<PAGE>
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 the 12-month period ended August 31, 1998. Your Fund produced
a total return, including share price changes and dividend income generated, of
9.78%,* and an annualized tax-free distribution rate per share of 4.83%.**
THE ECONOMY
Having consistently viewed inflation as the primary threat to our strong
growth, low unemployment economy, the Federal Reserve Board (the "Fed") now has
another factor to ponder in setting monetary policy: the risk of global
recession. The wave of economic uncertainty that shook stock markets and caused
currencies to devalue, begun in Thailand on July 2, 1997 (the onset of the Asian
financial crisis) , has spread through Asia and around the world. By the end of
the reporting period, Russia had devalued its ruble. All this financial tumult
has underscored just how economically interrelated the world's nations are. In
fact, the fragility of global financial markets has been a key factor in the
Fed' s reluctance to raise interest rates in an economy now in its seventh year
of economic expansion. It feared that a rise in rates might threaten the
stability of other currencies.
There were additional economic factors that stayed the Fed's hand. Inflation
has remained tame, comfortably below 2% on the consumer level, and is minimal at
the production level of the economy as well. One reason for the low inflation
rate is the strong dollar, which keeps imports cheap; domestic producers are
constrained from raising prices by competition from cheaper foreign goods. This
has all been good news for consumers, who account for two thirds of all economic
activity. Bolstered by solid wage gains and abundant jobs, consumers have been a
driving positive force in the economy. Whether it was housing, automobiles, big
ticket or small ticket items, their spending and their overall economic optimism
both were robust. But by the end of the reporting period, there were hints that
this could change. The political and economic instability in Russia jolted the
U.S. stock market in August. The stock market selloff could cause consumers to
grow less confident and curtail spending, even though the larger-scale economic
fundamentals for consumers remain positive: low inflation and plentiful jobs.
The wave of devaluations that began over a year ago in Southeast Asia has
become stronger. Collapsing currencies, the latest being the Russian ruble, have
triggered often violent reactions in foreign financial markets. The distant
financial turmoil has resulted in a reduced demand for U.S. exports, and has
begun to curtail domestic corporate profit growth. In the second quarter,
profits declined year-over-year for the first time in almost a decade. Mirroring
the slide in corporate profits, industrial production declined in June and July.
In addition to the profit pinch, second-quarter economic growth lessened to 1.6%
, the slowest rate in three years and dramatically below the 5.5% rate reported
for the first quarter. We remain alert for additional signs of the domestic
effects of global financial problems.
MARKET ENVIRONMENT
Long-term U. S. Treasury bonds have dramatically outperformed their municipal
counterparts as interest rates continue to decline due to the continuing
financial crisis in Asia and other foreign countries. During a financial crisis,
foreign investors typically purchase U.S. Treasuries for their financial
stability. Since foreign investors don' t pay U.S. taxes, municipal bonds
ordinarily would not be purchased by those investors. Long-term municipals
currently yield 93% of U. S. Treasury yields, while the municipal market's
health care sector is rapidly approaching 100% of U. S. Treasury yields. The lag
in municipal performance is mainly due to the imbedded calls that exist in most
municipal bonds. In general, municipals have ten years of call protection, which
limits their appreciation potential. Long-term U. S. Treasury bonds have 25
years of call protection, which enables them to outperform municipals as
interest rates decline. There also appear to be supply and demand imbalances,
which currently favor U. S. Treasury bonds. Municipal supply continues to be
strong while demand has lagged. The opposite appears to be occurring in the U.
S. Treasury markets.
<PAGE>
Heavy new issue volume in some high income tax states has continued to easily
exceed a local market's demand. This has allowed national municipal funds the
opportunity to continue to purchase specialty state issues at attractive levels.
This is especially true of the health care sector, which has a very heavy supply
of new issue bonds being sold in the primary market. When this supply subsides,
these types of issues should become more valuable as demand could eventually
outstrip supply. We do not expect this imbalance to last for a long time
THE PORTFOLIO
The Fund has continued to implement specific investment strategies, which have
enhanced its total return while maintaining a high level of current income. From
September 1997 through early 1998, 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. Interest rates bottomed
out by the middle of January and rose through April. As interest rates rose,
premium bonds held by the Fund performed extremely well. By late February,
interest rates had risen to a point where the Fund reversed strategy and began
purchasing discounted bonds. The Fund continued to purchase discount bonds
through August as interest rates slowly declined. During this time frame, the
Fund increased its purchase of hospital bonds, which were selling at substantial
discounts when compared to the rest of the municipal market and represented a
good opportunity to enhance the value of the Fund. If interest rates continue to
fall, the Fund would consider changing investment strategies because discounts
would start to trade at a premium when compared to the rest of the municipal
market.
The Fund' s performance was strong over the 12-month period ended August 31,
1998. The Fund's total return of 9.78% compares favorably with Lipper's General
Municipal Debt Funds Category Average of 8.20%. The Fund will continue to seek
to enhance its performance by purchasing bonds which are currently out of favor,
and are trading at a substantial discount when compared to the rest of the
municipal market.
Included in this report is a series of detailed statements about your Fund's
holdings and its financial condition. We hope they are informative. Please know
that we greatly appreciate your continued confidence in the Fund and in The
Dreyfus Corporation.
Very truly yours,
[Richard J. Moynihan signature logo]
Richard J. Moynihan
Director, Municipal Portfolio Management
The Dreyfus Corporation
September 18, 1998
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 period, adjusted for any capital gain distributions.
Some income may be subject to the Federal Alternative Minimum Tax (AMT) for
certain shareholders.
<PAGE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO AUGUST 31, 1998
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS BASIC MUNICIPAL
BOND PORTFOLIO AND THE LEHMAN BROTHERS MUNICIPAL BOND INDEX
Dollars
$14,594
Dreyfus BASIC Municipal Bond Portfolio
$13,930
Lehman Brothers Municipal Bond Index*
*Source: Lehman Brothers
Average Annual Total Returns
- -----------------------------------------------------------------------------
One Year Ended From Inception (5/6/94)
August 31, 1998 to August 31, 1998
____________________ ___________________________
9.78% 9.14%
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus BASIC Municipal
Bond Portfolio on 5/6/94 (Inception Date) to a $10,000 investment made in the
Lehman Brothers Municipal Bond Index on that date. For comparative purposes, the
value of the Index on 4/30/94 is used as the beginning value on 5/6/94. All
dividends and capital gain distributions are reinvested.
The Portfolio invests primarily in municipal securities and its performance
shown in the line graph takes into account fees and expenses. Unlike the
Portfolio, the Lehman Brothers Municipal Bond Index is an unmanaged total return
performance benchmark for the long-term, investment-grade tax exempt bond
market, calculated by using municipal bonds selected to be representative of the
municipal market overall. The Index does not take into account charges, fees and
other expenses which can contribute to the Index potentially outperforming the
Portfolio. Further information relating to Portfolio performance, including
expense reimbursements, if applicable, is contained in the Financial Highlights
section of the Prospectus and elsewhere in this report.
<PAGE>
<TABLE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS AUGUST 31, 1998
Principal
Long-Term Municipal Investments--97.1% Amount Value
- ------------------------------------------------------- _____________ _____________
<S> <C> <C>
Alabama--3.0%
Alabama Private Colleges and Universities Facilities Authority, Revenue
(Tuskegee University Project)
5.75%, 9/1/2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,400,000 $ 2,560,752
Alabama Water Pollution Control Authority, Revolving Fund Loan
6.25%, 8/15/2014 (Insured; AMBAC) . . . . . . . . . . . . . . . . . . . . . . . . . . . 750,000 794,542
Jefferson County, Sewer Revenue, Refunding 5.375%, 2/1/2027 (Insured; FGIC). . . . . . . . 2,200,000 2,272,028
California--5.6%
California Public Works Board, LR, Refunding (California Community College)
5.625%, 3/1/2019 (Insured; AMBAC) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 1,591,755
Los Angeles Harbor Department, Revenue 5.375%, 11/1/2019 (Insured; MBIA) . . . . . . . . . 4,000,000 4,103,680
Los Angeles, Wastewater System Revenue, Refunding 4.70%, 11/1/2017 (Insured; FGIC) . . . . 1,960,000 1,905,571
Saddleback Valley, Unified School District Public Financing Authority,
Special Tax Revenue, Refunding
5.65%, 9/1/2017 (Insured; FSA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,067,930
Walnut Valley, Unified School District 6.50%, 8/1/2019 (Insured; FGIC) . . . . . . . . . . 1,765,000 1,982,483
Colorado--2.3%
Colorado Springs, Utility Revenue 6.75%, 11/15/2021. . . . . . . . . . . . . . . . . . . . 500,000 546,185
Denver City and County, Airport Revenue:
7%, 11/15/2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820,000 881,877
Refunding 5.50%, 11/15/2025 (Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . 2,800,000 2,941,652
Florida--.6%
Florida, Department of Transportation (Right of Way Acquisition and Bridge)
5.50%, 7/1/2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,039,990
Palm Beach County, Solid Waste IDR (Osceola Power Limited Partnership)
6.85%, 1/1/2014 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 158,000
Georgia--3.8%
Fulton County, Water and Sewer Revenue 4.75%, 1/1/2019 . . . . . . . . . . . . . . . . . . 2,645,000 2,559,381
Georgia Housing and Finance Authority, SFMR
5.85%, 12/1/2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,500,000 4,704,165
Hawaii--1.1%
Hawaii, Department of Budget and Finance, Special Purpose Revenue (Hawaiian
Electric Co.)
5.65%, 10/1/2027 (Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,122,260
Idaho--1.3%
Idaho Building Authority, Building Revenue 4.75%, 9/1/2025 (Insured; MBIA) . . . . . . . . 1,250,000 1,208,463
Idaho Health Facilities Authority, Health System Revenue (Holy Cross Health
System Corp.)
5%, 12/1/2022 (Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,250,000 1,235,188
Illinois--.3%
Cicero, GO 6.50%, 12/1/2014 (Insured; MBIA). . . . . . . . . . . . . . . . . . . . . . . . 500,000 564,555
<PAGE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1998
Principal
Long-Term Municipal Investments (continued) Amount Value
- ------------------------------------------------------- _____________ _____________
Kentucky--1.3%
Jefferson County, PCR (Louisville Gas and Electric Co. Project) 5.625%, 8/15/2019. . . . . $ 1,300,000 $ 1,360,801
Trimble County, PCR (Louisville Gas and Electric Co.) 7.625%, 11/1/2020. . . . . . . . . . 1,000,000 1,088,160
Louisiana--.3%
West Feliciana Parish, PCR, Refunding (Gulf States Utilities Co. Project)
8%, 12/1/2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 530,475
Maine--5.2%
Maine Finance Authority, Revenue, Refunding (Electric Rate Stabilization)
5%, 7/1/2018 (Insured; FSA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,065,000 3,047,621
Maine Health and Higher Educational Facilities Authority, Revenue
4.875%, 7/1/2017 (Insured; FSA) . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000,000 6,889,400
Massachusetts--2.9%
Massachusetts Bay Transportation Authority, General Transport System,
Refunding 5.50%, 3/1/2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,015,000 3,076,898
Massachusetts Health and Educational Facilities Authority, Revenue
(Mt. Auburn Hospital Issue) 6.30%, 8/15/2024 (Insured; MBIA) . . . . . . . . . . . . . . 750,000 835,710
Massachusetts Housing Finance Agency, SFHR 7.125%, 6/1/2025. . . . . . . . . . . . . . . . 500,000 536,350
Massachusetts Industrial Finance Agency, Health Care Facility Revenue
(Metro Health Foundation Inc. Project)
6.75%, 12/1/2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,072,920
Michigan--3.5%
Downtown Detroit Development Authority, Tax Increment Revenue
(Development Area No. 1 Projects) 6.25%, 7/1/2025 . . . . . . . . . . . . . . . . . . . 1,000,000 1,087,240
Kalamazoo Hospital Finance Authority, Hospital Facility Revenue, Refunding
(Burgess Medical Center) 6.25%, 6/1/2014 (Insured; FGIC) . . . . . . . . . . . . . . . . 1,000,000 1,172,870
Lowell Area Schools, Refunding, Zero Coupon, 5/1/2016 (Insured; FGIC). . . . . . . . . . . 1,675,000 706,063
Michigan Municipal Bond Authority (Local Government Loan Program)
6.125%, 12/1/2018 (Insured; FGIC) . . . . . . . . . . . . . . . . . . . . . . . . . . . 750,000 830,302
Wayne Charter County, Airport Revenue (Detroit Metropolitan Wayne County)
5%, 12/1/2022 (Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 2,939,880
Minnesota--1.3%
Lakeville, Independent School District, Capital Appreciation
Zero Coupon, 2/1/2018 (Insured; FSA) . . . . . . . . . . . . . . . . . . . . . . . . . . 3,275,000 1,216,139
Minneapolis, Revenue (University Gateway Project) 5.25%, 12/1/2017 . . . . . . . . . . . . 1,000,000 1,020,850
Minnesota Housing Finance Agency, SFHR 6.90%, 7/1/2022 . . . . . . . . . . . . . . . . . . 240,000 257,304
Mississippi--.7%
Claiborne County, PCR, Refunding (System Energy Resources, Inc.) 7.30%, 5/1/2025 . . . . . 1,000,000 1,054,630
Vicksburg Warren School District (State Aid Capital Improvement) 4.70% 2/1/2015. . . . . . 250,000 245,308
<PAGE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1998
Principal
Long-Term Municipal Investments (continued) Amount Value
- ------------------------------------------------------- _____________ _____________
Missouri--3.9%
Cape Girardeau County Industrial Development Authority, MFHR, Refunding (Cape
LaCroix)
6.40%, 6/20/2031 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,245,000 $ 1,346,368
Missouri Housing Development Commission, SFMR (Homeowner Loan)
5.90%, 9/1/2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,940,000 5,162,745
Missouri State Health and Educational Facilities Authority, Health Facilities
Revenue, Refunding
(Lake Ozarks General Hospital, Inc.) 5.125%, 2/15/2024 . . . . . . . . . . . . . . . . . 1,000,000 980,470
Montana--2.2%
Billings, MFHR, Refunding (West Park Village) 5.55%, 12/1/2032 . . . . . . . . . . . . . . 1,620,000 1,658,686
Montana State Health Facilities Authority, Revenue (Sisters of Charity
Leavenworth)
5.125%, 12/1/2018 (Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,523,275
Nevada--.1%
Clark County IDR, Refunding (Nevada Power Co. Project) 7.20%, 10/1/2022. . . . . . . . . . 250,000 277,050
New Hampshire--3.1%
New Hampshire Higher Educational and Health Facilities Authority, HR:
(Androscoggin Valley Hospital) 5.75%, 11/1/2017 . . . . . . . . . . . . . . . . . . . . 1,525,000 1,615,814
(Mary Hitchcock Memorial Hospital) 5.75%, 8/15/2023 (Insured; FGIC) . . . . . . . . . . 3,850,000 4,067,255
New Hampshire Housing Finance Authority 6.85%, 7/1/2014. . . . . . . . . . . . . . . . . . 250,000 269,225
New Jersey--.9%
New Jersey Housing and Mortgage Finance Agency, Home Buyer Revenue
6.70%, 4/1/2016 (Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 543,515
New Jersey Turnpike Authority, Turnpike Revenue, Refunding 6.50%, 1/1/2016 . . . . . . . . 1,000,000 1,178,230
New Mexico--2.1%
New Mexico Mortgage Finance Authority, MFHR (Rio Volcan II Apartments Project)
5.65%, 7/1/2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,800,000 2,886,744
Rio Rancho, Water and Wastewater System Revenue 6%, 5/15/2022 (Insured; FSA) . . . . . . . 1,000,000 1,095,660
New York--.3%
New York City Industrial Development Agency, Special Facility Revenue
(American Airlines Inc., Project) 6.90%, 8/1/2024 . . . . . . . . . . . . . . . . . . . 500,000 558,720
North Carolina--2.6%
Charlotte-Mecklenberg Hospital Authority, Health Care System Revenue
5.875%, 1/15/2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,400,000 1,515,346
Mecklenburg County, Public Improvement:
4.50%, Series A 2/1/2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,105,000 1,075,552
4.50%, Series B 2/1/2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 1,946,700
North Carolina Eastern Municipal Power Agency, Power System Revenue, Refunding
7%, 1/1/2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000 292,812
Ohio--6.6%
Franklin County, Hospital Revenue, Refunding and Improvement (Children's
Hospital Project)
5.75%, 11/1/2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,126,460
<PAGE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1998
Principal
Long-Term Municipal Investments (continued) Amount Value
- ------------------------------------------------------- _____________ _____________
Ohio (continued)
Hamilton County, Hospital Facilities Revenue, Refunding (Bethesda Hospital) 6.25%, 1/1/2012. . $ 1,000,000 $ 1,085,650
Kent City, School District 5.75%, 12/1/2021 (Insured; FGIC). . . . . . . . . . . . . . . . 1,500,000 1,617,900
Lorain, Hospital Improvement Revenue, Refunding (Lakeland Community Hospital,
Inc.)
6.50%, 11/15/2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,145,520
Lucas County, Hospital Revenue 5.45%, 8/15/2014 (Insured; MBIA). . . . . . . . . . . . . . 2,500,000 2,619,000
Ohio Building Authority (State Facilities-Juvenile Correctional Projects)
6.60%, 10/1/2014 (Insured; AMBAC) . . . . . . . . . . . . . . . . . . . . . . . . . . . 750,000 855,405
Ohio Higher Educational Facility Commission, Revenue (Xavier University)
5.30%, 5/15/2017 (Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,114,270
Oklahoma--3.4%
Norman Regional Hospital Authority, HR, Refunding 5.625%, 9/1/2016 (Insured; MBIA) . . . . 1,020,000 1,084,138
Pottawatomie County Development Authority, Water Revenue, Refunding
(North Deer Creek Reservoir):
5.80%, 7/1/2015 (Insured; AMBAC) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,800,000 1,917,306
5.90%, 7/1/2026 (Insured; AMBAC) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,150,000 3,362,530
Oregon--.6%
Oregon Housing and Community Services Department, SFMR (Mortgage Program)
6.45%, 7/1/2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,077,310
Pennsylvania--24.2%
Allegheny County Hospital Development Authority, Revenue, Refunding
(Health System--Catholic Health East) 4.875%, 11/15/2015 (Insured; AMBAC) . . . . . . . 1,650,000 1,640,381
Blair County Hospital Authority, HR, Refunding (Altoona Hospital Project)
5%, 7/1/2022 (Insured; AMBAC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 1,971,100
Bucks County Technical School Authority, School Revenue
5.375%, 8/15/2015 (Insured; AMBAC) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,039,150
Dauphin County General Authority, Office and Packaging Revenue (Riverfront
Office)
6%, 1/1/2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,013,820
Delaware County Authority, Health System Revenue (Catholic Health East)
4.875%, 11/15/2015 (Insured; AMBAC) . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 1,988,340
Harrisburg Authority, Office and Packaging Revenue 6%, 5/1/2019. . . . . . . . . . . . . . 1,000,000 1,010,490
Lehigh County General Purpose Authority, Revenue (Wiley House)
9.50%, 11/1/2016 (Prerefunded 11/1/2001) (b) . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,542,790
North Wales Water Authority, Revenue, Refunding 5.60%, 11/1/2016 (Insured; FGIC) . . . . . 1,000,000 1,052,970
Northhampton County Industrial Development Authority, PCR, Refunding
(Bethlehem Steel) 7.55%, 6/1/2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000 280,115
Pennsylvania, COP 5%, 7/1/2015 (Insured; AMBAC). . . . . . . . . . . . . . . . . . . . . . 5,220,000 5,216,711
Pennsylvania Economic Development Financing Authority:
Exempt Facilities Revenue (MacMillan Limited Partnership Project) 7.60%, 12/1/2020 . . . 500,000 556,175
RRR (Northhampton Generating) 6.50%, 1/1/2013 . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,206,130
<PAGE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1998
Principal
Long-Term Municipal Investments (continued) Amount Value
- ------------------------------------------------------- _____________ _____________
Pennsylvania (continued)
Pennsylvania Higher Educational Facilities Authority, College and University
Revenue
Refunding 5.50%, 9/1/2020 (Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . . $ 1,640,000 $ 1,702,140
Pennsylvania Housing Finance Agency, Single Family Mortgage 6.75%, 4/1/2016. . . . . . . . 2,700,000 2,923,155
Pennsylvania Industrial Development Authority, EDR, Refunding
5.50%, 1/1/2014 (Insured; AMBAC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,044,970
Pennsylvania Turnpike Commission, Oil Franchise Tax Revenue
5.50%, 12/1/2012 (Insured; AMBAC) (Prerefunded 12/1/2004) (b). . . . . . . . . . . . . . 1,500,000 1,647,105
Philadelphia Hospitals and Higher Education Facilities Authority, HR, Refunding
(Children's Hospital of Philadelphia) 5%, 2/15/2021 . . . . . . . . . . . . . . . . . . 2,000,000 1,943,440
Philadelphia, Water and Wastewater Revenue, Refunding 5.75%, 6/15/2013 (Insured; MBIA) . . 1,405,000 1,514,197
Potter County Hospital Authority, Revenue, Refunding (Charles Cole Memorial Hospital)
5.95%, 8/1/2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200,000 1,294,164
Pottstown Borough Authority, Sewer Revenue, Refunding 5.50%, 11/1/2021 (Insured; AMBAC). . 2,000,000 2,085,980
Tredyffrin Township, Refunding 5.25%, 11/15/2017 . . . . . . . . . . . . . . . . . . . . . 3,800,000 3,854,074
Washington County Industrial Development Authority, PCR (West Penn Power Co.)
6.05%, 4/1/2014 (Insured; AMBAC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500,000 2,747,600
West Mifflin Sanitary Sewer Municipal Authority, Sewer Revenue
5.80%, 8/1/2026 (Insured; FGIC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,525,000 1,628,014
Rhode Island--.1%
Rhode Island Housing and Mortgage Finance Corp. (Homeownership Opportunity)
6.50%, 4/1/2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 211,776
South Carolina--2.5%
Greenville Hospital System, Hospital Facilities Revenue, Refunding 5.50%, 5/1/2016 . . . . 2,000,000 2,065,680
Pickens and Richland Counties, Hospital Facilities Revenue (Baptist Hospital)
5.75%, 8/1/2021 (Insured; AMBAC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,645,000 2,720,832
Tennessee--1.3%
Maury County Industrial Development Board, PCR, Refunding (Saturn Corp. Project
6.50%, 9/1/2024 (Guaranteed; General Motors Corp.) . . . . . . . . . . . . . . . . . . . 1,000,000 1,099,740
Sullivan County Industrial Board, Revenue, Refunding 6.35%, 7/20/2027. . . . . . . . . . . 1,000,000 1,077,750
Tennessee Housing Development Agency, Mortgage Finance 6.90%, 7/1/2025 . . . . . . . . . . 250,000 269,580
Texas--3.7%
Alliance Airport Authority, Special Facilities Revenue
(American Airlines Inc., Project) 7.50%, 12/1/2029 . . . . . . . . . . . . . . . . . . . 500,000 539,520
Garland, Certificates of Obligation 4.75%, 2/15/2018 . . . . . . . . . . . . . . . . . . . 1,975,000 1,922,366
Mesquite, Health Facilities Development, Refunding (Christian Retirement
Facility)
6.40%, 2/15/2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500,000 1,615,920
Odessa Junior College District, Revenue, Refunding 5%, 12/1/2019 (Insured; MBIA).. . . . . 2,900,000 2,882,890
<PAGE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1998
Principal
Long-Term Municipal Investments (continued) Amount Value
- ------------------------------------------------------- _____________ _____________
Vermont--1.0%
Vermont Municipal Bond Bank, Refunding 5.50%, 12/1/2022 (Insured; AMBAC) . . . . . . . . . $ 1,740,000 $ 1,814,785
Washington--2.1%
King County, School District 5.375%, 12/1/2013 . . . . . . . . . . . . . . . . . . . . . . 1,905,000 1,982,495
Seatac, Local Option Transportation, Tax Revenue 6.50%, 12/1/2013 (Insured; MBIA). . . . . 500,000 563,320
Tacoma, Conservation Systems Project Revenue (Tacoma Public Utilities Division)
6.60%, 1/1/2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,111,920
Washington, Public Power Supply System, Nuclear Project #2, Revenue
6.25%, 7/1/2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315,000 341,299
West Virginia--1.5%
Braxton County, SWDR (Weyerhauser Co., Project) 6.50%, 4/1/2025. . . . . . . . . . . . . . 1,000,000 1,107,780
Parkersburg, Waterworks and Sewer System Revenue,
Refunding 5.80%, 9/1/2019 (Insured; FSA) . . . . . . . . . . . . . . . . . . . . . . . . 500,000 540,375
Pleasants County, PCR (West Penn Power Co.) 6.15%, 5/1/2015 (Insured; AMBAC) . . . . . . . 1,000,000 1,101,910
Wyoming--.1%
Sweetwater County, SWDR (FMC Corp. Project) 7%, 6/1/2024 . . . . . . . . . . . . . . . . . 200,000 221,918
U.S. Related--1.6%
Commonwealth of Puerto Rico 5.40%, 7/1/2025 (Insured; MBIA). . . . . . . . . . . . . . . . 1,000,000 1,042,140
Commonwealth of Puerto Rico Highway and Transportation Authority, Highway Revenue,
Refunding 5.50%, 7/1/2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000 2,062,380
_____________
TOTAL LONG-TERM INVESTMENTS (cost $176,527,895). . . . . . . . . . . . . . . . . . . . . . $184,408,421
=============
Short-Term Municipal Investments--.6%
- -------------------------------------------------------
Minnesota--.6%
Saint Paul Housing and Redevelopment Authority, Revenue, VRDN
(Science Museum of Minnesota)
3.25% (LOC; First Bank National Association) (cost $1,100,000) . . . . . . . . . . . . . $ 1,100,000 $ 1,100,000
=============
TOTAL INVESTMENTS (cost $177,627,895). . . . . . . . . . . . . . . . . . . . . . . . . . . 97.7% $185,508,421
======= =============
CASH AND RECEIVABLES (NET) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3% $ 4,448,994
======= =============
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $189,957,415
======= =============
<PAGE>
</TABLE>
<TABLE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
Summary of Abbreviations
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation MBIA Municipal Bond Investors Assurance Insurance
COP Certificate of Participation Corporation
EDR Economic Development Revenue MFHR Multi-Family Housing Revenue
FGIC Financial Guaranty Insurance Company PCR Pollution Control Revenue
FSA Financial Security Assurance RRR Resources Recovery Revenue
GO General Obligation SFHR Single Family Housing Revenue
HR Hospital Revenue SFMR Single Family Mortgage Revenue
IDR Industrial Development Revenue SWDR Solid Waste Disposal Revenue
LOC Letter of Credit VRDN Variable Rate Demand Notes
LR Lease Revenue
Summary of Combined Ratings (Unaudited)
- -----------------------------------------------------------------------------
Fitch or Moody's or Standard & Poor's Percentage of Value
____ ________ _________________ ___________________
AAA Aaa AAA 60.4%
AA Aa AA 22.0
A A A 7.5
BBB Baa BBB 3.1
BB Ba BB .3
F1 MIG1/P1 SP1/A1 .6
Not Rated (c) Not Rated (c) Not Rated (c) 6.1
_______
100.0%
=======
</TABLE>
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Non-income producing security; interest payments in default.
(b) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(c) 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
rated securities in which the Fund may invest.
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998
Cost Value
_____________ ____________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments . . $177,627,895 $185,508,421
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 1,919,904
Interest receivable . . . . . . . . . . . . . . . . . . . 2,583,799
Prepaid expenses . . . . . . . . . . . . . . . . . . . . 24,759
_____________
190,036,883
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . 30,866
Accrued expenses . . . . . . . . . . . . . . . . . . . . 48,602
_____________
79,468
_____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $189,957,415
=============
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . $180,520,107
Accumulated net realized gain (loss) on investments . . . 1,556,782
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 . . . . . . . . . . . . . . . . 7,880,526
_____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $189,957,415
=============
SHARES OUTSTANDING
(500 million shares of $.001 par value Common Stock authorized). . . . . . . . . . . . . . 13,558,103
NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $14.01
=======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED AUGUST 31, 1998
INVESTMENT INCOME
<C> <C> <C>
INCOME Interest Income . . . . . . . . . . . . . . . . . . . . . $ 8,254,564
EXPENSES: Management fee--Note 3(a) . . . . . . . . . . . . . . . . $ 913,973
Shareholder servicing costs--Note 3(b) . . . . . . . . . 158,900
Registration fees . . . . . . . . . . . . . . . . . . . . 67,768
Professional fees . . . . . . . . . . . . . . . . . . . . 27,807
Custodian fees . . . . . . . . . . . . . . . . . . . . . 18,957
Prospectus and shareholders' reports . . . . . . . . . . 8,901
Directors' fees and expenses--Note 3(c) . . . . . . . . . 3,110
Loan commitment fees--Note 2 . . . . . . . . . . . . . . 815
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 27,530
____________
Total Expenses . . . . . . . . . . . . . . . . . . 1,227,761
Less--reduction in management fee due to
undertaking--Note 3(a) . . . . . . . . . . . . . . . . (541,467)
____________
Net Expenses . . . . . . . . . . . . . . . . . . . 686,294
____________
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,568,270
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments . . . . . . . . . $ 1,820,159
Net unrealized appreciation (depreciation) on investments . . 4,677,426
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . 6,497,585
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $14,065,855
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
August 31, 1998 August 31, 1997
_______________ _______________
OPERATIONS:
<S> <C> <C>
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,568,270 $ 4,546,181
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . . . . 1,820,159 1,668,646
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . . . . 4,677,426 2,419,736
_____________ _____________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . . . . . . 14,065,855 8,634,563
_____________ _____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,599,764) (4,523,738)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,850,141) (456,720)
_____________ _____________
Total Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,449,905) (4,980,458)
_____________ _____________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,713,820 135,673,647
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,550,898 3,273,233
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (73,191,748) (84,781,047)
_____________ _____________
Increase (Decrease) in Net Assets from Capital Stock Transactions . . . . . . . . . . 71,072,970 54,165,833
_____________ _____________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . . . . . . 75,688,920 57,819,938
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,268,495 56,448,557
_____________ _____________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $189,957,415 $114,268,495
============= =============
Undistributed investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . --- $ 31,494
_____________ _____________
Shares Shares
_____________ _____________
CAPITAL SHARE TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,993,748 10,125,714
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . 475,699 244,917
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,311,239) (6,302,195)
_____________ _____________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . . . . . . . 5,158,208 4,068,436
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of Common
Stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each period indicated. This information has been
derived from the Fund's financial statements.
Year Ended August 31,
__________________________________________________________________
PER SHARE DATA: 1998 1997 1996 1995 1994(1)
______ ______ ______ ______ ______
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period . . . . . . $13.60 $13.03 $13.01 $12.76 $12.50
______ ______ ______ ______ ______
Investment Operations:
Investment income--net . . . . . . . . . . . . . .69 .74 .73 .76 .19
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . .60 .66 .06 .25 .26
______ ______ ______ ______ ______
Total from Investment Operations . . . . . . . . 1.29 1.40 .79 1.01 .45
______ ______ ______ ______ ______
Distributions:
Dividends from investment income--net . . . . . . (.69) (.74) (.72) (.76) (.19)
Dividends from net realized gain on investments . . (.19) (.09) (.05) -- --
______ ______ ______ ______ ______
Total Distributions . . . . . . . . . . . . . . . (.88) (.83) (.77) (.76) (.19)
______ ______ ______ ______ ______
Net asset value, end of period . . . . . . . . . $14.01 $13.60 $13.03 $13.01 $12.76
______ ______ ______ ______ ______
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . 9.78% 11.03% 6.17% 8.30% 4.13%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets . . . . . .45% .26% .39% .20% --
Ratio of net investment income
to average net assets . . . . . . . . . . . . 4.97% 5.50% 5.52% 5.99% 6.03%(3)
Decrease reflected in above expense ratios
due to undertakings by the Manager . . . . . .36% .58% .52% .77% 2.06%(3)
Portfolio Turnover Rate . . . . . . . . . . . . . 43.39% 101.27% 59.23% 58.91% 8.82%(2)
Net Assets, end of period (000's Omitted) . . . . $189,957 $114,268 $56,449 $42,913 $15,334
- -----------------------------
(1) From May 6, 1994 (commencement of operations) to August 31, 1994.
(2) Not annualized.
(3) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus BASIC Municipal Bond Portfolio (the "Fund" ) is a separate
non-diversified series of Dreyfus BASIC Municipal Fund, Inc. (the "Company")
which is registered under the Investment Company Act of 1940, as amended (the
" Act" ) as an open-end management investment company and operates as a series
company currently offering four series including the Fund. The Fund's investment
objective is to 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 (the "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: Investments in securities (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. Under the terms of the custodian
agreement, the Fund received net earnings credits of $10,568 during the period
ended August 31, 1998 based on available cash balances left on deposit. Income
earned under this arrangement is included in interest income.
(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 of 1986, as
amended (the "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.
(D) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to qualify
as a regulated investment company, which can distribute tax exempt dividends, by
complying with the applicable provisions of the Code, and to make distributions
of income and net realized capital gain sufficient to relieve it from
substantially all Federal income and excise taxes.
<PAGE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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. During the period ended August
31, 1998, 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 has undertaken from
September 1, 1997 through June 30, 1998, and thereafter, until such time as it
gives shareholders at least 90 days' notice to the contrary, to reduce the
management fee paid by the Fund, to the extent that the Fund's aggregate
expenses, exclusive of taxes, brokerage, interest on borrowings, commitment fees
and extraordinary expenses, exceed an annual rate of .45 of 1% of the value of
the Fund' s average daily net assets. The reduction in management fee, pursuant
to the undertaking, amounted to $541,467 during the period ended August 31,
1998.
(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
August 31, 1998, the Fund was charged $114,947 pursuant to the Shareholder
Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. During the period
ended August 31, 1998, the Fund was charged $25,270 pursuant to the transfer
agency agreement.
(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.
NOTE 4--SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended August 31, 1998,
amounted to $136,274,801 and $63,895,575, respectively.
At August 31, 1998, accumulated net unrealized appreciation on investments was
$7,880,526, consisting of $7,929,262 gross unrealized appreciation and $48,736
gross unrealized depreciation.
At August 31, 1998, 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).
<PAGE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus BASIC Municipal Bond
Portfolio (one of the Series constituting Dreyfus BASIC Municipal Fund, Inc.) as
of August 31, 1998, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Fund' s management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of August 31, 1998 by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus BASIC Municipal Bond Portfolio at August 31, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the indicated years, in conformity with generally accepted accounting
principles.
New York, New York
October 2, 1998
<PAGE>
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
IMPORTANT TAX INFORMATION (UNAUDITED)
In accordance with Federal tax law, the Fund hereby makes the following
designations regarding its fiscal year ended August 31, 1998:
--all the dividends paid from investment income-net are "exempt-interest
dividends" (not generally subject to regular Federal income tax), and
--the Fund hereby designates $.0547 per share as a long-term capital gain
distribution (of which 21.75% is subject to the 20% maximum Federal tax rate) of
the $.1890 per share paid on December 4, 1997.
As required by Federal tax law rules, shareholders will receive notification
of their portion of the Fund's taxable ordinary dividends (if any) and capital
gain distributions (if any) paid for the 1998 calendar year on Form 1099-DIV
which will be mailed by January 31 1999.
<PAGE>
[dreyfus lion "d" logoreg.tm]
[dreyfus logo reg.tm]
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. 125AR988
BASIC Municipal
Bond Portfolio
Annual Report
August 31, 1998
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS BASIC MUNICIPAL BOND PORTFOLIO AND THE
LEHMAN BROTHERS MUNICIPAL BOND INDEX
EXHIBIT A:
LEHMAN DREYFUS
BROTHERS BASIC
PERIOD MUNICIPAL MUNICIPAL
BOND INDEX * BOND PORTFOLIO
5/6/94 10,000 10,000
8/31/94 10,244 10,414
8/31/95 11,152 11,278
8/31/96 11,736 11,974
8/31/97 12,821 13,294
8/31/98 13,930 14,594
* Source: Lehman Brothers
