DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Dreyfus BASIC
Municipal Money Market Portfolio. For its annual reporting period ended
August 31, 1996, your Fund provided an annualized yield of 3.36%. Income
dividends exempt from Federal personal income taxes of approximately $.034
per share were paid to shareholders.* Reinvesting these dividends and
calculating the effect of this compounding resulted in an annualized
effective yield of 3.41%.**
THE ECONOMY
Reports throughout the year of strong increases in new jobs and the
decline in the unemployment rate have been widely viewed as harbingers of
wage pressures that could lead to undesirable inflationary consequences.
Despite this, inflation, both at the consumer and at the production level,
has remained at the modest 3% level. There has been evidence that the economy
may be feeling the effects of the rise in long-term rates earlier in the
year, particularly in the consumer sector. Nevertheless, measures of consumer
confidence are high and the Index of Leading Economic Indicators continues to
predict economic expansion.
Ever alert to signs of price pressures that could rekindle inflation, the
Federal Reserve Board ("the Fed") left the Fed Funds rate unchanged at 5.25%
at its Open Market Committee meeting on August 20. The Fed has not raised
short-term interest rates since February 1, 1995. Since then, monetary policy
has tended to lower the cost of short-term credit. The last time this
occurred was when the Fed lowered the Fed Funds rate by a quarter of a
percentage point in January 1996.
MARKET ENVIRONMENT/PORTFOLIO ACTIVITY
If one were to trace the trend in short-term municipal rates over the
last six months of this period, the direction would mirror closely the
changes in supply and demand conditions. The six-month cycle would reflect:
low short-term yields in February due to strong money market fund cash flows
after the New Year, price weakness/higher rates in April as investors tapped
their money market funds to pay income taxes, market strength in late
June/early July as $9 billion in notes maturities left the market, price
weakness and buying opportunities in late July due to inflationary concerns
and the added supply of summer financings. These technical influences
continue to be the overriding factor affecting municipal money rates.
These conditions, coupled with actions taken by the Federal Reserve
Board, provide the framework for our investment strategy - both on a
day-to-day basis and looking ahead over a one-year horizon. During the first
few months of 1996, as a result of uncertainty surrounding potential tax
reform, variable rate demand notes (which represent a significant portion of
your Portfolio's investments) benefited from unusually high yields. While the
concerns were only temporary, they translated, for a time, into a more
attractive after-tax rate of return than was available to the tax-exempt
investor on taxable instruments with similar maturities. During this period,
the purchase of attractively yielding commercial paper in the 90-day range
also allowed us to capture returns similar to those on one-year issues
without a significant extension of average maturity - enabling us to wait out
a lower yield environment in anticipation of higher rates.
The opportunity to commit to the longer note issues appeared in July and
August and may continue to be available in the coming weeks as some issuers
have yet to return to the market with their traditional financings. We did,
to some extent, participate in these offerings, which resulted in an
extension of your
Fund's average maturity to the 75-day range. We will take advantage of
additional buying opportunities that represent an attractive return as we
monitor potential Fed activity and any other significant changes in the
municipal money market. All new investments will continue to meet the high
credit quality standards which we require and to provide a significant level
of liquidity, commensurate with the needs of your Fund.
Included in this report is a series of detailed statements about your
Fund's holdings and its financial condition. We hope they are informative.
Please know that we greatly appreciate your continued confidence in the Fund
and in The Dreyfus Corporation.
Very truly yours,
{Richard J. Moynihan, Signature}
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
September 12, 1996
New York, N.Y.
* Some income may be subject to the Federal Alternative Minimum Tax (AMT)
for certain shareholders.
**Annualized effective yield is based upon dividends declared daily and
reinvested monthly.
<TABLE>
<CAPTION>
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
STATEMENT OF INVESTMENTS AUGUST 31, 1996
PRINCIPAL
TAX EXEMPT INVESTMENTS-100.0% AMOUNT VALUE
____________ _____________
<S> <C> <C>
ALABAMA-3.3%
Alabama Industrial Development Authority, SWDR, VRDN (Pine City Fiber Co.
Project)
3.60% (LOC; Barclays Bank) (a,b)........................................ $ 20,000,000 $ 20,000,000
Phenix City Industrial Development Board, Environmental Improvement Revenue,
VRDN
(Mead Coated Board Project) 3.75%, Series A (LOC; Sumitomo Bank) (a,b).. 6,000,000 6,000,000
CALIFORNIA-10.3%
California Higher Education Loan Authority Inc., Student Loan Revenue, VRDN
3.50%, Series C (LOC; Student Loan Marketing Association) (a,b)......... 10,000,000 10,000,000
California Pollution Control Finance Authority, RRR, Refunding, VRDN
(Ultra Power Malaga) 3.55%, Series A (LOC; Bank of America) (a,b)....... 10,100,000 10,100,000
California Public Capital Improvement Financing Authority, Revenue (Pooled
Project)
3.65%, Series C, 9/16/96 (LOC; National Westminster Bank) (b)........... 10,000,000 10,000,000
California School Cash Reserve Program Authority
4.75%, Series A, 7/2/97 (Insured; MBIA)................................. 17,000,000 17,122,669
City of Los Angeles, TRAN 4.50%, 6/19/97.................................... 18,700,000 18,774,607
State of California, RAN 4.50%, Series A, 6/30/97........................... 16,000,000 16,067,471
COLORADO-2.7%
Colorado Student Obligation Bond Authority, Student Loan Revenue, VRDN
3.45%, Series A (LOC; Student Loan Marketing Association) (a,b)......... 15,000,000 15,000,000
Denver Urban Renewal Authority, Tax Increment Revenue (Downtown Denver
Renewal)
4%, Series A, 1/30/97 (Escrowed in; U.S. Treasury Bills)................ 6,260,000 6,260,000
DELAWARE-.3%
Delaware Health Facilities Authority, Revenue, Pooled Loan Program, VRDN
3.45% (BPA; Morgan Guaranty Trust Co. and Insured; MBIA) (a)............ 2,600,000 2,600,000
DISTRICT OF COLUMBIA-.6%
District of Columbia, VRDN (General Fund Recovery)
3.65%, Series B-1 (LOC; Union Bank of Switzerland) (a,b)................ 5,000,000 5,000,000
FLORIDA-3.6%
Dade County, Water and Sewer Systems Revenue, VRDN
3.35% (LOC; Comerica Bank) (a,b)........................................ 6,000,000 6,000,000
Hillsborough County Industrial Development Authority, PCR, VRDN
(Tampa Electric Co. Project) 3.70% (Corp. Guaranty; Tampa Electric Co.) (a) 4,700,000 4,700,000
Putnam County Development Authority, PCR (Seminole Electric Co-op)
3.55%, Series D, 12/15/96 (Corp. Guaranty; National Rural Utility Co-op) 12,585,000 12,585,000
Saint Lucie County, SWDR, VRDN (Florida Light & Power Co. Project)
3.70% (Corp. Guaranty; Florida Light & Power Co.) (a)................... 5,300,000 5,300,000
GEORGIA-7.0%
Fulton County, TAN 4%, 12/31/96............................................. 28,000,000 28,040,599
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
TAX EXEMPT INVESTMENTS (CONTINUED) AMOUNT VALUE
______________ ____________
GEORGIA (CONTINUED)
Rockdale County Development Authority, Industrial Revenue, VRDN
(Liochem Inc. Project) 4% (LOC; Sanwa Bank) (a,b)....................... $ 8,000,000 $ 8,000,000
Savannah Economic Development Authority, Exempt Facility Revenue, VRDN
(Home Depot Project) 3.65%, Series A (Corp. Guaranty; Home Depot) (a)... 20,000,000 20,000,000
INDIANA-5.1%
Indiana Bond Bank, Advanced Funding, 4.25%, Series A-2, 1/9/97.............. 20,000,000 20,051,621
Indiana Bond Bank Reassessment Assistance Program, 4.50%, Series B, 1/30/97. 13,400,000 13,432,300
Indiana Secondary Market Educational Loans Inc., Education Loan Revenue, VRDN
3.55%, Series B (Insured; AMBAC and LOC; Student Loan Marketing
Association) (a,b).......................................................... 7,000,000 7,000,000
IOWA-2.8%
Iowa School Corporation, Warrant Certificates (School Cash Anticipation
Program)
4.25%, Series B, 1/30/97 (Insured; FSA)................................. 7,425,000 7,450,227
Louisa County, PCR, Refunding, VRDN (Midwest Power System Inc. Project) 3.55% (a) 14,900,000 14,900,000
KANSAS-.6%
Butler County, Solid Waste Disposal Facilities Revenue, VRDN
(Texaco Refining and Marketing) 3.70%, Series A (Corp. Guaranty; Texaco Oil) (a) 5,700,000 5,700,000
KENTUCKY-4.2%
City of Carroll, Collateralized Solid Waste Disposal Facilities Revenue, VRDN
(Utilities Co. Project) 3.65%, Series A (a)............................. 23,700,000 23,700,000
Morgantown, IDR (Sumitomo Electric Wire System)
3.75%, 10/1/96 (LOC; Sumitomo Bank) (b)................................. 10,000,000 10,000,000
LOUISIANA-6.5%
New Orleans Aviation Board, Revenue, VRDN (Passenger Facility Charge
Projects)
4.15% (LOC: Banque Paribas and Canadian Imperial Bank of Commerce) (a,b) 13,400,000 13,400,000
Plaquemines Parish, Environmental Revenue, Refunding, VRDN
(British Petroleum Exploration and Oil) 3.70% (Corp. Guaranty; British
Petroleum) (a).............................................................. 12,200,000 12,200,000
Plaquemines Port, Harbor and Terminal District, Port Facilities Revenue
(International Marine Terminal Project)
3.25%, Series A, 3/17/97 (LOC; Morgan Guaranty Trust Co.) (b)........... 9,875,000 9,875,000
West Baton Rouge Parish Industrial District Number 3, Revenue, VRDN
(Dow Chemical Co. Project)
3.70%, Series A (Corp. Guaranty; Dow Chemical Co.) (a).................. 16,600,000 16,600,000
MICHIGAN-1.1%
Grand Rapids Economic Development Corporation, Revenue, VRDN
(Amway/Grand Plaza Hotel Facility #1) 3.45% (LOC; Old Kent Bank and
Trust) (a,b)................................................................ 4,000,000 4,000,000
Michigan Higher Education Student Loan Authority, Revenue, VRDN
3.45%, Series XII-F (Insured; AMBAC and Liquidity Agreement; Sumitomo Bank) (a) 5,000,000 5,000,000
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
TAX EXEMPT INVESTMENTS (CONTINUED) AMOUNT VALUE
_____________ ____________
MINNESOTA-2.0%
Minnesota Higher Education Coordinating Board, Revenue, VRDN
3.70% (LOC; Norwest Bank of Minnesota) (a,b)............................ $ 16,000,000 $ 16,000,000
MISSOURI-1.2%
Missouri Higher Education Loan Authority, Student Loan Revenue, Refunding,
VRDN
3.75%, Series B (Insured; MBIA and SBPA; NMB Post Bank Group) (a)....... 9,500,000 9,500,000
NEBRASKA-1.9%
Nebraska Investment Finance Authority, Single Family Housing Revenue
3.85%, Series C, 5/1/97 (LOC; Federal Farm Credit Bank) (b)............. 15,000,000 15,000,000
NEVADA-2.8%
Washoe County, Water Facility Revenue, VRDN (Sierra Pacific Power Co.
Project)
3.65% (LOC; Union Bank of Switzerland) (a,b)............................ 22,100,000 22,100,000
NEW JERSEY-1.6%
Monmouth County Improvement Authority, Revenue, VRDN
(Pooled Government Loan Program) 3.30% (LOC; Union Bank of Switzerland)
(a,b)...................................................... 3,000,000 3,000,000
New Jersey Turnpike Authority, Turnpike Revenue, Refunding, VRDN
3%, Series D (Insured; FGIC and LOC; Societe Generale) (a,b)............ 9,800,000 9,800,000
OHIO-6.5%
Cincinnati City School District Board, BAN 4.40%, 9/20/96................... 17,730,000 17,733,535
Ohio Housing Financing Agency, Mortgage Revenue:
3.40%, Series A-3, 3/3/97 (GIC; American Insurance Group)............... 18,000,000 18,000,000
4%, Series B-3, 8/13/97 (GIC; Trinity Fund Corp.)....................... 13,000,000 13,000,000
Student Loan Funding Corporation, Student Loan Revenue, VRDN
3.45%, Series A-3 (LOC; National Westminster Bank) (a,b)................ 3,400,000 3,400,000
OKLAHOMA-1.3%
Holdenville Industrial Authority, Correctional Facility Revenue, VRDN
3.55% (LOC; First Union National Bank) (a,b)............................ 10,000,000 10,000,000
PENNSYLVANIA-3.4%
Cambria County Hospital Development Authority, HR (Mercy Hospital Johnstown Project)
4.25%, 3/1/97 (LOC; Bank of Tokyo-Mitsubishi) (b)....................... 8,230,000 8,230,000
Delaware Valley Regional Finance Authority, Local Government Revenue, VRDN
3.50%, Series D (LOC; Marine Midland Bank) (a,b)........................ 10,300,000 10,300,000
Pennsylvania Energy Development Authority, Energy Development Revenue, VRDN
(B & W Ebensburg Project) 3.45% (LOC; Swiss Bank Corp.) (a,b)........... 8,500,000 8,500,000
RHODE ISLAND-1.0%
Rhode Island Student Loan Authority, Student Loan Revenue, VRDN
3.50%, Series 1 (LOC; National Westminster Bank) (a,b).................. 8,000,000 8,000,000
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
TAX EXEMPT INVESTMENTS (CONTINUED) AMOUNT VALUE
_______________ ____________
TENNESSEE-1.2%
Tennessee Housing Development Agency (Homeowner Program)
3.85%, 5/29/97 (Escrowed in; U.S. Treasury Securities).................. $ 10,000,000 $ 9,985,437
TEXAS-20.5%
Brazos River Authority, PCR, VRDN (Utilities Electric Co.):
3.65%, Series A (LOC; Morgan Guaranty Trust Co.) (a,b).................. 15,000,000 15,000,000
Refunding 3.70%, Series C (LOC; Swiss Bank Corp.) (a,b)................. 15,000,000 15,000,000
Brazos River Harbor Navigation District, Harbor Revenue, VRDN
(Dow Chemical Co. Project) 3.70% (Corp. Guaranty; Dow Chemical Co.) (a). 22,300,000 22,300,000
El Paso Industrial Development Authority Inc., IDR, VRDN
(El Paso School District Limited Project) 3.70% (LOC; Chemical Bank) (a,b) 3,600,000 3,600,000
Gulf Coast Industrial Development Authority, VRDN:
Marine Terminal Revenue (Amoco Oil Co. Project)
3.65% (Corp. Guaranty; Amoco Credit Corp.) (a)........................ 34,700,000 34,700,000
SWDR (Citgo Petroleum Corp. Project) 3.70% (LOC; Wachovia Bank of Georgia) (a,b) 9,100,000 9,100,000
Gulf Coast Waste Disposal Authority, PCR, VRDN (Amoco Oil Co. Project) SWDR,
Refunding 3.65% (Corp. Guaranty; Amoco Credit Corp.) (a)................ 10,000,000 10,000,000
North Texas Higher Education Authority Inc., Student Loan Revenue, Refunding,
VRDN
3.55%, Series A (LOC; Student Loan Marketing Association) (a,b)......... 10,500,000 10,500,000
Panhandle Plains Higher Education Authority Inc., Student Loan Revenue, VRDN
3.45%, Series A (LOC; Student Loan Marketing Association) (a,b)......... 26,000,000 26,000,000
Port Development Corporation, IDR, VRDN (Pasadena Terminals Project)
3.75% (LOC; ABN-Amro Bank) (a,b)........................................ 2,420,000 2,420,000
State of Texas, TRAN 4.75%, 8/29/97......................................... 15,000,000 15,114,418
UTAH-4.4%
Intermountain Power Agency, Power Supply:
3.93%, Series E, 6/16/97 (LOC; Morgan Guaranty Trust Co.) (b)........... 10,000,000 10,000,000
3.55%, Series E, 9/16/96 (LOC; Swiss Bank Corp.) (b).................... 10,000,000 10,000,000
CP 3.65%, Series E, 10/17/96 (LOC; Bank of America) (b)................. 10,400,000 10,400,000
Utah Board of Regents, Student Loan Revenue, Refunding, VRDN
3.55%, Series A (LOC; Student Loan Marketing Association) (a,b)......... 5,000,000 5,000,000
VIRGINIA-2.2%
Richmond Industrial Development Authority, VRDN (Cogentrix of Richmond
Project):
Exempt Facility Revenue 4%, Series A (LOC; Banque Paribas) (a,b)........ 3,400,000 3,400,000
Revenue:
4%, Series A (LOC; Banque Paribas) (a,b).............................. 8,300,000 8,300,000
4%, Series B (LOC; Banque Paribas) (a,b).............................. 6,000,000 6,000,000
WISCONSIN-1.0%
State of Wisconsin, Operating Notes 4.50%, 6/16/97.......................... 8,060,000 8,095,502
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
TAX EXEMPT INVESTMENTS (CONTINUED) AMOUNT VALUE
_____________ _____________
WYOMING-.9%
Uinta County, PCR (Amoco Standard Oil Co.) 3.98%, Series A, 12/1/96......... $ 7,455,000 $ 7,458,911
_______________ _____________
TOTAL INVESTMENTS (cost $799,793,360)....................................... $799,797,297
============
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF ABBREVIATIONS
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
BAN Bond Anticipation Notes Insurance Corporation
BPA Bond Purchase Agreement PCR Pollution Control Revenue
CP Commercial Paper RAN Revenue Anticipation Notes
FGIC Financial Guaranty Insurance Company RRR Resources Recovery Revenue
FSA Financial Security Assurance SBPA Standby Bond Purchase Agreement
GIC Guaranteed Investment Contract SWDR Solid Waste Disposal Revenue
HR Hospital Revenue TAN Tax Anticipation Notes
IDR Industrial Development Revenue TRAN Tax and Revenue Anticipation Notes
LOC Letter of Credit VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- ---------- -------- ------------------ -------------------
<S> <C> <S> <C>
F1+/F1 VMIG1/MIG1, P1 (d) SP1+/SP1, A1+/A1 (d) 92.8%
AAA/AA (e) Aaa/Aa (e) AAA/AA (e) 3.7
Not Rated (f) Not Rated (f) Not Rated (f) 3.5
_________
100.0%
=========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(b) Secured by letters of credit. At August 31, 1996, 47.7% of the
Series' net assets are backed by letters of credit issued by domestic
banks, foreign banks and government agencies.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) P1 and A1 are the highest ratings assigned tax exempt commercial
paper by Moody's and Standard & Poor's, respectively.
(e) Notes which are not F, MIG or SP rated are represented by bond
ratings of the issuers.
(f) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Board of Directors to be of comparable
quality to those rated securities in which the Series may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $799,793,360)-see statement..................................... $799,797,297
Interest receivable..................................................... 5,766,346
Prepaid expenses........................................................ 35,218
___________
805,598,861
LIABILITIES:
Due to The Dreyfus Corporation and affiliates........................... $ 243,718
Due to Custodian........................................................ 1,066,733
Accrued expenses and other liabilities.................................. 31,379 1,341,830
___________
NET ASSETS ................................................................ $804,257,031
============
REPRESENTED BY:
Paid-in capital......................................................... $804,368,262
Accumulated net realized (loss) on investments.......................... (115,168)
Accumulated gross unrealized appreciation on investments................ 3,937
____________
NET ASSETS at value applicable to 804,368,262 shares outstanding
(3 billion shares of $.001 par value Common Stock authorized)........... $804,257,031
============
NET ASSET VALUE, offering and redemption price per share
($804,257,031 / 804,368,262 shares)..................................... $1.00
============
See notes to financial statements.
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS YEAR ENDED AUGUST 31, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $37,514,646
EXPENSES:
Management fee-Note 2(a).............................................. $4,972,635
Shareholder servicing costs-Note 2(b)................................. 619,017
Registration fees..................................................... 80,030
Professional fees..................................................... 77,745
Custodian fees........................................................ 77,482
Directors' fees and expenses-Note 2(c)................................ 15,772
Prospectus and shareholders' reports.................................. 12,538
Miscellaneous......................................................... 45,229
___________
TOTAL EXPENSES.................................................... 5,900,448
Less-reduction in management fee due to undertakings-Note 2(a)........ 2,153,580
___________
NET EXPENSES...................................................... 3,746,868
____________
INVESTMENT INCOME-NET............................................. 33,767,778
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized (loss) on investments-Note 1(b)............................ $ (23,748)
Net unrealized appreciation on investments.............................. 3,937
_____________
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS................. (19,811)
_____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $33,747,967
=============
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
------------------------------------------
1995 1996
---------------- --------------------
<S> <C> <C>
OPERATIONS:
Investment income-net............................................. $ 38,916,102 $ 33,767,778
Net realized (loss) on investments................................ (37,281) (23,748)
Net unrealized appreciation on investments for the year........... -- 3,937
____________________ __________________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS............ 38,878,821 33,747,967
____________________ __________________
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net............................................. (38,916,102) (33,767,778)
____________________ __________________
CAPITAL STOCK TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold..................................... 1,715,223,924 1,301,637,332
Dividends reinvested.............................................. 36,684,023 31,816,712
Cost of shares redeemed........................................... (1,679,813,715) (1,628,610,840)
____________________ __________________
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS 72,094,232 (295,156,796)
____________________ __________________
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... 72,056,951 (295,176,607)
NET ASSETS:
Beginning of year................................................. 1,027,376,687 1,099,433,638
____________________ __________________
End of year....................................................... $ 1,099,433,638 $ 804,257,031
===================== ===================
</TABLE>
See notes to financial statements.
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
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 Series' financial statements.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
________________________________________________________________
PER SHARE DATA: 1992(1) 1993 1994 1995 1996
---------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_________ _________ ________ ________ ________
INVESTMENT OPERATIONS;
Investment income-net........................ .024 .027 .026 .037 .034
_________ _________ ________ ________ ________
DISTRIBUTIONS;
Dividends from investment income-net......... (.024) (.027) (.026) (.037) (.034)
_________ _________ ________ ________ ________
Net asset value, end of year................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========= ========= =========
TOTAL INVESTMENT RETURN.......................... 3.41%(2) 2.73% 2.60% 3.80% 3.42%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... - .02% .09% .14% .38%
Ratio of net investment income to average net assets 3.22%(2) 2.64% 2.58% 3.73% 3.40%
Decrease reflected in above expense ratios due to
undertakings by the Manager................ .77%(2) .64% .50% .45% .22%
Net Assets, end of year (000's Omitted)...... $228,708 $685,540 $1,027,377 $1,099,434 $804,257
(1) From December 16, 1991 (commencement of operations) to August 31, 1992.
(2) Annualized.
</TABLE>
See notes to financial statements.
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus BASIC Municipal Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as an open-end management investment
company and operates as a series company currently offering four series,
including Dreyfus BASIC Municipal Money Market Portfolio (the "Series"). The
Series is a non-diversified portfolio. The Series' investment objective is to
provide investors with as high a level of current income exempt from Federal
income tax as is consistent with the preservation of capital and maintenance
of liquidity. The Dreyfus Corporation ("Manager") serves as the Fund's
investment adviser. The Manager is a direct subsidiary of Mellon Bank, N.A.
Premier Mutual Fund Services, Inc. acts as the distributor of the Fund's
shares, which are sold to the public without a sales charge.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
It is the Series' policy to maintain a continuous net asset value per
share of $1.00; the Series has adopted certain investment, portfolio
valuation and dividend and distribution policies to enable it to do so. There
is no assurance, however, that the Series will be able to maintain a stable
net asset value per share of $1.00.
The Series' financial statements are prepared in accordance with
generally accepted accounting principles which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
(A) PORTFOLIO VALUATION: Investments are valued at amortized cost, which
has been determined by the Fund's Board of Directors to represent the fair
value of the Series' investments.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Interest income, adjusted
for amortization of premiums and original issue discounts on investments, is
earned from settlement date and recognized on the accrual basis. Realized
gain and loss from securities transactions are recorded on the identified
cost basis. Cost of investments represents amortized cost.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain, if any, are normally declared and
paid annually, but the Series may make distributions on a more frequent basis
to comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the Series not to distribute such gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
The Series has an unused capital loss carryover of approximately $90,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to August 31, 1996. The
carryover does not include net realized securities losses from November 1,
1995 through August 31, 1996, which are treated, for Federal income tax
purposes, as arising in fiscal 1997. If not applied, $1,700 of the carryover
expires in fiscal 2001, $2,000 expires in fiscal 2002, $50,300 expires in
fiscal 2003 and $36,000 expires in fiscal 2004.
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At August 31, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .50 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides that if in any full fiscal year the aggregate expenses of the
Series, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series, the Series may deduct from payments to be made
to the Manager, or the Manager will bear the amount of such excess to the
extent required by state law. The most stringent state expense limitation
applicable to the Series presently requires reimbursement of expenses in any
full fiscal year that such expenses (exclusive of certain expenses as
described above) exceed 21\2% of the first $30 million, 2% of the next $70
million and 11\2% of the excess over $100 million of the value of the Series'
average net assets in accordance with California "blue sky" regulations.
However, the Manager had undertaken from September 1, 1995 through January
31, 1996 to reduce the management fee paid by the Series, to the extent that
the Series' aggregate annual expenses (exclusive of certain expenses as
described above) exceeded specified annual percentages of the Series' average
daily net assets. The Manager has currently undertaken, until such time as it
gives shareholders at least 90 days' notice to the contrary, to reduce the
management fee paid by the Series, to the extent that the Series' aggregate
expenses (exclusive of certain expenses as described above) exceed an annual
rate of .45 of 1% of the value of the Series' average daily net assets. The
reduction in management fee, pursuant to the undertakings, amounted to
$2,153,580 during the year ended August 31, 1996.
The undertaking may be extended, modified or terminated by the Manager,
provided that the resulting expense reimbursement would not be less than the
amount required pursuant to the agreement.
(B) Pursuant to the Series' Shareholder Services Plan, the Series
reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of the
Manager, an amount not to exceed an annual rate of .25 of 1% of the value of
the Series' 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 Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. During the year ended August 31, 1996,
the Series was charged an aggregate of $507,804 pursuant to the Shareholder
Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer,
Inc., a wholly-owned subsidiary of the Manager, under a transfer agency
agreement for providing personnel and facilities to perform transfer agency
services for the Series. Such compensation amounted to $40,173 during the
period ended August 31, 1996.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus BASIC Municipal Money
Market Portfolio (one of the Series constituting Dreyfus BASIC Municipal
Fund, Inc.) as of August 31, 1996, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of
the two years in the period then ended, and financial highlights for each of
the years indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1996 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus BASIC Municipal Money Market Portfolio at August 31,
1996, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
(Ernst & Young, LLP signature logo)
New York, New York
October 3, 1996
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Series hereby designates all the
dividends paid from investment income-net during the fiscal year ended August
31, 1996 as "exempt-interest dividends" (not generally subject to regular
Federal income tax).
(Dreyfus Lion "D" Logo)
DREYFUS BASIC MUNICIPAL
MONEY MARKET PORTFOLIO
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 122AR968
(Dreyfus Logo)
BASIC Municipal
Money Market
Portfolio
Annual Report
August 31, 1996
insert
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Dreyfus BASIC
Municipal Money Market Portfolio. For its annual reporting period ended
August 31, 1996, your Fund provided an annualized yield of 3.36%. Income
dividends exempt from Federal personal income taxes of approximately $.034
per share were paid to shareholders.* Reinvesting these dividends and
calculating the effect of this compounding resulted in an annualized
effective yield of 3.41%.**
THE ECONOMY
Reports throughout the year of strong increases in new jobs and the
decline in the unemployment rate have been widely viewed as harbingers of
wage pressures that could lead to undesirable inflationary consequences.
Despite this, inflation, both at the consumer and at the production level,
has remained at the modest 3% level. There has been evidence that the economy
may be feeling the effects of the rise in long-term rates earlier in the
year, particularly in the consumer sector. Nevertheless, measures of consumer
confidence are high and the Index of Leading Economic Indicators continues to
predict economic expansion.
Ever alert to signs of price pressures that could rekindle inflation, the
Federal Reserve Board ("the Fed") left the Fed Funds rate unchanged at 5.25%
at its Open Market Committee meeting on August 20. The Fed has not raised
short-term interest rates since February 1, 1995. Since then, monetary policy
has tended to lower the cost of short-term credit. The last time this
occurred was when the Fed lowered the Fed Funds rate by a quarter of a
percentage point in January 1996.
MARKET ENVIRONMENT/PORTFOLIO ACTIVITY
If one were to trace the trend in short-term municipal rates over the
last six months of this period, the direction would mirror closely the
changes in supply and demand conditions. The six-month cycle would reflect:
low short-term yields in February due to strong money market fund cash flows
after the New Year, price weakness/higher rates in April as investors tapped
their money market funds to pay income taxes, market strength in late
June/early July as $9 billion in notes maturities left the market, price
weakness and buying opportunities in late July due to inflationary concerns
and the added supply of summer financings. These technical influences
continue to be the overriding factor affecting municipal money rates.
These conditions, coupled with actions taken by the Federal Reserve
Board, provide the framework for our investment strategy - both on a
day-to-day basis and looking ahead over a one-year horizon. During the first
few months of 1996, as a result of uncertainty surrounding potential tax
reform, variable rate demand notes (which represent a significant portion of
your Portfolio's investments) benefited from unusually high yields. While the
concerns were only temporary, they translated, for a time, into a more
attractive after-tax rate of return than was available to the tax-exempt
investor on taxable instruments with similar maturities. During this period,
the purchase of attractively yielding commercial paper in the 90-day range
also allowed us to capture returns similar to those on one-year issues
without a significant extension of average maturity - enabling us to wait out
a lower yield environment in anticipation of higher rates.
The opportunity to commit to the longer note issues appeared in July and
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Dreyfus BASIC
Municipal Bond Portfolio. For its annual reporting period ended August 31,
1996, your portfolio earned a total return, including share price changes,
interest income and capital gain distributions, of 6.17%.* Income dividends
exempt from Federal personal income taxes of approximately $.723 per share
were paid to shareholders.** This is equivalent to an annualized tax-free
distribution rate per share of 5.53%.***
THE ECONOMY
Recent reports indicating some moderation in the rate of economic growth,
low unemployment and benign inflation have so far deferred the
well-anticipated hiking of short-term interest rates by the Federal Reserve
Board's Open Market Committee ("the Fed"). Ever alert to signs of price
pressures that could rekindle inflation, the Central Bank left the Fed Funds
rate unchanged at 5.25% at the Fed's meeting on August 20. The Fed has not
raised short-term interest rates since February 1, 1995. Since then, monetary
policy has tended to lower the cost of short-term credit. Investors have
grown increasingly wary that, as the economy continues to expand, the Federal
Reserve would apply the monetary brakes to ward off higher levels of
inflation. Reports throughout the year of strong increases in new jobs and
the decline in the unemployment rate have been widely viewed as harbingers of
wage pressures that could lead to undesirable inflationary consequences. The
bond market has been particularly volatile in its anticipation of Federal
Reserve restraint - since January, long-term interest rates have risen a full
percentage point. Despite all this, inflation, both at the consumer and at
the production level, has remained subdued. The latest reports indicated that
both the Consumer and Producer Price Indices remained in the 3% range over
the past twelve months. Prices at earlier stages of the manufacturing process
fell over the past two months, lending support to those who expect a flat
inflation rate.
There has been some recent evidence that the economy may be reflecting
the effects of the rise in long-term interest earlier in the year. Retail
sales have slackened of late. In July, housing starts declined for the third
consecutive month and sales of existing homes also fell. On the production
side of the economy, latest reports on industrial output also showed signs of
moderation. In July, factory production rose only .1%, its smallest monthly
increase in four months. Despite these anecdotal signs of slowing, several
indicators of future economic activity remained positive. The Index of
Leading Economic Indicators has been on the rise since early this year, and
the Conference Board's Consumer Confidence Index reached a six-year high in
August. While rising consumer confidence is favorable for business (and
political incumbents), it could complicate the efforts of the Federal Reserve
to maintain balanced economic growth. We remain alert to any indications that
the economy may be entering a phase of undue expansion.
MARKET ENVIRONMENT
As taxable interest rates continued to rise, both municipals and 30-year
U.S. Treasury bonds rose in yield, but municipals at a slower pace. Long-term
general obligation municipal bonds were trading at approximately 87% of
treasuries during the middle of March. By early September, the ratio declined
to approximately 81%. Accordingly, municipal bonds have been selling at an
ever better price than Treasuries. This improvement compared to the
government market can be attributed to the declining
supply of municipal bonds, combined with the diminished possibility of a flat
tax, which was being considered by presidential candidates in early 1996.
Even though municipals are rich all along the yield curve, tax exempt bonds
should remain close to these ratios if interest rates stabilize or continue
to rise because supply should remain low while demand would continue to
improve.
THE PORTFOLIO
Since last writing to you in March 1996, the Fund has chosen to follow
specific investment strategies which have helped to enhance its total return
while maintaining a high level of current income. Specifically, the portfolio
maintained a defensive posture in early 1996, due to a low interest rate
environment. At that time, the Fund purchased premium bonds of a kind that
emphasize current income and have a better ability to protect the principal
price of each bond in a declining market. As the fundamental backdrop for the
municipal market declined from March through June, the Fund concentrated on
slowly purchasing longer maturing discount bonds. These types of bonds were
selling at a substantial discount to the rest of the municipal market because
they were out of favor and hence represented an excellent opportunity to
enhance the value of the Fund. The market had a dramatic improvement in July
and early August so the Fund took the opportunity to generate some gains and
become more defensive. By the middle of August, the markets had reversed
course and were declining again. If interest rates continue to rise, we
currently expect that the Fund will become more constructive and implement a
more aggressive strategy.
Included in this report is a series of detailed statements about your
Fund's holdings and its financial condition. We hope they are informative.
Please know that we greatly appreciate your continued confidence in the Fund
and in The Dreyfus Corporation.
Very truly yours,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
September 12, 1996
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid.
** Some income may be subject to the Federal Alternative Minimum Tax (AMT)
for certain shareholders.
*** Annualized distribution rate per share is based upon dividends per share
paid from net investment income during the period, divided by the net asset
value per share at the end of the period, adjusted for capital gain
distributions.
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO AUGUST 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS BASIC
MUNICIPAL BOND PORTFOLIO AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
[Exhibit A]
Dollars
$11,974
Dreyfus BASIC
Municipal Bond Portfolio
$11,736
Lehman Brothers
Municipal Bond Index*
*Source: Lehman Brothers
[Exhibit A]
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR ENDED FROM INCEPTION (5/6/94)
AUGUST 31, 1996 TO AUGUST 31, 1996
___________________ _________________________
6.17% 8.07%
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus BASIC Municipal
Bond Portfolio on 5/6/94 (Inception Date) to a $10,000 investment made in the
Lehman Brothers Municipal Bond Index on that date. For comparative purposes,
the value of the Index on 4/30/94 is used as the beginning value on 5/6/94.
All dividends and capital gain distributions are reinvested.
The Portfolio invests primarily in municipal securities and its performance
shown in the line graph takes into account fees and expenses. Unlike the
Portfolio, the Lehman Brothers Municipal Bond Index is an unmanaged total
return performance benchmark for the long-term, investment-grade tax exempt
bond market, calculated by using municipal bonds selected to be
representative of the municipal market overall. The Index does not take into
account charges, fees and other expenses which can contribute to the Index
potentially outperforming the Portfolio. Further information relating to
Portfolio performance, including expense reimbursements, if applicable, is
contained in the Financial Highlights section of the Prospectus and elsewhere
in this report.
<TABLE>
<CAPTION>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
STATEMENT OF INVESTMENTS AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-94.4% AMOUNT VALUE
__________ __________
<S> <C> <C>
ALABAMA-4.7%
Alabama Private Colleges and Universities Facilities Authority, Revenue
(Tuskegee University Project) 5.75%, 9/1/2026........................... $ 2,000,000 $1,902,840
Alabama Water Pollution Control Authority, Revolving Fund Loan
6.25%, 8/15/2014 (Insured; AMBAC)....................................... 750,000 773,932
ARIZONA-1.6%
Tuscon, GO 4.90%, 7/1/2013 (a).............................................. 1,000,000 920,670
CALIFORNIA-6.5%
Sacramento Sanitation District Financing Authority, Revenue, Refunding
5.125%, 12/1/2013....................................................... 2,000,000 1,830,400
Walnut Valley, Unified School District 6.50%, 8/1/2019 (Insured; FGIC)...... 1,765,000 1,889,944
COLORADO-2.7%
Colorado Springs, Utility Revenue, Refunding 6.75%, 11/15/2021.............. 500,000 542,210
Denver City and County, Airport Revenue 7%, 11/15/2025...................... 1,000,000 1,021,440
CONNECTICUT-1.9%
Connecticut Health and Educational Facilities Authority, Revenue (Capital Asset Issue)
6.875%, 1/1/2010 (Insured; MBIA)........................................ 1,000,000 1,093,050
FLORIDA-5.4%
Gainesville, Utilities System Revenue 6.50%, 10/1/2022 (Prerefunded; 10/1/2002) (b) 1,000,000 1,107,380
Jacksonville Electric Authority, Revenue, Refunding (Saint John's River)
5.25%, 10/1/2021........................................................ 1,000,000 909,930
Lakeland, Hospital System Revenue (Lakeland Regional Medical Center)
5.25%, 11/15/2025 (Insured; MBIA)....................................... 1,000,000 911,830
Palm Beach County, Solid Waste IDR (Osceola Power Limited Partnership)
6.85%, 1/1/2014......................................................... 200,000 177,660
GEORGIA-.9%
Burke County Development Authority, PCR (Georgia Power Co.-Plant Vogtle)
6.375%, 8/1/2024........................................................ 500,000 506,520
ILLINOIS-2.7%
Cicero, Tax Increment Revenue, Refunding 6.50%, 12/1/2014 (a)............... 500,000 537,310
Robbins, RRR (Robbins Resource Recovery Partners) 9.25%, 10/15/2016......... 1,000,000 997,500
KENTUCKY-1.9%
Trimble County, PCR (Louisville Gas and Electric Co.) 7.625%, 11/1/2020..... 1,000,000 1,094,060
LOUISIANA-.9%
West Feliciana Parish, PCR, Refunding (Gulf States Utilities Co. Project) 8%, 12/1/2024 500,000 531,865
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
__________ _________
MARYLAND-.4%
Maryland Community Development Administration, Department of Housing and
Community Development Revenue (Single Family Program) 6.75%, 4/1/2026... $ 250,000 $ 256,900
MASSACHUSETTS-3.9%
Massachusetts Health and Educational Facilities Authority, Revenue:
(Mt. Auburn Hospital Issue) 6.30%, 8/15/2024 (Insured; MBIA)............ 750,000 774,892
(Williams College Issue) 5.50%, 7/1/2026................................ 1,025,000 971,116
Massachusetts Housing Finance Agency, SFHR 7.125%, 6/1/2025................. 500,000 519,960
MICHIGAN-7.2%
Kalamazoo Hospital Finance Authority, Hospital Facility Revenue, Refunding
(Burgess Medical Center) 6.25%, 6/1/2014 (Insured; FGIC) (a)............ 1,000,000 1,061,380
Lowell Area Schools, Refunding Zero Coupon, 5/1/2016 (Insured; FGIC)........ 1,675,000 517,659
Michigan Building Authority, Revenue, Refunding 5.30%, 10/1/2016
(Insured; AMBAC) (a).................................................... 1,000,000 929,320
Michigan Municipal Bond Authority, Revenue (Local Government Loan Program)
6.125%, 12/1/2018 (Insured; FGIC)....................................... 750,000 768,270
Michigan Public Power Agency, Revenue, Refunding (Belle River Project)
5%, 1/1/2019............................................................ 1,000,000 883,920
MINNESOTA-.4%
Minnesota Housing Finance Agency, SFHR 6.90%, 7/1/2022...................... 250,000 258,477
MISSISSIPPI-1.8%
Claiborne County, PCR, Refunding (System Energy Resources, Inc.) 7.30%, 5/1/2025 1,000,000 1,031,200
NEVADA-.4%
Clark County, IDR, Refunding (Nevada Power Co. Project) 7.20%, 10/1/2022.... 250,000 260,485
NEW HAMPSHIRE-.4%
New Hampshire Housing Finance Authority 6.85%, 7/1/2014..................... 250,000 259,013
NEW JERSEY-2.8%
New Jersey Housing and Mortgage Finance Agency, Home Buyer Revenue
6.70%, 4/1/2016 (Insured; MBIA)......................................... 500,000 524,620
New Jersey Turnpike Authority, Turnpike Revenue, Refunding 6.50%, 1/1/2016.. 1,000,000 1,063,180
NEW YORK-3.0%
Battery Park City Authority, Revenue, Refunding 5.25%, 11/1/2017............ 1,000,000 895,800
New York City Industrial Development Agency, Special Facility Revenue
(American Airlines, Inc. Project) 6.90%, 8/1/2024....................... 500,000 523,910
New York State Energy, Research and Development Authority, Electric Facilities Revenue
(Long Island Lighting) 7.15%, 9/1/2019.................................. 300,000 301,053
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
__________ __________
NORTH CAROLINA-.5%
North Carolina Eastern Municipal Power Agency, Power System Revenue, Refunding
7%, 1/1/2008............................................................ $ 250,000 $ 269,467
OHIO-5.9%
Hamilton County, Hospital Facilities Revenue, Refunding (Bethesda Hospital)
6.25%, 1/1/2012......................................................... 1,000,000 1,009,910
Lorain, Hospital Improvement Revenue, Refunding (Lakeland Community Hospital, Inc.)
6.50%, 11/15/2012....................................................... 1,000,000 1,020,560
Ohio Air Quality Development Authority, Revenue (Columbus and Southern Ohio)
6.375%, 12/1/2020 (Insured; FGIC)....................................... 505,000 531,038
Ohio Building Authority (State Facilities-Juvenile Correctional Projects)
6.60%, 10/1/2014 (Insured; AMBAC)....................................... 750,000 814,178
OREGON-1.8%
Oregon Housing and Community Services Department, Mortgage Revenue
(Single Family Mortgage Program) 6.45%, 7/1/2026........................ 1,000,000 1,014,680
PENNSYLVANIA-13.6%
Bethlehem Water Authority, Revenue, Refunding 5.20%, 11/15/2021............. 1,000,000 912,930
Northhampton County Industrial Development Authority, PCR, Refunding
(Bethlehem Steel) 7.55%, 6/1/2017....................................... 250,000 257,870
Pennsylvania Convention Center Authority, Revenue, Refunding 6.75%, 9/1/2019 1,000,000 1,063,140
Pennsylvania Economic Development Financing Authority, Exempt Facilities Revenue
(MacMillan Limited Partnership Project) 7.60%, 12/1/2020................ 500,000 549,760
Pennsylvania Higher Educational Facilities Authority, College and University Revenue
(Duquesne University Project) 6.35%, 1/15/2017 (Insured; MBIA) (a)...... 500,000 517,745
Philadelphia Hospitals and Higher Educational Facilities Authority, HR
(Temple University Hospital) 6.625%, 11/15/2023......................... 2,225,000 2,249,141
Potter County Hospital Authority, Revenue, Refunding (Charles Cole Memorial Hospital)
5.95%, 8/1/2016........................................................ 2,000,000 1,928,740
Westmoreland Municipal Authority, Municipal Service Revenue
Zero Coupon, 7/1/2015 (Insured; FGIC)................................... 1,000,000 327,790
RHODE ISLAND-.3%
Rhode Island Housing and Mortgage Finance Corp. (Homeownership Opportunity)
6.50%, 4/1/2027......................................................... 200,000 203,884
TENNESSEE-2.3%
Maury County Industrial Development Board, PCR, Refunding (Saturn Corp. Project)
6.50%, 9/1/2024 (Guaranteed; General Motors Corp.)...................... 1,000,000 1,032,420
Tennessee Housing Development Agency, Mortgage Finance 6.90%, 7/1/2025...... 250,000 259,545
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
__________ __________
TEXAS-7.3%
Allen, Independent School District Building 5.20%, 2/15/2021................ $ 1,000,000 $ 917,800
Alliance Airport Authority, Special Facilities Revenue (American Airlines, Inc. Project)
7.50%, 12/1/2029........................................................ 500,000 529,305
Bexar County Health Facilities Development Corp., HR, Refunding
(Baptist Memorial Hospital Systems Project) 6.90%, 8/15/2014 (Insured; MBIA) 750,000 827,940
Coppell, Independent School District, Refunding 5.375%, 8/15/2020 (c)....... 2,000,000 1,888,900
VIRGINIA-6.0%
Augusta County Service Authority, Water and Sewer Revenue
5%, 11/1/2024 (Insured; MBIA)........................................... 1,000,000 888,910
Fairfax County Redevelopment and Housing Authority, Mortgage Revenue, Refunding
(Housing for the Elderly) 6.10%, 9/1/2026............................... 1,000,000 986,450
Virginia Transportation Board, Transportation Contract Revenue
(Northern Virginia Transportation District Program) 6.375%, 5/15/2020... 1,500,000 1,560,120
WASHINGTON-5.0%
Seatac, Local Option Transportation, Tax Revenue 6.50%, 12/1/2013 (Insured; MBIA) 500,000 537,140
Tacoma Conservation Systems Project Revenue (Tacoma Public Utilities Division)
6.60%, 1/1/2015......................................................... 1,000,000 1,051,180
Washington Public Power Supply System, Nuclear Project #2 Revenue, Refunding
6.25%, 7/1/2012......................................................... 1,250,000 1,257,938
WEST VIRGINIA-1.8%
Braxton County, SWDR (Weyerhaeuser Co. Project) 6.50%, 4/1/2025............. 1,000,000 1,033,160
WYOMING-.4%
Sweetwater County, SWDR (FMC Corp. Project) 7%, 6/1/2024.................... 200,000 209,022
____________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $53,416,995).................... $54,200,359
==============
SHORT-TERM MUNICIPAL INVESTMENTS-5.6%
NEW YORK-3.0%
New York Energy, Research and Development Authority, PCR
(Niagara Mohawk Power Corp.,) VRDN
3% (LOC; Mitsubishi Trust and Banking Corp.) (d,e)...................... $ 1,700,000 $ 1,700,000
U.S. RELATED-2.6%
Puerto Rico Commonwealth, Government Development Bank, Refunding, VRDN
3% (LOC; Credit Suisse) (d,e)........................................... 1,500,000 1,500,000
____________
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $3,200,000).................... $3,200,000
==============
TOTAL MUNICIPAL INVESTMENTS-100.0% (cost $56,616,995)....................... $57,400,359
==============
</TABLE>
<TABLE>
<CAPTION>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation PCR Pollution Control Revenue
FGIC Financial Guaranty Insurance Company RRR Resources Recovery Revenue
GO General Obligation SFHR Single Family Housing Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
IDR Industrial Development Revenue VRDN Variable Rate Demand Notes
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance
Insurance Corporation
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (F) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
_____ ___________ ________________ _____________________
<S> <C> <S> <C>
AAA Aaa AAA 34.6%
AA Aa AA 32.1
A A A 10.8
BBB Baa BBB 13.0
BB Ba BB 1.4
F-1, F-1+ VMIG1, MIG1, P1 SP1, A1 5.6
Not Rated (g) Not Rated (g) Not Rated (g) 2.5
______
100.0%
========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Wholly held by the custodian in a segregated account as collateral
for a when-issued security.
(b) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(c) Purchased on a when-issued basis.
(d) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(e) Secured by letters of credit.
(f) Fitch currently provides creditworthiness information for a limited
number of investments.
(g) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Manager to be of comparable quality to
those securities in which the Series may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $56,616,995)-see statement...................................... $57,400,359
Cash.................................................................... 87,889
Interest receivable..................................................... 852,294
Prepaid expenses........................................................ 35,157
Due from The Dreyfus Corporation and affiliates......................... 11,220
__________
58,386,919
LIABILITIES:
Payable for investment securities purchased............................. $1,924,336
Accrued expenses and other liabilities.................................. 14,026 1,938,362
_________ _________
NET ASSETS ................................................................ $56,448,557
============
REPRESENTED BY:
Paid-in capital......................................................... $55,281,304
Accumulated undistributed investment income-net......................... 9,051
Accumulated undistributed net realized gain on investments.............. 374,838
Accumulated net unrealized appreciation on investments-Note 3........... 783,364
__________
NET ASSETS at value applicable to 4,331,459 shares outstanding
(500 million shares of $.001 par value Common Stock authorized)......... $56,448,557
============
NET ASSET VALUE, offering and redemption price per share
($56,448,557 / 4,331,459 shares)........................................ $13.03
=======
See notes to financial statements.
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
STATEMENT OF OPERATIONS YEAR ENDED AUGUST 31, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $2,874,167
EXPENSES:
Management fee-Note 2(a).............................................. $ 291,587
Shareholder servicing costs-Note 2(b)................................. 79,912
Registration fees..................................................... 24,001
Auditing fees......................................................... 15,466
Organization expenses................................................. 9,846
Custodian fees........................................................ 6,124
Prospectus and shareholders' reports.................................. 1,839
Directors' fees and expenses-Note 2(c)................................ 767
Legal fees............................................................ 437
Miscellaneous......................................................... 11,842
_______
TOTAL EXPENSES.................................................... 441,821
Less-reduction in management fee due to undertakings-Note 2(a)........ 252,220
_______
NET EXPENSES...................................................... 189,601
_________
INVESTMENT INCOME-NET............................................. 2,684,566
REALIZED AND UNREALIZED GAIN ON INVESTMENTS-Note 3:
Net realized gain on investments........................................ $ 643,570
Net unrealized (depreciation) on investments............................ (623,929)
_______
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS................... 19,641
_________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $2,704,207
============
See notes to financial statements.
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
______________________________
1995 1996
____________ ____________
OPERATIONS:
Investment income-net................................................... $ 1,808,256 $ 2,684,566
Net realized gain (loss) on investments................................. (99,705) 643,570
Net unrealized appreciation (depreciation) on investments for the year.. 1,328,736 (623,929)
____________ ____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. 3,037,287 2,704,207
____________ ____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................... (1,808,256) (2,675,515)
Net realized gain on investments........................................ (1,957) (168,945)
____________ ____________
TOTAL DIVIDENDS....................................................... (1,810,213) (2,844,460)
____________ ____________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold........................................... 55,483,278 34,791,121
Dividends reinvested.................................................... 1,288,981 2,065,204
Cost of shares redeemed................................................. (30,420,630) (23,180,317)
____________ ____________
INCREASE IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS................ 26,351,629 13,676,008
____________ ____________
TOTAL INCREASE IN NET ASSETS...................................... 27,578,703 13,535,755
NET ASSETS:
Beginning of year....................................................... 15,334,099 42,912,802
____________ ____________
End of year (including undistributed investment income-net of $9,051 in 1996) $ 42,912,802 $ 56,448,557
============ =============
SHARES SHARES
____________ ____________
CAPITAL STOCK TRANSACTIONS:
Shares sold............................................................. 4,426,159 2,647,461
Shares issued for dividends reinvested.................................. 101,534 156,826
Shares redeemed......................................................... (2,431,192) (1,770,618)
____________ ____________
NET INCREASE IN SHARES OUTSTANDING.................................... 2,096,501 1,033,669
============ =============
See notes to financial statements.
</TABLE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
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 Series' financial statements.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
_________________________________________
PER SHARE DATA: 1994(1) 1995 1996
______ ______ ______
<S> <C> <C> <C>
Net asset value, beginning of year.................................... $12.50 $12.76 $13.01
______ ______ ______
INVESTMENT OPERATIONS:
Investment income_net................................................. .19 .76 .73
Net realized and unrealized gain on investments....................... .26 .25 .06
______ ______ ______
TOTAL FROM INVESTMENT OPERATIONS.................................... .45 1.01 .79
______ ______ ______
DISTRIBUTIONS:
Dividends from investment income-net.................................. (.19) (.76) (.72)
Dividends from net realized gain on investments....................... - - (.05)
______ ______ ______
TOTAL DISTRIBUTIONS................................................. (.19) (.76) (.77)
______ ______ ______
Net asset value, end of year.......................................... $12.76 $13.01 $13.03
======== ======= =======
TOTAL INVESTMENT RETURN................................................... 4.13%(2) 8.30% 6.17%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............................... - .20% .39%
Ratio of net investment income to average net assets.................. 6.03%(3) 5.99% 5.52%
Decrease reflected in above expense ratios due to undertakings by the Manager 2.06%(3) .77% .52%
Portfolio Turnover Rate............................................... 8.82%(2) 58.91% 59.23%
Net Assets, end of year (000's Omitted)............................... $15,334 $42,913 $56,449
(1) From May 6, 1994 (commencement of operations) to August 31, 1994.
(2) Not annualized.
(3) Annualized.
</TABLE>
See notes to financial statements.
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus BASIC Municipal Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as an open-end management investment
company and operates as a series company currently offering four series,
including Dreyfus BASIC Municipal Bond Portfolio (the "Series"). The Series
is a non-diversified portfolio. The Series' investment objective is to
provide investors with as high a level of current income exempt from Federal
income tax as is consistent with the preservation of capital. The Dreyfus
Corporation ("Manager") serves as the Fund's investment adviser. The Manager
is a direct subsidiary of Mellon Bank, N.A. Premier Mutual Fund Services,
Inc. acts as the distributor of the Fund's shares, which are sold to the
public without a sales charge.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
The Series' financial statements are prepared in accordance with
generally accepted accounting principles which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Directors. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Series not to distribute such
gain.
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can
distribute tax exempt dividends, by complying with the applicable provisions
of the Internal Revenue Code, and to make distributions of income and net real
ized capital gain sufficient to relieve it from substantially all Federal
income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .60 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides that if in any full fiscal year the aggregate expenses of the
Series, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series, the Series may deduct from payments to be made
to the Manager, or the Manager will bear the amount of such excess to the
extent required by state law. The most stringent state expense limitation
applicable to the Series presently requires reimbursement of expenses in any
full fiscal year that such expenses (exclusive of certain expenses as
described above) exceed 21\2% of the first $30 million, 2% of the next $70
million and 11\2% of the excess over $100 million of the value of the Series'
average net assets in accordance with California "blue sky" regulations.
However, the Manager had undertaken from September 1, 1995 through July 18,
1996 to reduce the management fee paid by the Series, to the extent that the
Series' aggregate annual expenses (exclusive of certain expenses as described
above) exceed an annual rate of .45 of 1% of the value of the Series' average
daily net assets. The Manager has currently undertaken from July 19, 1996
through December 31, 1996 to reimburse all fees and expenses of the Series
(exclusive of certain expenses as described above). The reduction in
management fee, pursuant to the undertakings, amounted to $252,220 during the
year ended August 31, 1996.
In addition, the Manager has undertaken through June 30, 1998, to reduce
the management fee paid by the Series, to the extent that the Series'
aggregate annual expenses (exclusive of certain expenses as described above)
exceed an annual rate of .45 of 1% of the value of the Series' average daily
net assets.
(B) Pursuant to the Series' Shareholder Services Plan, the Series
reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of the
Manager, an amount not to exceed an annual rate of .25 of 1% of the value of
the Series' 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 Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. During the year ended August 31, 1996,
the Series was charged an aggregate of $65,177 pursuant to the Shareholder
Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer,
Inc., a wholly-owned subsidiary of the Manager, under a transfer agency
agreement for providing personnel and facilities to perform transfer agency
services for the Series. Such compensation amounted to $6,145 during the
period ended August 31, 1996.
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and
an attendance fee of $250 per meeting. The Chairman of the Board receives an
additional 25% of such compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended August 31, 1996
amounted to $39,935,280 and $27,338,372, respectively.
At August 31, 1996, accumulated net unrealized appreciation on
investments was $783,364, consisting of $1,169,374 gross unrealized
appreciation and $386,010 gross unrealized depreciation.
At August 31, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus BASIC Municipal Bond
Portfolio (one of the Series constituting Dreyfus BASIC Municipal Fund, Inc.)
as of August 31, 1996, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years
in the period then ended, and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1996 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus BASIC Municipal Bond Portfolio at August 31, 1996, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the indicated years, in conformity with generally
accepted accounting principles.
[Ernst & Young signature logo]
New York, New York
October 3, 1996
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Series hereby makes the following
designations regarding its fiscal year ended August 31, 1996:
- all the dividends paid from investment income-net are "exempt-interest
dividends" (not generally subject to regular Federal income tax), and
- the Series hereby designates $.015 per share as a long-term capital
gain distribution of the $.047 per share paid on December 6, 1995.
As required by Federal tax law rules, shareholders will receive
notification of their portion of the Series' taxable ordinary dividends (if
any) and capital gain distributions (if any) paid for the 1996 calendar year
on Form 1099-DIV which will be mailed by January 31, 1997.
[Dreyfus lion "d" logo]
DREYFUS BASIC MUNICIPAL
BOND PORTFOLIO
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 125AR968
[Dreyfus logo]
BASIC Municipal
Bond Portfolio
Annual Report
August 31, 1996
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Dreyfus BASIC
Intermediate Municipal Bond Portfolio. For its annual reporting period ended
August 31, 1996, your portfolio earned a total return, including share price
changes and interest income, of 4.07%.* Income dividends exempt from Federal
personal income taxes of approximately $.649 per share were paid to
shareholders.** This is equivalent to an annualized tax-free distribution
rate per share of 5.06%.***
THE ECONOMY
Recent reports indicating some moderation in the rate of economic growth,
low unemployment and benign inflation have so far deferred the
well-anticipated hiking of short-term interest rates by the Federal Reserve
Board's Open Market Committee ("the Fed"). Ever alert to signs of price
pressures that could rekindle inflation, the Central Bank left the Fed Funds
rate unchanged at 5.25% at the Fed's meeting on August 20. The Fed has not
raised short-term interest rates since February 1, 1995. Since then, monetary
policy has tended to lower the cost of short-term credit. Investors have
grown increasingly wary that, as the economy continues to expand, the Federal
Reserve would apply the monetary brakes to ward off higher levels of
inflation. Reports throughout the year of strong increases in new jobs and
the decline in the unemployment rate have been widely viewed as harbingers of
wage pressures that could lead to undesirable inflationary consequences. The
bond market has been particularly volatile in its anticipation of Federal
Reserve restraint - since January, long-term interest rates have risen a full
percentage point. Despite all this, inflation, both at the consumer and at
the production level, has remained subdued. The latest reports indicated that
both the Consumer and Producer Price Indices remained in the 3% range over
the past twelve months. Prices at earlier stages of the manufacturing process
fell over the past two months, lending support to those who expect a flat
inflation rate.
There has been some recent evidence that the economy may be reflecting
the effects of the rise in long-term interest earlier in the year. Retail
sales have slackened of late. In July, housing starts declined for the third
consecutive month and sales of existing homes also fell. On the production
side of the economy, latest reports on industrial output also showed signs of
moderation. In July, factory production rose only .1%, its smallest monthly
increase in four months. Despite these anecdotal signs of slowing, several
indicators of future economic activity remained positive. The Index of
Leading Economic Indicators has been on the rise since early this year, and
the Conference Board's Consumer Confidence Index reached a six-year high in
August. While rising consumer confidence is favorable for business (and
political incumbents), it could complicate the efforts of the Federal Reserve
to maintain balanced economic growth. We remain alert to any indications that
the economy may be entering a phase of undue expansion.
MARKET ENVIRONMENT
As taxable interest rates continued to rise, both municipals and 10-year
U.S. Treasury notes rose in yield, but municipals at a slower pace. Ten-year
general obligation municipal bonds were trading at approximately 78% of
treasuries during the middle of March. By the middle of September, the ratio
declined to approximately 73%. Accordingly, municipal bonds have been selling
at an ever better price than Treasuries. This improvement compared to the
government market can be attributed to the
declining supply of municipal bonds, combined with the diminishing
possibility of a flat tax, which was being considered by presidential
candidates in early 1996. Even though municipals are rich all along the yield
curve, tax exempt bonds should remain close to these ratios if interest rates
stabilize or continue to rise because supply should remain low while demand
would continue to improve.
THE PORTFOLIO
Since last writing to you in March 1996, the Fund has chosen to follow
specific investment strategies which have helped to enhance its total return
while maintaining a high level of current income. Specifically, the portfolio
maintained a defensive posture in early 1996, due to a low interest rate
environment. At that time, the Fund purchased premium bonds of a kind that
emphasize current income and have a better ability to protect the principal
price of each bond in a declining market. As the fundamental backdrop for the
municipal market declined from March through June, the Fund concentrated on
slowly purchasing longer maturing discounted bonds. These types of bonds were
selling at a substantial discount to the rest of the municipal market because
they were out of favor and hence represented an excellent opportunity to
enhance the value of the Fund. The market had a dramatic improvement in July
and early August so the Fund took the opportunity to generate some gains and
become more defensive. By the middle of August, the markets had reversed
course and were declining again. If interest rates continue to rise, we
currently expect that the Fund will become more constructive and implement a
more aggressive strategy.
Included in this report is a series of detailed statements about your
Fund's holdings and its financial condition. We hope they are informative.
Please know that we appreciate greatly your continued confidence in the Fund
and in The Dreyfus Corporation.
Very truly yours,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
September 12, 1996
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid.
**Some income may be subject to the Federal Alternative Minimum Tax (AMT) for
certain shareholders.
*** Annualized distribution rate per share is based upon dividends per
share paid from net investment income during the period, divided by the net
asset value per share at the end of the period.
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO AUGUST 31, 1996
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS BASIC
INTERMEDIATE MUNICIPAL BOND PORTFOLIO AND THE LEHMAN BROTHERS 10-YEAR
MUNICIPAL BOND INDEX
[Exhibit A:
$11,726
Lehman Brothers 10-Year Municipal Bond Index*
Dollars
$11,599
Dreyfus BASIC
Intermediate Municipal
Bond Portfolio
*Source: Lehman Brothers]
AVERAGE ANNUAL TOTAL RETURNS
ONE YEAR ENDED FROM INCEPTION (5/4/94)
AUGUST 31, 1996 TO AUGUST 31, 1996
_________ _____________
4.07% 6.57%
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus BASIC
Intermediate Municipal Bond Portfolio on 5/4/94 (Inception Date) to a $10,000
investment made in the Lehman Brothers 10-Year Municipal Bond Index on that
date. For comparative purposes, the value of the Index on 4/30/94 is used as
the beginning value on 5/4/94. All dividends and capital gain distributions
are reinvested.
The Portfolio invests primarily in municipal securities and maintains a
portfolio with a weighted-average maturity ranging between 3 and 10 years.
The Portfolio performance shown in the line graph takes into account fees and
expenses. Unlike the Portfolio, the Lehman Brothers 10-Year Municipal Bond
Index is an unmanaged total return performance benchmark for the
investment-grade, 10-year tax exempt bond market, consisting of municipal
bonds with maturities of more than 8 years and less than 12 years. The Index
does not take into account charges, fees and other expenses which can
contribute to the Index potentially outperforming the Portfolio. Further
information relating to Portfolio performance, including expense
reimbursements, if applicable, is contained in the Financial Highlights
section of the Prospectus and elsewhere in this report.
<TABLE>
<CAPTION>
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
STATEMENT OF INVESTMENTS AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS-98.9% AMOUNT VALUE
_______ ______
<S> <C> <C>
ALABAMA-2.4%
Alabama Agricultural and Mechanical University, Revenues
6%, 11/1/2006 (Insured; MBIA)........................................... $ 1,000,000 $ 1,066,150
ARIZONA-4.4%
Arizona Transportation Board, Highway Revenue, Refunding 5%, 7/1/2010....... 1,000,000 957,060
Maricopa County, COP 5.625%, 6/1/2000....................................... 1,000,000 1,017,980
CALIFORNIA-4.8%
Foothill/Eastern Transportation Corridor Agency, Toll Road Revenue
Zero Coupon, 1/1/2004................................................... 1,000,000 643,970
Hemet, COP (Capital Projects) 6.50%, 2/1/2003............................... 200,000 192,888
Los Angeles City, COP, Refunding (Real Property Acquisition Program)
5.75%, 8/1/2004......................................................... 1,000,000 984,370
Watsonville Mammoth Lakes, COP:
7.25%, 6/1/1998......................................................... 185,000 186,306
7.50%, 6/1/1999......................................................... 110,000 110,844
COLORADO-2.2%
Denver City and County, Airport Revenue:
6.80%, 11/15/1997....................................................... 750,000 770,715
7.25%, 11/15/2007....................................................... 200,000 214,414
FLORIDA-3.3%
Palm Beach County, Criminal Justice Facilities Revenue
5.90%, 6/1/2008 (Insured; FGIC)......................................... 1,400,000 1,461,362
HAWAII-4.5%
Hawaii:
4.40%, 11/1/2004........................................................ 1,000,000 956,280
5.80%, 1/1/2005......................................................... 1,000,000 1,051,340
ILLINOIS-.5%
Hoffman Estates, Tax Increment Revenue (Hoffman Estates Economic
Development Project) 6.60%, 5/15/2002 (Guaranteed; Sears Roebuck & Co.). 200,000 210,762
INDIANA-2.4%
Indiana Transportation Finance Authority, Airport Facilities LR
(United Air) 6.25%, 11/1/2003........................................... 1,000,000 1,063,310
KENTUCKY-2.4%
Kentucky Turnpike Authority, EDR, Refunding (Revitalization Projects)
5.80%, 1/1/2004......................................................... 1,000,000 1,048,740
MARYLAND-9.5%
Baltimore, Consolidated Public Improvement, Refunding
7.25%, 10/15/2005 (Insured; FGIC)....................................... 1,000,000 1,156,420
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ ______
MARYLAND (CONTINUED)
Maryland, State and Local Facilities Loan 4.25%, 2/15/2005.................. $ 1,000,000 $ 937,910
Northeast Waste Disposal Authority, Solid Waste Revenue
(Montgomery County Resource Recovery Project) 6%, 7/1/2006.............. 1,000,000 1,013,240
Prince Georges County, HR (Dimensions Health Corp.)
7%, 7/1/2022 (Prerefunded 7/1/2002) (a)................................. 1,000,000 1,126,720
MASSACHUSETTS-3.0%
Massachusetts Health and Educational Facilities Authority, Revenue
(Sisters Providence Health Systems) 6.20%, 11/15/2002................... 250,000 253,565
University of Massachusetts Building Authority, Revenue, Refunding
6.50%, 5/1/2006......................................................... 1,000,000 1,102,920
MICHIGAN-2.4%
Michigan Hospital Finance Authority, HR, Refunding (Genesys Health System)
7.10%, 10/1/2002........................................................ 1,000,000 1,059,240
NEW JERSEY-5.5%
New Jersey Economic Development Authority, Market Transition Facility Revenue
7%, 7/1/2003 (Insured; MBIA)............................................ 1,000,000 1,120,960
New Jersey Turnpike Authority, Turnpike Revenue 6%, 1/1/2005................ 1,290,000 1,339,820
NEW YORK-11.4%
New York City 7.50%, 2/1/2004............................................... 1,130,000 1,239,440
New York State Dormitory Authority, Court Facilities LR 6%, 5/15/2003....... 100,000 103,557
New York State Housing Corp., Revenue, Refunding 6%, 11/1/2003.............. 1,500,000 1,579,170
New York State Housing Finance Agency, Service Contract Obligation Revenue
6%, 9/15/2005........................................................... 655,000 660,201
New York State Thruway Authority, Service Contract Revenue
(Local Highway and Bridge):
6%, 4/1/2002.......................................................... 500,000 519,640
5.75%, 4/1/2006....................................................... 1,000,000 1,001,400
NORTH CAROLINA-2.4%
North Carolina Eastern Municipal Power Agency, Power System Revenue,
Refunding
7%, 1/1/2008............................................................ 1,000,000 1,077,870
OHIO-1.2%
Cuyahoga County, HR (Meridia Health System) 6.20%, 8/15/2005................ 505,000 538,178
PENNSYLVANIA-11.9%
Fayette County Hospital Authority, HR, Refunding (Uniontown Hospital)
5.70%, 6/15/2010 (Insured; Connie Lee).................................. 1,595,000 1,552,701
Pennsylvania Convention Center Authority, Revenue, Refunding
6.25%, 9/1/2004......................................................... 200,000 207,250
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) AMOUNT VALUE
_______ ______
PENNSYLVANIA (CONTINUED)
Pennsylvania Higher Education Assistance Agency, Student Loan Revenue, Refunding
6.80%, 12/1/2000 (Insured; FGIC)........................................ $ 2,000,000 $ 2,141,720
Pittsburgh Water and Sewer Authority, Water and Sewer Systems Revenue,
Refunding
5%, 9/1/2010 (Insured; FGIC)............................................ 1,500,000 1,401,705
TEXAS-10.9%
Brazos Higher Education Authority, Student Loan Revenue, Refunding
6.20%, 12/1/2002........................................................ 200,000 210,322
Irving Hospital Authority, HR (Irving Healthcare Systems) 5.70%, 7/1/2008... 1,675,000 1,686,407
Lower Colorado River Authority, Revenue, Refunding
Zero Coupon, 1/1/2003 (Insured; AMBAC).................................. 1,000,000 727,260
San Antonio, Water Revenue, Refunding 6.30%, 5/15/2004 (Insured; FGIC)...... 1,000,000 1,081,200
Waco 6%, 2/1/2004 (Insured; FGIC)........................................... 1,070,000 1,135,259
VIRGINIA-5.3%
Brunswick County Industrial Development Authority, Correctional Facility LR
5.55%, 7/1/2008 (Insured; MBIA)......................................... 1,325,000 1,333,467
Virginia Housing Development Authority, Commonwealth Mortgage
5.75%, 1/1/2001......................................................... 1,000,000 1,025,310
WASHINGTON-4.8%
Snohomish County Public Utility District Number 1, Electric Revenue
6.60%, 1/1/2002 (Insured; FGIC)......................................... 1,000,000 1,079,380
Washington, Refunding 6.625%, 9/1/2006...................................... 1,000,000 1,071,400
WISCONSIN-2.3%
Wisconsin, Transportation Revenue 5.40%, 7/1/2004........................... 1,000,000 1,019,710
WYOMING-1.4%
Wyoming Farm Loan Board, Capital Facilities Revenue
Zero Coupon, 10/1/2004.................................................. 1,000,000 644,350
______
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $43,333,037).................... $44,084,183
======
SHORT-TERM MUNICIPAL INVESTMENTS-1.1%
MASSACHUSETTS;
Massachusetts Health and Educational Facilities Authority, Revenue, VRDN
(Capital Assets Program) 3.15%, 1/1/2035 (Insured; MBIA) (b) (cost $500,000) $ 500,000 $ 500,000
======
TOTAL INVESTMENTS-100.0% (cost $43,833,037)................................. $44,584,183
======
</TABLE>
<TABLE>
<CAPTION>
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation LR Lease Revenue
COP Certificate of Participation MBIA Municipal Bond Investors Assurance
EDR Economic Development Revenue Insurance Corporation
FGIC Financial Guaranty Insurance Company VRDN Variable Rate Demand Notes
HR Hospital Revenue
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- ------- ------- ---------------- -------------------
<S> <C> <S> <C>
AAA Aaa AAA 39.6%
AA Aa AA 22.1
A A A 19.3
BBB Baa BBB 17.9
F-1+ & F-1 MIG1, VMIG1 & P1 SP1 & A1 1.1
____
100.0%
====
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Securities payable on demand. The interest rate, which is subject to
change, is based upon prime rates or an index of market interest rates.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996
<S> <C>
ASSETS:
Investments in securities, at value
(cost $43,833,037)-see statement....................................................... $44,584,183
Cash..................................................................................... 1,407,445
Interest receivable...................................................................... 598,067
Prepaid expenses......................................................................... 16,555
Due from The Dreyfus Corporation and affiliates.......................................... 7,819
______
46,614,069
LIABILITIES;
Accrued expenses and other liabilities................................................... 16,269
______
NET ASSETS ....................................................................... $46,597,800
======
REPRESENTED BY:
Paid-in capital.......................................................................... $45,763,014
Accumulated undistributed investment income-net.......................................... 6,855
Accumulated undistributed net realized gain on investments............................... 76,785
Accumulated net unrealized appreciation on investments-Note 3............................ 751,146
______
NET ASSETS at value applicable to 3,633,323 shares outstanding
(500 million shares of $.001 par value Common Stock authorized).......................... $46,597,800
======
NET ASSET VALUE, offering and redemption price per share
($46,597,800 / 3,633,323 shares)......................................................... $12.83
======
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
STATEMENT OF OPERATIONS YEAR ENDED AUGUST 31, 1996
<S> <C> <C>
INVESTMENT INCOME:
INTEREST INCOME......................................................... $2,411,177
EXPENSES:
Management fee-Note 2(a).............................................. $ 267,142
Shareholder servicing costs-Note 2(b)................................. 43,000
Registration fees..................................................... 23,553
Auditing fees......................................................... 17,398
Custodian fees........................................................ 5,431
Prospectus and shareholders' reports.................................. 5,249
Directors' fees and expenses-Note 2(c)................................ 703
Legal fees............................................................ 219
Miscellaneous......................................................... 16,538
_____
TOTAL EXPENSES.................................................... 379,233
Less-reduction in management fee due to undertakings-Note 2(a)........ 203,943
_____
NET EXPENSES...................................................... 175,290
_____
INVESTMENT INCOME-NET............................................. 2,235,887
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS-Note 3:
Net realized gain on investments........................................ $ 288,324
Net unrealized (depreciation) on investments............................ (735,467)
_____
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS................. (447,143)
_____
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $1,788,744
=====
See notes to financial statements.
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
________________________________
1995 1996
_______ _______
OPERATIONS:
Investment income-net................................................... $ 1,983,679 $ 2,235,887
Net realized gain (loss) on investments................................. (210,183) 288,324
Net unrealized appreciation (depreciation) on investments for the year.. 1,232,381 (735,467)
______ ______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.................. 3,005,877 1,788,744
______ ______
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net................................................... (1,983,679) (2,229,032)
______ ______
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold........................................... 34,818,737 19,466,226
Dividends reinvested.................................................... 1,446,819 1,721,467
Cost of shares redeemed................................................. (22,408,065) (17,304,524)
______ ______
INCREASE IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS................ 13,857,491 3,883,169
______ ______
TOTAL INCREASE IN NET ASSETS...................................... 14,879,689 3,442,881
NET ASSETS:
Beginning of year....................................................... 28,275,230 43,154,919
______ ______
End of year (including undistributed investment income-net;
$6,855 on August 31, 1996)............................................ $ 43,154,919 $ 46,597,800
====== ======
SHARES SHARES
______ ______
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 2,793,004 1,499,256
Shares issued for dividends reinvested.................................. 115,064 132,850
Shares redeemed......................................................... (1,811,044) (1,331,127)
______ ______
NET INCREASE IN SHARES OUTSTANDING.................................... 1,097,024 300,979
====== ======
</TABLE>
See notes to financial statements.
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
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 Series' financial statements.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
----------------------------------
PER SHARE DATA: 1994(1) 1995 1996
----- ---- ----
<S> <C> <C> <C>
Net asset value, beginning of year.................................... $12.50 $12.65 $12.95
---- ---- ----
INVESTMENT OPERATIONS:
Investment income-net................................................. .24 .68 .65
Net realized and unrealized gain (loss) on investments................ .15 .30 (.12)
---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS.................................... .39 .98 .53
---- ---- ----
DISTRIBUTIONS;
Dividends from investment income-net.................................. (.24) (.68) (.65)
---- ---- ----
Net asset value, end of year.......................................... $12.65 $12.95 $12.83
==== ==== ====
TOTAL INVESTMENT RETURN................................................... 3.11%(2) 8.09% 4.07%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets............................... - .11% .39%
Ratio of net investment income to average net assets ................. 5.53%(3) 5.45% 5.01%
Decrease reflected in above expense ratios due to undertakings
by the Manager...................................................... 1.54%(3) .81% .46%
Portfolio Turnover Rate............................................... 41.15%(2) 34.12% 54.99%
Net Assets, end of year (000's Omitted)............................... $28,275 $43,155 $46,598
(1) From May 5, 1994 (commencement of operations) to August 31, 1994.
(2) Not annualized.
(3) Annualized.
</TABLE>
See notes to financial statements.
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus BASIC Municipal Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as an open-end management investment
company and operates as a series company currently offering four series,
including the Dreyfus BASIC Intermediate Municipal Bond Portfolio (the
"Series"). The Series is a non-diversified portfolio. The Series' investment
objective is to provide investors with as high a level of current income
exempt from Federal income tax as is consistent with the preservation of
capital. The Dreyfus Corporation ("Manager") serves as the Fund's investment
adviser. The Manager is a direct subsidiary of Mellon Bank, N.A. Premier
Mutual Fund Services, Inc. acts as the distributor of the Fund's shares,
which are sold to the public without a sales charge.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
The Series' financial statements are prepared in accordance with
generally accepted accounting principles which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
(A) PORTFOLIO VALUATION: The Series' investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Directors. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Series not to distribute such
gain.
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can
distribute tax exempt dividends, by complying with the applicable provisions
of the Internal Revenue Code, and to make distributions of income and net real
ized capital gain sufficient to relieve it from substantially all Federal
income and excise taxes.
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .60 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides that if in any full fiscal year the aggregate expenses of the
Series, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series, the Series may deduct from payments to be made
to the Manager, or the Manager will bear the amount of such excess to the
extent required by state law. The most stringent state expense limitation
applicable to the Series presently requires reimbursement of expenses in any
full fiscal year that such expenses (exclusive of certain expenses as
described above) exceed 21\2% of the first $30 million, 2% of the next $70
million and 11\2% of the excess over $100 million of the value of the Series'
average net assets in accordance with California "blue sky" regulations.
However, the Manager had undertaken from September 1, 1995 through July 18,
1996 to reduce the management fee paid by the Series, to the extent that the
Series' aggregate annual expenses (exclusive of certain expenses as described
above) exceed an annual rate of .45 of 1% of the value of the Series' average
daily net assets. The Manager has currently undertaken from July 19, 1996
through December 31, 1996 to reimburse all fees and expenses of the Series
(exclusive of certain expenses as described above). The reduction in
management fee pursuant to the undertakings, amounted to $203,943 during the
year ended August 31, 1996.
In addition, the Manager has undertaken through June 30, 1998, to reduce
the management fee paid by the Series to the extent that the Series'
aggregate annual expenses (exclusive of certain expenses as described above)
exceed an annual rate of .45 of 1% of the value of the Series' average daily
net assets.
(B) Pursuant to the Series' Shareholder Services Plan, the Series
reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of the
Manager, an amount not to exceed an annual rate of .25 of 1% of the value of
the Series' 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 Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. During the year ended August 31, 1996,
the Series was charged an aggregate of $32,369 pursuant to the Shareholder
Services Plan.
Effective December 1, 1995, the Series compensates Dreyfus Transfer,
Inc., a wholly-owned subsidiary of the Manager, under a transfer agency
agreement for providing personnel and facilities to perform transfer agency
services for the Series. Such compensation amounted to $1,170 during the
period ended August 31, 1996.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the year ended August 31, 1996
amounted to $26,704,542 and $23,451,332, respectively.
At August 31, 1996, accumulated net unrealized appreciation on
investments was $751,146, consisting of $887,972 gross unrealized
appreciation and $136,826 gross unrealized depreciation.
At August 31, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus BASIC Intermediate
Municipal Bond Portfolio (one of the Series constituting Dreyfus BASIC
Municipal Fund, Inc.) as of August 31, 1996, and the related statement of
operations for the year then ended, the statement of changes in net assets
for each of the two years in the period then ended, and financial highlights
for each of the years indicated therein. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1996 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus BASIC Intermediate Municipal Bond Portfolio at August 31,
1996, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
[Ernst and Young LLP signature logo]
New York, New York
October 3, 1996
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Series hereby designates all the
dividends paid from investment income-net during the fiscal year ended August
31, 1996 as "exempt-interest dividends" (not generally subject to regular
Federal income tax).
As required by Federal tax law rules, shareholders will receive
notification of their portion of the Series' taxable ordinary dividends (if
any) and capital gain distributions (if any) paid for the 1996 calendar year
on Form 1099-DIV which will be mailed by January 31, 1997.
[Dreyfus lion "d" logo]
DREYFUS BASIC INTERMEDIATE
MUNICIPAL BOND PORTFOLIO
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 126AR968
[Dreyfus logo]
BASIC Intermediate
Municipal Bond
Portfolio
Annual Report
August 31, 1996
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Dreyfus BASIC New
Jersey Municipal Money Market Portfolio. From its inception on December 1,
1995 to the end of the reporting period on August 31, 1996, your Fund
provided an annualized yield of 3.34%. Income dividends exempt from Federal
and State of New Jersey personal income taxes of approximately $.025 per
share were paid to shareholders.* Reinvesting these dividends and calculating
the effect of this compounding resulted in an annualized effective yield of
3.38%.**
THE ECONOMY
Reports throughout the year of strong increases in new jobs and the
decline in the unemployment rate have been widely viewed as harbingers of
wage pressures that could lead to undesirable inflationary consequences.
Despite this, inflation, both at the consumer and at the production level,
has remained at the modest 3% level. There has been evidence that the economy
may be feeling the effects of the rise in long-term rates earlier in the
year, particularly in the consumer sector. Nevertheless, measures of consumer
confidence are high and the Index of Leading Economic Indicators continues to
predict economic expansion.
Ever alert to signs of price pressures that could rekindle inflation, the
Federal Reserve Board ("the Fed") left the Fed Funds rate unchanged at 5.25%
at its Open Market Committee meeting on August 20. The Fed has not raised
short-term interest rates since February 1, 1995. Since then, monetary policy
has tended to lower the cost of short-term credit. The last time this
occurred was when the Fed lowered the Fed Funds rate by a quarter of a
percentage point in January 1996.
MARKET ENVIRONMENT/PORTFOLIO ACTIVITY
If one were to trace the trend in short-term municipal rates over the
last six months of this period, the direction would mirror closely the
changes in supply and demand conditions. The six-month cycle would reflect:
low short-term yields in February due to strong money market fund cash flows
after the New Year, price weakness/higher rates in April as investors tapped
their money market funds to pay income taxes, market strength in late
June/early July as $9 billion in notes maturities left the market, price
weakness and buying opportunities in late July due to inflationary concerns
and the added supply of summer financings. These technical influences
continue to be the overriding factor affecting municipal money rates.
These conditions, coupled with actions taken by the Federal Reserve
Board, provide the framework for our investment strategy - both on a
day-to-day basis and looking ahead over a one-year horizon. During the first
few months of 1996, as a result of uncertainty surrounding potential tax
reform, variable rate demand notes (which represent a significant portion of
your Portfolio's investments) benefited from unusually high yields. While the
concerns were only temporary, they translated, for a time, into a more
attractive after-tax rate of return than was available to the tax exempt
investor on taxable instruments with similar maturities. During this period,
the purchase of attractively yielding commercial paper in the 90-day range
also allowed us to capture returns close to those on one-year issues without
a significant extension of average maturity - enabling us to wait out a lower
yield environment in anticipation of higher rates.
A limited opportunity to commit to the longer New Jersey note issues
appeared in July and August and will hopefully be available in coming weeks
as issuers, such as the State of New Jersey, are expected to return to the
market with their traditional financings. We did, to some extent, participate
in these earlier offerings, which resulted in an extension of your Fund's
average maturity to the 65-day range. At times these purchases necessitated a
premium to general market notes because of the limited supply of sizeable,
high-quality New Jersey exempt issues in the market. We will take advantage
of additional buying opportunities as we monitor potential Fed activity and
any other significant changes in the municipal money market. All new
investments will continue to meet the high credit quality standards which we
require and to provide a significant level of liquidity and New Jersey exempt
income, commensurate with the needs of your Fund.
Included in this report is a series of detailed statements about your
Fund's holdings and its financial condition. We hope they are informative.
Please know that we greatly appreciate your continued confidence in the Fund
and in The Dreyfus Corporation.
Very truly yours,
(Richard J. Moynihan Signature)
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
September 12, 1996
New York, N.Y.
* Some income may be subject to the Federal Alternative Minimum Tax (AMT)
for certain shareholders.
**Annualized effective yield is based upon dividends declared daily and
reinvested monthly.
<TABLE>
<CAPTION>
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
STATEMENT OF INVESTMENTS AUGUST 31, 1996
PRINCIPAL
TAX EXEMPT INVESTMENTS-100.0% AMOUNT VALUE
_____________ _______________
<S> <C> <C>
NEW JERSEY-73.4%
Atlantic County Improvement Authority, Revenue, VRDN
(Pooled Government Loan Program) 3.20% (LOC; Midland Bank) (a,b)........ $ 4,000,000 $ 4,000,000
Burlington County, BAN 4.25%, 4/24/97....................................... 3,000,000 3,011,175
Camden County, GO Notes 5.05%, Series A, 2/1/97 (Insured; MBIA)............. 785,000 790,014
City of Fort Lee, TAN 4.25%, 2/7/97......................................... 1,000,000 1,002,194
Galloway Township, BAN 4%, Series B, 3/13/97................................ 2,500,000 2,505,103
Hudson County Improvement Authority, VRDN (Essential Purpose Pooled
Government)
3.50% (LOC; Hong Kong Shanghai Banking Corp.) (a,b)..................... 4,000,000 4,000,000
Middlesex County, BAN 3.90%, 6/25/97........................................ 2,000,000 2,000,147
Monmouth County Improvement Authority, Revenue, VRDN
(Pooled Government Loan Program) 3.30% (LOC; Union Bank of Switzerland) (a,b) 2,700,000 2,700,000
New Jersey Economic Development Authority:
Thermal Energy Facilities, Revenue (Thermal Energy Limited Partnership)
3.60%, 12/12/96 (Escrowed in; U.S. Treasury Bills).................... 1,000,000 1,000,000
VRDN:
EDR (Dow Chemical-El Dorado Terminal):
3.25%, Series 1984A (Corp. Guaranty; Dow Chemical Co.) (a)........ 2,200,000 2,200,000
3.25%, Series 1984B (Corp. Guaranty; Dow Chemical Co.) (a)........ 900,000 900,000
Industrial and EDR:
(Merck and Co.) 3.65%, Series A and B (a)......................... 1,700,000 1,700,000
(NUI Corp. Project)
3.35%, Series A (BPA; The Bank of New York and Insured; AMBAC) (a) 3,000,000 3,000,000
New Jersey Health Care Facilities Financing Authority, Revenue, VRDN
(Hospital Capital Asset Financing)
3.20%, Series A (LOC; Chase Manhattan Bank) (a,b)....................... 3,500,000 3,500,000
New Jersey Sports and Exposition Authority, VRDN (State Contract)
3.15%, Series C (Insured; MBIA and Liquidity Agreement; Barclays Bank) (a) 4,600,000 4,600,000
New Jersey Turnpike Authority, Turnpike Revenue, Refunding, VRDN
3%, Series D (LOC; Societe Generale and Insured; FGIC) (a,b)............ 5,200,000 5,200,000
Passaic County, BAN:
4%, 4/4/97.............................................................. 1,666,000 1,669,543
4.25%, 6/25/97.......................................................... 2,489,000 2,495,805
Port Authority of New York and New Jersey:
CP 3.40%, 9/26/96 (Liquidity Agreement; Bank of Nova Scotia)............ 1,010,000 1,010,000
Special Obligation Revenue, VRDN (Versatile Structure Obligation):
3.35%, Series 3 (BPA; Morgan Guaranty Trust Co.) (a).................. 13,400,000 13,400,000
3.40%, Series 2 (BPA; Morgan Guaranty Trust Co.) (a).................. 1,200,000 1,200,000
3.55%, Series 4 (BPA; Landesbank Hessen) (a).......................... 6,000,000 6,000,000
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1996
PRINCIPAL
TAX EXEMPT INVESTMENTS (CONTINUED) AMOUNT VALUE
_____________ _______________
NEW JERSEY (CONTINUED)
Washington Township Board of Education, Notes (Gloucester County School)
5%, Series 1986, 2/1/97 (Insured; MBIA)................................. $ 1,600,000 $ 1,610,829
Woodbridge Township, BAN 3.96%, 8/1/97...................................... 3,000,000 3,000,523
U.S. RELATED-26.6%
Commonwealth of Puerto Rico Government Development Bank:
CP:
3.40%, 9/13/96........................................................ 3,500,000 3,500,000
3.35%, 9/18/96........................................................ 7,000,000 7,000,000
3.55%, 10/10/96....................................................... 8,000,000 8,000,000
Refunding, VRDN 3.10% (LOC; Credit Suisse) (a,b)........................ 4,300,000 4,300,000
Puerto Rico Industrial Medical and Environmental Pollution Control Facility Authority,
Revenue (Reynolds Medal Co. Project)
3.80%, 9/1/97 (Liquidity Agreement; ABN Amro Bank)...................... 3,500,000 3,501,680
____________
TOTAL INVESTMENTS (cost $98,797,013)........................................ $98,797,013
=============
</TABLE>
<TABLE>
<CAPTION>
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
SUMMARY OF ABBREVIATIONS
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation GO General Obligation
BAN Bond Anticipation Notes LOC Letter of Credit
BPA Bond Purchase Agreement MBIA Municipal Bond Investors Assurance
CP Commercial Paper Insurance Corporation
EDR Economic Development Revenue TAN Tax Anticipation Notes
FGIC Financial Guaranty Insurance Company VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
SUMMARY OF COMBINED RATINGS (UNAUDITED)
FITCH (C) OR MOODY'S OR STANDARD & POOR'S PERCENTAGE OF VALUE
- ---------- ---------- ----------------- -------------------
<S> <C> <S> <C>
F1+/F1 VMIG1/MIG1, P1 (d) SP1+/SP1, A1+/A1 (d) 84.9%
AAA/AA (e) Aaa/Aa (e) AAA/AA (e) 1.7
Not Rated (f) Not Rated (f) Not Rated (f) 13.4
__________
100.0%
==========
</TABLE>
NOTES TO STATEMENT OF INVESTMENTS:
(a) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(b) Secured by letters of credit. At August 31, 1996, 23.6% of the
Series' net assets are backed by letters of credit issued by domestic
banks and foreign banks.
(c) Fitch currently provides creditworthiness information for a limited
number of investments.
(d) P1 and A1 are the highest ratings assigned tax exempt commercial
paper by Moody's and Standard & Poor's, respectively.
(e) Notes which are not F, MIG or SP rated are represented by bond
ratings of the issuers.
(f) Securities which, while not rated by Fitch, Moody's or Standard &
Poor's have been determined by the Board of Directors to be of comparable
quality to those rated securities in which the Series may invest.
See notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1996
<S> <C> <C>
ASSETS:
Investments in securities, at value-Note 1(a)........................... $ 98,797,013
Cash.................................................................... 4,572,466
Interest receivable..................................................... 453,140
Prepaid expenses........................................................ 3,188
________________
103,825,807
LIABILITIES:
Due to The Dreyfus Corporation and affiliates........................... $ 15,282
Payable for investment securities purchased............................. 3,501,680
Accrued expenses........................................................ 61,094 3,578,056
__________________
NET ASSETS at value, represented by paid-in capital, applicable to 100,247,751
shares outstanding (1 billion shares of $.001 par value Common Stock authorized) $100,247,751
=================
NET ASSET VALUE, offering and redemption price per share
($100,247,751 / 100,247,751 shares)....................................... $1.00
=================
STATEMENT OF OPERATIONS
from December 1, 1995 (commencement of operations) to August 31, 1996
INVESTMENT INCOME:
INTEREST INCOME......................................................... $ 1,310,658
EXPENSES:
Management fee-Note 2(a).............................................. $ 197,262
Registration fees..................................................... 34,863
Auditing fees......................................................... 25,000
Shareholder servicing costs-Note 2(b)................................. 12,203
Legal fees............................................................ 9,000
Prospectus and shareholders' reports.................................. 8,415
Custodian fees........................................................ 5,286
Directors' fees and expenses-Note 2(c)................................ 566
Miscellaneous......................................................... 2,481
_________________
TOTAL EXPENSES.................................................. 295,076
Less-expense reimbursement from Manager due to undertakings-Note 2(a). 270,079
_________________
NET EXPENSES.................................................... 24,997
_______________
INVESTMENT INCOME-NET, representing net increase in net assets
resulting from operations............................................... $ 1,285,661
=================
See notes to financial statements.
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
from December 1, 1995 (commencement of operations) to August 31, 1996
OPERATIONS;
Investment income-net, representing net increase in net assets
resulting from operations............................................................. $ 1,285,661
_______________
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net................................................................... (1,285,661)
_______________
CAPITAL STOCK TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold........................................................... 129,477,481
Dividends reinvested.................................................................... 1,250,908
Cost of shares redeemed................................................................. (30,480,638)
_______________
INCREASE IN NET ASSETS FROM CAPITAL STOCK TRANSACTIONS................................ 100,247,751
_______________
TOTAL INCREASE IN NET ASSETS...................................................... 100,247,751
NET ASSETS:
Beginning of period..................................................................... --
_______________
End of period........................................................................... $100,247,751
=================
</TABLE>
See notes to financial statements.
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
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 the period December 1, 1995
(commencement of operations) to August 31, 1996. This information has been
derived from the Series' financial statements.
<TABLE>
<CAPTION>
<S> <C>
PER SHARE DATA:
Net asset value, beginning of period.................................................... $ 1.00
_________
INVESTMENT OPERATIONS;
Investment income-net................................................................... .025
_________
DISTRIBUTIONS;
Dividends from investment income-net.................................................... (.025)
_________
Net asset value, end of period.......................................................... $ 1.00
=========
TOTAL INVESTMENT RETURN..................................................................... 3.38%*
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets................................................. .06%*
Ratio of net investment income to average net assets.................................... 3.25%*
Decrease reflected in above expense ratio due to undertakings by the Manager............ .68%*
Net Assets, end of period (000's Omitted).............................................. $100,248
* Annualized.
</TABLE>
See notes to financial statements.
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus BASIC Municipal Fund, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as an open-end management investment
company and operates as a series company currently offering four series,
including Dreyfus BASIC New Jersey Municipal Money Market Portfolio (the
"Series") which commenced operations on December 1, 1995. The Series is a
non-diversified portfolio. The Series' investment objective is to provide
investors with as high a level of current income exempt from Federal and New
Jersey income tax as is consistent with the preservation of capital and
maintenance of liquidity. The Dreyfus Corporation ("Manager") serves as the
Fund's investment adviser. The Manager is a direct subsidiary of Mellon Bank,
N.A. Premier Mutual Fund Services, Inc. acts as the distributor of the Fund's
shares, which are sold to the public without a sales charge.
The Fund accounts separately for the assets, liabilities and operations
of each series. Expenses directly attributable to each series are charged to
that series' operations; expenses which are applicable to all series are
allocated among them on a pro rata basis.
It is the Series' policy to maintain a continuous net asset value per
share of $1.00; the Series has adopted certain investment, portfolio
valuation and dividend and distribution policies to enable it to do so. There
is no assurance, however, that the Series will be able to maintain a stable
net asset value per share of $1.00.
The Series' financial statements are prepared in accordance with
generally accepted accounting principles which may require the use of
management estimates and assumptions. Actual results could differ from those
estimates.
(A) PORTFOLIO VALUATION: Investments are valued at amortized cost, which
has been determined by the Fund's Board of Directors to represent the fair
value of the Series' investments.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Interest income, adjusted
for amortization of premiums and original issue discounts on investments, is
earned from settlement date and recognized on the accrual basis. Realized
gain and loss from securities transactions are recorded on the identified
cost basis. Cost of investments represents amortized cost.
The Series follows an investment policy of investing primarily in
municipal obligations of one state. Economic changes affecting the state and
certain of its public bodies and municipalities may affect the ability of
issuers within the state to pay interest on, or repay principal of, municipal
obligations held by the Series.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Series to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Series may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Series not to distribute such
gain.
(D) FEDERAL INCOME TAXES: It is the policy of the Series to continue to
qualify as a regulated investment company, which can distribute tax exempt
dividends, by complying with the applicable provisions of the Internal
Revenue Code, and to make distributions of income and net realized capital
gain sufficient to relieve it from substantially all Federal income and
excise taxes.
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At August 31, 1996, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .50 of 1% of the value
of the Series' average daily net assets and is payable monthly. The Agreement
provides that if in any full fiscal year the aggregate expenses of the
Series, exclusive of taxes, brokerage, interest on borrowings and
extraordinary expenses, exceed the expense limitation of any state having
jurisdiction over the Series, the Series may deduct from payments to be made
to the Manager, or the Manager will bear the amount of such excess to the
extent required by state law. The most stringent state expense limitation
applicable to the Series presently requires reimbursement of expenses in any
full fiscal year that such expenses (exclusive of certain expenses as
described above) exceed 21\2% of the first $30 million, 2% of the next $70
million and 11\2% of the excess over $100 million of the value of the Series'
average net assets in accordance with California "blue sky" regulations.
However, the Manager had undertaken from December 1, 1995 through June 30,
1996 to reimburse all fees and expenses of the Series, and thereafter, had
undertaken through October 24, 1996 to reduce the management fee paid by the
Series, to the extent that the Series' aggregate expenses (exclusive of
certain expenses as described above) exceeded specified annual percentages of
the Series' average daily net assets. The Manager has currently undertaken
from October 25, 1996 through December 31, 1996 to reduce the management fee
paid by the Series, to the extent that the Series' aggregate expenses
(exclusive of certain expenses as described above) exceed an annual rate of
.30 of 1% of the value of the Series' average daily net assets. The expense
reimbursement, pursuant to the undertakings, amounted to $270,079 during the
period ended August 31, 1996.
In addition, the Manager has undertaken through June 30, 1998, to reduce
the management fee paid by the Series, to the extent that the Series'
aggregate annual expenses (exclusive of certain expenses as described above)
exceed an annual rate of .45 of 1% of the value of the Series' average daily
net assets.
(B) Pursuant to the Series' Shareholder Services Plan, the Series
reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of the
Manager, an amount not to exceed an annual rate of .25 of 1% of the value of
the Series' 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 Series and
providing reports and other information, and services related to the
maintenance of shareholder accounts. During the period ended August 31, 1996,
the Series was charged an aggregate of $5,000 pursuant to the Shareholder
Services Plan.
The Series compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary
of the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Series. Such
compensation amounted to $3,054 during the period ended August 31, 1996.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,000 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus BASIC New Jersey Municipal
Money Market Portfolio (one of the Series constituting Dreyfus BASIC
Municipal Fund, Inc.) as of August 31, 1996, and the related statements of
operations and changes in net assets and financial highlights for the period
from December 1, 1995 (commencement of operations) to August 31, 1996. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of August 31, 1996 by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus BASIC New Jersey Municipal Money Market Portfolio at
August 31, 1996, and the results of its operations, the changes in its net
assets and the financial highlights for the period from December 1, 1995 to
August 31, 1996, in conformity with generally accepted accounting principles.
(Ernst & Young LLP}
New York, New York
October 3, 1996
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Series hereby designates all the
dividends paid from investment income-net during the fiscal year ended August
31, 1996 as "exempt-interest dividends" (not subject to regular Federal and,
for individuals who are New Jersey residents, New Jersey personal income
taxes).
(Dreyfus Lion D Logo)
DREYFUS BASIC NEW JERSEY
MUNICIPAL MONEY MARKET PORTFOLIO
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 127AR968
(Dreyfus Logo)
BASIC New Jersey
Municipal Money
Market Portfolio
Annual Report
August 31, 1996
