DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on the Dreyfus BASIC
Intermediate Municipal Bond Portfolio for the 12-month period ended August 31,
1998. Your Fund produced a total return, including share price changes and
dividend income generated, of 8.51%,* and an annualized tax-free distribution
rate per share of 4.56%.**
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
Intermediate-term U. S. Treasury notes 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. A fifteen-year
municipal bond currently yields 90% of an equivalent U. S. Treasury yield, while
the municipal market's health care sector is approximately 96% of an equivalent
U. S. Treasury yield. 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.
Intermediate-term U. S. Treasury notes are not callable, 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 notes. Municipal
supply continues to be strong while demand has lagged. The opposite appears to
be occurring in the U. S. Treasury markets.
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 the12-month period ended August 31,
1998. The Fund' s total return of 8.51% compares favorably with Lipper's
Intermediate Municipal Debt Funds Category Average of 7.01%. The Fund will
continue to seek to enhance its performance potential 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 logo signature]
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 the period, adjusted for any capital gain distributions.
Some income may be subject to the Federal Alternative Minimum Tax (AMT) for
certain shareholders.
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO AUGUST 31, 1998
- -----------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN DREYFUS BASIC
INTERMEDIATE MUNICIPAL BOND PORTFOLIO AND THE LEHMAN BROTHERS 10-YEAR MUNICIPAL
BOND INDEX
Dollars
$13,910
Lehman Brothers 10-Year Municipal Bond Index*
$13,714
Dreyfus BASIC Intermediate Municipal Bond Portfolio
*Source: Lehman Brothers
Average Annual Total Returns
- -----------------------------------------------------------------------------
One Year Ended From Inception (5/4/94)
August 31, 1998 to August 31, 1998
____________________ ___________________________
8.51% 7.57%
- ---------------
Past performance is not predictive of future performance.
The above graph compares a $10,000 investment made in Dreyfus BASIC Intermediate
Municipal Bond Portfolio on 5/4/94 (Inception Date) to a $10,000 investment made
in the Lehman Brothers 10-Year Municipal Bond Index on that date. For
comparative purposes, the value of the Index on 4/30/94 is used as the beginning
value on 5/4/94. All dividends and capital gain distributions are reinvested.
The Portfolio invests primarily in municipal securities and maintains a
portfolio with a weighted-average maturity ranging between 3 and 10 years. The
Portfolio' s performance shown in the line graph takes into account fees and
expenses. Unlike the Portfolio, the Lehman Brothers 10-Year Municipal Bond Index
is an unmanaged total return performance benchmark for the investment-grade,
10-year tax exempt bond market, consisting of municipal bonds with maturities of
9-12 years. The Index does not take into account charges, fees and other
expenses and, coupled with the potentially longer maturity of the Index, can
contribute to the Index potentially outperforming the Portfolio. Further
information relating to Portfolio performance, including expense reimbursements,
if applicable, is contained in the Financial Highlights section of the
Prospectus and elsewhere in this report.
<TABLE>
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS AUGUST 31, 1998
Principal
Long-Term Municipal Investments--94.9% Amount Value
- ------------------------------------------------------- __________ __________
<S> <C> <C>
Alabama--1.2%
Alabama Agricultural and Mechanical University, Revenues
6%, 11/1/2006 (Insured; MBIA, Prerefunded 11/1/2005) (a) . . . . . . . . . . . . . . . . $ 1,000,000 $ 1,135,520
Arizona--1.8%
Arizona Transportation Board, Highway Revenue, Refunding 5%, 7/1/2010. . . . . . . . . . . 900,000 948,492
Maricopa County, COP 5.625%, 6/1/2000. . . . . . . . . . . . . . . . . . . . . . . . . . . 730,000 744,359
California--3.3%
California Statewide Communities Development Authority, COP, Revenue, Refunding
(Triad Healthcare) Zero Coupon, 8/1/2007
(Insured; California Health Facilities Construction Loan Fund) . . . . . . . . . . . . . 3,000,000 2,049,330
Foothill/Eastern Transportation Corridor Agency, Toll Road Revenue
Zero Coupon, 1/1/2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 789,550
Hemet, COP (Capital Projects) 6.50%, 2/1/2003. . . . . . . . . . . . . . . . . . . . . . . 200,000 214,940
Colorado--2.3%
Denver City and County, Airport Revenue
7.25%, 11/15/2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000 201,780
Westminster, MFHR, Refunding (Semper Village Apartments)
5.95%, 9/1/2006 (Guaranteed; AXA Reinsurance) . . . . . . . . . . . . . . . . . . . . . 1,830,000 1,936,049
Florida--1.7%
Palm Beach County, Criminal Justice Facilities Revenue
5.90%, 6/1/2008 (Insured; FGIC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,400,000 1,541,428
Hawaii--2.4%
Hawaii 5.80%, 1/1/2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,089,550
Hawaii Harbor, Capital Improvement Revenue, Refunding
6.20%, 7/1/2008 (Insured; FGIC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,107,990
Illinois--1.2%
Chicago Public Building Commerce, Building Revenue
(Chicago Park District) 5.80%, 1/1/2013 (Insured; FGIC) . . . . . . . . . . . . . . . . 1,000,000 1,073,110
Indiana--1.2%
Indiana Transportation Finance Authority, Airport Facilities LR
(United Air) 6.25%, 11/1/2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,097,800
Maine--3.7%
Maine Health and Higher Educational Facilities Authority, Revenue
4.875%, 7/1/2017 (Insured; FSA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,525,000 3,469,305
Massachusetts--3.8%
Massachusetts Health and Educational Facilities Authority, Revenue:
(Caregroup) 4.50%, 7/1/2014 (Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . 2,240,000 2,143,165
(Sisters Providence Health Systems) 6.20%, 11/15/2002 . . . . . . . . . . . . . . . . . 250,000 272,645
University of Massachusetts Building Authority, Revenue, Refunding
6.50%, 5/1/2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,151,840
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
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STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1998
Principal
Long-Term Municipal Investments (continued) Amount Value
- ------------------------------------------------------- __________ __________
Michigan--3.6%
Greater Detroit Resource Recovery Authority, Revenue, Refunding
6.25%, 12/13/2008 (Insured; AMBAC) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000,000 $ 1,159,710
Michigan Hospital Finance Authority, HR, Refunding:
(Genesys Health System) 7.10%, 10/1/2002 (Escrowed to Maturity) . . . . . . . . . . . . 140,000 156,367
(Genesys Health System) 7.10%, 10/1/2002 . . . . . . . . . . . . . . . . . . . . . . . . 860,000 951,220
(Holland Community Hospital) 5.25%, 1/1/2010 . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,035,290
Missouri--1.3%
Missouri Regional Convention and Sports Complex Authority
(Convention and Sports Project) 5.50%, 8/15/2013 (Insured; MBIA) . . . . . . . . . . . . 1,100,000 1,160,005
New Jersey--2.7%
New Jersey Economic Development Authority, Market Transition Facility Revenue
7%, 7/1/2003 (Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,129,880
New Jersey Turnpike Authority, Turnpike Revenue 6%, 1/1/2005 . . . . . . . . . . . . . . . 1,290,000 1,382,016
New York--7.6%
New York State Dormitory Authority, Secured Hospital Revenues
(Interfaith Medical Center) 5.375%, 2/15/2011 . . . . . . . . . . . . . . . . . . . . . 4,120,000 4,334,199
New York State Housing Corp., Revenue, Refunding 6%, 11/1/2003 . . . . . . . . . . . . . . 1,500,000 1,609,020
New York State Thruway Authority, Service Contract Revenue
(Local Highway and Bridge) 5.75%, 4/1/2006 . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,086,880
North Carolina--3.2%
Charlotte, COP, Refunding (Convention Facility Project)
5.25%, 12/1/2013 (Insured; AMBAC) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,750,000 1,815,502
North Carolina Eastern Municipal Power Agency, Power System Revenue, Refunding
7%, 1/1/2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,171,250
Ohio--1.7%
Cuyahoga County, HR (Meridia Health System) 6.20%, 8/15/2005 . . . . . . . . . . . . . . . 505,000 570,069
Ohio Building Authority,(State Facilities-Administration Building Fund Project)
4.75%, 10/1/2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 973,640
Pennsylvania--19.6%
Beaver County, Refunding 5%, 10/1/2012 (Insured; MBIA) . . . . . . . . . . . . . . . . . . 950,000 974,016
Butler County Hospital Authority, Health Center Revenue, Refunding
(St. Francis Health Care Project) 6%, 5/1/2008 . . . . . . . . . . . . . . . . . . . . . 1,860,000 2,038,262
Harrisburg Authority, Office and Parking Revenue 5.50%, 5/1/2005 . . . . . . . . . . . . . 650,000 655,174
Hempfield School District, Refunding (Lancaster County)
5.30%, 10/15/2014 (Insured; FGIC) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,031,600
Pennsylvania, COP, Refunding 5.40%, 7/1/2008 (Insured; AMBAC). . . . . . . . . . . . . . . 5,000,000 5,220,000
Pennsylvania Convention Center Authority, Revenue, Refunding
6.25%, 9/1/2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 214,922
Pennsylvania Finance Authority, Revenue, Refunding
(Municipal Capital Improvements Program) 6.60%, 11/1/2009 . . . . . . . . . . . . . . . 1,000,000 1,116,580
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1998
Principal
Long-Term Municipal Investments (continued) Amount Value
- ------------------------------------------------------- __________ __________
Pennsylvania (continued)
Pennsylvania Turnpike Commission, Oil Franchise Tax Revenue
5.50%, 12/1/2012 (Insured; AMBAC, Prerefunded 12/1/2004) (a) . . . . . . . . . . . . . . $ 4,000,000 $ 4,392,280
Philadelphia, Water and Wastewater Revenue, Refunding
5.75%, 6/15/2013 (Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,077,720
Philadelphia Hospitals and Higher Education Facilities Authority, Revenue
(Northwestern Corp.) 6.50%, 6/1/2004 (Prerefunded 6/1/2003) (a) . . . . . . . . . . . . 1,280,000 1,425,638
Rhode Island--1.2%
Rhode Island, Consolidated Capital Development Loan
5.95%, 8/1/2013 (Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,081,460
Texas--7.8%
Brazos Higher Education Authority, Student Loan Revenue, Refunding
6.20%, 12/1/2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,000 194,112
Houston Airport System, Special Facilities Revenue (Automated People Mover)
5.375%, 7/15/2009 (Insured; FSA, Guaranteed; Continental Airline, Inc.) . . . . . . . . 1,385,000 1,472,255
Irving Hospital Authority, HR (Irving Healthcare Systems)
5.70%, 7/1/2008 (Insured; FSA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,675,000 1,800,658
Lower Colorado River Authority, Revenue, Refunding
Zero Coupon, 1/1/2003 (Insured; AMBAC) . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 840,150
Mesquite Health Facilities Development Corporation
Retirement Facilities Revenue, Refunding (Christian Retirement Facility):
5.70%, 2/15/2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285,000 296,936
5.80%, 2/15/2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315,000 331,749
San Antonio, Water Revenue:
6.30%, 5/15/2004 (Insured; FGIC, Escrowed to Maturity) . . . . . . . . . . . . . . . . . 100,000 111,649
6.30%, 5/15/2004 (Insured; FGIC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900,000 984,969
Waco 6%, 2/1/2004 (Insured; FGIC). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,070,000 1,168,622
Utah--1.7%
Salt Lake County Municipal Building Authority, LR
6.15%, 10/1/2010 (Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,450,000 1,605,020
Virginia--2.7%
Brunswick County Industrial Development Authority, Correctional Facility LR
5.55%, 7/1/2008 (Insured; MBIA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,325,000 1,454,466
Virginia Housing Development Authority, Commonwealth Mortgage
5.75%, 1/1/2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,033,710
Washington--2.5%
Snohomish County Public Utility District Number 1, Electric Revenue
6.60%, 1/1/2002 (Insured; FGIC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,077,660
Washington Health Care Facilities Authority, Revenue, Refunding
(Gray Harbor Community Hospital) 5.75%, 7/1/2010 (Insured; Asset Guaranty) . . . . . . . 1,180,000 1,281,999
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
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STATEMENT OF INVESTMENTS (CONTINUED) AUGUST 31, 1998
Principal
Long-Term Municipal Investments (continued) Amount Value
- ------------------------------------------------------- __________ __________
West Virginia--1.1%
West Virginia Public Energy Authority, Energy Revenue (Morgantown Associates
Project)
5.05%, 7/1/2008 (LOC; Swiss Bank Corp.) . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000,000 $ 1,039,160
Wisconsin--2.2%
Wisconsin:
5.20%, 5/1/2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,022,850
Transportation Revenue 5.40%, 7/1/2004 . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 1,045,800
Wyoming--.8%
Wyoming Farm Loan Board, Capital Facilities Revenue
Zero Coupon, 10/1/2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 776,580
U.S. Related--12.6%
Puerto Rico Commonwealth Highway and Transportation Authority, Highway Revenue:
5.40%, 7/1/2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000 3,176,100
5.40%, 7/1/2006 (Insured; FSA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000,000 8,466,400
____________
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $83,584,898) . . . . . . . . . . . . . . . . . $87,910,398
============
Short-Term Municipal Investments--3.3%
- -------------------------------------------------------
Illinois--1.7%
Will County, SWDR VRDN (BASF Corp. Project) 3.75% (b). . . . . . . . . . . . . . . . . . . $ 1,600,000 $ 1,600,000
Louisiana--1.6%
Ascension Parish, Revenue, VRDN (BASF Corp. Project) 3.75% (b) . . . . . . . . . . . . . . 1,500,000 1,500,000
____________
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $3,100,000) . . . . . . . . . . . . . . . . . $ 3,100,000
============
TOTAL INVESTMENTS (cost $86,684,898) . . . . . . . . . . . . . . . . . . . . . . . . . . . 98.2% $91,010,398
======= ============
CASH AND RECEIVABLES (NET) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8% $ 1,650,266
======= ============
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.0% $92,660,664
======= ============
</TABLE>
<TABLE>
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
Summary of Abbreviations
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
AMBAC American Municipal Bond Assurance Corporation LR Lease Revenue
COP Certificate of Participation MBIA Municipal Bond Investors Assurance
FGIC Financial Guaranty Insurance Company Insurance Corporation
FSA Financial Security Assurance MFHR Multi-Family Housing Revenue
HR Hospital Revenue SWDR Solid Waste Disposal Revenue
LOC Letter of Credit VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited)
- -----------------------------------------------------------------------------
Fitch or Moody's or Standard & Poor's Percentage of Value
____ ________ _________________ ___________________
AAA Aaa AAA 47.9%
AA Aa AA 14.0
A A A 27.1
BBB Baa BBB 6.6
F-1+ & F-1 MIG1, VMIG1, & P1 SP1 & A1 3.4
Not Rated (c) Not Rated (c) Not Rated (c) 1.0
_______
100.0%
=======
Notes to Statement of Investments:
- -----------------------------------------------------------------------------
(a) Bonds which are prerefunded are collateralized by U.S. Government
securities which are held in escrow and are used to pay principal and
interest on the municipal issue and to retire the bonds in full at the
earliest refunding date.
(b) Securities payable on demand. Variable interest rate-subject to periodic
change.
(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.
(d) At August 31, 1998, the Fund had $24,080,462 (26.0%) of net assets invested
in securities whose payment of principal and interest is dependent upon
revenues generated from transportation projects.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES AUGUST 31, 1998
Cost Value
____________ ___________
<S> <C> <C>
ASSETS: Investments in securities--See Statement of Investments . . $86,684,898 $91,010,398
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 669,766
Interest receivable . . . . . . . . . . . . . . . . . . . 992,402
Receivable for shares of Common Stock subscribed . . . . 15,149
Prepaid expenses . . . . . . . . . . . . . . . . . . . . 24,680
____________
92,712,395
____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates . . . . . . 17,255
Accrued expenses and other liabilities . . . . . . . . . 34,476
____________
51,731
____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $92,660,664
============
REPRESENTED BY: Paid-in capital . . . . . . . . . . . . . . . . . . . . . $88,048,810
Accumulated net realized gain (loss) on investments . . . 286,354
Accumulated gross unrealized appreciation on investments. . 4,325,500
____________
NET ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $92,660,664
============
SHARES OUTSTANDING
(500 MILLION SHARES OF $.001 PAR VALUE COMMON STOCK AUTHORIZED). . . . . . . . . . . . . . 6,831,262
NET ASSET VALUE, offering and redemption price per share . . . . . . . . . . . . . . . . . $13.56
=======
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS YEAR ENDED AUGUST 31, 1998
INVESTMENT INCOME
<S> <C> <C>
INCOME Interest Income . . . . . . . . . . . . . . . . . . . . . $4,012,337
EXPENSES: Management fee--Note 3(a) . . . . . . . . . . . . . . . . $ 469,348
Shareholder servicing costs--Note 3(b) . . . . . . . . . 76,122
Registration fees . . . . . . . . . . . . . . . . . . . . 29,955
Auditing fees . . . . . . . . . . . . . . . . . . . . . . 22,580
Custodian fees . . . . . . . . . . . . . . . . . . . . . 8,749
Prospectus and shareholders' reports . . . . . . . . . . 3,366
Directors' fees and expenses--Note 3(c) . . . . . . . . . 1,632
Legal fees . . . . . . . . . . . . . . . . . . . . . . . 1,336
Loan commitment fees--Note 2 . . . . . . . . . . . . . . 641
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 17,299
___________
Total Expenses . . . . . . . . . . . . . . . . . . 631,028
Less--reduction in management fee due to
undertaking--Note 3(a) . . . . . . . . . . . . . . . . (278,376)
___________
Net Expenses . . . . . . . . . . . . . . . . . . . 352,652
___________
INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,659,685
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--Note 4:
Net realized gain (loss) on investments . . . . . . . . . $ 317,699
Net unrealized appreciation (depreciation) on investments . . 2,451,973
___________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS . . . . . . . . . . . . . . . . . . 2,769,672
___________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS . . . . . . . . . . . . . . . . . . . $6,429,357
===========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS BASIC INTERMEDIATE 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,659,685 $ 2,964,919
Net realized gain (loss) on investments . . . . . . . . . . . . . . . . . . . . . 317,699 830,786
Net unrealized appreciation (depreciation) on investments . . . . . . . . . . . . 2,451,973 1,122,381
____________ ____________
Net Increase (Decrease) in Net Assets Resulting from Operations . . . . . . . 6,429,357 4,918,086
____________ ____________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income--net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,677,127) (2,954,332)
Net realized gain on investments . . . . . . . . . . . . . . . . . . . . . . . . (822,083) (116,833)
____________ ____________
Total Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,499,210) (3,071,165)
____________ ____________
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . 36,124,077 63,306,603
Dividends reinvested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,570,034 2,344,563
Cost of shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,335,815) (47,723,666)
____________ ____________
Increase (Decrease) in Net Assets from Capital Stock Transactions . . . . . . 24,358,296 17,927,500
____________ ____________
Total Increase (Decrease) in Net Assets . . . . . . . . . . . . . . . . . 26,288,443 19,774,421
NET ASSETS:
Beginning of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,372,221 46,597,800
____________ ____________
End of Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $92,660,664 $66,372,221
============ ============
UNDISTRIBUTED INVESTMENT INCOME--NET . . . . . . . . . . . . . . . . . . . . . . . . -- $ 17,442
____________ ____________
Shares Shares
____________ ____________
CAPITAL SHARE TRANSACTIONS:
Shares sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,702,923 4,858,139
Shares issued for dividends reinvested . . . . . . . . . . . . . . . . . . . . . 267,346 179,212
Shares redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,148,735) (3,660,946)
____________ ____________
Net Increase (Decrease) in Shares Outstanding . . . . . . . . . . . . . . . . 1,821,534 1,376,405
============ ============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of Common
Stock outstanding, total investment return, ratios to average net assets and
other supplemental data for each 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 . . . . . . . . . . $13.25 $12.83 $12.95 $12.65 $12.50
______ ______ ______ ______ ______
Investment Operations:
Investment income--net . . . . . . . . . . . . . . . . . .63 .66 .65 .68 .24
Net realized and unrealized gain (loss)
on investments . . . . . . . . . . . . . . . . . . . .47 .45 (.12) .30 .15
______ ______ ______ ______ ______
Total from Investment Operations . . . . . . . . . . . . 1.10 1.11 .53 .98 .39
______ ______ ______ ______ ______
Distributions:
Dividends from investment income--net . . . . . . . . . .. (.63) (.66) (.65) (.68) (.24)
Dividends from net realized gain on investments . . . . . (.16) (.03) -- -- --
______ ______ ______ ______ ______
Total Distributions . . . . . . . . . . . . . . . . . . . (.79) (.69) (.65) (.68) (.24)
______ ______ ______ ______ ______
Net asset value, end of period . . . . . . . . . . . . . $13.56 $13.25 $12.83 $12.95 $12.65
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN. . . . . . . . . . . . . . . . . . . 8.51% 8.95% 4.07% 8.09% 3.11%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets . . . . . . . . . .45% .24% .39% .11% --
Ratio of net investment income
to average net assets . . . . . . . . . . . . . . . . 4.68% 5.07% 5.01% 5.45% 5.53%(3)
Decrease reflected in above expense ratios
due to undertakings by the Manager . . . . . . . . . .36% .56% .46% .81% 1.54%(3)
Portfolio Turnover Rate . . . . . . . . . . . . . . . . . 15.38% 64.65% 54.99% 34.12% 41.15%(2)
Net Assets, end of period (000's Omitted) . . . . . . . . $ 92,661 $ 66,372 $ 46,598 $ 43,155 $ 28,275
- -----------------------------
(1) From May 5, 1994 (commencement of operations) to August 31, 1994.
(2) Not annualized.
(3) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus BASIC Intermediate 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 $4,760 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.
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (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 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. 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
expense, 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 undertakings, amounted to $278,376 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 the 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 $58,510 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 $8,240 pursuant to the custody
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 $33,399,062 and $11,609,514, respectively.
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).
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
- -----------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SHAREHOLDERS AND BOARD OF DIRECTORS
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORFOLIO
We have audited the accompanying statement of assets and liabilities,
including the statement of investments, of Dreyfus BASIC Intermediate Municipal
Bond Portfolio (one of the Series constituting Dreyfus BASIC Municipal Fund,
Inc.) as of August 31, 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 Intermediate 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
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 $.0288 per share as a long-term capital gain
distribution (of which none is subject to the 20% maximum Federal tax rate) of
the $.1555 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.
[dreyfus lion "d" logo] (reg.tm)
[dreyfus logo] (reg.tm)
DREYFUS BASIC INTERMEDIATE
MUNICIPAL BOND PORTFOLIO
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 126AR988
BASIC Intermediate
Municipal Bond
Portfolio
Annual Report
August 31, 1998
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
IN DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
AND THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX
EXHIBIT A:
LEHMAN BROTHERS DREYFUS BASIC
10-YEAR INTERMEDIATE
PERIOD MUNICIPAL MUNICIPAL
BOND INDEX * BOND PORTFOLIO
5/4/94 10,000 10,000
8/31/94 10,245 10,312
8/31/95 11,228 11,146
8/31/96 11,726 11,599
8/31/97 12,811 12,638
8/31/98 13,910 13,714
* Source: Lehman Brothers
