DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Dreyfus BASIC
Municipal Bond Portfolio for its semi-annual reporting period ended February
28, 1997. Your Fund produced a total return, including bond price changes and
interest income, of 5.81%* and an annualized tax-free distribution rate per
share of 5.68%.**
ECONOMIC REVIEW
With the economy nearing the end of its sixth year of expansion,
inflation still remains quiescent despite the robust rate of new job creation
and low unemployment. Because of the relatively tight market, the potential
inflationary consequences of increased wage demands have been of growing
concern to Federal Reserve Board Chairman Alan Greenspan and other members of
the Federal Open Market Committee (FOMC, the policy-making arm of the Federal
Reserve Board). In recent testimony to the Senate Banking Committee, Chairman
Greenspan spoke very directly about the possibility of the FOMC raising
interest rates, despite the absence of any clear sign of accelerating
inflation. The Federal Reserve last changed its interest rate policy on
January 31, 1996 when it reduced both the Federal Funds target rate and its
discount rate. Since then, the economy has continued to advance.
Gains in worker productivity along with job security worries have been
keeping wage increases modest and noninflationary. Yet there are signs that
this wage restraint may be ending. Recent data suggests a tightening in the
labor market. Growing numbers of workers appear willing to quit current jobs,
more confident now that there are better positions available elsewhere. In
reaction to this, companies could be under pressure to raise compensation
levels. With this in mind, the recent comment by Chairman Greenspan warrants
attention: "Given the lags with which monetary policy affects the economy,
however, we cannot rule out a situation in which a preemptive policy
tightening may become appropriate before any sign of actual higher inflation
becomes evident." The lack of price pressure was particularly apparent in the
fourth quarter increase in the GDP price deflator, the government's broadest
measure of inflation: its 1.4% annual pace was the lowest rate of increase in
30 years.
With such low inflation accompanying the strong growth in new jobs,
consumer optimism remains high. The Research Board's Index of Consumer
Confidence reported that popular opinion about the state of the economy
reached a 27-year high in February. Since consumers account for two thirds of
economic activity, their collective attitude is an important indicator of
future economic momentum. Yet, despite this high level of consumer optimism,
retail sales growth remained modest, although signs of strengthening are
appearing.
While it is possible that a retrenchment in consumer spending could
result in an economic slowdown without a change in Federal Reserve monetary
policy, it is likely that the continued strong growth in new jobs and the low
unemployment rate will lead to labor shortages that could trigger
inflationary wage increases. We take Chairman Greenspan at his word and are
mindful of the possibility of a preemptive tightening in monetary policy.
MARKET ENVIRONMENT
As interest rates continued to decline through November, 1996, long-term
municipals remained fully priced compared to comparable term U. S. Treasury
bonds, and that relationship continues now, even with interest rates moving
higher. A low supply of municipals balanced with modest demand has helped to
support the tax exempt markets. Supplies have been especially tight in some
high income tax states, further pushing up prices for municipal bonds issued
within these states.
Since November, interest rates have begun to rise. If interest rates
continue in that trend, supply should moderate and demand would increase.
This would help support the municipal market even if the FOMC decided to
raise short-term interest rates. If this occurred, interest rates generally
would probably rise but municipal rates should not go up less than Treasuries
due to continued supply and demand imbalances.
THE PORTFOLIO
Since we last wrote to you in September 1996, the Fund has continued to
implement specific investment strategies which have enhanced its total return
while maintaining a high level of current income. For the rest of 1996, the
Fund maintained a defensive posture, due to a low interest rate environment.
During this time, premium bonds were purchased which emphasize current income
and have a better ability to protect the principal price of the Fund in a
declining market. As interest rates began to rise in 1997, these types of
bonds performed extremely well. The Fund reversed strategies by early 1997,
and began to slowly purchase bonds which sell at a substantial discount when
compared to the rest of the municipal market and represent a good opportunity
to enhance the value of the Fund. If interest rates continue to rise the Fund
would become more constructive and begin selling select premiums to again
purchase discounts.
Included in this report is a series of detailed statements about your
Fund's holdings and its financial condition. We hope they are informative.
Please know that we appreciate greatly your continued confidence in the Fund
and in The Dreyfus Corporation.
Very truly yours,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
March 17, 1997
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains paid.
** Distribution rate per share is based upon dividends per share paid
from net investment income during the period (annualized), divided by the net
asset value per share at the end of the period, adjusted for any capital gain
distributions.
<TABLE>
<CAPTION>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
STATEMENT OF INVESTMENTS FEBRUARY 28, 1997 (UNAUDITED)
Principal
Long-Term Municipal Investments_99.4% Amount Value
_____________ _____________
<S> <C> <C>
Alabama_4.0%
Alabama Private Colleges and Universities Facilities Authority, Revenue
(Tuskegee University Project) 5.75%, 9/1/2026............................. $ 2,400,000 $ 2,368,104
Alabama Water Pollution Control Authority, Revolving Fund Loan
6.25%, 8/15/2014 (Insured; AMBAC)......................................... 750,000 785,400
Arizona_1.2%
Tucson, GO 4.90%, 7/1/2013.................................................. 1,000,000 957,510
California_2.5%
Walnut Valley, Unified School District 6.50%, 8/1/2019 (Insured; FGIC)...... 1,765,000 1,958,779
Colorado_2.0%
Colorado Springs, Utility Revenue, Refunding 6.75%, 11/15/2021.............. 500,000 550,095
Denver City and County, Airport Revenue 7%, 11/15/2025...................... 1,000,000 1,051,070
Connecticut_1.4%
Connecticut Health and Educational Facilities Authority, Revenue (Capital Asset Issue)
6.875%, 1/1/2010 (Insured; MBIA) (Prerefunded 1/1/2001) (a)............... 1,000,000 1,094,085
Florida_2.6%
Jacksonville Electric Authority, Revenue, Refunding (Saint John's River) 5.25%, 10/1/2021 1,000,000 932,690
Lakeland, Hospital System Revenue (Lakeland Regional Medical Center)
5.25%, 11/15/2025 (Insured; MBIA)......................................... 1,000,000 941,380
Palm Beach County, Solid Waste IDR (Osceola Power Limited Partnership)
6.85%, 1/1/2014........................................................... 200,000 173,830
Georgia_.6%
Burke County Development Authority, PCR (Georgia Power Co.-Plant Vogtle)
6.375%, 8/1/2024.......................................................... 500,000 512,205
Illinois_2.0%
Cicero, Tax Increment Revenue, Refunding 6.50%, 12/1/2014................... 500,000 555,705
Robbins, RRR (Robbins Resource Recovery Partners) 8.375%, 10/15/2016........ 1,000,000 1,044,760
Kentucky_1.4%
Trimble County, PCR (Louisville Gas and Electric Co.) 7.625%, 11/1/2020..... 1,000,000 1,098,460
Louisiana_.7%
West Feliciana Parish, PCR, Refunding (Gulf States Utilities Co. Project) 8%, 12/1/2024 500,000 533,235
Maryland_.3%
Maryland Community Development Administration, Department of Housing and
Community Development Revenue (Single Family Program) 6.75%, 4/1/2026..... 250,000 261,017
Massachusetts_1.7%
Massachusetts Health and Educational Facilities Authority, Revenue (Mt. Auburn Hospital Issue)
6.30%, 8/15/2024 (Insured; MBIA).......................................... 750,000 803,212
Massachusetts Housing Finance Agency, SFHR 7.125%, 6/1/2025................. 500,000 531,195
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1997 (UNAUDITED)
Principal
Long-Term Municipal Investments (continued) Amount Value
__________ __________
Michigan_5.5%
Downtown Detroit Development Authority, Tax Increment Revenue
(Development Area No. 1 Projects) 6.25%, 7/1/2025......................... $ 1,000,000 $ 1,027,300
Kalamazoo Hospital Finance Authority, Hospital Facility Revenue, Refunding
(Burgess Medical Center) 6.25%, 6/1/2014 (Insured; FGIC).................. 1,000,000 1,092,770
Lowell Area Schools, Refunding, Zero Coupon, 5/1/2016 (Insured; FGIC)....... 1,675,000 567,071
Michigan Municipal Bond Authority, Revenue (Local Government Loan Program)
6.125%, 12/1/2018 (Insured; FGIC)......................................... 750,000 781,793
Michigan Public Power Agency, Revenue, Refunding (Belle River Project) 5%, 1/1/2019 1,000,000 909,040
Minnesota_.3%
Minnesota Housing Finance Agency, SFHR 6.90%, 7/1/2022...................... 245,000 256,513
Mississippi_1.3%
Claiborne County, PCR, Refunding (System Energy Resources, Inc.) 7.30%, 5/1/2025 1,000,000 1,048,470
Missouri_1.6%
Cape Girardeau County Industrial Development Authority, MFHR, Refunding (Cape LaCroix)
6.40%, 6/20/2031.......................................................... 1,245,000 1,297,800
Nevada_.3%
Clark County, IDR, Refunding (Nevada Power Co. Project) 7.20%, 10/1/2022.... 250,000 267,363
New Hampshire_.3%
New Hampshire Housing Finance Authority 6.85%, 7/1/2014..................... 250,000 261,725
New Jersey_2.1%
New Jersey Housing and Mortgage Finance Agency, Home Buyer Revenue
6.70%, 4/1/2016 (Insured; MBIA)........................................... 500,000 529,695
New Jersey Turnpike Authority, Turnpike Revenue, Refunding 6.50%, 1/1/2016.. 1,000,000 1,098,300
New York_3.3%
Battery Park City Authority, Revenue, Refunding 5.25%, 11/1/2017............ 1,000,000 929,050
Buffalo Municipal Water Financing Authority, Water Systems Revenue
5.90%, 7/1/2026 (Insured; AMBAC).......................................... 1,100,000 1,103,157
New York City Industrial Development Agency, Special Facility Revenue
(American Airlines, Inc. Project) 6.90%, 8/1/2024......................... 500,000 539,690
North Carolina_.4%
North Carolina Eastern Municipal Power Agency, Power System Revenue, Refunding
7%, 1/1/2008.............................................................. 250,000 278,132
Ohio_4.4%
Hamilton County, Hospital Facilities Revenue, Refunding (Bethesda Hospital)
6.25%, 1/1/2012........................................................... 1,000,000 1,041,670
Lorain, Hospital Improvement Revenue, Refunding (Lakeland Community Hospital, Inc.)
6.50%, 11/15/2012......................................................... 1,000,000 1,054,680
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1997 (UNAUDITED)
Principal
Long-Term Municipal Investments (continued) Amount Value
___________ ___________
Ohio (continued)
Ohio Air Quality Development Authority, Revenue (Columbus and Southern Ohio)
6.375%, 12/1/2020 (Insured; FGIC)......................................... $ 505,000 $ 542,582
Ohio Building Authority (State Facilities-Juvenile Correctional Projects)
6.60%, 10/1/2014 (Insured; AMBAC)......................................... 750,000 834,548
Oklahoma_4.1%
Pottawatomie County Development Authority, Water Revenue, Refunding
(North Deer Creek Reservoir) 5.90%, 7/1/2026 (Insured; AMBAC)............. 3,150,000 3,217,284
Oregon_1.3%
Oregon Housing and Community Services Department, Mortgage Revenue
(Single Family Mortgage Program) 6.45%, 7/1/2026.......................... 1,000,000 1,025,680
Pennsylvania_25.5%
Bethlehem Water Authority, Revenue, Refunding 5.20%, 11/15/2021............. 1,000,000 934,690
Lehigh County General Purpose Authority, Revenue (Wiley House) 9.50%, 11/1/2016 3,000,000 3,232,110
Northhampton County Industrial Development Authority, PCR, Refunding
(Bethlehem Steel) 7.55%, 6/1/2017......................................... 250,000 265,900
Pennsylvania, COP 5%, 7/1/2015 (Insured; AMBAC)............................. 5,220,000 4,886,129
Pennsylvania Economic Development Financing Authority, Exempt Facilities Revenue
(MacMillan Limited Partnership Project) 7.60%, 12/1/2020.................. 500,000 559,010
Pennsylvania Higher Educational Facilities Authority, College and University
Revenue
(Duquesne University Project) 6.35%, 1/15/2017 (Insured; MBIA)............ 500,000 526,340
Pennsylvania Housing Finance Agency, Single Family Mortgage 6.75%, 4/1/2016. 2,700,000 2,842,047
Philadelphia Hospitals and Higher Educational Facilities Authority, HR
(Temple University Hospital) 6.625%, 11/15/2023........................... 4,740,000 4,917,039
Potter County Hospital Authority, Revenue, Refunding (Charles Cole Memorial Hospital)
5.95%, 8/1/2016........................................................... 2,000,000 2,018,880
Rhode Island_.3%
Rhode Island Housing and Mortgage Finance Corp. (Homeownership Opportunity)
6.50%, 4/1/2027........................................................... 200,000 206,998
Tennessee_3.0%
Maury County Industrial Development Board, PCR, Refunding (Saturn Corp. Project)
6.50%, 9/1/2024 (Guaranteed; General Motors Corp.)........................ 1,000,000 1,054,270
Sullivan County, Industrial Board Revenue, Refunding 6.35%, 7/20/2027....... 1,000,000 1,040,680
Tennessee Housing Development Agency, Mortgage Finance 6.90%, 7/1/2025...... 250,000 262,240
Texas_4.9%
Allen, Independent School District Building 5.20%, 2/15/2021................ 1,000,000 943,160
Alliance Airport Authority, Special Facilities Revenue (American Airlines, Inc. Project)
7.50%, 12/1/2029.......................................................... 500,000 535,110
Bexar County Health Facilities Development Corp., HR, Refunding
(Baptist Memorial Hospital Systems Project) 6.90%, 8/15/2014 (Insured; MBIA) 750,000 842,970
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1997 (UNAUDITED)
Principal
Long-Term Municipal Investments (continued) Amount Value
_____________ _____________
Texas (continued)
Mesquite, Health Facilities Development, Refunding (Christian Retirement Facility)
6.40%, 2/15/2020.......................................................... $ 1,500,000 $ 1,513,470
Vermont_4.6%
Vermont Educational and Health Buildings Financing Agency, Revenue 6%, 11/1/2022 3,585,000 3,626,909
Virginia_4.4%
Augusta County Service Authority, Water and Sewer Revenue
5%, 11/1/2024 (Insured; MBIA)............................................. 1,000,000 914,050
Fairfax County Redevelopment and Housing Authority, Mortgage Revenue, Refunding
(Housing for the Elderly) 6.10%, 9/1/2026................................. 1,000,000 1,009,050
Virginia Transportation Board, Transportation Contract Revenue
(Northern Virginia Transportation District Program) 6.375%, 5/15/2020..... 1,500,000 1,583,145
Washington_9.8%
Lewis County, Public Utility District No. 1, Revenue, Refunding
(Cowlitz Falls Hydroelectric Project) 5.50%, 10/1/2022.................... 5,000,000 4,834,550
Seatac, Local Option Transportation, Tax Revenue 6.50%, 12/1/2013 (Insured; MBIA) 500,000 556,235
Tacoma Conservation Systems Project Revenue (Tacoma Public Utilities Division)
6.60%, 1/1/2015........................................................... 1,000,000 1,076,130
Washington Public Power Supply System, Nuclear Project #2, Revenue, Refunding
6.25%, 7/1/2012........................................................... 1,250,000 1,287,263
West Virginia_1.3%
Braxton County, SWDR (Weyerhaeuser Co. Project) 6.50%, 4/1/2025............. 1,000,000 1,056,910
Wyoming_.3%
Sweetwater County, SWDR (FMC Corp. Project) 7%, 6/1/2024.................... 200,000 214,464
_____________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $76,384,624).................... $78,596,794
==============
Short-Term Municipal Investments_.6%
Ohio;
Twinsburg, IDR (UTD Stationers Supply Co.) VRDN 4.75% (LOC; PNC Bank) (b,c)
(cost $500,000)........................................................... $ 500,000 $ 500,000
==============
TOTAL MUNICIPAL INVESTMENTS_100.0% (cost $76,884,624)....................... $79,096,794
==============
</TABLE>
<TABLE>
<CAPTION>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
Summary of Abbreviations
<S> <C> <S> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance
COP Certificate of Participation Insurance Corporation
FGIC Financial Guaranty Insurance Company MFHR Multi-Family Housing Revenue
GO General Obligation PCR Pollution Control Revenue
HR Hospital Revenue RRR Resources Recovery Revenue
IDR Industrial Development Revenue SFHR Single Family Housing Revenue
LOC Letter of Credit SWDR Solid Waste Disposal Revenue
VRDN Variable Rate Demand Notes
</TABLE>
<TABLE>
<CAPTION>
Summary of Combined Ratings (Unaudited)
Fitch (d) or Moody's or Standard & Poor's Percentage of Value
________ ___________ ___________________ ____________________
<S> <C> <C> <C>
AAA Aaa AAA 36.3%
AA Aa AA 33.6
A A A 15.6
BBB Baa BBB 7.2
BB Ba BB .7
F-1, F-1+ VMIG1, MIG1, P1 SP1, A1 .6
Not Rated (e) Not Rated (e) Not Rated (e) 6.0
________
100.0%
=========
</TABLE>
Notes to Statement of Investments:
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Secured by letter of credit.
(c) Securities payable on demand. The interest rate, which is subject to
change, is based upon bank prime rates or an index of market interest
rates.
(d) Fitch currently provides creditworthiness information for a limited
number of investments.
(e) Securities which, while not rated by Fitch, Moody's and Standard &
Poor's have been determined by the Manager to be of comparable quality to
those securities in which the Fund may invest.
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997 (UNAUDITED)
Cost Value
_____________ _____________
<S> <C> <C> <C> <C>
ASSETS: Investments in securities_See Statement of Investments $76,884,624 $79,096,794
Cash....................................... 269,496
Interest receivable........................ 1,268,387
Receivable for shares of Common Stock subscribed 181
Prepaid expenses........................... 36,438
Due from The Dreyfus Corporation and affiliates 6,494
_______________
80,677,790
LIABILITIES: Accrued expenses and other liabilities..... 27,040
_______________
NET ASSETS.................................................................. $80,650,750
===============
REPRESENTED BY: Paid-in capital............................ $78,111,387
Accumulated net realized gain (loss) on investments 327,193
Accumulated net unrealized appreciation (depreciation)
...on investments_Note 4 2,212,170
_______________
NET ASSETS.................................................................. $80,650,750
===============
SHARES OUTSTANDING
(500 MILLION SHARES OF $.001 PAR VALUE COMMON STOCK AUTHORIZED)............. 6,057,844
NET ASSET VALUE, offering and redemption price per share.................... $13.31
========
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
STATEMENT OF OPERATIONS SIX MONTHS ENDED FEBRUARY 28, 1997 (UNAUDITED)
INVESTMENT INCOME
INCOME Interest Income............................ $1,977,229
EXPENSES: Management fee_Note 3(a)................... $ 204,998
Shareholder servicing costs_Note 3(b)...... 43,422
Registration fees.......................... 17,988
Auditing fees.............................. 9,233
Organization expenses...................... 4,923
Custodian fees............................. 4,724
Prospectus and shareholders' reports....... 3,019
Directors' fees and expenses_Note 3(c)..... 803
Legal fees................................. 676
Miscellaneous.............................. 7,379
____________
Total Expenses....................... 297,165
Less_expense reimbursement from Manager due to
undertakings_Note 3(a)................. (283,824)
____________
Net Expenses......................... 13,341
____________
INVESTMENT INCOME_NET....................................................... 1,963,888
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS_Note 4:
Net realized gain (loss) on investments.... $ 409,075
Net unrealized appreciation (depreciation) on investments 1,428,806
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 1,837,881
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $3,801,769
=============
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
February 28, 1997 Year Ended
(Unaudited) August 31, 1996
__________________ _____________________
OPERATIONS:
Investment income_net.................................................. $ 1,963,888 $ 2,684,566
Net realized gain (loss) on investments................................ 409,075 643,570
Net unrealized appreciation (depreciation) on investments.............. 1,428,806 (623,929)
__________________ __________________
Net Increase (Decrease) in Net Assets Resulting from Operations...... 3,801,769 2,704,207
__________________ __________________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income_net.................................................. (1,972,939) (2,675,515)
Net realized gain on investments....................................... (456,720) (168,945)
__________________ __________________
Total Dividends...................................................... (2,429,659) (2,844,460)
__________________ __________________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold.......................................... 59,575,818 34,791,121
Dividends reinvested................................................... 1,659,832 2,065,204
Cost of shares redeemed................................................ (38,405,567) (23,180,317)
__________________ __________________
Increase (Decrease) in Net Assets from Capital Stock Transactions.... 22,830,083 13,676,008
__________________ __________________
Total Increase (Decrease) in Net Assets.......................... 24,202,193 13,535,755
NET ASSETS:
Beginning of Period.................................................... 56,448,557 42,912,802
__________________ __________________
End of Period.......................................................... $ 80,650,750 $ 56,448,557
================= ===================
Shares Shares
__________________ __________________
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................ 4,496,234 2,647,461
Shares issued for dividends reinvested................................. 124,820 156,826
Shares redeemed........................................................ (2,894,669) (1,770,618)
__________________ __________________
Net Increase (Decrease) in Shares Outstanding........................ 1,726,385 1,033,669
================= ===================
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This
information has been derived from the Fund's financial statements.
Six Months Ended
February 28, 1997 Year Ended August 31,
___________________________________
PER SHARE DATA: (Unaudited) 1996 1995 1994(1)
_________________ ________ _______ ________
Net asset value, beginning of period................. $13.03 $13.01 $12.76 $12.50
_______ ________ ________ ________
Investment Operations:
Investment income_net................................ .38 .73 .76 .19
Net realized and unrealized gain (loss)
on investments..................................... .37 .06 .25 .26
_______ ________ ________ ________
Total from Investment Operations..................... .75 .79 1.01 .45
_______ ________ ________ ________
Distributions:
Dividends from investment income_net................. (.38) (.72) (.76) (.19)
Dividends from net realized gain on investments...... (.09) (.05) -- --
_______ ________ ________ ________
Total Distributions.................................. (.47) (.77) (.76) (.19)
_______ ________ ________ ________
Net asset value, end of period....................... $13.31 $13.03 $13.01 $12.76
====== ======== ======== =========
TOTAL INVESTMENT RETURN.................................. 11.72%(2) 6.17% 8.30% 4.13%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets.............. .04%(2) .39% .20% --
Ratio of net investment income
to average net assets.............................. 5.75%(2) 5.52% 5.99% 6.03%(2)
Decrease reflected in above expense ratios
due to undertakings by the Manager................. .83%(2) .52% .77% 2.06%(2)
Portfolio Turnover Rate.............................. 41.79%(3) 59.23% 58.91% 8.82%(3)
Net Assets, end of period (000's Omitted)............ $80,651 $56,449 $42,913 $15,334
(1) From May 6, 1994 (commencement of operations) to August 31, 1994.
(2) Annualized.
(3) Not annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1_SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus BASIC Municipal Bond Portfolio (the "Fund") is a series of
Dreyfus BASIC Municipal Fund, Inc. (the "Company") which is registered under
the Investment Company Act of 1940 ("Act") as a non-diversified open-end
management investment company and operates as a series company currently
offering four series including the Fund. The Fund's investment objective is
to provide investors with as high a level of current income exempt from
Federal income tax as is consistent with the preservation of capital. The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A. Premier Mutual Fund
Services, Inc. is the distributor of the Fund's shares, which are sold to the
public without a sales charge.
The Company accounts separately for the assets, liabilities and
operations of each fund. Expenses directly attributable to each fund are
charged to that fund's operations; expenses which are applicable to all funds
are allocated among them on a pro rata basis.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management
estimates and assumptions. Actual results could differ from those estimates.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the
Board of Directors. Investments for which quoted bid prices are readily
available and are representative of the bid side of the market in the
judgment of the Service are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for
such securities). Other investments (which constitute a majority of the
portfolio securities) are carried at fair value as determined by the Service,
based on methods which include consideration of: yields or prices of
municipal securities of comparable quality, coupon, maturity and type;
indications as to values from dealers; and general market conditions. Options
and financial futures on municipal and U.S. treasury securities are valued at
the last sales price on the securities exchange on which such securities are
primarily traded or at the last sales price on the national securities market
on each business day. Investments not listed on an exchange or the national
securities market, or securities for which there were no transactions, are
valued at the average of the most recent bid and asked prices. Bid price is
used when no asked price is available.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual
basis. Securities purchased or sold on a when-issued or delayed-delivery
basis may be settled a month or more after the trade date.
(C) DIVIDENDS TO SHAREHOLDERS: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Fund not to distribute such gain.
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to
qualify as a regulated investment company, which can
distribute tax exempt dividends, by complying with the applicable provisions
of the Internal Revenue Code, and to make distributions of income and net
realized capital gain sufficient to relieve it from substantially all Federal
income and excise taxes.
NOTE 2_BANK LINE OF CREDIT:
The Fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility ("Facility") to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Fund has agreed to pay commitment fees on its pro rata portion
of the Facility. Interest is charged to the Fund at rates based on prevailing
market rates in effect at the time of borrowings. For the period ended
February 28, 1997, the Fund did not borrow under the Facility.
NOTE 3_MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement with the Manager, the management
fee is computed at the annual rate of .60 of 1% of the value of the Fund's
average daily net assets and is payable monthly. The Manager had undertaken
from September 1, 1996 through December 31, 1996 to reimburse all fees and
expenses of the Fund, exclusive of taxes, brokerage, interest on borrowings
and extraordinary expenses, and thereafter, had undertaken through February
28, 1997 to reduce the management fee paid by the Fund, to the extent that
the Fund's aggregate expenses (exclusive of certain expenses as described
above) exceeded specified annual percentages of the value of the Fund's
average daily net assets. The expense reimbursement, pursuant to the
undertakings, amounted to $283,824 during the period ended February 28, 1997.
In addition, the Manager has currently undertaken through June 30, 1998,
to reduce the management fee paid by the Fund, to the extent that the Fund's
aggregate expenses (exclusive of certain expenses as described above) exceed
an annual rate of .45 of 1% of the value of the Fund's average daily net
assets.
(B) Under the Shareholder Services Plan, the Fund reimburses Dreyfus
Service Corporation, a wholly-owned subsidiary of the Manager, an amount not
to exceed an annual rate of .25 of 1% of the value of the Fund's average
daily net assets for certain allocated expenses of providing personal
services and/or maintaining shareholder accounts. The services provided may
include personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance of shareholder accounts.
During the period ended February 28, 1997, the Fund was charged an aggregate
of $33,563 pursuant to the Shareholder Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such
compensation amounted to $5,271 during the period ended February 28, 1997.
(C) Each director who is not an "affiliated person" as defined in the Act
receives from the Company an annual fee of $1,000 and an attendance fee of
$250 per meeting. The Chairman of the Board receives an additional 25% of
such compensation.
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 4_SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended February 28, 1997,
amounted to $49,981,380 and $27,404,453, respectively.
At February 28, 1997, accumulated net unrealized appreciation on
investments was $2,212,170, consisting of $2,296,000 gross unrealized
appreciation and $83,830 gross unrealized depreciation.
At February 28, 1997, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
[Dreyfus lion "d" logo]
Registration Mark
DREYFUS BASIC MUNICIPAL
BOND PORTFOLIO
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 125SA972
[Dreyfus logo]
Registration Mark
BASIC Municipal
Bond Portfolio
Semi-Annual
Report
February 28, 1997
