File Nos. 33-42162
811-6377
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 14 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X ]
Amendment No. 14 [ X ]
(Check appropriate box or boxes.)
DREYFUS BASIC MUNICIPAL FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
----
X on January 2, 1998 pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on (date) pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
----
DREYFUS BASIC MUNICIPAL FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(b)
Prospectus for
Items in Money Market Portfolio Prospectus
for
Part A Interm. Bond Portfolio New Jersey
Form N-1A Caption Bond Portfolio Portfolio
_________ _______ ____________________ __________
1 Cover Page Cover Cover
2 Synopsis 3 3
3 Condensed Financial 4 4
Information
4 General Description of 7 5
Registrant
5 Management of the Fund 10 8
5(a) Management's Discussion * *
of Fund's Performance
6 Capital Stock and Other 21 17
Securities
7 Purchase of Securities 12 9
Being offered
8 Redemption or Repurchase 15 12
9 Pending Legal Proceedings * *
Items in
Part B
Form N-1A
___________
10 Cover Page Cover
11 Table of Contents Cover
12 General Information and History *
13 Investment Objectives and Policies B-2
14 Management of the Fund B-14
15 Control Persons and Principal B-17
Holders of Securities
DREYFUS BASIC MUNICIPAL FUND, INC.
Cross-Reference Sheet Pursuant to Rule 495(b) (continued)
Items in
Part B of
Form N-1A Caption Page
_________ _______ _____
16 Investment Advisory and Other B-18
Services
17 Brokerage Allocation B-28
18 Capital Stock and Other Securities B-31
19 Purchase, Redemption and Pricing B-21, B-22,
of Securities Being Offered B-25
20 Tax Status B-28
21 Underwriters B-21
22 Calculations of Performance Data B-30
23 Financial Statements B-46
Items in
Part C of
Form N-1A Caption Page
_________ _______ _____
24 Financial Statements and Exhibits C-1
25 Persons Controlled by or Under C-3
Common Control with Registrant
26 Number of Holders of Securities C-3
27 Indemnification C-3
28 Business and Other Connections of C-4
Investment Adviser
29 Principal Underwriters C-11
30 Location of Accounts and Records C-14
31 Management Services C-14
32 Undertakings C-14
____________________________________
NOTE: * Omitted since answer is negative or inapplicable.
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PROSPECTUS JANUARY 2, 1998
DREYFUS BASIC MUNICIPAL FUND, INC.
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DREYFUS BASIC MUNICIPAL FUND, INC. (THE "FUND") IS AN OPEN-END,
MANAGEMENT INVESTMENT COMPANY, KNOWN AS A SERIES MUTUAL FUND. BY THIS
PROSPECTUS, THE FUND IS OFFERING THREE SEPARATE NON-DIVERSIFIED SERIES (EACH,
A "PORTFOLIO"): DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO (THE "MONEY
MARKET PORTFOLIO"); DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO (THE
"INTERMEDIATE BOND PORTFOLIO"); AND DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
(THE "BOND PORTFOLIO"). EACH PORTFOLIO'S INVESTMENT OBJECTIVE IS TO PROVIDE
YOU WITH AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL INCOME TAX AS
IS CONSISTENT WITH THE PRESERVATION OF CAPITAL AND, FOR THE MONEY MARKET
PORTFOLIO ONLY, THE MAINTENANCE OF LIQUIDITY.
EACH PORTFOLIO IS DESIGNED TO BENEFIT INVESTORS WHO DO NOT ENGAGE IN
FREQUENT TRANSACTIONS IN PORTFOLIO SHARES.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING DREYFUS
TELETRANSFER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES EACH PORTFOLIO.
AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE MONEY
MARKET PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND AND
PORTFOLIOS THAT YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED JANUARY 2, 1998, WHICH
MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN
AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. THE SECURITIES AND EXCHANGE COMMISSION
MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND. FOR A FREE COPY OF THE STATEMENT OF
ADDITIONAL INFORMATION, WRITE TO THE FUND AT 144 GLENN CURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK
FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. THE NET ASSET VALUE OF ALL BOND MUTUAL FUNDS WILL FLUCTUATE FROM TIME
TO TIME.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
Page
Fee Table......................................... 4
Condensed Financial Information................... 5
Performance Information........................... 6
Description of the Portfolios..................... 7
Management of the Fund............................ 11
How to Buy Shares................................. 13
Shareholder Services.............................. 15
How to Redeem Shares.............................. 16
Shareholder Services Plan......................... 18
Dividends, Distributions and Taxes................ 19
General Information............................... 21
Appendix.......................................... 22
[Page 2]
[This Page Intentionally Left Blank]
[Page 3]
<TABLE>
<CAPTION>
FEE TABLE
MONEY INTERMEDIATE
MARKET BOND BOND
PORTFOLIO PORTFOLIO PORTFOLIO
__________ _________ __________
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Exchange Fee ............................................... $5.00 $5.00 $5.00
Account Closeout Fee........................................ $5.00 $5.00 $5.00
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees (after expense reimbursement)............... .35% .25% .21%
Other Expenses.............................................. .10% .20% .24%
Total Portfolio Operating Expenses (after expense reimbursement) .45% .45% .45%
EXAMPLE
You would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period:
1 YEAR...................................................... $10 $10 $10
3 YEARS..................................................... $19 $19 $19
5 YEARS..................................................... $30 $30 $30
10 YEARS.................................................... $62 $62 $62
</TABLE>
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THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES A 5% ANNUAL
RETURN, EACH PORTFOLIO'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN AN
ACTUAL RETURN GREATER OR LESS THAN 5%.
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The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by each Portfolio and investors, the payment of
which will reduce investors' annual return. The Dreyfus Corporation has
agreed to reduce its management fee or bear certain Portfolio expenses to the
extent certain Portfolio expenses, exceed .45 of 1% of the value of the
Portfolio's average net assets for the fiscal year. The expense reimbursement
arrangement will remain in effect, with respect to the Money Market
Portfolio, until such time as The Dreyfus Corporation gives investors at
least 90 days' notice to the contrary, and with respect to the Intermediate
Bond Portfolio and Bond Portfolio, until June 30, 1998, thereafter, such
arrangements may be extended, modified, or terminated. The expenses noted
above, without reimbursements, would be: Management Fees, .50% for the Money
Market Portfolio and .60% for the Intermediate Bond Portfolio and Bond
Portfolio, and Total Portfolio Operating Expenses .60% for the Money Market
Portfolio, .80% for the Intermediate Bond Portfolio, and .84% for the Bond
Portfolio. The information in the foregoing table does not reflect any other
fee waivers or expense reimbursement arrangements that may be in effect.
Moreover, unlike most other funds in the Dreyfus Family of Funds, the Fund
will charge your account $2.00 for each redemption check you write; you also
will be charged $5.00 for each exchange made and for each redemption you
make by wire or pursuant to the Dreyfus TELETRANSFER Privilege, or if you
otherwise closeout your account. These charges will be paid to the Fund's
transfer agent and will reduce the transfer agency charges otherwise payable
by the Fund. See "Shareholder Services" and "How to Redeem Shares." In
addition, certain securities dealers, banks or other financial institutions
may charge their clients direct fees for effecting transactions in Portfolio
shares; such fees are not reflected in the foregoing table. See "Management
of the Fund," "How to Buy Shares" and "Shareholder Services Plan."
[Page 4]
CONDENSED FINANCIAL INFORMATION
The information in the following tables has been audited by Ernst &
Young LLP, the Fund's independent auditors. Further financial data, related
notes and report of independent auditors, with respect to each Portfolio,
accompany the Statement of Additional Information, available upon request.
FINANCIAL HIGHLIGHTS
MONEY MARKET PORTFOLIO _ Contained below is per share operating
performance data for a share of Common Stock outstanding, total investment
return, ratios to average net assets and other supplemental data for each
year indicated. This information has been derived from the Money Market
Portfolio's financial statements.
<TABLE>
<CAPTION>
Money Market Portfolio
Year Ended August 31,
_______________________________________________________________________
PER SHARE DATA: 1992(1) 1993 1994 1995 1996 1997
______ ______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
______ ______ ______ ______ ______ ______
INVESTMENT OPERATIONS:
Investment income _ net................. .024 .027 .026 .037 .034 .033
______ ______ ______ ______ ______ ______
DISTRIBUTIONS:
Dividends from investment income _ net.. (.024) (.027) (.026) (.037) (.034) (.033)
______ ______ ______ ______ ______ ______
Net asset value, end of year............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======== ========= ======== =======
TOTAL INVESTMENT RETURN...................... 3.41%(2) 2.73% 2.60% 3.80% 3.42% 3.31%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.. __ .02% .09% .14% .38% .45%
Ratio of net investment income to average net assets 3.22%(2) 2.64% 2.58% 3.73% 3.40% 3.26%
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation .77%(2) .64% .50% .45% .22% .15%
Net Assets, end of year (000's omitted).. $228,708 $685,540 $1,027,377 $1,099,434 $804,257 $683,562
(1) From December 16, 1991 (commencement of operations) to August 31, 1992.
(2) Annualized.
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
INTERMEDIATE BOND PORTFOLIO _ Contained below is per share operating
performance data for a share of Common Stock outstanding, total investment
return, ratios to average net assets and other supplemental data for each
year indicated. This information has been derived from the Intermediate Bond
Portfolio's financial statements.
INTERMEDIATE BOND PORTFOLIO
YEAR ENDED AUGUST 31,
_____________________________________________
PER SHARE DATA: 1994(1) 1995 1996 1997
_______ _______ _______ _______
<S> <C> <C> <C> <C>
Net asset value, beginning of year.............................. $12.50 $12.65 $12.95 $12.83
_______ _______ _______ _______
INVESTMENT OPERATIONS:
Investment income _ net........................................ .24 .68 .65 .66
Net realized and unrealized gain (loss) on investments.......... . .15 .30 (.12) .45
_______ _______ _______ _______
TOTAL FROM INVESTMENT OPERATIONS................................ .39 .98 .53 1.11
_______ _______ _______ _______
DISTRIBUTIONS:
Dividends from investment income _ net......................... (.24) (.68) (.65) (.66)
_______ _______ _______ _______
Dividends from net realized gain on investments................. -- -- -- (.03)
_______ _______ _______ _______
TOTAL DISTRIBUTIONS............................................. (.24) (.68) (.65) (.69)
_______ _______ _______ _______
Net asset value, end of year.................................... $12.65 $12.95 $12.83 $13.25
======= ======= ======= =======
TOTAL INVESTMENT RETURN........................................... 3.11%(2) 8.09% 4.07% 8.95%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets......................... __ .11% .39% .24%
Ratio of net investment income to average net assets............ 5.53%(3) 5.45% 5.01% 5.07%
Decrease reflected in above expense ratios due
to undertakings by The Dreyfus Corporation...................... 1.54%(3) .81% .46% .56%
Portfolio Turnover Rate......................................... 41.15%(2) 34.12% 54.99% 64.65%
Net Assets, end of year (000's omitted)......................... $28,275 $43,155 $46,598 $66,372
(1) From May 5, 1994 (commencement of operations) to August 31, 1994.
(2) Not annualized.
(3) Annualized.
</TABLE>
[Page 5]
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
BOND PORTFOLIO _ Contained below is per share operating performance
data for a share of Common Stock outstanding, total investment return,
ratios to average net assets and other supplemental data for each year
indicated. This information has been derived from the Bond Portfolio's
financial statements.
BOND PORTFOLIO
YEAR ENDED AUGUST 31,
_____________________________________________
PER SHARE DATA: 1994(1) 1995 1996 1997
_______ _______ _______ _______
<S> <C> <C> <C> <C>
Net asset value, beginning of year.............................. $12.50 $12.76 $13.01 $13.03
_______ _______ _______ _______
INVESTMENT OPERATIONS:
Investment income-net........................................... .19 .76 .73 .74
Net realized and unrealized gain on investments................. . .26 .25 .06 .66
_______ _______ _______ _______
TOTAL FROM INVESTMENT OPERATIONS................................ .45 1.01 .79 1.40
_______ _______ _______ _______
DISTRIBUTIONS:
Dividends from investment income _ net......................... (.19) (.76) (.72) (.74)
Dividends from net realized gains on investments................ __ __ (.05) (.09)
_______ _______ _______ _______
TOTAL DISTRIBUTIONS............................................. (.19) (.76) (.77) (.83)
_______ _______ _______ _______
Net asset value, end of year.................................... $12.76 $13.01 $13.03 $13.60
======= ======= ======= =======
TOTAL INVESTMENT RETURN........................................... 4.13%(2) 8.30% 6.17% 11.03%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets......................... __ .20% .39% .26%
Ratio of net investment income to average net assets............ 6.03%(3) 5.99% 5.52% 5.50%
Decrease reflected in above expense ratios due to
undertakings by The Dreyfus Corporation......................... 2.06%(3) .77% .52% .58%
Portfolio Turnover Rate......................................... 8.82%(2) 58.91% 59.23% 101.27%
Net Assets, end of year (000's omitted)......................... $15,334 $42,913 $56,449 $114,268
(1) From May 6, 1994 (commencement of operations) to August 31, 1994.
(2) Not annualized.
(3) Annualized.
</TABLE>
Further information about the performance of the Intermediate Bond
Portfolio and Bond Portfolio is contained in each
Portfolio's respective annual report, which may be obtained without charge by
writing to the address or calling the number set forth on the cover of this
Prospectus.
PERFORMANCE INFORMATION
MONEY MARKET PORTFOLIO _ From time to time, the Money Market Portfolio
advertises its yield and effective yield. Both yield figures are based on
historical earnings and are not intended to indicate future performance. It
can be expected that these yields will fluctuate substantially. The yield of
the Money Market Portfolio refers to the income generated by an investment in
the Portfolio over a seven-day period (which period will be stated in the
advertisement). This income is then annualized. That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment.
The effective yield is calculated similarly, but, when annualized, the income
earned by an investment in the Portfolio is assumed to be reinvested. The
effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment. The Money Market Portfolio's
yield and effective yield may reflect absorbed expenses pursuant to any
undertakings that may be in effect. See "Management of the Fund."
Tax equivalent yield is calculated by determining the pre-tax yield
which, after being taxed at a stated rate, would be equivalent to a stated
yield or effective yield calculated as described above.
Yield information is useful in reviewing the Money Market Portfolio's
performance, but because yields will fluctuate, such information under
certain conditions may not provide a basis for comparison with domestic bank
deposits, other investments which pay a fixed yield for a stated period of
time, or other investment companies which may use a different method of
computing yield.
[Page 6]
Comparative performance information may be used from time to time
in advertising or marketing the Money Market
Portfolio's shares, including data from Lipper Analytical Services, Inc.,
Bank Rate Monitortrademark, N. Palm Beach, Fla. 33408, IBC's Money Fund Report
trademark, Morningstar, Inc. and other industry publications.
INTERMEDIATE BOND PORTFOLIO AND BOND PORTFOLIO _ For purposes of
advertising, performance of the Intermediate Bond Portfolio and the Bond
Portfolio (each, a "Longer Term Portfolio") may be calculated on several
bases, including current yield, tax equivalent yield, average annual total
return and/or total return.
Current yield of a Longer Term Portfolio refers to its annualized net
investment income per share over a 30-day period, expressed as a percentage
of the net asset value per share at the end of the period. For purposes of
calculating current yield, the amount of net investment income per share
during that 30-day period, computed in accordance with regulatory
requirements, is compounded by assuming it is reinvested at a constant rate
over a six-month period. An identical result is then assumed to have occurred
during a second six-month period which, when added to the result for the
first six months, provides an "annualized" yield for an entire one-year
period. Calculations of a Longer Term Portfolio's current yield may reflect
absorbed expenses pursuant to any undertakings that may be in effect. See
"Management of the Fund."
Tax equivalent yield also is calculated by determining the pre-tax
yield which, after being taxed at a stated rate, would be equivalent to a
stated current yield calculated as described above.
Average annual total return for each Longer Term Portfolio is
calculated pursuant to a standardized formula which assumes that an
investment in such Portfolio was purchased with an initial payment of $1,000
and that the investment was redeemed at the end of a stated period of time,
after giving effect to the reinvestment of dividends and distributions during
the period. The return is expressed as a percentage rate which, if applied on
a compounded annual basis, would result in the redeemable value of the
investment at the end of the period. Advertisements of a Longer Term
Portfolio's performance will include its average annual total return for one,
five and ten year periods, or for shorter time periods depending upon the
length of time the Portfolio has operated.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Comparative performance information may be used from time to time in
advertising or marketing shares of each Longer Term Portfolio, including data
from CDA Investment Technologies, Inc., Lipper Analytical Services, Inc.,
Moody's Bond Survey Bond Index, Lehman Brothers Municipal Bond Index,
Morningstar, Inc. and other industry publications.
ALL PORTFOLIOS _ Performance will vary from time to time and past results
are not necessarily representative of future results. You should remember
that performance is a function of portfolio management in selecting the type
and quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
DESCRIPTION OF THE PORTFOLIOS
INVESTMENT OBJECTIVE
Each Portfolio's investment objective is to provide you with as high
a level of current income exempt from Federal income tax as is consistent
with the preservation of capital and, for the Money Market Portfolio only,
the maintenance of liquidity. Each Portfolio invests primarily in Municipal
Obligations (described below). The Money Market Portfolio invests primarily
in high-quality, short-term instruments, which may not earn as high a level
of current income as long-term or lower quality
[Page 7]
securities which generally have less liquidity, greater market risk and more
fluctuation in market value. The dollar-weighted average maturity of the
Intermediate Bond Portfolio's investments ranges between three and ten years.
The Bond Portfolio invests without regard to maturity. Each Portfolio's
investment objective cannot be changed without approval by the holders of a
majority (as defined in the Investment Company Act of 1940, as amended (the
"1940 Act")) of such Portfolio's outstanding voting shares. There can be no
assurance that a Portfolio's investment objective will be achieved.
MUNICIPAL OBLIGATIONS
Municipal Obligations are debt obligations issued by states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities, or
multistate agencies or authorities, the interest from which is, in the
opinion of bond counsel to the issuer, exempt from Federal income tax.
Municipal Obligations generally include debt obligations issued to obtain
funds for various public purposes as well as certain industrial development
bonds issued by or on behalf of public authorities. Municipal Obligations are
classified as general obligation bonds, revenue bonds or notes. General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Tax exempt
industrial development bonds, in most cases, are revenue bonds that generally
do not carry the pledge of the credit of the issuing municipality, but
generally are guaranteed by the corporate entity on whose behalf they are
issued. Notes are short-term instruments which are obligations of the issuing
municipalities or agencies and are sold in anticipation of a bond sale,
collection of taxes or receipt of other revenues. Municipal Obligations
include municipal lease/purchase agreements which are similar to installment
purchase contracts for property or equipment issued by municipalities.
Municipal Obligations bear fixed, floating or variable rates of interest.
Each Longer Term Portfolio may purchase Municipal Obligations with interest
rates that are determined by formulas under which the rate will change
directly or inversely to changes in interest rates or an index, or multiples
thereof, in many cases subject to a maximum and minimum. Certain Municipal
Obligations purchased by a Longer Term Portfolio are subject to redemption at
a date earlier than their stated maturity pursuant to call options, which may
be separated from the related Municipal Obligation and purchased and sold
separately.
MANAGEMENT POLICIES
It is a fundamental policy of each Portfolio that it will invest at
least 80% of the value of its respective net assets (except when maintaining
a temporary defensive position) in Municipal Obligations. Additionally, at
least 65% of the value of each Longer Term Portfolio's net assets (except
when maintaining a temporary defensive position) will be invested in bonds,
debentures and other debt instruments.
MONEY MARKET PORTFOLIO _ The Money Market Portfolio seeks to
maintain a net asset value of $1.00 per share for purchases and redemptions.
To do so, the Money Market Portfolio uses the amortized cost method of
valuing its securities pursuant to Rule 2a-7 under the 1940 Act, which Rule
includes various maturity, quality and diversification requirements, certain
of which are summarized as follows. In accordance with Rule 2a-7, the Money
Market Portfolio is required to maintain a dollar-weighted average portfolio
maturity of 90 days or less, purchase only instruments having remaining
maturities of 13 months or less and invest only in U.S. dollar denominated
securities determined in accordance with procedures established by the Fund's
Board to present minimal credit risks and which are rated in one of the two
highest rating categories for debt obligations by at least two nationally
recognized statistical rating organizations (or one rating organization if
the instrument was rated only by one such organization) or, if unrated, are
of comparable quality as determined in accordance with procedures established
by the Fund's Board. The nationally recognized statistical rating
organizations currently rating investments of the type the Money Market
Portfolio may purchase are Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Ratings Group ("S&P") and Fitch Investors Service, L.P.
("Fitch") and their rating criteria are described in "Appendix B" to the
[Page 8]
Statement of Additional Information. For further information regarding the
amortized cost method of valuing securities, see "Determination of Net Asset
Value" in the Statement of Additional Information. There can be no assurance
that the Money Market Portfolio will be able to maintain a stable net asset
value of $1.00 per share.
INTERMEDIATE BOND PORTFOLIO AND BOND PORTFOLIO _ At least 65% of the
value of each Longer Term Portfolio's net assets must consist of Municipal
Obligations which, in the case of bonds, are rated no lower than A by
Moody's, S&P or Fitch or, if unrated, deemed to be of comparable quality by
The Dreyfus Corporation. Each Longer Term Portfolio may invest up to 35% of
the value of its net assets in Municipal Obligations which, in the case of
bonds, are rated lower than A by Moody's, S&P and Fitch and as low as the
lowest rating assigned by Moody's, S&P or Fitch. Each Longer Term Portfolio
may invest in short-term Municipal Obligations which are rated in the two
highest rating categories by Moody's, S&P or Fitch. See "Appendix B" in the
Statement of Additional Information. Municipal Obligations rated BBB by S&P
or Fitch or Baa by Moody's are considered investment grade obligations; those
rated BBB by S&P and Fitch are regarded as having an adequate capacity to pay
principal and interest, while those rated Baa by Moody's are considered
medium grade obligations which lack outstanding investment characteristics
and have speculative characteristics. Investments rated Ba or lower by
Moody's and BB or lower by S&P and Fitch ordinarily provide higher yields but
involve greater risk because of their speculative characteristics. Although
there is no current intention of doing so, each Longer Term Portfolio may
invest in Municipal Obligations rated C by Moody's or D by S&P or Fitch,
which is the lowest rating assigned by such rating organizations and
indicates that the Municipal Obligation is in default and interest and/or
repayment of principal is in arrears. See "Investment Considerations and
Risks_Lower Rated Bonds" below for a further discussion of certain risks.
The annual portfolio turnover rate for each Longer Term Portfolio's
for the current fiscal year is not expected to exceed 100%. A turnover rate
of 100% is equivalent to the Portfolio buying and selling all of the
securities in its portfolio once in the course of a year. Each Longer Term
Portfolio may engage in various investment techniques, such as lending
portfolio securities, options and futures transactions and short-selling. Use
of certain of these techniques may give rise to taxable income. See "Dividends
, Distributions and Taxes". For a discussion of the investment techniques and
their related risks, see "Investment Considerations and Risks" and
"Appendix_Investment Techniques" below and "Investment Objective and
Management Policies_Management Policies" in the Statement of Additional
Information.
ALL PORTFOLIOS _ From time to time, a Portfolio may invest more than
25% of the value of its total assets in industrial development bonds which,
although issued by industrial development authorities, may be backed only by
the assets and revenues of the non-governmental users. Interest on Municipal
Obligations (including certain industrial development bonds) which are
specified private activity bonds, as defined in the Internal Revenue Code of
1986, as amended (the "Code"), issued after August 7, 1986, while exempt from
Federal income tax, is a preference item for the purpose of the alternative
minimum tax. Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the investment
company may be treated as such a preference item to shareholders. Each
Portfolio may invest without limitation in such Municipal Obligations if The
Dreyfus Corporation determines that its purchase is consistent with such
Portfolio's investment objective. See "Investment Considerations and Risks"
below.
Each Portfolio also may invest in Taxable Investments of the quality
described under "Appendix _ Certain Portfolio Securities _ Taxable
Investments."
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL_The Fund is designed to benefit investors who do not engage in
frequent redemptions or exchanges of Portfolio shares. Because charges may
apply to redemptions and exchanges of Portfolio
[Page 9]
shares, and because the number of exchanges permitted is limited, the Fund
may not be an appropriate investment for an investor who intends to engage
frequently in such transactions.
Even though interest-bearing securities are investments which promise
a stable stream of income, the prices of such securities are inversely
affected by changes in interest rates and, therefore, are subject to the risk
of market price fluctuations. Certain securities that may be purchased by a
Longer Term Portfolio, such as those with interest rates that fluctuate
directly or indirectly based on multiples of a stated index, are designed to
be highly sensitive to changes in interest rates and can subject the holders
thereof to extreme reductions of yield and possibly loss of principal. The
values of fixed-income securities also may be affected by changes in the
credit rating or financial condition of the issuing entities. Once the rating
of a Longer Term Portfolio security has been changed, the Fund will consider
all circumstances deemed relevant in determining whether to continue to hold
the security. The Money Market Portfolio seeks to maintain a stable $1.00
share price, while the net asset value of each Longer Term Portfolio
generally will not be stable and should fluctuate based upon changes in the
value of its respective portfolio securities. Securities in which a Longer
Term Portfolio invests may earn a higher level of current income than certain
shorter-term or higher quality securities which generally have greater
liquidity, less market risk and less fluctuation in market value.
INVESTING IN MUNICIPAL OBLIGATIONS_Each Portfolio may invest more than 25%
of the value of its total assets in Municipal Obligations which are related
in such a way that an economic, business or political development or change
affecting one such security also would affect the other securities; for
example, securities the interest upon which is paid from revenues of similar
types of projects, or securities whose issuers are located in the same state.
As a result, each Portfolio may be subject to greater risk as compared to a
fund that does not follow this practice.
Certain municipal lease/purchase obligations in which a Portfolio may
invest may contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease/purchase obligations are secured by the leased
property, disposition of the leased property in the event of foreclosure
might prove difficult. In evaluating the credit quality of a municipal lease/p
urchase obligation that is unrated, The Dreyfus Corporation will consider, on
an ongoing basis, a number of factors including the likelihood that the
issuing municipality will discontinue appropriating funding for the leased
property.
Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase
the cost of the Municipal Obligations available for purchase by each
Portfolio and thus reduce the available yield. Shareholders should consult
their tax advisers concerning the effect of these provisions on an investment
in a Portfolio. Proposals that may restrict or eliminate the income tax
exemption for interest on Municipal Obligations may be introduced in the
future. If any such proposal were enacted that would reduce the availability
of Municipal Obligations for investment by a Portfolio so as to adversely
affect its shareholders, such Portfolio would reevaluate its investment
objective and policies and submit possible changes in its structure to
shareholders for their consideration. If legislation were enacted that would
treat a type of Municipal Obligation as taxable, each Portfolio would treat
such security as a permissible Taxable Investment within the applicable
limits set forth herein.
LOWER RATED BONDS (LONGER TERM PORTFOLIOS ONLY) _ Each Longer Term Portfolio
may invest up to 35% of the value of its net assets in higher yielding (and,
therefore, higher risk) debt securities, such as those rated Ba by Moody's or
BB by S&P or Fitch, or as low as the lowest rating assigned by Moody's, S&P
or Fitch (commonly known as junk bonds). They may be subject to certain risks
with respect to the issuing entity and to greater market fluctuations than
certain lower yielding, higher rated fixed-income securities. The market
price and yield of bonds rated Ba or lower by Moody's and BB or lower by S&P
and Fitch are more volatile than those of higher rated bonds. Factors
adversely affecting the market
[Page 10]
price and yield of these securities will adversely affect each Longer Term
Portfolio's net asset value. In addition, the retail secondary market for
these bonds may be less liquid than that of higher rated bonds; adverse
market conditions could make it difficult at times for a Longer Term
Portfolio to sell certain securities or could result in lower prices than
those used in calculating the net asset value of each Longer Term Portfolio.
See "Appendix _ Certain Portfolio Securities _ Ratings." Lower rated bonds
as discussed herein are not eligible investments for the Money Market
Portfolio.
ZERO COUPON SECURITIES (LONGER TERM PORTFOLIOS ONLY) _ Federal income tax
law requires the holder of a zero coupon security or of certain pay-in-kind
bonds to accrue income with respect to these securities prior to the receipt
of cash payments. To maintain its qualification as a regulated investment
company and avoid liability for Federal income taxes, a Longer Term Portfolio
may be required to distribute such income accrued with respect to these
securities and may have to dispose of portfolio securities under
disadvantageous circumstances in order to generate cash to satisfy these
distribution requirements.
Use of Derivatives (LONGER TERM PORTFOLIOS ONLY) _ Each Longer Term
Portfolio may invest in derivatives ("Derivatives"). These are financial
instruments which derive their performance, at least in part, from the
performance of an underlying asset, index or interest rate. The Derivatives
the Longer Term Portfolios may use include options and futures. While
Derivatives can be used effectively in furtherance of the Longer Term
Portfolio's investment objective, under certain market conditions, they can
increase the volatility of the Longer Term Portfolios' net asset value,
decrease the liquidity of the Longer Term Portfolios' investments and make
more difficult the accurate pricing of the Longer Term Portfolios' portfolio.
See "Appendix_Investment Techniques_Use of Derivatives" below, and
"Investment Objective and Management Policies_Management
Policies_Derivatives" in the Statement of Additional Information.
Non-Diversified Status_The classification of each Portfolio as a
"non-diversified" investment company means that the proportion of the
Portfolio's assets that may be invested in the securities of a single issuer
is not limited by the 1940 Act. A "diversified" investment company is
required by the 1940 Act generally, with respect to 75% of its total assets,
to invest not more than 5% of such assets in the securities of a single
issuer. Since a relatively high percentage of each Portfolio's assets may be
invested in the securities of a limited number of issuers, the Portfolio's
investments may be more sensitive to changes in the market value of a single
issuer. However, to meet Federal tax requirements, at the close of each
quarter no Portfolio may have more than 25% of its total assets invested in
any one issuer and, with respect to 50% of total assets, more than 5% of its
total assets invested in any one issuer. These limitations do not apply to
U.S. Government securities.
SIMULTANEOUS INVESTMENTS _ Investment decisions for each Portfolio are made
independently from those of other investment companies advised by The Dreyfus
Corporation. If, however, such other investment companies desire to invest
in, or dispose of, the same securities as a Portfolio, available investments
opportunities for sales will be allocated equitably to each. In some cases,
this procedure may adversely affect the size of the position obtained for or
disposed of by a Portfolio or the price paid or received by it.
MANAGEMENT OF THE FUND
Investment Adviser_The Dreyfus Corporation, located at 200 Park Avenue, New
York, New York 10166, was formed in 1947 and serves as the Fund's investment
adviser. The Dreyfus Corporation is a wholly-owned subsidiary of Mellon Bank,
N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). As of November 30, 1997, The Dreyfus Corporation managed or
administered approximately $94 billion in assets for approximately 1.7
million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the authority of the Fund's Board in accordance with Maryland law.
The primary portfolio manager of the Longer Term Portfolios is Douglas J.
Gaylor. He has held each position since he joined The Dreyfus Corporation in
January 1996. From 1993 through 1995, he was a portfolio manager in the
Investment Management and Research group at PNC Bank and, from
[Page 11]
1990 to 1993, he was a Senior Municipal Investment Officer with Wilmington
Trust Company. The Fund's other portfolio managers are identified in the
Statement of Additional Information. The Dreyfus Corporation also provides
research services for the Fund and for other funds advised by The Dreyfus
Corporation through a professional staff of portfolio managers and securities
analysts.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCOCredit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed more than
$299 billion in assets as of September 30, 1997, including approximately $102
billion in proprietary mutual fund assets. As of September 30, 1997, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $1.488 trillion in
assets, including approximately $60 billion in mutual fund assets.
Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate of: (i) .50 of
1% of the value of the Money Market Portfolio's average daily net assets and
(ii) .60 of 1% of the value of each Longer Term Portfolio's average daily net
assets. From time to time, The Dreyfus Corporation may waive receipt of its
fees and/or voluntarily assume certain expenses of a Portfolio, which would
have the effect of lowering the expense ratio of that Portfolio and
increasing yield to investors. The Fund will not pay The Dreyfus Corporation
at a later time for any amounts it may waive, nor will the Fund reimburse The
Dreyfus Corporation for any amounts it may assume. For the fiscal year ended
August 31, 1997, the Fund paid The Dreyfus Corporation monthly management
fees at the effective annual rates of .35 of 1% of the Money Market
Portfolio's, .04 of 1% of the Intermediate Bond Portfolio's, and .02 of 1% of
the Bond Portfolio's, respective average daily net assets, pursuant to
separate undertakings and agreements by The Dreyfus Corporation.
The Dreyfus Corporation has agreed that, until such time as it gives
shareholders at least 90 days' notice to the contrary, in the case of the
Money Market Portfolio, and until June 30, 1998, in the case of each Longer
Term Portfolio, if in any fiscal year the aggregate expenses of a Portfolio,
exclusive of taxes, brokerage, interest on borrowings and (with the prior
written consent of the necessary state securities commissions) extraordinary
expenses, but including the management fee, exceed .45 of 1% of the value of
such Portfolio's average daily net assets for the fiscal year, the Fund may
deduct from the payment to be made to The Dreyfus Corporation under the
Management Agreement, or The Dreyfus Corporation will bear, such excess
expense.
In allocating brokerage transactions, The Dreyfus Corporation seeks
to obtain the best execution of orders at the most favorable net price.
Subject to this determination, TheDreyfus Corporation may consider, among
other things, the receipt of research services and/or the sale of shares of
the Fund or other funds managed, advised or administered by The Dreyfus
Corporation as factors in the selection of broker-dealers to execute
portfolio transactions for the Fund. See "Portfolio Transactions" in the
Statement of Additional Information.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay securities
dealers, banks or other financial institutions in respect of these services.
Distributor_The Fund's distributor is Premier Mutual Fund Services, Inc. (the
"Distributor"), located at 60 State Street, Boston, Massachusetts 02109. The
Distributor's ultimate parent is Boston Institutional Group, Inc.
[Page 12]
Transfer and Dividend Disbursing Agent and Custodian_ Dreyfus Transfer, Inc.,
a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). The Transfer Agent will receive the
$5.00 exchange fee, the $5.00 account closeout fee, the $5.00 wire and
Dreyfus TELETRANSFER redemption fee and the $2.00 checkwriting charge,
described below. A sufficient number of your shares will be redeemed
automatically to pay these amounts. These payments will reduce the transfer
agency fee otherwise payable by the Fund. By purchasing shares of a
Portfolio, you are deemed to have consented to this procedure. The Bank of
New York, 90 Washington Street, New York, New York 10286, is the Fund's
Custodian.
HOW TO BUY SHARES
Portfolio shares are sold without a sales charge. You may be charged
a fee if you effect transactions in Portfolio shares through a securities
dealer, bank or other financial institution. Share certificates are issued
only upon your written request. No certificates are issued for fractional
shares. It is not recommended that any Portfolio be used as a vehicle for
Keogh, IRA or other qualified plans. The Fund reserves the right to reject
any purchase order. See "Appendix_Additional Information About Purchases,
Exchanges and Redemptions."
The minimum initial investment is $25,000 for the Money Market
Portfolio and $10,000 for each Longer Term Portfolio. Subsequent investments
in each Portfolio must be at least $1,000. The initial investment must be
accompanied by the Account Application.
You may purchase Portfolio shares by check or wire or through the
Dreyfus TELETRANSFER Privilege described below. Checks should be made payable
to "The Dreyfus Family of Funds" and should specify the Portfolio in which
you are investing. Payments to open new accounts which are mailed should be
sent to The Dreyfus Family of Funds, P.O. Box 9387, Providence, Rhode Island
02940-9387, together with your Account Application. For subsequent
investments, your Fund account number should appear on the check and an
investment slip should be enclosed and sent to The Dreyfus Family of Funds,
P.O. Box 105, Newark, New Jersey 07101-0105. Neither initial nor subsequent
investments should be made by third party check. Purchase orders may be
delivered in person only to a Dreyfus Financial Center. THESE ORDERS WILL BE
FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call one of the
telephone numbers listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, together with the applicable
Portfolio's DDA# as shown below, for purchase of Portfolio shares in your
name: DDA# 8900208767/Dreyfus BASIC Municipal Fund, Inc./Dreyfus BASIC
Municipal Money Market Portfolio; DDA# 8900088451/Dreyfus BASIC Municipal
Fund, Inc./Dreyfus BASIC Intermediate Municipal Bond Portfolio; or DDA#
8900088443/Dreyfus BASIC Municipal Fund, Inc./Dreyfus BASIC Municipal Bond
Portfolio. The wire must include your Fund account number (for new accounts,
your Taxpayer Identification Number ("TIN") should be included instead),
account registration and dealer number, if applicable. If your initial
purchase of Portfolio shares is by wire, please call 1-800-645-6561 after
completing your wire payment to obtain your Fund account number. Please
include your Fund account number on the Account Application and promptly mail
the Account Application to the Fund, as no redemptions will be permitted
until the Account Application is received. You may obtain further information
about remitting funds in this manner from your bank. All payments should be
made in U.S. dollars and, to avoid additional fees and delays, should be
drawn only on U.S. banks. A charge will be imposed if any check used for
investment in your account does not clear. The Fund makes available to
certain large institutions the ability to issue purchase instructions through
compatible computer facilities.
[Page 13]
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other
domestic financial institution that is an Automated Clearing House member.
You must direct the institution to transmit immediately available funds
through the Automated Clearing House to The Bank of New York with
instructions to credit your Fund account. The instructions must specify your
Fund account registration and your Fund account number PRECEDED BY THE DIGITS
"1111."
Shares of the Money Market Portfolio are sold on a continuous basis
at the net asset value per share next determined after an order in proper
form and Federal Funds (monies of member banks within the Federal Reserve
System which are held on deposit at a Federal Reserve Bank) are received by
the Transfer Agent. If you do not remit Federal Funds, your payment must be
converted into Federal Funds. This usually occurs within one business day of
receipt of a bank wire or within two business days of receipt of a check
drawn on a member bank of the Federal Reserve System. Checks drawn on banks
which are not members of the Federal Reserve System may take considerably
longer to convert into Federal Funds. Prior to receipt of Federal Funds, your
money will not be invested.
The Money Market Portfolio's net asset value per share is determined
as of 12:00 Noon, New York time, on each day the New York Stock Exchange is
open for business. Net asset value per share is computed by dividing the
value of the Money Market Portfolio's net assets (i.e., the value of its
assets less liabilities) by the total number of Money Market Portfolio shares
outstanding. See "Determination of Net Asset Value" in the Statement of
Additional Information.
If your payments for shares of the Money Market Portfolio are
received in or converted into Federal Funds by 12:00 Noon, New York time, by
the Transfer Agent, you will receive the dividend declared that day. If your
payments are received in or converted into Federal Funds after 12:00 Noon,
New York time, by the Transfer Agent, you will begin to accrue dividends on
the following business day.
Qualified institutions may telephone orders for purchase of the Money
Market Portfolio's shares. These orders will become effective at the price
determined at 12:00 Noon, New York time, and the shares purchased will
receive the dividend on Portfolio shares declared on that day, if the
telephone order is placed by 12:00 Noon, New York time, and Federal Funds are
received by 4:00 p.m., New York time, on that day.
Shares of each Longer Term Portfolio are sold on a continuous basis
at the net asset value per share next determined after an order in proper
form is received by the Transfer Agent. Each Longer Term Portfolio's net
asset value per share is determined as of the close of trading on the floor
of the New York Stock Exchange (currently 4:00 p.m., New York time), on each
day the New York Stock Exchange is open for business. For purposes of
determining the net asset value of each Longer Term Portfolio, options and
futures contracts will be valued 15 minutes after the close of trading on the
floor of the New York Stock Exchange. Net asset value per share is computed
by dividing the value of the specific Longer Term Portfolio's net assets
(i.e., the value of its assets less liabilities) by the total number of such
Portfolio's shares outstanding. The investments of each Longer Term Portfolio
are valued by an independent pricing service approved by the Fund's Board,
and are valued at fair value as determined by the pricing service. The
pricing service's procedures are reviewed under the general supervision of
the Fund's Board. For further information regarding the methods employed in
valuing each Longer Term Portfolio's investments, see "Determination of Net
Asset Value" in the Statement of Additional Information.
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends, Distributions and Taxes" and
the Account Application for further information concerning this requirement.
Failure to furnish a certified TIN to the Fund could subject you to a $50
penalty imposed by the Internal Revenue Service (the "IRS").
DREYFUS TELETRANSFER PRIVILEGE - You may purchase shares (minimum $1,000,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds
[Page 14]
will be transferred between the bank account designated in one of these
documents and your Fund account. Only a bank account maintained in a domestic
financial institution which is an Automated Clearing House member may be so
designated. The Fund may modify or terminate this Privilege at any time. No
fee currently is contemplated for purchases of shares pursuant to this
Privilege.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
FUND EXCHANGES _ You may purchase up to four times a calendar year, in
exchange for shares of a Portfolio, shares in one of the Fund's other
portfolios or shares of certain other funds managed or administered by The
Dreyfus Corporation, to the extent such shares are offered for sale in your
state of residence. These funds have different investment objectives which
may be of interest to you. If you desire to use this service, please call
1-800-645-6561 to determine if it is available and whether any conditions are
imposed on its use. YOU WILL BE CHARGED A $5.00 FEE FOR EACH EXCHANGE YOU
MAKE OUT OF A PORTFOLIO. This fee will be deducted from your account and paid
to the Transfer Agent; however, the Fund will waive this fee if the closing
balance in the shareholder's account on the business day immediately
preceding the effective date of such transaction is $50,000 or more.
To request an exchange you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange into a fund or
Fund portfolio offered by another prospectus, you must obtain and should
review a copy of the current prospectus of the fund or portfolio into which
the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of personal retirement plans, the shares
being exchanged must have a current value of at least $1,000; furthermore,
when establishing a new account by exchange, the shares being exchanged must
have a value of at least the minimum initial investment required for the fund
into which the exchange is being made. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless you check the applicable "No"box on the Account Application,
indicating that you specifically refuse this Privilege. The Telephone
Exchange Privilege may be established for an existing account by written
request signed by all shareholders on the account, by a separate signed
Shareholder Services Form, available by calling 1-800-645-6561, or by oral
request from any of the authorized signatories on the account by calling
1-800-645-6561. If you have established the Telephone Exchange Privilege, you
may telephone exchange instructions (including over The Dreyfus Touch
Registration Mark automated telephone system) by calling 1-800-645-6561. If
you are calling from overseas, call 516-794-5452. See "How to Redeem
Shares_Procedures." Upon an exchange into a new account, the following
shareholder services and privileges, as applicable and where available, will
be automatically carried over to the fund into which the exchange is made:
Telephone Exchange Privilege, Check Redemption Privilege, Wire Redemption
Privilege, Telephone Redemption Privilege, Dreyfus TELETRANSFER Privilege and
the dividend/capital gain distribution option (except for Dreyfus Dividend
Sweep) selected by the investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund that charges a
sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load, if the shares you are exchanging
were: (a) purchased with a sales load, (b) acquired by a previous exchange
from shares purchased with a sales load, or (c) acquired through reinvestment
of dividends or distributions paid with respect to the foregoing categories
of shares. To qualify, at the time of the exchange you must notify the
Transfer Agent. Any such qualification is subject to confirmation of your
holdings through a check of appropriate records. See "Shareholder Services"
in the Statement of Additional Information. The Fund reserves the right to
reject any exchange request in whole or in part and will reject any request
to exchange a Portfolio if the investor has made four such changes during the
calendar year. See "Appendix_Additional Information About Purchases,
Exchanges and Redemptions."
[Page 15]
The availability of Fund Exchanges may be modified or terminated at any time
upon notice to shareholders. See "Dividends, Distributions and Taxes."
DREYFUS DIVIDEND SWEEP PRIVILEGE _ Dreyfus Dividend Sweep enables you to
invest automatically dividends or dividends and capital gain distributions,
if any, paid by the Portfolio in shares of one of the Fund's other portfolios
or shares of another fund in the Dreyfus Family of Funds of which you are a
shareholder. Shares of other portfolios or funds will be purchased at the
then-current net asset value; however, a sales load may be charged with
respect to investments in shares of a fund sold with a sales load. If you are
investing in a fund that charges a sales load, you may qualify for share
prices which do not include the sales load or which reflect a reduced sales
load. If you are investing in a fund that charges a contingent deferred sales
charge, the shares purchased will be subject on redemption to the contingent
deferred sales charge, if any, applicable to the purchased shares. See
"Shareholder Services" in the Statement of Additional Information. For more
information concerning this Privilege or to request a Dividend Options Form,
please call toll free 1-800-645-6561. You may cancel your participation in
this Privilege by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. To select a new
fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of this Privilege is effective three business
days following receipt. This privilege is available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply. The Fund may modify or terminate this privilege at
any time or charge a service fee. No such fee currently is contemplated.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value. See "Appendix_Additional Information About
Purchases, Exchanges and Redemptions."
YOU WILL BE CHARGED $5.00 WHEN YOU REDEEM ALL SHARES IN YOUR ACCOUNT
OR YOUR ACCOUNT IS OTHERWISE CLOSED OUT. The fee will be deducted from your
redemption proceeds and paid to the Transfer Agent. The account closeout fee
does not apply to exchanges out of a Portfolio or to wire or Dreyfus TELETRANS
FER redemptions, for each of which a $5.00 fee may apply; however, the Fund
will waive the account closeout fee if the closing balance in the
shareholder's account on the business day immediately preceding the effective
date of such transaction is $50,000 or more. Securities dealers, banks and
other financial institutions may charge their clients a fee for effecting
redemptions of Portfolio shares. Any certificates representing Portfolio
shares being redeemed must be submitted with the redemption request. The
value of the shares redeemed may be more or less than their original cost,
depending upon the Portfolio's then current net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED PORTFOLIO SHARES BY CHECK OR BY
THE DREYFUS TELETRANSFER PRIVILEGE AND SUBSEQUENTLY SUBMIT A WRITTEN
REDEMPTION REQUEST TO THE TRANSFER AGENT, YOUR REDEMPTION WILL BE EFFECTIVE,
WITH RESPECT TO THE MONEY MARKET PORTFOLIO, AND, WITH RESPECT TO EACH
PORTFOLIO, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON
BANK CLEARANCE OF YOUR PURCHASE CHECK OR DREYFUS TELETRANSFER PURCHASE ORDER,
WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL
NOT HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL
REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE
DREYFUS TELETRANSFER PRIVILEGE, FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER
RECEIPT BY THE TRANSFER
[Page 16]
AGENT OF THE PURCHASE CHECK OR DREYFUS TELETRANSFER PURCHASE ORDER AGAINST
WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES WILL NOT APPLY IF YOUR
SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU OTHERWISE HAVE A SUFFICIENT
COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE REDEMPTION REQUEST. PRIOR TO
THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS ON SUCH SHARES WILL ACCRUE
AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE ALL OTHER RIGHTS OF
BENEFICIAL OWNERSHIP. Shares will not be redeemed until the Transfer Agent
has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if your account's net asset value is
$10,000 or less in the case of the Money Market Portfolio or $5,000 or less
in the case of a Longer Term Portfolio, and remains so during the notice
period. The $5.00 account closeout fee would be charged in such case.
PROCEDURES
You may redeem Portfolio shares by using the regular redemption
procedure through the Transfer Agent, or through the Telephone Redemption
Privilege or the Check Redemption Privilege, which are granted automatically
unless you specifically refuse them by checking the applicable "No" box on
the Account Application. The Telephone Redemption Privilege and the Check
Redemption Privilege may be established for an existing account by a separate
signed Shareholder Services Form or, with respect to the Telephone Redemption
Privilege, by oral request from any of the authorized signatories on the
account by calling 1-800-645-6561. You also may redeem shares through the
Wire Redemption Privilege or the Dreyfus TELETRANSFER Privilege, if you have
checked the appropriate box and supplied the necessary information on the
Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The Fund makes available to certain large institutions the
ability to issue redemption instructions through compatible computer
facilities. The Fund reserves the right to refuse any request made by wire or
telephone, including requests made shortly after a change of address, and may
limit the amount involved or the number of such requests. The Fund may modify
or terminate any redemption Privilege at any time upon notice to
shareholders. Shares for which certificates have been issued are not eligible
for the Check Redemption, Wire Redemption, Telephone Redemption, or Dreyfus
TELETRANSFER Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
over The Dreyfus TouchRegistration Mark automated telephone system) from any
person representing himself or herself to be you and reasonably believed by
the Transfer Agent to be genuine. The Fund will require the Transfer Agent to
employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine and, if it does not
follow such procedures, the Fund or the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Fund nor
the Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of Portfolio shares. In such cases, you
should consider using the other redemption procedures described herein. Use
of these other redemption procedures may result in your redemption request
being processed at a later time than it would have been if telephone
redemption had been used. During the delay, a Longer Term Portfolio's net
asset value may fluctuate.
REGULAR REDEMPTION _ Under the regular redemption procedure, you may redeem
your shares by written request mailed to The Dreyfus Family of Funds, P.O.
Box 9671, Providence, Rhode Island 02940-9671. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call one of the
telephone numbers listed under "General Information." Redemption requests
must be signed by each shareholder, including each owner
[Page 17]
of a joint account, and each signature must be guaranteed. The Transfer Agent
has adopted standards and procedures pursuant to which signature-guarantees
in proper form generally will be accepted from domestic banks, brokers,
dealers, credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations, as well as from
participants in the New York Stock Exchange Medallion Signature Program, the
Securities Transfer Agents Medallion Program ("STAMP") and the Stock
Exchanges Medallion Program. If you have any questions with respect to
signature-guarantees, please call one of the telephone numbers listed under
"General Information."
Redemption proceeds of at least $5,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE _ You may write Redemption Checks drawn on your
Fund account. Redemption Checks may be made payable to the order of any
person in the amount of $1,000 or more. Potential fluctuations in the net
asset value of the shares of each Longer Term Portfolio should be considered
in determining the amount of the check. Redemption Checks should not be used
to close your account. Your account will be charged $2.00 for each Redemption
Check you write; however, the Fund will waive this fee if the closing balance
in the shareholder's account on the business day immediately preceding the
effective date of such transaction is $50,000 or more. The Transfer Agent
also will impose a fee for stopping payment of a Redemption Check upon your
request or if the Transfer Agent cannot honor the Redemption Check due to
insufficient funds or other valid reason. The Fund may return unpaid a
Redemption Check that would draw your account balance below $5.00 and you may
be subject to extra charges. You should date your Redemption Checks with the
current date when you write them. Please do not postdate your Redemption
Checks. If you do, the Transfer Agent will honor, upon presentment, even if
presented before the date of the check, all postdated Redemption Checks which
are dated within six months of presentment for payment, if they are otherwise
in good order. With respect to the Longer Term Portfolios only, this
Privilege will be terminated immediately, without notice, with respect to any
account which is, or becomes, subject to backup withholding on redemptions
(see "Dividends, Distributions and Taxes"). Any Redemption Check written on
an account in a Longer Term Portfolio which has become subject to backup
withholding on redemptions will not be honored by the Transfer Agent. The
Check Redemption Privilege is granted automatically unless you refuse it.
WIRE REDEMPTION PRIVILEGE _ You may request by wire, telephone or letter
that redemption proceeds (minimum $5,000) be wired to your account at a bank
which is a member of the Federal Reserve System, or a correspondent bank if
your bank is not a member. You will be charged a $5.00 wire redemption fee
for each wire redemption, which will be deducted from your account and paid
to the Transfer Agent; however, the Fund will waive this fee if the closing
balance in the shareholder's account on the business day immediately
preceding the effective date of such transaction is $50,000 or more. Holders
of jointly registered Fund or bank accounts may have redemption proceeds of
not more than $250,000 wired within any 30-day period. You may telephone
redemption requests by calling 1-800-645-6561 or, if you are calling from
overseas, call 516-794-5452. The Statement of Additional Information sets
forth instructions for transmitting redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE _ You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Telephone Redemption Privilege is granted automatically unless you refuse it.
DREYFUS TELETRANSFER PRIVILEGE _ You may request by telephone that
redemption proceeds (minimum $1,000 per day) be transferred between your
Fund account and your bank account. Only a bank account maintained in a
domestic financial institution which is an Automated Clearing House member
may be designated. Redemption proceeds will be on deposit in your account at
an Automated Clearing House member
[Page 18]
bank ordinarily two days after receipt of the redemption request. Holders of
jointly registered Fund or bank accounts may redeem through the Dreyfus TELETR
ANSFER Privilege for transfer to their bank account not more than $250,000
within any 30-day period. You will be charged a $5.00 TELETRANSFER fee for
each Dreyfus TELETRANSFER redemption, which will be deducted from your
account and paid to the Transfer Agent.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which
the Fund reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of
The Dreyfus Corporation, an amount not to exceed an annual rate of .25 of l%
of the value of each Portfolio's average daily net assets for certain
allocated expenses of providing personal services and/or maintaining
shareholder accounts. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Portfolio and providing reports and other information, and
services related to the maintenance of shareholder accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Under the Code, each Portfolio is treated as a separate corporation
for purposes of qualification and taxation as a regulated investment company.
Each Portfolio ordinarily declares dividends from its net investment income
on each day the New York Stock Exchange is open for business. Dividends
usually are paid on the last business day (calendar day in the case of the
Money Market Portfolio) of each month and are automatically reinvested in
additional Portfolio shares at net asset value or, at your option, paid in
cash. The Portfolio's earnings for Saturdays, Sundays and holidays are
declared as dividends on the preceding business day in the case of the Money
Market Portfolio and on the next business day in the case of each Longer Term
Portfolio. With respect to each Longer Term Portfolio, Portfolio shares begin
earning income dividends on the day following the date of purchase. If you
redeem all shares in your account at any time during the month, all dividends
to which you are entitled will be paid to you along with the proceeds of the
redemption, after deduction of any fees. If you are an omnibus accountholder
and indicate in a partial redemption request that a portion of any accrued
dividends to which such account is entitled belongs to an underlying
accountholder who has redeemed all shares in his or her account, such portion
of the accrued dividends will be paid to you along with the proceeds of the
redemption, after the deduction of any fees. Distributions from net realized
securities gains, if any, generally are declared and paid once a year, but
each Portfolio may make distributions on a more frequent basis to comply with
the distribution requirements of the Code, in all events in a manner
consistent with the provisions of the 1940 Act. No Portfolio will make
distributions from net realized securities gains unless capital loss
carryovers, if any, have been utilized or have expired. You may choose
whether to receive distributions in cash or to reinvest in additional
Portfolio shares at net asset value. If you elect to receive dividends and
distributions in cash, and your dividend or distribution check is returned to
the Fund as undeliverable or remains uncashed for six months, the Fund
reserves the right to reinvest such dividend or distribution and all future
dividends and distributions payable to you in additional Portfolio shares at
net asset value. No interest will accrue on amounts represented by uncashed
distribution or redemption checks. All expenses are accrued daily and
deducted before declaration of dividends to investors.
Except for dividends from Taxable Investments, each Portfolio
anticipates that substantially all dividends paid by such Portfolio will not
be subject to Federal income tax. Dividends derived from Taxable Investments,
together with distributions from any net realized short-term securities gains
and all or a portion of any gains realized from the sale or other disposition
of certain market discount bonds, paid by a Portfolio are subject to Federal
income tax as ordinary income whether or not reinvested. No dividend paid by
a Portfolio will qualify for the dividends received deduction allowable to
certain U.S. corporations.
[Page 19]
Distributions from net realized long-term securities gains of each Portfolio
generally are taxable as long-term capital gains for Federal income tax
purposes if you are a citizen or resident of the United States. Dividends and
distributions attributable to income or gain derived from securities
transactions and from the use of certain of the investment techniques
described under "Appendix_Investment Techniques" will be subject to Federal
income tax. The Code provides that an individual generally will be taxed on
the net amount of his or her capital gain at a maximum rate of 28% with
respect to capital gain from property held for more than one year but not
more than 18 months and at a maximum rate of 20% with respect to capital gain
from property held for more than 18 months. Special rules (and generally
lower maximum rates) apply for individuals in lower tax brackets. Under the
Code, interest on indebtedness incurred or continued to purchase or carry
Portfolio shares which is deemed to relate to exempt-interest dividends is
not deductible. Dividends and distributions may be subject to state and local
taxes.
Taxable dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, paid by a Portfolio to a foreign investor generally
are subject to U.S. nonresident withholding taxes at the rate of 30%, unless
the foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from net realized long-term securities gains paid by a
Portfolio to a foreign investor as well as, in the case of a Longer Term
Portfolio, the proceeds of any redemptions from a foreign investor's account,
regardless of the extent to which gains or loss may be realized, generally
will not be subject to U.S. nonresident withholding tax. However, such
distributions may be subject to backup withholding, as described below,
unless the foreign investor certifies his non-U.S. residency status.
Although all or a substantial portion of the dividends paid by a
Portfolio may be excluded by its shareholders from their gross income for
Federal income tax purposes, such Portfolio may purchase specified private
activity bonds, the interest from which may be (i) a preference item for
purposes of the alternative minimum tax, or (ii) a factor in determining the
extent to which a shareholder's Social Security benefits are taxable. If a
Portfolio purchases such securities, the portion of its dividends related
thereto will not necessarily be tax exempt to an investor who is subject to
the alternative minimum tax and/or tax on Social Security benefits and may
cause an investor to be subject to such taxes.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year. These statements set forth
the dollar amount of income exempt from Federal tax and the dollar amount, if
any, subject to Federal tax. These dollar amounts will vary depending on the
size and length of time of your investment in a Portfolio. If a Portfolio
pays dividends derived from taxable income, it intends to designate as
taxable the same percentage of the day's dividend as the actual taxable
income earned on that day bears to total income earned on that day. Thus, the
percentage of the dividend designated as taxable, if any, may vary from day
to day.
The exchange of shares of one fund or Portfolio for shares of another
is treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder may
realize a taxable gain or loss.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of taxable dividends,
distributions from net realized securities gains of a Portfolio and, in the
case of a Longer Term Portfolio, the proceeds of redemption, regardless of
the extent to which gain or loss may be realized, paid to a shareholder if
such shareholder fails to certify either that the TIN furnished in connection
with opening an account is correct, or that such shareholder has not received
notice from the IRS of being subject to backup withholding as a result of a
failure to properly report taxable dividend or interest income on a Federal
income tax return. Furthermore, the IRS may notify the Fund to institute
backup withholding if the IRS determines a shareholder's TIN is incorrect or
if a shareholder has failed to properly report taxable dividend and interest
income on a Federal income tax return.
[Page 20]
A TIN is either the Social Security number, IRS individual taxpayer
identification number, or employer identification number of the record owner
of the account. Any tax withheld as a result of backup withholding does not
constitute an additional tax imposed on the record owner of the account, and
may be claimed as a credit on the record owner's Federal income tax return.
Management of the Fund believes that each Portfolio has qualified for
the fiscal year ended August 31, 1997 as a "regulated investment company"
under the Code. Each Portfolio intends to continue to so qualify if such
qualification is in the best interests of its shareholders. Qualification as
a "regulated investment company" relieves the Portfolio of any liability for
Federal income taxes to the extent its earnings are distributed in accordance
with applicable provisions of the Code. Each Portfolio is subject to a
non-deductible 4% excise tax, measured with respect to certain undistributed
amounts of taxable investment income and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on August 8, 1991, and
commenced operations on December 16, 1991. Before October 21, 1994, the
Fund's name was Dreyfus BASIC Municipal Money Market Fund, Inc. and, before
December 24, 1992, its name was Dreyfus Investors Municipal Money Market
Fund, Inc. The Fund is authorized to issue five billion shares of Common
Stock (with three billion shares allocated to the Money Market Portfolio and
five hundred million shares allocated to each Longer Term Portfolio) par
value $.001 per share. Each share has one vote.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members or
the appointment of auditors. However, pursuant to the Fund's By-Laws, the
holders of at least 10% of the shares outstanding and entitled to vote may
require the Fund to hold a special meeting of shareholders for purposes of
removing a Board member from office and for any other purpose. Fund
shareholders may remove a Board member by the affirmative vote of a majority
of the Fund's outstanding voting shares. In addition, the Fund's Board will
call a meeting of shareholders for the purpose of electing Board members if,
at any time, less than a majority of the Board members then holding office
have been elected by shareholders.
The Fund is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they vote
separately by portfolio. By this Prospectus, shares of the Money Market,
Intermediate Bond and Bond Portfolios are being offered. The other portfolio
is sold pursuant to another offering document.
To date, the Fund's Board has authorized the creation of four series
of shares. All consideration received by the Fund for shares of one of the
portfolios and all assets in which such consideration is invested will belong
to that portfolio (subject only to the rights of creditors of the Fund) and
will be subject to the liabilities related thereto. The income attributable
to, and the expenses of, one portfolio are treated separately from those of
the other portfolios. The Fund has the ability to create, from time to time,
new portfolios without shareholder approval.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account. The Fund sends an annual and
semi-annual financial report to all its shareholders.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561. In New York City, call
1-718-895-1206; outside the U.S. call 516-794-5452.
[Page 21]
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY _ Each Longer Term Portfolio is permitted to borrow to the
extent permitted under the 1940 Act, which permits an investment company to
borrow in an amount up to 331\3% of the value of its total assets. Each
Longer Term Portfolio currently intends to, and the Money Market Portfolio
may, borrow money only for temporary or emergency (not leveraging) purposes,
in an amount up to 15% of the value of such Portfolio's total assets
(including the amount borrowed) valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made. While borrowings exceed 5% of a Portfolio's total assets, such
Portfolio will not make any additional investments.
Forward Commitments_Each Portfolio may purchase Municipal Obligations and
other securities on a forward commitment or when-issued basis, which means
that delivery and payment take place a number of days after the date of the
commitment to purchase. The payment obligation and the interest rate
receivable on a forward commitment or when-issued security are fixed when the
Portfolio enters into the commitment, but the Portfolio does not make payment
until it receives delivery from the counterparty. Each Portfolio will commit t
o purchase such securities only with the intention of actually acquiring the
securities, but the Portfolio may sell these securities before the settlement
date if it is deemed advisable. A segregated account of the Portfolio
consisting of permissible liquid assets at least equal at all times to the
amount of the commitments will be established and maintained at the Fund's
custodian bank.
USE OF DERIVATIVES _ (LONGER TERM PORTFOLIOS ONLY) Each Longer Term
Portfolio may invest in the types of Derivatives enumerated under
"Description of the Portfolios _ Investment Considerations and Risks _ Use
of Derivatives." These instruments and certain related risks are described
more specifically under "Investment Objective and Management Policies _
Management Policies _ Derivatives" in the Statement of Additional
Information.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level
of risk, or change the character of the risk, of its portfolio by making
investments in specific securities. Derivatives may entail investment
exposures that are greater than their cost would suggest, meaning that a
small investment in Derivatives could have a large potential impact on each
Longer Term Portfolio's performance.
If a Longer Term Portfolio invests in Derivatives at inopportune
times or judges market conditions incorrectly, such investments may lower the
Portfolio's return or result in a loss. The Longer Term Portfolio also could
experience losses if its Derivatives were poorly correlated with its other
investments, or if the Portfolio were unable to liquidate its position
because of an illiquid secondary market. The market for many Derivatives is,
or suddenly can become, illiquid. Changes in liquidity may result in
significant, rapid and unpredictable changes in the prices for Derivatives.
Although neither the Fund nor the Longer Term Portfolios will be a
commodity pool, certain Derivatives subject the Longer Term Portfolios to the
rules of the Commodity Futures Trading Commission which limit the extent to
which the Longer Term Portfolios can invest in such Derivatives. Each Longer
Term Portfolio may invest in futures contracts and options with respect
thereto for hedging purposes without limit. However, neither Longer Term
Portfolio may invest in such contracts and options for other purposes if the
sum of the amount of initial margin deposits and premiums paid for unexpired
options with respect to such contracts, other than for bona fide hedging
purposes, exceeds 5% of the liquidation value of the Portfolio's assets,
after taking into account unrealized profits and unrealized losses on such
contracts and options; provided, however, that in the case of an option that
is in-the-money at the time of purchase, the in-the-money amount may be
excluded in calculating the 5% limitation.
[Page 22]
Each Longer Term Portfolio may invest up to 5% of its assets,
represented by the premium paid, in the purchase of call
and put options. Each Longer Term Portfolio may write (i.e., sell) covered
call and put option contracts to the extent of 20% of the value of its net
assets at the time such option contracts are written. When required by the
Securities and Exchange Commission, such Portfolio will set aside permissible
liquid assets in a segregated account to cover its obligations relating to
its transactions in Derivatives. To maintain this required cover, the
Portfolio may have to sell portfolio securities at disadvantageous prices or
times since it may not be possible to liquidate a Derivative position at a
reasonable price.
LENDING PORTFOLIO SECURITIES _ (LONGER TERM PORTFOLIOS ONLY) Each Longer
Term Portfolio may lend securities from its portfolio to brokers, dealers and
other financial institutions needing to borrow securities to complete certain
transactions. Each Longer Term Portfolio continues to be entitled to payments
in amounts equal to the interest or other distributions payable on the loaned
securities which affords the Longer Term Portfolio an opportunity to earn
interest on the amount of the loan and on the loaned securities' collateral.
Loans of portfolio securities may not exceed 331\3% of the value of a Longer
Term Portfolio's total assets, and the Longer Term Portfolio will receive
collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal to
at least 100% of the current market value of the loaned securities. Such
loans are terminable by the Longer Term Portfolio at any time upon specified
notice. A Longer Term Portfolio might experience risk of loss if the
institution with which it has engaged in a portfolio loan transaction
breaches its agreement with the Portfolio.
SHORT-SELLING _ (LONGER TERM PORTFOLIOS ONLY) Each Longer Term Portfolio
may make short sales, which are transactions in which the Portfolio sells a
security it does not own in anticipation of a decline in the market value of
that security. To complete the transaction, the Portfolio must borrow the
security to make delivery to the buyer. The Portfolio is obligated to replace
the security borrowed by purchasing it subsequently at the market price at
the time of replacement. The price at such time may be more or less than the
price at which the security was sold by the Portfolio, which would result in
a loss or gain, respectively.
Securities will not be sold short if, after effect is given to any
such short sale, the total market value of all securities sold short would
exceed 25% of the value of such Portfolio's net assets. Neither Longer Term
Portfolio may sell short the securities of any single issuer listed on a
national securities exchange to the extent of more than 5% of the value of
such Portfolio's net assets. A Longer Term Portfolio may not make a short
sale which results in the Portfolio having sold short in the aggregate more
than 5% of the outstanding securities of any class of an issuer.
Each Longer Term Portfolio also may make short sales "against the
box," in which the Portfolio enters into a short sale of a security which the
Portfolio owns. Neither Longer Term Portfolio will at any time have more than
15% of the value of its net assets in deposits on short sales against the
box.
CERTAIN PORTFOLIO SECURITIES
CERTAIN TAX EXEMPT OBLIGATIONS _ Each Portfolio may purchase floating or
variable rate demand notes, which are tax exempt obligations ordinarily
having stated maturities in excess of 13 months, but which permit the holder
to demand payment of principal at any time, or at specified intervals, which
for the Money Market Portfolio will not exceed 13 months, and in each case
will be upon not more than 30 days' notice. Variable rate demand notes
include master demand notes which are obligations that permit each Portfolio
to invest fluctuating amounts at varying rates of interest pursuant to direct
arrangements between the Portfolio, as lender, and the borrower. These
obligations permit daily changes in the amounts borrowed. Frequently such
obligations are secured by letters of credit or other credit support
arrangements provided by banks. Changes in the credit quality of banks and
other financial institutions that provide such credit or liquidity
enhancements to the Fund's portfolio securities could cause losses to the
relevant Portfolio and affect its share price. Because these obligations are
direct lending arrangements
[Page 23]
between the lender and borrower, it is not contemplated that such instruments
generally will be traded, and there generally is no established secondary
market for these obligations, although they are redeemable at face value,
plus accrued interest. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, the Portfolio's
right to redeem is dependent on the ability of the borrower to pay principal
and interest on demand. Each obligation purchased by a Portfolio will meet
the quality criteria established for its purchase of Municipal Obligations.
TAX EXEMPT PARTICIPATION INTERESTS _ Each Portfolio may purchase from
financial institutions participation interests in Municipal Obligations (such
as industrial development bonds and municipal lease/purchase agreements). A
participation interest gives a Portfolio an undivided interest in the
Municipal Obligation in the proportion that the Portfolio's participation
bears to the total principal amount of the Municipal Obligation. These
instruments may have fixed, floating or variable rates of interest and, in
the case of the Money Market Portfolio, will have remaining maturities of 13
months or less. If the participation interest is unrated, it will be backed
by an irrevocable letter of credit or guarantee of a bank that the Fund's
Board has determined meets prescribed quality standards for banks, or the
payment obligation otherwise will be collateralized by U.S. Government
securities. For certain participation interests, a Portfolio will have the
right to demand payment, on not more than seven days' notice, for all or any
part of the Portfolio's participation interest in the Municipal Obligation,
plus accrued interest. As to these instruments, each Portfolio intends to
exercise its right to demand payment only upon a default under the terms of
the Municipal Obligation, as needed to provide liquidity to meet redemptions,
or to maintain or improve the quality of its investment portfolio.
TENDER OPTION BONDS _ Each Portfolio may purchase tender option bonds. A
tender option bond is a Municipal Obligation (generally held pursuant to a
custodial arrangement) having a relatively long maturity and bearing interest
at a fixed rate substantially higher than prevailing short-term tax exempt
rates, that has been coupled with the agreement of a third party, such as a
bank, broker-dealer or other financial institution, pursuant to which such
institution grants the security holders the option, at periodic intervals, to
tender their securities to the institution and receive the face value
thereof. As consideration for providing the option, the financial institution
receives periodic fees equal to the difference between the Municipal
Obligation's fixed coupon rate and the rate, as determined by a remarketing
or similar agent at or near the commencement of such period, that would cause
the securities, coupled with the tender option, to trade at par on the date
of such determination. Thus, after payment of this fee, the security holder
effectively holds a demand obligation that bears interest at the prevailing
short-term tax exempt rate. The Dreyfus Corporation, on behalf of each
Portfolio, will consider on an ongoing basis the creditworthiness of the
issuer of the underlying Municipal Obligation, of any custodian and of the
third party provider of the tender option. In certain instances and for
certain tender option bonds, the option may be terminable in the event of a
default in payment of principal or interest on the underlying Municipal
Obligations and for other reasons.
CUSTODIAL RECEIPTS _ (LONGER TERM PORTFOLIOS ONLY) Each Longer Term
Portfolio may purchase custodial receipts representing the right to receive
certain future principal and interest payments on Municipal Obligations which
underlie the custodial receipts. A number of different arrangements are
possible. In a typical custodial receipt arrangement, an issuer or a third
party owner of Municipal Obligations deposits such obligations with a
custodian in exchange for two classes of custodial receipts. The two classes
have different characteristics, but, in each case, payments on the two
classes are based on payments received on the underlying Municipal
Obligations. One class has the characteristics of a typical auction rate
security, where at specified intervals its interest rate is adjusted, and
ownership changes, based on an auction mechanism. This class's interest rate
generally is expected to be below the coupon rate of the underlying Municipal
Obligations and generally is at a level comparable to that of a Municipal
Obligation of similar quality and having a maturity equal to the period
between interest
[Page 24]
rate adjustments. The second class bears interest at a rate that exceeds the
interest rate typically borne by a security of comparable quality and
maturity; this rate also is adjusted, but in this case inversely to changes
in the rate of interest of the first class. In no event will the aggregate
interest paid with respect to the two classes exceed the interest paid by the
underlying Municipal Obligations. The value of the second class and similar
securities should be expected to fluctuate more than the value of a Municipal
Obligation of comparable quality and maturity and their purchase by a Longer
Term Portfolio should increase the volatility of its net asset value and,
thus, its price per share. These custodial receipts are sold in private
placements. Each Longer Term Portfolio also may purchase directly from
issuers, and not in a private placement, Municipal Obligations having
characteristics similar to custodial receipts. These securities may be issued
as part of a multi-class offering and the interest rate on certain classes
may be subject to a cap or a floor.
STAND-BY COMMITMENTS _ Each Portfolio may acquire "stand-by commitments"
with respect to Municipal Obligations held in its portfolio. Under a stand-by
commitment, a Portfolio obligates a broker, dealer or bank to repurchase, at
the Portfolio's option, specified securities at a specified price and, in
this respect, stand-by commitments are comparable to put options. The
exercise of a stand-by commitment therefore is subject to the ability of the
seller to make payment on demand. Each Portfolio will acquire stand-by
commitments solely to facilitate portfolio liquidity and does not intend to
exercise any such rights thereunder for trading purposes. Each Portfolio may
pay for stand-by commitments if such action is deemed necessary, thus
increasing to a degree the cost of the underlying Municipal Obligation and
similarly decreasing such security's yield to investors. Gains realized in
connection with stand-by commitments will be taxable. The Longer Term
Portfolios also may acquire call options on specific Municipal Obligations. A
Longer Term Portfolio generally would purchase these call options to protect i
t from the issuer of the related Municipal Obligation redeeming, or other
holder of the call option from calling away, the Municipal Obligation before
maturity. The sale by a Longer Term Portfolio of a call option that it owns
on a specific Municipal Obligation could result in the receipt of taxable
income by the Portfolio.
ZERO COUPON SECURITIES _ (LONGER TERM PORTFOLIOS ONLY) Each Longer Term
Portfolio may invest in zero coupon securities which are debt securities
issued or sold at a discount from their face value which do not entitle the
holder to any periodic payment of interest prior to maturity or a specified
redemption date (or cash payment date). The amount of the discount varies
depending on the time remaining until maturity or cash payment date,
prevailing interest rates, liquidity of the security and perceived credit
quality of the issuer. Zero coupon securities also may take the form of debt
securities that have been stripped of their unmatured interest coupons, the
coupons themselves and receipts or certificates representing interest in such
stripped debt obligations and coupons. The market prices of zero coupon securi
ties generally are more volatile than the market prices of securities that
pay interest periodically and are likely to respond to a greater degree to
changes in interest rates than non-zero coupon securities having similar
maturities and credit qualities. Each Longer Term Portfolio may invest up to
5% of its assets in zero coupon bonds which are rated below investment grade.
ILLIQUID SECURITIES _ Each Portfolio may invest up to 15% (10% in the case
of the Money Market Portfolio) of the value of its net assets in securities
as to which a liquid trading market does not exist, provided such investments
are consistent with the Portfolio's investment objective. Such securities may
include securities that are not readily marketable, such as certain
securities that are subject to legal or contractual restrictions on resale,
and repurchase agreements providing for settlement in more than seven days
after notice. As to these securities, the Portfolio investing in such
securities is subject to a risk that should the Portfolio desire to sell them
when a ready buyer is not available at a price the Fund deems representative
of their value, the value of the Portfolio's net assets could be adversely
affected.
TAXABLE INVESTMENTS _ From time to time, on a temporary basis other than for
temporary defensive purposes (but not to exceed 20% of the value of its net
assets) or for temporary defensive purposes, a
[Page 25]
Portfolio may invest in taxable short-term investments ("Taxable
Investments") consisting of: notes of issuers having, at the time of
purchase, a quality rating within the two highest grades of Moody's, S&P or
Fitch; obligations of the U.S. Government, its agencies or instrumentalities;
commercial paper rated not lower than P-2 by Moody's, A-2 by S&P or F-2 by
Fitch; certificates of deposit of U.S. domestic banks, including foreign
branches of domestic banks, with assets of one billion dollars or more; time
deposits; bankers' acceptances and other short-term bank obligations; and
repurchase agreements in respect of any of the foregoing. Dividends paid by a
Portfolio that are attributable to income earned by such Portfolio from
Taxable Investments will be taxable to investors. See "Dividends,
Distributions and Taxes." Except for temporary defensive purposes, at no time
will more than 20% of the value of a Portfolio's net assets be invested in
Taxable Investments. If the Money Market Portfolio purchases Taxable
Investments, it will value them using the amortized cost method and comply
with Rule 2a-7 relating to purchases of taxable instruments. Under normal
market conditions, each Portfolio anticipates that not more than 5% of the
value of its total assets will be invested in any one category of Taxable
Investments. Taxable Investments are more fully described in the Statement of
Additional Information, to which reference hereby is made.
RATINGS _ (LONGER TERM PORTFOLIOS ONLY) Bonds rated Ba by Moody's are judged
to have speculative elements; their future cannot be considered as well
assured and often the protection of interest and principal payments may be
very moderate. Bonds rated BB by S&P are regarded as having predominantly
speculative characteristics and, while such obligations have less near-term
vulnerability to default than other speculative grade debt, they face major
ongoing uncertainties or exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to meet timely interest
and principal payments. Bonds rated BB by Fitch are considered speculative
and the payment of principal and interest may be affected at any time by
adverse economic changes. Bonds rated C by Moody's are regarded as having
extremely poor prospects of ever attaining any real investment standing.
Bonds rated D by S&P are in default and the payment of interest and/or
repayment of principal is in arrears. Bonds rated DDD, DD or D by Fitch are
in actual or imminent default, are extremely speculative and should be valued
on the basis of their ultimate recovery value in liquidation or
reorganization of the issues; DDD represents the highest potential for
recovery of such bonds; and D represents the lowest potential for recovery.
Such bonds, though high yielding, are characterized by great risk. See
"Appendix B" in the Statement of Additional Information for a general
description of Moody's, S&P and Fitch ratings of Municipal Obligations.
The ratings of Moody's, S&P and Fitch represent their opinions as to
the quality of the Municipal Obligations which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective and,
although ratings may be useful in evaluating the safety of interest and
principal payments, they do not evaluate the market value risk of these
bonds. Therefore, although these ratings may be an initial criterion for
selection of portfolio investments, The Dreyfus Corporation also will evaluate
these securities and the ability of the issuers of such securities to pay
interest and principal. The ability of a Longer Term Portfolio to achieve its
investment objective may be more dependent on The Dreyfus Corporation's
credit analysis than might be the case for a fund that invested in higher
rated securities.
ADDITIONAL INFORMATION ABOUT PURCHASES, EXCHANGES AND REDEMPTIONS
The following applies to the Longer Term Portfolios only. Each Portfolio is
intended to be a long-term investment vehicle and is not designed to provide
investors with a means of speculation on short-term market movements. A
pattern of frequent purchases and exchanges can be disruptive to efficient
portfolio management and, consequently, can be detrimental to the Portfolio's
performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is engaged in excessive trading, the Fund, with
or without prior notice, may temporarily or permanently terminate the
availability of Fund exchanges, or reject in whole or part any purchase or
exchange request, with respect to such investor's account. Such investors
also may be barred from purchasing other funds in the Dreyfus Family of Funds.
[Page 26]
Generally, an investor who makes exchanges that appear to coincide with an
active market-timing strategy may be deemed to be engaged in excessive
trading. Accounts under common ownership or control will be considered as one
account for purposes of determining a pattern of excessive trading. In
addition, the Fund may refuse or restrict purchase or exchange requests by
any person or group if, in the judgment of the Fund's management, the
Portfolio would be unable to invest the money effectively in accordance with
its investment objective and policies or could otherwise be adversely
affected or if the Fund receives or anticipates receiving simultaneous orders
that may significantly affect the Portfolio (E.G., amounts equal to 1% or
more of the Fund's total assets). If an exchange request is refused, the Fund
will take no other action with respect to the shares until it receives
further instructions from the investor. The Fund may delay forwarding
redemption proceeds for up to seven days if the investor redeeming shares is
engaged in excessive trading or if the amount of the redemption request
otherwise would be disruptive to efficient portfolio management or would
adversely affect the Portfolio. This policy on excessive trading applies to
investors who invest in the Fund directly or through financial
intermediaries.
During times of drastic economic or market conditions, the Fund may
suspend the Exchange Privilege temporarily without notice and treat exchange
requests based on their separate components _ redemption orders with a
simultaneous request to purchase the other fund's shares. In such a case, the
redemption request would be processed at the Portfolio's next determined net
asset value but the purchase order would be effective only at the net asset
value next determined after the fund being purchased receives the proceeds of
the redemption, which may result in the purchase being delayed.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
[Page 27]
Basic Municipal
Fund, Inc.
* Dreyfus BASIC Municipal
Money Market Portfolio
* Dreyfus BASIC Intermediate
Municipal Bond Portfolio
* Dreyfus BASIC Municipal
Bond Portfolio
Prospectus
Registration Mark
Copy Rights 1998 Dreyfus Service Corporation
BMBp0198
[Page 28]
- -----------------------------------------------------------------------------
PROSPECTUS JANUARY 2, 1998
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
- -----------------------------------------------------------------------------
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO (THE
"PORTFOLIO") IS A SEPARATE NON-DIVERSIFIED PORTFOLIO OF DREYFUS BASIC
MUNICIPAL FUND, INC. (THE "FUND"), AN OPEN-END, MANAGEMENT INVESTMENT
COMPANY, KNOWN AS A SERIES MUTUAL FUND. THE PORTFOLIO'S INVESTMENT OBJECTIVE
IS TO PROVIDE YOU WITH AS HIGH A LEVEL OF CURRENT INCOME EXEMPT FROM FEDERAL
AND NEW JERSEY INCOME TAXES AS IS CONSISTENT WITH THE PRESERVATION OF CAPITAL
AND THE MAINTENANCE OF LIQUIDITY.
THE PORTFOLIO IS DESIGNED TO BENEFIT INVESTORS WHO WILL NOT ENGAGE IN
FREQUENT TRANSACTIONS IN PORTFOLIO SHARES.
YOU CAN PURCHASE OR REDEEM SHARES BY TELEPHONE USING DREYFUS
TELETRANSFER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES THE PORTFOLIO.
AN INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. SINCE THE
PORTFOLIO MAY INVEST A SIGNIFICANT PERCENTAGE OF ITS ASSETS IN A SINGLE
ISSUER, AN INVESTMENT IN THE PORTFOLIO MAY INVOLVE GREATER RISK THAN
INVESTMENTS IN CERTAIN OTHER TYPES OF MONEY MARKET FUNDS.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND AND
PORTFOLIO THAT YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND
RETAINED FOR FUTURE REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED JANUARY 2, 1998, WHICH
MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN
AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. THE SECURITIES AND EXCHANGE COMMISSION
MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND. FOR A FREE COPY OF THE STATEMENT OF
ADDITIONAL INFORMATION, WRITE TO THE FUND AT 144 GLENN CURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK
FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY.
TABLE OF CONTENTS
Page
Fee Table......................................... 3
Condensed FInancial Information................... 4
Yield Information................................. 4
Description of the Portfolio...................... 5
Management of the Fund............................ 8
How to Buy Shares................................. 9
Shareholder Services.............................. 11
How to Redeem Shares.............................. 12
Shareholder Services Plan......................... 15
Dividends, Distributions and Taxes................ 15
General Information............................... 17
Appendix.......................................... 19
- ----------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ----------------------------------------------------------------------------
[This Page Intentionally Left Blank ]
[Page 2]
<TABLE>
<CAPTION>
<S> <C>
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Exchange Fee ............................................................................... $5.00
Account Closeout Fee........................................................................ $5.00
ANNUAL PORTFOLIO OPERATING EXPENSES
(as a percentage of average daily net assets)
Management Fees (after expense reimbursement)............................................... .32%
Other Expenses.............................................................................. .13%
Total Portfolio Operating Expenses (after expense reimbursement)............................ .45%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $10 $19 $30 $62
</TABLE>
- ----------------------------------------------------------------------------
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE
EXAMPLE ASSUMES A 5% ANNUAL RETURN, THE PORTFOLIO'S ACTUAL PERFORMANCE WILL
VARY AND MAY RESULT IN AN ACTUAL RETURN GREATER OR LESS THAN 5%.
- ----------------------------------------------------------------------------
The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Portfolio and investors, the payment of
which will reduce investors' annual return. The Dreyfus Corporation has
agreed that, until June 30, 1998, if in any fiscal year certain expenses of
the Portfolio, including the management fee, exceed .45% of the value of the
Portfolio's average net assets for the fiscal year, the Fund may deduct from
the payment to be made to The Dreyfus Corporation under the Management
Agreement, or The Dreyfus Corporation will bear, such excess expense. After
June 30, 1998, this undertaking may be extended, modified, or terminated. The
expenses noted above, without reimbursement, would be: Management Fees _ .50%
and Total Portfolio Operating Expenses _ .63%. The information in the
foregoing table does not reflect any other fee waivers or expense
reimbursement arrangements that may be in effect. Moreover, unlike certain
other funds in the Dreyfus Family of Funds, the Fund will charge your account
$2.00 for each redemption check you write; you also will be charged $5.00 for
each exchange made and for each redemption you make by wire or pursuant to
the Dreyfus TELETRANSFER Privilege, or if you otherwise closeout your
account. These charges will be paid to the Fund's transfer agent and will
reduce the transfer agency charges otherwise payable by the Portfolio. See
"Shareholder Services" and "How to Redeem Shares." In addition, certain
securities dealers, banks or other financial institutions may charge their
clients direct fees for effecting transactions in Portfolio shares; such fees
are not reflected in the foregoing table. See "Management of the Fund," "How
to Buy Shares" and "Shareholder Services Plan."
[Page 3]
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors. Further financial data, related
notes and the report of independent auditors accompany the Statement of
Additional Information, available upon request.
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 Portfolio's financial statements.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
____________________________
PER SHARE DATA: 1996(1) 1997
_______ ______
<S> <C> <C>
Net asset value, beginning of year............................... $ 1.00 $1.00
_______ ______
INVESTMENT OPERATIONS:
Investment income-net............................................ .025 .031
_______ ______
DISTRIBUTIONS:
Dividends from investment income-net............................. (.025) (.031)
_______ ______
Net asset value, end of year..................................... $ 1.00 $ 1.00
====== ========
TOTAL INVESTMENT RETURN............................................ 3.38%(2) 3.17%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.......................... .06%(2) .36%
Ratio of net investment income to average net assets............. 3.25%(2) 3.12%
Decrease reflected in above expense ratios due to undertakings
by The Dreyfus Corporation....................................... .68%(2) .27%
Net Assets, end of year (000's omitted).......................... $100,248 $136,553
(1) From December 1, 1995 (commencement of operations) to August 31, 1996.
(2) Annualized.
</TABLE>
YIELD INFORMATION
From time to time, the Portfolio advertises its yield and effective
yield. Both yield figures are based on historical earnings and are not
intended to indicate future performance. It can be expected that these yields
will fluctuate substantially. The yield of the Portfolio refers to the income
generated by an investment in the Portfolio over a seven-day period (which
period will be stated in the advertisement). This income is then annualized.
That is, the amount of income generated by the investment during that week is
assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The effective yield is calculated similarly,
but, when annualized, the income earned by an investment in the Portfolio is
assumed to be reinvested. The effective yield will be slightly higher than
the yield because of the compounding effect of this assumed reinvestment. The
Portfolio's yield and effective yield may reflect absorbed expenses pursuant
to any undertaking that may be in effect. See "Management of the Fund."
Tax equivalent yield is calculated by determining the pre-tax yield
which, after being taxed at a stated rate, would be equivalent to a stated
yield or effective yield calculated as described above.
Yield information is useful in reviewing the Portfolio's performance,
but because yields will fluctuate, such information under certain conditions
may not provide a basis for comparison with domestic bank deposits, other
investments which pay a fixed yield for a stated period of time, or other
investment companies which may use a different method of computing yield.
[Page 4]
Comparative performance information may be used from time to time in
advertising or marketing the Portfolio's shares,
including data from Lipper Analytical Services, Inc., Bank Rate
Monitortrademark, N. Palm Beach, Fla. 33408, IBC's Money Fund
Reporttrademark, Morningstar, Inc. and other industry publications.
DESCRIPTION OF THE PORTFOLIO
INVESTMENT OBJECTIVE
The Portfolio's investment objective is to provide you with as high a
level of current income exempt from Federal and New Jersey income taxes as is
consistent with the preservation of capital and the maintenance of liquidity.
To accomplish its investment objective, the Portfolio invests primarily in
the debt securities of the State of New Jersey, its political subdivisions,
authorities and corporations, and certain other specified securities, the
interest from which is, in the opinion of bond counsel to the issuer, exempt
from Federal and New Jersey income taxes (collectively, "New Jersey Municipal
Obligations"). To the extent acceptable New Jersey Municipal Obligations are
at any time unavailable for investment by the Portfolio, the Portfolio will
invest temporarily in other debt securities the interest from which is, in
the opinion of bond counsel to the issuer, exempt from Federal, but not New
Jersey, income taxes. The Portfolio's investment objective cannot be changed
without approval by the holders of a majority (as defined in the Investment
Company Act of 1940, as amended (the "1940 Act")) of the Portfolio's
outstanding voting shares. There can be no assurance that the Portfolio's
investment objective will be achieved. Securities in which the Portfolio
invests may not earn as high a level of current income as long-term or lower
quality securities which generally have less liquidity, greater market risk
and more fluctuation in market value.
MUNICIPAL OBLIGATIONS
Debt securities the interest from which is, in the opinion of bond
counsel to the issuer, exempt from Federal income tax ("Municipal
Obligations") generally include debt obligations issued to obtain funds for
various public purposes as well as certain industrial development bonds
issued by or on behalf of public authorities. Municipal Obligations are
classified as general obligation bonds, revenue bonds and notes. General
obligation bonds are secured by the issuer's pledge of its faith, credit and
taxing power for the payment of principal and interest. Revenue bonds are
payable from the revenue derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source, but not from the general taxing power. Tax exempt
industrial development bonds, in most cases, are revenue bonds that do not
carry the pledge of the credit of the issuing municipality, but generally are
guaranteed by the corporate entity on whose behalf they are issued. Notes are
short-term instruments which are obligations of the issuing municipalities or
agencies and are sold in anticipation of a bond sale, collection of taxes or
receipt of other revenues. Municipal Obligations include municipal
lease/purchase agreements which are similar to installment purchase contracts
for property or equipment issued by municipalities. Municipal Obligations
bear fixed, floating or variable rates of interest.
MANAGEMENT POLICIES
It is a fundamental policy of the Portfolio that it will invest at
least 80% of the value of its net assets (except when maintaining a temporary
defensive position) in Municipal Obligations. Under normal circumstances, at
least 65% of the value of the Portfolio's net assets will be invested in New
Jersey Municipal Obligations and the remainder may be invested in securities
that are not New Jersey Municipal Obligations and therefore may be subject to
New Jersey income taxes. See "Investment
[Page 5]
Considerations and Risks_Investing in New Jersey Municipal Obligations"
below, and "Dividends, Distributions and Taxes."
The Portfolio seeks to maintain a net asset value of $1.00 per share
for purchases and redemptions. To do so, the Portfolio uses the amortized
cost method of valuing its securities pursuant to Rule 2a-7 under the 1940
Act, which Rule includes various maturity, quality and diversification
requirements, certain of which are summarized as follows. In accordance with
Rule 2a-7, the Portfolio is required to maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase only instruments having
remaining maturities of 13 months or less and invest only in U.S. dollar
denominated securities determined in accordance with procedures established
by the Fund's Board to present minimal credit risks and which are rated in
one of the two highest rating categories for debt obligations by at least two
nationally recognized statistical rating organizations (or one rating
organization if the instrument was rated only by one such organization) or,
if unrated, are of comparable quality as determined in accordance with
procedures established by the Fund's Board. The nationally recognized
statistical rating organizations currently rating instruments of the type the
Portfolio may purchase are Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Ratings Group ("S&P"), and Fitch Investors Service, L.P.
("Fitch") and their rating criteria are described in "Appendix B" to the
Statement of Additional Information. For further information regarding the
amortized cost method of valuing securities, see "Determination of Net Asset
Value" in the Statement of Additional Information. There can be no assurance
that the Portfolio will be able to maintain a stable net asset value of $1.00
per share.
From time to time, the Portfolio may invest more than 25% of the
value of its total assets in industrial development bonds which, although
issued by industrial development authorities, may be backed only by the
assets and revenues of the non-governmental users. Interest on Municipal
Obligations (including certain industrial development bonds) which are
specified private activity bonds, as defined in the Internal Revenue Code of
1986, as amended (the "Code"), issued after August 7, 1986, while exempt from
Federal income tax, is a preference item for the purpose of the alternative
minimum tax. Where a regulated investment company receives such interest, a
proportionate share of any exempt-interest dividend paid by the investment
company may be treated as such a preference item to shareholders. The
Portfolio may invest without limitation in such Municipal Obligations if The
Dreyfus Corporation determines that their purchase is consistent with the
Portfolio's investment objective. See "Investment Considerations and Risks"
below.
The Portfolio also may invest in Taxable Investments of the quality
described under "Appendix_Certain Portfolio Securities_Taxable
Investments."
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL _ The Fund is designed to benefit investors who do not engage in
frequent redemptions or exchanges of Portfolio shares. Because charges may
apply to redemptions and exchanges of Portfolio shares, and because the
number of exchanges permitted is limited, the Fund may not be an appropriate
investment for an investor who intends to engage frequently in such
transactions.
Even though interest-bearing securities are investments which promise
a stable stream of income, the prices of such securities are inversely
affected by changes in interest rates and, therefore, are subject to the risk
of market price fluctuations. The values of fixed-income securities also may
be affected by changes in the credit rating or financial condition of the
issuing entities.
INVESTING IN NEW JERSEY MUNICIPAL OBLIGATIONS _ Since the Portfolio is
concentrated in securities issued by New Jersey or entities within New
Jersey, an investment in the Portfolio may involve greater
[Page 6]
risk than investments in certain other types of money market funds. You
should consider carefully the special risks inherent in the Portfolio's
investment in New Jersey Municipal Obligations. If there should be a default
or other financial crisis relating to the State of New Jersey or an agency or
municipality thereof, the market value and marketability of outstanding New
Jersey Municipal Obligations held by the Portfolio and interest income to the
Portfolio could be adversely affected. Although New Jersey enjoyed a period
of economic growth with unemployment levels below the national average during
the mid-1980s, the State's economy slowed down well before the onset of the
national recession, which, according to the National Bureau of Economic
Research, began in July 1990. Reflecting the economic downturn, the State's
unemployment rate rose from a low of 3.6% in the first quarter of 1989 to a
recessionary peak of 8.4% during 1992. Since then, the State's unemployment
rate fell to an average of 6.2% during 1996. In July l991, S&P lowered its
rating of the State's general obligation debt from AAA to AA+. You should
obtain and review a copy of the Statement of Additional Information which
more fully sets forth these and other risk factors.
INVESTING IN MUNICIPAL OBLIGATIONS _ The Portfolio may invest more than 25%
of the value of its total assets in Municipal Obligations which are related
in such a way that an economic, business or political development or change
affecting one such security also would affect the other securities; for
example, securities the interest upon which is paid from revenues of similar
types of projects. As a result, the Portfolio may be subject to greater risk
as compared to a fund that does not follow this practice.
Certain municipal lease/purchase obligations in which the Portfolio
may invest may contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease/purchase obligations are secured by the leased
property, disposition of the leased property in the event of foreclosure
might prove difficult. In evaluating the credit quality of a municipal lease/p
urchase obligation that is unrated, The Dreyfus Corporation will consider, on
an ongoing basis, a number of factors including the likelihood that the
issuing municipality will discontinue appropriating funding for the leased
property.
Certain provisions in the Code relating to the issuance of Municipal
Obligations may reduce the volume of Municipal Obligations qualifying for
Federal tax exemption. One effect of these provisions could be to increase
the cost of the Municipal Obligations available for purchase by the Portfolio
and thus reduce available yield. Shareholders should consult their tax
advisers concerning the effect of these provisions on an investment in the
Portfolio. Proposals that may restrict or eliminate the income tax exemption
for interest on Municipal Obligations may be introduced in the future. If any
such proposal were enacted that would reduce the availability of Municipal
Obligations for investment by the Portfolio so as to adversely affect
Portfolio shareholders, the Portfolio would reevaluate its investment
objective and policies and submit possible changes in the Portfolio's
structure to shareholders for their consideration. If legislation were
enacted that would treat a type of Municipal Obligation as taxable, the
Portfolio would treat such security as a permissible Taxable Investment
within the applicable limits set forth herein.
Non-Diversified Status _ The classification of the Portfolio as a
"non-diversified" investment company means that the proportion of the
Portfolio's assets that may be invested in the securities of a single issuer
is not limited by the 1940 Act. A "diversified" investment company is
required by the 1940 Act generally, with respect to 75% of its total assets,
to invest not more than 5% of such assets in the securities of a single
issuer. Since a relatively high percentage of the Portfolio's assets may be
invested in the obligations of a limited number of issuers, the Portfolio's
investments may be more sensitive to changes in
[Page 7]
the market value of a single issuer. However, to meet Federal tax
requirements, at the close of each quarter the Portfolio may not have more
than 25% of its total assets invested in any one issuer and, with respect to
50% of total assets, not more than 5% of its total assets invested in any one
issuer. These limitations do not apply to U.S. Government securities.
SIMULTANEOUS INVESTMENTS _ Investment decisions for the Portfolio are made
independently from those of other investment companies advised by The Dreyfus
Corporation. If, however, such other investment companies desire to invest
in, or dispose of, the same securities as the Portfolio, available
investments or opportunities for sales will be allocated equitably to each
investment company. In some cases, this procedure may adversely affect the
size of the position obtained for or disposed of by the Portfolio or the
price paid or received by the Portfolio.
MANAGEMENT OF THE FUND
Investment Adviser _ The Dreyfus Corporation, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947 and serves as the Fund's
investment adviser. The Dreyfus Corporation is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of November 30, 1997, The Dreyfus Corporation
managed or administered approximately $94 billion in assets for approximately
1.7 million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the authority of the Fund's Board in accordance with Maryland law.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed more than
$299 billion in assets as of September 30 1997, including approximately $102
billion in proprietary mutual fund assets. As of September 30, 1997, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $1.488 trillion in
assets, including approximately $60 billion in mutual fund assets.
Under the terms of the Management Agreement, the Fund has agreed to
pay The Dreyfus Corporation a monthly fee at the annual rate of .50 of 1% of
the value of the Portfolio's average daily net assets. From time to time, The
Dreyfus Corporation may waive receipt of its fees and/or voluntarily assume
certain expenses of the Portfolio, which would have the effect of lowering
the expense ratio of the Portfolio and increasing yield to investors. The
Portfolio will not pay The Dreyfus Corporation at a later time for any
amounts it may waive, nor will the Portfolio reimburse The Dreyfus
Corporation for any amounts it may assume. For the fiscal year ended August
31, 1997, the Fund paid The Dreyfus Corporation a monthly management fee at
the effective annual rate of .23 of 1% of the Portfolio's average daily net
assets, pursuant to an undertaking by The Dreyfus Corporation.
The Dreyfus Corporation has agreed that, until June 30, 1998, if in
any fiscal year the aggregate expenses of the Portfolio, exclusive of taxes,
brokerage, interest on borrowings and (with the prior written
[Page 8]
consent of the necessary state securities commissions) extraordinary
expenses, but including the management fee, exceed .45 of 1% of the value of
the Portfolio's average daily net assets for the fiscal year, the Fund may
deduct from the payment to be made to The Dreyfus Corporation under the
Management Agreement, or The Dreyfus Corporation will bear, such excess
expense.
In allocating brokerage transactions, The Dreyfus Corporation seeks
to obtain the best execution of orders at the most favorable net price.
Subject to this determination, The Dreyfus Corporation may consider, among
other things, the receipt of research services and/or the sale of shares of
the Fund or other funds managed, advised or administered by The Dreyfus
Corporation as factors in the selection of broker-dealers to execute
portfolio transactions for the Fund. See "Portfolio Transactions" in the
Statement of Additional Information.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay securities
dealers, banks or other financial institutions in respect of these services.
Distributor _ The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
Transfer and Dividend Disbursing Agent and Custodian _ Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). The Transfer Agent will receive the
$5.00 exchange fee, the $5.00 account closeout fee, the $5.00 wire and
Dreyfus TELETRANSFER redemption fee, and the $2.00 checkwriting charge,
described below. A sufficient number of shares will be redeemed automatically
to pay these amounts. These payments will reduce the transfer agency fee
otherwise payable by the Portfolio. By purchasing shares of the Portfolio you
are deemed to have consented to this procedure. The Bank of New York, 90
Washington Street, New York, New York 10286, is the Fund's Custodian.
HOW TO BUY SHARES
Portfolio shares are sold without a sales charge. You may be charged
a fee if you effect transactions in Portfolio shares through a securities
dealer, bank or other financial institution. Share certificates are issued
only upon your written request. No certificates are issued for fractional
shares. It is not recommended that the Portfolio be used as a vehicle for
Keogh, IRA or other qualified plans. The Fund reserves the right to reject
any purchase order.
The minimum initial investment for the Portfolio is $25,000.
Subsequent investments must be at least $1,000. The initial investment must
be accompanied by the Account Application.
You may purchase Portfolio shares by check or wire, or through the
Dreyfus TELETRANSFER Privilege described below. Checks should be made payable
to "The Dreyfus Family of Funds." Payments to open new accounts which are
mailed should be sent to The Dreyfus Family of Funds, P.O. Box 9387,
Providence, Rhode Island 02940-9387, together with your Account Application.
For subsequent investments, your Fund account number should appear on the
check and an investment slip should be enclosed and sent to The Dreyfus
Family of Funds, P.O. Box 105, Newark, New Jersey 07101-0105. Neither initial
nor subsequent investments should be made by third party check. Purchase
orders may be delivered in person only to a Dreyfus Financial Center. THESE
ORDERS WILL BE FORWARDED TO THE
[Page 9]
FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the
nearest Dreyfus Financial Center, please call one of the telephone numbers
listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #8900279923/Dreyfus BASIC
Municipal Fund, Inc./Dreyfus BASIC New Jersey Municipal Money Market
Portfolio, for purchase of Portfolio shares in your name. The wire must
include your Fund account number (for new accounts, your Taxpayer
Identification Number ("TIN") should be included instead), account
registration and dealer number, if applicable. If your initial purchase of
Portfolio shares is by wire, please call 1-800-645-6561 after completing your
wire payment to obtain your Fund account number. Please include your Fund
account number on the Account Application and promptly mail the Account
Application to the Fund, as no redemptions will be permitted until the
Account Application is received. You may obtain further information about
remitting funds in this manner from your bank. All payments should be made in
U.S. dollars and, to avoid fees and delays, should be drawn only on U.S.
banks. A charge will be imposed if any check used for investment in your
account does not clear. The Fund makes available to certain large institutions
the ability to issue purchase instructions through compatible computer
facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
your Fund account number PRECEDED BY THE DIGITS "1111."
Portfolio shares are sold on a continuous basis at the net asset
value per share next determined after an order in proper form and Federal
Funds (monies of member banks within the Federal Reserve System which are
held on deposit at a Federal Reserve Bank) are received by the Transfer
Agent. If you do not remit Federal Funds, your payment must be converted into
Federal Funds. This usually occurs within one business day of receipt of a
bank wire or within two business days of receipt of a check drawn on a member
bank of the Federal Reserve System. Checks drawn on banks which are not
members of the Federal Reserve System may take considerably longer to convert
into Federal Funds. Prior to receipt of Federal Funds, your money will not be
invested.
The Portfolio's net asset value per share is determined as of 12:00
Noon, New York time, on each day the New York Stock Exchange is open for
business. Net asset value per share is computed by dividing the value of the
Portfolio's net assets (i.e., the value of its assets less liabilities) by
the total number of Portfolio shares outstanding. See "Determination of Net
Asset Value" in the Statement of Additional Information.
If your payments for Portfolio shares are received in or converted
into Federal Funds by 12:00 Noon, New York time, by the Transfer Agent, you
will receive the dividend declared that day. If your payments are received in
or converted into Federal Funds after 12:00 Noon, New York time, by the
Transfer Agent, you will begin to accrue dividends on the following business
day.
Qualified institutions may telephone orders for purchase of Portfolio
shares. These orders will become effective at the price determined at 12:00
Noon, New York time, and the shares purchased will receive the dividend on
Portfolio shares declared on that day, if the telephone order is placed by
12:00 Noon, New York time, and Federal Funds are received by 4:00 p.m., New
York time, on that day.
[Page 10]
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends,
Distributions and Taxes" and the Account Application for further information
concerning this requirement. Failure to furnish a certified TIN to the Fund
could subject you to a $50 penalty imposed by the Internal Revenue Service
(the "IRS").
DREYFUS TELETRANSFER PRIVILEGE _ You may purchase shares (minimum $1,000,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between the bank account designated in one of these documents
and your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time. No fee currently
is contemplated for purchases of shares pursuant to this Privilege.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
FUND EXCHANGES _ You may purchase up to four times per calendar year, in
exchange for shares of the Portfolio, shares in one of the Fund's other
portfolios or shares of certain other funds managed or administered by The
Dreyfus Corporation, to the extent such shares are offered for sale in your
state of residence. These funds have different investment objectives which
may be of interest to you. If you desire to use this service, please call
1-800-645-6561 to determine if it is available and whether any other
conditions are imposed on its use. YOU WILL BE CHARGED A $5.00 FEE FOR EACH
EXCHANGE YOU MAKE OUT OF THE PORTFOLIO. This fee will be deducted from your
account and paid to the Transfer Agent.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange into a fund or
portfolio, you must obtain and should review a copy of the current prospectus
of the fund into which the exchange is being made. Prospectuses may be
obtained by calling 1-800-645-6561. Except in the case of personal retirement
plans, the shares being exchanged must have a current value of at least
$1,000; furthermore, when establishing a new account by exchange, the shares
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. The ability to
issue exchange instructions by telephone is given to all Fund shareholders
automatically, unless you check the applicable "No" box on the Account
Application, indicating that you specifically refuse this Privilege. The
Telephone Exchange Privilege may be established for an existing account by
written request signed by all shareholders on the account, by a separate
signed Shareholder Services Form, available by calling 1-800-645-6561, or by
oral request from any of the authorized signatories on the account by calling
1-800-645-6561. If you have established the Telephone Exchange Privilege, you
may telephone exchange instructions (including over The Dreyfus Touch
Registration Mark automated telephone system) by calling 1-800-221-4060.
If you are calling from overseas, call 516-794-5452. See "How to Redeem
Shares_Procedures." Upon an exchange into a new account, the following
shareholder services and privileges, as applicable and where available, will
be automatically carried over to the fund into which the exchange is made:
Telephone Exchange Privilege, Check Redemption Privilege, Wire Redemption
Privilege, Telephone Redemption Privilege, Dreyfus TELETRANSFER Privilege and
the dividend/capital gain distribution option (except for Dreyfus Dividend
Sweep) selected by the investor.
[Page 11]
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to
exchanges into funds sold with a sales load. If you are exchanging into a
fund that charges a sales load, you may qualify for share prices which do not
include the sales load or which reflect a reduced sales load, if the shares
you are exchanging were: (a) purchased with a sales load, (b) acquired by a
previous exchange from shares purchased with a sales load, or (c) acquired
through reinvestment of dividends or distributions paid with respect to the
foregoing categories of shares. To qualify, at the time of the exchange you
must notify the Transfer Agent. Any such qualification is subject to
confirmation of your holdings through a check of appropriate records. See
"Shareholder Services" in the Statement of Additional Information. The Fund
reserves the right to reject any exchange request in whole or in part and
will reject any request to exchange out of the Portfolio if the investor has
made four such exchanges during any calendar year. The availability of Fund
Exchanges may be modified or terminated at any time upon notice to
shareholders. See "Dividends, Distributions and Taxes."
DREYFUS DIVIDEND SWEEP PRIVILEGE _ Dreyfus Dividend Sweep enables you to
invest automatically dividends or dividends and capital gain distributions,
if any, paid by the Portfolio in shares of one of the Fund's other portfolios
or shares of another fund in the Dreyfus Family of Funds of which you are a
shareholder. Shares of other portfolios or funds will be purchased at the
then-current net asset value; however, a sales load may be charged with
respect to investments in shares of a fund sold with a sales load. If you are
investing in a fund that charges a sales load, you may qualify for share
prices which do not include the sales load or which reflect a reduced sales
load. If you are investing in a fund that charges a contingent deferred sales
charge, the shares purchased will be subject on redemption to the contingent
deferred sales charge, if any, applicable to the purchased shares. See
"Shareholder Services" in the Statement of Additional Information. For more
information concerning this Privilege or to request a Dividend Options Form,
please call toll free 1-800-645-6561. You may cancel this Privilege by
mailing written notification to The Dreyfus Family of Funds, P.O. Box 9671,
Providence, Rhode Island 02940-9671. To select a new portfolio or fund after
cancellation, you must submit a new Dividend Options Form. Enrollment in or
cancellation of this Privilege is effective three business days following
receipt. This Privilege is available only for existing accounts and may not
be used to open new accounts. Minimum subsequent investments do not apply.
The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value.
YOU WILL BE CHARGED $5.00 WHEN YOU REDEEM ALL SHARES IN YOUR ACCOUNT
OR YOUR ACCOUNT IS OTHERWISE CLOSED OUT. The fee will be deducted from your
redemption proceeds and paid to the Transfer Agent. The account closeout fee
does not apply to exchanges out of the Portfolio or to wire or Dreyfus
TELETRANSFER redemptions, for each of which a $5.00 fee applies. Securities
dealers, banks and other financial institutions may charge their clients a fee
for effecting redemptions of Fund shares. Any certificates representing
Portfolio shares being redeemed must be submitted with the redemption request.
The value of the shares redeemed may be more or less than their original cost,
depending upon the Portfolio's then-current net asset value.
[Page 12]
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED PORTFOLIO SHARES BY CHECK OR BY
THE DREYFUS TELETRANSFER PRIVILEGE AND SUBSEQUENTLY SUBMIT A WRITTEN
REDEMPTION REQUEST TO THE TRANSFER AGENT, YOUR REDEMPTION WILL BE EFFECTIVE
AND THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK
CLEARANCE OF YOUR PURCHASE CHECK OR DREYFUS TELETRANSFER PURCHASE ORDER,
WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR MORE. IN ADDITION, THE FUND WILL
NOT HONOR REDEMPTION CHECKS UNDER THE CHECK REDEMPTION PRIVILEGE, AND WILL
REJECT REQUESTS TO REDEEM SHARES BY WIRE OR TELEPHONE OR PURSUANT TO THE
DREYFUS TELETRANSFER PRIVILEGE, FOR A PERIOD OF EIGHT BUSINESS DAYS AFTER
RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE CHECK OR THE DREYFUS TELETRANSFER
PURCHASE ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES
WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU
OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE
REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS
ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO EXERCISE
ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be redeemed
until the Transfer Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if your account's net asset value is
$10,000 or less and remains so during the notice period. The $5.00 account
closeout fee would be charged in such case.
PROCEDURES
You may redeem shares by using the regular redemption procedure
through the Transfer Agent, or through the Telephone Redemption Privilege or
the Check Redemption Privilege, which are granted automatically unless you
specifically refuse them by checking the applicable "No" box on the Account
Application. The Telephone Redemption Privilege and the Check Redemption
Privilege may be established for an existing account by a separate signed
Shareholder Services Form or, with respect to the Telephone Redemption
Privilege, by oral request from any of the authorized signatories on the
account by calling 1-800-645-6561. You also may redeem shares through the
Wire Redemption Privilege or the Dreyfus TELETRANSFER Privilege, if you have
checked the appropriate box and supplied the necessary information on the
Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The Fund makes available to certain large institutions the
ability to issue redemption instructions through compatible computer
facilities. The Fund reserves the right to refuse any request made by wire or
telephone, including requests made shortly after a change of address, and may
limit the amount involved or the number of such requests. The Fund may modify
or terminate any redemption Privilege at any time upon notice to
shareholders. Shares for which certificates have been issued are not eligible
for the Check Redemption, Wire Redemption, Telephone Redemption, or Dreyfus
TELETRANSFER Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
over The Dreyfus TouchRegistration Mark automated telephone system) from any
person representing himself or herself to be you and reasonably believed by
the Transfer Agent to be genuine. The Fund will require the Transfer Agent to
employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine and, if it does not
follow such procedures, the Fund or the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Fund nor
the Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
[Page 13]
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by
telephone to request a redemption or exchange of Portfolio shares. In such
cases, you should consider using the other redemption procedures described
herein. Use of these other redemption procedures may result in your
redemption request being processed at a later time than it would have been if
telephone redemption had been used.
REGULAR REDEMPTION _ Under the regular redemption procedure, you may redeem
shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671. Redemption requests may be
delivered in person only to a Dreyfus Financial Center. THESE REQUESTS WILL
BE FORWARDED TO THE FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For
the location of the nearest Dreyfus Financial Center, please call one of the
telephone numbers listed under "General Information." Redemption requests
must be signed by each shareholder, including each owner of a joint account,
and each signature must be guaranteed. The Transfer Agent has adopted
standards and procedures pursuant to which signature-guarantees in proper
form generally will be accepted from domestic banks, brokers, dealers, credit
unions, national securities exchanges, registered securities associations,
clearing agencies and savings associations, as well as from participants in
the New York Stock Exchange Medallion Signature Program, the Securities
Transfer Agents Medallion Program ("STAMP") and the Stock Exchanges Medallion
Program. If you have any questions with respect to signature-guarantees,
please call one of the telephone numbers listed under "General Information."
Redemption proceeds of at least $5,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE _ You may write Redemption Checks drawn on your
Fund account. Redemption Checks may be made payable to the order of any
person in the amount of $1,000 or more. Redemption Checks should not be used
to close your account. Your account will be charged $2.00 for each Redemption
Check you write. The Transfer Agent also will impose a fee for stopping
payment of a Redemption Check upon your request or if the Transfer Agent
cannot honor the Redemption Check due to insufficient funds or other valid
reason. The Fund may return an unpaid Redemption Check that would draw your
account balance below $5.00, and you may be subject to extra charges. You
should date your Redemption Checks with the current date when you write them.
Please do not postdate your Redemption Checks. If you do, the Transfer Agent
will honor, upon presentment, even if presented before the date of the check,
all postdated Redemption Checks which are dated within six months of
presentment for payment, if they are otherwise in good order. The Check
Redemption Privilege is granted automatically unless you refuse it.
WIRE REDEMPTION PRIVILEGE _ You may request by wire, telephone or letter
that redemption proceeds (minimum $5,000) be wired to your account at a bank
which is a member of the Federal Reserve System, or a correspondent bank if
your bank is not a member. You will be charged a $5.00 wire redemption fee
for each wire redemption, which will be deducted from your account and paid
to the Transfer Agent. Holders of jointly registered Fund or bank accounts
may have redemption proceeds of not more than $250,000 wired within any
30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE _ You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption
[Page 14]
instructions by calling 1-800-645-6561 or, if you are calling from overseas,
call 516-794-5452. The Telephone Redemption Privilege is granted
automatically unless you refuse it.
DREYFUS TELETRANSFER PRIVILEGE _ You may request by telephone that
redemption proceeds (minimum $1,000 per day) be transferred between your Fund
account and your bank account. Only a bank account maintained in a domestic
financial institution which is an Automated Clearing House member may be
designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request. Holders of jointly registered Fund or bank accounts may
redeem through the Dreyfus TELETRANSFER Privilege for transfer to their bank
account not more than $250,000 within any 30-day period. You will be charged
a $5.00 TELETRANSFER fee for each Dreyfus TELETRANSFER redemption, which will
be deducted from your account and paid to the Transfer Agent.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which
the Fund reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of
The Dreyfus Corporation, an amount not to exceed an annual rate of .25 of 1%
of the value of the Portfolio's average daily net assets for certain
allocated expenses of providing personal services and/or maintaining
shareholder accounts. The services provided may include personal services
relating to shareholder accounts, such as answering shareholder inquiries
regarding the Portfolio and providing reports and other information, and
services related to the maintenance of shareholder accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Under the Code, the Portfolio is treated as a separate corporation
for purposes of qualification and taxation as a regulated investment company.
The Portfolio ordinarily declares dividends from net investment income on
each day the New York Stock Exchange is open for business. The Portfolio's
earnings for Saturdays, Sundays and holidays are declared as dividends on the
preceding business day. Dividends usually are paid on the last calendar day
of each month and are automatically reinvested in additional Portfolio shares
at net asset value or, at your option, paid in cash. If you redeem all shares
in your account at any time during the month, all dividends to which you are
entitled will be paid to you along with the proceeds of the redemption, after
the deduction of any fees. If you are an omnibus accountholder and indicate
in a partial redemption request that a portion of any accrued dividends to
which such account is entitled belongs to an underlying accountholder who has
redeemed all shares in his or her account, such portion of the accrued
dividends will be paid to you along with the proceeds of the redemption,
after the deduction of any fees. Distributions from net realized securities
gains, if any, generally are declared and paid once a year, but the Portfolio
may make distributions on a more frequent basis to comply with the
distribution requirements of the Code, in all events in a manner consistent
with the provisions of the 1940 Act. The Portfolio will not make
distributions from net realized securities gains unless capital loss
carryovers, if any, have been utilized or have expired. You may choose
whether to receive distributions in cash or to reinvest in additional
Portfolio shares at net asset value. If you elect to receive dividends and
distributions in cash, and your dividend or distribution check is returned to
the Fund as undeliverable or remains uncashed for six months, the Fund
reserves
[Page 15]
the right to reinvest such dividend or distribution and all future dividends
and distributions payable to you in additional Portfolio shares at net asset
value. No interest will accrue on amounts represented by uncashed
distribution or redemption checks. All expenses are accrued daily and
deducted before declaration of dividends to investors.
Management of the Fund believes that the Portfolio qualified for
calendar year 1997 as a "qualified investment fund" within the meaning of the
New Jersey gross income tax. The primary criteria for constituting a
"qualified investment fund" are that (i) the Portfolio is an investment
company registered with the Securities and Exchange Commission which, for the
calendar year in which the dividends and distributions (if any) are paid, has
no investments other than interest-bearing obligations, obligations issued at
a discount, and cash and cash items, including receivables, and financial
options, futures and forward contracts, or other similar financial
instruments relating to interest-bearing obligations, obligations issued at a
discount or bond indices related thereto and (ii) at the close of each
quarter of the taxable year, the Fund has not less than 80% of the aggregate
principal amount of all of its investments, excluding financial options,
futures and forward contracts, or other similar financial instruments,
related to interest-bearing obligations, obligations issued at a discount or
bond indices related thereto, cash and cash items, which cash items shall
include receivables, in New Jersey Municipal Obligations, including
obligations of Puerto Rico, the Virgin Islands and other territories and
possessions of the United States and certain other specified securities
exempt from Federal and New Jersey income taxes. Additionally, a qualified
investment fund must comply with certain continuing reporting requirements.
If the Portfolio continues to qualify as a qualified investment fund
and complies with its reporting obligations, (a) dividends and distributions
by the Fund to a New Jersey resident individual shareholder will not be
subject to New Jersey gross income tax to the extent that the dividends and
distributions are attributable to income earned by the Portfolio as interest
on or gain from New Jersey Municipal Obligations, and (b) gain from the sale
of Portfolio shares by a New Jersey resident individual shareholder will not
be subject to the New Jersey gross income tax. Shares of the Portfolio are
not subject to property taxation by New Jersey or its political subdivisions.
To the extent that you are subject to state and local taxes outside of New
Jersey, dividends and distributions earned by an investment in the Portfolio
may represent taxable income.
Except for dividends from Taxable Investments, the Fund anticipates
that substantially all dividends paid by the Portfolio will not be subject to
Federal income tax. Dividends derived from Taxable Investments, together with
distributions from any net realized short-term securities gains and all or a
portion of any gains realized from the sale or other disposition of certain
market discount bonds, are subject to Federal income tax as ordinary income,
whether or not reinvested in additional Fund shares. No dividend paid by the
Portfolio will qualify for the dividends received deduction allowable to
certain U.S. corporations. Distributions from net realized long-term
securities gains of the Portfolio generally are taxable as long-term capital
gains for Federal income tax purposes if you are a citizen or resident of the
United States. The Code provides that an individual generally will be taxed
on the net amount of his or her capital gain at a maximum rate of 28% with
respect to capital gain from property held for more than one year but not
more than 18 months and at a maximum rate of 20% with respect to capital gain
from property held for more than 18 months. Special rules (and generally
lower maximum rates) apply for individuals in lower tax brackets. Under the
Code, interest on indebtedness incurred or continued to purchase or carry
Fund shares which is deemed to relate to exempt-interest dividends is not
deductible.
[Page 16]
Although all or a substantial portion of the dividends paid by the
Portfolio may be excluded by shareholders of the Portfolio from their gross
income for Federal income tax purposes, the Portfolio may purchase specified
private activity bonds, the interest from which may be (i) a preference item
for purposes of the alternative minimum tax, or (ii) a factor in determining
the extent to which a shareholder's Social Security benefits are taxable. If
the Portfolio purchases such securities, the portion of the Portfolio's
dividends related thereto will not necessarily be tax exempt to an investor
who is subject to the alternative minimum tax and/or the tax on Social Security
benefits and may cause an investor to be subject to such taxes.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year. These statements set forth
the dollar amount of income exempt from Federal tax and the dollar amount, if
any, subject to Federal tax. These dollar amounts will vary depending on the
size and length of time of your investment in the Portfolio. If the Portfolio
pays dividends derived from taxable income, it intends to designate as
taxable the same percentage of the day's dividends as the actual taxable
income earned on that day bears to total income earned on that day. Thus, the
percentage of the dividend designated as taxable, if any, may vary from day
to day.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of taxable dividends and
distributions from net realized securities gains of the Fund paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or in
terest income on a Federal income tax return. Furthermore, the IRS may notify
the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has not properly reported
taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number, IRS individual taxpayer
identification number, or employer identification number of the record owner
of the account. Any tax withheld as a result of backup withholding does not
constitute an additional tax imposed on the record owner of the account, and
may be claimed as a credit on the record owner's Federal income tax return.
Management of the Fund believes that the Portfolio has qualified for
the fiscal year ended August 31, 1997 as a "regulated investment company"
under the Code. The Portfolio intends to continue to so qualify if such
qualification is in the best interests of its shareholders. Such
qualification relieves the Portfolio of any liability for Federal income
taxes to the extent its earnings are distributed in accordance with
applicable provisions of the Code. The Portfolio is subject to a
non-deductible 4% excise tax, measured with respect to certain undistributed
amounts of taxable investment income and capital gains.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
[Page 17]
GENERAL INFORMATION
The Fund was incorporated under Maryland law on August 8, 1991, and
commenced operations on December 16, 1991. Before October 21, 1994, the
Fund's name was Dreyfus BASIC Municipal Money Market Fund, Inc. and, before
December 24, 1992, its name was Dreyfus Investors Municipal Money Market
Fund, Inc. The Fund is authorized to issue five billion shares of Common
Stock (with one billion shares allocated to the Portfolio), par value $.001
per share. Each share has one vote.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members or
the appointment of auditors. However, pursuant to the Fund's By-Laws, the
holders of at least 10% of the shares outstanding and entitled to vote may
require the Fund to hold a special meeting of shareholders for the purpose of
removing a Board member from office and the holders of at least 25% of such
shares may require the Fund to hold a special meeting of shareholders for any
other purpose. Fund shareholders may remove a Board member by the affirmative
vote of a majority of the Fund's outstanding voting shares. In addition, the
Fund's Board will call a meeting of shareholders for the purpose of electing
Board members if, at any time, less than a majority of the Board members then
holding office have been elected by shareholders.
The Fund is a "series fund," which is a mutual fund divided into
separate portfolios, each of which is treated as a separate entity for
certain matters under the 1940 Act and for other purposes. A shareholder of
one portfolio is not deemed to be a shareholder of any other portfolio. For
certain matters shareholders vote together as a group; as to others they vote
separately by portfolio. By this Prospectus, shares of the New Jersey
Portfolio are being offered. Other portfolios are sold pursuant to other
offering documents.
To date, the Fund's Board has authorized the creation of four series
of shares. All consideration received by the Fund for shares of one of the
portfolios and all assets in which such consideration is invested will belong
to that portfolio (subject only to the rights of creditors of the Fund) and
will be subject to the liabilities related thereto. The income attributable
to, and the expenses of, one portfolio are treated separately from those of
the other portfolios. The Fund has the ability to create, from time to time,
new portfolios without shareholder approval.
The Transfer Agent maintains a record of your ownership and sends
confirmations and statements of account. The Fund sends annual and
semi-annual financial reports to all its shareholders.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561; in New York City, call 1-718-895-1206; outside the U. S. call
516-794-5452.
[Page 18]
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY _ The Portfolio is permitted to borrow to the extent
permitted under the 1940 Act, which permits an investment company to borrow
in an amount up to 331\3% of the value of its total assets. The Portfolio
currently intends to borrow money only for temporary or emergency (not
leveraging) purposes, in an amount up to 15% of the value of its total assets
(including the amount borrowed) valued at the lesser of cost or market, less
liabilities (not including the amount borrowed) at the time the borrowing is
made. While borrowings exceed 5% of the Portfolio's total assets, the
Portfolio will not make any addition investments.
Forward Commitments _ The Portfolio may purchase Municipal Obligations and
other securities on a forward commitment or when-issued basis, which means
that delivery and payment take place a number of days after the date of the
commitment to purchase. The payment obligation and the interest rate
receivable on a forward commitment or when-issued security are fixed when the
Portfolio enters into the commitment, but the Portfolio does not make payment
until it receives delivery from the counterparty. The Portfolio will commit to
purchase such securities only with the intention of actually acquiring the
securities, but the Portfolio may sell these securities before the settlement
date if it is deemed advisable. A segregated account of the Portfolio
consisting of permissible liquid assets at least equal at all times to the
amount of the commitments will be established and maintained at the Fund's
custodian bank.
CERTAIN PORTFOLIO SECURITIES
CERTAIN TAX EXEMPT OBLIGATIONS _ The Portfolio may purchase floating and
variable rate demand notes and bonds, which are tax exempt obligations
ordinarily having stated maturities in excess of 13 months, but which permit
the holder to demand payment of principal at any time, or at specified
intervals not exceeding 13 months, in each case upon not more than 30 days'
notice. Variable rate demand notes include master demand notes which are
obligations that permit the Portfolio to invest fluctuating amounts, at
varying rates of interest, pursuant to direct arrangements between the
Portfolio, as lender, and the borrower. These obligations permit daily
changes in the amount borrowed. Frequently, such obligations are secured by
letters of credit or other credit support arrangements provided by banks.
Changes in the credit quality of banks and other financial institutions that
provide such credit or liquidity enhancements to the Fund's portfolio
securities could cause losses to the Fund and affect its share price. Because
these obligations are direct lending arrangements between the lender and
borrower, it is not contemplated that such instruments generally will be
traded, and there generally is no established secondary market for these
obligations, although they are redeemable at face value, plus accrued
interest. Accordingly, where these obligations are not secured by letters of
credit or other credit support arrangements, the Portfolio's right to redeem
is dependent on the ability of the borrower to pay principal and interest on
demand. Each obligation purchased by the Portfolio will meet the quality
criteria established for the purchase of Municipal Obligations.
TAX EXEMPT PARTICIPATION INTERESTS _ The Portfolio may purchase from
financial institutions participation interests in Municipal Obligations (such
as industrial development bonds and municipal lease/purchase agreements). A
participation interest gives the Portfolio an undivided interest in the
Municipal Obligation in the proportion that the Portfolio's participation
interest bears to the total principal amount of the Municipal Obligation.
These instruments may have fixed, floating or variable rates of interest,
with remaining maturities of 13 months or less. If the participation interest
is unrated, or
[Page 19]
has been given a rating below that which otherwise is permissible for
purchase by the Portfolio, the participation interest will be backed by an
irrevocable letter of credit or guarantee of a bank that the Fund's Board has
determined meets prescribed quality standards for banks, or the payment
obligation otherwise will be collateralized by U.S. Government securities.
For certain participation interests, the Portfolio will have the right to
demand payment, on not more than seven days' notice, for all or any part of
the Portfolio's participation interest in the Municipal Obligation, plus
accrued interest. As to these instruments, the Portfolio intends to exercise
its right to demand payment only upon a default under the terms of the
Municipal Obligation, as needed to provide liquidity to meet redemptions, or
to maintain or improve the quality of its investment portfolio.
TENDER OPTION BONDS _ The Portfolio may purchase tender option bonds. A
tender option bond is a Municipal Obligation (generally held pursuant to a
custodial arrangement) having a relatively long maturity and bearing interest
at a fixed rate substantially higher than prevailing short-term tax exempt
rates, that has been coupled with the agreement of a third party, such as a
bank, broker-dealer or other financial institution, pursuant to which such
institution grants the security holders the option, at periodic intervals, to
tender their securities to the institution and receive the face value
thereof. As consideration for providing the option, the financial institution
receives periodic fees equal to the difference between the Municipal
Obligation's fixed coupon rate and the rate, as determined by a remarketing
or similar agent at or near the commencement of such period, that would cause
the securities, coupled with the tender option, to trade at par on the date
of such determination. Thus, after payment of this fee, the security holder
effectively holds a demand obligation that bears interest at the prevailing
short-term tax exempt rate. The Dreyfus Corporation, on behalf of the
Portfolio, will consider on an ongoing basis the creditworthiness of the
issuers of the underlying Municipal Obligations, of any custodian and of the
third party provider of the tender option. In certain instances and for
certain tender option bonds, the option may be terminable in the event of a
default in payment of principal or interest on the underlying Municipal
Obligations and for other reasons.
STAND-BY COMMITMENTS _ To the extent consistent with the requirements for a
"qualified investment fund" under the New Jersey gross income tax, the
Portfolio may acquire "stand-by commitments" with respect to Municipal
Obligations held in its portfolio. Under a stand-by commitment, the Portfolio
obligates a broker, dealer or bank to repurchase, at the Portfolio's option,
specified securities at a specified price and, in this respect, stand-by
commitments are comparable to put options. The exercise of a stand-by
commitment therefore is subject to the ability of the seller to make payment
on demand. The Portfolio will acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes. The Portfolio may pay for stand-by
commitments if such action is deemed necessary, thus increasing to a degree
the cost of the underlying Municipal Obligation and similarly decreasing such
security's yield to investors.
ILLIQUID SECURITIES _ The Portfolio may invest up to 10% of the value of its
net assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Portfolio's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, and repurchase agreements providing for
settlement in more than seven days after notice. As to these securities, the
Portfolio is subject to a risk that should the Portfolio desire to sell them
when a ready buyer is not available at a price the Portfolio deems
representative of their value, the value of the Portfolio's net assets could
be adversely affected.
[Page 20]
TAXABLE INVESTMENTS _ From time to time, on a temporary basis other than for
temporary defensive purposes (but not to exceed 20% of the value of the
Portfolio's net assets) or for temporary defensive purposes, the Portfolio
may invest in taxable short-term investments ("Taxable Investments")
consisting of: notes of issuers having, at the time of purchase, a quality
rating within the two highest grades of Moody's, S&P or Fitch; obligations of
the U.S. Government, its agencies or instrumentalities; commercial paper
rated not lower than P-2 by Moody's, A-2 by S&P or F-2 by Fitch; certificates
of deposit of U.S. domestic banks, including foreign branches of domestic
banks, with assets of one billion dollars or more; time deposits; bankers'
acceptances and other short-term bank obligations; and repurchase agreements
in respect of any of the foregoing. Dividends paid by the Portfolio that are
attributable to income earned by the Portfolio from Taxable Investments will
be taxable to investors. See "Dividends, Distributions and Taxes." Except for
temporary defensive purposes, at no time will more than 20% of the value of
the Portfolio's net assets be invested in Taxable Investments. If the
Portfolio purchases Taxable Investments, it will value them using the
amortized cost method and comply with the provisions of Rule 2a-7 relating to
purchases of taxable instruments. When the Portfolio has adopted a temporary
defensive position, including when acceptable New Jersey Municipal
Obligations are unavailable for investment by the Portfolio, in excess of 35%
of the Portfolio's net assets may be invested in securities that are not
exempt from State of New Jersey income tax. Under normal market conditions,
the Portfolio anticipates that not more than 5% of the value of its total
assets will be invested in any one category of Taxable Investments. Taxable
Investments are more fully described in the Statement of Additional
Information to which reference hereby is made.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
[Page 21]
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[Page 22]
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[Page 23]
Basic New Jersey
Municipal Money
Market Portfolio
Prospectus
Registration Mark
Copy Rights 1998 Dreyfus Service Corporation
127p0198
[Page 24]
____________________________________________________________________________
DREYFUS BASIC MUNICIPAL FUND, INC.
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
JANUARY 2, 1998
____________________________________________________________________________
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus BASIC Intermediate Municipal Bond Portfolio ("Intermediate Bond
Portfolio"), Dreyfus BASIC Municipal Bond Portfolio ("Bond Portfolio"), and
Dreyfus BASIC Municipal Money Market Portfolio ("Money Market Portfolio"),
and the Prospectus of Dreyfus BASIC New Jersey Municipal Money Market
Portfolio ("New Jersey Portfolio") (each, a "Portfolio") of Dreyfus BASIC
Municipal Fund, Inc. (the "Fund"), each dated January 2, 1998, as each may
be revised from time to time. To obtain a copy of the relevant Portfolio's
Prospectus, please write to the Fund at 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144, or call the following numbers:
Call Toll Free 1-800-645-6561
In New York City - Call 1-718-895-1206
Outside the U.S. - Call 516-794-5452
The Dreyfus Corporation (the "Manager") serves as the Fund's investment
adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies B-2
Management of the Fund B-15
Management Agreement B-18
Shareholder Services Plan B-20
Purchase of Shares B-21
Redemption of Shares B-23
Shareholder Services B-25
Determination of Net Asset Value B-27
Dividends, Distributions and Taxes B-28
Portfolio Transactions B-30
Performance Information B-31
Information About the Fund B-33
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors B-34
Financial Statements and Reports of Independent Auditors B-35
Appendix A B-36
Appendix B B-39
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the sections in each Portfolio's Prospectus entitled "Description of
the Portfolio(s)" and "Appendix."
Portfolio Securities
Municipal Obligations. The average distribution of investments (at
value) in Municipal Obligations by ratings for the fiscal year ended August
31, 1997, in each case computed on a monthly basis, was as follows:
Fitch or Moody's or Standard &
Investors Investors Poor's Percentage of Value
Service, L.P. Service, Inc. Ratings Group Money Market Intermediate
("Fitch") ("Moody's") ("S&P") Portfolio Bond
Portfolio
F1+/F1 MIG 1/VMIG 1, SP-1+/SP-1, 94.2% 1.5%
P-1 A-1+/A1
AAA/AA Aaa/Aa AAA/AA 3.2% 51.3%
AA Aa AA - 17.6%
A A A - 16.0%
BBB Baa BBB - 13.6%
BB Ba BB - -
B B B - -
Not Rated Not Rated Not Rated 2.6%() ___________
100.0% 100.0%
Fitch or Moody's or Standard & Percentage of Value
Investors Investors Poor's
Service, L.P. Service, Inc. Ratings Group Bond New Jersey
("Fitch") ("Moody's") ("S&P") Portfolio Portfolio
F1+/F1 MIG 1/VMIG 1, SP-1+/SP-1, 3.0% 83.3%
P-1 A-1+/A1
AAA/AA Aaa/Aa AAA/AA 43.5% 1.4%
AA Aa AA 29.7% -
A A A 11.9% -
BBB Baa BBB 7.6% -
BB Ba BB - -
B B B - -
Not Rated Not Rated Not Rated 4.3%(2)2 15.3%(3)
100.0% 100.0%
_______________________________
(1) Included in the Not Rated category are securities comprising 2.6% of the
Money Market Portfolio's market value which, while not rated, have been
determined by the Manager to be of comparable quality to securities in the
MIG 1/VMIG 1 rating category.
(2) Included in the Not Rated category are securities comprising 4.3% of the
Bond Portfolio's market value which, while not rated, have been determined
by the Manager to be of comparable quality to securities rated as follows:
Baa/BBB (4.0%) and B/B (.3%).
(3) Included in the Not Rated category are securities comprising 15.3% of the
New Jersey Portfolio's market value which, while not rated, have been
determined by the Manager to be of comparable quality to securities in the
MIG 1/VMIG 1 rating category.
The term "Municipal Obligations" generally includes debt obligations
issued to obtain funds for various public purposes, including the
construction of a wide range of public facilities such as airports, bridges,
highways, housing, hospitals, mass transportation, schools, streets and
water and sewer works. Other public purposes for which Municipal
Obligations may be issued include refunding outstanding obligations,
obtaining funds for general operating expenses and lending such funds to
other public institutions and facilities. In addition, certain types of
industrial development bonds are issued by or on behalf of public
authorities to obtain funds to provide for the construction, equipment,
repair or improvement of privately operated housing facilities, sports
facilities, convention or trade show facilities, airport, mass transit,
industrial, port or parking facilities, air or water pollution control
facilities and certain local facilities for water supply, gas, electricity,
or sewage or solid waste disposal; the interest paid on such obligations may
be exempt from Federal income tax, although current tax laws place
substantial limitations on the size of such issues. Such obligations are
considered to be Municipal Obligations if the interest paid thereon
qualifies as exempt from Federal income tax in the opinion of bond counsel
to the issuer. There are, of course, variations in the security of
Municipal Obligations, both within a particular classification and between
classifications.
Floating and variable rate demand notes and bonds are tax exempt
obligations ordinarily having stated maturities in excess of 13 months, but
which permit the holder to demand payment of principal (upon not more than
30 days' notice in the case of the Money Market Portfolio and the New Jersey
Portfolio (collectively, the "Short Term Portfolios") at any time or at
specified intervals, which, in the case of the Short Term Portfolios, may
not exceed 13 months. The issuer of such obligations ordinarily has a
corresponding right, after a given period, to prepay in its discretion the
outstanding principal amount of the obligations plus accrued interest upon a
specified number of days' notice to the holders thereof. The interest rate
on a floating rate demand obligation is based on a known lending rate, such
as a bank's prime rate, and is adjusted automatically each time such rate is
adjusted. The interest rate on a variable rate demand obligation is
adjusted automatically at specified intervals.
The yields on Municipal Obligations are dependent on a variety of
factors, including general economic and monetary conditions, money market
factors, conditions in the Municipal Obligations market, size of a
particular offering, maturity of the obligation, and rating of the issue.
The imposition of the management fee, as well as other operating expenses,
will have the effect of reducing the yield to investors.
Municipal lease obligations or installment purchase contract
obligations (collectively, "lease obligations") have special risks not
ordinarily associated with Municipal Obligations. Although lease obligations
do not constitute general obligations of the municipality for which the
municipality's taxing power is pledged, a lease obligation ordinarily is
backed by the municipality's covenant to budget for, appropriate and make
the payments due under the lease obligation. However, certain lease
obligations contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease or installment purchase
payments in future years unless money is appropriated for such purpose on a
yearly basis. Although "non-appropriation" lease obligations are secured by
the leased property, disposition of the property in the event of foreclosure
might prove difficult. The Short Term Portfolios will seek to minimize
these risks by investing only in those lease obligations that (1) are rated
in one of the two highest rating categories for debt obligations by at least
two nationally recognized statistical rating organizations (or one rating
organization if the lease obligation was rated only by one such
organization); or (2) if unrated, are purchased principally from the issuer
or domestic banks or other responsible third parties, in each case only if
the seller shall have entered into an agreement with a Short Term Portfolio
providing that the seller or other responsible third party will either
remarket or repurchase the lease obligation within a short period after
demand by such Short Term Portfolio. The staff of the Securities and
Exchange Commission currently considers certain lease obligations to be
illiquid. Determination as to the liquidity of such securities is made in
accordance with guidelines established by the Fund's Board. Pursuant to
such guidelines, the Board has directed the Manager to monitor carefully the
Fund's investment in such securities with particular regard to (1) the
frequency of trades and quotes for the lease obligation; (2) the number of
dealers willing to purchase or sell the lease obligation and the number of
the potential buyers; (3) the willingness of dealers to undertake to make a
market in the lease obligation; (4) the nature of the marketplace trades,
including the time needed to dispose of the mechanics of transfer; and (5)
such other factors concerning the trading market for the lease obligation as
the Manager may deem relevant. In addition, in evaluating the liquidity and
credit quality of a lease obligation that is unrated, the Fund's Board has
directed the Manager to consider (a) whether the lease can be cancelled; (b)
what assurance there is that the assets represented by the lease can be
sold; (c) the strength of the lessee's general credit (e.g., its debt,
administrative, economic, and financial characteristics); (d) the likelihood
that the municipality will discontinue appropriating funding for the leased
property because the property is no longer deemed essential to the
operations of the municipality (e.g., the potential for an "event of
nonappropriation"); (e) the legal recourse in the event of failure to
appropriate; and (f) such other factors concerning credit quality as the
Manager may deem relevant. Accordingly, not more than 15% of the value of
the net assets of the Intermediate Bond Portfolio or Bond Portfolio
(collectively, the "Longer Term Portfolios" and not more than 10% of the
value of the net assets of a Short Term Portfolio will be invested in lease
obligations that are illiquid and in other illiquid securities.
Neither Short Term Portfolio will purchase tender option bonds unless
(a) the demand feature applicable thereto is exercisable by such Portfolio
within 13 months of the date of such purchase upon no more than 30 days'
notice and thereafter is exercisable by the Portfolio no less frequently
than annually upon no more than 30 days' notice and (b) at the time of such
purchase, the Manager reasonably expects (i) based upon its assessment of
current and historical interest rate trends, that prevailing short-term tax
exempt rates will not exceed the stated interest rate on the underlying
Municipal Obligations at the time of the next tender fee adjustment and (ii)
that the circumstances which might entitle the grantor of a tender option to
terminate the tender option would not occur prior to the time of the next
tender opportunity. At the time of each tender opportunity, a Short Term
Portfolio will exercise the tender option with respect to any tender option
bonds unless the Manager reasonably expects, (x) based upon its assessment
of current and historical interest rate trends, that prevailing short-term
tax exempt rates will not exceed the stated interest rate on the underlying
Municipal Obligations at the time of the next tender fee adjustment, and (y)
that the circumstances which entitle the grantor of a tender option to
terminate the tender option would not occur prior to the time of the next
tender opportunity. The Short Term Portfolios will exercise the tender
feature with respect to tender option bonds, or otherwise dispose of its
tender option bonds, prior to the time the tender option is scheduled to
expire pursuant to the terms of the agreement under which the tender option
is granted. Each Short Term Portfolio otherwise will comply with the
provisions of Rule 2a-7 in connection with the purchase of tender option
bonds, including, without limitation, the requisite determination by the
Fund's Board that the tender option bonds in question meet the quality
standards described in Rule 2a-7, which, in the case of a tender option bond
subject to a conditional demand feature, would include a determination that
the security has received both the required short-term and long-term quality
rating or is determined to be of comparable quality. In the event of a
default of the Municipal Obligation underlying a tender option bond, or the
termination of the tender option agreement, the particular Short Term
Portfolio would look to the maturity date of the underlying security for
purposes of compliance with Rule 2a-7 and, if its remaining maturity was
greater than 13 months, the security would be sold as soon as would be
practicable.
A Longer Term Portfolio will purchase tender option bonds only when
the Fund is satisfied that the custodial and tender option arrangements will
not adversely affect the tax exempt status of the underlying Municipal
Obligations and that payment of any tender fees will not have the effect of
creating taxable income for the Portfolio. Based on the tender option bond
agreement, the Fund expects to be able to value the tender option bond at
par; however, the value of the instrument will be monitored to assure that
it is valued at fair value.
Ratings of Municipal Obligations. If, subsequent to being purchased by
a Short Term Portfolio, (a) an issue of rated Municipal Obligations ceases
to be rated in the highest rating category by at least two rating
organizations (or one rating organization if the instrument was rated by
only one organization), or the Fund's Board determines that it is no longer
of comparable quality; or (b) the Manager becomes aware that any portfolio
security not so highly rated or any unrated security has been given a rating
by any rating organization below the rating organization's second highest
rating category, the Fund's Board will reassess promptly whether such
security presents minimal credit risk and will cause a Short Term Portfolio
to take such action as it determines is in the best interest of a Short Term
Portfolio and its shareholders, provided that the reassessment required by
clause (b) is not required if the portfolio security is disposed of or
matures within five business days of the Manager becoming aware of the new
rating and the Fund's Board is subsequently notified of the Manager's
actions. Subsequent to being purchased by a Longer Term Portfolio, an issue
of rated Municipal Obligations may cease to be rated or its rating may be
reduced below the minimum required for purchase by the Portfolio. Neither
event will require the sale of such Municipal Obligations by a Longer Term
Portfolio, but the Manager will consider such event in determining whether
the Portfolio should continue to hold the Municipal Obligations.
To the extent the ratings by Moody's, S&P or Fitch for Municipal
Obligations may change as a result of changes in such organizations or their
rating systems, the Fund will attempt to use comparable ratings as standards
for Portfolio investments in accordance with the investment policies
contained in the Prospectus and this Statement of Additional Information.
The ratings of Moody's, S&P and Fitch represent their opinions as to the
quality of the Municipal Obligations which they undertake to rate. It
should be emphasized, however, that ratings are relative and subjective and
are not absolute standards of quality. Although these ratings may be an
initial criterion for selection of portfolio investments, the Manager also
will evaluate these securities and the creditworthiness of the issuers of
such securities.
Illiquid Securities. Where a substantial market of qualified
institutional buyers develops for certain restricted securities purchased by
a Portfolio pursuant to Rule 144A under the Securities Act of 1933, as
amended, the Fund intends to treat such securities as liquid securities in
accordance with procedures approved by the Fund's Board. Because it is not
possible to predict with assurance how the market for restricted securities
pursuant to Rule 144A will develop, the Fund's Board has directed the
Manager to monitor carefully each Portfolio's investments in such securities
with particular regard to trading activity, availability of reliable price
information and other relevant information. To the extent that, for a
period of time, qualified institutional buyers cease purchasing restricted
securities pursuant to Rule 144A, a Portfolio's investment in such
securities may have the effect of increasing the level of illiquidity in the
Portfolio's investments during such period.
Taxable Investments. Securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the U.S.
Treasury; others by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; and others
only by the credit of the agency or instrumentality. These securities bear
fixed, floating or variable rates of interest. Interest may fluctuate based
on generally recognized reference rates or the relationship of rates. While
the U.S. Government provides financial support to such U.S.
Government-sponsored agencies or instrumentalities, no assurance can be
given that it will always do so, since it is not so obligated by law.
Commercial paper consists of short-term, unsecured promissory notes
issued to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate. Investments in time deposits generally are
limited to London branches of domestic banks that have total assets in
excess of one billion dollars. Time deposits which may be held by a
Portfolio will not benefit from insurance from the Bank Insurance Fund or
the Savings Association Insurance Fund administered by the Federal Deposit
Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments
reflect the obligation both of the bank and of the drawer to pay the face
amount of the instrument upon maturity. Other short-term bank obligations
may include uninsured, direct obligations bearing fixed, floating or
variable interest rates.
In a repurchase agreement, the Portfolio buys, and the seller agrees to
repurchase, a security at a mutually agreed upon time and price (usually
within seven days). The repurchase agreement thereby determines the yield
during the purchaser's holding period, while the seller's obligation to
repurchase is secured by the value of the underlying security. The Fund's
custodian or sub-custodian will have custody of, and will hold in a
segregated account, securities acquired by the Portfolio under a repurchase
agreement. Repurchase agreements are considered by the Staff of the
Securities and Exchange Commission to be loans by the Portfolio that enters
into them. In an attempt to reduce the risk of incurring a loss on a
repurchase agreement, a Portfolio will enter into repurchase agreements only
with domestic banks with total assets in excess of $1 billion, or primary
government securities dealers reporting to the Federal Reserve Bank of New
York, with respect to securities of the type in which the Portfolio may
invest, and will require that additional securities be deposited with it if
the value of the securities purchased should decrease below resale price.
Repurchase agreements could involve risks in the event of a default or
insolvency of the other party to the agreement, including possible delays or
restrictions upon the Portfolio ability to dispose of the underlying
securities.
Management Policies
Derivatives. (Longer Term Portfolios only) Each Longer Term Portfolio
may invest in Derivatives (as defined in the Longer Term Portfolios'
Prospectus) for a variety of reasons, including to hedge certain market
risks, to provide a substitute for purchasing or selling particular
securities or to increase potential income gain. Derivatives may provide a
cheaper, quicker or more specifically focused way for a Longer Term
Portfolio to invest than "traditional" securities would.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and
the portfolio as a whole. Derivatives permit each Longer Term Portfolio to
increase or decrease the level of risk, or change the character of the risk,
to which its portfolio is exposed in much the same way as such Portfolio can
increase or decrease the level of risk, or change the character of the risk,
of its portfolio by making investments in specific securities.
When required by the Securities and Exchange Commission, a Longer Term
Portfolio will set aside permissible liquid assets in a segregated account
to cover its obligations relating to its purchase of Derivatives. To
maintain this required cover, a Longer Term Portfolio may have to sell
portfolio securities at disadvantageous prices or times since it may not be
possible to liquidate a Derivative position at a reasonable price.
Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the-counter Derivatives. Exchange-
traded Derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such Derivatives. This guarantee
usually is supported by a daily payment system (i.e., variation margin
requirements) operated by the clearing agency in order to reduce overall
credit risk. As a result, unless the clearing agency defaults, there is
relatively little counterparty credit risk associated with Derivatives
purchased on an exchange. By contrast, no clearing agency guarantees over-the-
counter Derivatives. Therefore, each party to an over-the-counter
Derivative bears the risk that the counterparty will default. Accordingly,
the Manager will consider the creditworthiness of counterparties to over-the-
counter Derivatives in the same manner as it would review the credit quality
of a security to be purchased by a Longer Term Portfolio. Over-the-counter
Derivatives are less liquid than exchange-traded Derivatives since the other
party to the transaction may be the only investor with sufficient
understanding of the Derivative to be interested in bidding for it.
Futures Transactions--In General. Each Longer Term Portfolio may enter into
futures contracts in U.S. domestic markets, such as the Chicago Board of
Trade. Engaging in these transactions involves risk of loss to the Longer
Term Portfolio which could adversely affect the value of the Portfolio's net
assets. Although each Longer Term Portfolio intends to purchase or sell
futures contracts only if there is an active market for such contracts, no
assurance can be given that a liquid market will exist for any particular
contract at any particular time. Many futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices during
a single trading day. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond that limit or
trading may be suspended for specified periods during the trading day.
Futures contract prices could move to the limit for several consecutive
trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and potentially subjecting the Longer Term
Portfolio to substantial losses.
Successful use of futures by a Longer Term Portfolio also is subject to
the ability of the Manager to predict correctly movements in the direction
of the relevant market and, to the extent the transaction is entered into
for hedging purposes, to ascertain the appropriate correlation between the
transaction being hedged and the price movements of the futures contract.
For example, if a Longer Term Portfolio uses futures to hedge against the
possibility of a decline in the market value of securities held in its
portfolio and the prices of such securities instead increase, such Portfolio
will lose part or all of the benefit of the increased value of securities
which it has hedged because it will have offsetting losses in its futures
positions. Furthermore, if in such circumstances a Longer Term Portfolio
has insufficient cash, it may have to sell securities to meet daily
variation margin requirements, in which case the Portfolio may have to sell
such securities at a time when it may be disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities
and Exchange Commission, each Longer Term Portfolio may be required to
segregate permissible liquid assets in connection with its commodities
transactions in an amount generally equal to the value of the underlying
commodity. The segregation of such assets will have the effect of limiting
such Portfolio's ability otherwise to invest those assets.
Specific Futures Transactions. Each Longer Term Portfolio may purchase and
sell interest rate futures contracts. An interest rate future obligates the
Portfolio to purchase or sell an amount of a specific debt security at a
future date at a specific price.
Options--In General. Each Longer Term Portfolio may purchase and write
(i.e., sell) call or put options with respect to interest rate futures
contracts. A call option gives the purchaser of the option the right to
buy, and obligates the writer to sell, the underlying security or securities
at the exercise price at any time during the option period, or at a specific
date. Conversely, a put option gives the purchaser of the option the right
to sell, and obligates the writer to buy, the underlying security or
securities at the exercise price at any time during the option period, or at
a specific date.
There is no assurance that sufficient trading interest to create a
liquid secondary market on a securities exchange will exist for any
particular option or at any particular time, and for some options no such
secondary market may exist. A liquid secondary market in an option may
cease to exist for a variety of reasons. In the past, for example, higher
than anticipated trading activity or order flow, or other unforeseen events,
at times have rendered certain of the clearing facilities inadequate and
resulted in the institution of special procedures, such as trading
rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible
to effect closing transactions in particular options.
Successful use by a Longer Term Portfolio of options will be subject to
the Manager's ability to predict correctly movements in interest rates. To
the extent the Manager's predictions are incorrect, the Portfolio may incur
losses.
Future Developments. (Longer Term Portfolios only) Each Longer Term
Portfolio may take advantage of opportunities in the area of options and
futures contracts and options on futures contracts and any other Derivatives
which are not presently contemplated for use by a Longer Term Portfolio or
which are not currently available but which may be developed, to the extent
such opportunities are both consistent with the Portfolio's investment
objective and legally permissible for such Portfolio. Before entering into
such transactions or making any such investment, appropriate disclosure will
be provided in the Longer Term Portfolios' Prospectus or this Statement of
Additional Information.
Lending Portfolio Securities. (Longer Term Portfolios only) In
connection with its securities lending transactions, a Longer Term Portfolio
may return to the borrower or a third party which is unaffiliated with the
Fund, and which is acting as a "placing broker," a part of the interest
earned from the investment of collateral received from securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Longer Term Portfolio must receive at least 100% cash collateral
from the borrower; (2) the borrower must increase such collateral whenever
the market value of the securities rises above the level of such collateral;
(3) the Longer Term Portfolio must be able to terminate the loan at any
time; (4) the Longer Term Portfolio must receive reasonable interest on the
loan, as well as any dividends, interest or other distributions payable on
the loaned securities, and any increase in market value; and (5) the Longer
Term Portfolio may pay only reasonable custodian fees in connection with the
loan.
Short Selling. (Longer Term Portfolios only). Until the Portfolio
replaces a borrowed security in connection with a short sale, the Portfolio
will: (a) maintain daily a segregated account, containing permissible
liquid assets, at such a level that the amount deposited in the account plus
the amount deposited with the broker as collateral always equals the current
value of the security sold short, or (b) otherwise cover its short position.
Forward Commitments. Municipal Obligations and other securities
purchased on a forward commitment or when-issued basis are subject to
changes in value (generally changing in the same way, i.e., appreciating
when interest rates decline and depreciating when interest rates rise) based
upon the public's perception of the creditworthiness of the issuer and
changes, real or anticipated, in the level of interest rates. Securities
purchased on a when-issued basis may expose a Portfolio to risks because
they may experience such fluctuations prior to their actual delivery.
Purchasing securities on a when-issued basis can involve the additional risk
that the yield available in the market when the delivery takes place
actually may be higher than that obtained in the transaction itself.
Purchasing securities on a when-issued basis when a Portfolio is fully or
almost fully invested may result in greater potential fluctuation in the
value of the Portfolio's net assets and its net asset value per share.
Investment Considerations and Risks
Lower Rated Bonds. This section applies only to the Longer Term
Portfolios. Lower rated bonds as described herein are not eligible
investments for the Short Term Portfolios. Each Longer Term Portfolio is
permitted to invest in securities rated Ba by Moody's and BB by S&P or Fitch
(collectively, the "Rating Agencies") and as low as the lowest rating
assigned by the Rating Agencies. Such bonds, though higher yielding, are
characterized by risk. See "Description of the Portfolios--Investment
Considerations and Risks--Lower Rated Bonds" and "Appendix--Certain
Portfolio Securities--Ratings" in the Longer Term Portfolios' Prospectus for
a discussion of certain risks and "Appendix B" for a general description of
Rating Agencies' ratings of Municipal Obligations. Although ratings may be
useful in evaluating the safety of interest and principal payments, they do
not evaluate the market value risk of these bonds. Each Longer Term
Portfolio will rely on the Manager's judgment, analysis and experience in
evaluating the creditworthiness of an issuer.
Investors should be aware that the market values of many of these bonds
tend to be more sensitive to economic conditions than are higher rated
securities. These bonds generally are considered by the Rating Agencies to
be predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation and generally
will involve more credit risk than securities in the higher rating
categories.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these bonds does exist, it generally
is not as liquid as the secondary market for higher rated securities. The
lack of a liquid secondary market may have an adverse impact on market price
and yield and a Longer Term Portfolio's ability to dispose of particular
issues when necessary to meet its liquidity needs or in response to a
specific economic event such as a deterioration in the creditworthiness of
the issuer. The lack of a liquid secondary market for certain securities
also may make it more difficult for a Longer Term Portfolio to obtain
accurate market quotations for purposes of valuing its portfolio and
calculating its net asset value. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of these securities. In such cases, judgment may play
a greater role in valuation because less reliable, objective data may be
available.
These bonds may be particularly susceptible to economic downturns. It
is likely that any economic recession could severely disrupt the market for
such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn could
adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon and increase the incidence of default of
such securities.
Each Longer Term Portfolio may acquire these bonds during an initial
offering. Such securities may involve special risks because they are new
issues. Neither Longer Term Portfolio has any arrangements with any persons
concerning the acquisition of such securities, and the Manager will review
carefully the credit and other characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also apply
to lower rated zero coupon bonds, in which each Longer Term Portfolio may
invest up to 5% of its total assets. Zero coupon bonds carry an additional
risk in that, unlike bonds which pay interest throughout the period to
maturity, the Portfolio will realize no cash until the cash payment date
unless a portion of such securities are sold and, if the issuer defaults,
the Longer Term Portfolio may obtain no return at all on its investment.
See "Dividends, Distributions and Taxes."
Investing in New Jersey Municipal Obligations. (New Jersey Portfolio
only) Investors in the New Jersey Portfolio should consider carefully the
special risks inherent in the New Jersey Portfolio's investment in New
Jersey Municipal Obligations. These risks result from the financial
condition of the State of New Jersey. If there should be a default or other
financial crisis relating to the State of New Jersey or an agency of
municipality thereof, the market value and marketability of outstanding New
Jersey Municipal Obligations in the New Jersey Portfolio and interest income
to the Fund could be adversely affected. Although New Jersey enjoyed a
period of economic growth in the mid-1980s, the State's economy slowed down
well before the onset of the national recession which, according to the
National Bureau of Economic Research, began in July 1990. Reflecting the
downturn, the State's unemployment rate rose from a low of 3.6% in the first
quarter of 1989 to a recessionary peak of 8.4% during 1992. Since then, the
State's unemployment rate fell an average of to 6.2% during 1996. In July
1991, S&P lowered its rating of the State's general obligation debt from AAA
to AA+. Investors in the New Jersey Portfolio should review "Appendix A"
which sets forth these and other risk factors.
Investment Restrictions
Money Market Portfolio only. The Money Market Portfolio has adopted
investment restrictions numbered 1 through 10 as fundamental policies, which
cannot be changed without approval by the holders of a majority (as defined
in the Investment Company Act of 1940, as amended (the "1940 Act")) of such
Portfolio's outstanding voting shares. Investment restriction number 11 is
not a fundamental policy and may be changed by a vote of a majority of the
Fund's Board members at any time. The Money Market Portfolio may not:
1. Purchase securities other than Municipal Obligations and Taxable
Investments as those terms are defined above and in the Prospectus for the
Portfolio.
2. Borrow money, except from banks for temporary or emergency (not
leveraging) purposes in an amount up to 15% of the value of the Portfolio's
total assets (including the amount borrowed) based on the lesser of cost or
market, less liabilities (not including the amount borrowed) at the time the
borrowing is made. While borrowings exceed 5% of the value of the
Portfolio's total assets, the Portfolio will not make any additional
investments.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to secure borrowings for temporary or emergency purposes.
4. Sell securities short or purchase securities on margin.
5. Underwrite the securities of other issuers, except that the
Portfolio may bid separately or as part of a group for the purchase of
Municipal Obligations directly from an issuer for its own portfolio to take
advantage of the lower purchase price available.
6. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil and gas interests,
but this shall not prevent the Portfolio from investing in Municipal
Obligations secured by real estate or interests therein.
7. Make loans to others except through the purchase of qualified debt
obligations and the entry into repurchase agreements referred to above and
in the Prospectus for the Portfolio.
8. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no such
limitation on the purchase of Municipal Obligations and, for temporary
defensive purposes, obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities.
9. Invest in companies for the purpose of exercising control.
10. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition of assets.
11. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid if,
in the aggregate, more than 10% of its net assets would be so invested.
* * *
Intermediate Bond Portfolio, Bond Portfolio and New Jersey Portfolio.
Each Longer Term Portfolio and the New Jersey Portfolio has adopted
investment restrictions numbered 1 through 7 as fundamental policies, which
cannot be changed, as to a Portfolio, without approval by the holders of a
majority (as defined in the 1940 Act) of such Portfolio's outstanding voting
shares. Investment restrictions numbered 8 through 13 are not fundamental
policies and may be changed by vote of a majority of the Fund's Board
members at any time. None of these Portfolios may:
1. Invest more than 25% of its total assets in the securities of
issuers in any single industry; provided that there shall be no such
limitation on the purchase of Municipal Obligations and, for temporary
defensive purposes, obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities.
2. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of
the Portfolio's total assets). For purposes of this investment restriction,
the entry into options, forward contracts, futures contracts, including
those relating to indices, and options on futures contracts or indices shall
not constitute borrowing.
3. Purchase or sell real estate, commodities or commodity contracts,
or oil and gas interests, but this shall not prevent the Portfolio from
investing in Municipal Obligations secured by real estate or interests
therein, or prevent the Portfolio from purchasing and selling options,
forward contracts, futures contracts, including those relating to indices,
and options on futures contracts or indices.
4. Underwrite the securities of other issuers, except that the
Portfolio may bid separately or as part of a group for the purchase of
Municipal Obligations directly from an issuer for its own portfolio to take
advantage of the lower purchase price available, and except to the extent
the Portfolio may be deemed an underwriter under the Securities Act of 1933,
as amended, by virtue of disposing of portfolio securities.
5. Make loans to others, except through the purchase of debt
obligations and the entry into repurchase agreements; however, the Portfolio
may lend its portfolio securities in an amount not to exceed 33-1/3% of the
value of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the Securities and Exchange
Commission and the Fund's Board.
6. Issue any senior security (as such term is defined in Section
18(f) of the 1940 Act), except to the extent that the activities permitted
in Investment Restrictions numbered 2, 3, 10 and 11 may be deemed to give
rise to a senior security.
7. Purchase securities on margin, but the Portfolio may make margin
deposits in connection with transactions in options, forward contracts,
futures contracts, including those relating to indices, and options on
futures contracts or indices.
8. Purchase securities other than Municipal Obligations and Taxable
Investments and those arising out of transactions in futures and options or
as otherwise provided in the Portfolio's Prospectus.
9. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.
10. Pledge, hypothecate, mortgage or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings and to the
extent related to the deposit of assets in escrow in connection with the
purchase of securities on a when-issued or delayed-delivery basis and
collateral and initial or variation margin arrangements with respect to
options, forward contracts, futures contracts, including those related to
indices, and options on futures contracts or indices.
11. Purchase, sell or write puts, calls or combinations thereof,
except as described in the Portfolio's Prospectus and Statement of
Additional Information.
12. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid
(which securities could include participation interests (including municipal
lease/purchase agreements) and floating and variable rate demand obligations
as to which the Portfolio cannot exercise the demand feature as described in
the Portfolio's Prospectus on less than seven days' notice and as to which
there is no secondary market), if, in the aggregate, more than 15% (10% in
the case of the New Jersey Portfolio) of its net assets would be so
invested.
13. Invest in companies for the purpose of exercising control.
* * *
For purposes of Investment Restriction No. 8 with respect to the Money
Market Portfolio, and Investment Restriction No. 1 with respect to each
other Portfolio, industrial development bonds, where the payment of
principal and interest is the ultimate responsibility of companies within
the same industry, are grouped together as an "industry."
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values
or assets will not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Portfolio shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interest of the Portfolio and its shareholders, the Fund reserves the right
to revoke the commitment by terminating the sale of such Portfolio's shares
in the state involved.
MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below.
Board Members of the Fund
JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of
the Board of various funds in the Dreyfus Family of Funds. He is
Chairman of the Board of Directors of Staffing Resources, Inc., a
temporary placement agency; and a director of The Muscular Dystrophy
Association, HealthPlan Services Corporation, a provider of marketing,
administrative and risk management services to health and other benefit
programs, Noel Group, Inc., a venture capital company and Carlyle
Industries, Inc. (formerly, Belding Heminway Company, Inc.), a button
packager and distributor. For more than five years prior to January
1995, he was President, a director and, until August 1994, Chief
Operating Officer of the Manager and Executive Vice President and a
director of Dreyfus Service Corporation, a wholly-owned subsidiary of
the Manager and, until August 24, 1994, the Fund's distributor. From
August 1994 until December 31, 1994, he was a director of Mellon Bank
Corporation. He is 54 years old and his address is 200 Park Avenue,
New York, New York 10166.
DAVID W. BURKE, Board Member. Chairman of the Broadcasting Board of
Governors, an independent board within the United States Information
Agency, since August 1995. From August 1994 to December 31, 1994, Mr.
Burke was a Consultant to the Manager, and from October 1990 to August
1994, he was Vice President and Chief Administrative Officer of the
Manager. From 1977 to 1990, Mr. Burke was involved in the management
of national television news, as Vice President and Executive Vice
President of ABC News, and subsequently as President of CBS News. He
is 61 years old and his address is Box 654, Eastham, Massachusetts
02642.
SAMUEL CHASE, Board Member. From 1982 to 1996, President of Samuel Chase &
Company, Ltd., an economic consulting firm. He is 65 years old and his
address is 4410 Massachusetts Avenue, N.W., Suite 408, Washington, D.C.
20016.
GORDON J. DAVIS, Board Member. Since October 1994, a senior partner with
the law firm of LeBoeuf, Lamb, Greene & MacRae. From 1983 to September
1994, Mr. Davis was a senior partner with the law firm of Lord Day &
Lord, Barrett Smith. From 1978 to 1983, he was Commissioner of Parks
and Recreation for the City of New York. He is also a director of
Consolidated Edison, a utility company, and Phoenix Home Life Insurance
Company and a member of various other corporate and not-for-profit
boards. He is 56 years old and his address is 241 Central Park West,
New York, New York 10023.
JONI EVANS, Board Member. Senior Vice President of the William Morris
Agency since September 1993. From September 1987 to May 1993,
Executive Vice President of Random House Inc. and, from January 1991 to
May 1993, President and Publisher of Turtle Bay Books; from January
1987 to December 1990, Publisher of Random House-Adult Trade Division;
from September 1985 to September 1987, President of Simon and
Schuster-Trade Division. She is 55 years old and her address is 1325
Avenue of the Americas, New York, New York 10019.
ARNOLD S. HIATT, Board Member. Chairman of The Stride Rite Foundation.
From 1969 to June 1992, Chairman of the Board, President or Chief
Executive Officer of The Stride Rite Corporation, a multi-divisional
footwear manufacturing and retailing company. Mr. Hiatt is also a
director of The Cabot Corporation. He is 70 years old and his address
is 400 Atlantic Avenue, Boston, Massachusetts 02110.
DAVID J. MAHONEY, Board Member. President of David Mahoney Ventures since
1983. From 1968 to 1983, he was Chairman and Chief Executive Officer of
Norton Simon Inc., a producer of consumer products and services. Mr.
Mahoney is also a director of Bionaire, Inc. and Intercostal Health
Systems, Inc. He is 74 years old and his address is 745 Fifth Avenue,
Suite 700, New York, New York 10151.
BURTON N. WALLACK, Board Member. President and co-owner of Wallack
Management Company, a real estate management company managing real
estate in the New York City area. He is 47 years old and his address
is 18 East 64th Street, New York, New York 10021.
For so long as the Fund's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Board members of the Fund
who are not "interested persons" of the Fund, as defined in the 1940 Act,
will be selected and nominated by the Board members who are not "interested
persons" of the Fund.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the
Board receives an additional 25% of such compensation. Emeritus Board
members are entitled to receive an annual retainer and a per meeting fee of one-
half the amount paid to them as Board members. The aggregate amount of
compensation paid to each Board member by the Fund for the fiscal year ended
August 31, 1997, and by all other funds in the Dreyfus Family of Funds for
which such person is a Board member (the number of which is set forth in
parenthesis next to each Board member's total compensation) for the year
ended December 31, 1996, were as follows:
Total Compensation
From Fund and
Aggregate From Fund Complex
Name of Board Compensation From Paid to Board
Member Fund* Member
Joseph S. DiMartino $ 3,125 $ 517,075 (93)
David W. Burke $ 2,500 $ 232,699 (52)
Samuel Chase $ 2,500 $ 49,370 (12)
Gordon J. Davis $ 2,250 $ 88,536 (23)
Joni Evans $ 2,000 $ 45,620 (12)
Arnold S. Hiatt $ 2,500 $ 45,620 (12)
David J. Mahoney $ 1,250 $ 40,312 (12)
Burton N. Wallack $ 2,500 $ 49,370 (12)
_____________________
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $282 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer, Chief Compliance Officer and a director of the Distributor and
Funds Distributor, Inc., the ultimate parent of which is Boston
Institutional Group, Inc., and an officer of other investment companies
advised or administered by the Manager. She is 40 years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
April 1993 to January 1995, he was a Senior Fund Accountant for
Investors Bank & Trust Company. From December 1991 to March 1993, he
was employed as a Fund Accountant at The Boston Company, Inc. He is 28
years old.
RICHARD W. INGRAM, Vice President and Assistant Treasurer. Executive Vice
President of the Distributor and Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From March 1994 to November 1995, he was Vice President and
Division Manager for First Data Investor Services Group. From 1989 to
1994, he was Vice President, Assistant Treasurer and Tax Director -
Mutual Funds of The Boston Company, Inc. He is 42 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President of
the Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for The Boston Company, Inc. She is 33 years old.
ELIZABETH A. KEELEY, Vice President and Assistant Secretary. Vice President
of the Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. She has
been employed by the Distributor since September 1995. She is 28 years
old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer, Chief Financial Officer and a director of the
Distributor and Funds Distributor Inc., and an officer of other
investment companies advised or administered by the Manager. From July
1988 to August 1994, he was employed by The Boston Company, Inc. where
he held various management positions in the Corporate Finance and
Treasury areas. He is 35 years old.
MICHAEL S. PETRUCELLI, Vice President and Assistant Treasurer. Senior Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
December 1989 through November 1996, he was employed by GE Investments
where he held various financial, business developments and compliance
positions. He also served as Treasurer of the GE Funds and a Director
of GE Investments Services. He is 36 years old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers, as a group, owned less than 1%
of each Portfolio's shares outstanding on December 15, 1997.
MANAGEMENT AGREEMENT
The following information supplements and should be read in conjunction
with the section in each Portfolio's Prospectus entitled "Management of the
Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994, with the Fund. As to
each Portfolio, the Agreement is subject to annual approval by (i) the
Fund's Board or (ii) vote of a majority (as defined in the 1940 Act) of the
outstanding voting securities of such Portfolio, provided that in either
event the continuance also is approved by a majority of the Board members
who are not "interested persons" (as defined in the 1940 Act) of the Fund or
the Manager, by vote cast in person at a meeting called for the purpose of
voting on such approval. The Agreement was approved by shareholders of each
Portfolio (other than the New Jersey Portfolio) on August 2, 1994. The
Agreement was last approved by the Fund's Board, including a majority of the
Board members who are not "interested persons" of any party to the
Agreement, at a meeting held on July 23, 1997. As to each Portfolio, the
Agreement is terminable without penalty, on 60 days' notice, by the Fund's
Board or by vote of the holders of a majority of such Portfolio's shares,
or, on not less than 90 days' notice, by the Manager. The Agreement will
terminate automatically, as to the relevant Portfolio, in the event of its
assignment (as defined in the 1940 Act).
The following persons are officers and/or directors of the Manager: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman--Distribution and a director; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Patrice M. Kozlowski, Vice President--
Corporate Communications; Andrew S. Wasser, Vice President--
Information Services; Mary Beth Leibig, Vice President--Human Resources;
William V. Healey, Assistant Secretary; and Mandell L. Berman, Burton C.
Borgelt, Frank V. Cahouet and Richard F. Syron, directors.
The Manager manages each Portfolio's investments in accordance with the
stated policies of the Portfolio, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions and provides the
Fund with portfolio managers who are authorized by the Fund's Board to
execute purchases and sales of securities. The Fund's portfolio managers
are Richard J. Moynihan, Joseph P. Darcy, A. Paul Disdier, Douglas J.
Gaylor, Karen M. Hand, Stephen C. Kris, W. Michael Petty, Jill C. Shaffro,
Samuel J. Weinstock and Monica S. Wieboldt. The Manager also maintains a
research department with a professional staff of portfolio managers and
securities analysts who provide research services for the Fund and for other
funds advised by the Manager.
The Manager maintains office facilities on behalf of each Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to each Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include: organizational costs, taxes, interest,
loan commitment fees, interest and distributions paid on securities sold
short, brokerage fees and commissions, if any, fees of Board members who are
not officers, directors, employees or holders of 5% or more of the
outstanding voting securities of the Manager, Securities and Exchange
Commission fees, state Blue Sky qualification fees, advisory fees, charges
of custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, industry association fees, outside auditing and legal
expenses, costs of maintaining the Fund's existence, costs of independent
pricing services, costs attributable to investor services (including,
without limitation, telephone and personnel expenses), costs of
shareholders' reports and corporate meetings, costs of preparing and
printing prospectuses and statements of additional information for
regulatory purposes and for distribution to existing shareholders, and any
extraordinary expenses. Expenses attributable to a particular Portfolio are
charged against the assets of that Portfolio; other expenses of the Fund are
allocated among the Portfolios on the basis determined by the Board,
including, but not limited to, proportionately in relation to the net assets
of each Portfolio.
The Manager maintains office facilities on behalf of the Fund and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time
deems appropriate.
As compensation for the Manager's services, the Fund has agreed to pay
the Manager a monthly management fee at the annual rate of .50 of 1% of the
value of each Short Term Portfolio's average daily net assets, and .60 of 1%
of the value of each Longer Term Portfolio's average daily net assets. All
fees and expenses are accrued daily and deducted before the declaration of
dividends to shareholders. For the fiscal years ended August 31, 1995, 1996
and 1997, the management fees payable, reduction in fee and net fees paid by
the Fund were as follows:
<TABLE>
<CAPTION>
Portfolio Management Fee Payable Reduction In Fee Net Fees Paid by Portfolio
1995 1996 1997 1995 1996 1997 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market Portfolio $5,219,151 $4,972,635 $3,735,343 $4,674,468 $2,153,580 $1,155,582 $544,683 $2,819,055 $2,579,761
Intermediate Bond Portfolio $ 218,523 $ 267,142 $ 350,994 $ 218,523 $ 203,943 $ 328,180 $ 0 $ 63,199 $ 22,814
Bond Portfolio $ 181,126 $ 291,587 $ 496,223 $ 181,126 $ 252,220 $ 482,224 $ 0 $ 39,367 $ 13,999
New Jersey Portfolio - $ 197,262* $ 608,537 - $ 197,262* $ 324,583 - $ 0* $ 283,954
</TABLE>
____________________
* From December 1, 1995 (commencement of operations) through August 31,
1996.
As to each Portfolio, the Manager has agreed that if in any fiscal year
the aggregate expenses of such Portfolio, exclusive of taxes, brokerage,
interest on borrowings and (with the prior written consent of the necessary
state securities commissions) extraordinary expenses, but including the
management fee, exceed the expense limitation of any state having
jurisdiction over the Fund, the Fund may deduct from the payment to be made
to the Manager under the Agreement, or the Manager will bear, such excess
expense to the extent required by state law. Such deduction or payment, if
any, will be estimated daily, and reconciled and effected or paid, as the
case may be, on a monthly basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of a Portfolio's net assets increases.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in conjunction
with the section in each Portfolio's Prospectus entitled "Shareholder
Services Plan."
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant
to which the Fund, with respect to each Portfolio, reimburses Dreyfus
Service Corporation for certain allocated expenses of providing personal
services and/or maintaining shareholder accounts. The services provided may
include personal services relating to shareholder accounts, such as
answering shareholder inquiries and providing reports and other information,
and services related to the maintenance of shareholder accounts.
A quarterly report of the amounts expended under the Plan, with respect
to each Portfolio, and the purposes for which such expenditures were
incurred, must be made to the Fund's Board for their review. In addition,
the Plan provides that material amendments of the Plan must be approved by
the Fund's Board, and by the Board members who are not "interested persons"
(as defined in the 1940 Act) of the Fund and have no direct or indirect
financial interest in the operation of the Plan, by vote cast in person at a
meeting called for the purpose of considering such amendments. The Plan is
subject to annual approval by such vote of the Board members cast in person
at a meeting called for the purpose of voting on the Plan. The Plan is
terminable at any time with respect to each Portfolio by vote of a majority
of the Board members who are not "interested persons" and have no direct or
indirect financial interest in the operation of the Plan.
For the fiscal year ended August 31, 1997, $408,721 was chargeable to
the Money Market Portfolio, $27,376 was chargeable to the Intermediate Bond
Portfolio, $74,091 was chargeable to the Bond Portfolio and $74,759 was
chargeable to the New Jersey Portfolio under the Plan.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the section in each Portfolio's Prospectus entitled "How to Buy
Shares."
The Distributor. The Distributor serves as the Fund's distributor on a
best efforts basis pursuant to an agreement which is renewable annually. The
Distributor also acts as distributor for the other funds in the Dreyfus
Family of Funds and for certain other investment companies.
Using Federal Funds. The following information is applicable to the
Short Term Portfolios only. Dreyfus Transfer, Inc., the Fund's transfer and
dividend disbursing agent (the "Transfer Agent"), or the Fund may attempt to
notify the investor upon receipt of checks drawn on banks that are not
members of the Federal Reserve System as to the possible delay in conversion
into Federal Funds and may attempt to arrange for a better means of
transmitting the money. If the investor is a customer of a securities
dealer, bank or other financial institution and his order to purchase shares
of a Short Term Portfolio is paid for other than in Federal Funds, the
securities dealer, bank or other financial institution acting on behalf of
its customer, will complete the conversion into, or itself advance, Federal
Funds generally on the business day following receipt of the customer order.
The order is effective only when so converted and received by the Transfer
Agent. An order for the purchase of shares of a Short Term Portfolio placed
by an investor with sufficient Federal Funds or cash balance in his
brokerage account with a securities dealer, bank or other financial
institution will become effective on the day that the order, including
Federal Funds, is received by the Transfer Agent.
Transactions Through Securities Dealers. Portfolio shares may be
purchased and redeemed through securities dealers which may charge a
transaction fee for such services. Some dealers will place Portfolio shares
in an account with their firm. Dealers also may require that the customer
not take physical delivery of stock certificates; the customer not request
redemption checks to be issued in the customer's name; fractional shares not
be purchased; monthly income distributions be taken in cash; or other
conditions.
There is no sales charge by the Fund or the Distributor, although
securities dealers, banks and other institutions may make reasonable charges
to investors for their services. The services provided and the applicable
fees are established by each dealer or other institution acting
independently of the Fund. The Fund has been given to understand that these
fees may be charged for customer services, including, but not limited to,
same-day investment of client funds; same-day access to client funds; advice
to customers about the status of their accounts, yield currently being paid
or income earned to date; provision of periodic account statements showing
security and money market positions; other services available from the
dealer, bank or other institution; and assistance with inquiries related to
their investment. Any such fees will be deducted monthly from the
investor's account, which on smaller accounts could constitute a substantial
portion of distributions. Small, inactive, long-term accounts involving
monthly service charges may not be in the best interest of investors.
Investors should be aware that they may purchase Portfolio shares directly
from the Fund without imposition of any maintenance or service charges,
other than those already described herein.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 p.m., New York
time, on any business day that the Transfer Agent and the New York Stock
Exchange are open for business will be credited to the shareholder's Fund
account on the next bank business day following such purchase order.
Purchase orders made after 4:00 p.m., New York time, on any business day the
Transfer Agent and the New York Stock Exchange are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the New York
Stock Exchange is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use the Dreyfus TeleTransfer Privilege, the
initial payment for purchase of Portfolio shares must be drawn on, and
redemption proceeds paid to, the same bank and account as are designated on
the Account Application or Shareholder Services Form on file. If the
proceeds of a particular redemption are to be wired to an account at any
other bank, the request must be in writing and signature-guaranteed. See
"Redemption of Shares--Dreyfus TeleTransfer Privilege."
Reopening an Account. An investor may reopen an account with a minimum
investment of $10,000 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in each Portfolio's Prospectus entitled "How to Redeem
Shares."
Check Redemption Privilege. The Fund provides Redemption Checks
("Checks") automatically upon opening an account, unless the investor
specifically refuses the Privilege by checking the applicable "No" box on
the Account Application. Checks will be sent only to the registered
owner(s) of the account and only to the address of record. The Check
Redemption Privilege may be established for an existing account by a
separate signed Shareholder Services Form. The Account Application or
Shareholder Services Form must be manually signed by the registered
owner(s). Checks are drawn on an investor's Fund account and may be made
payable to the order of any person in an amount of $1,000 or more. When a
Check is presented to the Transfer Agent for payment, the Transfer Agent, as
the investor's agent, will cause the Fund to redeem a sufficient number of
shares in the investor's account to cover the amount of the Check and the
$2.00 charge. Dividends are earned until the Check clears. After
clearance, a copy of the Check will be returned to the investor. Investors
generally will be subject to the same rules and regulations that apply to
checking accounts, although election of this Privilege creates only a
shareholder-transfer agent relationship with the Transfer Agent.
If the amount of the Check, plus any applicable charges, is greater
than the value of the shares in an investor's account, the Check will be
returned marked insufficient funds. Checks should not be used to close an
account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions from any person representing himself or herself to be the
investor and reasonably believed by the Transfer Agent to be genuine. An
investor will be charged a $5.00 fee for each wire redemption, which will be
deducted from the investor's account and paid to the Transfer Agent.
Ordinarily, the Fund will initiate payment for shares of a Short Term
Portfolio redeemed pursuant to this Privilege on the same business day if
the Transfer Agent receives the redemption request in proper form prior to
Noon on such day; otherwise, and with respect to all Longer Term Portfolio
shares redeemed pursuant to this Privilege, the Fund will initiate payment
on the next business day. Redemption proceeds ($5,000 minimum) will be
transferred by Federal Reserve wire only to the commercial bank account
specified by the investor on the Account Application or Shareholder Services
Form, or to a correspondent bank if the investor's bank is not a member of
the Federal Reserve System. Fees ordinarily are imposed by such bank and
usually are borne by the investor. Immediate notification by the
correspondent bank to the investor's bank is necessary to avoid a delay in
crediting the funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at
1-800-654-7171, toll free. Investors should advise the operator that the
above transmittal code must be used and should also inform the operator of
the Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have also selected the Dreyfus TeleTransfer Privilege, any request for a
wire redemption will be effected as a Dreyfus TeleTransfer transaction
through the Automated Clearing House ("ACH") system unless more prompt
transmittal specifically is requested. Redemption proceeds will be on
deposit in the investor's account at an ACH member bank ordinarily two
business days after receipt of the redemption request. Investors will be
charged a $5.00 fee for each redemption made pursuant to this Privilege,
which will be deducted from the investor's account and paid to the Transfer
Agent. See "Purchase of Shares--Dreyfus TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each holder of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP"), and the Stock Exchanges Medallion Program.
Guarantees must be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record of a Portfolio, limited
in amount during any 90-day period to the lesser of $250,000 or 1% of the
value of such Portfolio's net assets at the beginning of such period. Such
commitment is irrevocable without the prior approval of the Securities and
Exchange Commission. In the case of requests for redemption in excess of
such amount, the Fund's Board reserves the right to make payments in whole
or in part in securities or other assets in case of an emergency or any time
a cash distribution would impair the liquidity of the Portfolio to the
detriment of the existing shareholders. In such event, the securities would
be valued in the same manner as the portfolio of the Portfolio is valued.
If the recipient sold such securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b)
when trading in the markets the Fund ordinarily utilizes is restricted, or
when an emergency exists as determined by the Securities and Exchange
Commission so that disposal of the Fund's investments or determination of
its net asset value is not reasonably practicable, or (c) for such other
periods as the Securities and Exchange Commission by order may permit to
protect the Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in each Portfolio's Prospectus entitled "Shareholder
Services."
Fund Exchanges. Shares of other Portfolios of the Fund or other funds
purchased by exchange will be purchased on the basis of relative net asset
value per share as follows:
A. Exchanges for shares of funds that are offered without a sales load
will be made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged for
shares of other funds sold with a sales load, and the applicable sales
load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged without a
sales load for shares of other funds sold without a sales load.
D. Shares of funds purchased with a sales load, shares of funds acquired
by a previous exchange from shares purchased with a sales load and
additional shares acquired through reinvestment of dividends or
distributions of any such funds (collectively referred to herein as
"Purchased Shares") may be exchanged for shares of other funds sold
with a sales load (referred to herein as "Offered Shares"), provided
that, if the sales load applicable to the Offered Shares exceeds the
maximum sales load that could have been imposed in connection with the
Purchased Shares (at the time the Purchased Shares were acquired),
without giving effect to any reduced loads, the difference will be
deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
To request an exchange, an investor must give exchange instructions to
the Transfer Agent in writing or by telephone. The ability to issue
exchange instructions by telephone is given to all Fund shareholders
automatically, unless the investor checks the applicable "No" box on the
Account Application, indicating that the investor specifically refuses this
Privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions (including
over The Dreyfus Touchr automated telephone system) from any person
representing himself or herself to be the investor, and reasonably believed
by the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange. Investors will be charged a $5.00 fee for each exchange made out
of the Fund, which will be deducted from the investor's account and paid to
the Transfer Agent. Exchanges out of the Fund pursuant to the Exchange
Privilege are limited on a per Portfolio basis to four per calendar year.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. The minimum
initial investment is $750 for Dreyfus-sponsored Keogh Plans, IRAs including
regular IRAs, spousal IRAs for a non-working spouse, Roth IRAs, IRAs set up
under a Simplified Employee Pension Plan ("SEP-IRAs"), and rollover IRAs and
403(b)(7) Plans with only one participant, and $500 for Dreyfus Sponsored
Education IRAs. To exchange shares held in corporate plans, 403(b)(7) Plans
and SEP-IRAs with more than one participant, the minimum initial investment
is $100 if the plan has at least $2,500 invested among the funds in the
Dreyfus Family of Funds. To exchange shares held in personal retirement
plans, the shares exchanged must have a current value of at least $100.
The Fund Exchanges service is available to shareholders resident in any
state in which shares of the fund being acquired may legally be sold.
Shares may be exchanged only between accounts having identical names and
other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchanges service may be
modified or terminated at any time upon notice to shareholders.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from the New Jersey Portfolio in shares of another
fund in the Dreyfus Family of Funds of which the investor is a shareholder.
Shares of other funds purchased pursuant to this privilege will be purchased
on the basis of relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested without
imposition of a sales load in shares of other funds that are offered
without a sales load.
B. Dividends and distributions paid by a fund which does not charge a
sales load may be invested in shares of other funds sold with a sales
load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales load
may be invested in shares of other funds sold with a sales load
(referred to herein as "Offered Shares"), provided that, if the sales
load applicable to the Offered Shares exceeds the maximum sales load
charged by the fund from which dividends or distributions are being
swept, without giving effect to any reduced loads, the difference will
be deducted.
D. Dividends and distributions paid by a fund may be invested in shares
of other funds that impose a contingent deferred sales charge ("CDSC")
and the applicable CDSC, if any, will be imposed upon redemption of
such shares.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in each Portfolio's Prospectus entitled "How to Buy
Shares."
Amortized Cost Pricing. The information contained in this section is
applicable only to each Short Term Portfolio. The valuation of each Short
Term Portfolio's portfolio securities is based upon their amortized cost
which does not take into account unrealized capital gains or losses. This
involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless of
the impact of fluctuating interest rates on the market value of the
instrument. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Portfolio would receive if it sold the
instrument.
The Fund's Board has established, as a particular responsibility within
the overall duty of care owed to the Short Term Portfolios' investors,
procedures reasonably designed to stabilize each Portfolio's price per share
as computed for purposes of purchases and redemptions at $1.00. Such
procedures include review of each Short Term Portfolio's portfolio holdings
by the Fund's Board at such intervals as it deems appropriate, to determine
whether such Portfolio's net asset value calculated by using available
market quotations or market equivalents deviates from $1.00 per share based
on amortized cost. Market quotations and market equivalents used in such
review are obtained from an independent pricing service (the "Service")
approved by the Fund's Board. The Service values each Short Term
Portfolio's investments based on methods which include consideration of:
yields or prices of municipal bonds of comparable quality, coupon, maturity
and type; indications of values from dealers; and general market conditions.
The Service also may employ electronic data processing techniques and/or a
matrix system to determine valuations.
The extent of any deviation between a Short Term Portfolio's net asset
value based upon available market quotations or market equivalents and $1.00
per share based on amortized cost will be examined by the Fund's Board. If
such deviation exceeds 1/2 of 1%, the Fund's Board will consider what
actions, if any, will be initiated. In the event the Fund's Board
determines that a deviation exists which may result in material dilution or
other unfair results to investors or existing shareholders, it has agreed to
take such corrective action as it regards as necessary and appropriate,
including: selling portfolio instruments prior to maturity to realize
capital gains or losses or to shorten average portfolio maturity;
withholding dividends or paying distributions from capital or capital gains;
redeeming shares in kind; or establishing a net asset value per share by
using available market quotations or market equivalents.
Valuation of Portfolio Securities. The information contained in this
section is applicable to each Longer Term Portfolio only. The investments
of each Longer Term Portfolio are valued each business day by an independent
pricing service (the "Service") approved by the Fund's Board of Directors.
When, in the judgment of the Service, quoted bid prices for investments are
readily available and are representative of the bid side of the market,
these investments are valued at the mean between the quoted bid prices (as
obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the
Service, based on methods which include consideration of: yields or prices
of municipal bonds of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. The
Service may employ electronic data processing techniques and/or a matrix
system to determine valuations. The Service's procedures are reviewed by
the Portfolio's officers under the general supervision of the Fund's Board.
Expenses and fees, including the management fee (reduced by the expense
limitation, if any), are accrued daily and are taken into account for the
purpose of determining the net asset value of Portfolio shares.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in each Portfolio's Prospectus entitled "Dividends,
Distributions and Taxes."
In the case of a Short Term Portfolio's shares redeemed in connection
with any exchange or redemption fees, a shareholder will recognize a capital
loss in the amount of the fee paid. In the case of Longer Term Portfolio's
shares redeemed in connection with any exchange or redemption fees, such
fees will either decrease a capital gain or increase a capital loss realized
in such disposition. In general, such loss will be treated as a short-term
capital loss if the shares were held for one year or less, or, in the case
of shares held for greater than one year, a long-term capital loss.
The Internal Revenue Code of 1986, as amended (the "Code"), provides
that if a shareholder has not held his Fund shares for more than six months
(or such shorter time as the Internal Revenue Service may prescribe by
regulation) and has received an exempt-interest dividend with respect to
such shares, any loss incurred on the sale of such shares will be disallowed
to the extent of the exempt-interest dividend received.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or a portion of any gains
realized from the sale or other disposition of certain market discount bonds
will be treated as ordinary income under Section 1276 of the Code. In
addition, all or a portion of the gain realized from engaging in "conversion
transactions" may be treated as ordinary income under Section 1258 of the
Code. "Conversion transactions" are defined to include certain forward,
futures, option and "straddle" transactions, transactions marketed or sold
to produce capital gains, or transactions described in Treasury regulations
to be issued in the future.
Under Section 1256 of the Code, gain or loss realized by the Longer
Term Portfolio from certain financial futures and options transactions will
be treated as 60% long-term capital gain or loss and 40% short-term capital
gain or loss. Gain or loss will arise upon exercise or lapse of such
futures and options as well as from closing transactions. In addition, such
futures and options remaining unexercised at the end of a Longer Term
Portfolio's taxable year will be treated as sold for their fair market
value, resulting in additional gain or loss to a Longer Term Portfolio
characterized in the manner described above.
Offsetting positions held by a Longer Term Portfolio involving certain
futures and options transactions may be considered, for tax purposes, to
constitute "straddles." "Straddles" are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of
"straddles" is governed by Sections 1092 and 1258 of the Code, which, in
certain circumstances, overrides or modify the provisions of Section 1256.
As such, all or a portion of any short or long-term capital gain from
certain "straddle" transactions may be recharacterized to ordinary income.
If a Longer Term Portfolio were treated as entering into "straddles" by
reason of its engaging in certain futures or options transactions, such
"straddles" would be characterized as "mixed straddles" if the futures or
options transactions comprising a part of such "straddles" were governed by
Section 1256 of the Code. The Portfolio may make one or more elections with
respect to "mixed straddles." Depending on which election is made, if any,
the results to the Portfolio may differ. If no election is made, to the
extent the "straddle" rules apply to positions established by the Portfolio,
losses realized by the Portfolio will be deferred to the extent of
unrealized gain in any offsetting positions. Moreover, as a result of the
"straddle" and "conversion transaction" rules, short-term capital losses on
"straddle" positions may be recharacterized as long-term capital losses and
long-term capital gains may be recharacterized to short-term capital gains
or ordinary income.
The Taxpayer Relief Act of 1997 included constructive sale provisions
that generally will apply if the Fund either (1) holds an appreciated
financial position with respect to stock, certain debt obligations, or
partnership interests ("appreciated financial position") and then enters
into a short sale, futures, forward, or offsetting notional principal
contract (collectively, a "Contract") respecting the same or substantially
identical property or (2) holds an appreciated financial position that is a
Contract and then acquires property that is the same as, or substantially
identical to, the underlying property. In each instance, with certain
exceptions, the Fund generally will be taxed as if the appreciated financial
position were sold at fair market value on the date the Fund enters into the
financial position or acquires the property, respectively. Transactions
that are identified hedging or straddle transactions under other provisions
of the Code can be subject to the constructive sale provisions.
Investment by the Longer Term Portfolio in securities issued at a
discount or providing for deferred interest or for payment of interest in
the form of additional obligations could, under special tax rules, affect
the amount, timing and character of distributions to shareholders. For
example, a Longer Term Portfolio could be required to take into account
annually a portion of the discount (or deemed discount) at which such
securities were issued and to distribute such portion in order to maintain
its qualifications as a regulated investment company. In that case, the
Portfolio may have to dispose of securities which it might otherwise have
continued to hold in order to generate cash to satisfy these distribution
requirements.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly-issued securities ordinarily are
purchased directly from the issuer or from an underwriter; other purchases
and sales usually are placed with those dealers from which it appears that
the best price or execution will be obtained. Usually no brokerage
commissions, as such, are paid by a Portfolio for such purchases and sales,
although the price paid usually includes an undisclosed compensation to the
dealer acting as agent. The prices paid to underwriters of newly-issued
securities usually include a concession paid by the issuer to the underwriter,
and purchases of after-market securities from dealers ordinarily are executed at
a price between the bid and asked price. No brokerage commissions have been
paid by any Portfolio to date.
Transactions are allocated to various dealers by a Portfolio's
portfolio managers in their best judgment. The primary consideration is
prompt and effective execution of orders at the most favorable price.
Subject to that primary consideration, dealers may be selected for research,
statistical or other services to enable the Manager to supplement its own
research and analysis with the views and information of other securities
firms.
Research services furnished by brokers through which a Portfolio
effects securities transactions may be used by the Manager in advising other
funds it advises and, conversely, research services furnished to the Manager
by brokers in connection with other funds the Manager advises may be used by
the Manager in advising a Portfolio. Although it is not possible to place a
dollar value on these services, it is the opinion of the Manager that the
receipt and study of such services should not reduce the overall expenses of
its research department.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the New Jersey Portfolio's Prospectus entitled "Yield
Information" or in each other Portfolio's Prospectus entitled "Performance
Information."
Money Market Portfolio. For the seven-day period ended August 31,
1997, the Money Market Portfolio's yield was 3.17% and effective yield was
3.22%. See "Management of the Fund" in the Portfolio's Prospectus. During
this period, the Manager was waiving receipt of a portion of the management
fee payable, and/or absorbing certain expenses of the Portfolio, without
which the Portfolio's 7-day yield and effective yield as of August 31, 1997,
would have been 3.01% and 3.05%.
Based upon the highest 1997 Federal income tax rate of 39.6%, the Money
Market Portfolio's tax equivalent yield for the seven-day period ended
August 31, 1997 was 5.25%. Without the expense reimbursement in effect, the
7-day tax-equivalent yield would have been 4.98%.
New Jersey Portfolio. For the seven-day period ended August 31, 1997,
the New Jersey Portfolio's yield was 2.88% and effective yield was 2.92%.
See "Management of the Fund" in the Portfolio's Prospectus.
Based upon the highest combined 1997 Federal and New Jersey income tax
rate of 43.45%, the New Jersey Portfolio's tax equivalent yield for the
seven-day period ended August 31, 1997 was 5.09%.
Longer Term Portfolios. The Intermediate Bond Portfolio's yield for
the 30-day period ended August 31, 1997 was 4.59%. The Bond Portfolio's
yield for the 30-day period ended August 31, 1997 was 5.03%. See
"Management of the Fund" in the Portfolios' Prospectus.
Based upon the highest 1997 Federal income tax rate of 39.6%, the
Intermediate Bond Portfolio's and Bond Portfolio's tax equivalent yield for
the 30-day period ended August 31, 1997 was 7.60% and 8.33%, respectively.
For the one-year period ended August 31, 1997 the average annual total
return of the Intermediate Bond Portfolio was 8.95%, respectively. For the one-
year period ended August 31, 1997, and for the average annual total
return of the Bond Portfolio was 11.03%. During the period, the Manager
waived receipt of the management fee and/or absorbed certain Portfolio
expenses, without which returns would have been lower.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result.
For the fiscal year ended August 31, 1997, the total return of the
Intermediate Bond Fund was 26.38% respectively. For the fiscal year ended
August 31, 1997, the total return for the Bond Portfolio was 32.94%,
respectively. During the period, the Manager waived receipt of the
management fee and/or absorbed certain Portfolio expenses, without which
returns would have been lower.
Total return is calculated by subtracting the amount of the Portfolio's
net asset value per share at the beginning of a stated period from the net
asset value per share at the end of the period (after giving effect to the
reinvestment of dividends and distributions during the period), and dividing
the result by the net asset value per share at the beginning of the period.
Computation of Yield. Current yield for a Short Term Portfolio is
computed in accordance with a standardized method which involves determining
the net change in the value of a hypothetical pre-existing Fund account
having a balance of one share at the beginning of a seven calendar day
period for which yield is to be quoted, dividing the net change by the value
of the account at the beginning of the period to obtain the base period
return, and annualizing the results (i.e., multiplying the base period
return by 365/7). The net change in the value of the account reflects the
value of additional shares purchased with dividends declared on the original
share and any such additional shares and fees that may be charged to
shareholder accounts, in proportion to the length of the base period and the
Portfolio's average account size, but does not include realized gains and
losses or unrealized appreciation and depreciation. Effective yield is
computed by adding 1 to the base period return (calculated as described
above), raising that sum to a power equal to 365 divided by 7, and
subtracting 1 from the result. Current yield for a Longer Term Portfolio is
computed pursuant to a formula which operates as follows: the amount of the
Portfolio's expenses accrued for a 30-day period (net of reimbursements) is
subtracted from the amount of the dividends and interest earned (computed in
accordance with regulatory requirements) by it during the period. That
result is then divided by the product of: (a) the average daily number of
shares outstanding during the period that were entitled to receive dividends
and distributions, and (b) the net asset value per share on the last day of
the period less any undistributed earned income per share reasonably
expected to be declared as a dividend shortly thereafter. The quotient is
then added to 1, and that sum is raised to the 6th power, after which 1 is
subtracted. The current yield is then arrived at by multiplying the result
by 2.
All Portfolios. Tax equivalent yield is computed by dividing that
portion of the yield or effective yield (calculated as described above)
which is tax exempt by 1 minus a stated tax rate and adding the quotient to
that portion, if any, of the yield of the Portfolio that is not tax exempt.
The tax equivalent yield noted above represents the application of the
highest Federal marginal personal income tax rate presently in effect. The
tax equivalent figure, however, does not include the potential effect of any
state (except with respect to the New Jersey Portfolio) or local (including,
but not limited to, county, district or city) taxes, including applicable
surcharges. In addition, there may be pending legislation which could
affect such stated tax rate or yields. Each investor should consult its tax
adviser, and consider its own factual circumstances and applicable tax laws,
in order to ascertain the relevant tax equivalent yield.
Yields will fluctuate and are not necessarily representative of future
results. Each investor should remember that yield is a function of the type
and quality of the instruments in the portfolio, portfolio maturity and
operating expenses. An investor's principal in a Portfolio is not
guaranteed. See "Determination of Net Asset Value" for a discussion of the
manner in which a Portfolio's price per share is determined.
From time to time, a Portfolio may use hypothetical tax equivalent
yields or charts in its advertising. These hypothetical yields or charts
will be used for illustrative purposes only and are not indicative of the
Portfolio's past or future performance.
From time to time, advertising materials for a Portfolio also may refer
to or discuss then current or past economic conditions, developments, and/or
events, to actual or proposed legislation or to statistical or other
information concerning trends relating to investment companies, as compiled
by industry associations such as the Investment Company Institute. From
time to time, advertising materials for a Portfolio may refer to
Morningstar, Inc. ratings and related analysis supporting the ratings. In
addition, advertising materials for a Portfolio may, from time to time
include biographical information relating to its portfolio managers and may
refer to, or include commentary by a portfolio manager relating to
investment strategy, asset growth, current or past business, political,
economic or financial conditions and other matters of general interest to
investors.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in each Portfolio's Prospectus entitled "General
Information."
Each Portfolio share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Portfolio shares are of one class and have equal rights as to dividends and
in liquidation. Shares have no preemptive, subscription or conversion
rights and are freely transferable.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an
investment company, such as the Fund, will not be deemed to have been
effectively acted upon unless approved by the holders of a majority of the
outstanding shares of each Portfolio affected by such matter. Rule 18f-2
further provides that a Portfolio shall be deemed to have been effectively
acted upon unless approved by the holders of a majority of the outstanding
shares of each Portfolio affected by such matter. Rule 18f-2 further
provides that a Portfolio shall be deemed to be affected by a matter unless
it clear that the interests of each Portfolio in the matter are identical or
that the matter does not affect any interest of such Portfolio. However,
the Rule exempts the selection of independent accountants and the election
of Board members from the separate voting requirements of the Rule.
The Fund sends annual and semi-annual financial statements to
shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN, COUNSEL,
AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Fund,
the Transfer Agent arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, the Transfer Agent receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Fund during the month, and is reimbursed for certain out-of-
pocket expenses. For the fiscal years ended, August 31, 1997, the Fund
paid the Transfer Agent, with respect to the Money Market Portfolio,
Intermediate Bond Portfolio, Bond Portfolio and New Jersey Portfolio
$85,361, $9,133, $12,523 and $7,254, respectively.
The Bank of New York, 90 Washington Street, New York, New York 10286,
is the Fund's custodian.
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York 10038-
4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares being sold pursuant to the Fund's Prospectuses.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as auditors of the Fund.
FINANCIAL STATEMENTS AND REPORTS OF INDEPENDENT AUDITORS
Each Portfolio's Annual Report to Shareholders for the fiscal year
ended August 31, 1997 is a separate document supplied with this Statement of
Additional Information, and the financial statements, accompanying notes,
and report of independent auditors appearing therein are incorporated by
reference in this Statement of Additional Information.
APPENDIX A
This Appendix A relates to the New Jersey Portfolio only.
RISK FACTORS -- INVESTING IN NEW JERSEY MUNICIPAL OBLIGATIONS.
New Jersey's economic base is diversified, consisting of a variety of
manufacturing, construction and service industries, supplemented by rural
areas with selective commercial agriculture. New Jersey's principal
manufacturing industries produce chemicals and pharmaceuticals, electrical
equipment and instruments, printing machinery and food products. Other
economic activities include services, wholesale and retail trade, insurance,
tourism, petroleum refining and truck farming.
While New Jersey's economy continued to expand during the late 1980s,
the level of growth slowed considerably after 1987. By the beginning of the
national recession in July 1990 (according to the National Bureau of
Economic Research), construction activity had already been declining in New
Jersey for nearly two years, growth had tapered off markedly in the service
sectors and the long-term downward trend of factory employment had
accelerated, partly because of a leveling off of industrial demand
nationally. The onset of recession caused an acceleration of New Jersey's
job losses in construction and manufacturing, as well as an employment
downturn in such previously growing sectors as wholesale trade, retail
trade, finance, utilities and trucking and warehousing. The net effect was
a decline in the State's total nonfarm wage and salary employment from a
peak of 3,689,800 in 1989 to a low of 1,457,900 in 1992. This loss has been
followed by an employment gain of 255,600 from May 1992 to June 1997, a
recovery of 97.5% of the jobs lost during the recession. In July 1991, S&P
lowered the State's general obligation bond rating from AAA to AA+.
Reflecting the downturn, the rate of unemployment in the State rose
from a low of 3.6% during the first quarter of 1989 to a recessionary peak
of 8.5% during 1992. Since then, the unemployment rate fell to 6.2% in 1996
and 5.5% during the first six months of 1997.
The revised estimate as shown in the Governor's Fiscal Year 1998 Budget
forecasts Sales and Use Tax collections for Fiscal Year 1997 as $4.385
billion, a 1.5% increase from Fiscal Year 1996 revenue. The Fiscal Year
1998 estimate of $4.550 billion, is a 3.8% increase from the Fiscal Year
1997 estimate.
The revised estimate as shown in the Governor's Fiscal Year 1998 Budget
forecasts Gross Income Tax collections for Fiscal Year 1997 of $4.855
billion, a 2.6% increase from Fiscal Year 1996 revenue. The estimate for
Fiscal Year 1998 is $1.036 billion, a 3.7% increase from the Fiscal Year
1997 estimate. Included in the Fiscal Year 1998 forecast is the enactment
of a property tax deduction, to be phased in over a three-year period,
permitting a deduction by resident taxpayers against gross income tax of a
percentage of their property taxes.
The revised estimate as shown in the Governor's Fiscal Year 1998 Budget
forecasts Corporation Business Tax collections for Fiscal Year 1997 of
$1.303 billion, and 11.2% increase from Fiscal Year 1996 revenue. The
Fiscal Year 1998 forecast as shown in the Governor's Fiscal 1998 Budget of
$1.282 billion, represents a 1.6% decrease from the Fiscal Year 1997
estimate.
The revised estimate as shown in the Governor's Fiscal Year 1998 Budget
forecasts Other Miscellaneous Taxes, Fees and Revenues collections for
Fiscal Year 1997 as $1.395 billion, a decrease from Fiscal Year 1996
revenue.
Should revenues be less than the amount anticipated in the budget for a
fiscal year, the Governor may, pursuant to statutory authority, prevent any
expenditure under any appropriation. There are additional means by which
the Governor may ensure that the State is operated efficiently and does not
incur a deficit. No supplemental appropriation may be enacted after
adoption of an appropriations act except where there are sufficient revenues
on hand or anticipated, as certified by the Governor, to meet such
appropriation. In the past when actual revenues have been less than the
amount anticipated in the budget, the Governor has exercised her plenary
powers leading to, among other actions, implementation of a hiring freeze
for all State departments and the discontinuation of programs for which
appropriations were budgeted but not yet spent.
The State appropriated approximately $16.282 billion and $16.787
billion for Fiscal Years 1997 and 1998, respectively. Of the $16.787
billion appropriated in Fiscal Year 1998 from the General Fund, the Property
Tax Relief Fund, the Casino Control Fund, the Casino Revenue Fund and
Gubernatorial Elections Fund, $6.829 billion (40.7%) is appropriated for
State aid to local governments, $3.850 billion (22.9%) is appropriated for
grants-in-aid (payments to individuals or public or private agencies for
benefits to which a recipient is entitled by law or for the provision of
service on behalf of the State), $5.108 billion (30.4%) for Direct State
services, $83.7 million (2.9%) for debt service on State general obligation
bonds and $516.0 million (3.1%) for capital construction.
Should tax revenues be less than the amount anticipated in the Budget
for a fiscal year, the Governor may, pursuant to statutory authority,
prevent any expenditure under any appropriation. The appropriations for
Fiscal Year 1997 and for Fiscal year 1998 reflect the amounts contained in
the Governor's Fiscal Year 1998 Budget.
The State has made appropriations for principal and interest payments
for general obligation bonds for fiscal years 1994 through 1997 in the
amounts of $119.9 million, $103.6 million, $466.3 million and $446.9
million, respectively. The Governor's Fiscal Year 1998 Budget for Fiscal
Year 1998 includes an appropriation in the amount of $483.7 million for
principal and interest payments for general obligations bonds.
APPENDIX B
Description of certain S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable, and will include:
(1) likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A
Principal and interest payments on bonds in this category are regarded
as safe. This rating describes the third strongest capacity for payment of
debt service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local
economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse
circumstances, any one such weakness might impair the ability of the issuer
to meet debt obligations at some future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several
of the above factors could contribute to a lesser capacity for payment of
debt service. The difference between A and BBB rating is that the latter
shows more than one fundamental weakness, or one very substantial
fundamental weakness, whereas the former shows only one deficiency among the
factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations with the revenue flow possibly
being subject to erosion over time. Basic security provisions are no more
than adequate. Management performance could be stronger.
BB, B, CCC, CC
Debt rated BB, B, CCC or CC is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and
repay principal. BB indicates the lowest degree of speculation and CC the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payment.
B
Debt rated B has a greater vulnerability to default but presently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default, and
is dependent upon favorable business, financial and economic conditions to
meet timely payments of principal. In the event of adverse business,
financial or economic conditions, it is not likely to have the capacity to
pay interest and repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C
The rating C typically is applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus or minus
sign designation, which is used to show relative standing within the major
rating categories, except in the AAA (Prime Grade) category.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given a plus (+) sign designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to
pay principal and interest.
Commercial Paper Ratings
The rating A is the highest rating and is assigned by S&P to issues
that are regarded as having the greatest capacity for timely payment.
Issues in this category are delineated with the numbers 1, 2 and 3 to
indicate the relative degree of safety. Paper rated A-1 indicates that the
degree of safety regarding timely payment is either overwhelming or very
strong. Those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign designation.
Moody's
Municipal Bond Ratings
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what generally are
known as high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa
Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate, and therefore not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca
Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Generally, Moody's provides either a generic rating or a rating with a
numerical modifier of 1 for bonds in each of the generic rating categories
Aa, A, Baa, Ba and B. Moody's also provides numerical modifiers of 2 and 3
in each of these categories for bond issues in the health care, higher
education and other not-for-profit sectors; the modifier 1 indicates that
the issue ranks in the higher end of its generic rating category; the
modifier 2 indicates that the issue is in the mid-range of the generic
category; and the modifier 3 indicates that the issue is in the low end of
the generic category.
Municipal Note Ratings
Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade (MIG). Such ratings recognize
the difference between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower and short-term cyclical elements are
critical in short-term ratings, while other factors of major importance in
bond risk, long-term secular trends for example, may be less important over
the short run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG or, if the demand feature
is not rated, as NR. Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such characteristics
as payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to
the fact that the source of payment may be limited to the external liquidity
with no or limited legal recourse to the issuer in the event the demand is
not met.
Moody's short-term ratings are designated Moody's Investment Grade as
MIG 1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's
assigns a MIG or VMIG rating, all categories define an investment grade
situation.
MIG 1/VMIG 1
This description denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation and well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to
meet the obligations of a specific debt issue or class of debt. The ratings
take into consideration special features of the issue, its relationship to
other obligations of the issuer, the current financial condition and
operative performance of the issuer and of any guarantor, as well as the
political and economic environment that might affect the issuer's future
financial strength and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because
bonds rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated F-1+.
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have an adverse
impact on these bonds and, therefore, impair timely payment. The likelihood
that the ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to
pay interest and repay principal may be affected over time by adverse
economic changes. However, business and financial alternatives can be
identified which could assist the obligor in satisfying its debt service
requirements.
B
Bonds rated B are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the probability of
continued timely payment of principal and interest reflects the obligor's
limited margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if
not remedied, may lead to default. The ability to meet obligations requires
an advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or
principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or imminent default of interest
and/or principal payments. Such bonds are extremely speculative and should
be valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest potential for
recovery on these bonds and D represents lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate
the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category covering 12-36 months
or the DDD, DD or D categories.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
3 Although the credit analysis is similar to Fitch's bond rating
analysis, the short-term rating places greater emphasis than bond ratings on
the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-
1+.
F-2
Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as
great as the F-1+ and
F-1 categories.
DREYFUS BASIC MUNICIPAL FUND, INC.
PART C. OTHER INFORMATION
______________________________
Item 24. Financial Statements and Exhibits. - List
_______ _________________________________________
(a) Financial Statements:
Included in Part A of the Registration Statement:
Financial Highlights--with respect to the Money Market
Portfolio for the period December 16, 1991 (commencement
of operations) to August 31, 1992 and for each of the
five years in the period ended August 31, 1997; with
respect to the Intermediate Bond Portfolio and Bond
Portfolio for the periods May 5 and 6, 1994
(commencement of operations) to August 31, 1994, and for
each of the three years in the period ended August 31,
1997, respectively; and with respect to the New Jersey
Portfolio for the period December 1, 1995 (commencement
of operations) to August 31, 1996 and for the year ended
August 31, 1997.
Included (by reference) in Part B of the Registration
Statement:
For each individual annual report for the Money Market
Portfolio, Intermediate Bond Portfolio and Bond
Portfolio and New Jersey Portfolio.
Statement of Investments--as of August 31, 1997*.
Statement of Assets and Liabilities--as of August 31,
1997*.
Statement of Operations for the year ended August 31,
1997*.
Statement of Changes in Net Assets--for each of the
years ended August 31, 1996 and August 31, 1997*.
Financial Highlights--with respect to the Money Market
Portfolio for the period December 16, 1991 (commencement
of operations) to August 31, 1992 and for each of the
five years in the period ended August 31, 1997; with
respect to the Intermediate Bond Portfolio and Bond
Portfolio for the periods May 5 and 6, 1994
(commencement of operations) to August 31, 1994, and for
each of the three years in the period ended August 31,
1997, respectively; and with respect to the New Jersey
Portfolio for the period December 1, 1995 (commencement
of operations) to August 31, 1996 and for the year ended
August 31, 1997.*
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
Notes to Financial Statements*
Report of Ernst & Young LLP, Independent Auditors, dated
October 3, 1997*. _______________________
* The Annual Report for each Portfolio is incorporated by reference to
the Fund's Statement of Additional Information
Schedules No. I through VII and other financial statement information, for
which provision is made in the applicable accounting regulations of the
Securities and Exchange Commission are either omitted because they are not
required under the related instructions, they are inapplicable, or the
required information is presented in the financial statements or notes which
are included in Part B of the Registration Statement.
(b) Exhibits:
(1) Articles of Incorporation dated August 8, 1991 and Articles of
Amendment are incorporated by reference to Exhibit (1) of Post-
Effective Amendment No. 10 to the Registration Statement, filed on
April 1, 1996.
(2) By-Laws dated August 8, 1991, as amended January 8, 1992 are
incorporated by reference to Exhibit (2) of Post-Effective
Amendment No. 11 to the Registration Statement, filed on April 29,
1996.
(5) Management Agreement dated August 24, 1994, as amended October 11,
1995 is incorporated by reference to Exhibit (5) of Post-Effective
Amendment No. 9 to the Registration Statement, filed on December
29, 1995.
(6) Distribution Agreement dated August 24, 1994, as amended October
11, 1995 is incorporated by reference to Exhibit (6) of Post-
Effective Amendment No. 9 to the Registration Statement, filed on
December 29, 1995.
(8)(a) Custody Agreement is incorporated by reference to Exhibit (8)(a)
of Post-Effective Amendment No. 10 to the Registration Statement,
filed on April 1, 1996.
(8)(b) Forms of Sub-Custodian Agreements are incorporated by reference to
Exhibit 8(b) of Post-Effective Amendment No. 3 to the Registration
Statement, filed on December 15, 1993.
(9) Shareholder Services Plan dated August 24, 1994, as amended
October 11, 1995 is incorporated by reference to Exhibit (9) of
Post-Effective Amendment No. 9 to the Registration Statement,
filed on December 29, 1995.
Item 24. Financial Statements and Exhibits. - List (continued)
_______ _____________________________________________________
(10) Opinion and Consent of Stroock & Stroock & Lavan LLP is
incorporated by reference to Exhibit (10) of Post-Effective
Amendment No. 10 to the Registration Statement, filed on April 1,
1996.
(11) Consent of Ernst & Young LLP.
(16) Schedule of Computation of Performance Data as to the Money Market
Portfolio is incorporated by reference to Exhibit (16) of Post-
Effective Amendment No. 3 to the Registration Statement, filed on
December 15, 1993.
Schedules of Computation of Performance Data as to the Longer Term
Portfolios are incorporated by reference to Exhibit (16) of Post-
Effective Amendment No. 7 to the Registration Statement, filed on
December 16, 1994.
Schedule of Computation of Performance Data as to the New Jersey
Portfolio is incorporated by reference to Exhibit (16) of Post-
Effective Amendment No. 10 to the Registration Statement, filed on
April 1, 1996.
(17) Financial Data Schedule.
Other Exhibits
______________
(a) Power of Attorney for Joseph S. DiMartino is
incorporated by reference to the Other Exhibits section
of Post-Effective Amendment No. 8 to the Registration
Statement, filed on September 15, 1995. Powers of
Attorney for David W. Burke, Samuel Chase, Joni Evans,
Arnold S. Hiatt, David J. Mahoney and Burton N. Wallack,
Directors; and for Marie E. Connolly, President and
Treasurer of the Fund are incorporated by reference to
the Other Exhibits section of Post-Effective Amendment
No. 7 to the Registration Statement, filed on December
16, 1994.
(b) Certificate of Assistant Secretary is incorporated by
reference to the Other Exhibits section of Post-
Effective Amendment No. 7 to the Registration Statement,
filed on December 16, 1994.
Item 25. Persons Controlled by or under Common Control with Registrant.
_______ ______________________________________________________________
Not Applicable
Item 26. Number of Holders of Securities.
_______ ________________________________
(1) (2)
Number of Record
Title of Class Holders as of December 15, 1997
______________ _______________________________
Common Stock Money Market Portfolio - 4487
(Par value $.001) Intermediate Bond Portfolio - 715
Bond Portfolio - 1351
New Jersey Portfolio - 633
Item 27. Indemnification
_______ _______________
Reference is made to Article Seventh of the Registrant's Amended
Articles of Incorporation, dated August 7, 1991, as amended on
October 19, 1994, filed as Exhibit (1) of Post-Effective Amendment
No. 10 to the Registration Statement on Form N-1A on April 1, 1996
and the laws of the State of Maryland. The application of these
provisions is limited by Article VIII of the Registrant's By-Laws
filed as Exhibit (2) of Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A on April 29, 1996 and by the
following undertaking set forth in the rules promulgated by the
Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted Board members, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
such Act and will be governed by the final adjudication of such
issue.
Reference is also made to the Distribution Agreement incorporated by
reference to Exhibit (6) of Post-Effective Amendment No. 9 to
the Registration Statement on Form N-1A, filed on November 29,
1995.
Item 28. Business and Other Connections of Investment Adviser.
_______ ____________________________________________________
The Dreyfus Corporation ("Dreyfus") and subsidiary
companies comprise a financial service organization whose
business consists primarily of providing investment management
services as the investment adviser and manager for sponsored
investment companies registered under the Investment Company Act
of 1940 and as an investment adviser to institutional and
individual accounts. Dreyfus also serves as sub-investment
adviser to and/or administrator of other investment companies.
Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, is a registered broker-dealer. Dreyfus Investment
Advisors, Inc., another wholly-owned subsidiary, provides
investment management services to various pension plans,
institutions and individuals.
Item 28. Business and Other Connections of Investment Adviser (continued)
________ ________________________________________________________________
Officers and Directors of Investment Adviser
____________________________________________
Name and Position
with Dreyfus Other Businesses
_________________ ________________
MANDELL L. BERMAN Real estate consultant and private investor
Director 29100 Northwestern Highway, Suite 370
Southfield, Michigan 48034;
Past Chairman of the Board of Trustees:
Skillman Foundation;
Member of The Board of Vintners Intl.
BURTON C. BORGELT Chairman Emeritus of the Board and
Director Past Chairman, Chief Executive Officer and
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405;
Director:
DeVlieg-Bullard, Inc.
1 Gorham Island
Westport, Connecticut 06880
Mellon Bank Corporation***;
Mellon Bank, N.A.***
FRANK V. CAHOUET Chairman of the Board, President and
Director Chief Executive Officer:
Mellon Bank Corporation***;
Mellon Bank, N.A.***;
Director:
Avery Dennison Corporation
150 North Orange Grove Boulevard
Pasadena, California 91103;
Saint-Gobain Corporation
750 East Swedesford Road
Valley Forge, Pennsylvania 19482;
Teledyne, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
W. KEITH SMITH Chairman and Chief Executive Officer:
Chairman of the Board The Boston Company****;
Vice Chairman of the Board:
Mellon Bank Corporation***;
Mellon Bank, N.A.***;
Director:
Dentsply International, Inc.
570 West College Avenue
York, Pennsylvania 17405
CHRISTOPHER M. CONDRON Vice Chairman:
President, Chief Mellon Bank Corporation***;
Executive Officer, The Boston Company****;
Chief Operating Deputy Director:
Officer and a Mellon Trust***;
Director Chief Executive Officer:
The Boston Company Asset Management,
Inc.****;
President:
Boston Safe Deposit and Trust Company****
STEPHEN E. CANTER Director:
Vice Chairman and The Dreyfus Trust Company++;
Chief Investment Officer, Formerly, Chairman and Chief Executive Officer:
and a Director Kleinwort Benson Investment Management
Americas Inc.*
LAWRENCE S. KASH Chairman, President and Chief
Vice Chairman-Distribution Executive Officer:
and a Director The Boston Company Advisors, Inc.
53 State Street
Exchange Place
Boston, Massachusetts 02109;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.**;
Director:
Dreyfus America Fund+++;
The Dreyfus Consumer Credit Corporation*;
The Dreyfus Trust Company++;
Dreyfus Service Corporation*;
President:
The Boston Company****;
Laurel Capital Advisors***;
Boston Group Holdings, Inc.;
Executive Vice President:
Mellon Bank, N.A.***;
Boston Safe Deposit and Trust
Company****
RICHARD F. SYRON Chairman of the Board and
Director Chief Executive Officer:
American Stock Exchange
86 Trinity Place
New York, New York 10006;
Director:
John Hancock Mutual Life Insurance Company
John Hancock Place, Box 111
Boston, Massachusetts, 02117;
Thermo Electron Corporation
81 Wyman Street, Box 9046
Waltham, Massachusetts 02254-9046;
American Business Conference
1730 K Street, NW, Suite 120
Washington, D.C. 20006;
Trustee:
Boston College - Board of Trustees
140 Commonwealth Ave.
Chestnut Hill, Massachusetts 02167-3934
WILLIAM T. SANDALLS, JR. Director:
Senior Vice President and Dreyfus Partnership Management, Inc.*;
Chief Financial Officer Seven Six Seven Agency, Inc.*;
Chairman and Director:
Dreyfus Transfer, Inc.
One American Express Plaza
Providence, Rhode Island 02903
President and Director:
Lion Management, Inc.*;
Executive Vice President and Director:
Dreyfus Service Organization, Inc.*;
Vice President, Chief Financial Officer and
Director:
Dreyfus America Fund+++;
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
The Truepenny Corporation*;
Treasurer, Financial Officer and Director:
The Dreyfus Trust Company++;
Treasurer and Director:
Dreyfus Management, Inc.*;
Dreyfus Service Corporation*;
Formerly, President and Director:
Sandalls & Co., Inc.
MARK N. JACOBS Vice President, Secretary and Director:
Vice President, Lion Management, Inc.*;
General Counsel Secretary:
and Secretary The Dreyfus Consumer Credit Corporation*;
Dreyfus Management, Inc.*;
Assistant Secretary:
Dreyfus Service Organization, Inc.**;
Major Trading Corporation*;
The Truepenny Corporation*
PATRICE M. KOZLOWSKI None
Vice President-
Corporate Communications
MARY BETH LEIBIG None
Vice President-
Human Resources
JEFFREY N. NACHMAN President and Director:
Vice President-Mutual Fund Dreyfus Transfer, Inc.
Accounting One American Express Plaza
Providence, Rhode Island 02903
ANDREW S. WASSER Vice President:
Vice President-Information Mellon Bank Corporation***
Services
WILLIAM V. HEALEY President:
Assistant Secretary The Truepenny Corporation*;
Vice President and Director:
The Dreyfus Consumer Credit Corporation*;
Secretary and Director:
Dreyfus Partnership Management Inc.*;
Director:
The Dreyfus Trust Company++;
Assistant Secretary:
Dreyfus Service Corporation*;
Dreyfus Investment Advisors, Inc.*;
Assistant Clerk:
Dreyfus Insurance Agency of Massachusetts,
Inc.+++++
______________________________________
* The address of the business so indicated is 200 Park Avenue, New York,
New York 10166.
** The address of the business so indicated is 131 Second Street,
Lewes, Delaware 19958.
*** The address of the business so indicated is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258.
**** The address of the business so indicated is One Boston Place,
Boston, Massachusetts 02108.
+ The address of the business so indicated is Atrium Building,
80 Route 4 East, Paramus, New Jersey 07652.
++ The address of the business so indicated is 144 Glenn Curtiss Boulevard,
Uniondale, New York 11556-0144.
+++ The address of the business so indicated is 69, Route `d'Esch, L-
1470 Luxembourg.
++++ The address of the business so indicated is 69, Route `d'Esch, L-
2953 Luxembourg.
+++++ The address of the business so indicated is 53 State Street, Boston,
Massachusetts 02103.
Item 29. Principal Underwriters
________ ______________________
(a) Other investment companies for which Registrant's principal
underwriter (exclusive distributor) acts as principal underwriter or
exclusive distributor:
1) Comstock Partners Funds, Inc.
2) Dreyfus A Bonds Plus, Inc.
3) Dreyfus Appreciation Fund, Inc.
4) Dreyfus Asset Allocation Fund, Inc.
5) Dreyfus Balanced Fund, Inc.
6) Dreyfus BASIC GNMA Fund
7) Dreyfus BASIC Money Market Fund, Inc.
8) Dreyfus BASIC Municipal Fund, Inc.
9) Dreyfus BASIC U.S. Government Money Market Fund
10) Dreyfus California Intermediate Municipal Bond Fund
11) Dreyfus California Tax Exempt Bond Fund, Inc.
12) Dreyfus California Tax Exempt Money Market Fund
13) Dreyfus Cash Management
14) Dreyfus Cash Management Plus, Inc.
15) Dreyfus Connecticut Intermediate Municipal Bond Fund
16) Dreyfus Connecticut Municipal Money Market Fund, Inc.
17) Dreyfus Florida Intermediate Municipal Bond Fund
18) Dreyfus Florida Municipal Money Market Fund
19) The Dreyfus Fund Incorporated
20) Dreyfus Global Bond Fund, Inc.
21) Dreyfus Global Growth Fund
22) Dreyfus GNMA Fund, Inc.
23) Dreyfus Government Cash Management
24) Dreyfus Growth and Income Fund, Inc.
25) Dreyfus Growth and Value Funds, Inc.
26) Dreyfus Growth Opportunity Fund, Inc.
27) Dreyfus Income Funds
28) Dreyfus Institutional Money Market Fund
29) Dreyfus Institutional Short Term Treasury Fund
30) Dreyfus Insured Municipal Bond Fund, Inc.
31) Dreyfus Intermediate Municipal Bond Fund, Inc.
32) Dreyfus International Funds, Inc.
33) Dreyfus Investment Grade Bond Funds, Inc.
34) The Dreyfus/Laurel Funds, Inc.
35) The Dreyfus/Laurel Funds Trust
36) The Dreyfus/Laurel Tax-Free Municipal Funds
37) Dreyfus LifeTime Portfolios, Inc.
38) Dreyfus Liquid Assets, Inc.
39) Dreyfus Massachusetts Intermediate Municipal Bond Fund
40) Dreyfus Massachusetts Municipal Money Market Fund
41) Dreyfus Massachusetts Tax Exempt Bond Fund
42) Dreyfus MidCap Index Fund
43) Dreyfus Money Market Instruments, Inc.
44) Dreyfus Municipal Bond Fund, Inc.
45) Dreyfus Municipal Cash Management Plus
46) Dreyfus Municipal Money Market Fund, Inc.
47) Dreyfus New Jersey Intermediate Municipal Bond Fund
48) Dreyfus New Jersey Municipal Bond Fund, Inc.
49) Dreyfus New Jersey Municipal Money Market Fund, Inc.
50) Dreyfus New Leaders Fund, Inc.
51) Dreyfus New York Insured Tax Exempt Bond Fund
52) Dreyfus New York Municipal Cash Management
53) Dreyfus New York Tax Exempt Bond Fund, Inc.
54) Dreyfus New York Tax Exempt Intermediate Bond Fund
55) Dreyfus New York Tax Exempt Money Market Fund
56) Dreyfus 100% U.S. Treasury Intermediate Term Fund
57) Dreyfus 100% U.S. Treasury Long Term Fund
58) Dreyfus 100% U.S. Treasury Money Market Fund
59) Dreyfus 100% U.S. Treasury Short Term Fund
60) Dreyfus Pennsylvania Intermediate Municipal Bond Fund
61) Dreyfus Pennsylvania Municipal Money Market Fund
62) Dreyfus Premier California Municipal Bond Fund
63) Dreyfus Premier Equity Funds, Inc.
64) Dreyfus Premier International Growth Fund, Inc.
65) Dreyfus Premier GNMA Fund
66) Dreyfus Premier Worldwide Growth Fund, Inc.
67) Dreyfus Premier Insured Municipal Bond Fund
68) Dreyfus Premier Municipal Bond Fund
69) Dreyfus Premier New York Municipal Bond Fund
70) Dreyfus Premier State Municipal Bond Fund
71) Dreyfus Premier Value Fund
72) Dreyfus Index Funds, Inc.
73) Dreyfus Short-Intermediate Government Fund
74) Dreyfus Short-Intermediate Municipal Bond Fund
75) The Dreyfus Socially Responsible Growth Fund, Inc.
76) Dreyfus Stock Index Fund, Inc.
77) Dreyfus Tax Exempt Cash Management
78) The Dreyfus Third Century Fund, Inc.
79) Dreyfus Treasury Cash Management
80) Dreyfus Treasury Prime Cash Management
81) Dreyfus Variable Investment Fund
82) Dreyfus Worldwide Dollar Money Market Fund, Inc.
83) General California Municipal Bond Fund, Inc.
84) General California Municipal Money Market Fund
85) General Government Securities Money Market Fund, Inc.
86) General Money Market Fund, Inc.
87) General Municipal Bond Fund, Inc.
88) General Municipal Money Market Fund, Inc.
89) General New York Municipal Bond Fund, Inc.
90) General New York Municipal Money Market Fund
(b)
Positions and
Name and principal Positions and offices with offices with
business address the Distributor Registrant
__________________ ___________________________ _____________
Marie E. Connolly+ Director, President, Chief President and
Executive Officer and Compliance Treasurer
Officer
Joseph F. Tower, III+ Director, Senior Vice President, Vice President
Tresurer and Chief Financial Officer and Assistant
Treasurer
Richard W. Ingram Executive Vice President Vice President
and Assistant
Treasurer
Elizabeth A. Keeley++ Vice President Vice President
and Assistant
Secretary
Mary A. Nelson+ Vice President Vice President
and Assistant
Treasurer
Paul Prescott+ Vice President None
Jean M. O'Leary+ Assistant Secretary and None
Assistant Clerk
John W. Gomez+ Director None
William J. Nutt+ Director None
________________________________
+ Principal business address is 60 State Street, Boston, Massachusetts
02109.
++ Principal business address is 200 Park Avenue, New York, New York 10166.
Item 30. Location of Accounts and Records
________________________________
1. First Data Investor Services Group, Inc.,
a subsidiary of First Data Corporation
P.O. Box 9671
Providence, Rhode Island 02940-9671
2. Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
3. Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, Rhode Island 02940-9671
4. The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Item 31. Management Services
_______ ___________________
Not Applicable
Item 32. Undertakings
________ ____________
(1) To call a meeting of shareholders for the purpose of voting upon
the question of removal of a Board member or Board members when
requested in writing to do so by the holders of at least 10% of
the Registrant's outstanding shares and in connection with such
meeting to comply with the provisions of Section 16(c) of the
Investment Company Act of 1940 relating to shareholder
communications.
(2) To furnish each person to whom a prospectus is delivered with a
copy of the Fund's latest Annual Report to Shareholders, upon
request and without charge.
SIGNATURES
__________
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
of the requirements for effectiveness of this Amendment to the Registration
Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New
York, and State of New York on the 18th day of December 1997.
DREYFUS BASIC MUNICIPAL FUND, INC.
BY: /s/Marie E. Connolly*
-----------------------------------
Marie E. Connolly, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
Signatures Title Date
__________________________ ______________________________ __________
/s/Marie E. Connolly* President and Treasurer, 12/18/97
- --------------------------- (Principal Executive, Accounting
Marie E. Connolly and Financial Officer)
/s/David W. Burke* Board Member 12/18/97
- ---------------------------
David W. Burke
/s/Samuel Chase* Board Member 12/18/97
- ---------------------------
Samuel Chase
/s/Joseph S. DiMartino* Board Member 12/18/97
- ---------------------------
Joseph S. DiMartino
/s/Joni Evans* Board Member 12/18/97
- ---------------------------
Joni Evans
/s/Gordon J. Davis* Board Member 12/18/97
- ---------------------------
Gordon J. Davis
/s/Arnold S. Hiatt* Board Member 12/18/97
- ---------------------------
Arnold S. Hiatt
/s/David J. Mahoney* Board Member 12/18/97
- ---------------------------
David J. Mahoney
/s/Burton N. Wallack* Board Member 12/18/97
- ---------------------------
Burton N. Wallack
*BY: Elizabeth A. Keeley
---------------------------
Elizabeth A. Keeley,
Attorney-in-Fact
INDEX OF EXHIBITS
Exhibit No.
24(b)(11) Consent of Ernst & Young LLP
24(b)(17) Financial Data Schedule
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Condensed
Financial Information" and "Transfer and Dividend Disbursing Agent,
Custodian, Counsel and Independent Auditors" and to the use of our reports
dated October 3, 1997 on Dreyfus BASIC Municipal Fund, Inc. (comprising the
Dreyfus BASIC Municipal Money Market Portfolio, Dreyfus BASIC Intermediate
Municipal Bond Portfolio, Dreyfus BASIC Municipal Bond Portfolio and Dreyfus
BASIC New Jersey Municipal Money Market Portfolio), in this Registration
Statement (Form N-1A No. 33-42162) of Dreyfus BASIC Municipal Fund, Inc.
ERNST & YOUNG LLP
New York, New York
December 15, 1997
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