a level comparable
to that of a Municipal Obligation of similar quality and having a maturity
equal to the period between interest rate adjustments. The second class bears
interest at a rate that exceeds the interest rate typically borne by a
security of comparable quality and maturity; this rate also is adjusted, but
in this case inversely to changes in the rate of interest of the first class.
If the interest rate on the first class exceeds the coupon rate of the
underlying Municipal Obligations, its interest rate will exceed the rate paid
on the second class. In no event will the aggregate interest paid with
respect to the two classes exceed the interest paid by the underlying
Municipal Obligations. The value of the second class and similar securities
should be expected to fluctuate more than the value of a Municipal Obligation
of comparable quality and maturity and their purchase by a LONGER TERM
PORTFOLIO should increase the volatility of its net asset value and, thus,
its price per share. These custodial receipts are sold in private placements.
Each LONGER TERM PORTFOLIO also may purchase directly from issuers, and not
in a private placement, Municipal Obligations having characteristics similar
to custodial receipts. These securities may be issued as part of a
multi-class offering and the interest rate on certain classes may be subject
to a cap or a floor.
ALL PORTFOLIOS (EXCEPT AS INDICATED BELOW) _ Each Portfolio may invest more
than 25% of the value of its total assets in Municipal Obligations which are
related in such a way that an economic, business or political development or
change affecting one such security also would affect the other securities;
for example, securities the interest upon which is paid from revenues of
similar types of projects, or securities whose issuers are located in the
same state. As a result, each Portfolio may be subject to greater risk as
compared to a fund that does not follow this practice.
From time to time, a Portfolio may invest more than 25% of the value
of its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental users. Interest on Municipal Obligations
(including certain industrial development bonds) which are specified private
activity bonds, as defined in the Internal Revenue Code of 1986, as amended
(the "Code"), issued after August 7, 1986, while exempt from Federal income
tax, is a preference item for the purpose of the alternative minimum tax.
Where a regulated investment company receives such interest, a proportionate
share of any exempt-interest dividend paid by the investment company may be
treated as such a preference item to shareholders. Each Portfolio may invest
without limitation in such Municipal Obligations if The Dreyfus Corporation
determines that its purchase is consistent with such Portfolio's investment
objective. See "Risk Factors _ Other Investment Considerations" below.
Each Portfolio may purchase floating or variable rate demand notes,
which are tax exempt obligations ordinarily having stated maturities in
excess of 13 months, but which permit the holder to demand payment of
principal at any time, or at specified intervals, which for the MONEY MARKET
PORTFOLIO will not exceed 13 months, and in each case will be upon not more
than 30 days' notice. Variable rate demand notes include master demand notes
which are obligations that permit each Portfolio to invest fluctuating
amounts at varying rates of interest pursuant to direct arrangements between
the Portfolio, as lender, and the borrower. These obligations permit daily
changes in the amounts borrowed. Frequently, such obligations are secured by
letters of credit or other credit support arrangements provided by banks. Use
of letters of credit or other credit support arrangements will not adversely
affect the tax exempt status of these obligations. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value, plus accrued interest. Accordingly, where
these obligations are not secured by letters of credit or other credit
support arrangements, the Portfolio's
Page 9
right to redeem is dependent on the ability of the borrower to pay principal
and interest on demand. Each obligation purchased by a Portfolio will meet
the quality criteria established for its purchase of Municipal Obligations.
The Dreyfus Corporation, on behalf of each Portfolio, will consider on an
ongoing basis the creditworthiness of the issuers of the floating and variable
rate demand obligations held by the Portfolios.
Each Portfolio may purchase from financial institutions participation
interests in Municipal Obligations (such as industrial development bonds and
municipal lease/purchase agreements). A participation interest gives a
Portfolio an undivided interest in the Municipal Obligation in the proportion
that the Portfolio's participation bears to the total principal amount of the
Municipal Obligation. These instruments may have fixed, floating or variable
rates of interest and, in the case of the MONEY MARKET PORTFOLIO, will have
remaining maturities of 13 months or less. If the participation interest is
unrated, it will be backed by an irrevocable letter of credit or guarantee of
a bank that the Fund's Board of Directors has determined meets the prescribed
quality standards for banks set forth below, or the payment obligation
otherwise will be collateralized by U.S. Government securities. For certain
participation interests, a Portfolio will have the right to demand payment,
on not more than seven days' notice, for all or any part of the Portfolio's
participation interest in the Municipal Obligation, plus accrued interest. As
to these instruments, each Portfolio intends to exercise its right to demand
payment only upon a default under the terms of the Municipal Obligation, as
needed to provide liquidity to meet redemptions, or to maintain or improve
the quality of its investment portfolio.
Each Portfolio may purchase tender option bonds. A tender option bond
is a Municipal Obligation (generally held pursuant to a custodial
arrangement) having a relatively long maturity and bearing interest at a
fixed rate substantially higher than prevailing short-term tax exempt rates,
that has been coupled with the agreement of a third party, such as a bank,
broker-dealer or other financial institution, pursuant to which such
institution grants the security holders the option, at periodic intervals, to
tender their securities to the institution and receive the face value
thereof. As consideration for providing the option, the financial institution
receives periodic fees equal to the difference between the Municipal
Obligation's fixed coupon rate and the rate, as determined by a remarketing
or similar agent at or near the commencement of such period, that would cause
the securities, coupled with the tender option, to trade at par on the date
of such determination. Thus, after payment of this fee, the security holder
effectively holds a demand obligation that bears interest at the prevailing
short-term tax exempt rate. The Dreyfus Corporation, on behalf of each
Portfolio, will consider on an ongoing basis the creditworthiness of the
issuer of the underlying Municipal Obligation, of any custodian and of the
third party provider of the tender option. In certain instances and for
certain tender option bonds, the option may be terminable in the event of a
default in payment of principal or interest on the underlying Municipal
Obligations and for other reasons. No Portfolio will invest more than 15%
(10% in the case of the MONEY MARKET PORTFOLIO) of the value of its net
assets in securities that are illiquid, which could include tender option
bonds as to which it cannot exercise the tender feature on not more than
seven days' notice if there is no secondary market available for these
obligations.
Each Portfolio may acquire "stand-by commitments" with respect to
Municipal Obligations held in its portfolio. Under a stand-by commitment, a
Portfolio obligates a broker, dealer or bank to repurchase, at such
Portfolio's option, specified securities at a specified price and, in this
respect, stand-by commitments are comparable to put options. The exercise of
a stand-by commitment therefore is subject to the ability of the seller to
make payment on demand. Each Portfolio will acquire stand-by commitments
solely to facilitate portfolio liquidity and does not intend to exercise any
such rights thereunder for trading purposes. Each Portfolio may pay for
stand-by commitments if such action is deemed necessary, thus increasing to a
degree the cost of the underlying Municipal Obligation and similarly
decreasing such security's yield to investors. Gains realized in connection
with stand-by commitments will be taxable. The LONGER TERM PORTFOLIOS also
may acquire call options on specific
Page 10
Municipal Obligations. A LONGER TERM PORTFOLIO generally would purchase these
call options to protect it from the issuer of the related Municipal
Obligation redeeming, or other holder of the call option from calling away,
the Municipal Obligation before maturity. The sale by a LONGER TERM PORTFOLIO
of a call option that it owns on a specific Municipal Obligation could result
in the receipt of taxable income by the Portfolio.
Each Portfolio may invest up to 15% (10% in the case of the MONEY
MARKET PORTFOLIO) of the value of its net assets in securities as to which a
liquid trading market does not exist, provided such investments are
consistent with the Portfolio's investment objective. Such securities may
include securities that are not readily marketable, such as certain
securities that are subject to legal or contractual restrictions on resale
and repurchase agreements providing for settlement in more than seven days
after notice. As to these securities, a LONGER TERM PORTFOLIO investing in
such securities is subject to a risk that should the Portfolio desire to sell
them when a ready buyer is not available at a price the Portfolio deems
representative of their value, the value of the Portfolio's net assets could
be adversely affected.
From time to time, on a temporary basis other than for temporary
defensive purposes (but not to exceed 20% of the value of its net assets) or
for temporary defensive purposes, a Portfolio may invest in taxable
short-term investments ("Taxable Investments") consisting of: notes of
issuers having, at the time of purchase, a quality rating within the two
highest grades of Moody's, S&P or Fitch; obligations of the U.S. Government,
its agencies or instrumentalities; commercial paper rated not lower than P-2
by Moody's, A-2 by S&P or F-2 by Fitch; certificates of deposit of U.S.
domestic banks, including foreign branches of domestic banks, with assets of
one billion dollars or more; time deposits; bankers' acceptances and other
short-term bank obligations; and repurchase agreements in respect of any of
the foregoing. Dividends paid by a Portfolio that are attributable to income
earned by such Portfolio from Taxable Investments will be taxable to
investors. See "Dividends, Distributions and Taxes." Except for temporary
defensive purposes, at no time will more than 20% of the value of a
Portfolio's net assets be invested in Taxable Investments. If the MONEY
MARKET PORTFOLIO purchases Taxable Investments, it will value them using the
amortized cost method and comply with Rule 2a-7 relating to purchases of
taxable instruments. Under normal market conditions, each Portfolio
anticipates that not more than 5% of the value of its total assets will be
invested in any one category of Taxable Investments. Taxable Investments are
more fully described in the Statement of Additional Information, to which
reference hereby is made.
INVESTMENT TECHNIQUES _ Each LONGER TERM PORTFOLIO may engage in various
investment and hedging techniques such as short-selling, options and futures
transactions and lending portfolio securities, each of which involves risk.
Options and futures transactions involve so-called "derivative securities."
Use of these techniques may give rise to taxable income.
FUTURES TRANSACTIONS _ IN GENERAL _ Neither LONGER TERM PORTFOLIO is a
commodity pool. However, as a substitute for a comparable market position in
the underlying securities or for hedging purposes, each LONGER TERM PORTFOLIO
may engage in futures and options on futures transactions as described below.
Each LONGER TERM PORTFOLIO'S commodities transactions must constitute
bona fide hedging or other permissible transactions pursuant to regulations
promulgated by the Commodity Futures Trading Commission. In addition, each
LONGER TERM PORTFOLIO may not engage in such transactions if the sum of the
amount of initial margin deposits and premiums paid for unexpired commodity
options, other than for bona fide hedging transactions, would exceed 5% of
the liquidation value of such Portfolio's assets, after taking into account
unrealized profits and unrealized losses on such contracts it has entered
into; provided, however, that in the case of an option that is in-the-money
at the time of purchase, the in-the-money amount may be excluded in calculatin
g the 5%. Pursuant to regulations and/or published positions of the
Securities and Exchange Commission, each LONGER TERM PORTFOLIO may be
required to segregate cash or high quality money market instruments in
connection with its commodities transactions in an amount generally equal to
the value of the underlying commodity. To the extent a LONGER TERM
Page 11
PORTFOLIO engages in the use of futures and options on futures other than for
bona fide hedging purposes, the Portfolio may be subject to additional risk.
Initially, when purchasing or selling futures contracts each LONGER
TERM PORTFOLIO will be required to deposit with the Fund's custodian in the
broker's name an amount of cash or cash equivalents up to approximately 10%
of the contract amount. This amount is subject to change by the exchange or
board of trade on which the contract is traded and members of such exchange
or board of trade may impose their own higher requirements. This amount is
known as "initial margin" and is in the nature of a performance bond or good
faith deposit on the contract which is returned to such Portfolio upon
termination of the futures position, assuming all contractual obligations
have been satisfied. Subsequent payments, known as "variation margin," to and
from the broker will be made daily as the price of the index or securities
underlying the futures contract fluctuates, making the long and short
positions in the futures contract more or less valuable, a process known as
"marking-to-market." At any time prior to the expiration of a futures
contract, a LONGER TERM PORTFOLIO may elect to close the position by taking
an opposite position at the then prevailing price, which will operate to
terminate such Portfolio's existing position in the contract.
Although each LONGER TERM PORTFOLIO intends to purchase or sell
futures contracts only if there is an active market for such contracts, no
assurance can be given that a liquid market will exist for any particular
contract at any particular time. Many futures exchanges and boards of trade li
mit the amount of fluctuation permitted in futures contract prices during a
single trading day. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond the limit or
trading may be suspended for specified periods during the trading day.
Futures contract prices could move to the limit for several consecutive
trading days with little or no trading, thereby preventing prompt liquidation
of futures positions and potentially subjecting a LONGER TERM PORTFOLIO to a
substantial loss. If it is not possible, or such Portfolio determines not, to
close a futures position in anticipation of adverse price movements, such
Portfolio will be required to make daily cash payments of variation margin.
In such circumstances, an increase in the value of the portion of the
portfolio being hedged, if any, may offset partially or completely losses on
the futures contract. However, no assurance can be given that the price of
the securities being hedged will correlate with the price movements in a
futures contract and thus provide an offset to losses on the futures
contract.
To the extent a LONGER TERM PORTFOLIO is engaging in a futures
transaction as a hedging device because of the risk of an imperfect
correlation between securities held by the LONGER TERM PORTFOLIO that are
the subject of a hedging transaction and the futures contract used as a
hedging device, it is possible that the hedge will not be fully effective if,
for example, losses on the portfolio securities exceed gains on the futures
contract or losses on the futures contract exceed gains on the portfolio
securities. For futures contracts based on indices, the risk of imperfect
correlation increases as the composition of the Portfolio's securities varies
from the composition of the index. In an effort to compensate for the
imperfect correlation of movements in the price of the securities being
hedged and movements in the price of futures contracts, such Portfolio may
buy or sell futures contracts in a greater or lesser dollar amount than the
dollar amount of the securities being hedged if the historical volatility of
the futures contract has been less or greater than that of the securities.
Such "over hedging" or "under hedging" may adversely affect a LONGER TERM
PORTFOLIO'S net investment results if the market does not move as anticipated
when the hedge is established.
Successful use of futures by each LONGER TERM PORTFOLIO is also
subject to The Dreyfus Corporation's ability to predict correctly movements
in the direction of the market or interest rates. For example, if a LONGER
TERM PORTFOLIO has hedged against the possibility of a decline in the market
adversely affecting the value of securities held in its portfolio and prices
increase instead, such Portfolio will lose part or all of the benefit of the
increased value of securities it has hedged because it will have offsetting
losses in its futures positions. Furthermore, if in such circumstances the
Portfolio has insufficient cash, it
Page 12
may have to sell securities to meet daily variation margin requirements. The
LONGER TERM PORTFOLIO may have to sell such securities at a time when it may
be disadvantageous to do so.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a
long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the option exercise
period. The writer of the option is required upon exercise to assume an
offsetting futures position (a short position if the option is a call and a
long position if the option is a put). Upon exercise of the option, the
assumption of offsetting futures positions by the writer and holder of the
option will be accompanied by delivery of the accumulated cash balance in the
writer's futures margin account which represents the amount by which the
market price of the futures contract, at exercise, exceeds, in the case of a
call, or is less than, in the case of a put, the exercise price of the option
on the futures contract.
Call options sold by each LONGER TERM PORTFOLIO with respect to
futures contracts will be covered by, among other things, entering into a
long position in the same contract at a price no higher than the strike price
of the call option, or by ownership of the instruments underlying, or
instruments the prices of which are expected to move relatively consistently
with the instruments underlying, the futures contract. Put options sold by
each LONGER TERM PORTFOLIO with respect to futures contracts will be covered
when, among other things, cash or liquid securities are placed in a
segregated account to fulfill the obligation undertaken.
Each LONGER TERM PORTFOLIO may utilize municipal bond index futures
to protect against changes in the market value of the Municipal Obligations
in its portfolio or which it intends to acquire. Municipal bond index futures
contracts are based on an index of long-term Municipal Obligations. The index
assigns relative values to the Municipal Obligations included in an index,
and fluctuates with changes in the market value of such Municipal
Obligations. The contract is an agreement pursuant to which two parties agree
to take or make delivery of an amount of cash based upon the difference
between the value of the index at the close of the last trading day of the
contract and the price at which the index contract was originally written.
The acquisition or sale of a municipal bond index futures contract enables a
LONGER TERM PORTFOLIO to protect its assets from fluctuations in rates on tax
exempt securities without actually buying or selling such securities.
INTEREST RATE FUTURES CONTRACTS AND OPTIONS ON INTEREST RATE FUTURES
CONTRACTS_Each LONGER TERM PORTFOLIO may purchase and sell interest rate
futures contracts and options on interest rate futures contracts as a
substitute for a comparable market position or to hedge against adverse
movements in interest rates.
To the extent a LONGER TERM PORTFOLIO has invested in interest rate
futures contracts or options on interest rate futures contracts as a
substitute for a comparable market position, the Portfolio will be subject to
the investment risks of having purchased the securities underlying the
contract.
Each LONGER TERM PORTFOLIO may purchase call options on interest rate
futures contracts to hedge against a decline in interest rates and may
purchase put options on interest rate futures contracts to hedge its
portfolio securities against the risk of rising interest rates.
Each LONGER TERM PORTFOLIO may sell call options on interest rate
futures contracts to partially hedge against declining prices of its
portfolio securities. If the futures price at expiration of the option is
below the exercise price, the Portfolio will retain the full amount of the
option premium which provides a partial hedge against any decline that may
have occurred in such Portfolio's securities holdings. Each LONGER TERM
PORTFOLIO may sell put options on interest rate futures contracts to hedge
against increasing prices of the securities which are deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is higher than the exercise price, the Portfolio will retain the full
amount of the option premium which provides a partial hedge against any
increase in the price of securities which the Portfolio intends to purchase.
If a put or call option sold by a Portfolio is exercised, the Portfolio will
incur a loss which will be reduced by the amount of the premium it receives.
Page 13
Depending on the degree of correlation between changes in the value of its
portfolio securities and changes in the value of its futures positions, a
Portfolio's losses from existing options on futures may to some extent be
reduced or increased by changes in the value of its portfolio securities.
Each LONGER TERM PORTFOLIO also may sell options on interest rate
futures contracts as part of closing purchase transactions to terminate its
options positions. No assurance can be given that such closing transactions
can be effected or that there will be a correlation between price movements
in the options on interest rate futures and price movements in a Portfolio's
securities which are the subject of the hedge. In addition, a Portfolio's
purchase of such options will be based upon predictions as to anticipated
interest rate trends, which could prove to be inaccurate.
SHORT-SELLING _ Each LONGER TERM PORTFOLIO may make short sales, which are
transactions in which the Portfolio sells a security it does not own in
anticipation of a decline in the market value of that security. To complete
such a transaction, the Portfolio must borrow the security to make delivery
to the buyer. The Portfolio then is obligated to replace the security
borrowed by purchasing it at the market price at the time of replacement. The
price at such time may be more or less than the price at which the security
was sold by the Portfolio. A LONGER TERM PORTFOLIO will incur a loss as a
result of the short sale if the price of the security increases between the
date of the short sale and the date on which the Portfolio replaces the
borrowed security. A LONGER TERM PORTFOLIO will realize a gain if the
security declines in price between those dates.
No securities will be sold short if, after effect is given to any
such short sale, the total market value of all securities sold short would
exceed 25% of the value of such Portfolio's net assets. Neither LONGER TERM
PORTFOLIO may sell short the securities of any class of an issuer to the
extent, at the time of the transaction, of more than 5% of the outstanding
securities of that class.
In addition to the short sales discussed above, each LONGER TERM
PORTFOLIO may make short sales "against the box," a transaction in which the
Portfolio enters into a short sale of a security which the Portfolio owns.
Neither LONGER TERM PORTFOLIO will at any time have more than 15% of the
value of its net assets in deposits on short sales against the box. It
currently is anticipated that each LONGER TERM PORTFOLIO will make short
sales against the box for purposes of protecting the value of the Portfolio's
net assets.
FUTURE DEVELOPMENTS _ Each LONGER TERM PORTFOLIO may take advantage of
opportunities in the area of options and futures contracts and options on
futures contracts and any other derivative investments which are not
presently contemplated for use by either LONGER TERM PORTFOLIO or which are
not currently available but which may be developed, to the extent such
opportunities are both consistent with its investment objective and legally
permissible. Before entering into such transactions or making any such
investment, a LONGER TERM PORTFOLIO will provide appropriate disclosure in
its prospectus.
LENDING PORTFOLIO SECURITIES _ From time to time, each LONGER TERM PORTFOLIO
may lend securities from its portfolio to brokers, dealers and other
financial institutions needing to borrow securities to complete certain
transactions. Such loans may not exceed 33-1/3% of the value of such
Portfolio's total assets. In connection with such loans, the Portfolio will
receive collateral consisting of cash, U.S. Government securities or
irrevocable letters of credit which will be maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. Each LONGER TERM PORTFOLIO can increase its income through the
investment of such collateral. The LONGER TERM PORTFOLIO engaging in the
portfolio loan transaction continues to be entitled to payments in amounts
equal to the interest or other distributions payable on the loaned security
and receives interest on the amount of the loan. Such loans will be
terminable at any time upon specified notice. A LONGER TERM PORTFOLIO might
experience risk of loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with the Portfolio.
BORROWING MONEY _ As a fundamental policy, each LONGER TERM PORTFOLIO is
permitted to borrow to the extent permitted under the Investment Company Act
of 1940. However, each LONGER TERM
Page 14
PORTFOLIO currently intends to borrow money only for temporary or emergency
(not leveraging) purposes, in an amount up to 15% of the value of such
Portfolio's total assets (including the amount borrowed) valued at the lesser
of cost or market, less liabilities (not including the amount borrowed) at the
time the borrowing is made. While borrowings exceed 5% of a LONGER TERM
PORTFOLIO'S total assets, such Portfolio will not make any additional
investments.
CERTAIN FUNDAMENTAL POLICIES _ Each Portfolio may invest up to 25% of its
total assets in the securities of issuers in any single industry, provided
that there is no such limitation on investments in Municipal Obligations and,
for temporary defensive purposes, obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. In addition, each LONGER
TERM PORTFOLIO may borrow money to the extent permitted under the Investment
Company Act of 1940 and the MONEY MARKET PORTFOLIO may: (i) borrow money from
banks, but only for temporary or emergency (not leveraging) purposes, in an
amount up to 15% of the value of its total assets (including the amount
borrowed) valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made. While
borrowings exceed 5% of the value of the MONEY MARKET PORTFOLIO'S total
assets, the MONEY MARKET PORTFOLIO will not make any additional investments;
and (ii) pledge, hypothecate, mortgage or otherwise encumber its assets, but
only to secure borrowings for temporary or emergency purposes. This paragraph
describes fundamental policies that cannot be changed, as to a Portfolio,
without approval by the holders of a majority (as defined in the Investment
Company Act of 1940) of such Portfolio's outstanding voting shares. See
"Investment Objective and Management Policies_Investment Restrictions" in the
Statement of Additional Information.
CERTAIN ADDITIONAL NON-FUNDAMENTAL POLICIES
Each Portfolio may invest up to 15% (10% in the case of the MONEY MARKET
PORTFOLIO) of the value of its net assets in repurchase agreements providing
for settlement in more than seven days after notice and in other illiquid
securities (which securities could include participation interests (including
municipal lease/purchase agreements) and floating and variable rate demand
obligations as to which the Portfolio cannot exercise the demand feature
described above and as to which there is no secondary market). In addition,
each LONGER TERM PORTFOLIO may pledge, hypothecate, mortgage or otherwise
encumber its assets, but only to secure permitted borrowings. See "Investment
Objective and Management Policies_Investment Restrictions" in the Statement
of Additional Information.
RISK FACTORS
LOWER RATED BONDS (APPLICABLE TO EACH LONGER TERM PORTFOLIO ONLY) _ You
should carefully consider the relative risks of investing in the higher
yielding (and, therefore, higher risk) securities in which a LONGER TERM
PORTFOLIO may invest up to 35% of the value of its net assets. Lower rated
bonds as discussed herein are not eligible investments for the MONEY MARKET
PORTFOLIO. These are bonds such as those rated Ba by Moody's or BB by S&P or
Fitch, or as low as the lowest rating assigned by Moody's, S&P or Fitch. They
generally are not meant for short-term investing and may be subject to
certain risks with respect to the issuing entity and to greater market
fluctuations than certain lower yielding, higher rated fixed-income
securities. Bonds rated Ba by Moody's are judged to have speculative
elements; their future cannot be considered as well assured and often the
protection of interest and principal payments may be very moderate. Bonds
rated BB by S&P are regarded as having predominantly speculative
characteristics and, while such obligations have less near-term vulnerability
to default than other speculative grade debt, they face major ongoing
uncertainties or exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to meet timely interest
and principal payments. Bonds rated BB by Fitch are considered speculative
and the payment of principal and interest may be affected at any time by
adverse economic changes. Bonds rated C by Moody's are regarded as having
extremely poor prospects of ever attaining any real investment standing.
Bonds rated D by S&P are in default and the payment of interest and/or
repayment of principal is in arrears. Bonds rated DDD,
Page 15
DD or D by Fitch are in actual or imminent default, are extremely speculative
and should be valued on the basis of their ultimate recovery value in
liquidation or reorganization of the issues; DDD represents the highest
potential for recovery of such bonds; and D represents the lowest potential
for recovery. Such Municipal Obligations, though high yielding, are
characterized by great risk. See "Appendix B" in the Statement of Additional
Information for a general description of Moody's, S&P and Fitch ratings of
Municipal Obligations. The ratings of Moody's, S&P and Fitch represent their
opinions as to the quality of the Municipal Obligations which they undertake
to rate. It should be emphasized, however, that ratings are relative and
subjective and, although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market value risk of
these bonds. Therefore, although these ratings may be an initial criterion for
selection of portfolio investments, The Dreyfus Corporation also will evaluate
these securities and the ability of the issuers of such securities to pay
interest and principal. The ability of a LONGER TERM PORTFOLIO to achieve its
investment objective may be more dependent on The Dreyfus Corporation's
credit analysis than might be the case for a fund that invested in higher
rated securities. Once the rating of a portfolio security held by a LONGER
TERM PORTFOLIO has been changed, such Portfolio will consider all
circumstances deemed relevant in determining whether to continue to hold the
security.
The market price and yield of bonds rated Ba or lower by Moody's and
BB or lower by S&P and Fitch are more volatile than those of higher rated
bonds. Factors adversely affecting the market price and yield of these
securities will adversely affect each LONGER TERM PORTFOLIO'S net asset
value. In addition, the retail secondary market for these bonds may be less
liquid than that of higher rated bonds; adverse market conditions could make
it difficult at times for a LONGER TERM PORTFOLIO to sell certain securities
or could result in lower prices than those used in calculating the net asset
value of each LONGER TERM PORTFOLIO.
Each LONGER TERM PORTFOLIO may invest up to 5% of the value of its
total assets in zero coupon securities and pay-in-kind bonds (bonds which pay
interest through the issuance of additional bonds) rated Ba or lower by
Moody's and BB or lower by S&P and Fitch. These securities may be subject to
greater fluctuations in value due to changes in interest rates than
interest-bearing securities and thus may be considered more speculative than
comparably rated interest-bearing securities. See "Other Investment
Considerations" below and "Investment Objective and Management Policies_Risk
Factors_Lower Rated Bonds" and "Dividends, Distributions and Taxes" in the
Statement of Additional Information.
OTHER INVESTMENT CONSIDERATIONS _ The Fund is designed to benefit investors
who do not engage in frequent redemptions or exchanges of Portfolio shares.
Because charges may apply to redemptions and exchanges of Portfolio shares,
the Fund may not be an appropriate investment for an investor who intends to
engage frequently in such transactions.
Even though interest-bearing securities are investments which promise
a stable stream of income, the prices of such securities are inversely
affected by changes in interest rates and, therefore, are subject to the risk
of market price fluctuations. Certain securities that may be purchased by a
LONGER TERM PORTFOLIO, such as those with interest rates that fluctuate
directly or indirectly based on multiples of a stated index, are designed to
be highly sensitive to changes in interest rates and can subject the holders
thereof to extreme reductions of yield and possibly loss of principal. The
values of fixed-income securities also may be affected by changes in the
credit rating or financial condition of the issuing entities. The MONEY
MARKET PORTFOLIO seeks to maintain a stable $1.00 share price, while the net
asset value of each LONGER TERM PORTFOLIO generally will not be stable and
should fluctuate based upon changes in the value of its respective portfolio
securities. Securities in which a LONGER TERM PORTFOLIO invests may earn a
higher level of current income than certain shorter-term or higher quality
securities which generally have greater liquidity, less market risk and less
fluctuation in market value.
Page 16
New issues of Municipal Obligations usually are offered on a
when-issued basis, which means that delivery and payment for such Municipal
Obligations ordinarily take place within 45 days after the date of the
commitment to purchase. The payment obligation and the interest rate that
will be received on the Municipal Obligations are fixed at the time the
Portfolio enters into the commitment. A Portfolio will make commitments to
purchase such Municipal Obligations only with the intention of actually
acquiring the securities, but a Portfolio may sell these securities before
the settlement date if it is deemed advisable, although any gain realized on
such sale would be taxable. The Portfolio will not accrue income in respect
of a when-issued security prior to its stated delivery date. No additional
when-issued commitments will be made by a Portfolio if more than 20% of the
value of its net assets would be so committed.
Municipal Obligations purchased on a when-issued basis and the
securities held by a Portfolio are subject to changes in value (both
generally changing in the same way, i.e., appreciating when interest rates
decline and depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Municipal Obligations purchased
by a Portfolio on a when-issued basis may expose the Portfolio to risk
because they may experience such fluctuations prior to their actual delivery.
Purchasing Municipal Obligations on a when-issued basis can involve the
additional risk that the yield available in the market when the delivery
takes place actually may be higher than that obtained in the transaction
itself. Each Portfolio will establish and maintain at the Fund's custodian
bank a segregated account consisting of cash, cash equivalents or U.S.
Government securities or other high quality liquid debt securities at least
equal at all times to the amount of the when-issued commitment. Purchasing
Municipal Obligations on a when-issued basis when a Portfolio is fully or
almost fully invested may result in greater potential fluctuation in the
value of such Portfolio's net assets and its net asset value per share.
Certain municipal lease/purchase obligations in which a Portfolio may
invest may contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease/purchase obligations are secured by the leased
property, disposition of the leased property in the event of foreclosure
might prove difficult. In evaluating the credit quality of a municipal lease/p
urchase obligation that is unrated, The Dreyfus Corporation will consider, on
an ongoing basis, a number of factors including the likelihood that the
issuing municipality will discontinue appropriating funding for the leased
property.
Federal income tax law requires the holder of a zero coupon security
or of certain pay-in-kind bonds to accrue income with respect to these
securities prior to the receipt of cash payments. To maintain its
qualification as a regulated investment company and avoid liability for
Federal income taxes, a LONGER TERM PORTFOLIO may be required to distribute
such income accrued with respect to these securities and may have to dispose
of portfolio securities under disadvantageous circumstances in order to
generate cash to satisfy these distribution requirements.
Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase
the cost of the Municipal Obligations available for purchase by each
Portfolio and thus reduce the available yield. Shareholders should consult
their tax advisers concerning the effect of these provisions on an investment
in a Portfolio. Proposals that may restrict or eliminate the income tax
exemption for interest on Municipal Obligations may be introduced in the
future. If any such proposal were enacted that would reduce the availability
of Municipal Obligations for investment by a Portfolio so as to adversely
affect its shareholders, such Portfolio would reevaluate its investment
objective and policies and submit possible changes in its structure to
shareholders for their consideration. If legislation were enacted that would
treat a type of Municipal Obligation as taxable, each Portfolio would treat
such security as a permissible Taxable Investment within the applicable
limits set forth herein.
Page 17
Classification of each Portfolio as a "non-diversified" investment
company means that the proportion of the Portfolio's assets that may be
invested in the securities of a single issuer is not limited by the
Investment Company Act of 1940. A "diversified" investment company is
required by the Investment Company Act of 1940 generally to invest, with
respect to 75% of its total assets, not more than 5% of such assets in the
securities of a single issuer. However, each Portfolio intends to conduct its
operations so as to qualify as a "regulated investment company" for purposes
of the Code which requires that, at the end of each quarter of its taxable
year, (i) at least 50% of the market value of the Portfolio's total assets be
invested in cash, U.S. Government securities, the securities of other
regulated investment companies and other securities, with such other
securities of any one issuer limited for the purposes of this calculation to
an amount not greater than 5% of the value of the Portfolio's total assets,
and (ii) not more than 25% of the value of the Portfolio's total assets be
invested in the securities of any one issuer (other than U.S. Government
securities or the securities of other regulated investment companies). Since
a relatively high percentage of each Portfolio's assets may be invested in
the obligations of a limited number of issuers, the Portfolio's investments
may be more susceptible to any single economic, political or regulatory
occurrence than the portfolio securities of a diversified investment company.
Investment decisions for each Portfolio are made independently from
those of other investment companies advised by The Dreyfus Corporation.
However, if such other investment companies or one or more of the Portfolios
are prepared to invest in, or desire to dispose of, Municipal Obligations or
Taxable Investments at the same time as a Portfolio, available investments or
opportunities for sales will be allocated equitably to each investment
company or Portfolio, as the case may be. In some cases, this procedure may
adversely affect the size of the position obtained for or disposed of by a
Portfolio or the price paid or received by it.
MANAGEMENT OF THE FUND
The Dreyfus Corporation, located at 200 Park Avenue, New York, New
York 10166, was formed in 1947 and serves as the Fund's investment adviser.
The Dreyfus Corporation is a wholly-owned subsidiary of Mellon Bank, N.A.,
which is a wholly-owned subsidiary of Mellon Bank Corporation ("Mellon"). As
of August 31, 1995, The Dreyfus Corporation managed or administered
approximately $80 billion in assets for more than 1.8 million investor
accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the overall authority of the Fund's Board of Directors in
accordance with Maryland law. The primary portfolio manager of the each LONGER
TERM PORTFOLIO is Joseph P. Darcy. He has held that position since the
commencement of operations of each LONGER TERM PORTFOLIO and has been
employed by The Dreyfus Corporation since May 1994. From October 1989 to May
1994, Mr. Darcy was Vice President and a Portfolio Manager for Merrill Lynch
Asset Management.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCOCredit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed more than
$203 billion in assets as of June 30, 1995, including approximately $73
billion in mutual fund assets. As of June 30, 1995, various subsidiaries of
Mellon provided non-investment services, such as custodial or administration
services, for approximately $707 billion in assets including approximately
$71 billion in mutual fund assets.
Page 18
Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate of: (i) .50 of
1% of the value of the MONEY MARKET PORTFOLIO'S average daily net assets and
(ii) .60 of 1% of the value of each LONGER TERM PORTFOLIO's average daily net
assets. From time to time, The Dreyfus Corporation may waive receipt of its
fees and/or voluntarily assume certain expenses of a Portfolio, which would
have the effect of lowering the overall expense ratio of that Portfolio and
increasing yield to investors at the time such amounts are waived or assumed,
as the case may be. The Fund will not pay The Dreyfus Corporation at a later
time for any amounts it may waive, nor will the Fund reimburse The Dreyfus
Corporation for any amounts it may assume. For the fiscal year ended August
31, 1995, the Fund, with respect to the MONEY MARKET PORTFOLIO, paid The
Dreyfus Corporation a monthly management fee at the effective annual rate of
_ of 1% of the Portfolio's average daily net assets pursuant to an
undertaking by The Dreyfus Corporation. For the fiscal year ended August 31,
1995, no management fee was paid by the Fund as to the INTERMEDIATE BOND
PORTFOLIO and BOND PORTFOLIO, respectively, pursuant to separate undertakings
by The Dreyfus Corporation.
The Dreyfus Corporation has agreed until June 30, 1996, in the case
of the MONEY MARKET PORTFOLIO, and until June 30, 1998, in the case of each LO
NGER TERM PORTFOLIO, that if in any fiscal year the aggregate expenses of a
Portfolio, exclusive of taxes, brokerage, interest on borrowings and (with
the prior written consent of the necessary state securities commissions)
extraordinary expenses, but including the management fee, exceed .45% of the
value of such Portfolio's average daily net assets for the fiscal year, the
Fund may deduct from the payment to be made to The Dreyfus Corporation under
the Management Agreement, or The Dreyfus Corporation will bear, such excess
expense.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay securities
dealers or others in respect of these services.
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"), located at One Exchange Place, Boston, Massachusetts 02109.
The Distributor is a wholly-owned subsidiary of FDI Distribution Services,
Inc., a provider of mutual fund administration services, which in turn is a
wholly-owned subsidiary of FDI Holdings, Inc. the parent company of which is
Boston Institutional Group, Inc.
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671, is the
Fund's Transfer and Dividend Disbursing Agent (the "Transfer Agent"). The
Transfer Agent will receive the $5.00 exchange fee, the $5.00 account
closeout fee, the $5.00 wire and Dreyfus TELETRANSFER redemption fee and the
$2.00 checkwriting charge, described below. A sufficient number of your
shares will be redeemed automatically to pay these amounts. These payments
will reduce the transfer agency fee otherwise payable by the Fund. By
purchasing shares of a Portfolio, you are deemed to have consented to this
procedure. The Bank of New York, 90 Washington Street, New York, New York
10286, is the Fund's Custodian.
HOW TO BUY SHARES
Portfolio Shares are sold without a sales charge. You may be charged
a nominal fee if you effect transactions in Portfolio shares through a
securities dealer, bank or other financial institution. Share certificates
are issued only upon your written request. No certificates are issued for
fractional shares. It is not recommended that any Portfolio be used as a
vehicle for Keogh, IRA or other qualified plans. The Fund reserves the right
to reject any purchase order.
The minimum initial investment is $25,000 for the MONEY MARKET
PORTFOLIO and $10,000 for each LONGER TERM PORTFOLIO. Subsequent investments
in each Portfolio must be at least $1,000. The initial investment must be
accompanied by the Fund's Account Application.
You may purchase Portfolio shares by check or wire or through the
Dreyfus TELETRANSFER Privilege described below. Checks should be made payable
to "The Dreyfus Family of Funds" and should specify
Page 19
the Portfolio in which you are investing. Payments to open new accounts
which are mailed should be sent to The Dreyfus Family of Funds, P.O. Box
9387, Providence, Rhode Island 02940-9387, together with your Account
Application. For subsequent investments, your Fund account number should
appear on the check and an investment slip should be enclosed and sent to
The Dreyfus Family of Funds, P.O. Box 105, Newark, New Jersey 07101-0105.
Neither initial nor subsequent investments should be made by third party
check. Purchase orders may be delivered in person only to a Dreyfus Financial
Center. THESE ORDERS WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY
UPON RECEIPT THEREBY. For the location of the nearest Dreyfus Financial
Center, please call one of the telephone numbers listed under "General
Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, together with the applicable
Portfolio's DDA# as shown below, for purchase of Portfolio shares in your
name: DDA# 8900208767/Dreyfus BASIC Municipal Fund, Inc./Dreyfus BASIC
Municipal Money Market Portfolio; DDA# 8900088451/Dreyfus BASIC Municipal
Fund, Inc./Dreyfus BASIC Intermediate Municipal Bond Portfolio; or DDA#
8900088443/Dreyfus BASIC Municipal Fund, Inc./Dreyfus BASIC Municipal Bond
Portfolio. The wire must include your Fund account number (for new accounts,
your Taxpayer Identification Number ("TIN") should be included instead),
account registration and dealer number, if applicable. If your initial
purchase of Portfolio shares is by wire, please call 1-800-645-6561 after
completing your wire payment to obtain your Fund account number. Please
include your Fund account number on the Fund's Account Application and
promptly mail the Account Application to the Fund, as no redemptions will be
permitted until the Account Application is received. You may obtain further
information about remitting funds in this manner from your bank. All payments
should be made in U.S. dollars and, to avoid additional fees and delays,
should be drawn only on U.S. banks. A charge will be imposed if any check
used for investment in your account does not clear. The Fund makes available
to certain large institutions the ability to issue purchase instructions
through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
your Fund account number PRECEDED BY THE DIGITS "1111."
Shares of the MONEY MARKET PORTFOLIO are sold on a continuous basis
at the net asset value per share next determined after an order in proper
form and Federal Funds (monies of member banks within the Federal Reserve
System which are held on deposit at a Federal Reserve Bank) are received by
the Transfer Agent. If you do not remit Federal Funds, your payment must be
converted into Federal Funds. This usually occurs within one business day of
receipt of a bank wire or within two business days of receipt of a check
drawn on a member bank of the Federal Reserve System. Checks drawn on banks
which are not members of the Federal Reserve System may take considerably
longer to convert into Federal Funds. Prior to receipt of Federal Funds, your
money will not be invested.
The MONEY MARKET PORTFOLIO'S net asset value per share is determined
as of 12:00 Noon, New York time, on each day the New York Stock Exchange is
open for business. Net asset value per share is computed by dividing the
value of the MONEY MARKET PORTFOLIO'S net assets (i.e., the value of its
assets less liabilities) by the total number of MONEY MARKET PORTFOLIO'S
shares outstanding. See "Determination of Net Asset Value" in the Statement
of Additional Information.
If your payments for shares of the MONEY MARKET PORTFOLIO are
received in or converted into Federal Funds by 12:00 Noon, New York time, by
the Transfer Agent, you will receive the dividend declared that day. If your
payments are received in or converted into Federal Funds after 12:00 Noon,
Page 20
New York time, by the Transfer Agent, you will begin to accrue dividends on
the following business day.
Qualified institutions may telephone orders for purchase of the MONEY
MARKET PORTFOLIO'S shares. These orders will become effective at the price
determined at 12:00 Noon, New York time, and the shares purchased will
receive the dividend on Portfolio shares declared on that day if the
telephone order is placed by 12:00 Noon, New York time, and Federal Funds are
received by 4:00 p.m., New York time, on that day.
Shares of each LONGER TERM PORTFOLIO are sold on a continuous basis
at the net asset value per share next determined after an order in proper
form is received by the Transfer Agent. Each LONGER TERM PORTFOLIO'S net
asset value per share is determined as of the close of trading on the floor
of the New York Stock Exchange (currently 4:00 p.m., New York time), on each
day that the New York Stock Exchange is open for business. For purposes of
determining the net asset value of each LONGER TERM PORTFOLIO, options and
futures contracts will be valued 15 minutes after the close of trading on the
floor of the New York Stock Exchange. Net asset value per share is computed
by dividing the value of the specific LONGER TERM PORTFOLIO'S net assets
(i.e., the value of its assets less liabilities) by the total number of such
Portfolio's shares outstanding. The investments of each LONGER TERM PORTFOLIO
are valued by an independent pricing service approved by the Fund's Board of
Directors, and are valued at fair value as determined by the pricing service.
The pricing service's procedures are reviewed under the general supervision
of the Fund's Board of Directors. For further information regarding the
methods employed in valuing each LONGER TERM PORTFOLIO'S investments, see
"Determination of Net Asset Value" in the Statement of Additional
Information.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject you
to a $50 penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE - You may purchase Portfolio shares (minimum
$1,000 maximum $150,000 per day) by telephone if you have checked the
appropriate box and supplied the necessary information on the Fund's Account
Application or have filed a Shareholder Services Form with the Transfer
Agent. The proceeds will be transferred between the bank account designated
in one of these documents and your Fund account. Only a bank account
maintained in a domestic financial institution which is an Automated Clearing
House member may be so designated. The Fund may modify or terminate this
Privilege at any time. No fee currently is contemplated for purchases of
Portfolio shares pursuant to this Privilege.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of Portfolio shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-3306.
FUND EXCHANGES
You may purchase up to four times a calendar year, in exchange for
shares of a Portfolio, shares in one of the Fund's other Portfolios or shares
of certain other funds managed or administered by The Dreyfus Corporation, to
the extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
As to each portfolio of the Fund, this service may be exercised four times
during the calendar year as described below. If you desire to use this
service please call 1-800-645-6561 to determine if it is available and
whether any conditions are imposed on its use. You will be charged a $5.00
fee for each exchange you make out of a Fund portfolio. This fee will be
deducted from your account and paid to the Transfer Agent.
To request an exchange you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange into a fund
offered by another prospectus, you must obtain and should review a copy of
the current prospectus of the fund into which the exchange is being made.
Prospectuses may be
Page 21
obtained by calling 1-800-645-6561. Except in the case of Personal Retirement
Plans, the shares being exchanged must have a current value of at least
$1,000; furthermore, when establishing a new account by exchange, the shares
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. The ability to
issue exchange instructions by telephone is given to all Fund shareholders
automatically, unless you check the relevant "No"box on the Account
Application, indicating that you specifically refuse this Privilege. The
Telephone Exchange Privilege may be established for an existing account by
written request, signed by all shareholders on the account, or by a separate
signed Shareholder Services Form, also available by calling 1-800-645-6561.
If you have established the Telephone Exchange Privilege, you may telephone
exchange instructions by calling 1-800-221-4060 or, if you are calling from
overseas, call 1-401-455-3306. See "How to Redeem Shares_Procedures." Upon
an exchange into a new account, the following shareholder services and
privileges, as applicable and where available, will be automatically carried
over to the fund into which the exchange is made: Telephone Exchange
Privilege, Check Redemption Privilege, Wire Redemption Privilege, Telephone
Redemption Privilege, Dreyfus TELETRANSFER Privilege and the dividend/capital
gain distribution option selected by the investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund that charges a
sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load, if the shares of the fund from
which you are exchanging were: (a) purchased with a sales load, (b) acquired
by a previous exchange from shares purchased with a sales load, or (c)
acquired through reinvestment of dividends or distributions paid with respect
to the foregoing categories of shares. To qualify, at the time of your
exchange you must notify the Transfer Agent. Any such qualification is
subject to confirmation of your holdings through a check of appropriate
records. See "Fund Exchanges" in the Statement of Additional Information. The
Fund reserves the right to reject any exchange request in whole or in part
and will reject any request to exchange out of one of the Portfolios in
excess of four during any calendar year. The availability of fund exchanges
may be modified or terminated at any time upon notice to shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
HOW TO REDEEM SHARES
GENERAL _ You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.
You will be charged $5.00 when you redeem all shares in your account
or your account is otherwise closed out. The fee will be deducted from your
redemption proceeds and paid to the Transfer Agent. The account closeout fee
does not apply to exchanges out of a Portfolio or to wire or Dreyfus
TELETRANSFER redemptions, for each of which a $5.00 fee applies. Securities
dealers, banks and other financial institutions may charge a nominal fee for
effecting redemptions of Portfolio shares. Any certificates representing
Portfolio shares being redeemed must be submitted with the redemption request.
The value of the shares redeemed may be more or less than their original cost,
depending upon the Portfolio's then current net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED PORTFOLIO SHARES BY CHECK OR BY
THE DREYFUS TELETRANSFER PRIVILEGE AND SUBSEQUENTLY SUBMIT A WRITTEN
REDEMPTION REQUEST TO THE TRANSFER AGENT, YOUR REDEMPTION WILL BE EFFECTIVE
AND THE REDEMPTION PROCEEDS WILL BE
Page 22
TRANSMITTED TO YOU PROMPTLY UPON BANK CLEARANCE OF YOUR PURCHASE CHECK OR
DREYFUS TELETRANSFER PURCHASE ORDER,WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS
OR MORE. IN ADDITION, THE FUND WILL NOT HONOR REDEMPTION CHECKS UNDER THE
CHECK REDEMPTION PRIVILEGE, AND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE
OR TELEPHONE OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE, FOR A PERIOD
OF EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE
CHECK OR DREYFUS TELETRANSFER PURCHASE ORDER AGAINST WHICH SUCH REDEMPTION IS
REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY
WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR
ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL
BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Shares will
not be redeemed until the Transfer Agent has received your Account
Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if your account's net asset value is
$10,000 or less in the case of the MONEY MARKET PORTFOLIO or $5,000 or less
in the case of a LONGER TERM PORTFOLIO and remains so during the notice
period. The $5.00 account closeout fee would be charged in such case.
PROCEDURES _ You may redeem Portfolio shares by using the regular redemption
procedure through the Transfer Agent, the Check Redemption Privilege, the
Wire Redemption Privilege or the Telephone Redemption Privilege, or the
Dreyfus TELETRANSFER Privilege. The Fund makes available to certain large
institutions the ability to issue redemption instructions through compatible
computer facilities.
You may redeem Portfolio shares by telephone if you have checked the
appropriate box on the Fund's Account Application or have filed a Shareholder
Services Form with the Transfer Agent. If you select a telephone redemption
privilege or telephone exchange privilege (which is granted automatically
unless you refuse it), you authorize the Transfer Agent to act on telephone
instructions from any person representing himself or herself to be you and
reasonably believed by the Transfer Agent to be genuine. The Fund will
require the Transfer Agent to employ reasonable procedures, such as requiring
a form of personal identification, to confirm that instructions are genuine
and, if it does not follow such procedures, the Fund or the Transfer Agent
may be liable for any losses due to unauthorized or fraudulent instructions.
Neither the Fund nor the Transfer Agent will be liable for following
telephone instructions reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of Portfolio shares. In such cases, you
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in your redemption request
being processed at a later time than it would have been if telephone
redemption had been used. During the delay, a LONGER TERM PORTFOLIO'S net
asset value may fluctuate.
REGULAR REDEMPTION _ Under the regular redemption procedure, you may redeem
your shares by written request mailed to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call one of the
telephone numbers listed under "General Information." Redemption requests
must be signed by each shareholder, including each owner of a joint account,
and each signature must be guaranteed. The Transfer Agent has adopted
standards and procedures pursuant to which signature-guarantees in proper
form generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations, as well as from participants in
the New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges Medallion
Program. If you have any questions with respect to signature-guarantees,
please call one of the telephone numbers listed under "General Information."
Page 23
Redemption proceeds of at least $5,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE _ You may request on the Account Application,
Shareholder Services Form or by later written request, that the Fund provide
Redemption Checks drawn on the Fund's account. Redemption Checks may be made
payable to the order of any person in the amount of $1,000 or more. Potential
fluctuations in the net asset value of the shares of each LONGER TERM
PORTFOLIO should be considered in determining the amount of the check.
Redemption Checks should not be used to close your account. Your account will
be charged $2.00 for each Redemption Check you write. The Transfer Agent also
will impose a fee for stopping payment of a Redemption Check upon your
request or if the Transfer Agent cannot honor the Redemption Check due to
insufficient funds or other valid reason. The Fund may return unpaid a
Redemption Check that would draw your account balance below $5.00 and you may
be subject to extra charges. You should date your Redemption Checks with the
current date when you write them. Please do not post-date your Redemption
Checks. If you do, the Transfer Agent will honor, upon presentment, even if
presented before the date of the check, all post-dated Redemption Checks
which are dated within six months of presentment for payment, if they are
otherwise in good order. Shares for which certificates have been issued may
not be redeemed by Redemption Check. This Privilege may be modified or
terminated at any time by the Fund or the Transfer Agent upon notice to
shareholders.
WIRE REDEMPTION PRIVILEGE _ You may request by wire or telephone that
redemption proceeds (minimum $5,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You will be charged a $5.00 wire redemption fee for
each wire redemption, which will be deducted from your account and paid to
the Transfer Agent. To establish the Wire Redemption Privilege, you must
check the appropriate box and supply the necessary information on the Fund's
Account Application or file a Shareholder Services Form with the Transfer
Agent. You may direct that redemption proceeds be paid by check (maximum
$150,000 per day) made out to the owners of record and mailed to your
address. Redemption proceeds of less than $5,000 will be paid automatically
by check. Holders of jointly registered Fund or bank accounts may have
redemption proceeds of not more than $250,000 wired within any 30-day period.
You may telephone redemption requests by calling 1-800-221-4060 or, if you
are calling from overseas, call 1-401-455-3306. The Fund reserves the right
to refuse any redemption request, including requests made shortly after a
change of address, and may limit the amount involved or the number of such
requests. This Privilege may be modified or terminated at any time by the
Transfer Agent or the Fund. The Fund's Statement of Additional Information
sets forth instructions for transmitting redemption requests by wire. Shares
for which certificates have been issued are not eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE _ You may redeem Portfolio shares (maximum
$150,000 per day) by telephone if you have checked the appropriate box on the
Fund's Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The redemption proceeds will be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-221-4060 or, if you are calling from overseas, call 1-401-455-3306. The
Fund reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of telephone redemption requests. This Privilege may
be modified or terminated at any time by the Transfer Agent or the Fund.
Shares for which certificates have been issued are not eligible for this
Privilege.
DREYFUS TELETRANSFER PRIVILEGE _ You may redeem Portfolio shares (minimum
$1,000 per day) by telephone if you have checked the appropriate box and
supplied the necessary information on the Fund's Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between your Fund account and the bank account designated in
one of
Page 24
these documents. Only such an account maintained in a domestic
financial institution which is an Automated Clearing House member may be so
designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period. The
Fund reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of such request. The Fund may modify or terminate this
Privilege at any time. You will be charged $5.00 for each redemption
transaction you make pursuant to this Privilege, and this charge will be
deducted out of your account and paid to the Transfer Agent.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of Portfolio shares by telephoning
1-800-221-4060 or, if you are calling from overseas, call 1-40l-455-3306.
Shares issued in certificate form are not eligible for this Privilege.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which
the Fund reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of
The Dreyfus Corporation, an amount not to exceed an annual rate of .25 of l%
of the value of each Portfolio'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 Portfolio and providing reports and other information, and
services related to the maintenance of shareholder accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Portfolio ordinarily declares dividends from its net investment
income on each day the New York Stock Exchange is open for business.
Dividends usually are paid on the last business day of each month (calendar
day in the case of the MONEY MARKET PORTFOLIO) and are automatically
reinvested in additional Portfolio shares at net asset value or, at your
option, paid in cash. The Portfolio's earnings for Saturdays, Sundays and
holidays are declared as dividends on the preceding business day in the case
of the MONEY MARKET PORTFOLIO and on the next business day in the case of the
LONGER TERM PORTFOLIO. With respect to each LONGER TERM PORTFOLIO, Portfolio
shares begin earning income dividends on the day following the date of
purchase. If you redeem all shares in your account at any time during the
month, all dividends to which you are entitled will be paid to you along with
the proceeds of the redemption, after deduction of any fees. Distributions
from net realized securities gains, if any, generally are declared and paid
once a year, but each Portfolio may make distributions on a more frequent
basis to comply with the distribution requirements of the Code, in all events
in a manner consistent with the provisions of the Investment Company Act of
1940. No Portfolio will make distributions from net realized securities gains
unless capital loss carryovers, if any, have been utilized or have expired.
You may choose whether to receive distributions in cash or to reinvest in
additional Portfolio shares at net asset value. All expenses are accrued
daily and deducted before declaration of dividends to investors.
Except for dividends from Taxable Investments, each Portfolio
anticipates that substantially all dividends paid by such Portfolio will not
be subject to Federal income tax. Dividends derived from Taxable Investments,
together with distributions from any net realized short-term securities gains
and all or a portion of any gains realized from the sale or other disposition
of certain market discount bonds, paid by a Portfolio are subject to Federal
income tax as ordinary income whether or not reinvested. No dividend paid by
a Portfolio will qualify for the dividends received deduction allowable to
certain U.S. corporations. Distributions from net realized long-term
securities gains of each Portfolio generally are taxable as long-term capital
gains for Federal income tax
Page 25
purposes if you are a citizen or resident of the United States. The Code
provides that the net capital gain of an individual generally will not be
subject to Federal income tax at a rate in excess of 28%. Under the Code,
interest on indebtedness incurred or continued to purchase or carry Portfolio
shares which is deemed to relate to exempt-interest dividends is not
deductible. Dividends and distributions may be subject to state and local
taxes.
Taxable dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by a Portfolio to a foreign investor generally
are subject to U.S. nonresident withholding taxes at the rate of 30%, unless
the foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from net realized long-term securities gains paid by a
Portfolio to a foreign investor as well as, in the case of a LONGER TERM
PORTFOLIO, the proceeds of any redemptions from a foreign investor's account,
regardless of the extent to which gains or loss may be realized, generally
will not be subject to U.S. nonresident withholding tax. However, such
distributions may be subject to backup withholding, as described below,
unless the foreign investor certifies his non-U.S. residency status.
Although all or a substantial portion of the dividends paid by a
Portfolio may be excluded by its shareholders from their gross income for
Federal income tax purposes, such Portfolio may purchase specified private
activity bonds, the interest from which may be (i) a preference item for
purposes of the alternative minimum tax, (ii) a component of the "adjusted
current earnings" preference item for purposes of the corporate alternative
minimum tax as well as a component in computing the corporate environmental
tax or (iii) a factor in determining the extent to which a shareholder's
Social Security benefits are taxable. If a Portfolio purchases such
securities, the portion of its dividends related thereto will not necessarily
be tax exempt to an investor who is subject to the alternative minimum tax
and/or tax on Social Security benefits and may cause an investor to be
subject to such taxes.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year. These statements set forth
the dollar amount of income exempt from Federal tax and the dollar amount, if
any, subject to Federal tax. These dollar amounts will vary depending on the
size and length of time of your investment in a Portfolio. If a Portfolio
pays dividends derived from taxable income, it intends to designate as
taxable the same percentage of the day's dividend as the actual taxable
income earned on that day bears to total income earned on that day. Thus, the
percentage of the dividend designated as taxable, if any, may vary from day
to day.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of taxable dividends,
distributions from net realized securities gains of a Portfolio and, in the
case of a LONGER TERM PORTFOLIO, the proceeds of redemption, regardless of
the extent to which gain or loss may be realized, paid to a shareholder if
such shareholder fails to certify either that the TIN furnished in connection
with opening an account is correct, or that such shareholder has not received
notice from the IRS of being subject to backup withholding as a result of a
failure to properly report taxable dividend or interest income on a Federal
income tax return. Furthermore, the IRS may notify the Fund to institute
backup withholding if the IRS determines a shareholder's TIN is incorrect or
if a shareholder has failed to properly report taxable dividend and interest
income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Management of the Fund believes that each Portfolio has qualified for
the fiscal year ended August 31, 1995 as a "regulated investment company"
under the Code. Each Portfolio intends to continue to so qualify if such
qualification is in the best interests of its shareholders. Qualification as
a "regulated investment company" relieves the Portfolio of any liability for
Federal income taxes to the extent its
Page 26
earnings are distributed in accordance with applicable provisions of the Code.
In addition, each Portfolio is subject to a non-deductible 4% excise tax,
measured with respect to certain undistributed amounts of taxable investment
income and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on August 8, 1991, and
commenced operations on December 16, 1991. On December 24, 1992, the Fund's
name was changed from Dreyfus Investors Municipal Money Market Fund, Inc. to
Dreyfus BASIC Municipal Money Market Fund, Inc., and, on October 21, 1994, to
Dreyfus BASIC Municipal Fund, Inc. The Fund is authorized to issue five
billion shares of Common Stock, (with three billion shares allocated to the
MONEY MARKET PORTFOLIO and five hundred million shares allocated to each
LONGER TERM PORTFOLIO) par value $.001 per share. Each share has one vote.
Unless otherwise required by the Investment Company Act of 1940,
ordinarily it will not be necessary for the Fund to hold annual meetings of
shareholders. As a result, Fund shareholders may not consider each year the
election of Directors or the appointment of auditors. However, pursuant to
the Fund's By-Laws, the holders of at least 10% of the shares outstanding and
entitled to vote may require the Fund to hold a special meeting of
shareholders for purposes of removing a Director from office and for any
other purpose. Fund shareholders may remove a Director by the affirmative
vote of a majority of the Fund's outstanding voting shares. In addition, the
Fund's Board of Directors will call a meeting of shareholders for the purpose
of electing Directors if, at any time, less than a majority of the Directors
then holding office have been elected by shareholders.
To date, the Fund's Board of Directors has authorized the creation of
four series of shares. All consideration received by the Fund for shares of
one of the Portfolios and all assets in which such consideration is invested
will belong to that Portfolio (subject only to the rights of creditors of the
Fund) and will be subject to the liabilities related thereto. The income
attributable to, and the expenses of, one Portfolio are treated separately
from those of the other Portfolios. The Fund has the ability to create, from
time to time, new portfolios without shareholder approval.
Rule 18f-2 under the Investment Company Act of 1940 provides that any
matter required to be submitted under the provisions of the Investment
Company Act of 1940 or applicable state law or otherwise to the holders of
the outstanding voting securities of an investment company, such as the Fund,
will not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each Portfolio affected by
such matter. Rule 18f-2 further provides that a Portfolio shall be deemed to
be affected by a matter unless it is clear that the interests of each
Portfolio in the matter are identical or that the matter does not affect any
interest of such Portfolio. However, the Rule exempts the selection of
independent accountants and the election of Directors from the separate
voting requirements of the Rule.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account. The Fund sends an annual and
semi-annual financial report to all its shareholders.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561. In New York City, call 1-718-895-1206; outside the U.S. and
Canada call 516-794-5452.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 27
DREYFUS
Basic Municipal Fund, Inc.
* Dreyfus BASIC Municipal
Money Market Portfolio
* Dreyfus BASIC Intermediate
Municipal Bond Portfolio
* Dreyfus BASIC Municipal
Bond Portfolio
Prospectus
(LION LOGO)
Registration Mark
Copy Rights 1994 Dreyfus Service Corporation
BMBp3120195
______________________________________________________________________________
PROSPECTUS __________ __, 1995
DREYFUS BASIC MUNICIPAL FUND, INC.
______________________________________________________________________________
DREYFUS BASIC MUNICIPAL FUND, INC. (THE "FUND") IS AN OPEN-END,
MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MUTUAL FUND. THE FUND PERMITS YOU
TO INVEST IN FOUR SEPARATE NON-DIVERSIFIED SERIES. ONE SERIES OF THE FUND,
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO (THE "NEW JERSEY
PORTFOLIO" OR THE "PORTFOLIO"), IS DESCRIBED IN THIS PROSPECTUS. THE GOAL OF
THE NEW JERSEY PORTFOLIO IS TO PROVIDE YOU WITH AS HIGH A LEVEL OF CURRENT
INCOME EXEMPT FROM FEDERAL AND NEW JERSEY INCOME TAXES AS IS CONSISTENT WITH
THE PRESERVATION OF CAPITAL AND THE MAINTENANCE OF LIQUIDITY.
THE NEW JERSEY PORTFOLIO IS DESIGNED TO BENEFIT INVESTORS WHO WILL
NOT ENGAGE IN FREQUENT TRANSACTIONS IN PORTFOLIO SHARES.
THE DREYFUS CORPORATION WILL PROFESSIONALLY MANAGE THE NEW JERSEY
PORTFOLIO.
AN INVESTMENT IN THE NEW JERSEY PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE NEW
JERSEY PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE NEW JERSEY
PORTFOLIO THAT YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED _________ __, 1995,
WHICH MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF
CERTAIN AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST
TO SOME INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION AND IS INCORPORATED HEREIN BY REFERENCE. FOR A FREE COPY, WRITE TO
THE FUND AT 144 GLENN CURTISS BOULEVARD, UNIONDALE, NEW YORK 11556-0144, OR
CALL 1-800-645-6561. WHEN TELEPHONING, ASK FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
Annual Portfolio Operating Expenses............... 3
Yield Information................................. 3
Description of the Portfolio...................... 4
Management of the Fund............................ 10
How to Buy Shares................................. 11
Fund Exchanges.................................... 12
How to Redeem Shares.............................. 14
Shareholder Services Plan......................... 16
Dividends, Distributions and Taxes................ 17
General Information............................... 19
______________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
______________________________________________________________________________
[This Page Intentionally Left Blank}
Page 2
<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average daily net assets)
<S> <C>
Management Fees ........................................................................ .30%
Other Expenses........................................................................... .15%
Total Portfolio Operating Expenses....................................................... .45%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
______ _______ _______ ________
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $10 $19 $30 $62
</TABLE>
______________________________________________________________________________
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL RETURN,
THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN ACTUAL RETURN
GREATER OR LESS THAN 5%.
____________________________________________________________________________--
The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the NEW JERSEY PORTFOLIO and investors, the
payment of which will reduce investors' annual return. The expenses noted
above, without reimbursement, would be: Management Fees_.50% and Total Fund
Operating Expenses_.65%; and the amount of expenses that an investor would
pay, assuming redemption after one, three, five and ten years, would be $__,
$__, $__ and $__, respectively. In addition, unlike certain other funds in
the Dreyfus Family of Funds, the NEW JERSEY PORTFOLIO will charge your
account $2.00 for each redemption check you write; you also will be charged
$5.00 for each exchange made, for each redemption you make by wire and
pursuant to the Dreyfus TELETRANSFER Privilege, and you will be charged a
$5.00 account closeout fee except if the account is closed by a method to
which a nominal charge otherwise applies. These charges will be paid to the
Fund's transfer agent and will reduce the transfer agency charges otherwise
payable by the NEW JERSEY PORTFOLIO. See "Fund Exchanges" and "How to Redeem
Shares." The Dreyfus Corporation has agreed until June 30, 1998, that if in
any fiscal year certain expenses of the NEW JERSEY PORTFOLIO, including the
management fee, exceed .45% of the value of the Portfolio's average net
assets for the fiscal year, the Fund may deduct from the payment to be made
to The Dreyfus Corporation under the Management Agreement, or The Dreyfus
Corporation will bear, such excess expense. The foregoing table does not
reflect any other fee waivers or expense reimbursement arrangements that may
be in effect. See "Management of the Fund" and "Shareholder Services Plan."
YIELD INFORMATION
From time to time, the NEW JERSEY PORTFOLIO will advertise its yield
and effective yield. Both yield figures are based on historical earnings and
are not intended to indicate future performance. It can be expected that
these yields will fluctuate substantially. The yield of the NEW JERSEY
PORTFOLIO refers to the income generated by an investment in the NEW JERSEY
PORTFOLIO over a seven-day period (which period will be stated in the
advertisement). This income is then annualized. That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment.
The effective yield is calculated similarly, but, when annualized, the income
earned by an investment in the NEW JERSEY PORTFOLIO is assumed to be
reinvested. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment. The NEW
JERSEY PORTFOLIO'S yield and effective yield may reflect absorbed expenses
pursuant to any undertaking that may be in effect. See "Management of the
Portfolio."
Tax equivalent yield is calculated by determining the pre-tax yield
which, after being taxed at a stated rate, would be equivalent to a stated
yield or effective yield calculated as described above.
Yield information is useful in reviewing the NEW JERSEY PORTFOLIO'S
performance, but because yields will fluctuate, such information under
certain conditions may not provide a basis for comparison
Page 3
with domestic bank deposits, other investments which pay a fixed yield for a
stated period of time, or other investment companies which may use a different
method of computing yield.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Lipper
Analytical Services, Inc., Bank Rate Monitortrademark, N. Palm Beach, Fla.
33408, IBC/Donoghue's Money Fund ReportRegistration Mark, Morningstar, Inc.
and other industry publications.
DESCRIPTION OF THE PORTFOLIO
INVESTMENT OBJECTIVE _ The NEW JERSEY PORTFOLIO'S goal is to provide you
with as high a level of current income exempt from Federal and New Jersey
income taxes as is consistent with the preservation of capital and the
maintenance of liquidity. To accomplish this goal, the NEW JERSEY PORTFOLIO
invests primarily in the debt securities of the State of New Jersey, its
political subdivisions, authorities and corporations, and certain other
specified securities, the interest from which is, in the opinion of bond
counsel to the issuer, exempt from Federal and New Jersey income taxes
(collectively, "New Jersey Municipal Obligations"). To the extent acceptable
New Jersey Municipal Obligations are at any time unavailable for investment
by the NEW JERSEY PORTFOLIO, the Portfolio will invest temporarily in other
debt securities the interest from which is, in the opinion of bond counsel to
the issuer, exempt from Federal, but not New Jersey income taxes. The NEW
JERSEY PORTFOLIO'S investment objective cannot be changed without approval by
the holders of a majority (as defined in the Investment Company Act of 1940)
of the Portfolio's outstanding voting shares. There can be no assurance that
the NEW JERSEY PORTFOLIO'S investment objective will be achieved. Securities
in which the NEW JERSEY PORTFOLIO invests may not earn as high a level of
current income as long-term or lower quality securities which generally have
less liquidity, greater market risk and more fluctuation in market value.
MUNICIPAL OBLIGATIONS _ Debt securities the interest from which is, in the
opinion of bond counsel to the issuer, exempt from Federal income tax
("Municipal Obligations") generally include debt obligations issued to obtain
funds for various public purposes as well as certain industrial development
bonds issued by or on behalf of public authorities. Municipal Obligations are
classified as general obligation bonds, revenue bonds and notes. General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Tax exempt
industrial development bonds, in most cases, are revenue bonds that do not
carry the pledge of the credit of the issuing municipality, but generally are
guaranteed by the corporate entity on whose behalf they are issued. Notes are
short-term instruments which are obligations of the issuing municipalities or
agencies and are sold in anticipation of a bond sale, collection of taxes or
receipt of other revenues. Municipal Obligations include municipal
lease/purchase agreements which are similar to installment purchase contracts
for property or equipment issued by municipalities. Municipal Obligations
bear fixed, floating or variable rates of interest.
MANAGEMENT POLICIES _ It is a fundamental policy of the NEW JERSEY PORTFOLIO
that it will invest at least 80% of the value of its net assets (except when
maintaining a temporary defensive position) in Municipal Obligations. Under
normal circumstances, at least 65% of the value of the NEW JERSEY PORTFOLIO'S
net assets will be invested in New Jersey Municipal Obligations and the
remainder may be invested in securities that are not New Jersey Municipal
Obligations and therefore may be subject to New Jersey income taxes. See
"Risk Factors_Investing in New Jersey Municipal Obligations" below, and
"Dividends, Distributions and Taxes."
The NEW JERSEY PORTFOLIO seeks to maintain a net asset value of $1.00
per share for purchases and redemptions. To do so, the NEW JERSEY PORTFOLIO
uses the amortized cost method of valuing its securities
Page 4
pursuant to Rule 2a-7 under the Investment Company Act of 1940, certain
requirements of which are summarized as follows. In accordance with Rule 2a-7,
the NEW JERSEY PORTFOLIO will maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase only instruments having remaining
maturities of 13 months or less and invest only in U.S. dollar denominated
securities determined in accordance with procedures established by the Board
of Directors to present minimal credit risks and which are rated in one of the
two highest rating categories for debt obligations by at least two nationally
recognized statistical rating organizations (or one rating organization if the
instrument was rated only by one such organization) or, if unrated, are of
comparable quality as determined in accordance with procedures established by
the Board of Directors. The nationally recognized statistical rating
organizations currently rating instruments of the type the NEW JERSEY
PORTFOLIO may purchase are Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Corporation ("S&P") and Fitch Investors Service, Inc.
("Fitch") and their rating criteria are described in Appendix B to the Fund's
Statement of Additional Information. For further information regarding the
amortized cost method of valuing securities, see "Determination of Net Asset
Value" in the Fund's Statement of Additional Information. There can be no
assurance that the NEW JERSEY PORTFOLIO will be able to maintain a stable net
asset value of $1.00 per share.
The NEW JERSEY PORTFOLIO may invest more than 25% of the value of its
total assets in Municipal Obligations which are related in such a way that an
economic, business or political development or change affecting one such
security also would affect the other securities; for example, securities the
interest upon which is paid from revenues of similar types of projects. As a
result, the NEW JERSEY PORTFOLIO may be subject to greater risk as compared
to a fund that does not follow this practice.
From time to time, the NEW JERSEY PORTFOLIO may invest more than 25%
of the value of its total assets in industrial development bonds which,
although issued by industrial development authorities, may be backed only by
the assets and revenues of the non-governmental users. Interest on Municipal
Obligations (including certain industrial development bonds) which are
specified private activity bonds, as defined in the Internal Revenue Code of
1986, as amended (the "Code"), issued after August 7, 1986, while exempt from
Federal income tax, is a preference item for the purpose of the alternative
minimum tax. Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the investment
company may be treated as such a preference item to shareholders. The NEW
JERSEY PORTFOLIO may invest without limitation in such Municipal Obligations
if The Dreyfus Corporation determines that their purchase is consistent with
the Portfolio's investment objective. See "Risk Factors _ Other Investment
Considerations" below.
The NEW JERSEY PORTFOLIO may purchase floating and variable rate
demand notes and bonds, which are tax exempt obligations ordinarily having
stated maturities in excess of 13 months, but which permit the holder to
demand payment of principal at any time, or at specified intervals not
exceeding 13 months, in each case upon not more than 30 days' notice.
Variable rate demand notes include master demand notes which are obligations
that permit the NEW JERSEY PORTFOLIO to invest fluctuating amounts, at
varying rates of interest, pursuant to direct arrangements between the
Portfolio, as lender, and the borrower. These obligations permit daily
changes in the amounts borrowed. Frequently, such obligations are secured by
letters of credit or other credit support arrangements provided by banks. Use
of letters of credit or other credit support arrangements will not adversely
affect the tax exempt status of these obligations. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value, plus accrued interest. Accordingly, where
these obligations are not secured by letters of credit or other credit
support arrangements, the NEW JERSEY
Page 5
PORTFOLIO'S right to redeem is dependent on the ability of the borrower to pay
principal and interest on demand. Each obligation purchased by the NEW JERSEY
PORTFOLIO will meet the quality criteria established for the purchase of
Municipal Obligations. The Dreyfus Corporation, on behalf of the NEW JERSEY
PORTFOLIO, will consider on an ongoing basis the creditworthiness of the
issuers of the floating and variable rate demand obligations in the
Portfolio's portfolio.
The NEW JERSEY PORTFOLIO may purchase from financial institutions
participation interests in Municipal Obligations (such as industrial
development bonds and municipal lease/purchase agreements). A participation
interest gives the NEW JERSEY PORTFOLIO an undivided interest in the
Municipal Obligation in the proportion that the Portfolio's participation
interest bears to the total principal amount of the Municipal Obligation.
These instruments may have fixed, floating or variable rates of interest, with
remaining maturities of 13 months or less. If the participation interest is
unrated, or has been given a rating below that which otherwise is permissible
for purchase by the NEW JERSEY PORTFOLIO, the participation interest will be
backed by an irrevocable letter of credit or guarantee of a bank that the
Board of Directors has determined meets the prescribed quality standards for
banks set forth below, or the payment obligation otherwise will be
collateralized by U.S. Government securities. For certain participation
interests, the NEW JERSEY PORTFOLIO will have the right to demand payment, on
not more than seven days' notice, for all or any part of the Fund's
participation interest in the Municipal Obligation, plus accrued interest. As
to these instruments, the NEW JERSEY PORTFOLIO intends to exercise its right
to demand payment only upon a default under the terms of the Municipal
Obligation, as needed to provide liquidity to meet redemptions, or to
maintain or improve the quality of its investment portfolio.
The NEW JERSEY PORTFOLIO may purchase tender option bonds. A tender
option bond is a Municipal Obligation (generally held pursuant to a custodial
arrangement) having a relatively long maturity and bearing interest at a
fixed rate substantially higher than prevailing short-term tax exempt rates,
that has been coupled with the agreement of a third party, such as a bank,
broker-dealer or other financial institution, pursuant to which such
institution grants the security holders the option, at periodic intervals, to
tender their securities to the institution and receive the face value
thereof. As consideration for providing the option, the financial institution
receives periodic fees equal to the difference between the Municipal
Obligation's fixed coupon rate and the rate, as determined by a remarketing
or similar agent at or near the commencement of such period, that would cause
the securities, coupled with the tender option, to trade at par on the date
of such determination. Thus, after payment of this fee, the security holder
effectively holds a demand obligation that bears interest at the prevailing
short-term tax exempt rate. The Dreyfus Corporation, on behalf of the NEW
JERSEY PORTFOLIO, will consider on an ongoing basis the creditworthiness of
the issuers of the underlying Municipal Obligations, of any custodian and of
the third party provider of the tender option. In certain instances and for
certain tender option bonds, the option may be terminable in the event of a
default in payment of principal or interest on the underlying Municipal
Obligations and for other reasons.
To the extent consistent with the requirements for a "qualified
investment fund" under the New Jersey gross income tax, the NEW JERSEY
PORTFOLIO may acquire "stand-by commitments" with respect to Municipal
Obligations held in its portfolio. Under a stand-by commitment, the NEW
JERSEY PORTFOLIO obligates a broker, dealer or bank to repurchase, at the
Portfolio's option, specified securities at a specified price and, in this
respect, stand-by commitments are comparable to put options. The exercise of
a stand-by commitment therefore is subject to the ability of the seller to
make payment on demand. The NEW JERSEY PORTFOLIO will acquire stand-by
commitments solely to facilitate portfolio liquidity and does
Page 6
not intend to exercise its rights thereunder for trading purposes. The NEW
JERSEY PORTFOLIO may pay for stand-by commitments if such action is deemed
necessary, thus increasing to a degree the cost of the underlying Municipal
Obligation and similarly decreasing such security's yield to investors.
The NEW JERSEY PORTFOLIO may invest up to 10% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Portfolio's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, and repurchase agreements providing for
settlement in more than seven days after notice. As to these securities, the
NEW JERSEY PORTFOLIO is subject to a risk that should the Portfolio desire to
sell them when a ready buyer is not available at a price the Portfolio deems
representative of their value, the value of the Portfolio's net assets could
be adversely affected.
From time to time, on a temporary basis other than for temporary
defensive purposes (but not to exceed 20% of the value of the NEW JERSEY
PORTFOLIO'S net assets) or for temporary defensive purposes, the NEW JERSEY
PORTFOLIO may invest in taxable short-term investments ("Taxable
Investments") consisting of: notes of issuers having, at the time of
purchase, a quality rating within the two highest grades of Moody's, S&P or
Fitch; obligations of the U.S. Government, its agencies or instrumentalities;
commercial paper rated not lower than P-2 by Moody's, A-2 by S&P or F-2 by
Fitch; certificates of deposit of U.S. domestic banks, including foreign
branches of domestic banks, with assets of one billion dollars or more; time
deposits; bankers' acceptances and other short-term bank obligations; and
repurchase agreements in respect of any of the foregoing. Dividends paid by
the NEW JERSEY PORTFOLIO that are attributable to income earned by the
Portfolio from Taxable Investments will be taxable to investors. See
"Dividends, Distributions and Taxes." Except for temporary defensive purposes,
at no time will more than 20% of the value of the Fund's net assets be
invested in Taxable Investments. If the NEW JERSEY PORTFOLIO purchases Taxable
Investments, it will value them using the amortized cost method and comply
with the provisions of Rule 2a-7 relating to purchases of taxable
instruments. When the NEW JERSEY PORTFOLIO has adopted a temporary defensive
position, including when acceptable New Jersey Municipal Obligations are
unavailable for investment by the Portfolio, in excess of 35% of the
Portfolio's net assets may be invested in securities that are not exempt from
State of New Jersey income tax. Under normal market conditions, the NEW
JERSEY PORTFOLIO anticipates that not more than 5% of the value of its total
assets will be invested in any one category of Taxable Investments. Taxable
Investments are more fully described in the Statement of Additional
Information to which reference hereby is made.
CERTAIN FUNDAMENTAL POLICIES _ The NEW JERSEY PORTFOLIO may (i) borrow money
from banks, but only for temporary or emergency (not leveraging) purposes in
an amount up to 15% of the value of the NEW JERSEY PORTFOLIO'S total assets
(including the amount borrowed) valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made. While borrowings exceed 5% of the NEW JERSEY PORTFOLIO'S total assets,
the Portfolio will not make any additional investments; (ii) pledge,
hypothecate, mortgage or otherwise encumber its assets, but only to secure
borrowings for temporary or emergency purposes; and (iii) invest up to 25% of
its total assets in the securities of issuers in any industry, provided that
there is no such limitation on investments in Municipal Obligations and, for
temporary defensive purposes, securities issued by domestic banks and
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. This paragraph describes fundamental policies that cannot
be changed without approval by the holders of a majority (as defined in the
Investment Company Act of 1940) of the NEW JERSEY PORTFOLIO'S out-
Page 7
standing voting shares. See "Investment Objective and Management Policies_
Investment Restrictions" in the Statement of Additional Information.
RISK FACTORS
INVESTING IN NEW JERSEY MUNICIPAL OBLIGATIONS _ You should consider
carefully the special risks inherent in the NEW JERSEY PORTFOLIO'S investment
in New Jersey Municipal Obligations. If there should be a default or other
financial crisis relating to the State of New Jersey or an agency or
municipality thereof, the market value and marketability of outstanding New
Jersey Municipal Obligations in the NEW JERSEY PORTFOLIO'S portfolio and
interest income to the Portfolio could be adversely affected. Although New
Jersey enjoyed a period of economic growth with unemployment levels below the
national average during the mid-1980s, the State's economy slowed down well
before the onset of the national recession, which, according to the National
Bureau of Economic Research, began in July 1990. Reflecting the economic
downturn, the State's unemployment rate rose from a low of 3.6% in the first
quarter of 1989 to a recessionary peak of 9.3% during 1992. Since then, the
State's unemployment rate fell to 6.7% during the fourth quarter of 1993 and
averaged 7.1% during the first nine months of 1994. As a result of New
Jersey's recent fiscal weakness, in July l991, S&P lowered its rating of the
State's general obligation debt from AAA to AA+. You should obtain and review
a copy of the Statement of Additional Information which more fully sets forth
these and other risk factors.
OTHER INVESTMENT CONSIDERATIONS _ Even though interest-bearing
securities are investments which promise a stable stream of income, the
prices of such securities are inversely affected by changes in interest rates
and, therefore, are subject to the risk of market price fluctuations. The
values of fixed-income securities also may be affected by changes in the
credit rating or financial condition of the issuing entities.
New issues of Municipal Obligations usually are offered on a
when-issued basis, which means that delivery and payment for such Municipal
Obligations ordinarily take place within 45 days after the date of the
commitment to purchase. The payment obligation and the interest rate that
will be received on the Municipal Obligations are fixed at the time the NEW
JERSEY PORTFOLIO enters into the commitment. The NEW JERSEY PORTFOLIO will
make commitments to purchase such Municipal Obligations only with the
intention of actually acquiring the securities, but the NEW JERSEY PORTFOLIO
may sell these securities before the settlement date if it is deemed
advisable, although any gain realized on such sale would be taxable. The NEW
JERSEY PORTFOLIO will not accrue income in respect of a when-issued security
prior to its stated delivery date. No additional when-issued commitments will
be made if more than 20% of the value of the NEW JERSEY PORTFOLIO'S net
assets would be so committed.
Municipal Obligations purchased on a when-issued basis and the
securities held in the NEW JERSEY PORTFOLIO'S portfolio are subject to
changes in value (both generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise) based
upon the public's perception of the creditworthiness of the issuer and
changes, real or anticipated, in the level of interest rates. Municipal
Obligations purchased on a when-issued basis may expose the NEW JERSEY
PORTFOLIO to risk because they may experience such fluctuations prior to their
actual delivery. Purchasing Municipal Obligations on a when-issued basis can
involve the additional risk that the yield available in the market when the
delivery takes place actually may be higher than that obtained in the trans-
action itself. A segregated account of the NEW JERSEY PORTFOLIO consisting of
cash, cash equivalents or U.S. Government securities or other high quality
liquid debt securities at least equal at all times to the amount of the when-
issued commitments will be established and maintained at the Fund's custodian
bank. Purchasing Municipal Obligations on a when-issued basis when the NEW
JERSEY
Page 8
PORTFOLIO is fully or almost fully invested may result in greater potential
fluctuation in the value of the Portfolio's net assets and its net asset
value per share.
Certain municipal lease/purchase obligations in which the NEW JERSEY
PORTFOLIO may invest may contain "non-appropriation" clauses which provide
that the municipality has no obligation to make lease payments in future
years unless money is appropriated for such purpose on a yearly basis.
Although "non-appropriation" lease/purchase obligations are secured by the
leased property, disposition of the leased property in the event of
foreclosure might prove difficult. In evaluating the credit quality of a
municipal lease/purchase obligation that is unrated, The Dreyfus Corporation
will consider, on an ongoing basis, a number of factors including the
likelihood that the issuing municipality will discontinue appropriating
funding for the leased property.
Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase
the cost of the Municipal Obligations available for purchase by the NEW
JERSEY PORTFOLIO and thus reduce available yield. Shareholders should consult
their tax advisers concerning the effect of these provisions on an investment
in the NEW JERSEY PORTFOLIO. Proposals that may restrict or eliminate the
income tax exemption for interest on Municipal Obligations may be introduced
in the future. If any such proposal were enacted that would reduce the
availability of Municipal Obligations for investment by the NEW JERSEY
PORTFOLIO so as to adversely affect Portfolio shareholders, the Portfolio
would reevaluate its investment objective and policies and submit possible
changes in the Portfolio's structure to shareholders for their consideration.
If legislation were enacted that would treat a type of Municipal Obligation
as taxable, the NEW JERSEY PORTFOLIO would treat such security as a
permissible Taxable Investment within the applicable limits set forth herein.
The NEW JERSEY PORTFOLIO'S classification as a "non-diversified"
investment company means that the proportion of the NEW JERSEY PORTFOLIO'S
assets that may be invested in the securities of a single issuer is not
limited by the Investment Company Act of 1940. A "diversified" investment
company is required by the Investment Company Act of 1940 generally to
invest, with respect to 75% of its total assets, not more than 5% of such
assets in the securities of a single issuer. However, the NEW JERSEY
PORTFOLIO intends to conduct its operations so as to qualify as a "regulated
investment company" for purposes of the Code which requires that, at the end
of each quarter of its taxable year, (i) at least 50% of the market value of
the NEW JERSEY PORTFOLIO'S total assets be invested in cash, U.S. Government
securities, the securities of other regulated investment companies and other
securities, with such other securities of any one issuer limited for the
purposes of this calculation to an amount not greater than 5% of the value of
the Portfolio's total assets, and (ii) not more than 25% of the value of its
total assets be invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated investment
companies). Since a relatively high percentage of the NEW JERSEY PORTFOLIO'S
assets may be invested in the obligations of a limited number of issuers, the
portfolio securities may be more susceptible to any single economic,
political or regulatory occurrence than the portfolio securities of a
diversified investment company.
Investment decisions for the NEW JERSEY PORTFOLIO are made
independently from those of other investment companies advised by The Dreyfus
Corporation. However, if such other investment companies are prepared to
invest in, or desire to dispose of, Municipal Obligations or Taxable
Investments at the same time as the NEW JERSEY PORTFOLIO, available
investments or opportunities for sales will be allocated equitably to each
investment company. In some cases, this procedure may adversely affect the
size of the position obtained for or disposed of by the NEW JERSEY PORTFOLIO
or the price paid or received by the Portfolio.
Page 9
MANAGEMENT OF THE FUND
The Dreyfus Corporation, located at 200 Park Avenue, New York, New
York 10166, was formed in 1947 and serves as the Fund's investment adviser.
The Dreyfus Corporation is a wholly-owned subsidiary of Mellon Bank, N.A.,
which is a wholly-owned subsidiary of Mellon Bank Corporation ("Mellon"). As
of August 31, 1995, The Dreyfus Corporation managed or administered
approximately $80 billion in assets for approximately 1.8 million investor
accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the overall authority of the Fund's Board of Directors in
accordance with Maryland law.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed more than
$203 billion in assets as of June 30, 1995, including approximately $73
billion in mutual fund assets. As of June 30, 1995, various subsidiaries of
Mellon provided non-investment services, such as custodial or administration
services, for approximately $707 billion in assets, including approximately
$71 billion in mutual fund assets.
Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate of .50 of 1% of
the value of the NEW JERSEY PORTFOLIO'S average daily net assets. From time
to time, The Dreyfus Corporation may waive receipt of its fees and/or
voluntarily assume certain expenses of the NEW JERSEY PORTFOLIO, which would
have the effect of lowering the overall expense ratio of the NEW JERSEY
PORTFOLIO and increasing yield to investors at the time such amounts are
waived or assumed, as the case may be. The NEW JERSEY PORTFOLIO will not pay
The Dreyfus Corporation at a later time for any amounts it may waive, nor
will the Portfolio reimburse The Dreyfus Corporation for any amounts it may
assume. The Dreyfus Corporation has undertaken until June 30, 1998, that if
in any fiscal year the aggregate expenses of the Portfolio, exclusive of
taxes, brokerage, interest on borrowings and (with the prior written consent
of the necessary state securities commissions) extraordinary expenses, but
including the management fee, exceed .45% of the value of such Portfolio's
average daily net assets for the fiscal year, the Fund may deduct from the
payment to be made to The Dreyfus Corporation under the Management Agreement,
or The Dreyfus Corporation will bear, such excess expense.
The Dreyfus Corporation may pay the Fund's distributor for shareholder
services from The Dreyfus Corporation's own assets, including past profits but
not including the management fee paid by the Fund with respect to the NEW
JERSEY PORTFOLIO. The Fund's distributor may use part or all of such payments
to pay securities dealers or others in respect of these services.
The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"), located at One Exchange Place, Boston, Massachusetts 02109.
The Distributor is a wholly-owned subsidiary of FDI Distribution Services,
Inc., a provider of mutual fund administration services, which in turn is a
wholly-owned subsidiary of FDI Holdings, Inc., the parent company of which is
Boston Institutional Group, Inc.
Page 10
The Shareholder Services Group, Inc., a subsidiary of First Data
Corporation, P.O. Box 9671, Providence, Rhode Island 02940-9671, is the
Fund's Transfer and Dividend Disbursing Agent (the "Transfer Agent"). The
Transfer Agent will receive the $5.00 exchange fee, the $5.00 account
closeout fee, the $5.00 wire and Dreyfus TELETRANSFER redemption fee, and the
$2.00 checkwriting charge, described below. A sufficient number of shares
will be redeemed automatically to pay these amounts. These payments will
reduce the transfer agency fee otherwise payable by each Fund. By purchasing
shares of NEW JERSEY PORTFOLIO you are deemed to have consented to this
procedure. The Bank of New York, 90 Washington Street, New York, New York
10286, is the Fund's Custodian.
HOW TO BUY SHARES
NEW JERSEY PORTFOLIO shares are sold without a sales charge. You may
be charged a nominal fee if you effect transactions in NEW JERSEY PORTFOLIO
shares through a securities dealer, bank or other financial institution.
Share certificates are issued only upon your written request. No certificates
are issued for fractional shares. It is not recommended that the NEW JERSEY
PORTFOLIO be used as a vehicle for Keogh, IRA or other qualified plans. The
NEW JERSEY PORTFOLIO reserves the right to reject any purchase order.
The minimum initial investment for the NEW JERSEY PORTFOLIO is
$25,000. Subsequent investments must be at least $1,000. The initial
investment must be accompanied by the Fund's Account Application.
You may purchase NEW JERSEY PORTFOLIO shares by check or wire, or
through the Dreyfus TELETRANSFER Privilege described below. Checks should be
made payable to "The Dreyfus Family of Funds." Payments to open new accounts
which are mailed should be sent to The Dreyfus Family of Funds, P.O. Box
9387, Providence, Rhode Island 02940-9387, together with your Account
Application. For subsequent investments, your Fund account number should
appear on the check and an investment slip should be enclosed and sent to The
Dreyfus Family of Funds, P.O. Box 105, Newark, New Jersey 07101-0105. Neither
initial nor subsequent investments should be made by third party check.
Purchase orders may be delivered in person only to a Dreyfus Financial
Center. THESE ORDERS WILL BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY
UPON RECEIPT THEREBY. For the location of the nearest Dreyfus Financial
Center, please call one of the telephone numbers listed under "General
Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #____________/Dreyfus BASIC
New Jersey Municipal Money Market Portfolio, for purchase of NEW JERSEY
PORTFOLIO shares in your name. The wire must include your Fund account number
(for new accounts, your Taxpayer Identification Number ("TIN") should be
included instead), account registration and dealer number, if applicable. If
your initial purchase of NEW JERSEY PORTFOLIO shares is by wire, please call
1-800-645-6561 after completing your wire payment to obtain your Fund account
number. Please include your Fund account number on the Fund's Account
Application and promptly mail the Account Application to the Fund, as no
redemptions will be permitted until the Account Application is received. You
may obtain further information about remitting funds in this manner from your
bank. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. A charge will be imposed if any
check used for investment in your account does not clear. The Fund makes
available to certain large institutions the ability to issue purchase
instructions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account main-
Page 11
tained in a bank or other domestic financial institution that is an Automated
Clearing House member. You must direct the institution to transmit immediately
available funds through the Automated Clearing House to The Bank of New York
with instructions to credit your Fund account. The instructions must specify
your Fund account registration and your Fund account number PRECEDED BY THE
DIGITS "1111."
NEW JERSEY PORTFOLIO shares are sold on a continuous basis at the net
asset value per share next determined after an order in proper form and
Federal Funds (monies of member banks within the Federal Reserve System which
are held on deposit at a Federal Reserve Bank) are received by the Transfer
Agent. If you do not remit Federal Funds, your payment must be converted into
Federal Funds. This usually occurs within one business day of receipt of a
bank wire or within two business days of receipt of a check drawn on a member
bank of the Federal Reserve System. Checks drawn on banks which are not
members of the Federal Reserve System may take considerably longer to convert
into Federal Funds. Prior to receipt of Federal Funds, your money will not be
invested.
The NEW JERSEY PORTFOLIO'S net asset value per share is determined as
of 12:00 Noon, New York time, on each day the New York Stock Exchange is open
for business. Net asset value per share is computed by dividing the value of
the Fund's net assets (i.e., the value of its assets less liabilities) by the
total number of shares outstanding. See "Determination of Net Asset Value" in
the Statement of Additional Information.
If your payments for NEW JERSEY PORTFOLIO shares are received in or
converted into Federal Funds by 12:00 Noon, New York time, by the Transfer
Agent, you will receive the dividend declared that day. If your payments are
received in or converted into Federal Funds after 12:00 Noon, New York time,
by the Transfer Agent, you will begin to accrue dividends on the following
business day.
Qualified institutions may telephone orders for purchase of NEW
JERSEY PORTFOLIO shares. These orders will become effective at the price
determined at 12:00 Noon, New York time, and the shares purchased will
receive the dividend on Fund shares declared on that day, if the telephone
order is placed by 12:00 Noon, New York time, and Federal Funds are received
by 4:00 p.m., New York time, on that day.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Fund's Account Application for further information concerning this
requirement. Failure to furnish a certified TIN to the Fund could subject you
to a $50 penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE _ You may purchase NEW JERSEY PORTFOLIO
shares (minimum $1,000, maximum $150,000 per day) by telephone if you have
checked the appropriate box and supplied the necessary information on the
Fund's Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The proceeds will be transferred between the bank account
designated in one of these documents and your Fund account. Only a bank
account maintained in a domestic financial institution which is an Automated
Clearing House member may be so designated. The Fund may modify or terminate
this Privilege at any time. No fee currently is contemplated for purchases of
NEW JERSEY PORTFOLIO shares pursuant to this Privilege.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of NEW JERSEY PORTFOLIO shares by
telephoning 1-800-221-4060 or, if you are calling from overseas, call
1-401-455-3306.
FUND EXCHANGES
You may purchase up to four times per calendar year, in exchange for
shares of the NEW JERSEY PORTFOLIO, shares in one of the Fund's other
portfolios or shares of certain other funds managed or
Page 12
administered by The Dreyfus Corporation, to the extent such shares are offered
for sale in your state of residence. These funds have different investment
objectives which may be of interest to you. As to each portfolio of the Fund,
this service may be exercised four times during the calendar year as described
below. If you desire to use this service, please call 1-800-645-6561 to
determine if it is available and whether any conditions are imposed on its
use. You will be charged a $5.00 fee for each exchange you make out of a Fund
portfolio. This fee will be deducted from your account and paid to the
Transfer Agent.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must
obtain and should review a copy of the current prospectus of the fund into
which the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of Personal Retirement Plans, the shares
being exchanged must have a current value of at least $1,000; furthermore,
when establishing a new account by exchange, the shares being exchanged must
have a value of at least the minimum initial investment required for the fund
into which the exchange is being made. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless you check the applicable "No" box on the Account Application,
indicating that you specifically refuse this Privilege. The Telephone
Exchange Privilege may be established for an existing account by written
request, signed by all shareholders on the Account, or by a separate signed
Shareholder Services Form, also available by calling 1-800-645-6561. If you
have established the Telephone Exchange Privilege, you may telephone exchange
instructions by calling 1-800-221-4060 or, if you are calling from overseas,
call 1-401-455-3306. See "How to Redeem Shares_Procedures." Upon an exchange
into a new account, the following shareholder services and privileges, as
applicable and where available, will be automatically carried over to the
fund in which the exchange is made: Telephone Exchange Privilege, Check
Redemption Privilege, Wire Redemption Privilege, Telephone Redemption
Privilege, Dreyfus TELETRANSFER Privilege and the dividend/capital gain
distribution option selected by the investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund that charges a
sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load, if the shares of the fund from
which you are exchanging were: (a) purchased with a sales load, (b) acquired
by a previous exchange from shares purchased with a sales load, or (c)
acquired through reinvestment of dividends or distributions paid with respect
to the foregoing categories of shares. To qualify, at the time of your
exchange you must notify the Transfer Agent. Any such qualification is
subject to confirmation of your holdings through a check of appropriate
records. See "Fund Exchanges" in the Statement of Additional Information. No
fees currently are charged shareholders directly in connection with
exchanges, although the Fund reserves the right, upon not less than 60 days'
written notice, to charge shareholders a nominal fee in accordance with rules
promulgated by the Securities and Exchange Commission. The Fund reserves the
right to reject any exchange request in whole or in part. The availability of
Fund Exchanges may be modified or terminated at any time upon notice to
shareholders.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Page 13
HOW TO REDEEM SHARES
GENERAL _ You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.
You will be charged $5.00 when you redeem all shares in your account
or your account is otherwise closed out. The fee will be deducted from your
redemption proceeds and paid to the Transfer Agent. The account closeout fee
does not apply to exchanges out of the NEW JERSEY PORTFOLIO or to wire or
Dreyfus TELETRANSFER redemptions, for each of which a $5.00 fee applies.
Securities dealers, banks and other financial institutions may charge a
nominal fee for effecting redemptions of Fund shares. Any certificates
representing NEW JERSEY PORTFOLIO shares being redeemed must be submitted
with the redemption request. The value of the shares redeemed may be more or
less than their original cost, depending upon the Fund's then-current net
asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED NEW JERSEY PORTFOLIO SHARES BY
CHECK OR BY THE DREYFUS TELETRANSFER PRIVILEGE AND SUBSEQUENTLY SUBMIT A
WRITTEN REDEMPTION REQUEST TO THE TRANSFER AGENT, YOUR REDEMPTION WILL BE
EFFECTIVE AND THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY
UPON BANK CLEARANCE OF YOUR PURCHASE CHECK OR DREYFUS TELETRANSFER PURCHASE
ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE
FUND WILL NOT HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE,
AND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO
THE DREYFUS TELETRANSFER PRIVILEGE, FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER
RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK OR THE DREYFUS
TELETRANSFER PURCHASE ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED.
THESE PROCEDURES WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE
PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR
ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS
EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL
BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares
will not be redeemed until the Transfer Agent has received your Account
Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if your account's net asset value is
$10,000 or less and remains so during the notice period. The $5.00 account
closeout fee would be charged in such case.
PROCEDURES _ You may redeem shares by using the regular redemption procedure
through the Transfer Agent, the Check Redemption Privilege, the Wire
Redemption Privilege, the Telephone Redemption Privilege, or the Dreyfus
TELETRANSFER Privilege. The Fund makes available to certain large institutions
the ability to issue redemption instructions through compatible computer
facilities.
You may redeem NEW JERSEY PORTFOLIO shares by telephone if you have
checked the appropriate box on the Fund's Account Application or have filed a
Shareholder Services Form with the Transfer Agent. If you select a telephone
redemption privilege or telephone exchange privilege (which is granted
automatically unless you refuse it), you authorize the Transfer Agent to act
on telephone instructions from any person representing himself or herself to
be you and reasonably believed by the Transfer Agent to be genuine. The Fund
will require the Transfer Agent to employ reasonable procedures, such as
requiring a form of personal identification, to confirm that instructions are
genuine and, if it does not follow such procedures, the Fund or the Transfer
Agent may be liable for any losses due to unau-
Page 14
thorized or fraudulent instructions. Neither the Fund nor the Transfer Agent
will be liable for following telephone instructions reasonably believed to be
genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of NEW JERSEY PORTFOLIO shares. In such
cases, you should consider using the other redemption procedures described
herein. Use of these other redemption procedures may result in your
redemption request being processed at a later time than it would have been if
telephone redemption had been used.
REGULAR REDEMPTION _ Under the regular redemption procedure, you may redeem
shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call one of the
telephone numbers listed under "General Information." Redemption requests
must be signed by each shareholder, including each owner of a joint account,
and each signature must be guaranteed. The Transfer Agent has adopted
standards and procedures pursuant to which signature-guarantees in proper
form generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations, as well as from participants in
the New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges Medallion
Program. If you have any questions with respect to signature-guarantees,
please call one of the telephone numbers listed under "General Information."
Redemption proceeds of at least $5,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE _ You may request on the Account Application,
Shareholder Services Form or by later written request that the Fund provide
Redemption Checks drawn on the Fund's account. Redemption Checks may be made
payable to the order of any person in the amount of $1,000 or more.
Redemption Checks should not be used to close your account. Your account will
be charged $2.00 for each Redemption Check you write. The Transfer Agent also
will impose a fee for stopping payment of a Redemption Check upon your
request or if the Transfer Agent cannot honor the Redemption Check due to
insufficient funds or other valid reason. The Fund may return an unpaid
Redemption Check that would draw your account balance below $5.00, and you
may be subject to extra charges. You should date your Redemption Checks with
the current date when you write them. Please do not postdate your Redemption
Checks. If you do, the Transfer Agent will honor, upon presentment, even if
presented before the date of the check, all postdated Redemption Checks which
are dated within six months of presentment for payment, if they are otherwise
in good order. Shares held under retirement accounts and for which
certificates have been issued may not be redeemed by Redemption Check. This
Privilege may be modified or terminated at any time by the Fund or the
Transfer Agent upon notice to shareholders.
WIRE REDEMPTION PRIVILEGE _ You may request by wire or telephone that
redemption proceeds (minimum $5,000) be wired to your account at a bank which
is a member of the Federal Reserve System, or a correspondent bank if your
bank is not a member. You will be charged a $5.00 wire redemption fee for
each wire redemption, which will be deducted from your account and paid to
the Transfer Agent.To establish the Wire Redemption Privilege, you must check
the appropriate box and supply the necessary information on the Fund's
Account Application or file a Shareholder Services Form with the Transfer
Agent. You may direct that redemption proceeds be paid by check (maximum
$150,000 per day)made out to the owners of record and mailed to your address.
Redemption pro-
Page 15
ceeds of less than $5,000 will be paid automatically by check. Holders of
jointly registered Fund or bank accounts may have redemption proceeds of not
more than $250,000 wired within any 30-day period. You may telephone
redemption requests by calling 1-800-221-4060 or, if you are calling from
overseas, call 1-401-455-3306. The Fund reserves the right to refuse any
redemption request, including requests made shortly after a change
of address, and may limit the amount involved or the number of such requests.
This Privilege may be modified or terminated at any time by the Transfer
Agent or the Fund. The Fund's Statement of Additional Information sets forth
instructions for transmitting redemption requests by wire. Shares for which
certificates have been issued are not eligible for this Privilege.
TELEPHONE REDEMPTION PRIVILEGE _ You may redeem NEW JERSEY PORTFOLIO shares
(maximum $150,000 per day) by telephone if you have checked the appropriate
box on the Fund's Account Application or have filed a Shareholder Services
Form with the Transfer Agent. The redemption proceeds will be paid by check
and mailed to your address. You may telephone redemption instructions by
calling 1-800-221-4060 or, if you are calling from overseas, call
1-401-455-3306. The Fund reserves the right to refuse any request made by
telephone, including requests made shortly after a change of address, and may
limit the amount involved or the number of telephone redemption requests.
This Privilege may be modified or terminated at any time by the Transfer
Agent or the Fund. Shares for which certificates have been issued are not
eligible for this Privilege.
DREYFUS TELETRANSFER PRIVILEGE _ You may redeem NEW JERSEY PORTFOLIO shares
(minimum $1,000 per day) by telephone if you have checked the appropriate box
and supplied the necessary information on the Fund's Account Application or
have filed a Shareholder Services Form with the Transfer Agent. The proceeds
will be transferred between your Fund account and the bank account designated
in one of these documents. Only such an account maintained in a domestic
financial institution which is an Automated Clearing House member may be so
designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request or, at your request, paid by check (maximum $150,000 per
day) and mailed to your address. Holders of jointly registered Fund or bank
accounts may redeem through the Dreyfus TELETRANSFER Privilege for transfer
to their bank account not more than $250,000 within any 30-day period. The
Fund reserves the right to refuse any request made by telephone, including
requests made shortly after a change of address, and may limit the amount
involved or the number of such requests. The Fund may modify or terminate
this Privilege at any time. You will be charged $5.00 for each redemption
transaction you make pursuant to this Privilege, and this charge will be
deducted out of your account and paid to the Transfer Agent.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of NEW JERSEY PORTFOLIO shares by
telephoning 1-800-221-4060 or, if you are calling from overseas, call
1-401-455-3306. Shares issued in certificate form are not eligible for this
Privilege.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which
the Fund reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of
The Dreyfus Corporation, an amount not to exceed an annual rate of .25 of 1%
of the value of the NEW JERSEY PORTFOLIO'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 Portfolio and providing reports and other information, and
services related to the maintenance of shareholder accounts.
Page 16
DIVIDENDS, DISTRIBUTIONS AND TAXES
The NEW JERSEY PORTFOLIO ordinarily declares dividends from net
investment income on each day the New York Stock Exchange is open for
business. Dividends usually are paid on the last calendar day of each month
and are automatically reinvested in additional NEW JERSEY PORTFOLIO shares at
net asset value or, at your option, paid in cash. The NEW JERSEY PORTFOLIO'S
earnings for Saturdays, Sundays and holidays are declared as dividends on the
preceding business day. If you redeem all shares in your account at any time
during the month, all dividends to which you are entitled will be paid to you
along with the proceeds of the redemption, after the deduction of any fees.
Distributions from net realized securities gains, if any, generally are
declared and paid once a year, but the NEW JERSEY PORTFOLIO may make
distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the
provisions of the Investment Company Act of 1940. The NEW JERSEY PORTFOLIO
will not make distributions from net realized securities gains unless capital
loss carryovers, if any, have been utilized or have expired. You may choose
whether to receive distributions in cash or to reinvest in additional NEW
JERSEY PORTFOLIO shares at net asset value. All expenses are accrued daily
and deducted before declaration of dividends to investors.
The NEW JERSEY PORTFOLIO intends to be a "qualified investment fund"
within the meaning of the New Jersey gross income tax. The primary criteria
for constituting a "qualified investment fund" are that (i) the NEW JERSEY
PORTFOLIO is an investment company registered with the Securities and
Exchange Commission which, for the calendar year in which the dividends and
distributions (if any) are paid, has no investments other than
interest-bearing obligations, obligations issued at a discount, and cash and
cash items, including receivables, and financial options, futures and forward
contracts, or other similar financial instruments relating to
interest-bearing obligations, obligations issued at a discount or bond
indexes related thereto and (ii) at the close of each quarter of the taxable
year, the Fund has not less than 80% of the aggregate principal amount of all
of its investments, excluding financial options, futures and forward
contracts, or other similar financial instruments, related to
interest-bearing obligations, obligations issued at a discount or bond
indexes related thereto, cash and cash items, which cash items shall include
receivables, in New Jersey Municipal Obligations, including obligations of
Puerto Rico, the Virgin Islands and other territories and possessions of the
United States and certain other specified securities exempt from Federal and
New Jersey income taxes. Additionally, a qualified investment fund must
comply with certain continuing reporting requirements.
If the NEW JERSEY PORTFOLIO qualifies as a qualified investment fund
and the Portfolio complies with its reporting obligations, (a) dividends and
distributions by the Fund to a New Jersey resident individual shareholder
will not be subject to New Jersey gross income tax to the extent that the
dividends and distributions are attributable to income earned by the
Portfolio as interest on or gain from New Jersey Municipal Obligations, and
(b) gain from the sale of Portfolio shares by a New Jersey resident
individual shareholder will not be subject to the New Jersey gross income
tax. Shares of the Portfolio are not subject to property taxation by New
Jersey or its political subdivisions. To the extent that you are subject to
state and local taxes outside of New Jersey, dividends and distributions
earned by an investment in the NEW JERSEY PORTFOLIO may represent taxable
income.
Except for dividends from Taxable Investments, the Fund anticipates
that substantially all dividends paid by the NEW JERSEY PORTFOLIO will not be
subject to Federal income tax. Dividends derived from Taxable Investments,
together with distributions from any net realized short-term securities gains
and all or a portion of any gains realized from the sale or other disposition
of certain market discount bonds, are subject to Federal income tax as
ordinary income, whether or not reinvested in additional
Page 17
Fund shares. No dividend paid by the NEW JERSEY PORTFOLIO will qualify for the
dividends received deduction allowable to certain U.S. corporations.
Distributions from net realized long-term securities gains of the NEW JERSEY
PORTFOLIO generally are taxable as long-term capital gains for Federal income
tax purposes if you are a citizen or resident of the United States. The Code
provides that the net capital gain of an individual generally will not be
subject to Federal income tax at a rate in excess of 28%. Under the Code,
interest on indebtedness incurred or continued to purchase or carry Fund
shares which is deemed to relate to exempt-interest dividends is not
deductible.
Although all or a substantial portion of the dividends paid by the NEW
JERSEY PORTFOLIO may be excluded by shareholders of the Portfolio from their
gross income for Federal income tax purposes, the Portfolio may purchase
specified private activity bonds, the interest from which may be (i) a
preference item for purposes of the alternative minimum tax, (ii) a component
of the "adjusted current earnings" preference item for purposes of the
corporate alternative minimum tax as well as a component in computing the
corporate environmental tax or (iii) a factor in determining the extent to
which a shareholder's Social Security benefits are taxable. If the NEW JERSEY
PORTFOLIO purchases such securities, the portion of the Portfolio's dividends
related thereto will not necessarily be tax exempt to an investor who is
subject to the alternative minimum tax and/or the tax on Social Security
benefits and may cause an investor to be subject to such taxes.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year. These statements set forth
the dollar amount of income exempt from Federal tax and the dollar amount, if
any, subject to Federal tax. These dollar amounts will vary depending on the
size and length of time of your investment in the NEW JERSEY PORTFOLIO. If
the NEW JERSEY PORTFOLIO pays dividends derived from taxable income, it
intends to designate as taxable the same percentage of the day's dividends as
the actual taxable income earned on that day bears to total income earned on
that day. Thus, the percentage of the dividend designated as taxable, if any,
may vary from day to day.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of taxable dividends and
distributions from net realized securities gains of the Fund paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or in
terest income on a Federal income tax return. Furthermore, the IRS may notify
the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has not properly reported
taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number or employer identification
number of the record owner of the account. Any tax withheld as a result of
backup withholding does not constitute an additional tax imposed on the
record owner of the account, and may be claimed as a credit on the record
owner's Federal income tax return.
Management of the Fund expects that the NEW JERSEY PORTFOLIO will
qualify as a "regulated investment company" under the Code if such
qualification is in the best interests of its shareholders. Such
qualification relieves the Fund of any liability for Federal income taxes to
the extent its earnings are distributed in accordance with applicable
provisions of the Code. The NEW JERSEY PORTFOLIO is subject to a
non-deductible 4% excise tax, measured with respect to certain undistributed
amounts of taxable investment income and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
Page 18
GENERAL INFORMATION
The Fund was incorporated under Maryland law on August 8, 1991, and
commenced operations on December 16, 1991. On December 24, 1992, the Fund's
name was changed from Dreyfus Investors Municipal Money Market Fund, Inc. to
Dreyfus BASIC Municipal Money Market Fund, Inc. and, on October 21, 1994, to
Dreyfus BASIC Municipal Fund, Inc. The Fund is authorized to issue five
billion shares of Common Stock, (with one billion shares allocated to the NEW
JERSEY PORTFOLIO) par value $.001 per share. Each share has one vote.
Unless otherwise required by the Investment Company Act of 1940,
ordinarily it will not be necessary for the Fund to hold annual meetings of
shareholders. As a result, Fund shareholders may not consider each year the
election of Directors or the appointment of auditors. However, pursuant to
the Fund's By-Laws, the holders of at least 10% of the shares outstanding and
entitled to vote may require the Fund to hold a special meeting of
shareholders for the purpose of removing a Director from office and the
holders of at least 25% of such shares may require the Fund to hold a special
meeting of shareholders for any other purpose. Fund shareholders may remove a
Director by the affirmative vote of a majority of the Fund's outstanding
voting shares. In addition, the Board of Directors will call a meeting of
shareholders for the purpose of electing Directors if, at any time, less than
a majority of the Directors then holding office have been elected by
shareholders.
To date, the Fund's Board of Directors has authorized the creation of
four series of shares. All consideration received by the Fund for shares of
one of the portfolios and all assets in which such consideration is invested
will belong to that portfolio (subject only to the rights of creditors of the
Fund) and will be subject to the liabilities related thereto. The income
attributable to, and the expenses of, one portfolio are treated separately
from those of the other portfolios. The Fund has the ability to create, from
time to time, new portfolios without shareholder approval.
Rule 18f-2 under the Investment Company Act of 1940 provides that any
matter required to be submitted under the provisions of the Investment
Company Act of 1940 or applicable state law or otherwise to the holders of
the outstanding voting securities of an investment company, such as the Fund,
will not be deemed to have been effectively acted upon unless approved by the
holders of a majority of the outstanding shares of each Portfolio affected by
such matter. Rule 18f-2 further provides that a Portfolio shall be deemed to
be affected by a matter unless it is clear that the interests of each
Portfolio in the matter are identical or that the matter does not affect any
interest of such Portfolio. However, the Rule exempts the selection of
independent accountants and the election of Directors from the separate
voting requirements of the Rule.
The Transfer Agent maintains a record of your ownership and sends
confirmations and statements of account. The Fund sends annual and
semi-annual financial reports to all its shareholders.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561; in New York City, call 1-718-895-1206; outside the U. S. and
Canada, call 516-794-5452.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
Page 19
DREYFUS
Basic
Municipal
Fund, Inc.
* Dreyfus BASIC New Jersey
Municipal Money Market
Portfolio
Prospectus
LION LOGO
Registration Mark
Copy Rights 1995 Dreyfus Service Corporation
000p1120195
__________________________________________________________________________
DREYFUS BASIC MUNICIPAL FUND, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
__________, 1995
__________________________________________________________________________
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current
Prospectuses of Dreyfus BASIC Municipal Fund, Inc. (the "Fund"), each
dated __________, 1995, as each may be revised from time to time. To
obtain a copy of the Fund's Prospectus with respect to either (i) the
Dreyfus BASIC Municipal Money Market Portfolio, Dreyfus BASIC Intermediate
Municipal Bond Portfolio, and the Dreyfus BASIC Municipal Bond Portfolio
(collectively, the "National Portfolios") or (ii) the Dreyfus BASIC New
Jersey Municipal Money Market Portfolio, please write to the Fund at 144
Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call the
following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
On Long Island -- Call 794-5452
The Dreyfus Corporation (the "Manager") serves as the Fund's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies. . . . . . . . . . . . B-2
Management of the Fund. . . . . . . . . . . . . . . . . . . . . . . B-12
Management Agreement. . . . . . . . . . . . . . . . . . . . . . . . B-16
Shareholder Services Plan . . . . . . . . . . . . . . . . . . . . . B-18
Purchase of Shares. . . . . . . . . . . . . . . . . . . . . . . . . B-18
Redemption of Shares. . . . . . . . . . . . . . . . . . . . . . . . B-20
Fund Exchanges. . . . . . . . . . . . . . . . . . . . . . . . . . . B-22
Determination of Net Asset Value. . . . . . . . . . . . . . . . . . B-23
Dividends, Distributions and Taxes. . . . . . . . . . . . . . . . . B-25
Performance Information . . . . . . . . . . . . . . . . . . . . . . B-26
Portfolio Transactions. . . . . . . . . . . . . . . . . . . . . . . B-28
Information About the Fund. . . . . . . . . . . . . . . . . . . . . B-29
Custodian, Transfer and Dividend Disbursing Agent,
Counsel and Independent Auditors . . . . . . . . . . . . . . . . . B-29
Appendix A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-30
Appendix B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . B-33
Financial Statements and Reports of Independent Auditors
Money Market Portfolio . . . . . . . . . . . . . . . . . . . . B-41
Intermediate Bond Portfolio . . . . . . . . . . . . . . . . . B- , B-
Bond Portfolio . . . . . . . . . . . . . . . . . . . . . . . . B- , B-
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in
conjunction with the section in each Fund Prospectus entitled "Description
of the Portfolio(s)."
The average distribution of investments (at value) in Municipal
Obligations by ratings for the fiscal year ended August 31, 1995 for the
Money Market Portfolio and each Longer Term Portfolio, in each case
computed on a monthly basis, was as follows (as of the date of this
Statement of Additional Information, the New Jersey Portfolio had not
commenced operations):
<TABLE>
<CAPTION>
Fitch or Moody's or Standard &
Investors Investors Poor's Percentage of Value
Service, Inc. Service, Inc. Corporation Money Market Intermediate Bond
("Fitch") ("Moody's") ("S&P") Portfolio Bond Portfolio Portfolio
------------- ------------- ------------ ------------ ------------------- ---------
<S> <C> <C> <C> <C> <C>
F1+/F1 MIG 1/VMIG 1, SP-1+/SP-1,
P-1 A-1+/A1
AAA/AA Aaa/Aa AAA/AA
AA Aa AA
A A A
BBB Baa BBB
BB Ba BB
B B B
Not Rated Not Rated Not Rated
100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
Municipal Obligations. The term "Municipal Obligations" generally
includes debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities
such as airports, bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Obligations may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses
and lending such funds to other public institutions and facilities. In
addition, certain types of industrial development bonds are issued by or
on behalf of public authorities to obtain funds to provide for the
construction, equipment, repair or improvement of privately operated
housing facilities, sports facilities, convention or trade show
facilities, airport, mass transit, industrial, port or parking facilities,
air or water pollution control facilities and certain local facilities for
water supply, gas, electricity, or sewage or solid waste disposal; the
interest paid on such obligations may be exempt from Federal income tax,
although current tax laws place substantial limitations on the size of
such issues. Such obligations are considered to be Municipal Obligations
if the interest paid thereon qualifies as exempt from Federal income tax
in the opinion of bond counsel to the issuer. There are, of course,
variations in the security of Municipal Obligations, both within a
particular classification and between classifications.
Floating and variable rate demand notes and bonds are tax exempt
obligations ordinarily having stated maturities in excess of 13 months,
but which permit the holder to demand payment of principal (upon not more
than 30 days' notice in the case of the Money Market Portfolio and the New
Jersey Portfolio) at any time or at specified intervals, which, in the
case of the Money Market Portfolio and the New Jersey Portfolio, may not
exceed 13 months. The issuer of such obligations ordinarily has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon
a specified number of days' notice to the holders thereof. The interest
rate on a floating rate demand obligation is based on a known lending
rate, such as a bank's prime rate, and is adjusted automatically each time
such rate is adjusted. The interest rate on a variable rate demand
obligation is adjusted automatically at specified intervals.
The yields on Municipal Obligations are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions in the Municipal Obligations market, size of a
particular offering, maturity of the obligation, and rating of the issue.
The imposition of the management fee, as well as other operating expenses,
will have the effect of reducing the yield to investors.
Municipal lease obligations or installment purchase contract
obligations (collectively, "lease obligations") have special risks not
ordinarily associated with Municipal Obligations. Although lease
obligations do not constitute general obligations of the municipality for
which the municipality's taxing power is pledged, a lease obligation
ordinarily is backed by the municipality's covenant to budget for,
appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses
which provide that the municipality has no obligation to make lease or
installment purchase payments in future years unless money is appropriated
for such purpose on a yearly basis. Although "non-appropriation" lease
obligations are secured by the leased property, disposition of the
property in the event of foreclosure might prove difficult. The Money
Market Portfolio and New Jersey Portfolio (collectively, the "Short Term
Portfolios") will seek to minimize these risks by investing only in those
lease obligations that (1) are rated in one of the two highest rating
categories for debt obligations by at least two nationally recognized
statistical rating organizations (or one rating organization if the lease
obligation was rated only by one such organization); or (2) if unrated,
are purchased principally from the issuer or domestic banks or other
responsible third parties, in each case only if the seller shall have
entered into an agreement with a Short Term Portfolio providing that the
seller or other responsible third party will either remarket or repurchase
the lease obligation within a short period after demand by such Short Term
Portfolio. The staff of the Securities and Exchange Commission currently
considers certain lease obligations to be illiquid. Determination as to
the liquidity of such securities is made in accordance with guidelines
established by the Fund's Board. Pursuant to such guidelines, the Board
has directed the Manager to monitor carefully the Fund's investment in
such securities with particular regard to (1) the frequency of trades and
quotes for the lease obligation; (2) the number of dealers willing to
purchase or sell the lease obligation and the number of the potential
buyers; (3) the willingness of dealers to undertake to make a market in
the lease obligation; (4) the nature of the marketplace trades, including
the time needed to dispose of the mechanics of transfer; and (5) such
other factors concerning the trading market for the lease obligation as
the Manager may deem relevant. In addition, in evaluating the liquidity
and credit quality of a lease obligation that is unrated, the Fund's Board
has directed the Manager to consider (a) whether the lease can be
cancelled; (b) what assurance there is that the assets represented by the
lease can be sold; (c) the strength of the lessee's general credit (e.g.,
its debt, administrative, economic, and financial characteristics); (d)
the likelihood that the municipality will discontinue appropriating
funding for the leased property because the property is no longer deemed
essential to the operations of the municipality (e.g., the potential for
an "event of nonappropriation"); (e) the legal recourse in the event of
failure to appropriate; and (f) such other factors concerning credit
quality as the Manager may deem relevant. Accordingly, not more than 15%
of the value of the net assets of a Longer Term Portfolio, or 10% in the
case of a Short Term Portfolio, will be invested in lease obligations that
are illiquid and in other illiquid securities.
Each Short Term Portfolio will not purchase tender option bonds
unless (a) the demand feature applicable thereto is exercisable by such
Portfolio within 13 months of the date of such purchase upon no more than
30 days' notice and thereafter is exercisable by the Portfolio no less
frequently than annually upon no more than 30 days' notice and (b) at the
time of such purchase, the Manager reasonably expects (i) based upon its
assessment of current and historical interest rate trends, that prevailing
short-term tax exempt rates will not exceed the stated interest rate on
the underlying Municipal Obligations at the time of the next tender fee
adjustment and (ii) that the circumstances which might entitle the grantor
of a tender option to terminate the tender option would not occur prior to
the time of the next tender opportunity. At the time of each tender
opportunity, a Short Term Portfolio will exercise the tender option with
respect to any tender option bonds unless the Manager reasonably expects,
(x) based upon its assessment of current and historical interest rate
trends, that prevailing short-term tax exempt rates will not exceed the
stated interest rate on the underlying Municipal Obligations at the time
of the next tender fee adjustment, and (y) that the circumstances which
entitle the grantor of a tender option to terminate the tender option
would not occur prior to the time of the next tender opportunity. The
Short Term Portfolios will exercise the tender feature with respect to
tender option bonds, or otherwise dispose of its tender option bonds,
prior to the time the tender option is scheduled to expire pursuant to the
terms of the agreement under which the tender option is granted. The
Short Term Portfolios otherwise will comply with the provisions of Rule
2a-7 in connection with the purchase of tender option bonds, including,
without limitation, the requisite determination by the Fund's Board of
Directors that the tender option bonds in question meet the quality
standards described in Rule 2a-7, which, in the case of a tender option
bond subject to a conditional demand feature, would include a
determination that the security has received both the required short-term
and long-term quality rating or is determined to be of comparable quality.
In the event of a default of the Municipal Obligation underlying a tender
option bond, or the termination of the tender option agreement, the
particular Short Term Portfolio would look to the maturity date of the
underlying security for purposes of compliance with Rule 2a-7 and, if its
remaining maturity was greater than 13 months, the Fund would sell the
security as soon as would be practicable.
A Longer Term Portfolio will purchase tender option bonds only when
the Fund is satisfied that the custodial and tender option arrangements
will not adversely affect the tax exempt status of the underlying
Municipal Obligations and that payment of any tender fees will not have
the effect of creating taxable income for such Portfolio. Based on the
tender option bond agreement, the Fund expects to be able to value the
tender option bond at par; however, the value of the instrument will be
monitored to assure that it is valued at fair value.
For the purpose of diversification under the Investment Company Act
of 1940, as amended (the "Act"), the identification of the issuer of
Municipal Obligations depends on the terms and conditions of the security.
When the assets and revenues of an agency, authority, instrumentality or
other political subdivision are separate from those of the government
creating the subdivision and the security is backed only by the assets and
revenues of the subdivision, such subdivision would be deemed to be the
sole issuer. Similarly, in the case of an industrial development bond, if
that bond is backed only by the assets and revenues of the
non-governmental user, then such non-governmental user would be deemed to
be the sole issuer. If, however, in either case, the creating government
or some other entity guarantees a security, such a guaranty would be
considered a separate security and will be treated as an issue of such
government or other entity.
Ratings of Municipal Obligations. If, subsequent to being purchased
by a Short Term Portfolio, (a) an issue of rated Municipal Obligations
ceases to be rated in the highest rating category by at least two rating
organizations (or one rating organization if the instrument was rated by
only one organization), or the Fund's Board of Directors determines that
it is no longer of comparable quality; or (b) the Manager becomes aware
that any portfolio security not so highly rated or any unrated security
has been given a rating by any rating organization below the rating
organization's second highest rating category, the Fund's Board of
Directors will reassess promptly whether such security presents minimal
credit risk and will cause a Short Term Portfolio to take such action as
it determines is in the best interest of a Short Term Portfolio and its
shareholders, provided that the reassessment required by clause (b) is not
required if the portfolio security is disposed of or matures within five
business days of the Manager becoming aware of the new rating and the
Fund's Board of Directors is subsequently notified of the Manager's
actions. Subsequent to being purchased by a Longer Term Portfolio, an
issue of rated Municipal Obligations may cease to be rated or its rating
may be reduced below the minimum required for purchase by such Portfolio.
Neither event will require the sale of such Municipal Obligations by a
Longer Term Portfolio, but the Manager will consider such event in
determining whether the Portfolio should continue to hold the Municipal
Obligations.
To the extent the ratings by Moody's, S&P or Fitch for Municipal
Obligations may change as a result of changes in such organizations or
their rating systems, the Fund will attempt to use comparable ratings as
standards for Portfolio investments in accordance with the investment
policies contained in the Prospectus and this Statement of Additional
Information. The ratings of Moody's, S&P and Fitch represent their
opinions as to the quality of the Municipal Obligations which they
undertake to rate. It should be emphasized, however, that ratings are
relative and subjective and are not absolute standards of quality.
Although these ratings may be an initial criterion for selection of
portfolio investments, the Manager also will evaluate these securities and
the creditworthiness of the issuers of such securities.
Futures Contracts and Options on Futures Contracts (Longer Term
Portfolios only). For each Longer Term Portfolio, upon exercise of an
option on a futures contract, the writer of the option delivers to the
holder of the option the futures position and the accumulated balance in
the writer's futures margin account, which represents the amount by which
the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on
the futures contract. The potential loss related to the purchase of
options on futures contracts is limited to the premium paid for the option
(plus transaction costs). Because the value of the option is fixed at the
time of sale, there are no daily cash payments to reflect changes in the
value of the underlying contract; however, the value of the option does
change daily and that change would be reflected in the net asset value of
the Longer Term Portfolio.
Lending Portfolio Securities (Longer Term Portfolios only). To a
limited extent, each Longer Term Portfolio may lend its portfolio
securities to brokers, dealers and other financial institutions, provided
it receives cash collateral which at all times is maintained in an amount
equal to at least 100% of the current market value of the securities
loaned. By lending its securities, a Longer Term Portfolio can increase
its income through the investment of the cash collateral. For purposes of
this policy, the Fund considers collateral consisting of U.S. Government
securities or irrevocable letters of credit issued by banks whose
securities meet the standards for investment by the Longer Term Portfolio
to be the equivalent of cash. From time to time, the Fund may return to
the borrower or a third party which is unaffiliated with the Fund, and
which is acting as a "placing broker," a part of the interest earned from
the investment of collateral received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Longer Term Portfolio must receive at least 100% cash collateral
from the borrower; (2) the borrower must increase such collateral whenever
the market value of the securities rises above the level of such
collateral; (3) the Longer Term Portfolio must be able to terminate the
loan at any time; (4) the Longer Term Portfolio must receive reasonable
interest on the loan, as well as any dividends, interest or other
distributions payable on the loaned securities, and any increase in market
value; and (5) the Longer Term Portfolio may pay only reasonable custodian
fees in connection with the loan. These conditions may be subject to
future modification.
Short Sales (Longer Term Portfolios only). Until the Portfolio
replaces a borrowed security in connection with a short sale, the
Portfolio will: (a) maintain daily a segregated account, containing cash
or U.S. Government securities, at such a level that (i) the amount
deposited in the account plus the amount deposited with the broker as
collateral will equal the current value of the security sold short and
(ii) the amount deposited in the segregated account plus the amount
deposited with the broker as collateral will not be less than the market
value of the security at the time it was sold short; or (b) otherwise
cover its short position.
Illiquid Securities. If a substantial market of qualified
institutional buyers develops pursuant to Rule 144A under the Securities
Act of 1933, as amended, for certain restricted securities held by any
Portfolio, the Fund intends to treat such securities as liquid securities
in accordance with procedures approved by the Fund's Board. Because it is
not possible to predict with assurance how the market for restricted
securities pursuant to Rule 144A will develop, the Fund's Board has
directed the Manager to monitor carefully each Portfolio's investments in
such securities with particular regard to trading activity, availability
of reliable price information and other relevant information. To the
extent that, for a period of time, qualified institutional buyers cease
purchasing restricted securities pursuant to Rule 144A, a Portfolio's
investing in such securities may have the effect of increasing the level
of illiquidity in the Portfolio's investments during such period.
Taxable Investments. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ in their interest rates, maturities and times of
issuance. Treasury Bills have initial maturities of one year or less;
Treasury Notes have initial maturities of one to ten years; and Treasury
Bonds generally have initial maturities of greater than ten years. Some
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, for example, Government National Mortgage Association
pass-through certificates, are supported by the full faith and credit of
the U.S. Treasury; others, such as those of the Federal Home Loan Banks,
by the right of the issuer to borrow from the U.S. Treasury; others, such
as those issued by the Federal National Mortgage Association, by
discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as those
issued by the Student Loan Marketing Association, only by the credit of
the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. Interest may fluctuate based on generally
recognized reference rates or the relationship of rates. While the U.S.
Government provides financial support to such U.S. Government-sponsored
agencies or instrumentalities, no assurance can be given that it will
always do so, since it is not so obligated by law. A Portfolio will
invest in such securities only when the Fund is satisfied that the credit
risk with respect to the issuer is minimal.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing the
obligation of a bank to repay funds deposited with it for a specified
period of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate.
Investments in time deposits generally are limited to London branches of
domestic banks that have total assets in excess of one billion dollars.
Time deposits which may be held by a Portfolio will not benefit from
insurance from the Bank Insurance Fund or the Savings Association
Insurance Fund administered by the Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. Other short-term bank obligations
may include uninsured, direct obligations bearing fixed, floating or
variable interest rates.
Repurchase agreements involve the acquisition by a Portfolio of an
underlying debt instrument subject to an obligation of the seller to
repurchase, and such Portfolio to resell, the instrument at a fixed price,
usually not more than one week after its purchase. The Fund's custodian
or sub-custodian will have custody of, and will hold in a segregated
account, securities acquired by the Portfolio under a repurchase
agreement. Repurchase agreements are considered by the Staff of the
Securities and Exchange Commission to be loans by the Portfolio that
enters into them. In an attempt to reduce the risk of incurring a loss on
a repurchase agreement, a Portfolio will enter into repurchase agreements
only with domestic banks with total assets in excess of one billion
dollars or primary government securities dealers reporting to the Federal
Reserve Bank of New York, with respect to securities of the type in which
the Portfolio may invest, and will require that additional securities be
deposited with it if the value of the securities purchased should decrease
below resale price. The Manager will monitor on an ongoing basis the
value of the collateral to assure that it always equals or exceeds the
repurchase price. Certain costs may be incurred by a Portfolio in
connection with the sale of the securities if the seller does not
repurchase them in accordance with the repurchase agreement. In addition,
if bankruptcy proceedings are commenced with respect to the seller of the
securities, realization on the securities by a Portfolio may be delayed or
limited. Each Portfolio will consider on an ongoing basis the
creditworthiness of the institutions with which it enters into repurchase
agreements.
Risk Factors
Lower Rated Bonds. This section applies to each Longer Term
Portfolio only. Lower rated bonds as described herein are not eligible
investments for the Short Term Portfolios. Each Longer Term Portfolio is
permitted to invest in securities rated below Baa by Moody's and below BBB
by S&P or Fitch. Such bonds, though higher yielding, are characterized by
risk. See in the Prospectus "Risk Factors--Lower Rated Bonds" for a
discussion of certain risks and "Appendix" for a general description of
Moody's, S&P and Fitch ratings of Municipal Obligations. Although ratings
may be useful in evaluating the safety of interest and principal payments,
they do not evaluate the market value risk of these bonds. Each Longer
Term Portfolio will rely on the Manager's judgment, analysis and
experience in evaluating the creditworthiness of an issuer. In this
evaluation, the Manager will take into consideration, among other things,
the issuer's financial resources, its sensitivity to economic conditions
and trends, the quality of the issuer's management and regulatory matters.
It also is possible that a rating agency might not timely change the
rating on a particular issue to reflect subsequent events. As stated
above, once the rating of a bond held by a Longer Term Portfolio has been
changed, the Manager will consider all circumstances deemed relevant in
determining whether the Portfolio should continue to hold the bond.
Investors should be aware that the market values of many of these
bonds tend to be more sensitive to economic conditions than are higher
rated securities. These bonds generally are considered by Moody's, S&P
and Fitch to be predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation and generally will involve more credit risk than securities in
the higher rating categories.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these bonds does exist, it generally
is not as liquid as the secondary market for higher rated securities. The
lack of a liquid secondary market may have an adverse impact on market
price and yield and a Longer Term Portfolio's ability to dispose of
particular issues when necessary to meet its liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary market for
certain securities also may make it more difficult for a Longer Term
Portfolio to obtain accurate market quotations for purposes of valuing its
portfolio and calculating its net asset value. Adverse publicity and
investor perceptions, whether or not based on fundamental analysis, may
decrease the values and liquidity of these securities. In such cases,
judgment may play a greater role in valuation because less reliable,
objective data may be available.
These bonds may be particularly susceptible to economic downturns.
It is likely that any economic recession could severely disrupt the market
for such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn
could adversely affect the ability of the issuers of such securities to
repay principal and pay interest thereon and increase the incidence of
default of such securities.
Each Longer Term Portfolio may acquire these bonds during an initial
offering. Such securities may involve special risks because they are new
issues. Neither Longer Term Portfolio has any arrangements with the
Distributor or any other persons concerning the acquisition of such
securities, and the Manager will review carefully the credit and other
characteristics pertinent to such new issues.
Lower rated zero coupon securities, in which each Longer Term
Portfolio may invest up to 5% of its total assets, involve special
consideration. The credit risk factors pertaining to lower rated
securities also apply to lower rated zero coupon bonds. Such zero coupon
bonds carry an additional risk in that, unlike bonds which pay interest
throughout the period to maturity, the Portfolio will realize no cash
until the cash payment date unless a portion of such securities are sold
and, if the issuer defaults, the Longer Term Portfolio may obtain no
return at all on its investment. See "Dividends, Distributions and
Taxes."
Investing in New Jersey Municipal Obligations. This applies to the
New Jersey Portfolio only. Investors should consider carefully the
special risks inherent in the New Jersey Portfolio's investment in New
Jersey Municipal Obligations. These risks result from the financial
condition of the State of New Jersey. If there should be a default or
other financial crisis relating to the State of New Jersey or an agency of
municipality thereof, the market value and marketability of outstanding
New Jersey Municipal Obligations in the New Jersey Portfolio and interest
income to the Fund could be adversely affected. Although New Jersey
enjoyed a period of economic growth in the mid-1980s, the State's economy
slowed down well before the onset of the national recession which,
according to the National Bureau of Economic Research, began in July 1990.
Reflecting the downturn, the State's unemployment rate rose from a low of
3.6% in the first quarter of 1989 to a recessionary peak of 9.3% during
1992. Since then, the State's unemployment rate fell to 6.7% during the
fourth quarter of 1993 and averaged 7.1% during the first nine months of
1994. As a result of New Jersey's recent fiscal weakness, in July 1991,
S&P lowered its rating of the State's general obligation debt from AAA to
AA+. Investors should review Appendix A which sets forth these and other
risk factors.
Investment Restrictions
Money Market Portfolio and New Jersey Portfolio. Each Short Term
Portfolio has adopted investment restrictions numbered 1 through 10 as
fundamental policies. Fundamental policies cannot be changed without
approval by the holders of a majority (as defined in the Act) of each
Short Term Portfolio's respective outstanding voting shares. Investment
restriction number 11 is a non-fundamental policy and may be changed by a
vote of a majority of the Fund's Directors at any time. Neither Short
Term Portfolio may:
1. Purchase securities other than Municipal Obligations and Taxable
Investments as those terms are defined above and in the relevant
Prospectus for the Portfolio.
2. Borrow money, except from banks for temporary or emergency (not
leveraging) purposes in an amount up to 15% of the value of a Portfolio's
total assets (including the amount borrowed) based on the lesser of cost
or market, less liabilities (not including the amount borrowed) at the
time the borrowing is made. While borrowings exceed 5% of the value of a
Portfolio's total assets, such Portfolio will not make any additional
investments.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to secure borrowings for temporary or emergency purposes.
4. Sell securities short or purchase securities on margin.
5. Underwrite the securities of other issuers, except that a
Portfolio may bid separately or as part of a group for the purchase of
Municipal Obligations directly from an issuer for its own portfolio to
take advantage of the lower purchase price available.
6. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil and gas interests,
but this shall not prevent a Portfolio from investing in Municipal
Obligations secured by real estate or interests therein.
7. Make loans to others except through the purchase of qualified
debt obligations and the entry into repurchase agreements referred to
above and in the relevant Prospectus for the Portfolio.
8. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no such
limitation on the purchase of Municipal Obligations and, for temporary
defensive purposes, obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
9. Invest in companies for the purpose of exercising control.
10. Invest in securities of other investment companies, except as
they may be acquired as part of a merger, consolidation or acquisition of
assets.
11. Enter into repurchase agreements providing for settlement in
more than seven days after notice or purchase securities which are
illiquid if, in the aggregate, more than 10% of its net assets would be so
invested.
Intermediate Bond Portfolio and Bond Portfolio. Each Longer Term
Portfolio has adopted investment restrictions numbered 1 through 7 as
fundamental policies. Fundamental policies cannot be changed, as to a
Portfolio, without approval by the holders of a majority (as defined in
the Act) of such Portfolio's outstanding voting shares. Investment
restrictions numbered 8 through 13 are non-fundamental policies and may be
changed by vote of a majority of the Fund's Directors at any time.
Neither Longer Term Portfolio may:
1. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no such
limitation on the purchase of Municipal Obligations and, for temporary
defensive purposes, obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
2. Borrow money, except to the extent permitted under the Act. For
purposes of this investment restriction, the entry into options, forward
contracts, futures contracts, including those relating to indices, and
options on futures contracts or indices shall not constitute borrowing.
3. Purchase or sell real estate, commodities or commodity
contracts, or oil and gas interests, but this shall not prevent the
Portfolio from investing in Municipal Obligations secured by real estate
or interests therein, or prevent the Portfolio from purchasing and selling
options, forward contracts, futures contracts, including those relating to
indices, and options on futures contracts or indices.
4. Underwrite the securities of other issuers, except that the
Portfolio may bid separately or as part of a group for the purchase of
Municipal Obligations directly from an issuer for its own portfolio to
take advantage of the lower purchase price available, and except to the
extent the Portfolio may be deemed an underwriter under the Securities Act
of 1933, as amended, by virtue of disposing of portfolio securities.
5. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements; however, the
Portfolio may lend its portfolio securities in an amount not to exceed 33-
1/3% of the value of its total assets. Any loans of portfolio securities
will be made according to guidelines established by the Securities and
Exchange Commission and the Fund's Board of Directors.
6. Issue any senior security (as such term is defined in Section
18(f) of the Act), except to the extent that the activities permitted in
Investment Restrictions numbered 2, 3, 10 and 11 may be deemed to give
rise to a senior security.
7. Purchase securities on margin, but the Portfolio may take margin
deposits in connection with transactions in options, forward contracts,
futures contracts, including those relating to indices, and options on
futures contracts or indices.
8. Purchase securities other than Municipal Obligations and Taxable
Investments and those arising out of transactions in futures and options
or as otherwise provided in the Prospectus.
9. Invest in securities of other investment companies, except to
the extent permitted under the Act.
10. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings and to the
extent related to the deposit of assets in escrow in connection with the
purchase of securities on a when-issued or delayed-delivery basis and
collateral and initial or variation margin arrangements with respect to
options, forward contracts, futures contracts, including those related to
indices, and options on futures contracts or indices.
11. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Fund's Prospectus and Statement of Additional
Information.
12. Enter into repurchase agreements providing for settlement in
more than seven days after notice or purchase securities which are
illiquid (which securities could include participation interests
(including municipal lease/purchase agreements) and floating and variable
rate demand obligations as to which the Portfolio cannot exercise the
demand feature as described in the Prospectus on less than seven days'
notice and as to which there is no secondary market), if, in the
aggregate, more than 15% of its net assets would be so invested.
13. Invest in companies for the purpose of exercising control.
For purposes of Investment Restriction No. 8 with respect to each
Short Term Portfolio, and Investment Restriction No. 1 with respect to
each Longer Term Portfolio, industrial development bonds, where the
payment of principal and interest is the ultimate responsibility of
companies within the same industry, are grouped together as an "industry."
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values
or assets will not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Portfolio shares in certain
states. Should the Fund determine that a commitment is no longer in the
best interest of the Portfolio and its shareholders, the Fund reserves the
right to revoke the commitment by terminating the sale of such Portfolio's
shares in the state involved.
MANAGEMENT OF THE FUND
Directors and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below. Each Director who is deemed to be an "interested person"
of the Fund, as defined in the Act, is indicated by an asterisk.
Directors of the Fund
*JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman
of the Board for various funds in the Dreyfus Family of Funds. For
more than five years prior thereto, he was President, a director and,
until August 1994, Chief Operating Officer of the Manager and
Executive Vice President and a director of Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager and, until
August 24, 1994, the Fund's distributor. From August 1994 to
December 31, 1994, he was a director of Mellon Bank Corporation. He
is Chairman of the Board of Noel Group, Inc., a venture capital
company; a trustee of Bucknell University; and a director of the
Muscular Dystrophy Association, HealthPlan Services Corporation,
Belding Heminway Company, Inc., a manufacturer and marketer of
industrial threads, specialty yarns, home furnishings and fabrics,
Curtis Industries, Inc., a national distributor of security products,
chemicals and automotive and other hardware, Simmons Outdoor
Corporation and Staffing Resources, Inc. He is 51 years old and his
address is 200 Park Avenue, New York, New York 10166.
*DAVID W. BURKE, Director. Consultant to the Manager since August 1994.
From October 1990 to August 1994, he was Vice President and Chief
Administrative Officer of the Manager. From 1977 to 1990, Mr. Burke
was involved in the management of national television news, as Vice
President and Executive Vice President of ABC News, and subsequently
as President of CBS News. He is 59 years old and his address is 200
Park Avenue, New York, New York 10166.
SAMUEL CHASE, Director. Since 1982, President of Samuel Chase & Company,
Ltd., and from 1983 to 1990, Chairman of Chase, Brown & Blaxall,
Inc., economic consulting firms. He is 63 years old and his address
is 4410 Massachusetts Avenue, N.W., Suite 408, Washington, D.C.
20016.
GORDON J. DAVIS, Director/Trustee. Since October 1994, a senior partner
with the firm of LeBoeuf, Lamb, Greene & MacRae. From 1983 to
September 1994, Mr. Davis was a senior partner with the law firm of
Lord Day & Lord, Barrett Smith. From 1978 to 1983, he was
Commissioner of Parks and Recreation for the City of New York. He is
also a director of Consolidated Edison, a utility company, and
Phoenix Home Life Insurance Company and a member of various other
corporate and not-for-profit boards. He is 54 years old and his
address is 241 Central Park West, New York, New York 10023.
JONI EVANS, Director. Senior Vice President of the William Morris Agency.
From September 1987 to May 1993, Executive Vice President of
Random House Inc. and, from January 1991 to May 1993, President and
Publisher of Turtle Bay Books; from January 1987 to December 1990,
Publisher of Random House-Adult Trade Division; from September 1985
to September 1987, President of Simon and Schuster-Trade Division.
She is 50 years old and her address is 1350 Avenue of the Americas,
New York, New York 10019.
ARNOLD S. HIATT, Director. Chairman of The Stride Rite Foundation. From
1969 to June 1992, Chairman of the Board, President or Chief
Executive Officer of The Stride Rite Corporation, a multi-divisional
footwear manufacturing and retailing company. Mr. Hiatt is also a
director of The Cabot Corporation. He is 68 years old and his
address is 400 Atlantic Avenue, Boston, Massachusetts 02110.
DAVID J. MAHONEY, Director. President of David Mahoney Ventures since
1983. From 1968 to 1983, he was Chairman and Chief Executive Officer
of Norton Simon Inc., a producer of consumer products and services.
Mr. Mahoney is also a director of Bionaire, Inc. and Intercostal
Health Systems, Inc. He is 72 years old and his address is 745 Fifth
Avenue, Suite 700, New York, New York 10151.
BURTON N. WALLACK, Director. President and co-owner of Wallack Management
Company, a real estate management company managing real estate in the
New York City area. He is 44 years old and his address is 18 East
64th Street, Suite 3D, New York, New York 10021.
The Fund typically pays its Board members an annual retainer and a
per meeting fee and reimburses them for their expenses. The Chairman of
the Board receives an additional 25% of such compensation. Emeritus Board
members are entitled to receive an annual retainer and a per meeting fee,
each at a rate of one-half the amount paid to them as Board members. The
aggregate amount of compensation paid to each Board member by each Fund
for the fiscal year ended August 31, 1995, and by all other funds in the
Dreyfus Family of Funds for which such person is a Board member (the
number of which is set forth in parenthesis next to each Board members
total compensation) for the year ended December 31, 1994, was as follows:
<TABLE>
<CAPTION>
(5)
(3) Total Compensation
(2) Pension or (4) From Fund and
(1) Aggregate Retirement Benefits Estimated Annual From Fund Complex
Name of Board Compensation From Accrued as Part of Benefits Upon Paid to Board
Member Fund* Fund's Expenses Retirement Member
------------- ------------------ ------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Joseph S. DiMartino none none $445,000** (93)
David W. Burke none none $ (51)
Samuel Chase none none $ (13)
Gordon J. Davis none none $ (24)
Joni Evans none none $ (13)
Arnold S. Hiatt none none $ (13)
David J. Mahoney none none $ (13)
Burton N. Wallack none none $ (13)
</TABLE>
_____________________
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $_____ for all Directors as a group.
** Estimated amount for the year ending December 31, 1995.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President and Chief Operating
Officer of the Distributor and an officer of other investment
companies advised or administered by the Manager. From December 1991
to July 1994, she was President and Chief Compliance Officer of Funds
Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc. Prior to December 1991, she served as Vice
President and Controller, and later as Senior Vice President, of The
Boston Company Advisors, Inc. She is 37 years old.
JOHN E. PELLETIER, Vice President and Secretary. Senior Vice President
and General Counsel of the Distributor and an officer of other
investment companies advised or administered by the Manager. From
February 1992 to July 1994, he served as Counsel for The Boston
Company Advisors, Inc. From August 1990 to February 1992, he was
employed as an associate at Ropes & Gray. He is 30 years old.
FREDERICK C. DEY, Vice President and Assistant Treasurer. Senior Vice
President of the Distributor and an officer of other investment
companies advised or administered by the Manager. From 1988 to
August 1994, he was manager of the High Performance Fabric Division
of Springs Industries Inc. He is 33 years old.
ERIC B. FISCHMAN, Vice President and Assistant Secretary. Associate
General Counsel of the Distributor and an officer of other investment
companies advised or administered by the Manager. From September 1992
to August 1994, he was an attorney with the Board of Governors of the
Federal Reserve System. He is 30 years old.
JOSEPH F. TOWER, III, Assistant Treasurer. Senior Vice President,
Treasurer and Chief Financial Officer of the Distributor and an
officer of other investment companies advised or administered by the
Manager. From July 1988 to August 1994, he was employed by The Boston
Company, Inc. where he held various management positions in the
Corporate Finance and Treasury areas. He is 32 years old.
JOHN J. PYBURN, Assistant Treasurer. Assistant Treasurer of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From 1984 to July 1994, was Assistant
Vice President in the Mutual Fund Accounting Department of the
Manager. He is 59 years old.
RUTH D. LEIBERT, Assistant Secretary. Assistant Vice President of the
Distributor and an officer of other investment companies advised or
administered by the Manager. From March 1992 to July 1994, she was a
Compliance Officer for The Managers Funds, a registered investment
company. From March 1990 until September 1991, she was Development
Director of The Rockland Center for the Arts. She is 50 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
Directors and officers of the Fund, as a group, owned less than 1% of
each Portfolio's common stock outstanding on ___________, 1995.
The following entity is known by the Fund to be the holder of record
of 5% or more of the [ ] Portfolio's shares of common stock
outstanding as of __________, 1995.
MANAGEMENT AGREEMENT
The following information supplements and should be read in
conjunction with the section in each Fund Prospectus entitled "Management
of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994, with the Fund. As to
each Portfolio, the Agreement is subject to annual approval by (i) the
Fund's Board of Directors or (ii) vote of a majority (as defined in the
Act) of the outstanding voting securities of such Portfolio, provided that
in either event the continuance also is approved by a majority of the
Directors who are not "interested persons" (as defined in the Act) of the
Fund or the Manager, by vote cast in person at a meeting called for the
purpose of voting on such approval. The Agreement was approved by
shareholders of each National Portfolio on August 2, 1994. It was last
approved by the Fund's Board of Directors, including a majority of the
Directors who are not "interested persons" of any party to the Agreement,
with respect to the National Portfolios, at a meeting held on July 26,
1995 and, with respect to the New Jersey Portfolio, at a meeting held on
October 11, 1995. As to each Portfolio, the Agreement is terminable
without penalty, on 60 days' notice, by the Fund's Board of Directors or
by vote of the holders of a majority of such Portfolio's shares, or, on
not less than 90 days' notice, by the Manager. The Agreement will
terminate automatically, as to the relevant Portfolio, in the event of its
assignment (as defined in the Act).
The following persons are officers and/or directors of the Manager:
Howard Stein, Chairman of the Board and Chief Executive Officer; W. Keith
Smith, Vice Chairman of the Board; Robert E. Riley, President, Chief
Operating Officer and a director; Stephen E. Canter, Vice Chairman, Chief
Investment Officer and a director; Lawrence S. Kash, Vice Chairman--
Distribution and a director; Philip L. Toia, Vice Chairman--Operations and
Administration; David Mossman, Acting Chief Financial Officer; Daniel C.
Maclean, Vice President and General Counsel; Barbara E. Casey, Vice
President--Dreyfus Retirement Services; Diane Coffey, Vice President--
Corporate Communications; Elie M. Genadry, Vice President--Wholesale;
Henry D. Gottmann, Vice President--Retail Sales and Service; William F.
Glavin, Jr., Vice President--Corporate Development; Andrew S. Wasser, Vice
President--Information Services; Mark N. Jacobs, Vice President--Fund
Legal and Compliance and Secretary; Jeffrey N. Nachman, Vice President--
Mutual Fund Accounting; Katherine C. Wickham, Vice President--Human
Resources; Maurice Bendrihem, Controller; Elvira Oslapas, Assistant
Secretary; and Mandell L. Berman, Frank V. Cahouet, Alvin E. Friedman,
Lawrence M. Greene, Julian Smerling and David B. Truman, directors.
The Manager manages each Portfolio's investments in accordance with
the stated policies of the Portfolio, subject to the approval of the
Fund's Board of Directors. The Manager is responsible for investment
decisions and provides the Fund with portfolio managers who are authorized
by the Fund's Board of Directors to execute purchases and sales of
securities. The Fund's portfolio managers are Richard J. Moynihan, Joseph
P. Darcy, A. Paul Disdier, Karen M. Hand, Stephen C. Kris, Jill C.
Shaffro, L. Lawrence Troutman, Samuel J. Weinstock and Monica S. Wieboldt.
The Manager also maintains a research department with a professional staff
of portfolio managers and securities analysts who provide research
services for the Fund as well as for other funds advised by the Manager.
All purchases and sales are reported for the Directors' review at the
meeting subsequent to such transactions.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include: organizational costs, taxes, interest,
loan commitment fees, interest and distributions paid on securities sold
short, brokerage fees and commissions, if any, fees of certain Board
members, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain
insurance premiums, industry association fees, outside auditing and legal
expenses, costs of maintaining the Fund's existence, costs of independent
pricing services, costs attributable to investor services (including,
without limitation, telephone and personnel expenses), costs of
shareholders' reports and corporate meetings, costs of preparing and
printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders, and any
extraordinary expenses. Expenses attributable to a particular Portfolio
are charged against the assets of that Portfolio; other expenses of the
Fund are allocated among the Portfolio on the basis determined by the
Board of Directors, including, but not limited to, proportionately in
relation to the net assets of each Portfolio.
The Manager maintains office facilities on behalf of the Fund and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
As compensation for the Manager's services, the Fund has agreed to
pay the Manager a monthly management fee at the annual rate of .50 of 1%
of the value of each Short Term Portfolio's average daily net assets and
.60 of 1% of the value of each of the Longer Term Portfolio's average
daily net assets. All fees and expenses are accrued daily and deducted
before the declaration of dividends to shareholders. For the fiscal years
ended August 31, 1993 and 1994, no management fee was paid by the Fund
with respect to the Money Market Portfolio pursuant to undertakings by the
Manager. For the fiscal year ended August 31, 1995 the management fee
payable by the Fund with respect to the Money Market Portfolio amounted to
$______, which fees were reduced by $______ pursuant to an undertaking by
the Manager, resulting in net fees of $______ paid by the Money Market
Portfolio. For the periods May 5 and 6, 1994 (commencement of operations
of the Intermediate Bond Portfolio and Bond Portfolio, respectively)
through August 31, 1994, and for the fiscal year ended August 31, 1995, no
management fee was paid by the Fund with respect to either Longer Term
Portfolio, pursuant to separate undertakings by the Manager. As of the
date of this Statement of Additional Information, the New Jersey Portfolio
had not commenced operations.
As to each Portfolio, the Manager has agreed that if in any fiscal
year the aggregate expenses of such Portfolio, exclusive of taxes,
brokerage, interest on borrowings and (with the prior written consent of
the necessary state securities commissions) extraordinary expenses, but
including the management fee, exceed the expense limitation of any state
having jurisdiction over the Fund, the Fund may deduct from the payment to
be made to the Manager under the Agreement, or the Manager will bear, such
excess expense to the extent required by state law. Such deduction or
payment, if any, will be estimated daily, and reconciled and effected or
paid, as the case may be, on a monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of a Portfolio's net assets increases.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in
conjunction with the section in each Fund Prospectus entitled "Shareholder
Services Plan."
The Fund has adopted a Shareholder Services Plan (the "Plan")
pursuant to which the Fund, with respect to each Portfolio, reimburses
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager, 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 and providing reports and other information, and
services related to the maintenance of shareholder accounts.
A quarterly report of the amounts expended under the Plan, with
respect to each Portfolio, and the purposes for which such expenditures
were incurred, must be made to the Fund's Board of Directors for their
review. In addition, the Plan provides that material amendments of the
Plan must be approved by the Fund's Board of Directors, and by the
Directors who are not "interested persons" (as defined in the Act) of the
Fund and have no direct or indirect financial interest in the operation of
the Plan, by vote cast in person at a meeting called for the purpose of
considering such amendments. The Plan is subject to annual approval by
such vote of the Directors cast in person at a meeting called for the
purpose of voting on the Plan. The Plan is terminable at any time with
respect to each Portfolio by vote of a majority of the Directors who are
not "interested persons" and have no direct or indirect financial interest
in the operation of the Plan.
For the fiscal year ended August 31, 1995, $______ was chargeable to
the Money Market Portfolio under the Plan. No amounts were charged to the
Longer Term Portfolios pursuant to separate undertakings by the Manager.
As of the date of this Statement of Additional Information, the New Jersey
Portfolio had not commenced operations.
PURCHASE OF SHARES
The following information supplements and should be read in
conjunction with the section in each Fund Prospectus entitled "How to Buy
Shares."
The Distributor. The Distributor serves as the Fund's distributor
pursuant to an agreement which is renewable annually. The Distributor also
acts as distributor for the other funds in the Dreyfus Family of Funds and
for certain other investment companies.
Using Federal Funds. The following information is applicable to the
Short Term Portfolios only. The Shareholder Services Group, Inc., the
Fund's transfer and dividend disbursing agent (the "Transfer Agent"), or
the Fund may attempt to notify the investor upon receipt of checks drawn
on banks that are not members of the Federal Reserve System as to the
possible delay in conversion into Federal Funds and may attempt to arrange
for a better means of transmitting the money. If the investor is a
customer of a securities dealer, bank or other financial institution and
his order to purchase shares of a Short Term Portfolio is paid for other
than in Federal Funds, the securities dealer, bank or other financial
institution acting on behalf of its customer, will complete the conversion
into, or itself advance, Federal Funds generally on the business day
following receipt of the customer order. The order is effective only when
so converted and received by the Transfer Agent. An order for the
purchase of shares of a Short Term Portfolio placed by an investor with
sufficient Federal Funds or cash balance in his brokerage account with a
securities dealer, bank or other financial institution will become
effective on the day that the order, including Federal Funds, is received
by the Transfer Agent.
Transactions Through Securities Dealers. Portfolio shares may be
purchased and redeemed through securities dealers which may charge a
nominal transaction fee for such services. Some dealers will place
Portfolio shares in an account with their firm. Dealers also may require
that the customer not take physical delivery of stock certificates; the
customer not request redemption checks to be issued in the customer's
name; fractional shares not be purchased; monthly income distributions be
taken in cash; or other conditions.
There is no sales charge by the Fund or the Distributor, although
securities dealers, banks and other institutions may make reasonable
charges to investors for their services. The services provided and the
applicable fees are established by each dealer or other institution acting
independently of the Fund. The Fund has been given to understand that
these fees may be charged for customer services, including, but not
limited to, same-day investment of client funds; same-day access to client
funds; advice to customers about the status of their accounts, yield
currently being paid or income earned to date; provision of periodic
account statements showing security and money market positions; other
services available from the dealer, bank or other institution; and
assistance with inquiries related to their investment. Any such fees will
be deducted monthly from the investor's account, which on smaller accounts
could constitute a substantial portion of distributions. Small, inactive,
long-term accounts involving monthly service charges may not be in the
best interest of investors. Investors should be aware that they may
purchase Portfolio shares directly from the Fund without imposition of any
maintenance or service charges, other than those already described herein.
In some states, banks or other institutions effecting transactions in
Portfolio shares may be required to register as dealers pursuant to state
law.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made between the hours of 8:00 a.m. and 4:00 p.m., New York time,
on any business day that The Shareholder Services Group, Inc., the Fund's
transfer and dividend disbursing agent (the "Transfer Agent"), and the New
York Stock Exchange are open. Such purchases will be credited to the
shareholder's Fund account on the next bank business day. To qualify to
use the Dreyfus TeleTransfer Privilege, the initial payment for purchase
of Fund shares must be drawn on, and redemption proceeds paid to, the same
bank and account as are designated on the Account Application or
Shareholder Services Form on file. If the proceeds of a particular
redemption are to be wired to an account at any other bank, the request
must be in writing and signature-guaranteed. See "Redemption of Shares-
Dreyfus TeleTransfer Privilege" in each Fund Prospectus.
Reopening an Account. An investor may reopen an account with a
minimum investment of $10,000 without filing a new Account Application
during the calendar year the account is closed or during the following
calendar year, provided the information on the old Account Application is
still applicable.
REDEMPTION OF SHARES
The following information supplements and should be read in
conjunction with the section in each Fund Prospectus entitled "How to
Redeem Shares."
Check Redemption Privilege. An investor may indicate on the Account
Application or by later written request that the Fund provide Redemption
Checks ("Checks") drawn on the Fund's account. Checks will be sent only
to the registered owner(s) of the account and only to the address of
record. The Account Application or later written request must be manually
signed by the registered owner(s). Checks may be made payable to the
order of any person in an amount of $1,000 or more. When a Check is
presented to the Transfer Agent for payment, the Transfer Agent, as the
investor's agent, will cause the Fund to redeem a sufficient number of
shares in the investor's account to cover the amount of the Check and the
$2.00 charge. Dividends are earned until the Check clears. After
clearance, a copy of the Check will be returned to the investor. Investors
generally will be subject to the same rules and regulations that apply to
checking accounts, although election of this Privilege creates only a
shareholder-transfer agent relationship with the Transfer Agent.
If the amount of the Check, plus any applicable charges, is greater
than the value of the shares in an investor's account, the Check will be
returned marked insufficient funds. Checks should not be used to close an
account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire or telephone redemption
instructions from any person representing himself or herself to be the
investor and reasonably believed by the Transfer Agent to be genuine. An
investor will be charged a $5.00 fee for each wire redemption, which will
be deducted from the investor's account and paid to the Transfer Agent.
Ordinarily, the Fund will initiate payment for shares of a Short Term
Portfolio redeemed pursuant to this Privilege on the same business day if
the Transfer Agent receives the redemption request in proper form prior to
Noon on such day; otherwise, and with respect to all Longer Term Portfolio
shares redeemed pursuant to this Privilege, the Fund will initiate payment
on the next business day. Redemption proceeds will be transferred by
Federal Reserve wire only to the commercial bank account specified by the
investor on the Account Application or Shareholder Services Form.
Redemption proceeds, if wired, must be in the amount of $5,000 or more and
will be wired to the investor's account at the bank of record designated
in the investor's file at the Transfer Agent, if the investor's bank is a
member of the Federal Reserve System, or to a correspondent bank if the
investor's bank is not a member. Fees ordinarily are imposed by such bank
and usually are borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at
1-800-654-7171, toll free. Investors should advise the operator that the
above transmittal code must be used and should also inform the operator of
the Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if
they have also selected the Dreyfus TeleTransfer Privilege, any request
for a wire redemption will be effected as a Dreyfus TeleTransfer
transaction through the Automated Clearing House ("ACH") system unless
more prompt transmittal specifically is requested. Redemption proceeds
will be on deposit in the investor's account at an ACH member bank
ordinarily two business days after receipt of the redemption request.
Investors will be charged a $5.00 fee for each redemption made pursuant to
this Privilege, which will be deducted from the investor's account and
paid to the Transfer Agent. See "Purchase of Shares--Dreyfus TeleTransfer
Privilege" or "Redemption of Shares--Dreyfus TeleTransfer Privilege" in
each of the Funds' Prospectuses.
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing
agencies and savings associations, as well as from participants in the New
York Stock Exchange Medallion Signature Program, the Securities Transfer
Agents Medallion Program ("STAMP"), and the Stock Exchanges Medallion
Program. Guarantees must be signed by an authorized signatory of the
guarantor and "Signature-Guaranteed" must appear with the signature. The
Transfer Agent may request additional documentation from corporations,
executors, administrators, trustees or guardians, and may accept other
suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to
signature-guarantees, please call one of the telephone numbers listed on
the cover.
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of a Portfolio,
limited in amount during any 90-day period to the lesser of $250,000 or 1%
of the value of such Portfolio's net assets at the beginning of such
period. Such commitment is irrevocable without the prior approval of the
Securities and Exchange Commission. In the case of requests for
redemption in excess of such amount, the Fund's Board of Directors
reserves the right to make payments in whole or in part in securities or
other assets in case of an emergency or any time a cash distribution would
impair the liquidity of the Portfolio to the detriment of the existing
shareholders. In this event, the securities would be valued in the same
manner as the portfolio of the Portfolio is valued. If the recipient sold
such securities, brokerage charges would be incurred.
Suspension of Redemptions. The right of redemption may be suspended
or the date of payment postponed (a) during any period when the New York
Stock Exchange is closed (other than customary weekend and holiday
closings), (b) when trading in the markets the Fund ordinarily utilizes is
restricted, or when an emergency exists as determined by the Securities
and Exchange Commission so that disposal of the Fund's investments or
determination of its net asset value is not reasonably practicable, or (c)
for such other periods as the Securities and Exchange Commission by order
may permit to protect the Fund's shareholders.
FUND EXCHANGES
The following information supplements and should be read in
conjunction with the section in each Fund Prospectus entitled "Fund
Exchanges."
Shares of other Portfolios of the Fund or other funds purchased by
exchange will be purchased on the basis of relative net asset value per
share as follows:
A. Exchanges for shares of funds that are offered without a sales
load will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged
for shares of other funds sold with a sales load, and the
applicable sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged
without a sales load for shares of other funds sold without a
sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through reinvestment
of dividends or distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load
applicable to the Offered Shares exceeds the maximum sales load
that could have been imposed in connection with the Purchased
Shares (at the time the Purchased Shares were acquired), without
giving effect to any reduced loads, the difference will be
deducted.
To accomplish an exchange under item D above, shareholders must
notify the Transfer Agent of their prior ownership of fund shares and
their account number.
To request an exchange, an investor must give exchange instructions
to the Transfer Agent in writing or by telephone. The ability to issue
exchange instructions by telephone is given to all Fund shareholders
automatically, unless the investor checks the relevant "No" box on the
Account Application, indicating that the investor specifically refuses
this Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions from any
person representing himself or herself to be the investor, and reasonably
believed by the Transfer Agent to be genuine. Telephone exchanges may be
subject to limitations as to the amount involved or the number of
telephone exchanges permitted. Shares issued in certificate form are not
eligible for telephone exchange. Investors will be charged a $5.00 fee
for each exchange made out of the Fund, which will be deducted from the
investor's account and paid to the Transfer Agent. Exchanges out of the
Fund pursuant to the Exchange Privilege are limited on a per Portfolio
basis to four per calendar year.
To establish a personal retirement plan by exchange, shares of the
fund being exchanged must have a value of at least the minimum initial
investment required for the fund into which the exchange is being made.
For Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up under a Simplified
Employee Pension Plan ("SEP-IRAs") with only one participant, the minimum
initial investment is $750. To exchange shares held in Corporate Plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum
initial investment is $100 if the plan has at least $2,500 invested among
the funds in the Dreyfus Family of Funds. To exchange shares held in
personal retirement plans, the shares exchanged must have a current value
of at least $100.
This Privilege is available to shareholders resident in any state in
which shares of the fund being acquired may legally be sold. Shares may
be exchanged only between accounts having identical names and other
identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund's Exchange Privilege
may be modified or terminated at any time upon notice to shareholders.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in
conjunction with the section in each Fund Prospectus entitled "How to Buy
Shares."
Amortized Cost Pricing. The information contained in this section is
applicable only to each Short Term Portfolio. The valuation of each Short
Term Portfolio's portfolio securities is based upon their amortized cost
which does not take into account unrealized capital gains or losses. This
involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates on the market value of the
instrument. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Portfolio would receive if it sold the
instrument.
The Fund's Board of Directors has established, as a particular
responsibility within the overall duty of care owed to the Short Term
Portfolios' investors, procedures reasonably designed to stabilize each
Portfolio's price per share as computed for purposes of sales and
redemptions at $1.00. Such procedures include review of each Short Term
Portfolio's portfolio holdings by the Fund's Board of Directors, at such
intervals as it deems appropriate, to determine whether such Portfolio's
net asset value calculated by using available market quotations or market
equivalents deviates from $1.00 per share based on amortized cost. Market
quotations and market equivalents used in such review are obtained from an
independent pricing service (the "Service") approved by the Fund's Board
of Directors. The Service values each Short Term Portfolio's investments
based on methods which include consideration of: yields or prices of
municipal bonds of comparable quality, coupon, maturity and type;
indications of values from dealers; and general market conditions. The
Service also may employ electronic data processing techniques and/or a
matrix system to determine valuations.
The extent of any deviation between a Short Term Portfolio's net
asset value based upon available market quotations or market equivalents
and $1.00 per share based on amortized cost will be examined by the Fund's
Board of Directors. If such deviation exceeds 1/2 of 1%, the Fund's Board
of Directors will consider what actions, if any, will be initiated. In
the event the Fund's Board of Directors determines that a deviation exists
which may result in material dilution or other unfair results to investors
or existing shareholders, it has agreed to take such corrective action as
it regards as necessary and appropriate, including: selling portfolio
instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; withholding dividends or paying
distributions from capital or capital gains; redeeming shares in kind; or
establishing a net asset value per share by using available market
quotations or market equivalents.
Valuation of Portfolio Securities. The information contained in this
section is applicable to each Longer Term Portfolio only. The investments
of each Longer Term Portfolio are valued each business day by an
independent pricing service (the "Service") approved by the Fund's Board
of Directors. When, in the judgment of the Service, quoted bid prices for
investments are readily available and are representative of the bid side
of the market, these investments 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 bonds of comparable quality, coupon,
maturity and type; indications as to values from dealers; and general
market conditions. The Service may employ electronic data processing
techniques and/or a matrix system to determine valuations. The Service's
procedures are reviewed by the Portfolio's officers under the general
supervision of the Fund's Board of Directors. Expenses and fees,
including the management fee (reduced by the expense limitation, if any),
are accrued daily and are taken into account for the purpose of
determining the net asset value of Portfolio shares.
New York Stock Exchange Closings. The holidays (as observed) on
which the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in
conjunction with the section in each Fund Prospectus entitled "Dividends,
Distributions and Taxes."
In the case of a Short Term Portfolio's shares redeemed in connection
with any exchange or redemption fees, a shareholder will recognize a
capital loss in the amount of the fee paid. In the case of Longer Term
Portfolio's shares redeemed in connection with any exchange or redemption
fees, such fees will either decrease a capital gain or increase a capital
loss realized in such disposition. In general, such loss will be treated
as a short-term capital loss if the shares were held for one year or less,
or, in the case of shares held for greater than one year, a long-term
capital loss.
The Internal Revenue Code of 1986, as amended (the "Code"), provides
that if a shareholder has not held his Fund shares for more than six
months (or such shorter time as the Internal Revenue Service may prescribe
by regulation) and has received an exempt-interest dividend with respect
to such shares, any loss incurred on the sale of such shares will be
disallowed to the extent of the exempt-interest dividend received.
Ordinarily, gains and losses realized from portfolio transactions
will be treated as capital gain or loss. However, all or a portion of any
gains realized from the sale or other disposition of certain market
discount bonds will be treated as ordinary income under Section 1276 of
the Code. In addition, all or a portion of the gain realized from
engaging in "conversion transactions" may be treated as ordinary income
under Section 1258 of the Code. "Conversion transactions" are defined to
include certain forward, futures, option and "straddle" transactions,
transactions marketed or sold to produce capital gains, or transactions
described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, gain or loss realized by the Longer
Term Portfolio from certain financial futures and options transactions
will be treated as 60% long-term capital gain or loss and 40% short-term
capital gain or loss. Gain or loss will arise upon exercise or lapse of
such futures and options as well as from closing transactions. In
addition, such futures and options remaining unexercised at the end of a
Longer Term Portfolio's taxable year will be treated as sold for their
fair market value, resulting in additional gain or loss to a Longer Term
Portfolio characterized in the manner described above.
Offsetting positions held by a Longer Term Portfolio involving
certain futures and options transactions may be considered, for tax
purposes, to constitute "straddles." "Straddles" are defined to include
"offsetting positions" in actively traded personal property. The tax
treatment of "straddles" is governed by Sections 1092 and 1258 of the
Code, which, in certain circumstances, overrides or modifies the
provisions of Section 1256. As such, all or a portion of any short or
long-term capital gain from certain "straddle" transactions may be
recharacterized to ordinary income.
If a Longer Term Portfolio were treated as entering into "straddles"
by reason of its engaging in certain futures or options transactions, such
"straddles" would be characterized as "mixed straddles" if the futures or
options transactions comprising a part of such "straddles" were governed
by Section 1256 of the Code. The Portfolio may make one or more elections
with respect to "mixed straddles." Depending on which election is made,
if any, the results to the Portfolio may differ. If no election is made,
to the extent the "straddle" rules apply to positions established by the
Portfolio, losses realized by the Portfolio will be deferred to the extent
of unrealized gain in any offsetting positions. Moreover, as a result of
the "straddle" and "conversion transaction" rules, short-term capital
losses on "straddle" positions may be recharacterized as long-term capital
losses and long-term capital gains may be recharacterized to short-term
capital gains or ordinary income.
Investment by the Longer Term Portfolio in securities issued at a
discount or providing for deferred interest or for payment of interest in
the form of additional obligations could, under special tax rules, affect
the amount, timing and character of distributions to shareholders. For
example, a Longer Term Portfolio could be required to take into account
annually a portion of the discount (or deemed discount) at which such
securities were issued and to distribute such portion in order to maintain
its qualifications as a regulated investment company. In that case, the
Portfolio may have to dispose of securities which it might otherwise have
continued to hold in order to generate cash to satisfy these distribution
requirements.
PERFORMANCE INFORMATION
The following information supplements and should be read in
conjunction with the section in the National Portfolios' Prospectus
entitled "Performance Information and in the New Jersey Portfolio's
Prospectus entitled "Yield Information."
Money Market Portfolio. For the seven-day period ended August 31,
1995, the Money Market Portfolio's yield was ( )% and effective yield
was ( )%. These yields reflect the waiver of a portion of the
management fee by the Manager, without which the Money Market Portfolio's
seven-day yield and effective yield for the period ended August 31, 1995
would have been ( )% and ( )%, respectively. See "Management of the
Fund" in the National Portfolios' Prospectus.
Based upon the highest 1995 Federal income tax rate of 39.6%, the
Money Market Portfolio's tax equivalent yield for the seven-day period
ended August 31, 1995 was ( )%. Without the waiver of a portion of the
management fee then in effect, the Money Market Portfolio's tax equivalent
yield for the seven-day period ended August 31, 1995 would have been ( )%.
As of the date of this Statement of Additional Information, the New
Jersey Portfolio had not commenced operations.
Short Term Portfolios. Yield is computed in accordance with a
standardized method which involves determining the net change in the value
of a hypothetical pre-existing Fund account having a balance of one share
at the beginning of a seven calendar day period for which yield is to be
quoted, dividing the net change by the value of the account at the
beginning of the period to obtain the base period return, and annualizing
the results (i.e., multiplying the base period return by 365/7). The net
change in the value of the account reflects the value of additional shares
purchased with dividends declared on the original share and any such
additional shares and fees that may be charged to shareholder accounts, in
proportion to the length of the base period and the Portfolio's average
account size, but does not include realized gains and losses or unrealized
appreciation and depreciation. Effective yield is computed by adding 1 to
the base period return (calculated as described above), raising that sum
to a power equal to 365 divided by 7, and subtracting 1 from the result.
Longer Term Portfolios. The Intermediate Bond Portfolio's yield for
the 30-day period ended August 31, 1995 was ( )%. The Bond Fund's
yield for the 30-day period ended August 31, 1995 was ( )%. These
yields reflect the waiver of the management fee and absorption of expenses
by the Manager, without which the Intermediate Bond Portfolio's yield for
the 30-day period ended August 31, 1995 would have been ( )% and the
Bond Portfolio's yield for the 30-day period ended August 31, 1995 would
have been ( )%. See "Management of the Fund" in the National
Portfolios' Prospectus. Current yield for a Longer Term Portfolio is
computed pursuant to a formula which operates as follows: the amount of
the Portfolio's expenses accrued for a 30-day period (net of
reimbursements) is subtracted from the amount of the dividends and
interest earned (computed in accordance with regulatory requirements) by
it during the period. That result is then divided by the product of: (a)
the average daily number of shares outstanding during the period that were
entitled to receive dividends, and (b) the net asset value per share on
the last day of the period less any undistributed earned income per share
reasonably expected to be declared as a dividend shortly thereafter. The
quotient is then added to 1, and that sum is raised to the 6th power,
after which 1 is subtracted. The current yield is then arrived at by
multiplying the result by 2.
Based upon a 1995 Federal income tax rate of 39.6%, the Intermediate
Bond Portfolio's tax equivalent yield for the 30-day period ended August
31, 1995 was ( )% and the Bond Portfolio's tax equivalent yield for the
30-day period ended August 31, 1995 was ( )%. Without the waiver
discussed above then in effect, the Intermediate Bond Portfolio's tax
equivalent yield for the 30-day period ended August 31, 1995 would have
been ( )% and the Bond Portfolio's tax equivalent yield for the 30-day
period ended August 31, 1995 would have been ( )%.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result.
The Intermediate Bond Portfolio's total return for the period May 5,
1994 (commencement of operations) to August 31, 1995 was ( )%. The
Bond Portfolio's total return for the period May 6, 1994 (commencement of
operations) to August 31, 1995 was ( )%. Without the waiver
discussed above then in effect, returns would have been lower. Total
return is calculated by subtracting the amount of the Portfolio's net
asset value per share at the beginning of a stated period from the net
asset value per share at the end of the period (after giving effect to the
reinvestment of dividends and distributions during the period), and
dividing the result by the net asset value per share at the beginning of
the period.
All Portfolios. Tax equivalent yield is computed by dividing that
portion of the yield or effective yield (calculated as described above)
which is tax exempt by 1 minus a stated tax rate and adding the quotient
to that portion, if any, of the yield of the Portfolio that is not tax
exempt.
The tax equivalent yield noted above represents the application of
the highest Federal marginal personal income tax rate presently in effect.
The tax equivalent figure, however, does not include the potential effect
of any state or local (including, but not limited to, county, district or
city) taxes, including applicable surcharges. In addition, there may be
pending legislation which could affect such stated tax rate or yields.
Each investor should consult its tax adviser, and consider its own factual
circumstances and applicable tax laws, in order to ascertain the relevant
tax equivalent yield.
Yields will fluctuate and are not necessarily representative of
future results. Each investor should remember that yield is a function of
the type and quality of the instruments in the portfolio, portfolio
maturity and operating expenses. An investor's principal in a Portfolio
is not guaranteed. See "Determination of Net Asset Value" for a
discussion of the manner in which a Portfolio's price per share is
determined.
From time to time, a Portfolio may use hypothetical tax equivalent
yields or charts in its advertising. These hypothetical yields or charts
will be used for illustrative purposes only and are not indicative of the
Portfolio's past or future performance.
Advertising materials for a Portfolio also may refer to or discuss
then current or past economic conditions, developments, and/or events,
including those relating to actual or proposed legislation. From time to
time, advertising materials for a Portfolio also may refer to statistical
or other information concerning trends relating to investment companies,
as compiled by industry associations such as the Investment Company
Institute. From time to time, advertising materials for a Portfolio may
refer to Morningstar, Inc. ratings and related analysis supporting the
ratings.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to
parties acting as either principal or agent. Newly-issued securities
ordinarily are purchased directly from the issuer or from an underwriter;
other purchases and sales usually are placed with those dealers from which
it appears that the best price or execution will be obtained. Usually no
brokerage commissions, as such, are paid by a Portfolio for such purchases
and sales, although the price paid usually includes an undisclosed
compensation to the dealer acting as agent. The prices paid to
underwriters of newly-issued securities usually include a concession paid
by the issuer to the underwriter, and purchases of after-market securities
from dealers ordinarily are executed at a price between the bid and asked
price. No brokerage commissions have been paid by any Portfolio to date.
Transactions are allocated to various dealers by a Portfolio's
portfolio managers in their best judgment. The primary consideration is
prompt and effective execution of orders at the most favorable price.
Subject to that primary consideration, dealers may be selected for
research, statistical or other services to enable the Manager to
supplement its own research and analysis with the views and information of
other securities firms.
Research services furnished by brokers through which a Portfolio
effects securities transactions may be used by the Manager in advising
other funds it advises and, conversely, research services furnished to the
Manager by brokers in connection with other funds the Manager advises may
be used by the Manager in advising a Portfolio. Although it is not
possible to place a dollar value on these services, it is the opinion of
the Manager that the receipt and study of such services should not reduce
the overall expenses of its research department.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in
conjunction with the section in each Fund Prospectus entitled "General
Information."
Each Portfolio share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and
non-assessable. Portfolio shares are of one class and have equal rights
as to dividends and in liquidation. Shares have no preemptive,
subscription or conversion rights and are freely transferable.
The Fund will send annual and semi-annual financial statements to all
its shareholders.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT, COUNSEL
AND INDEPENDENT AUDITORS
The Bank of New York, 90 Washington Street, New York, New York 10286,
is the Fund's custodian. The Shareholder Services Group, Inc., a
subsidiary of First Data Corporation, P.O. Box 9671, Providence, Rhode
Island 02940-9671, is the Fund's transfer and dividend disbursing agent.
Neither The Bank of New York nor The Shareholder Services Group, Inc. has
any part in determining the investment policies of the Fund or which
portfolio securities are to be purchased or sold by the Fund.
Stroock & Stroock & Lavan, 7 Hanover Square, New York, New York
10004-2696, as counsel for the Fund, has rendered its opinion as to
certain legal matters regarding the due authorization and valid issuance
of the shares of Common Stock being sold pursuant to the Fund's
Prospectuses.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
APPENDIX A
RISK FACTORS -- INVESTING IN NEW JERSEY MUNICIPAL OBLIGATIONS
This Appendix A relates to the New Jersey Portfolio only.
The following information constitutes only a brief summary, does not
purport to be a complete description, and is based on information drawn
from official statements relating to securities offerings of the State of
New Jersey and various local agencies available as of the date of this
Statement of Additional Information. While the Fund has not independently
verified this information, it has no reason to believe that such
information is not correct in all material respects.
New Jersey's economic base is diversified, consisting of a variety of
manufacturing, construction and service industries, supplemented by rural
areas with selective commercial agriculture. New Jersey's principal
manufacturing industries produce chemicals, pharmaceutical, electrical
equipment and instruments, machinery, printing and food products. Other
economic activities include services, wholesale and retail trade,
insurance, tourism, petroleum refining and truck farming.
While New Jersey's economy continued to expand during the late 1980s,
the level of growth slowed considerably after 1987. Initially, this
slowdown was an expected response to the State's tight labor market and
the decrease in the number of persons entering the labor force. Late in
the decade, a decline in construction demand and in the rate of growth in
consumer spending as well as continued softness in the State's
manufacturing sector set the stage for recession in New Jersey. By the
beginning of the national recession in July 1990 (according to the
National Bureau of Economic Research), construction activity had already
been declining in New Jersey for nearly two years. As the rapid
acceleration for real estate prices forced many would-be homeowners out of
the market and high non-residential vacancy rates reduced new commitments
for offices and commercial facilities, construction employment began to
decline; also growth had tapered off markedly in the service sectors and
the long-term downward trend of factory employment had accelerated, partly
because of a leveling off of industrial demand nationally. The onset of
recession caused an acceleration of New Jersey's job losses in
construction and manufacturing, as well as an employment downturn in such
previously growing sectors as wholesale trade, retail trade, finance,
utilities and trucking and warehousing. The net effect was a decline in
the State's total nonfarm wage and salary employment from a peak of
3,706,400 in March 1989 to a low of 3,445,000 in March 1992. This loss
has been followed by an employment gain of 118,700 from March 1992 to
September 1994. As a result of the State's recent fiscal weakness, S&P,
in July 1991, lowered its rating of the State's general obligation debt
from AAA to AA+.
Reflecting the downturn, the rate of unemployment in the State rose
from a low of 3.6% during the first quarter of 1989 to a recessionary peak
of 9.3% during 1992. Since then, the unemployment rate fell to 6.7%
during the fourth quarter of 1993. The jobless rate averaged 7.1% during
the first nine months of 1994. In the first nine months of 1994, relative
to the same period a year ago, job growth took place in services (3.5%)
and construction (5.7%), more moderate growth took place in trade (1.9%),
transportation and utilities (1.2%) and finance/insurance/real estate
(1.4%), while manufacturing and government declined (by 1.5% and 0.1%,
respectively). The net result was a 1.6% increase in average employment
during the first nine months of 1994 compared to the first nine months of
1993.
The fiscal year ending June 30, 1995 Appropriations Act forecasts
Sales and Use Tax collections for fiscal year 1995 of $3.98 billion, a
5.3% increase from unaudited revenue for Fiscal Year 1994. Unaudited
revenue for fiscal year 1994 for the Sales and Use Tax of $3.778 billion
represents a 3.5% increase from actual receipts for fiscal year 1993.
The fiscal year 1995 Appropriations Act forecasts Gross Income Tax
collections for Fiscal Year 1995 of $4.582 billion, a 2.4% increase from
unaudited revenue for fiscal year 1994. Included in the fiscal year 1995
Gross Income Tax forecast is a 5% reduction of personal income tax rates
effective January 1, 1994 and a further 10% reduction of personal income
tax rates effective January 1, 1995. The fiscal year 1995 Gross Income
Tax estimates a $549 million reduction related to these tax cuts.
Unaudited revenue for fiscal year 1994 for the Gross Income Tax of $4.475
billion represents a 2.9% increase from actual receipts for fiscal year
1993.
The fiscal year 1995 Appropriations Act forecasts Corporation
Business Tax collections for fiscal year 1995 of $915 million, a 14%
decrease from unaudited revenue for fiscal year 1994. Included in the
Corporation Business Tax forecast is a reduction in the Corporation
Business Tax rate from 9.375% to 9.0% of net New Jersey income. Unaudited
revenue for fiscal year 1994 for the Corporation Business Tax of $1.063
billion, represents a 10.6% increase from actual receipts for fiscal 1993.
The fiscal year 1995 Appropriations Act forecasts Other Miscellaneous
Taxes Fees and Revenues collections for fiscal year 1995 of $1.338
billion, represents a 15.6% decrease from unaudited revenue for fiscal
year 1994 for Other Miscellaneous Taxes, Fees and Revenues. Included in
the Other Miscellaneous Taxes Fees and Revenues forecast is a decline of
$426 million in the Public Utility Gross receipts and Franchise tax in
accordance with the collection date changes that were legislated in 1991.
In connection with the current fiscal year 1995 budget, certain
unions and individual plaintiffs have filed a lawsuit concerning the
funding of certain retirement systems.
Should revenues be less than the amount anticipated in the budget for
a fiscal year, the Governor may, pursuant to statutory authority, prevent
any expenditure under any appropriation. There are additional means by
which the Governor may ensure that the State is operated efficiently and
does not incur a deficit. No supplemental appropriation may be enacted
after adoption of an appropriations act except where there are sufficient
revenues on hand or anticipated, as certified by the Governor, to meet
such appropriation. In the past when actual revenues have been less than
the amount anticipated in the budget, the Governor has exercised her
plenary powers leading to, among other actions, implementation of a hiring
freeze for all State departments and the discontinuation of programs for
which appropriations were budgeted but not yet spent.
The State appropriated approximately $15.492 billion and $15.291
billion for fiscal 1994 and 1995, respectively. Of the $15.492 billion
appropriated in fiscal year 1995 from the General Fund, the Property Tax
Relief Fund, the Casino Control Funds, the Casino Revenue Fund and
Gubernatorial Elections Fund, $5.782 billion (37.8%) is appropriated for
State Aid to Local Governments, $3.762 billion (24.6%) is appropriated for
Grants-in-Aid (payments to individuals or public or private agencies for
benefits to which a recipient is entitled by law or for the provision of
service on behalf of the State), $5.203 billion (34.0%) for Direct State
Services, $103.5 million (0.7%) for Debt Services on State general
obligation bonds and $440.6 million (2.9%) for Capital Construction.
Should tax revenues be less than the amount anticipated in the Budget
for a fiscal year, the Government may, pursuant to statutory authority,
prevent an expenditure under any appropriation. The appropriations for
fiscal year 1994 are unaudited and for fiscal year 1995 as revised
estimates, as of November 7, 1994, from the amount contained in the fiscal
year 1995 Appropriations Act.
The State has made appropriations for principal and interest payments
for general obligation bonds for fiscal years 1991 through 1994 in the
amounts of $388.5 million, $410.6 million, $444.3 million and $119.9
million, respectively. For fiscal year 1995, $103.5 million has been
appropriated for principal and interest payments for general obligation
bonds.
As of June 30, 1993, the outstanding general obligation bonded
indebtedness of the State was approximately $3.6 billion.
APPENDIX B
Description of certain S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer
or obtained by S&P from other sources it considers reliable, and will
include: (1) likelihood of default-capacity and willingness of the
obligor as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation; (2) nature and provisions of
the obligation; and (3) protection afforded by, and relative position of,
the obligation in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws affecting
creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small
degree.
A
Principal and interest payments on bonds in this category are
regarded as safe. This rating describes the third strongest capacity for
payment of debt service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local
economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse
circumstances, any one such weakness might impair the ability of the
issuer to meet debt obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management
performance appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several
of the above factors could contribute to a lesser capacity for payment of
debt service. The difference between A and BBB rating is that the latter
shows more than one fundamental weakness, or one very substantial
fundamental weakness, whereas the former shows only one deficiency among
the factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the
pledged revenues could show substantial variations with the revenue flow
possibly being subject to erosion over time. Basic security provisions
are no more than adequate. Management performance could be stronger.
BB, B, CCC, CC
Debt rated BB, B, CCC or CC is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the lowest degree of speculation and CC the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payment.
B
Debt rated B has a greater vulnerability to default but presently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions would likely impair
capacity or willingness to pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic
conditions to meet timely payments of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC rating.
C
The rating C typically is applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or
repayment of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus or
minus sign designation, which is used to show relative standing within the
major rating categories, except in the AAA (Prime Grade) category.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to
possess overwhelming safety characteristics are given a plus (+) sign
designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to
pay principal and interest.
Commercial Paper Ratings
The rating A is the highest rating and is assigned by S&P to issues
that are regarded as having the greatest capacity for timely payment.
Issues in this category are delineated with the numbers 1, 2 and 3 to
indicate the relative degree of safety. Paper rated A-1 indicates that
the degree of safety regarding timely payment is either overwhelming or
very strong. Those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign designation.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa
Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba
Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection
of interest and principal payments may be very moderate, and therefore not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca
Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major ratings categories, except in the Aaa category
and in the categories below B. The modifier 1 indicates a ranking for the
security in the higher end of a rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower
end of a rating category.
Municipal Note Ratings
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade (MIG). Such ratings
recognize the difference between short-term credit risk and long-term
risk. Factors affecting the liquidity of the borrower and short-term
cyclical elements are critical in short-term ratings, while other factors
of major importance in bond risk, long-term secular trends for example,
may be less important over the short run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG or, if the demand
feature is not rated, as NR. Short-term ratings on issues with demand
features are differentiated by the use of the VMIG symbol to reflect such
characteristics as payment upon periodic demand rather than fixed maturity
dates and payment relying on external liquidity. Additionally, investors
should be alert to the fact that the source of payment may be limited to
the external liquidity with no or limited legal recourse to the issuer in
the event the demand is not met.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when
Moody's assigns a MIG or VMIG rating, all categories define an investment
grade situation.
MIG 1/VMIG 1
This description denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity
for repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins
in earnings coverage of fixed financial charges and high internal cash
generation and well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have
a strong capacity for repayment of short-term promissory obligations.
This ordinarily will be evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and coverage ratios, while
sound, will be more subject to variation. Capitalization characteristics,
while still appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The
ratings take into consideration special features of the issue, its
relationship to other obligations of the issuer, the current financial
condition and operative performance of the issuer and of any guarantor, as
well as the political and economic environment that might affect the
issuer's future financial strength and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable
to foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A
Bonds rated A are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal
is considered to be strong, but may be more vulnerable to adverse changes
in economic conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have an adverse
impact on these bonds and, therefore, impair timely payment. The
likelihood that the ratings of these bonds will fall below investment
grade is higher than for bonds with higher ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt service
requirements.
B
Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if
not remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default in payment of
interest and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or imminent default of
interest and/or principal payments. Such bonds are extremely speculative
and should be valued on the basis of their ultimate recovery value in
liquidation or reorganization of the obligor. DDD represents the highest
potential for recovery on these bonds and D represents lowest potential
for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to
indicate the relative position of a credit within the rating category.
Plus and minus signs, however, are not used in the AAA category covering
12-36 months or the DDD, DD or D categories.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and
municipal and investment notes.
Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings
on the existence of liquidity necessary to meet the issuer's obligations
in a timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
F-1+.
F-2
Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the F-1+ and F-1 categories.
DREYFUS BASIC MUNICIPAL FUND, INC.
PART C. OTHER INFORMATION
_________________________
Item 24. Financial Statements and Exhibits. - List
_______ _________________________________________
(a) Financial Statements:
Included in Part A of the Registration Statement:
Financial Highlights--for the period December 16, 1991
(commencement of operations) to August 31, 1992 and for
the fiscal years ended August 31, 1993, 1994 and 1995
for the Money Market Portfolio; and for the periods May
5 and 6, 1994 (commencement of operations) to August 31,
1994, and for the fiscal year ended August 31, 1995, for
the Intermediate Bond Portfolio and Bond Portfolio,
respectively.
Included in Part B of the Registration Statement:
The National Portfolios Only.
Statement of Investments--as of August 31, 1995.
Statement of Assets and Liabilities--as of August 31,
1995.
Statement of Operations--for the year ended August 31,
1995.
Statement of Changes in Net Assets--Money Market
Portfolio for the years ended August 31, 1994 and August
31, 1995. Intermediate Bond and Bond Portfolio. For the
periods May 5 and 6, 1994 (commencement of operations,
respectively) to August 31, 1994 and the year ended
August 31, 1995.
Notes to Financial Statements
Report of Ernst & Young LLP, Independent Auditors, dated
October __, 1995.
Notes to Financial Statements
Schedules No. I through VII and other financial statement information, for
which provision is made in the applicable accounting regulations of the
Securities and Exchange Commission are either omitted because they are not
required under the related instructions, they are inapplicable, or the
required information is presented in the financial statements or notes which
are included in Part B of the Registration Statement.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
(b) Exhibits:
(1) Articles of Incorporation dated August 8, 1991 and Articles of
Amendment thereto are incorporated by reference to Exhibit (1) of
Post-Effective Amendment No. 3 to the Registration Statement,
filed on December 15, 1993.
Articles of Amendment dated October 28, 1994 are incorporated by
reference to Exhibit (1) of Post-Effective Amendment No. 6 to the
Registration Statement, filed on December 16, 1994.
(2) By-Laws are incorporated by reference to Exhibit (2) of Post-
Effective Amendment No. 3 to the Registration Statement, filed on
December 15, 1993.
(5) Management Agreement is incorporated by reference to Exhibit (5)
of Post-Effective Amendment No. 6 to the Registration Statement
filed on October 27, 1994.
(6) Distribution Agreement is incorporated by reference to Exhibit (6)
of Post-Effective Amendment No. 6 to the Registration Statement
filed on October 27, 1994.
(8)(a) Form of revised Custody Agreement is incorporated by
reference to Exhibit 8(a) of Post-Effective Amendment No. 4 to
the Registration Statement, filed on February 16, 1994.
(8)(b) Forms of Sub-Custodian Agreements are incorporated by reference to
Exhibit 8(b) of Post-Effective Amendment No. 3 to the Registration
Statement, filed on December 15, 1993.
(9) Revised Shareholder Services Plan is incorporated by reference to
Exhibit (9) of Post-Effective Amendment No. 6 to the Registration
Statement filed on October 27, 1994.
(10) Opinion and Consent of Stroock & Stroock & Lavan is incorporated
by reference to Exhibit (10) of Post-Effective Amendment No. 3 to
the Registration Statement, filed on December 15, 1993.
(11) Consent of Ernst & Young LLP.
(16) Schedule of Computation of Performance Data as to the Money Market
Portfolio is incorporated by reference to Exhibit (16) of Post-
Effective Amendment No. 3 to the Registration Statement, filed on
December 15, 1993.
Schedules of Computation of Performance Data as to the Longer Term
Portfolios are incorporated by reference to Exhibit (16) of Post-
Effective Amendment No. 7 to the Registration Statement, filed on
December 16, 1994.
Other Exhibits
______________
(a) Power of Attorney for Joseph S. DiMartino. Other Powers
of Attorney for David W. Burke, Samuel Chase, Joni
Evans, Arnold S. Hiatt, David J. Mahoney and Burton N.
Wallack, Directors; and for Marie E. Connolly, President
and Treasurer of the Fund are incorporated by reference
to the Other Exhibits section of Post-Effective
Amendment No. 7 to the Registration Statement, filed on
December 16, 1994.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
(b) Certificate of Assistant Secretary is incorporated by
reference to the Other Exhibits section of Post-
Effective Amendment No. 7 to the Registration Statement,
filed on December 16, 1994.
Item 25. Persons Controlled by or under Common Control with Registrant.
_______ ______________________________________________________________
Not Applicable
Item 26. Number of Holders of Securities.
_______ ________________________________
(1) (2)
Number of Record
Title of Class Holders as of __________, 1995
______________ _______________________________
Money Market Intermediate Bond
Portfolio Bond Portfolio Portfolio
____________ ____________ ______
Common Stock
(Par value $.001)
Item 27. Indemnification
_______ _______________
The Statement as to the general effect of any contract,
arrangements or statute under which a director, officer,
underwriter or affiliated person of the Registrant is insured or
indemnified in any manner against any liability which may be
incurred in such capacity, other than insurance provided by any
director, officer, affiliated person or underwriter for their own
protection, is incorporated by reference to Item 27 of Pre-
Effective Amendment No.1, filed in December 1991.
Reference is also made to the Distribution Agreement filed as
Exhibit 6 to Post-Effective Amendment No. 6 filed on October 27, 1994.
Item 28. Business and Other Connections of Investment Adviser.
_______ ____________________________________________________
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business
consists primarily of providing investment management services
as the investment adviser and manager for sponsored investment
companies registered under the Investment Company Act of 1940
and as an investment adviser to institutional and individual
accounts. Dreyfus also serves as sub-investment adviser to
and/or administrator of other investment companies. Dreyfus
Service Corporation, a wholly-owned subsidiary of Dreyfus,
served primarily as distributor of shares of investment
companies sponsored by Dreyfus and of investment companies for
which Dreyfus acts as sub-investment adviser and administrator
prior to August 24, 1994. Dreyfus Management, Inc., another
wholly-owned subsidiary, provides investment management services
to various pension plans, institutions and individuals.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees of
Skillman Foundation.
Member of The Board of Vintners Intl.
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
ALVIN E. FRIEDMAN Senior Adviser to Dillon, Read & Co. Inc.
Director 535 Madison Avenue
New York, New York 10022;
Director and member of the Executive
Committee of Avnet, Inc.**
LAWRENCE M. GREENE Director:
Director Dreyfus America Fund
JULIAN M. SMERLING None
Director
DAVID B. TRUMAN Educational consultant;
Director Past President of the Russell Sage Foundation
230 Park Avenue
New York, New York 10017;
Past President of Mount Holyoke College
South Hadley, Massachusetts 01075;
DAVID B. TRUMAN Former Director:
(cont'd) Student Loan Marketing Association
1055 Thomas Jefferson Street, N.W.
Washington, D.C. 20006;
Former Trustee:
College Retirement Equities Fund
730 Third Avenue
New York, New York 10017
HOWARD STEIN Chairman of the Board:
Chairman of the Board and Dreyfus Acquisition Corporation*;
Chief Executive Officer The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Chairman of the Board and Chief Executive
Officer:
Major Trading Corporation*;
Director:
Avnet, Inc.**;
Dreyfus America Fund++++;
The Dreyfus Fund International
Limited+++++;
World Balanced Fund+++;
Dreyfus Partnership Management,
Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Precious Metals, Inc.*;
Dreyfus Service Organization, Inc.*;
Seven Six Seven Agency, Inc.*;
Trustee:
Corporate Property Investors
New York, New York;
W. KEITH SMITH Chairman and Chief Executive Officer:
Vice Chairman of the Board The Boston Company
One Boston Place
Boston, Massachusetts 02108
Vice Chairman of the Board:
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
ROBERT E. RILEY Director:
President, Chief Dreyfus Service Corporation*;
Operating Officer, Former Executive Vice President:
and a Director Prudential Investment Corporation
751 Board Street
Newark, New Jersey 07102
STEPHEN E. CANTER Former Chairman and Chief Executive Officer:
Vice Chairman and Kleinwort Benson Investment Management
Chief Investment Officer, Americas Inc.*;
and a Director
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Director:
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++'
Dreyfus Service Corporation*;
President:
The Boston Company
One Boston Place
Boston, Massachusetts 02108;
Laurel Capital Advisors
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Group Holdings, Inc.
Executive Vice President
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258;
Boston Safe Deposit & Trust
One Boston Place
Boston, Massachusetts 02108
PHILIP L. TOIA Chairman of the Board and Trust Investment
Vice Chairman-Operations Officer:
and Administration The Dreyfus Trust Company+++;
Chairman of the Board and Chief Executive
Officer:
Major Trading Corporation*;
Director:
The Dreyfus Security Savings Bank F.S.B.+;
Dreyfus Service Corporation*;
Seven Six Seven Agency, Inc.*;
President and Director:
Dreyfus Acquisition Corporation*;
The Dreyfus Consumer Credit Corporation*;
Dreyfus-Lincoln, Inc.*;
Dreyfus Management, Inc.*;
Dreyfus Personal Management, Inc.*;
Dreyfus Partnership Management, Inc.+;
Dreyfus Service Organization*;
The Truepenny Corporation*;
PHILIP L. TOIA Formerly, Senior Vice President:
(cont'd) The Chase Manhattan Bank, N.A. and
The Chase Manhattan Capital Markets
Corporation
One Chase Manhattan Plaza
New York, New York 10081
BARBARA E. CASEY President:
Vice President- Dreyfus Retirement Services Division;
Dreyfus Retirement Executive Vice President:
Services Boston Safe Deposit & Trust Co.
One Boston Place
Boston, Massachusetts 02108;
DIANE M. COFFEY None
Vice President-
Corporate Communications
ELIE M. GENADRY President:
Vice President- Institutional Services Division of Dreyfus
Institutional Sales Service Corporation*;
Broker-Dealer Division of Dreyfus Service
Corporation*;
Group Retirement Plans Division of Dreyfus
Service Corporation;
Executive Vice President:
Dreyfus Service Corporation*;
Dreyfus Service Organization, Inc.*;
Vice President:
The Dreyfus Trust Company++;
HENRY D. GOTTMANN Executive Vice President:
Vice President-Retail Dreyfus Service Corporation*;
Sales and Service Vice President:
Dreyfus Precious Metals*;
DANIEL C. MACLEAN Director, Vice President and Secretary:
Vice President and General Dreyfus Precious Metals, Inc.*;
Counsel Director and Vice President:
The Dreyfus Consumer Credit Corporation*;
Director and Secretary:
Dreyfus Partnership Management, Inc.*;
Major Trading Corporation*;
The Truepenny Corporation+;
Director:
The Dreyfus Trust Company++;
DANIEL C. MACLEAN Secretary:
(cont'd) Seven Six Seven Agency, Inc.*;
JEFFREY N. NACHMAN None
Vice President-Mutual Fund
Accounting
WILLIAM F. GLAVIN, JR. Senior Vice President:
Vice President-Corporate The Boston Company Advisors, Inc.
Development 53 State Street
Exchange Place
Boston, Massachusetts 02109
KATHERINE C. WICKHAM Formerly, Assistant Commissioner:
Vice President- Department of Parks and Recreation of the
Human Resources City of New York
830 Fifth Avenue
New York, New York 10022
MARK N. JACOBS Vice President, Secretary and Director:
Vice President-Fund Lion Management, Inc.*;
Legal and Secretary Secretary:
The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.*;
Major Trading Corporation*;
The Truepenny Corporation*
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation
Services One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
MAURICE BENDRIHEM Treasurer:
Controller Dreyfus Partnership Management, Inc.*;
Dreyfus Service Organization, Inc.*;
Seven Six Seven Agency, Inc.*;
The Truepenny Corporation*;
Controller:
Dreyfus Acquisition Corporation*;
The Dreyfus Trust Company++;
The Dreyfus Consumer Credit Corporation*;
Assistant Treasurer:
Dreyfus Precious Metals*
Formerly, Vice President-Financial Planning,
Administration and Tax:
Showtime/The Movie Channel, Inc.
1633 Broadway
New York, New York 10019
ELVIRA OSLAPAS Assistant Secretary:
Assistant Secretary Dreyfus Service Corporation*;
Dreyfus Management, Inc.*;
Dreyfus Acquisition Corporation, Inc.*;
The Truepenny Corporation+;
______________________________________
* The address of the business so indicated is 200 Park Avenue, New
York, New York 10166.
** The address of the business so indicated is 80 Cutter Mill Road,
Great Neck, New York 11021.
+ The address of the business so indicated is Atrium Building, 80 Route
4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss
Boulevard, Uniondale, New York 11556-0144.
+++ The address of the business so indicated is One Rockefeller Plaza,
New York, New York 10020.
++++ The address of the business so indicated is 2 Boulevard Royal,
Luxembourg.
+++++ The address of the business so indicated is Nassau, Bahama Islands.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Strategy Fund, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC Money Market Fund, Inc.
7) Dreyfus BASIC Municipal Fund, Inc.
8) Dreyfus BASIC U.S. Government Money Market Fund
9) Dreyfus California Intermediate Municipal Bond Fund
10) Dreyfus California Tax Exempt Bond Fund, Inc.
11) Dreyfus California Tax Exempt Money Market Fund
12) Dreyfus Capital Value Fund, Inc.
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) The Dreyfus Convertible Securities Fund, Inc.
18) Dreyfus Edison Electric Index Fund, Inc.
19) Dreyfus Florida Intermediate Municipal Bond Fund
20) Dreyfus Florida Municipal Money Market Fund
21) Dreyfus Focus Funds, Inc.
22) The Dreyfus Fund Incorporated
23) Dreyfus Global Bond Fund, Inc.
24) Dreyfus Global Growth, L.P. (A Strategic Fund)
25) Dreyfus GNMA Fund, Inc.
26) Dreyfus Government Cash Management
27) Dreyfus Growth and Income Fund, Inc.
28) Dreyfus Growth Opportunity Fund, Inc.
29) Dreyfus Institutional Money Market Fund
30) Dreyfus Institutional Short Term Treasury Fund
31) Dreyfus Insured Municipal Bond Fund, Inc.
32) Dreyfus Intermediate Municipal Bond Fund, Inc.
33) Dreyfus International Equity Fund, Inc.
34) Dreyfus Investors GNMA Fund
35) The Dreyfus/Laurel Funds, Inc.
36) The Dreyfus/Laurel Funds Trust
37) The Dreyfus/Laurel Tax-Free Municipal Funds
38) The Dreyfus/Laurel Investment Series
39) The Dreyfus Leverage Fund, Inc.
40) Dreyfus Life and Annuity Index Fund, Inc.
41) Dreyfus LifeTime Portfolios, Inc.
42) Dreyfus Liquid Assets, Inc.
43) Dreyfus Massachusetts Intermediate Municipal Bond Fund
44) Dreyfus Massachusetts Municipal Money Market Fund
45) Dreyfus Massachusetts Tax Exempt Bond Fund
46) Dreyfus Michigan Municipal Money Market Fund, Inc.
47) Dreyfus Money Market Instruments, Inc.
48) Dreyfus Municipal Bond Fund, Inc.
49) Dreyfus Municipal Cash Management Plus
50) Dreyfus Municipal Money Market Fund, Inc.
51) Dreyfus New Jersey Intermediate Municipal Bond Fund
52) Dreyfus New Jersey Municipal Bond Fund, Inc.
53) Dreyfus New Jersey Municipal Money Market Fund, Inc.
54) Dreyfus New Leaders Fund, Inc.
55) Dreyfus New York Insured Tax Exempt Bond Fund
56) Dreyfus New York Municipal Cash Management
57) Dreyfus New York Tax Exempt Bond Fund, Inc.
58) Dreyfus New York Tax Exempt Intermediate Bond Fund
59) Dreyfus New York Tax Exempt Money Market Fund
60) Dreyfus Ohio Municipal Money Market Fund, Inc.
61) Dreyfus 100% U.S. Treasury Intermediate Term Fund
62) Dreyfus 100% U.S. Treasury Long Term Fund
63) Dreyfus 100% U.S. Treasury Money Market Fund
64) Dreyfus 100% U.S. Treasury Short Term Fund
65) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
66) Dreyfus Pennsylvania Municipal Money Market Fund
67) Dreyfus Short-Intermediate Government Fund
68) Dreyfus Short-Intermediate Municipal Bond Fund
69) Dreyfus Short-Term Income Fund, Inc.
70) The Dreyfus Socially Responsible Growth Fund, Inc.
71) Dreyfus Strategic Growth, L.P.
72) Dreyfus Strategic Income
73) Dreyfus Strategic Investing
74) Dreyfus Tax Exempt Cash Management
75) The Dreyfus Third Century Fund, Inc.
76) Dreyfus Treasury Cash Management
77) Dreyfus Treasury Prime Cash Management
78) Dreyfus Variable Investment Fund
79) Dreyfus-Wilshire Target Funds, Inc.
80) Dreyfus Worldwide Dollar Money Market Fund, Inc.
81) General California Municipal Bond Fund, Inc.
82) General California Municipal Money Market Fund
83) General Government Securities Money Market Fund, Inc.
84) General Money Market Fund, Inc.
85) General Municipal Bond Fund, Inc.
86) General Municipal Money Market Fund, Inc.
87) General New York Municipal Bond Fund, Inc.
88) General New York Municipal Money Market Fund
89) Pacifica Funds Trust -
Pacific American Money Market Portfolio
Pacific American U.S. Treasury Portfolio
90) Peoples Index Fund, Inc.
91) Peoples S&P MidCap Index Fund, Inc.
92) Premier Insured Municipal Bond Fund
93) Premier California Municipal Bond Fund
94) Premier Global Investing, Inc.
95) Premier GNMA Fund
96) Premier Growth Fund, Inc.
97) Premier Municipal Bond Fund
98) Premier New York Municipal Bond Fund
99) Premier State Municipal Bond Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Operating Officer and Compliance Treasurer
Officer
Joseph F. Tower, III+ Senior Vice President, Treasurer Assistant
and Chief Financial Officer Treasurer
John E. Pelletier+ Senior Vice President, General Vice President
Counsel, Secretary and Clerk and Secretary
Frederick C. Dey++ Senior Vice President Vice President
and Assistant
Treasurer
Eric B. Fischman++ Vice President and Associate Vice President
General Counsel and Assistant
Secretary
Lynn H. Johnson+ Vice President None
Ruth D. Leibert++ Assistant Vice President Assistant
Secretary
Paul Prescott+ Assistant Vice President None
Leslie M. Gaynor+ Assistant Treasurer None
Mary Nelson+ Assistant Treasurer None
John J. Pyburn++ Assistant Treasurer Assistant
Treasurer
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is One Exchange Place, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 30. Location of Accounts and Records
________________________________
1. The Shareholder Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. The Bank of New York
90 Washington Street
New York, New York 10286
3. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a director or directors when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares of common stock and in
connection with such meeting to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 relating to
shareholder communications.
(2) To furnish each person to whom a prospectus is delivered with a
copy of the Fund's latest Annual Report to Shareholders, upon
request and without charge.
SIGNATURES
__________
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York on
the 13th day of September 1995.
DREYFUS BASIC MUNICIPAL FUND, INC.
BY: /s/Marie E. Connolly*
Marie E. Connolly, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to the Registration Statement
has been signed below by the following persons in the capacities and on the
date indicated.
Signatures Title Date
__________________________ ______________________________ __________
/s/Marie E. Connolly* President (Principal Executive 09/13/95
Officer) and Treasurer
Marie E. Connolly (Principal Financial Officer and
Principal Accounting Officer)
/s/David W. Burke* Director 09/13/95
David W. Burke
/s/Samuel Chase* Director 09/13/95
Samuel Chase
/s/Joseph S. DiMartino* Director 09/13/95
Joseph S. DiMartino
/s/Joni Evans* Director 09/13/95
Joni Evans
/s/Gordon J. Davis Director 09/13/95
Gordon J. Davis
/s/Arnold S. Hiatt* Director 09/13/95
Arnold S. Hiatt
/s/David J. Mahoney* Director 09/13/95
David J. Mahoney
/s/Burton N. Wallack* Director 09/13/95
Burton N. Wallack
*BY: /s/Eric B. Fischman
Eric B. Fischman
Attorney-in-Fact
DREYFUS BASIC MUNICIPAL FUND, INC.
EXHIBIT INDEX
Exhibit No.
24(b)(11) Consent of Independent Auditors
Other Exhibits Power of Attorney
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Custodian, Transfer and Dividend Disbursing
Agent, Counsel and Independent Auditors" and to the use of our reports
dated October 4, 1994 on Dreyfus BASIC Municipal Fund, Inc. (formerly
Dreyfus BASIC Municipal Money Market Fund) (comprising the Money Market
Portfolio, Intermediate Bond Portfolio and Bond Portfolio), in this
Registration Statement (Form N-1A 811-6377) of Dreyfus BASIC Municipal
Fund, Inc.
ERNST & YOUNG LLP
New York, New York
September 13, 1995
Other Exhibit
POWER OF ATTORNEY
The undersigned hereby constitute and appoint Frederick C. Dey, Eric B.
Fischman, Ruth D. Leibert and John E. Pelletier and each of them, with full
power to act without the other, his or her true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him or her
and in his or her name, place and stead, in any and all capacities (until
revoked in writing) to sign any and all amendments to the Registration
Statement of Dreyfus BASIC Municipal Fund, Inc. (including post-effective
amendments and amendments thereto), and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act
and thing ratifying and confirming all that said attorneys-in-fact and agents
or any of them, or their or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
/s/ June 23, 1995
_______________________________________
/s/Joseph S. DiMartino
_________________________________
Joseph S. DiMartino
