SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ X
]
Pre-Effective Amendment No.
[ ]
Post-Effective Amendment No. 16 [ X
]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ X
]
Amendment No. 16
[ X ]
(Check appropriate box or boxes.)
DREYFUS BASIC MUNICIPAL FUND, INC.
(Exact Name of Registrant as Specified in Charter)
c/o The Dreyfus Corporation
200 Park Avenue, New York, New York 10166
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 922-6000
Mark N. Jacobs, Esq.
200 Park Avenue
New York, New York 10166
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
----
X on (date) pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a)(i)
----
on January 1, 2000 pursuant to paragraph (a)(i)
----
75 days after filing pursuant to paragraph (a)(ii)
----
on (date) pursuant to paragraph (a)(ii) of Rule 485
----
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
--
Dreyfus BASIC
Municipal Fund, Inc.
Dreyfus BASIC Intermediate Municipal Bond Portfolio
Dreyfus BASIC Municipal Bond Portfolio
Dreyfus BASIC Municipal Money Market Portfolio
Dreyfus BASIC New Jersey Municipal Money Market Portfolio
Three investment choices for income exempt from federal income tax, and one
investment choice for income exempt from federal and New Jersey state income
taxes
PROSPECTUS January 1, 2000
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
Contents
THE PORTFOLIOS
- -----------------------------------------------------------------
1 Introduction
2 Goal/Approach
5 Main Risks
8 Past Performance
12 Expenses
16 Management
18 Financial Highlights
YOUR INVESTMENT
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22 Account Policies
25 Distributions and Taxes
26 Services for Fund Investors
28 Instructions for Regular Accounts
FOR MORE INFORMATION
- -------------------------------------------------------------------------------
INFORMATION ON EACH PORTFOLIO'S RECENT
PERFORMANCE CAN BE FOUND IN ITS CURRENT ANNUAL/SEMIANNUAL REPORT (SEE BACK
COVER)
Each portfolio's investment approach, risks, performance, expenses and related
information
Information for managing your fund account
Where to learn more about this and other Dreyfus funds
<PAGE>
The Portfolios
Dreyfus BASIC Intermediate Municipal Bond Portfolio
- ------------------------------
Ticker Symbol: DBIMX
Dreyfus BASIC Municipal Bond Portfolio
- -------------------------------
Ticker Symbol: DRMBX
Dreyfus BASIC Municipal Money Market Portfolio
- -------------------------------
Ticker Symbol: DBMXX
Dreyfus BASIC New Jersey Municipal Money Market Portfolio
- ------------------------------
Ticker Symbol: DBJXX
These portfolios differ in their average maturity, which affects their level of
income and degree of share price fluctuation. The Money Market portfolios seek
to maintain a stable $1.00 share price. They offer share price stability for
investors looking to protect principal, but have lower income potential than the
Bond portfolios. The Bond portfolios each offer higher income and return
potential, mainly relative to their average maturities, but their share prices
will fluctuate.
Each portfolio is non-diversified, which means that a relatively high percentage
of its assets may be invested in a limited number of issuers. Therefore, each
portfolio's performance may be more vulnerable to changes in the market value of
a single issuer or a group of issuers.
An investment in the Money Market and New Jersey Money Market portfolios is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although each portfolio seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in a
portfolio.
What these portfolios are -- and aren't
Each portfolio is a mutual fund: a pooled investment that is professionally
managed and gives you the opportunity to participate in financial markets. Each
strives to reach its stated goal, although as with all mutual funds, each fund
cannot offer guaranteed results.
An investment in these portfolios is not a bank deposit. It is not insured or
guaranteed by the FDIC or any other government agency. It is not a complete
investment program. You could lose money in these portfolios, but you also have
the potential to make money.
Introduction
<PAGE 1>
Dreyfus BASIC Municipal Fund, Inc.
GOAL/APPROACH
Dreyfus BASIC Intermediate Municipal Bond Portfolio
THE INTERMEDIATE BOND PORTFOLIO seeks as high a level of current income exempt
from federal income tax as is consistent with the preservation of capital. To
pursue this goal, the portfolio normally invests substantially all of its assets
in municipal bonds that provide income exempt from federal income tax. The
portfolio's dollar-weighted average portfolio maturity ranges between three and
ten years. The portfolio will invest at least 65% of its assets in municipal
bonds with an A or higher credit rating, or the unrated equivalent as determined
by Dreyfus. The remaining 35% of the portfolio may be invested in bonds with a
credit quality lower than A, including bonds of below investment grade credit
quality ("high yield" or "junk" bonds).
Dreyfus BASIC Municipal Bond Portfolio
THE BOND PORTFOLIO seeks as high a level of current income exempt from federal
income tax as is consistent with the preservation of capital. To pursue this
goal, the portfolio normally invests substantially all of its assets in
municipal bonds that provide income exempt from federal income tax.
The dollar-weighted average maturity of the portfolio normally exceeds ten
years, but the portfolio is not subject to any maturity restrictions. The
portfolio will invest at least 65% of Concepts to understand
AVERAGE MATURITY: an average of the stated maturities of the bonds held in a
portfolio, based on their dollar-weighted proportions in the portfolio.
INVESTMENT GRADE BONDS: independent rating organizations analyze and evaluate a
bond issuer's credit history and ability to repay debts. Based on their
assessment, they assign letter grades that reflect the issuer's
creditworthiness. AAA or Aaa represents the highest credit rating, AA/Aa the
second highest, and so on down to D, for defaulted debt. Bonds rated BBB or Baa
and above are considered investment grade.
<PAGE 2>
its assets in municipal bonds with an A or higher credit rating, or the unrated
equivalent as determined by Dreyfus. The remaining 35% of the portfolio may be
invested in bonds with a credit quality lower than A, including high yield
municipal bonds.
Dreyfus BASIC Municipal Money Market Portfolio
THE MONEY MARKET PORTFOLIO seeks as high a level of current income exempt from
federal income tax as is consistent with the preservation of capital and the
maintenance of liquidity. As a money market portfolio, the portfolio is subject
to maturity, quality and diversification requirements designed to help it
maintain a stable share price.
To pursue this goal, the portfolio normally invests substantially all of its net
assets in short-term, high quality municipal obligations that provide income
exempt from federal income tax.
Concepts to understand
MUNICIPAL OBLIGATIONS: debt securities that provide income free from federal
income tax. Municipal bonds are typically of two types:
* GENERAL OBLIGATION BONDS, which are secured by the full faith and credit
of the issuer and its taxing power
O REVENUE BONDS, which are payable from the revenues derived from a specific
revenue source, such as charges for water and sewer service or highway tolls
The Portfolios
<PAGE 3>
GOAL/APPROACH (CONTINUED)
Dreyfus BASIC New Jersey Municipal Money Market Portfolio
THE NEW JERSEY MONEY MARKET PORTFOLIO seeks as high a level of current income
exempt from federal and New Jersey state income taxes as is consistent with the
preservation of capital and the maintenance of liquidity. As a money market
portfolio, the portfolio is subject to maturity, quality and diversification
requirements designed to help it maintain a stable share price.
To pursue this goal, the portfolio normally invests substantially all of its net
assets in short-term, high quality municipal obligations that provide income
exempt from federal and New Jersey state income taxes. When the portfolio
manager believes that acceptable New Jersey municipal obligations are
unavailable for investment, the portfolio may invest temporarily in municipal
obligations that pay income subject to New Jersey state income tax, but not
federal income tax.
Concepts to understand
MONEY MARKET FUND: a specific type of fund that seeks to maintain a $1.00 price
per share. Money market funds are subject to strict federal requirements and
must:
* maintain an average dollar-weighted portfolio maturity of 90 days or
less
O buy individual securities that have remaining maturities of 13 months or less
* invest only in high quality, dollar-denominated obligations
<PAGE 4>
MAIN RISKS
Dreyfus BASIC Intermediate Municipal Bond Portfolio and Dreyfus BASIC Municipal
Bond Portfolio
Prices of bonds tend to move inversely with changes in interest rates. While a
rise in rates may allow a portfolio to invest for higher yields, the most
immediate effect is usually a drop in bond prices, and therefore in a
portfolio's share price as well. As a result, the value of your investment in a
portfolio could go up and down, which means that you could lose money.
Other risk factors could have an effect on a portfolio's performance:
* if an issuer fails to make timely interest or
principal payments, or there is a decline in the credit quality of a bond, or
perception of a decline, the bond's value could fall, potentially lowering a
portfolio's share price
* any of these portfolios' holdings could have its
credit rating downgraded or could default
Although each portfolio's objective is to generate income exempt from federal
income tax, interest from some of each portfolio's holdings may be subject to
the federal alternative minimum tax. In addition, each portfolio temporarily may
invest in taxable bonds.
Other potential risks
The Intermediate Bond Portfolio and Bond Portfolio may invest in certain
derivatives, such as futures and options, that may produce taxable income, and
in inverse floaters. Derivatives are used primarily to hedge the portfolio or
for daily liquidity. They also may be used to increase returns. However, these
practices may lower returns or increase volatility. Derivatives can be highly
sensitive to changes in their underlying security, interest rate or index. A
small investment in certain derivatives could have a potentially large impact on
a portfolio's performance.
The Portfolios
<PAGE 5>
MAIN RISKS (CONTINUED)
Dreyfus BASIC Municipal Money Market Portfolio and Dreyfus BASIC New Jersey
Municipal Money Market Portfolio
Each portfolio's yield will fluctuate as market conditions and interest rates
change and as the short-term securities in their portfolios mature and the
proceeds are reinvested in securities with different interest rates.
An investment in a portfolio is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although each portfolio
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in a portfolio.
While each portfolio has maintained a constant share price since inception and
will continue to try to do so, the following factors could reduce a portfolio's
income level and/or share price:
* interest rates could rise sharply, causing a
portfolio's share price to drop
* any of a portfolio's holdings could have its credit
rating downgraded or could default
Concepts to understand
CREDIT RATING: a measure of the issuer's expected ability to make all required
interest and principal payments in a timely manner.
An issuer with the highest credit rating has a very strong degree of certainty
(or safety) with respect to making all payments. An issuer with the
second-highest credit rating still has a strong capacity to make all payments,
although the degree of safety is somewhat less.
Generally, each Money Market portfolio is required to invest at least 95% of its
assets in the securities of issuers with the highest credit rating or the
unrated equivalent as determined by Dreyfus, with the remainder invested in
securities with the second-highest credit rating.
<PAGE 6>
The New Jersey Money Market Portfolio is subject to certain additional risks:
* New Jersey's economy and revenues underlying its municipal obligations
may decline
* the portfolio's securities may be more sensitive to risks that are
specific to investing primarily in a single state
Although each portfolio's objective is to generate income exempt from federal
and, for the New Jersey Money Market Portfolio, New Jersey state income taxes,
interest from some of each portfolio's holdings may be subject to the federal
alternative minimum tax. In addition, each portfolio temporarily may invest in
taxable obligations. At times, the New Jersey Money Market Portfolio also may
temporarily invest in municipal obligations that pay income free from federal
income tax but not New Jersey state income tax.
The Portfolios
<PAGE 7>
PAST PERFORMANCE
Dreyfus BASIC Intermediate Municipal Bond Portfolio
The tables below show some of the risks of investing in the portfolio. The first
table shows the changes in the portfolio's performance from year to year. The
second table compares the portfolio's performance over time to that of the
Lehman Brothers 10-Year Municipal Bond Index, an unmanaged total return
intermediate-term municipal bond performance benchmark. Both tables assume
reinvestment of dividends. Of course, past performance is no guarantee of future
results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
[Exhibit A]
BEST QUARTER: Q1 '95 +5.16%
WORST QUARTER: Q1 '96 -0.47%
THE PORTFOLIO'S YEAR-TO-DATE RETURN AS OF 9/30/99 WAS -1.79%.
--------------------------------------------------------
Average annual total return AS OF 12/31/98
Since inception
1 Year (5/4/94)
--------------------------------------------------------
PORTFOLIO 6.72% 7.45%
LEHMAN BROTHERS 10-YEAR
MUNICIPAL BOND INDEX 6.76% 7.81%*
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON
4/30/94 IS USED AS THE BEGINNING VALUE ON 5/4/94.
<PAGE 8>
Dreyfus BASIC Municipal Bond Portfolio
The tables below show some of the risks of investing in the portfolio. The first
table shows the changes in the portfolio's performance from year to year. The
second table compares the portfolio's performance over time to that of the
Lehman Brothers Municipal Bond Index, an unmanaged total return municipal bond
performance benchmark. Both tables assume reinvestment of dividends. Of course,
past performance is no guarantee of future results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
[Exhibit B]
BEST QUARTER: Q1 '95 +7.85%
WORST QUARTER: Q1 '96 -2.46%
THE PORTFOLIO'S YEAR-TO-DATE RETURN AS OF 9/30/99 WAS -3.88%.
--------------------------------------------------------
Average annual total return AS OF 12/31/98
Since inception
1 Year (5/6/94)
--------------------------------------------------------
PORTFOLIO 6.79% 8.83%
LEHMAN BROTHERS
MUNICIPAL BOND INDEX 6.48% 7.78%*
* FOR COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON
4/30/94 IS USED AS THE BEGINNING VALUE ON 5/6/94.
The Portfolios
<PAGE 9>
PAST PERFORMANCE (CONTINUED)
Dreyfus BASIC Municipal Money Market Portfolio
The tables below show some of the risks of investing in the portfolio. The first
table shows the changes in the portfolio's performance from year to year. The
second table averages the portfolio's performance over time. Both tables assume
reinvestment of dividends. Of course, past performance is no guarantee of future
results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
[Exhibit C]
BEST QUARTER: Q2 '95 +1.04%
WORST QUARTER: Q1 '94 +0.58%
THE PORTFOLIO'S YEAR-TO-DATE RETURN AS OF 9/30/99 WAS 2.11%.
--------------------------------------------------------
Average annual total return AS OF 12/31/98
Since inception
1 Year 5 Years (12/16/91)
--------------------------------------------------------
3.20% 3.33% 3.22%
The portfolio's 7-day yield on 12/31/98 was 3.36%. For the portfolio's current
yield, call toll-free 1-800-645-6561.
<PAGE 10>
Dreyfus BASIC New Jersey Municipal Money Market Portfolio
The tables below show some of the risks of investing in the portfolio. The first
table shows the changes in the portfolio's performance from year to year. The
second table averages the portfolio's performance over time. Both tables assume
reinvestment of dividends. Of course, past performance is no guarantee of future
results.
--------------------------------------------------------
Year-by-year total return AS OF 12/31 EACH YEAR (%)
[Exhibit D]
BEST QUARTER: Q2 '96 +0.86%
WORST QUARTER: Q1 '98 +0.68%
THE PORTFOLIO'S YEAR-TO-DATE RETURN AS OF 9/30/99 WAS
1.92%.
--------------------------------------------------------
Average annual total return AS OF 12/31/98
Since inception
1 Year (12/1/95)
--------------------------------------------------------
2.87% 3.13%
The portfolio's 7-day yield on 12/31/98 was 3.15%. For the portfolio's current
yield, call toll-free 1-800-645-6561.
The Portfolios
<PAGE 11>
EXPENSES
Dreyfus BASIC Intermediate Municipal Bond Portfolio
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the following table. Shareholder transaction
fees are paid from your account. Annual portfolio operating expenses are paid
out of fund assets, so their effect is included in the share price. The
portfolio has no sales charge (load) or Rule 12b-1 distribution fees.
--------------------------------------------------------
Fee table
SHAREHOLDER TRANSACTION FEES
CHARGED IF YOUR ACCOUNT BALANCE IS LESS THAN
$50,000 AT THE TIME OF THE TRANSACTION
Exchange fee $5.00
Account closeout fee* $5.00
Wire and TeleTransfer redemption fee $5.00
Checkwriting charge $2.00
--------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.60%
Shareholder services fee 0.07%
Other expenses 0.11%
-------------------------------------------------------
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 0.78%
Fee waiver and/or expense reimbursement (0.33%)
-------------------------------------------------------
NET OPERATING EXPENSES** 0.45%
**UNLESS BY EXCHANGE OR WIRE FOR WHICH A CHARGE APPLIES.
**THE DREYFUS CORPORATION HAS AGREED, UNTIL IT GIVES SHAREHOLDERS AT LEAST 90
DAYS' NOTICE TO THE CONTRARY, TO WAIVE RECEIPT OF ITS FEES AND/OR ASSUME THE
EXPENSES OF THE PORTFOLIO SO THAT TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT
EXCEED 0.45%.
--------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
$51 $149 $257 $572
This example shows what you could pay in expenses over
time. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in
expenses. The figures shown would be the same whether
you sold your shares at the end of a period or kept
them. Because actual return and expenses will be
different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to Dreyfus for managing the portfolio and assisting
in all aspects of the portfolio's operations.
SHAREHOLDER SERVICES FEE: a fee of up to 0.25% used to reimburse Dreyfus Service
Corporation for shareholder account service and maintenance.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
SHAREHOLDER TRANSACTION FEE: fees paid from your account and retained by the
portfolio to help keep operating expenses lower.
<PAGE 12>
Dreyfus BASIC Municipal Bond Portfolio
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the following table. Shareholder transaction
fees are paid from your account. Annual portfolio operating expenses are paid
out of fund assets, so their effect is included in the share price. The
portfolio has no sales charge (load) or Rule 12b-1 distribution fees.
--------------------------------------------------------
Fee table
SHAREHOLDER TRANSACTION FEES
CHARGED IF YOUR ACCOUNT BALANCE IS LESS THAN
$50,000 AT THE TIME OF THE TRANSACTION
Exchange fee $5.00
Account closeout fee* $5.00
Wire and TeleTransfer redemption fee $5.00
Checkwriting charge $2.00
--------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.60%
Shareholder services fee 0.07%
Other expenses 0.09%
-------------------------------------------------------
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 0.76%
Fee waiver and/or expense reimbursement (0.31%)
-------------------------------------------------------
NET OPERATING EXPENSES** 0.45%
**UNLESS BY EXCHANGE OR WIRE FOR WHICH A CHARGE APPLIES.
**THE DREYFUS CORPORATION HAS AGREED, UNTIL IT GIVES SHAREHOLDERS AT LEAST 90
DAYS' NOTICE TO THE CONTRARY, TO WAIVE RECEIPT OF ITS FEES AND/OR ASSUME THE
EXPENSES OF THE PORTFOLIO SO THAT TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT
EXCEED 0.45%.
--------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
$51 $149 $257 $572
This example shows what you could pay in expenses over
time. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in
expenses. The figures shown would be the same whether
you sold your shares at the end of a period or kept
them. Because actual return and expenses will be
different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to Dreyfus for managing the portfolio and assisting
in all aspects of the portfolio's operations.
SHAREHOLDER SERVICES FEE: a fee of up to 0.25% used to reimburse Dreyfus Service
Corporation for shareholder account service and maintenance.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
SHAREHOLDER TRANSACTION FEE: fees paid from your account and retained by the
portfolio to help keep operating expenses lower.
The Portfolios
<PAGE 13>
EXPENSES (CONTINUED)
Dreyfus BASIC Municipal Money Market Portfolio
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the following table. Shareholder transaction
fees are paid from your account. Annual portfolio operating expenses are paid
out of fund assets, so their effect is included in the share price. The
portfolio has no sales charge (load) or Rule 12b-1 distribution fees.
--------------------------------------------------------
Fee table
SHAREHOLDER TRANSACTION FEES
CHARGED IF YOUR ACCOUNT BALANCE IS LESS THAN
$50,000 AT THE TIME OF THE TRANSACTION
Exchange fee $5.00
Account closeout fee* $5.00
Wire and TeleTransfer redemption fee $5.00
Checkwriting charge $2.00
--------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.50%
Shareholder services fee 0.05%
Other expenses 0.05%
--------------------------------------------------------
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 0.60%
Fee waiver and/or expense reimbursement (0.15%)
--------------------------------------------------------
NET OPERATING EXPENSES** 0.45%
**UNLESS BY EXCHANGE OR WIRE FOR WHICH A CHARGE APPLIES.
**THE DREYFUS CORPORATION HAS AGREED, UNTIL IT GIVES SHAREHOLDERS AT LEAST 90
DAYS' NOTICE TO THE CONTRARY, TO WAIVE RECEIPT OF ITS FEES AND/OR ASSUME THE
EXPENSES OF THE PORTFOLIO SO THAT TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT
EXCEED 0.45%.
--------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
$51 $149 $257 $572
This example shows what you could pay in expenses over
time. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in
expenses. The figures shown would be the same whether
you sold your shares at the end of a period or kept
them. Because actual return and expenses will be
different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to Dreyfus for managing the portfolio and assisting
in all aspects of the portfolio's operations.
SHAREHOLDER SERVICES FEE: a fee of up to 0.25% used to reimburse Dreyfus Service
Corporation for shareholder account service and maintenance.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
SHAREHOLDER TRANSACTION FEE: fees paid from your account and retained by the
portfolio to help keep operating expenses lower.
The Portfolios
<PAGE 14>
Dreyfus BASIC New Jersey Municipal Money Market Portfolio
As an investor, you pay certain fees and expenses in connection with the
portfolio, which are described in the following table. Shareholder transaction
fees are paid from your account. Annual portfolio operating expenses are paid
out of fund assets, so their effect is included in the share price. The
portfolio has no sales charge (load) or Rule 12b-1 distribution fees.
--------------------------------------------------------
Fee table
SHAREHOLDER TRANSACTION FEES
CHARGED IF YOUR ACCOUNT BALANCE IS LESS THAN
$50,000 AT THE TIME OF THE TRANSACTION
Exchange fee $5.00
Account closeout fee* $5.00
Wire and TeleTransfer redemption fee $5.00
Checkwriting charge $2.00
--------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
% OF AVERAGE DAILY NET ASSETS
Management fees 0.50%
Shareholder services fee 0.08%
Other expenses 0.07%
-------------------------------------------------------
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 0.65%
Fee waiver and/or expense reimbursement (0.20%)
-------------------------------------------------------
NET OPERATING EXPENSES** 0.45%
**UNLESS BY EXCHANGE OR WIRE FOR WHICH A CHARGE APPLIES.
**THE DREYFUS CORPORATION HAS AGREED, UNTIL IT GIVES SHAREHOLDERS AT LEAST 90
DAYS' NOTICE TO THE CONTRARY, TO WAIVE RECEIPT OF ITS FEES AND/OR ASSUME THE
EXPENSES OF THE PORTFOLIO SO THAT TOTAL ANNUAL FUND OPERATING EXPENSES DO NOT
EXCEED 0.45%.
--------------------------------------------------------
Expense example
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
$51 $149 $257 $572
This example shows what you could pay in expenses over
time. It uses the same hypothetical conditions other
funds use in their prospectuses: $10,000 initial
investment, 5% total return each year and no changes in
expenses. The figures shown would be the same whether
you sold your shares at the end of a period or kept
them. Because actual return and expenses will be
different, the example is for comparison only.
Concepts to understand
MANAGEMENT FEE: the fee paid to Dreyfus for managing the portfolio and assisting
in all aspects of the portfolio's operations.
SHAREHOLDER SERVICES FEE: a fee of up to 0.25% used to reimburse Dreyfus Service
Corporation for shareholder account service and maintenance.
OTHER EXPENSES: fees paid by the portfolio for miscellaneous items such as
transfer agency, custody, professional and registration fees.
SHAREHOLDER TRANSACTION FEE: fees paid from your account and retained by the
portfolio to help keep operating expenses lower.
The Portfolios
<PAGE 15>
MANAGEMENT
The investment adviser for each portfolio is The Dreyfus Corporation, 200 Park
Avenue, New York, New York 10166. Founded in 1947, Dreyfus manages more than
$120 billion in over 160 mutual fund portfolios. For the past fiscal year,
Dreyfus BASIC Intermediate Municipal Bond Portfolio, Dreyfus BASIC Municipal
Bond Portfolio, Dreyfus BASIC Municipal Money Market Portfolio and Dreyfus BASIC
New Jersey Municipal Money Market Portfolio each paid Dreyfus a management fee
at the annual rate of x.xx%, x.xx%, x.xx% and x.xx%, respectively, of the
portfolio's average daily net assets.
Dreyfus is the primary mutual portfolio business of Mellon Financial
Corporation, a broad-based financial services company with a bank at its core.
With more than $426 billion of assets under management and $2.0 trillion of
assets under administration and custody, Mellon provides a full range of
banking, investment and trust products and services to individuals, businesses
and institutions. Mellon is headquartered in Pittsburgh, Pennsylvania.
Concepts to understand
YEAR 2000 ISSUES: these portfolios could be adversely affected if the computer
systems used by Dreyfus and the portfolios' other service providers do not
properly process and calculate date-related information from and after January
1, 2000.
Dreyfus has taken steps designed to avoid year 2000-related problems in its
systems and to monitor the readiness of other service providers. In addition,
issuers of securities in which a portfolio invests may be adversely affected by
year 2000-related problems. This could have an impact on the value of a
portfolio's investments and its yield and share price.
<PAGE 16>
Douglas J. Gaylor has managed Dreyfus BASIC Intermediate Municipal Bond
Portfolio and Dreyfus BASIC Municipal Bond Portfolio since he joined The Dreyfus
Corporation in January 1996. Prior to joining Dreyfus, Mr. Gaylor was a
municipal portfolio manager at PNC Bank, since 1993.
Dreyfus has a personal securities trading policy (the "Policy") which restricts
the personal securities transactions of its employees. Its primary purpose is to
ensure that personal trading by Dreyfus employees does not disadvantage any
Dreyfus-managed fund. Dreyfus portfolio managers and other investment personnel
who comply with the Policy's preclearance and disclosure procedures may be
permitted to purchase, sell or hold certain types of securities which also may
be or are held in the fund(s) they advise.
The Portfolios
<PAGE 17>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following tables describe each portfolio's performance for the fiscal
periods indicated. "Total return" shows how much your investment in a portfolio
would have increased (or decreased) during each period, assuming you had
reinvested all dividends and distributions. These figures have been
independently audited by [____________], whose report for each portfolio, along
with each portfolio's financial statements, is included in the fund's annual
report.
Dreyfus BASIC Intermediate Municipal Bond Portfolio
YEAR ENDED AUGUST 31,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 13.56 13.25 12.83 12.95 12.65
Investment operations:
Investment income -- net .61 .63 .66 .65 .68
Net realized and unrealized
gain (loss) on investments (.58) .47 .45 (.12) .30
Total from investment operations .03 1.10 1.11 .53 .98
Distributions:
Dividends from investment
income -- net (.61) (.63) (.66) (.65) (.68)
Dividends from net realized
gain on investments (.10) (.16) (.03) -- --
Total distributions (.71) (.79) (.69) (.65) (.68)
Net asset value, end of period 12.88 13.56 13.25 12.83 12.95
Total return (%) .11 8.51 8.95 4.07 8.09
- ---------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .45 .45 .24 .39 .11
Ratio of net investment income
to average net assets (%) 4.55 4.68 5.07 5.01 5.45
Decrease reflected in above
expense ratios due to
actions by Dreyfus (%) .33 .36 .56 .46 .81
Portfolio turnover rate (%) 60.65 15.38 64.65 54.99 34.12
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 110,344 92,661 66,372 46,598 43,155
<PAGE 18>
Dreyfus BASIC Municipal Bond Portfolio
YEAR ENDED AUGUST 31,
1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 14.01 13.60 13.03 13.01 12.76
Investment operations:
Investment income -- net .66 .69 .74 .73 .76
Net realized and unrealized
gain (loss) on investments (.86) .60 .66 .06 .25
Total from investment operations (.20) 1.29 1.40 .79 1.01
Distributions:
Dividends from investment
income -- net (.66) (.69) (.74) (.72) (.76)
Dividends from net realized
gain on investments (.17) (.19) (.09) (.05) --
Total distributions (.83) (.88) (.83) (.77) (.76)
Net asset value, end of period 12.98 14.01 13.60 13.03 13.01
Total return (%) (1.63) 9.78 11.03 6.17 8.30
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .45 .45 .26 .39 .20
Ratio of net investment income
to average net assets (%) 4.79 4.97 5.50 5.52 5.99
Decrease reflected in above
expense ratios due to
actions by Dreyfus (%) .31 .36 .58 .52 .77
Portfolio turnover rate (%) 87.54 43.39 101.27 59.23 58.91
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 246,861 189,957 114,268 56,449 42,913
The Portfolios
<PAGE 19>
FINANCIAL HIGHLIGHTS (CONTINUED)
Dreyfus BASIC Municipal Money Market Portfolio
YEAR ENDED AUGUST 31,
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .029 .033 .033 .034 .037
Distributions:
Dividends from investment
income -- net (.029) (.033) (.033) (.034) (.037)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
Total return (%) 2.90 3.31 3.31 3.42 3.80
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses
to average net assets (%) .45 .45 .45 .38 .14
Ratio of net investment income
to average net assets (%) 2.86 3.26 3.26 3.40 3.73
Decrease reflected in above
expense ratios due to
actions by Dreyfus (%) .15 .17 .15 .22 .45
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 609,532 615,469 683,562 804,257 1,099,434
<PAGE 20>
Dreyfus BASIC New Jersey Municipal Money Market Portfolio
YEAR ENDED AUGUST 31,
1999 1998 1997 1996(1)
- -----------------------------------------------------------------------------------------------------------------------------------
PER-SHARE DATA ($)
Net asset value, beginning of period 1.00 1.00 1.00 1.00
Investment operations:
Investment income -- net .026 .030 .031 .025
Distributions:
Dividends from investment income -- net (.026) (.030) (.031) (.025)
Net asset value, end of period 1.00 1.00 1.00 1.00
Total return (%) 2.62 3.01 3.17 3.38(2)
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratio of expenses to average net assets (%) .45 .45 .36 .06(2)
Ratio of net investment income
to average net assets (%) 2.59 2.97 3.12 3.25(2)
Decrease reflected in above expense ratios
due to actions by Dreyfus (%) .20 .19 .27 .68(2)
- -----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ x 1,000) 111,946 118,622 136,553 100,248
</TABLE>
(1) FROM DECEMBER 1, 1995 (COMMENCEMENT OF OPERATIONS) TO AUGUST 31, 1996.
(2) ANNUALIZED.
The Portfolios
<PAGE 21>
Your Investment
ACCOUNT POLICIES
Buying shares
YOU PAY NO SALES CHARGES to invest in a portfolio. Your price for portfolio
shares is the net asset value per share (NAV), which is generally calculated at
12:00 noon Eastern time for the Money Market Portfolio and New Jersey Money
Market Portfolio, and at the close of trading on the New York Stock Exchange
(usually 4:00 p.m. Eastern time) for the Intermediate Bond Portfolio and the
Bond Portfolio, every day the exchange is open. Your order will be priced at the
next NAV calculated after your order is accepted by the fund's transfer agent or
other authorized entity. The Money Market Portfolio and New Jersey Money Market
Portfolio use the amortized cost method of valuing its securities. Investments
for the Bond and Intermediate Bond portfolios are valued at fair value by an
independent pricing service approved and supervised by the fund's board. Because
the portfolios seek tax-exempt income, they are not recommended for purchase in
IRAs or other qualified plans.
--------------------------------------------------------
Minimum investments
Initial Additional
--------------------------------------------------------
REGULAR ACCOUNTS $25,000 $1,000 (INCLUDING
FOR
TELETRANSFER
INVESTMENTS)
All investments must be in U.S. dollars. Third-party
checks cannot be accepted. You may be charged a fee for
any check that does not clear. Maximum TeleTransfer
purchase is $150,000 per day.
Concepts to understand
NET ASSET VALUE (NAV): a portfolio's share price on a given day. A portfolio's
NAV is calculated by dividing the value of its net assets by the number of
existing shares.
AMORTIZED COST: a method of valuing a money market fund's securities, which does
not take into account unrealized gains or losses. As a result, portfolio
securities are valued at their acquisition cost, adjusted over time based on the
discounts or premiums reflected in their purchase price. This method of
valuation is designed to permit each portfolio to maintain a stable NAV.
<PAGE 22>
Selling shares
YOU MAY SELL (REDEEM) SHARES AT ANY TIME. Your shares will be sold at the next
NAV calculated after your order is accepted by the fund's transfer agent or
other authorized entity. Any certificates representing portfolio shares being
sold must be returned with your redemption request. Your order will be processed
promptly and you will generally receive the proceeds within a week.
BEFORE SELLING OR WRITING A CHECK for recently purchased shares, please note
that if payment for the shares you are selling has not been collected for the
portfolio, the portfolio may delay sending the proceeds for up to eight business
days or until it has collected payment.
--------------------------------------------------------
Limitations on selling shares by phone
Proceeds
sent by Minimum Maximum
--------------------------------------------------------
CHECK NO MINIMUM $250,000 PER DAY
WIRE $5,000 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
TELETRANSFER $1,000 $500,000 FOR JOINT
ACCOUNTS
EVERY 30 DAYS
--------------------------------------------------------
SHAREHOLDER TRANSACTION FEES
CHARGED IF YOUR ACCOUNT BALANCE IS LESS THAN
$50,000 AT THE TIME OF THE TRANSACTION
Exchange fee $5.00
Account closeout fee* $5.00
Wire and TeleTransfer redemption fee $5.00
Checkwriting charge $2.00
*UNLESS BY EXCHANGE OR WIRE FOR WHICH A CHARGE APPLIES.
Written sell orders
Some circumstances require written sell orders along with signature guarantees.
These include:
* amounts of $10,000 or more on accounts whose address has been changed
within the last 30 days
* requests to send the proceeds to a different payee or address
Written sell orders of $100,000 or more must also be signature guaranteed.
A SIGNATURE GUARANTEE helps protect against fraud. You can obtain one from most
banks or securities dealers, but not from a notary public. For joint accounts,
each signature must be guaranteed. Please call us to ensure that your signature
guarantee will be processed correctly.
Your Investment
<PAGE 23>
ACCOUNT POLICIES (CONTINUED)
General policies
UNLESS YOU DECLINE TELEPHONE PRIVILEGES on your application, you may be
responsible for any fraudulent telephone order as long as Dreyfus takes
reasonable measures to verify the order.
THE FUND (EXCEPT AS NOTED BELOW) RESERVES THE RIGHT TO:
* refuse any purchase or exchange request
including, for the Intermediate Bond Portfolio and the
Bond Portfolio, those from any individual or group who,
in the fund's view, is likely to engage in excessive
trading (usually defined as more than four exchanges out
of a portfolio within a calendar year)
* refuse any purchase or exchange request in excess of
1% of a portfolio's total assets (applies mainly to the Intermediate Bond
Portfolio and the Bond Portfolio only)
* change or discontinue its exchange privilege or
temporarily suspend this privilege during unusual market conditions
* change its minimum investment amounts
* delay sending out redemption proceeds for up to
seven days (generally applies only in cases of very large redemptions, excessive
trading or during unusual market conditions)
Each portfolio also reserves the right to make a "redemption in kind" -- payment
in portfolio securities rather than cash -- if the amount you are redeeming is
large enough to affect portfolio operations (for example, if it represents more
than 1% of a portfolio's assets).
Small account policies
To offset the relatively higher costs of servicing smaller accounts, each
portfolio charges regular accounts with balances below $2,000 an annual fee of
$12. The fee will be imposed during the fourth quarter of each calendar year.
The fee will be waived for any investor whose aggregate Dreyfus mutual fund
investments total at least $25,000, and accounts opened through a financial
institution.
If your account falls below $10,000 in the Money Market Portfolio or New Jersey
Money Market Portfolio, or $5,000 in the Intermediate Bond Portfolio or Bond
Portfolio, you may be asked to increase your balance. If it is still below the
relevant minimum after 45 days, the portfolio may close your account and send
you the proceeds.
<PAGE 24>
DISTRIBUTIONS AND TAXES
THE FUND USUALLY PAYS ITS SHAREHOLDERS dividends from its net investment income
once a month, and distributes any net capital gains it has realized once a year.
Your dividends and distributions will be reinvested in your portfolio unless you
instruct the fund otherwise. There are no fees or sales charges on
reinvestments.
EACH PORTFOLIO ANTICIPATES THAT VIRTUALLY ALL OF ITS INCOME DIVIDENDS will be
exempt from federal and, for the New Jersey Money Market Portfolio, New Jersey
state income taxes. However, any dividends paid from interest on taxable
investments or short-term capital gains will be taxable as ordinary income. Any
distributions of long-term capital gains will be taxable as such. The tax status
of any distribution is the same regardless of how long you have been in the
portfolio and whether you reinvest your distributions or take them in cash. In
general, distributions are federally taxable as follows:
--------------------------------------------------------
Taxability of distributions
Type of Tax rate for Tax rate for
distribution 15% bracket 28% bracket or above
--------------------------------------------------------
INCOME GENERALLY GENERALLY
DIVIDENDS TAX EXEMPT TAX EXEMPT
SHORT-TERM ORDINARY ORDINARY
CAPITAL GAINS INCOME RATE INCOME RATE
LONG-TERM
CAPITAL GAINS 10% 20%
The tax status of your dividends and distributions will be detailed in your
annual tax statement from the fund.
Because everyone's tax situation is unique, always consult your tax professional
about federal, state and local tax consequences.
Taxes on transactions
Any sale or exchange of portfolio shares, including through the checkwriting
privilege, may generate a tax liability.
The table at right also can provide a guide for your potential tax liability
when selling or exchanging portfolio shares. "Short-term capital gains" applies
to portfolio shares sold or exchanged up to 12 months after buying them.
"Long-term capital gains" applies to shares sold or exchanged after 12 months.
<PAGE 25>
SERVICES FOR FUND INVESTORS
Dreyfus Dividend Sweep
FOR AUTOMATICALLY REINVESTING the dividends and distributions from one Dreyfus
fund into another, use Dreyfus Dividend Sweep (not available for IRAs). You can
set up this service with your application or by calling 1-800-645-6561.
Checkwriting privilege
YOU MAY WRITE REDEMPTION CHECKS against your account in amounts of $1,000 or
more. There is a $2.00 charge for each check written, unless you meet the
$50,000 minimum balance requirement at the time of the transaction. The charge
is retained by the relevant portfolio. A fee also will be charged by the
transfer agent if you request a stop payment or if the transfer agent cannot
honor a redemption check due to insufficient funds or another valid reason.
Please do not postdate your checks or use them to close your account.
Exchange privilege
YOU CAN EXCHANGE SHARES WORTH $1,000 OR MORE from one Dreyfus fund into another.
You are allowed only four exchanges out of a portfolio in a calendar year. You
can request your exchange in writing or by phone. Be sure to read the current
prospectus for any fund into which you are exchanging. Any new account
established through an exchange will have the same privileges as your original
account (as long as they are available). There is a $5.00 exchange fee, unless
you meet the $50,000 minimum balance requirement at the time of the transaction.
The charge is retained by the relevant portfolio. You may be charged a sales
load when exchanging into any fund that has one.
<PAGE 26>
Dreyfus TeleTransfer privilege
TO MOVE MONEY BETWEEN YOUR BANK ACCOUNT and your Dreyfus fund account with a
phone call, use the Dreyfus TeleTransfer privilege. You can set up TeleTransfer
on your account by providing bank account information and following the
instructions on your application. For accounts with a balance below $50,000,
there is a $5.00 fee for TeleTransfer redemptions.
24-hour automated account access
YOU CAN EASILY MANAGE YOUR DREYFUS ACCOUNTS, check your account balances,
transfer money between your Dreyfus funds, get price and yield information and
much more -- when it's convenient for you.
Account statements
EVERY DREYFUS INVESTOR automatically receives regular account statements. You'll
also be sent a yearly statement detailing the tax characteristics of any
dividends and distributions you have received.
Dreyfus Financial Centers
THROUGH A NATIONWIDE NETWORK of Dreyfus Financial Centers, Dreyfus offers a full
array of investment services and products. This includes information on mutual
funds, brokerage services, tax-advantaged products and retirement planning.
EXPERIENCED FINANCIAL CONSULTANTS can help you make informed choices and provide
you with personalized attention in handling account transactions. The Financial
Centers also offer informative seminars and events. To find the Financial Center
nearest you, call 1-800-499-3327.
Your Investment
<PAGE 27>
INSTRUCTIONS FOR REGULAR ACCOUNTS
TO OPEN AN ACCOUNT
In Writing
Complete the application.
Mail your application and a check to:
The Dreyfus Family of Funds
P.O. Box 9387, Providence, RI 02940-9387
TO ADD TO AN ACCOUNT
Fill out an investment slip, and write your account number on your check.
Mail the slip and the check to: The Dreyfus Family of Funds P.O. Box 105,
Newark, NJ 07101-0105
By Telephone
WIRE Have your bank send your
investment to The Bank of New York, with these instructions:
* ABA# 021000018
* Dreyfus BASIC Intermediate
Municipal Bond Portfolio DDA# 8900088451
* Dreyfus BASIC Municipal Bond Portfolio
DDA# 8900088443
* Dreyfus BASIC Municipal
Money Market Portfolio DDA# 8900208767
* Dreyfus BASIC New Jersey Municipal Money Market Portfolio DDA# 890027992
* your Social Security or tax ID number
* name(s) of investor(s)
Call us to obtain an account number. Return your application.
WIRE Have your bank send your investment to The Bank of New York, with these
instructions:
* ABA# 021000018
* Dreyfus BASIC Intermediate
Municipal Bond Portfolio DDA# 8900088451
* Dreyfus BASIC Municipal Bond Portfolio
DDA# 8900088443
* Dreyfus BASIC Municipal
Money Market Portfolio DDA# 8900208767
* Dreyfus BASIC New Jersey Municipal Money Market Portfolio DDA# 8900279923
* your account number
* name(s) of investor(s)
ELECTRONIC CHECK Same as wire, but insert "1111" before your account number.
TELETRANSFER Request TeleTransfer on your application. Call us to request your
transaction.
Automatically
WITH AN INITIAL INVESTMENT Indicate
on your application which automatic service(s) you want. Return your application
with your investment.
ALL SERVICES Call us to request a form to add any automatic investing service
(see "Services for Fund Investors"). Complete and return the forms along with
any other required materials.
Via the Internet
COMPUTER Visit the Dreyfus Web site http://www.dreyfus.com and follow the
instructions to download an account application.
<PAGE 28>
TO SELL SHARES
Write a redemption check OR write a letter of instruction that includes:
* your name(s) and signature(s)
* your account number
* the fund name and share class
* the dollar amount you want to sell
* how and where to send the proceeds
Obtain a signature guarantee or other documentation, if required (see "Account
Policies -- Selling Shares").
Mail your request to: The Dreyfus Family of Funds P.O. Box 9671, Providence, RI
02940-9671
To reach Dreyfus, call toll free in the U.S.
1-800-645-6561
Outside the U.S. 516-794-5452
Make checks payable to:
THE DREYFUS FAMILY OF FUNDS
You also can deliver requests to any Dreyfus Financial Center. Because
processing time may vary, please ask the representative when your account will
be credited or debited.
Concepts to understand
WIRE TRANSFER: for transferring money from one financial institution to another.
Wiring is the fastest way to move money, although your bank may charge a fee to
send or receive wire transfers. Wire redemptions from the fund are subject to a
$5,000 minimum.
ELECTRONIC CHECK: for transferring money out of a bank account. Your transaction
is entered electronically, but may take up to eight business days to clear.
Electronic checks usually are available without a fee at all Automated Clearing
House (ACH) banks.
WIRE Be sure the fund has your bank account information on file. Call us to
request your transaction. Proceeds will be wired to your bank.
TELETRANSFER Be sure the fund has your bank account information on file. Call
us to request your transaction. Proceeds will be sent to your bank by electronic
check.
CHECK Call us to request your transaction. A check will be sent to the address
of record.
DREYFUS AUTOMATIC WITHDRAWAL PLAN Call us to request a form to add the plan.
Complete the form, specifying the amount and frequency of withdrawals you would
like.
Be sure to maintain an account balance of $5,000 or more.
Your Investment
<PAGE 29>
For More Information
Dreyfus BASIC Intermediate Municipal Bond Portfolio
Dreyfus BASIC Municipal Bond Portfolio
Dreyfus BASIC Municipal Money Market Portfolio
Dreyfus BASIC New Jersey Municipal Money Market Porfoli
(each a series of Dreyfus BASIC Municipal Fund, Inc.)
----------------------------
SEC file number: 811-6377
More information on these portfolios is available free
upon request, including the following:
Annual/Semiannual Report
Describes each portfolio's performance, lists portfolio
holdings and contains a letter from the portfolio's
manager discussing recent market conditions, economic
trends and fund strategies that significantly affected
the portfolio's performance during the last fiscal year
Statement of Additional Information (SAI)
Provides more details about each portfolio and its
policies. A current SAI is on file with the Securities
and Exchange Commission (SEC) and is incorporated by
reference (is legally considered part of this
prospectus).
To obtain information:
BY TELEPHONE Call 1-800-645-6561
BY MAIL Write to: The Dreyfus Family of Funds 144 Glenn Curtiss Boulevard
Uniondale, NY 11556-0144
BY E-MAIL Send your request to [email protected]
ON THE INTERNET Text-only versions of fund documents can be viewed online or
downloaded from:
SEC
http://www.sec.gov
DREYFUS
http://www.dreyfus.com
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330) or by sending your request and a
duplicating fee to the SEC's Public Reference Section, Washington, DC
20549-6009.
(c) 2000 Dreyfus Service Corporation BMBP0100
DREYFUS BASIC MUNICIPAL FUND, INC.
DREYFUS BASIC INTERMEDIATE MUNICIPAL BOND PORTFOLIO
DREYFUS BASIC MUNICIPAL BOND PORTFOLIO
DREYFUS BASIC MUNICIPAL MONEY MARKET PORTFOLIO
DREYFUS BASIC NEW JERSEY MUNICIPAL MONEY MARKET PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 1, 2000
- ------------------------------------------------------------------------------
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the relevant current
Prospectus of Dreyfus BASIC Intermediate Municipal Bond Portfolio ("Intermediate
Bond Portfolio"), Dreyfus BASIC Municipal Bond Portfolio ("Bond Portfolio"),
Dreyfus BASIC Municipal Money Market Portfolio ("Money Market Portfolio"),
Dreyfus BASIC New Jersey Municipal Money Market Portfolio ("New Jersey
Portfolio") (each, a "Portfolio") of Dreyfus BASIC Municipal Fund, Inc. (the
"Fund"), each dated January 1, 2000, as each may be revised from time to time.
To obtain a copy of the relevant Portfolio's Prospectus, please write to the
Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York 11556-0144, or call one
of the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
Each Portfolio's most recent Annual Report and Semi-Annual Report to
Shareholders are separate documents supplied with this Statement of Additional
Information, and the financial statements, accompanying notes and report of
independent auditors appearing in the Annual Report are incorporated by
reference into this Statement of Additional Information.
TABLE OF CONTENTS
Page
Description of the Fund and
Portfolios...........................................................B-2
Management of the
Fund................................................................B-21
Management
Arrangements........................................................B-25
Shareholder Services
Plan................................................................B-28
How to Buy
Shares..............................................................B-29
How to Redeem
Shares..............................................................B-31
Shareholder
Services............................................................B-33
Determination of Net Asset
Value...............................................................B-35
Dividends, Distributions And
Taxes...............................................................B-36
Portfolio
Transactions........................................................B-39
Performance
Information.........................................................B-40
Information About the Fundand
Portfolios..........................................................B-42
Counsel and Independent
Auditors............................................................B-44
Appendix
A...................................................................B-45
Appendix
B...................................................................B-48
<PAGE>
DESCRIPTION OF THE FUND AND PORTFOLIOS
The Fund is a Maryland corporation that commenced operations on December
16, 1991. The Fund is an open-end management investment company, known as a
mutual fund.
The Dreyfus Corporation (the "Manager") serves as each Portfolio's
investment adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of each Portfolio's shares.
Certain Portfolio Securities
The following information supplements (except as noted) and should be read
in conjunction with the relevant Portfolio's Prospectus.
Municipal Obligations. Each Portfolio will invest at least 80% of the
value of its net assets (except when maintaining a temporary defensive position)
in Municipal Obligations. Municipal Obligations are debt obligations issued by
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, or
multistate agencies or authorities, the interest from which, in the opinion of
bond counsel to the issuer, is exempt from Federal income tax. Municipal
Obligations generally include debt obligations issued to obtain funds for
various public purposes as well as certain industrial development bonds issued
by or on behalf of public authorities. Municipal Obligations are classified as
general obligation bonds, revenue bonds and notes. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for the
payment of principal and interest. Revenue bonds are payable from the revenue
derived from a particular facility or class of facilities or, in some cases,
from the proceeds of a special excise or other specific revenue source, but not
from the general taxing power. Tax exempt industrial development bonds, in most
cases, are revenue bonds that do not carry the pledge of the credit of the
issuing municipality, but generally are guaranteed by the corporate entity on
whose behalf they are issued. Notes are short-term instruments which are
obligations of the issuing municipalities or agencies and are sold in
anticipation of a bond sale, collection of taxes or receipt of other revenues.
Municipal Obligations include municipal lease/purchase agreements which are
similar to installment purchase contracts for property or equipment issued by
municipalities. Municipal Obligations bear fixed, floating or variable rates of
interest. The Intermediate Bond Portfolio and Bond Portfolio (each, a "Longer
Term Portfolio") may purchase Municipal Obligations with interest rates that are
determined by formulas under which the rate will change directly or inversely to
changes in interest rates or an index, or multiples thereof, in many cases
subject to a maximum and minimum. Certain Municipal Obligations purchased by a
Longer Term Portfolio are subject to redemption at a date earlier than their
stated maturity pursuant to call options, which may be separated from the
related Municipal Obligation and purchased and sold separately.
Under normal circumstances, the New Jersey Portfolio will invest at least
65% of the value of its net assets in Municipal Obligations issued by the State
of New Jersey, its political subdivisions, authorities and corporations, and
certain other specified securities, the interest from which, in the opinion of
bond counsel to the issuer, is exempt from New Jersey, as well as Federal,
income taxes (collectively, "New Jersey Municipal Obligations"). To the extent
acceptable New Jersey Municipal Obligations are at any time unavailable for
investment by the New Jersey Portfolio, the New Jersey Portfolio will invest
temporarily in Municipal Obligations exempt from Federal, but not New Jersey,
income taxes.
The yields on Municipal Obligations are dependent on a variety of factors,
including general economic and monetary conditions, money market factors,
conditions in the Municipal Obligations market, size of a particular offering,
maturity of the obligation, and rating of the issue.
Certain Tax Exempt Obligations. Each Portfolio may purchase floating and
variable rate demand notes and bonds, which are tax exempt obligations
ordinarily having stated maturities in excess of 13 months, but which permit the
holder to demand payment of principal at any time, or at specified intervals,
which for the Money Market Portfolio and New Jersey Portfolio (each, a "Short
Term Portfolio") will not exceed 13 months, and in each case will be upon not
more than 30 days' notice. Variable rate demand notes include master demand
notes which are obligations that permit each Portfolio to invest fluctuating
amounts at varying rates of interest pursuant to direct arrangements between the
Portfolio, as lender, and the borrower. These obligations permit daily changes
in the amounts borrowed. Frequently, such obligations are secured by letters of
credit or other credit support arrangements provided by banks. Changes in the
credit quality of banks and other financial institutions that provide such
credit or liquidity enhancements to securities in which a Portfolio invests
could cause losses to the Portfolio and affect its share price. Because these
obligations are direct lending arrangements between the lender and borrower, it
is not contemplated that such instruments generally will be traded, and there
generally is no established secondary market for these obligations, although
they are redeemable at face value, plus accrued interest. Accordingly, where
these obligations are not secured by letters of credit or other credit support
arrangements, the Portfolio's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Each obligation purchased by a
Portfolio will meet the quality criteria established for its purchase of
Municipal Obligations.
Tax Exempt Participation Interests. Each Portfolio may purchase from
financial institutions participation interests in Municipal Obligations (such as
industrial development bonds and municipal lease/purchase agreements). A
participation interest gives a Portfolio an undivided interest in the Municipal
Obligation in the proportion that the Portfolio's participation interest bears
to the total principal amount of the Municipal Obligation. These instruments may
have fixed, floating or variable rates of interest, and, in the case of the
Short Term Portfolio, will have remaining maturities of 13 months or less. If
the participation interest is unrated, it will be backed by an irrevocable
letter of credit or guarantee of a bank that the Fund's Board has determined
meets prescribed quality standards for banks, or the payment obligation
otherwise will be collateralized by U.S. Government securities. For certain
participation interests, a Portfolio will have the right to demand payment, on
not more than seven days' notice, for all or any part of the Portfolio's
participation interest in the Municipal Obligation, plus accrued interest. As to
these instruments, the Portfolio's intends to exercise its right to demand
payment only upon a default under the terms of the Municipal Obligation, as
needed to provide liquidity to meet redemptions, or to maintain or improve the
quality of its investment portfolio.
Municipal lease obligations or installment purchase contract obligations
(collectively, "lease obligations") have special risks not ordinarily associated
with Municipal Obligations. Although lease obligations do not constitute general
obligations of the municipality for which the municipality's taxing power is
pledged, a lease obligation ordinarily is backed by the municipality's covenant
to budget for, appropriate and make the payments due under the lease obligation.
However, certain lease obligations contain "non-appropriation" clauses which
provide that the municipality has no obligation to make lease or installment
purchase payments in future years unless money is appropriated for such purpose
on a yearly basis. Although "non-appropriation" lease obligations are secured by
the leased property, disposition of the property in the event of foreclosure
might prove difficult. The Short Term Portfolios will seek to minimize these
risks by investing only in those lease obligations that (1) are rated in one of
the two highest rating categories for debt obligations by at least two
nationally recognized statistical rating organizations (or one rating
organization if the lease obligation was rated only by one such organization);
or (2) if unrated, are purchased principally from the issuer or domestic banks
or other responsible third parties, in each case only if the seller shall have
entered into an agreement with a Short Term Portfolio providing that the seller
or other responsible third party will either remarket or repurchase the lease
obligation within a short period after demand by such Short Term Portfolio. The
staff of the Securities and Exchange Commission currently considers certain
lease obligations to be illiquid. Determination as to the liquidity of such
securities is made in accordance with guidelines established by the Fund's
Board. Pursuant to such guidelines, the Board has directed the Manager to
monitor carefully the Portfolios' investment in such securities with particular
regard to: (1) the frequency of trades and quotes for the lease obligation; (2)
the number of dealers willing to purchase or sell the lease obligation and the
number of the potential buyers; (3) the willingness of dealers to undertake to
make a market in the lease obligation; (4) the nature of the marketplace trades,
including the time needed to dispose of the mechanics of transfer; and (5) such
other factors concerning the trading market for the lease obligation as the
Manager may deem relevant. In addition, in evaluating the liquidity and credit
quality of a lease obligation that is unrated, the Fund's Board has directed the
Manager to consider (a) whether the lease can be cancelled; (b) what assurance
there is that the assets represented by the lease can be sold; (c) the strength
of the lessee's general credit (e.g., its debt, administrative, economic, and
financial characteristics); (d) the likelihood that the municipality will
discontinue appropriating funding for the leased property because the property
is no longer deemed essential to the operations of the municipality (e.g., the
potential for an "event of nonappropriation"); (e) the legal recourse in the
event of failure to appropriate; and (f) such other factors concerning credit
quality as the Manager may deem relevant. Accordingly, not more than 15% of the
value of the net assets of a Longer Term Portfolio and not more than 10% of the
value of the net assets of a Short Term Portfolio will be invested in lease
obligations that are illiquid and in other illiquid securities.
Tender Option Bonds. Each Portfolio may purchase tender option bonds. A
tender option bond is a Municipal Obligation (generally held pursuant to a
custodial arrangement) having a relatively long maturity and bearing interest at
a fixed rate substantially higher than prevailing short-term tax exempt rates,
that has been coupled with the agreement of a third party, such as a bank,
broker-dealer or other financial institution, pursuant to which such institution
grants the security holders the option, at periodic intervals, to tender their
securities to the institution and receive the face value thereof. As
consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the Municipal Obligation's fixed
coupon rate and the rate, as determined by a remarketing or similar agent at or
near the commencement of such period, that would cause the securities, coupled
with the tender option, to trade at par on the date of such determination. Thus,
after payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax exempt rate. The
Manager, on behalf of the Portfolios, will consider on an ongoing basis the
creditworthiness of the issuer of the underlying Municipal Obligation, of any
custodian and of the third party provider of the tender option. In certain
instances and for certain tender option bonds, the option may be terminable in
the event of a default in payment of principal or interest on the underlying
Municipal Obligations and for other reasons.
Neither Short Term Portfolio will purchase tender option bonds unless (a)
the demand feature applicable thereto is exercisable by such Portfolio within 13
months of the date of such purchase upon no more than 30 days' notice and
thereafter is exercisable by the Portfolio no less frequently than annually upon
no more than 30 days' notice and (b) at the time of such purchase, the Manager
reasonably expects (i) based upon its assessment of current and historical
interest rate trends, that prevailing short-term tax exempt rates will not
exceed the stated interest rate on the underlying Municipal Obligations at the
time of the next tender fee adjustment and (ii) that the circumstances which
might entitle the grantor of a tender option to terminate the tender option
would not occur prior to the time of the next tender opportunity. At the time of
each tender opportunity, a Short Term Portfolio will exercise the tender option
with respect to any tender option bonds unless the Manager reasonably expects,
(x) based upon its assessment of current and historical interest rate trends,
that prevailing short-term tax exempt rates will not exceed the stated interest
rate on the underlying Municipal Obligations at the time of the next tender fee
adjustment, and (y) that the circumstances which entitle the grantor of a tender
option to terminate the tender option would not occur prior to the time of the
next tender opportunity. The Short Term Portfolios will exercise the tender
feature with respect to tender option bonds, or otherwise dispose of its tender
option bonds, prior to the time the tender option is scheduled to expire
pursuant to the terms of the agreement under which the tender option is granted.
Each Short Term Portfolio otherwise will comply with the provisions of Rule 2a-7
in connection with the purchase of tender option bonds, including, without
limitation, the requisite determination by the Fund's Board that the tender
option bonds in question meet the quality standards described in Rule 2a-7,
which, in the case of a tender option bond subject to a conditional demand
feature, would include a determination that the security has received both the
required short-term and long-term quality rating or is determined to be of
comparable quality. In the event of a default of the Municipal Obligation
underlying a tender option bond, or the termination of the tender option
agreement, the particular Short Term Portfolio would look to the maturity date
of the underlying security for purposes of compliance with Rule 2a-7 and, if its
remaining maturity was greater than 13 months, the security would be sold as
soon as would be practicable.
A Longer Term Portfolio will purchase tender option bonds only when the
Fund is satisfied that the custodial and tender option arrangements will not
adversely affect the tax exempt status of the underlying Municipal Obligations
and that payment of any tender fees will not have the effect of creating taxable
income for the Portfolio. Based on the tender option bond agreement, the Fund
expects to be able to value the tender option bond at par; however, the value of
the instrument will be monitored to assure that it is valued at fair value.
Custodial Receipts. (Longer Term Portfolios only) Each Longer Term
Portfolio may purchase custodial receipts representing the right to receive
certain future principal and interest payments on Municipal Obligations which
underlie the custodial receipts. A number of different arrangements are
possible. In a typical custodial receipt arrangement, an issuer or a third party
owner of Municipal Obligations deposits such obligations with a custodian in
exchange for two classes of custodial receipts. The two classes have different
characteristics, but, in each case, payments on the two classes are based on
payments received on the underlying Municipal Obligations. One class has the
characteristics of a typical auction rate security, where at specified intervals
its interest rate is adjusted, and ownership changes, based on an auction
mechanism. This class's interest rate generally is expected to be below the
coupon rate of the underlying Municipal Obligations and generally is at a level
comparable to that of a Municipal Obligation of similar quality and having a
maturity equal to the period between interest rate adjustments. The second class
bears interest at a rate that exceeds the interest rate typically borne by a
security of comparable quality and maturity; this rate also is adjusted, but in
this case inversely to changes in the rate of interest of the first class. In no
event will the aggregate interest paid with respect to the two classes exceed
the interest paid by the underlying Municipal Obligations. The value of the
second class and similar securities should be expected to fluctuate more than
the value of a Municipal Obligation of comparable quality and maturity and the
volatility of the net asset value and, thus, price per share of a Longer Term
Portfolio investing in such securities should increase. These custodial receipts
are sold in private placements. Each Longer Term Portfolio also may purchase
directly from issuers, and not in a private placement, Municipal Obligations
having characteristics similar to custodial receipts. These securities may be
issued as part of a multi-class offering and the interest rate on certain
classes may be subject to a cap or a floor.
Stand-By Commitments. Each Portfolio may acquire "stand-by commitments"
with respect to Municipal Obligations held in its portfolio. Under a stand-by
commitment, a Portfolio obligates a broker, dealer or bank to repurchase, at the
Portfolio's option, specified securities at a specified price and, in this
respect, stand-by commitments are comparable to put options. The exercise of a
stand-by commitment therefore is subject to the ability of the seller to make
payment on demand. Each Portfolio will acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise any such rights
thereunder for trading purposes. Each Portfolio may pay for stand-by commitments
if such action is deemed necessary, thus increasing to a degree the cost of the
underlying Municipal Obligation and similarly decreasing such security's yield
to investors. Gains realized in connection with stand-by commitments will be
taxable. The Longer Term Portfolios also may acquire call options on specific
Municipal Obligations. A Longer Term Portfolio generally would purchase these
call options to protect it from the issuer of the related Municipal Obligation
redeeming, or other holder of the call option from calling away, the Municipal
Obligation before maturity. The sale by a Longer Term Portfolio of a call option
that it owns on a specific Municipal Obligation could result in the receipt of
taxable income by the Portfolio. The New Jersey Portfolio will acquire stand-by
commitments only to the extent consistent with the requirements for a "qualified
investment fund" under the New Jersey gross income tax.
Ratings of Municipal Obligations. At least 65% of the value of each Longer
Term Portfolio's net assets will consist of Municipal Obligations which, in the
case of bonds, are rated no lower than A by Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Ratings Group ("S&P") or Fitch IBCA, Inc.
("Fitch" and, together with Moody's and S&P, the "Rating Agencies") or, if
unrated, deemed to be of comparable quality by the Manager. Each Longer Term
Portfolio may invest up to 35% of the value of its net assets in Municipal
Obligations which, in the case of bonds, are rated lower than A by the Rating
Agencies and as low as the lowest rating assigned by a Rating Agency. Each
Longer Term Portfolio may invest in short-term Municipal Obligations which are
rated in the two highest rating categories by a Rating Agency. Although there is
no current intention of doing so, each Longer Term Portfolio may invest in
Municipal Obligations rated C by Moody's or D by S&P or Fitch, which is the
lowest rating assigned by such Rating Agencies and indicates that the Municipal
Obligation is in default and interest and/or repayment of principal is in
arrears.
Each Short Term Portfolio may invest only in those Municipal Obligations
which are rated in one of the two highest rating categories for debt obligations
by at least two Rating Agencies (or one Rating Agency if the instrument was
rated by only one Rating Agency) or, if unrated, are of comparable quality as
determined in accordance with procedures established by the Fund's Board.
The average distribution of investments (at value) in Municipal
Obligations by ratings for the fiscal year ended August 31, 1999, in each case
computed on a monthly basis, was as follows:
Percentage of Value
-----------------------------------
Fitch or Moody's or S&P
Money Market Portfolio New
Jersey Portfolio
F1+/F1 VMIG 1/MIG SP-1+/SP-1,
1,
P-1 A-1+/A1
F-2 MIG 2 SP-2
AAA Aaa AAA
AA Aa AA
(1) (2)
----------- --------
100.0% 100.0%
====== ======
Percentage of Value
----------------------------------
Fitch or Moody's or S&P Bond Intermediate
- ----------- ------------- -----------
Portfolio Bond
Portfolio
AAA Aaa AAA
AA Aa AA
A A A
BBB Baa BBB
BB Ba BB
B B B
F1+/F1 MIG 1/VMIG SP-1+/SP-1,
1,
P-1 A-1+/A1
Not Rated Not Rated Not Rated (3) (4)
-------- ---
100.0% 100.0%
====== ======
(1) Included in the Not Rated category are securities comprising ___% of the
Money Market Portfolio's market value which, while not rated, have been
determined by the Manager to be of comparable quality to securities in the
MIG 1/VMIG 1 rating category.
(2) Included in the Not Rated category are securities comprising ____% of the
New Jersey Portfolio's market value which, while not rated, have been
determined by the Manager to be of comparable quality to securities in the
MIG 1/VMIG1 rating category.
(3) Included in the Not Rated category are securities comprising ___% of the
Bond Portfolio's market value which, while not rated, have been determined
by the Manager to be of comparable quality to securities rated as follows:
Baa/BBB (___%) and B/B (___%).
(4) Included in the Not Rated category are securities comprising ___% of the
Intermediate Bond Portfolio's market value which, while not rated, have
been determined by the Manager to be of comparable quality to securities
rated as follows: Aaa/AAA (___%) and Baa/BBB (___%).
If, subsequent to being purchased by a Short Term Portfolio, (a) an issue
of rated Municipal Obligations ceases to be rated in the highest rating category
by at least two rating organizations (or one rating organization if the
instrument was rated by only one organization), or the Fund's Board determines
that it is no longer of comparable quality; or (b) the Manager becomes aware
that any portfolio security not so highly rated or any unrated security has been
given a rating by any rating organization below the rating organization's second
highest rating category, the Fund's Board will reassess promptly whether such
security presents minimal credit risk and will cause a Short Term Portfolio to
take such action as it determines is in the best interest of a Short Term
Portfolio and its shareholders, provided that the reassessment required by
clause (b) is not required if the portfolio security is disposed of or matures
within five business days of the Manager becoming aware of the new rating and
the Fund's Board is subsequently notified of the Manager's actions. Subsequent
to being purchased by a Longer Term Portfolio, an issue of rated Municipal
Obligations may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Portfolio. Neither event will require the sale of
such Municipal Obligations by a Longer Term Portfolio, but the Manager will
consider such event in determining whether the Portfolio should continue to hold
the Municipal Obligations.
To the extent the ratings by a Rating Agency for Municipal Obligations may
change as a result of changes in such organization or its rating system, the
Fund will attempt to use comparable ratings as standards for Portfolio
investments in accordance with the investment policies contained in the relevant
Portfolio's Prospectus and this Statement of Additional Information. The ratings
of the Rating Agencies represent their opinions as to the quality of the
Municipal Obligations which they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute standards
of quality. Although these ratings may be an initial criterion for selection of
portfolio investments, the Manager also will evaluate these securities and the
creditworthiness of the issuers of such securities.
Zero Coupon Securities. (Longer Term Portfolios only) Each Longer Term
Portfolio may invest in zero coupon securities which are debt securities issued
or sold at a discount from their face value which do not entitle the holder to
any periodic payment of interest prior to maturity or a specified redemption
date (or cash payment date) and pay-in-kind bonds (bonds which pay interest
through the issuance of additional bonds). The amount of the discount varies
depending on the time remaining until maturity or cash payment date, prevailing
interest rates, liquidity of the security and perceived credit quality of the
issuer. Zero coupon securities also may take the form of debt securities that
have been stripped of their unmatured interest coupons, the coupons themselves
and receipts or certificates representing interests in such stripped debt
obligations and coupons. The market prices of zero coupon securities generally
are more volatile than the market prices of securities that pay interest
periodically and are likely to respond to a greater degree to changes in
interest rates than non-zero coupon securities having similar maturities and
credit qualities. Each Longer Term Portfolio may invest up to 5% of its assets
in zero coupon bonds and pay-in-kind bonds which are rated below investment
grade.
Illiquid Securities. Each Longer Term Portfolio may invest up to 15% and
each Short Term Portfolio may invest up to 10% of the value of its net assets in
securities as to which a liquid trading market does not exist, provided such
investments are consistent with the Portfolio's investment objective. These
securities may include securities that are not readily marketable, such as
securities that are subject to legal or contractual restrictions on resale, and
repurchase agreements providing for settlement in more than seven days after
notice. As to these securities, the Portfolio investing in such securities is
subject to a risk that should the Portfolio desire to sell them when a ready
buyer is not available at a price the Portfolio deems representative of their
value, the value of the Portfolio's net assets could be adversely affected.
Taxable Investments. From time to time, on a temporary basis other than
for temporary defensive purposes (but not to exceed 20% of the value of its net
assets) or for temporary defensive purposes, a Portfolio may invest in taxable
short-term investments ("Taxable Investments") consisting of: notes of issuers
having, at the time of purchase, a quality rating within the two highest grades
of a Rating Agency; obligations of the U.S. Government, its agencies or
instrumentalities; commercial paper rated not lower than P-2 by Moody's, A-2 by
S&P or F-2 by Fitch; certificates of deposit of U.S. domestic banks, including
foreign branches of domestic banks, with assets of $1 billion or more; time
deposits; bankers' acceptances and other short-term bank obligations; and
repurchase agreements in respect of any of the foregoing. Dividends paid by a
Portfolio that are attributable to income earned by such Portfolio from Taxable
Investments will be taxable to investors. See "Dividends, Distributions and
Taxes." Except for temporary defensive purposes, at no time will more than 20%
of the value of a Portfolio's net assets be invested in Taxable Investments. If
either Short Term Portfolio purchases Taxable Investments, it will value them
using the amortized cost method and comply with Rule 2a-7 relating to purchases
of taxable instruments. When the New Jersey Portfolio has adopted a temporary
defensive position, including when acceptable New Jersey Municipal Obligations
are unavailable for investment by the New Jersey Portfolio, in excess of 35% of
the New Jersey Portfolio's net assets may be invested in securities that are not
exempt from State of New Jersey income tax. Under normal market conditions, each
Portfolio anticipates that not more than 5% of the value of its total assets
will be invested in any one category of Taxable Investments.
Securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities include U.S. Treasury securities, which differ in their
interest rates, maturities and times of issuance. Some obligations issued or
guaranteed by U.S. Government agencies and instrumentalities are supported by
the full faith and credit of the U.S. Treasury; others by the right of the
issuer to borrow from the U.S. Treasury; others by discretionary authority of
the U.S. Government to purchase certain obligations of the agency or
instrumentality; and others only by the credit of the agency or instrumentality.
These securities bear fixed, floating or variable rates of interest. Interest
may fluctuate based on generally recognized reference rates or the relationship
of rates. While the U.S. Government provides financial support to such U.S.
Government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law.
Commercial paper consists of short-term, unsecured promissory notes issued
to finance short-term credit needs.
Certificates of deposit are negotiable certificates representing the
obligation of a bank to repay funds deposited with it for a specified period of
time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven days)
at a stated interest rate. Investments in time deposits generally are limited to
London branches of domestic banks that have total assets in excess of $1
billion. Time deposits which may be held by a Portfolio will not benefit from
insurance from the Bank Insurance Fund or the Savings Association Insurance Fund
administered by the Federal Deposit Insurance Corporation.
Bankers' acceptances are credit instruments evidencing the obligation of a
bank to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. Other short-term bank obligations may include
uninsured, direct obligations bearing fixed, floating or variable interest
rates.
In a repurchase agreement, the Portfolio buys, and the seller agrees to
repurchase, a security at a mutually agreed upon time and price (usually within
seven days). The repurchase agreement thereby determines the yield during the
purchaser's holding period, while the seller's obligation to repurchase is
secured by the value of the underlying security. The Fund's custodian or
sub-custodian will have custody of, and will hold in a segregated account,
securities acquired by the Portfolio under a repurchase agreement. Repurchase
agreements are considered by the Staff of the Securities and Exchange Commission
to be loans by the Portfolio that enters into them. Repurchase agreements could
involve risks in the event of a default or insolvency of the other party to the
agreement, including possible delays or restrictions upon the Portfolio ability
to dispose of the underlying securities. In an attempt to reduce the risk of
incurring a loss on a repurchase agreement, a Portfolio will enter into
repurchase agreements only with domestic banks with total assets in excess of $1
billion, or primary government securities dealers reporting to the Federal
Reserve Bank of New York, with respect to securities of the type in which the
Portfolio may invest, and will require that additional securities be deposited
with it if the value of the securities purchased should decrease below resale
price.
Investment Techniques
The following information supplements and should be read in conjunction
with the relevant Portfolio's Prospectus. A Portfolio's use of certain of the
investment techniques described below may give rise to taxable income.
Borrowing Money. Each Longer Term Portfolio and the New Jersey Portfolio
is permitted to borrow to the extent permitted under the Investment Company Act
of 1940, as amended (the "1940 Act"), which permits an investment company to
borrow in an amount up to 33-1/3% of the value of its total assets. Each Longer
Term Portfolio and the New Jersey Portfolio currently intends to, and the Money
Market Portfolio may, borrow money only for temporary or emergency (not
leveraging) purposes, in an amount up to 15% of the value of such Portfolio's
total assets (including the amount borrowed) valued at the lesser of cost or
market, less liabilities (not including the amount borrowed) at the time the
borrowing is made. While borrowings exceed 5% of a Portfolio's total assets,
such Portfolio will not make any additional investments.
Derivatives. (Longer Term Portfolios only) Each Longer Term Portfolio may
invest in, or enter into, derivatives, such as options and futures, for a
variety of reasons, including to hedge certain market risks, to provide a
substitute for purchasing or selling particular securities or to increase
potential income gain. Derivatives may provide a cheaper, quicker or more
specifically focused way for a Portfolio to invest than "traditional" securities
would.
Derivatives can be volatile and involve various types and degrees of risk,
depending upon the characteristics of the particular derivative and the
portfolio as a whole. Derivatives permit a Longer Term Portfolio to increase or
decrease the level of risk, or change the character of the risk, to which its
portfolio is exposed in much the same way as the Portfolio can increase or
decrease the level of risk, or change the character of the risk, of its
portfolio by making investments in specific securities. However, derivatives may
entail investment exposures that are greater than their cost would suggest,
meaning that a small investment in derivatives could have a large potential
impact on the Portfolio's performance.
If a Longer Term Portfolio invests in derivatives at inopportune times or
judges market conditions incorrectly, such investments may lower the Portfolio's
return or result in a loss. The Portfolio also could experience losses if its
derivatives were poorly correlated with its other investments, or if the
Portfolio were unable to liquidate its position because of an illiquid secondary
market. The market for many derivatives is, or suddenly can become, illiquid.
Changes in liquidity may result in significant, rapid and unpredictable changes
in the prices for derivatives.
Although neither Longer Term Portfolio will be a commodity pool, certain
derivatives subject the Portfolios to the rules of the Commodity Futures Trading
Commission which limit the extent to which a Portfolio can invest in such
derivatives. A Portfolio may invest in futures contracts and options with
respect thereto for hedging purposes without limit. However, a Portfolio may not
invest in such contracts and options for other purposes if the sum of the amount
of initial margin deposits and premiums paid for unexpired options with respect
to such contracts, other than for bona fide hedging purposes, exceeds 5% of the
liquidation value of the Portfolio's assets, after taking into account
unrealized profits and unrealized losses on such contracts and options;
provided, however, that in the case of an option that is in-the-money at the
time of purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
Derivatives may be purchased on established exchanges or through privately
negotiated transactions referred to as over-the-counter derivatives.
Exchange-traded derivatives generally are guaranteed by the clearing agency
which is the issuer or counterparty to such derivatives. This guarantee usually
is supported by a daily variation margin system operated by the clearing agency
in order to reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk associated with
derivatives purchased on an exchange. By contrast, no clearing agency guarantees
over-the-counter derivatives. Therefore, each party to an over-the-counter
derivative bears the risk that the counterparty will default. Accordingly, the
Manager will consider the creditworthiness of counterparties to over-the-counter
derivatives in the same manner as it would review the credit quality of a
security to be purchased by a Longer Term Portfolio. Over-the-counter
derivatives are less liquid than exchange-traded derivatives since the other
party to the transaction may be the only investor with sufficient understanding
of the derivative to be interested in bidding for it.
Futures Transactions--In General. Each Longer Term Portfolio may enter into
futures contracts in U.S. domestic markets. Engaging in these transactions
involves risk of loss to a Portfolio which could adversely affect the value of
the Portfolio's net assets. Although the Portfolio intends to purchase or sell
futures contracts only if there is an active market for such contracts, no
assurance can be given that a liquid market will exist for any particular
contract at any particular time. Many futures exchanges and boards of trade
limit the amount of fluctuation permitted in futures contract prices during a
single trading day. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond that limit or trading
may be suspended for specified periods during the trading day. Futures contract
prices could move to the limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions and
potentially subjecting the Portfolio to substantial losses.
Successful use of futures by a Longer Term Portfolio also is subject to
the Manager's ability to predict correctly movements in the direction of the
relevant market and, to the extent the transaction is entered into for hedging
purposes, to ascertain the appropriate correlation between the securities being
hedged and the price movements of the futures contract. For example, if a
Portfolio uses futures to hedge against the possibility of a decline in the
market value of securities held in its portfolio and the prices of such
securities instead increase, the Portfolio will lose part or all of the benefit
of the increased value of securities which it has hedged because it will have
offsetting losses in its futures positions. Furthermore, if in such
circumstances the Portfolio has insufficient cash, it may have to sell
securities to meet daily variation margin requirements, in which case the
Portfolio may have to sell such securities at a time when it may be
disadvantageous to do so.
Pursuant to regulations and/or published positions of the Securities and
Exchange Commission, a Longer Term Portfolio may be required to segregate
permissible liquid assets to cover its obligations relating to its transactions
in derivatives. To maintain this required cover, the Portfolio may have to sell
portfolio securities at disadvantageous prices or times since it may not be
possible to liquidate a derivative position at a reasonable price. In addition,
the segregation of such assets will have the effect of limiting the Portfolio's
ability otherwise to invest those assets.
Specific Futures Transactions. Each Longer Term Portfolio may purchase and sell
interest rate futures contracts. An interest rate future obligates the Portfolio
to purchase or sell an amount of a specific debt security at a future date at a
specific price.
Options--In General. Each Longer Term Portfolio may invest up to 5% of its
assets, represented by the premium paid, in the purchase of call and put options
with respect to interest rate futures contracts. A Longer Term Portfolio may
write (i.e., sell) covered call and put option contracts to the extent of 20% of
the value of its net assets at the time such option contracts are written. A
call option gives the purchaser of the option the right to buy, and obligates
the writer to sell, the underlying security or securities at the exercise price
at any time during the option period, or at a specific date. Conversely, a put
option gives the purchaser of the option the right to sell, and obligates the
writer to buy, the underlying security or securities at the exercise price at
any time during the option period, or at a specific date.
A covered call option written by a Longer Term Portfolio is a call option
with respect to which the Portfolio owns the underlying security or otherwise
covers the transaction by segregating permissible liquid assets. A put option
written by a Longer Term Portfolio is covered when, among other things, the
Portfolio segregates permissible liquid assets having a value equal to or
greater than the exercise price of the option to fulfill the obligation
undertaken. The principal reason for writing covered call and put options is to
realize, through the receipt of premiums, a greater return than would be
realized on the underlying securities alone. The Portfolio receives a premium
from writing covered call or put options which it retains whether or not the
option is exercised.
There is no assurance that sufficient trading interest to create a liquid
secondary market on a securities exchange will exist for any particular option
or at any particular time, and for some options no such secondary market may
exist. A liquid secondary market in an option may cease to exist for a variety
of reasons. In the past, for example, higher than anticipated trading activity
or order flow, or other unforeseen events, at times have rendered certain of the
clearing facilities inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it might
not be possible to effect closing transactions in particular options. If, as a
covered call option writer, a Longer Term Portfolio is unable to effect a
closing purchase transaction in a secondary market, it will not be able to sell
the underlying security until the option expires or it delivers the underlying
security upon exercise or it otherwise covers its position.
Successful use by a Longer Term Portfolio of options will be subject to
the Manager's ability to predict correctly movements in interest rates. To the
extent the Manager's predictions are incorrect, the Portfolio may incur losses.
Future Developments. (Longer Term Portfolios only) Each Longer Term
Portfolio may take advantage of opportunities in the area of options and futures
contracts and options on futures contracts and any other derivatives which are
not presently contemplated for use by a Longer Term Portfolio or which are not
currently available but which may be developed, to the extent such opportunities
are both consistent with the Portfolio's investment objective and legally
permissible for such Portfolio. Before entering into such transactions or making
any such investment, appropriate disclosure will be provided in the Longer Term
Portfolios' Prospectus or this Statement of Additional Information.
Lending Portfolio Securities. (Longer Term and New Jersey Portfolios only)
Each Longer Term Portfolio and the New Jersey Portfolio may lend securities from
its portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Portfolio continues to
be entitled to payments in amounts equal to the interest or other distributions
payable on the loaned securities which affords the Portfolio an opportunity to
earn interest on the amount of the loan and on the loaned securities'
collateral. Loans of portfolio securities may not exceed 33-1/3% of the value of
a Portfolio's total assets, and the Portfolio will receive collateral consisting
of cash, U.S. Government securities or irrevocable letters of credit which will
be maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Such loans are terminable by the
Portfolio at any time upon specified notice. A Portfolio might experience risk
of loss if the institution with which it has engaged in a portfolio loan
transaction breaches its agreement with the Portfolio. In connection with its
securities lending transactions, a Portfolio may return to the borrower or a
third party which is unaffiliated with the Fund, and which is acting as a
"placing broker," a part of the interest earned from the investment of
collateral received for securities loaned. The New Jersey Portolio currently
does not intend to lend portfolio securities.
Short Selling. (Longer Term Portfolios only) Each Longer Term Portfolio
may make short sales, which are transactions in which the Portfolio sells a
security it does not own in anticipation of a decline in the market value of
that security. To complete the transaction, the Portfolio must borrow the
security to make delivery to the buyer. The Portfolio is obligated to replace
the security borrowed by purchasing it subsequently at the market price at the
time of replacement. The price at such time may be more or less than the price
at which the security was sold by the Portfolio, which would result in a loss or
gain, respectively.
Securities will not be sold short if, after effect is given to any such
short sale, the total market value of all securities sold short would exceed 25%
of the value of such Portfolio's net assets. A Longer Term Portfolio may not
make a short sale which results in the Portfolio having sold short in the
aggregate more than 5% of the outstanding securities of any class of an issuer.
Each Longer Term Portfolio also may make short sales "against the box," in
which the Portfolio enters into a short sale of a security which the Portfolio
owns. Neither Longer Term Portfolio will at any time have more than 15% of the
value of its net assets in deposits on short sales against the box.
Until the Portfolio replaces a borrowed security in connection with a
short sale, the Portfolio will: (a) segregate permissible liquid assets in an
amount that, together with the amount deposited with the broker as collateral,
always equals the current value of the security sold short; or (b) otherwise
cover its short position.
Forward Commitments. Each Portfolio may purchase Municipal Obligations and
other securities on a forward commitment, when-issued or delayed-delivery basis,
which means that delivery and payment take place a number of days after the date
of the commitment to purchase. The payment obligation and the interest rate
receivable on a forward commitment or when-issued security are fixed when the
Portfolio enters into the commitment, but the Portfolio does not make payment
until it receives delivery from the counterparty. The Portfolio will commit to
purchase such securities only with the intention of actually acquiring the
securities, but the Portfolio may sell these securities before the settlement
date if it is deemed advisable. The Portfolio will segregate permissible liquid
assets at least equal at all times to the amount of the Portfolio's purchase
commitments.
Municipal Obligations and other securities purchased on a forward
commitment or when-issued basis are subject to changes in value (generally
changing in the same way, i.e., appreciating when interest rates decline and
depreciating when interest rates rise) based upon the public's perception of the
creditworthiness of the issuer and changes, real or anticipated, in the level of
interest rates. Securities purchased on a when-issued basis may expose a
Portfolio to risks because they may experience such fluctuations prior to their
actual delivery. Purchasing securities on a when-issued basis can involve the
additional risk that the yield available in the market when the delivery takes
place actually may be higher than that obtained in the transaction itself.
Purchasing securities on a when-issued basis when a Portfolio is fully or almost
fully invested may result in greater potential fluctuation in the value of the
Portfolio's net assets and its net asset value per share.
Investment Considerations and Risks
General. The Fund is designed to benefit investors who do not engage in
frequent redemptions or exchanges of Portfolio shares. Because charges may apply
to redemptions and exchanges of Portfolio shares, and because the number of
exchanges permitted is limited, the Fund may not be an appropriate investment
for an investor who intends to engage frequently in such transactions.
Even though interest-bearing securities are investments which promise a
stable stream of income, the prices of such securities are inversely affected by
changes in interest rates and, therefore, are subject to the risk of market
price fluctuations. Certain securities that may be purchased by a Longer Term
Portfolio, such as those with interest rates that fluctuate directly or
indirectly based on multiples of a stated index, are designed to be highly
sensitive to changes in interest rates and can subject the holders thereof to
extreme reductions of yield and possibly loss of principal. The values of
fixed-income securities also may be affected by changes in the credit rating or
financial condition of the issuing entities. Once the rating of a security held
by a Longer Term Portfolio has been changed, the Portfolio will consider all
circumstances deemed relevant in determining whether to continue to hold the
security. Each Short Term Portfolio seeks to maintain a stable $1.00 share
price, while the net asset value of each Longer Term Portfolio generally will
not be stable and should fluctuate based upon changes in the value of its
respective portfolio securities. Securities in which a Longer Term Portfolio
invests may earn a higher level of current income than certain shorter-term or
higher quality securities which generally have greater liquidity, less market
risk and less fluctuation in market value.
Investing in Municipal Obligations. Each Portfolio may invest more than
25% of the value of its total assets in Municipal Obligations which are related
in such a way that an economic, business or political development or change
affecting one such security also would affect the other securities; for example,
securities the interest upon which is paid from revenues of similar types of
projects, or securities whose issuers are located in the same state. As a
result, each Portfolio may be subject to greater risk as compared to a fund that
does not follow this practice.
Certain municipal lease/purchase obligations in which a Portfolio may
invest may contain "non-appropriation" clauses which provide that the
municipality has no obligation to make lease payments in future years unless
money is appropriated for such purpose on a yearly basis. Although
"non-appropriation" lease/purchase obligations are secured by the leased
property, disposition of the leased property in the event of foreclosure might
prove difficult. In evaluating the credit quality of a municipal lease/purchase
obligation that is unrated, the Manager will consider, on an ongoing basis, a
number of factors including the likelihood that the issuing municipality will
discontinue appropriating funding for the leased property.
Certain provisions in the Internal Revenue Code of 1986, as amended (the
"Code"), relating to the issuance of Municipal Obligations may reduce the volume
of Municipal Obligations qualifying for Federal tax exemption. One effect of
these provisions could be to increase the cost of the Municipal Obligations
available for purchase by a Portfolio and thus reduce the available yield.
Shareholders should consult their tax advisers concerning the effect of these
provisions on an investment in a Portfolio. Proposals that may restrict or
eliminate the income tax exemption for interest on Municipal Obligations may be
introduced in the future. If any such proposal were enacted that would reduce
the availability of Municipal Obligations for investment by a Portfolio so as to
adversely affect its shareholders, such Portfolio would reevaluate its
investment objective and policies and submit possible changes in its structure
to shareholders for their consideration. If legislation were enacted that would
treat a type of Municipal Obligation as taxable, each Portfolio would treat such
security as a permissible Taxable Investment within the applicable limits set
forth herein.
Investing in New Jersey Municipal Obligations. (New Jersey Portfolio only)
Investors in the New Jersey Portfolio should consider carefully the special
risks inherent in the New Jersey Portfolio's investment in New Jersey Municipal
Obligations. These risks result from the financial condition of the State of New
Jersey. If there should be a default or other financial crisis relating to the
State of New Jersey or an agency of municipality thereof, the market value and
marketability of outstanding New Jersey Municipal Obligations in the New Jersey
Portfolio and interest income to the Fund could be adversely affected. Investors
in the New Jersey Portfolio should review "Appendix A" which provides a brief
description of New Jersey's recent economic condition.
Lower Rated Securities. (Longer Term Portfolios only) Each Longer Term
Portfolio may invest up to 35% of the value of its net assets in higher yielding
(and, therefore, higher risk) debt securities, such as those rated Ba by Moody's
or BB by S&P or Fitch, or as low as the lowest rating assigned by a Rating
Agency (commonly known as junk bonds). They may be subject to certain risks with
respect to the issuing entity and to greater market fluctuations than certain
lower yielding, higher rated fixed-income securities. See "Appendix B" for a
general description of the Rating Agencies' ratings of Municipal Obligations.
Although ratings may be useful in evaluating the safety of interest and
principal payments, they do not evaluate the market value risk of these bonds.
Each Longer Term Portfolio will rely on the Manager's judgment, analysis and
experience in evaluating the creditworthiness of an issuer.
You should be aware that the market values of many of these bonds tend to
be more sensitive to economic conditions than are higher rated securities and
will fluctuate over time. These bonds generally are considered by the Rating
Agencies to be, on balance, predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of the
obligation and generally will involve more credit risk than securities in the
higher rating categories.
Because there is no established retail secondary market for many of these
securities, the Fund anticipates that such securities could be sold only to a
limited number of dealers or institutional investors. To the extent a secondary
trading market for these bonds does exist, it generally is not as liquid as the
secondary market for higher rated securities. The lack of a liquid secondary
market may have an adverse impact on market price and yield and a Longer Term
Portfolio's ability to dispose of particular issues when necessary to meet its
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for a
Portfolio to obtain accurate market quotations for purposes of valuing its
portfolio and calculating its net asset value. Adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of these securities. In such cases, judgment may play a
greater role in valuation because less reliable objective data may be available.
These bonds may be particularly susceptible to economic downturns. It is
likely that any economic recession would disrupt severely the market for such
securities and may have an adverse impact on the value of such securities, and
could adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon which would increase the incidence of default
for such securities.
Each Longer Term Portfolio may acquire these bonds during an initial
offering. Such securities may involve special risks because they are new issues.
Neither Portfolio has any arrangement with any person concerning the acquisition
of such securities, and the Manager will review carefully the credit and other
characteristics pertinent to such new issues.
The credit risk factors pertaining to lower rated securities also apply to
lower rated zero coupon bonds and pay-in-kind bonds, in which each Longer Term
Portfolio may invest up to 5% of its total assets. Zero coupon bonds and
pay-in-kind bonds carry an additional risk in that, unlike bonds which pay
interest throughout the period to maturity, the Portfolio will realize no cash
until the cash payment date unless a portion of such securities are sold and, if
the issuer defaults, the Portfolio may obtain no return at all on its
investment. See "Zero Coupon Securities" below, and "Dividends, Distributions
and Taxes."
Zero Coupon Securities. (Longer Term Portfolios only) The Fund may invest
in zero coupon securities and pay-in-kind bonds (bonds which pay interest
through the issuance of additional bonds). Federal income tax law requires the
holder of a zero coupon security or of certain pay-in-kind bonds to accrue
income with respect to these securities prior to the receipt of cash payments.
To maintain its qualification as a regulated investment company and avoid
liability for Federal income taxes, a Portfolio may be required to distribute
such income accrued with respect to these securities and may have to dispose of
portfolio securities under disadvantageous circumstances in order to generate
cash to satisfy these distribution requirements.
Simultaneous Investments. Investment decisions for each Portfolio are made
independently from those of other investment companies advised by the Manager.
If, however, such other investment companies desire to invest in, or dispose of,
the same securities as a Portfolio, available investments or opportunities for
sales will be allocated equitably to each investment company. In some cases,
this procedure may adversely affect the size of the position obtained for or
disposed of by a Portfolio or the price paid or received by it.
Investment Restrictions
Each Portfolio's investment objective is a fundamental policy, which
cannot be changed without approval by the holders of a majority (as defined in
the 1940 Act) of the Portfolio's outstanding voting shares. In addition, the
Portfolios have adopted certain investment restrictions as fundamental policies
and certain other investment restrictions as non-fundamental policies, as
described below.
Money Market Portfolio only. The Money Market Portfolio has adopted
investment restrictions numbered 1 through 10 as fundamental policies, which
cannot be changed without approval by the holders of a majority (as defined in
the 1940 Act) of such Portfolio's outstanding voting shares. Investment
restriction number 11 is not a fundamental policy and may be changed by a vote
of a majority of the Fund's Board members at any time. The Money Market
Portfolio may not:
1. Purchase securities other than Municipal Obligations and Taxable
Investments as those terms are defined above and in the Prospectus for the
Portfolio.
2. Borrow money, except from banks for temporary or emergency (not
leveraging) purposes in an amount up to 15% of the value of the Portfolio's
total assets (including the amount borrowed) based on the lesser of cost or
market, less liabilities (not including the amount borrowed) at the time the
borrowing is made. While borrowings exceed 5% of the value of the Portfolio's
total assets, the Portfolio will not make any additional investments.
3. Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to secure borrowings for temporary or emergency purposes.
4. Sell securities short or purchase securities on margin.
5. Underwrite the securities of other issuers, except that the Portfolio
may bid separately or as part of a group for the purchase of Municipal
Obligations directly from an issuer for its own portfolio to take advantage of
the lower purchase price available.
6. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or oil and gas interests, but this shall not
prevent the Portfolio from investing in Municipal Obligations secured by real
estate or interests therein.
7. Make loans to others except through the purchase of qualified debt
obligations and the entry into repurchase agreements referred to above and in
the Prospectus for the Portfolio.
8. Invest more than 25% of its total assets in the securities of issuers
in any single industry; provided that there shall be no such limitation on the
purchase of Municipal Obligations and, for temporary defensive purposes,
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
9. Invest in companies for the purpose of exercising control.
10. Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets.
11. Enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities which are illiquid if, in the
aggregate, more than 10% of its net assets would be so invested.
* * *
Intermediate Bond Portfolio, Bond Portfolio and New Jersey Portfolio. Each
of the Longer Term Portfolios and the New Jersey Portfolio has adopted
investment restrictions numbered 1 through 7 as fundamental policies, which
cannot be changed, as to a Portfolio, without approval by the holders of a
majority (as defined in the 1940 Act) of such Portfolio's outstanding voting
shares. Investment restrictions numbered 8 through 13 are not fundamental
policies and may be changed by vote of a majority of the Fund's Board members at
any time. None of these Portfolios may:
1. Invest more than 25% of its total assets in the securities of issuers
in any single industry; provided that there shall be no such limitation on the
purchase of Municipal Obligations and, for temporary defensive purposes,
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
2. Borrow money, except to the extent permitted under the 1940 Act (which
currently limits borrowing to no more than 33-1/3% of the value of the
Portfolio's total assets). For purposes of this investment restriction, the
entry into options, forward contracts, futures contracts, including those
relating to indices, and options on futures contracts or indices shall not
constitute borrowing.
3. Purchase or sell real estate, commodities or commodity contracts, or
oil and gas interests, but this shall not prevent the Portfolio from investing
in Municipal Obligations secured by real estate or interests therein, or prevent
the Portfolio from purchasing and selling options, forward contracts, futures
contracts, including those relating to indices, and options on futures contracts
or indices.
4. Underwrite the securities of other issuers, except that the Portfolio
may bid separately or as part of a group for the purchase of Municipal
Obligations directly from an issuer for its own portfolio to take advantage of
the lower purchase price available, and except to the extent the Portfolio may
be deemed an underwriter under the Securities Act of 1933, as amended, by virtue
of disposing of portfolio securities.
5. Make loans to others, except through the purchase of debt obligations
and the entry into repurchase agreements; however, the Portfolio may lend its
portfolio securities in an amount not to exceed 33-1/3% of the value of its
total assets. Any loans of portfolio securities will be made according to
guidelines established by the Securities and Exchange Commission and the Fund's
Board.
6. Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), except to the extent that the activities permitted in Investment
Restrictions numbered 2, 3, 10 and 11 may be deemed to give rise to a senior
security.
7. Purchase securities on margin, but the Portfolio may make margin
deposits in connection with transactions in options, forward contracts, futures
contracts, including those relating to indices, and options on futures contracts
or indices.
8. Purchase securities other than Municipal Obligations and Taxable
Investments and those arising out of transactions in futures and options or as
otherwise provided in the Portfolio's Prospectus.
9. Invest in securities of other investment companies, except to the
extent permitted under the 1940 Act.
10. Pledge, hypothecate, mortgage or otherwise encumber its assets, except
to the extent necessary to secure permitted borrowings and to the extent related
to the deposit of assets in escrow in connection with the purchase of securities
on a when-issued or delayed-delivery basis and collateral and initial or
variation margin arrangements with respect to options, forward contracts,
futures contracts, including those related to indices, and options on futures
contracts or indices.
11. Purchase, sell or write puts, calls or combinations thereof, except as
described in the Portfolio's Prospectus and Statement of Additional Information.
12. Enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities which are illiquid (which
securities could include participation interests (including municipal
lease/purchase agreements) and floating and variable rate demand obligations as
to which the Portfolio cannot exercise the demand feature as described in the
Portfolio's Prospectus on less than seven days' notice and as to which there is
no secondary market), if, in the aggregate, more than 15% (10% in the case of
the New Jersey Portfolio) of its net assets would be so invested.
13. Invest in companies for the purpose of exercising control.
* * *
For purposes of Investment Restriction No. 8 with respect to the Money
Market Portfolio, and Investment Restriction No. 1 with respect to each other
Portfolio, industrial development bonds, where the payment of principal and
interest is the ultimate responsibility of companies within the same industry,
are grouped together as an "industry."
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values or
assets will not constitute a violation of such restriction.
MANAGEMENT OF THE FUND
The Fund's Board is responsible for the management and supervision of the
Portfolios. The Board approves all significant agreements between the Fund, on
behalf of the Portfolios, and those companies that furnish services to the
Portfolios. These companies are as follows:
The Dreyfus Corporation.....................Investment Adviser
Premier Mutual Fund Services, Inc...........Distributor
Dreyfus Transfer, Inc.......................Transfer Agent
The Bank of New York........................Custodian
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years, are
shown below.
Board Members of the Fund
JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of the
Board of various funds in the Dreyfus Family of Funds. He also is a
director of The Muscular Dystrophy Association, HealthPlan Services
Corporation, a provider of marketing, administrative and risk management
services to health and other benefit programs, Carlyle Industries, Inc.
(formerly, Belding Heminway Company, Inc.), a button packager and
distributor, Career Blazers, Inc. (formerly, Staffing Resources, Inc.), a
temporary placement agency, and Century Business Services, Inc. (formerly,
International Alliance Services, Inc.), a provider of various outsourcing
functions for small and medium size companies. For more than five years
prior to January 1995, he was President, a director and, until August
1994, Chief Operating Officer of the Manager and Executive Vice President
and a director of Dreyfus Service Corporation, a wholly-owned subsidiary
of the Manager and, until August 24, 1994, the Fund's distributor. From
August 1994 until December 31, 1994, he was a director of Mellon Bank
Corporation. He is 56 years old and his address is 200 Park Avenue, New
York, New York 10166.
DAVID W. BURKE, Board Member. Board member of various funds in the Dreyfus
Family of Funds. Chairman of the Broadcasting Board of Governors, an
independent board within the United States Information Agency, from August
1994 to November 1998. From August 1994 to December 1994, Mr. Burke was a
Consultant to the Manager, and from October 1990 to August 1994, he was
Vice President and Chief Administrative Officer of the Manager. From 1977
to 1990, Mr. Burke was involved in the management of national television
news, as Vice President and Executive Vice President of ABC News, and
subsequently as President of CBS News. He is 63 years old and his address
is Box 654, Eastham, Massachusetts 02642.
SAMUEL CHASE, Board Member. Retired. From 1982 to 1996, Mr. Chase was
President of Samuel Chase & Company, Ltd., an economic consulting
firm. He is 67 years old and his address is 10380 Springhill Road,
Belgrade, Montana 59714.
GORDON J. DAVIS, Board Member. Since October 1994, a senior partner with the law
firm of LeBoeuf, Lamb, Greene & MacRae. From 1983 to September 1994, Mr.
Davis was a senior partner with the law firm of Lord Day & Lord, Barrett
Smith. From 1978 to 1983, he was Commissioner of Parks and Recreation for
the City of New York. He is also a director of Consolidated Edison, a
utility company, and Phoenix Home Life Insurance Company and a member of
various other corporate and not-for-profit boards. He is 58 years old and
his address is 241 Central Park West, New York, New York 10023.
JONI EVANS, Board Member. Senior Vice President of the William Morris Agency
since September 1993. From September 1987 to May 1993, Executive Vice
President of Random House Inc. and, from January 1991 to May 1993,
President and Publisher of Turtle Bay Books; from January 1987 to December
1990, Publisher of Random House-Adult Trade Division; from September 1985
to September 1987, President of Simon and Schuster-Trade Division. She is
57 years old and her address is 1325 Avenue of the Americas, New York, New
York 10019.
ARNOLD S. HIATT, Board Member. Chairman of The Stride Rite Foundation. From
1969 to June 1992, Chairman of the Board, President or Chief Executive
Officer of The Stride Rite Corporation, a multi-divisional footwear
manufacturing and retailing company. Mr. Hiatt is also a director of
The Cabot Corporation. He is 72 years old and his address is 400
Atlantic Avenue, Boston, Massachusetts 02110.
BURTON N. WALLACK, Board Member. President and co-owner of Wallack Management
Company, a real estate management company managing real estate in the New
York City area. He is 49 years old and his address is 18 East 64th Street,
New York, New York 10021.
The Fund has a standing nominating committee comprised of its Board
members who are not "interested persons" of the Fund, as defined in the 1940
Act. The function of the nominating committee is to select and nominate all
candidates who are not "interested persons" of the Fund for election to the
Fund's Board.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the Board
receives an additional 25% of such compensation. Emeritus Board members are
entitled to receive an annual retainer and a per meeting fee of one-half the
amount paid to them as Board members. The aggregate amount of compensation paid
to each Board member by the Fund for the fiscal year ended August 31, 1999, and
by all funds in the Dreyfus Family of Funds for which such person was a Board
member (the number of which is set forth in parenthesis next to each Board
member's total compensation)* for the year ended December 31, 1998, was as
follows:
Aggregate Total Compensation From
-------------------------- Fund and Fund Complex
Name of Board Member Compensation Paid to Board Member
--------------------------
From Fund**
- ----------------------------
Joseph S. DiMartino $ ____ $ ________( )
- ----------------------------
- ----------------------------
David W. Burke $ ____ $ ________( )
- ----------------------------
- ----------------------------
Samuel Chase $ ____ $ ________( )
- ----------------------------
- ----------------------------
Gordon J. Davis $ ____ $ ________( )
- ----------------------------
- ----------------------------
Joni Evans $ ____ $ ________( )
- ----------------------------
- ----------------------------
Arnold S. Hiatt $ ____ $ ________( )
- ----------------------------
- ----------------------------
Burton N. Wallack $ ____ $ ________( )
- ---------------------
* Represents the number of separate portfolios comprising the investment
companies in the Fund Complex, including the Portfolios, for which the
Board member serves.
** Amount does not include reimbursed expenses for attending Board meetings,
which amounted to $_____ for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive Officer,
Chief Compliance Officer and a director of the Distributor and Funds
Distributor, Inc., the ultimate parent of which is Boston Institutional
Group, Inc., and an officer of other investment companies advised or
administered by the Manager. She is 41 years old.
MARGARET W. CHAMBERS, Vice President and Secretary. Senior Vice President and
General Counsel of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From August
1996 to March 1998, she was Vice President and Assistant General Counsel
for Loomis, Sayles & Company, L.P. From January 1986 to July 1996, she was
an associate with the law firm of Ropes & Gray. She is 38 years old.
*FREDERICK C. DEY, Vice President and Assistant Treasurer and Assistant
Secretary. Vice President, New Business Development of Funds
Distributor, Inc. since September 1994, and an officer of other
investment companies advised or administered by the Manager. He is 37
years old.
STEPHANIE D. PIERCE, Vice President, Assistant Secretary and Assistant
Treasurer. Vice President of the Distributor and Funds Distributor, Inc.,
and an officer of other investment companies advised or administered by
the Manager. From April 1997 to March 1998, she was employed as a
Relationship Manager with Citibank, N.A. From August 1995 to April 1997,
she was an Assistant Vice President with Hudson Valley Bank, and from
September 1990 to August 1995, she was Second Vice President with Chase
Manhattan Bank. She is 31 years old.
*JOHN P. COVINO, Vice President and Assistant Treasurer. Vice President and
Treasury Group Manager of Treasury Servicing and Administration of Funds
Distributor, Inc., since December 1998, and an officer of other investment
companies advised or administered by the Manager. From December 1995 to
November 1998, he was employed by Fidelity Investments where he held
multiple positions in their Institutional Brokerage Group. Prior to
joining Fidelity, he was employed by SunGard Brokerage systems where he
was responsible for the technology and development of the accounting
product group. He is 35 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President of
the Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. She is 34
years old.
*GEORGE A. RIO, Vice President and Assistant Treasurer. Executive Vice President
and Client Service Director of Funds Distributor, Inc., and an officer of
other investment companies advised or administered by the Manager. From
June 1995 to March 1998, he was Senior Vice President and Senior Key
Account Manager for Putnam Mutual Funds. From May 1994 to June 1995, he
was Director of Business Development for First Data Corporation. He is 43
years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer, Chief Financial Officer and a director of the
Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. He is 36
years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
April 1993 to January 1995, he was a Senior Fund Accountant for
Investors Bank & Trust Company. He is 29 years old.
*KAREN JACOPPO-WOOD, Vice President and Assistant Secretary. Vice President
and Senior Counsel of Funds Distributor, Inc. since February 1997, and
an officer of other investment companies advised or administered by the
Manager. From June 1994 to January 1996, she was Manager of SEC
Registration at Scudder, Stevens & Clark, Inc. She is 32 years old.
CHRISTOPHER J. KELLEY, Vice President and Assistant Secretary. Vice
President and Senior Associate General Counsel of Funds Distributor,
Inc., and an officer of other investment companies advised or
administered by the Manager. From April 1994 to July 1996, he was
Assistant Counsel at Forum Financial Group. He is 33 years old.
KATHLEEN K. MORRISEY, Vice President and Assistant Secretary. Manager of
Treasury Services Administration of Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From July 1994 to November 1995, she was a Fund Accountant
for Investors Bank & Trust Company. She is 26 years old.
ELBA VASQUEZ, Vice President and Assistant Secretary. Assistant Vice President
of Funds Distributor, Inc., and an officer of other investment companies
advised or administered by the Manager. From March 1990 to May 1996, she
was employed by U.S. Trust Company of New York where she held various
sales and marketing positions. She is 37 years old.
The address of each officer of the Fund is 200 Park Avenue, New York, New
York 10166, except those officers indicated by an (*), whose address is 60 State
Street, Boston, Massachusetts 02109.
The Fund's Board members and officers, as a group, owned less than 1% of
each Portfolio's shares outstanding on __________, 1999.
MANAGEMENT ARRANGEMENTS
Investment Adviser. The Manager is a wholly-owned subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation
("Mellon"). Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international markets.
Mellon is among the twenty-five largest bank holding companies in the United
States based on total assets.
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994, with the Fund. As to each
Portfolio, the Agreement is subject to annual approval by (i) the Fund's Board
or (ii) vote of a majority (as defined in the 1940 Act) of the outstanding
voting securities of such Portfolio, provided that in either event the
continuance also is approved by a majority of the Board members who are not
"interested persons" (as defined in the 1940 Act) of the Fund or the Manager, by
vote cast in person at a meeting called for the purpose of voting on such
approval. The Agreement was approved by shareholders of each Portfolio (other
than the New Jersey Portfolio which had not commenced operations) on August 2,
1994. The Agreement was last approved by the Fund's Board, including a majority
of the Board members who are not "interested persons" of any party to the
Agreement, at a meeting held on ______, 1999. As to each Portfolio, the
Agreement is terminable without penalty, on 60 days' notice, by the Fund's Board
or by vote of the holders of a majority of such Portfolio's shares, or, on not
less than 90 days' notice, by the Manager. The Agreement will terminate
automatically, as to the relevant Portfolio, in the event of its assignment (as
defined in the 1940 Act).
The following persons are officers and/or directors of the Manager:
Christopher M. Condron, Chairman of the Board and Chief Executive Officer;
Stephen E. Canter, President, Chief Operating Officer, Chief Investment
Officer and a director; Lawrence S. Kash, Vice Chairman and a director; J.
David Officer, Vice Chairman and a director; Thomas F. Eggers, Vice
Chairman--Institutional and a director; Ronald P. O'Hanley III, Vice
Chairman; William T. Sandalls, Jr., Executive Vice President; Mark N. Jacobs,
Vice President, General Counsel and Secretary; Diane P. Durnin, Vice
President--Product Development; Patrice M. Kozlowski, Vice
President--Corporate Communications; Mary Beth Leibig, Vice President--Human
Resources; Andrew S. Wasser, Vice President--Information Systems; Theodore A.
Schachar, Vice President; Wendy Strutt, Vice President; Richard Terres, Vice
President; William H. Maresca, Controller; James Bitetto, Assistant
Secretary; Steven F. Newman, Assistant Secretary; and Mandell L. Berman,
Burton C. Borgelt, Steven G. Elliot, Martin C. McGuinn, Richard W. Sabo and
Richard F. Syron, directors.
The Manager manages each Portfolio's investments in accordance with the
stated policies of the Portfolio, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions and provides the
Fund with portfolio managers who are authorized by the Fund's Board to
execute purchases and sales of securities. The Fund's portfolio managers are
Richard J. Moynihan, Joseph P. Darcy, A. Paul Disdier, Douglas J. Gaylor, W.
Michael Petty, Jill C. Shaffro, Samuel J. Weinstock and Monica S. Wieboldt.
The Manager also maintains a research department with a professional staff of
portfolio managers and securities analysts who provide research services for
the Fund and for other funds advised by the Manager.
The Manager has a personal securities trading policy (the "Policy") which
restricts the personal securities transactions of its employees. Its primary
purpose is to ensure that personal trading by the Manager's employees does not
disadvantage any fund managed by the Manager. Under the Policy, the Manager's
employees must preclear personal transactions in securities not exempt under the
Policy. In addition, the Manager's employees must report their personal
securities transactions and holdings, which are reviewed for compliance with the
Policy. In that regard, the Manager's portfolio managers and other investment
personnel also are subject to the oversight of Mellon's Investment Ethics
Committee. Portfolio managers and other investment personnel of the Manager who
comply with the Policy's preclearance and disclosure procedures and the
requirements of the Committee may be permitted to purchase, sell or hold
securities which also may be or are held in fund(s) they manage or for which
they otherwise provide investment advice.
The Manager maintains office facilities on behalf of each Fund, and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to each Fund. The Manager may pay the Distributor for shareholder
services from the Manager's own assets, including past profits but not including
the management fee paid by the Fund. The Distributor may use part or all of such
payments to pay securities dealers, banks or other financial institutions in
respect of these services. The Manager also may make such advertising and
promotional expenditures, using its own resources, as it from time to time deems
appropriate.
All expenses incurred in the operation of the Fund are borne by the Fund,
except to the extent specifically assumed by the Manager. The expenses borne by
the Fund include: taxes, interest, loan commitment fees, interest and
distributions paid on securities sold short, brokerage fees and commissions, if
any, fees of Board members who are not officers, directors, employees or holders
of 5% or more of the outstanding voting securities of the Manager, Securities
and Exchange Commission fees, state Blue Sky qualification fees, advisory fees,
charges of custodians, transfer and dividend disbursing agents' fees, certain
insurance premiums, industry association fees, outside auditing and legal
expenses, costs of maintaining the Fund's existence, costs of independent
pricing services, costs attributable to investor services (including, without
limitation, telephone and personnel expenses), costs of shareholders' reports
and corporate meetings, costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders, and any extraordinary expenses. Expenses
attributable to a particular Portfolio are charged against the assets of that
Portfolio; other expenses of the Fund are allocated among the Portfolios on the
basis determined by the Board, including, but not limited to, proportionately in
relation to the net assets of each Portfolio.
As compensation for the Manager's services, the Fund has agreed to pay the
Manager a monthly management fee at the annual rate of .50% of the value of each
Short Term Portfolio's average daily net assets, and .60% of the value of each
Longer Term Portfolio's average daily net assets. All fees and expenses are
accrued daily and deducted before the declaration of dividends to shareholders.
For the fiscal years ended August 31, 1997, 1998 and 1999, the management fees
payable, reduction in fee and net fees paid by the Fund were as follows:
<TABLE>
<CAPTION>
Portfolio Management Fee Payable Reduction in Fee Net Fees Paid by Portfolio
1997 1998 1999 1997 1998 1999 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market $3,735,343 $3,194,542, $ $1,155,582 $1,101,681 $ $2,579,761 $2,092,861 $
Portfolio
Intermediate $350,994 $469,348 $ $ 328,180 $278,376 $ $22,814 $190,972 $
Bond Portfolio
Bond Portfolio $496,223 $913,973 $ $ 482,224 $541,467 $ $13,999 $372,506 $
New Jersey $608,537 $642,28$ $ $ 324,583 $247,82 $ $283,954 $394,460 $
Portfolio
</TABLE>
As to each Portfolio, the Manager has agreed that if in any fiscal year
the aggregate expenses of such Portfolio, exclusive of taxes, brokerage,
interest on borrowings and (with the prior written consent of the necessary
state securities commissions) extraordinary expenses, but including the
management fee, exceed the expense limitation of any state having jurisdiction
over the Fund, the Fund may deduct from the payment to be made to the Manager
under the Agreement, or the Manager will bear, such excess expense to the extent
required by state law. Such deduction or payment, if any, will be estimated
daily, and reconciled and effected or paid, as the case may be, on a monthly
basis.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of a Portfolio's net assets increases.
Distributor. The Distributor, located at 60 State Street, Boston,
Massachusetts 02109, serves as each Portfolio's distributor on a best efforts
basis pursuant to an agreement which is renewable annually.
Transfer and Dividend Disbursing Agent and Custodian. Dreyfus Transfer,
Inc. (the "Transfer Agent"), a wholly-owned subsidiary of the Manager, P.O. Box
9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and dividend
disbursing agent. Under a transfer agency agreement with the Fund, the Transfer
Agent arranges for the maintenance of shareholder account records for each
Portfolio, the handling of certain communications between shareholders and the
Portfolio and the payment of dividends and distributions payable by the
Portfolio. For these services, the Transfer Agent receives a monthly fee
computed on the basis of the number of shareholder accounts it maintains for
each Portfolio during the month, and is reimbursed for certain out-of-pocket
expenses.
The Bank of New York (the "Custodian"), 90 Washington Street, New York,
New York 10286, acts as the custodian of each Portfolio's investments. The
Custodian has no part in determining the investment policies of any Portfolio or
which securities are to be purchased or sold by a Portfolio. Under a custody
agreement with the Fund, the Custodian holds each Portfolio's securities and
keeps all necessary accounts and records. For its custody services, the
Custodian receives a monthly fee based on the market value of the Portfolio's
assets held in custody and receives certain securities transactions charges.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant to
which the Fund, with respect to each Portfolio, reimburses Dreyfus Service
Corporation an amount not to exceed an annual rate of .25% of the value of each
Portfolio's average daily net assets for certain allocated expenses of providing
personal services and/or maintaining shareholder accounts. The services provided
may include personal services relating to shareholder accounts, such as
answering shareholder inquiries and providing reports and other information, and
services related to the maintenance of shareholder accounts.
A quarterly report of the amounts expended under the Plan, with respect to
each Portfolio, and the purposes for which such expenditures were incurred, must
be made to the Fund's Board for their review. In addition, the Plan provides
that material amendments of the Plan must be approved by the Fund's Board, and
by the Board members who are not "interested persons" (as defined in the 1940
Act) of the Fund and have no direct or indirect financial interest in the
operation of the Plan, by vote cast in person at a meeting called for the
purpose of considering such amendments. The Plan is subject to annual approval
by such vote of the Board members cast in person at a meeting called for the
purpose of voting on the Plan. The Plan is terminable at any time with respect
to each Portfolio by vote of a majority of the Board members who are not
"interested persons" and have no direct or indirect financial interest in the
operation of the Plan.
For the fiscal year ended August 31, 1999, $_______ was chargeable to the
Money Market Portfolio, $______ was chargeable to the Intermediate Bond
Portfolio, $_______ was chargeable to the Bond Portfolio and $_______ was
chargeable to the New Jersey Portfolio under the Plan.
HOW TO BUY SHARES
General. Portfolio shares are sold without a sales charge. You may be
charged a fee if you effect transactions in Portfolio shares through a
securities dealer, bank or other financial institution. Share certificates are
issued only upon your written request. No certificates are issued for fractional
shares. It is not recommended that any Portfolio be used as a vehicle for Keogh,
IRA or other qualified plans. The Fund reserves the right to reject any purchase
order.
The minimum initial investment is $25,000 for each Short Term Portfolio
and $10,000 for each Longer Term Portfolio. Subsequent investments in each
Portfolio must be at least $1,000. The initial investment must be accompanied by
the Account Application.
Shares of each Short Term Portfolio are sold on a continuous basis as the
net asset value per share next determined after an order in proper form and
Federal Funds (monies of member banks within the Federal Reserve System which
are held on deposit at a Federal Reserve Bank) are received by the Transfer
Agent or other entity authorized to receive orders on behalf of the Fund. If you
do not remit Federal Funds, your payment must be converted into Federal Funds.
This usually occurs within one business day of receipt of a bank wire or within
two business days of receipt of a check drawn on a member bank of the Federal
Reserve System. Checks drawn on banks which are not members of the Federal
Reserve System may take considerably longer to convert into Federal Funds. Prior
to receipt of Federal Funds, your money will not be invested.
The net asset value per share of each Short Term Portfolio is determined
as of 12:00 Noon, New York time, on each day the New York Stock Exchange is open
for business. Net asset value per share is computed by dividing the value of the
specific Short Term Portfolio's net assets (i.e., the value of its assets less
liabilities) by the total number of such Portfolio's shares outstanding. See
"Determination of Net Asset Value."
If your payments for shares of a Short Term Portfolio are received in or
converted into Federal Funds by 12:00 Noon, New York time, by the Transfer
Agent, you will receive the dividend declared that day. If your payments are
received in or converted into Federal Funds after 12:00 Noon, New York time, by
the Transfer Agent, you will begin to accrue dividends on the following business
day.
Qualified institutions may telephone orders for purchase of a Short Term
Portfolio's shares. These orders will become effective at the price determined
at 12:00 Noon, New York time, and the shares purchased will receive the dividend
on Portfolio shares declared on that day, if the telephone order is placed by
12:00 Noon, New York time, and Federal Funds are received by 4:00 p.m., New York
time, on that day.
Shares of each Longer Term Portfolio are sold on a continuous basis at the
net asset value per share next determined after an order in proper form is
received by the Transfer Agent or other entity authorized to receive orders on
behalf of the Fund. The net asset value per share of each Longer Term Portfolio
is determined as of the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m., New York time), on each day the New York Stock
Exchange is open for business. For purposes of determining the net asset value
of each Longer Term Portfolio, options and futures contracts will be valued 15
minutes after the close of trading on the floor of the New York Stock Exchange.
Net asset value per share is computed by dividing the value of the specific
Longer Term Portfolio's net assets (i.e., the value of its assets less
liabilities) by the total number of such Portfolio's shares outstanding. The
investments of each Longer Term Portfolio are valued by an independent pricing
service approved by the Fund's Board, and are valued at fair value as determined
by the pricing service. The pricing service's procedures are reviewed under the
general supervision of the Fund's Board. For further information regarding the
methods employed in valuing each Longer Term Portfolio's investments, see
"Determination of Net Asset Value."
Using Federal Funds. (Short Term Portfolios only) The Transfer Agent or
the Fund may attempt to notify you upon receipt of checks drawn on banks that
are not members of the Federal Reserve System as to the possible delay in
conversion into Federal Funds and may attempt to arrange for a better means of
transmitting the money. If you are a customer of a securities dealer, bank or
other financial institution and your order to purchase shares of a Short Term
Portfolio is paid for other than in Federal Funds, the securities dealer, bank
or other financial institution, acting on your behalf, will complete the
conversion into, or itself advance, Federal Funds generally on the business day
following receipt of your order. The order is effective only when so converted
and received by the Transfer Agent. If you have sufficient Federal Funds or a
cash balance in your brokerage account with a securities dealer, bank or other
financial institution, your order to purchase Short Term Portfolio shares will
become effective on the day that the order, including Federal Funds, is received
by the Transfer Agent.
Dreyfus TeleTransfer Privilege. You may purchase shares by telephone if
you have checked the appropriate box and supplied the necessary information on
the Account Application or have filed a Shareholder Services Form with the
Transfer Agent. The proceeds will be transferred between the bank account
designated in one of these documents and your Fund account. Only a bank account
maintained in a domestic financial institution which is an Automated Clearing
House ("ACH") member may be so designated.
Dreyfus TeleTransfer purchase orders may be made at any time. Purchase
orders received by 4:00 p.m., New York time, on any day the Transfer Agent and
the New York Stock Exchange are open for business will be credited to the
shareholder's Fund account on the next bank business day following such purchase
order. Purchase orders made after 4:00 p.m., New York time, on any day the
Transfer Agent and the New York Stock Exchange are open for business, or orders
made on Saturday, Sunday or any holiday (e.g., when the New York Stock Exchange
is not open for business), will be credited to the shareholder's Fund account on
the second bank business day following such purchase order. To qualify to use
the Dreyfus TeleTransfer Privilege, the initial payment for purchase of
Portfolio shares must be drawn on, and redemption proceeds paid to, the same
bank and account as are designated on the Account Application or Shareholder
Services Form on file. If the proceeds of a particular redemption are to be
wired to an account at any other bank, the request must be in writing and
signature-guaranteed. See "Redemption of Shares--Dreyfus TeleTransfer
Privilege."
Reopening an Account. You may reopen an account with a minimum investment
of $10,000 without filing a new Account Application during the calendar year the
account is closed or during the following calendar year, provided the
information on the old Account Application is still applicable.
HOW TO REDEEM SHARES
Transaction Fees. You will be charged $5.00 when you redeem all shares in
your account or your account is otherwise closed out. The fee will be deducted
from your redemption proceeds and paid to the Transfer Agent. The account
closeout fee does not apply to exchanges out of a Portfolio or to wire or
Dreyfus TeleTransfer redemptions, for each of which a $5.00 fee may apply;
however, the Fund will waive the account closeout fee if the closing balance in
your account on the business day immediately preceeding the effeictive date of
such transaction is $50,000 or more. Securities dealers, banks, and other
financial institutions may charge their clients a fee for effecting redemptions
of Portfolio shares.
Check Redemption Privilege. The Fund provides Redemption Checks ("Checks")
automatically upon opening an account, unless you specifically refuse the
Privilege by checking the applicable "No" box on the Account Application. Checks
will be sent only to the registered owner(s) of the account and only to the
address of record. The Check Redemption Privilege may be established for an
existing account by a separate signed Shareholder Services Form. The Account
Application or Shareholder Services Form must be manually signed by the
registered owner(s). Checks are drawn on your Fund account and may be made
payable to the order of any person in an amount of $1,000 or more. Your account
will be charged $2.00 for each Check you write; however, the Fund will waive
this fee if the closing balance in your account on the business day immediately
preceeding the effective date of such transaction is $50,000 or more. When a
Check is presented to the Transfer Agent for payment, the Transfer Agent, as
your agent, will cause the Fund to redeem a sufficient number of shares in your
account to cover the amount of the Check and the $2.00 charge. Dividends are
earned until the Check clears. After clearance, a copy of the Check will be
returned to you. You generally will be subject to the same rules and regulations
that apply to checking accounts, although election of this Privilege creates
only a shareholder-transfer agent relationship with the Transfer Agent.
You should date your Checks with the current date when you write them.
Please do not postdate your Checks. If you do, the Transfer Agent will honor,
upon presentment, even if presented before the date of the Check, all postdated
Checks which are dated within six months of presentment for payment, if they are
otherwise in good order.
Checks are free, but the Transfer Agent will impose a fee for stopping
payment of a Check upon your request or if the Transfer Agent cannot honor a
Check due to insufficient funds or other valid reason. If the amount of the
Check, plus any applicable charges, is greater than the value of the shares in
your account, the Check will be returned marked insufficient funds and you may
be subject to extra charges. Checks should not be used to close an account.
This Privilege will be terminated immediately, without notice, with
respect to any account in a Longer Term Portfolio which is, or becomes, subject
to backup withholding on redemptions. Any Check written on an account which has
become subject to backup withholding on redemptions will not be honored by the
Transfer Agent.
Wire Redemption Privilege. By using this Privilege, you authorize the
Transfer Agent to act on wire, telephone or letter redemption instructions from
any person representing himself or herself to be you and reasonably believed by
the Transfer Agent to be genuine. You will be charged a $5.00 fee for each wire
redemption, which will be deducted from your account and paid to the Transfer
Agent; however, the Fund will waive this fee if the closing balance in your
account on the business day immediately preceeding the effective date of such
transaction is $50,000 or more. Ordinarily, the Fund will initiate payment for
shares of a Short Term Portfolio redeemed pursuant to this Privilege on the same
business day if the Transfer Agent receives the redemption request in proper
form prior to Noon on such day; otherwise, and with respect to all Longer Term
Portfolio shares redeemed pursuant to this Privilege, the Fund will initiate
payment on the next business day. Redemption proceeds ($5,000 minimum) will be
transferred by Federal Reserve wire only to the commercial bank account
specified by you on the Account Application or Shareholder Services Form, or to
a correspondent bank if your bank is not a member of the Federal Reserve System.
Fees ordinarily are imposed by such bank and usually are borne by the investor.
Immediate notification by the correspondent bank to your bank is necessary to
avoid a delay in crediting the funds to your bank account.
If you have access to telegraphic equipment, you may wire redemption
requests to the Transfer Agent by employing the following transmittal code which
may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Code Answer Back Sign
144295 144295 TSSG PREP
If you do not have direct access to telegraphic equipment, you may have
the wire transmitted by contacting a TRT Cables operator at 1-800-654-7171, toll
free. You should advise the operator that the above transmittal code must be
used and should also inform the operator of the Transfer Agent's answer back
sign.
To change the commercial bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent. This request
must be signed by each shareholder, with each signature guaranteed as described
below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. You should be aware that if you also have
selected the Dreyfus TeleTransfer Privilege, any request for a wire redemption
will be effected as a Dreyfus TeleTransfer transaction through the ACH system
unless more prompt transmittal specifically is requested. Redemption proceeds
will be on deposit in your account at an ACH member bank ordinarily two business
days after receipt of the redemption request. You will be charged a $5.00 fee
for each redemption made pursuant to this Privilege, which will be deducted from
your account and paid to the Transfer Agent; however, the Fund will waive this
fee if the closing balance in your account on the business day immediately
preceeding the effective date of such transaction is $50,000 or more. See "How
to Buy Shares--Dreyfus TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund shares
to be redeemed must be submitted with the redemption request. Written redemption
requests must be signed by each shareholder, including each holder of a joint
account, and each signature must be guaranteed. Signatures on endorsed
certificates submitted for redemption also must be guaranteed. The Transfer
Agent has adopted standards and procedures pursuant to which
signature-guarantees in proper form generally will be accepted from domestic
banks, brokers, dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings associations,
as well as from participants in the New York Stock Exchange Medallion Signature
Program, the Securities Transfer Agents Medallion Program ("STAMP"), and the
Stock Exchanges Medallion Program. Guarantees must be signed by an authorized
signatory of the guarantor and "Signature-Guaranteed" must appear with the
signature. The Transfer Agent may request additional documentation from
corporations, executors, administrators, trustees or guardians, and may accept
other suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to
signature-guarantees, please call one of the telephone numbers listed on the
cover.
Redemption Commitment. The Fund has committed itself to pay in cash all
redemption requests by any shareholder of record of a Portfolio, limited in
amount during any 90-day period to the lesser of $250,000 or 1% of the value of
such Portfolio's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such amount, the
Fund's Board reserves the right to make payments in whole or in part in
securities or other assets in case of an emergency or any time a cash
distribution would impair the liquidity of the Portfolio to the detriment of the
existing shareholders. In such event, the securities would be valued in the same
manner as the portfolio of the Portfolio is valued. If the recipient sells such
securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or the
date of payment postponed (a) during any period when the New York Stock Exchange
is closed (other than customary weekend and holiday closings), (b) when trading
in the markets the Fund ordinarily utilizes is restricted, or when an emergency
exists as determined by the Securities and Exchange Commission so that disposal
of the Fund's investments or determination of its net asset value is not
reasonably practicable, or (c) for such other periods as the Securities and
Exchange Commission by order may permit to protect the Fund's shareholders.
SHAREHOLDER SERVICES
Fund Exchanges. You may purchase up to four times per calendar year, in
exchange for shares of a Portfolio, shares of other Portfolios or shares of
certain other funds managed or administered by the Manager, to the extent such
shares are offered for sale in your state of residence. Shares of other
Portfolios or other funds purchased by exchange will be purchased on the basis
of relative net asset value per share as follows:
A. Exchanges for shares of funds offered without a sales load will be
made without a sales load.
B. Shares of funds purchased without a sales load may be exchanged for
shares of other funds sold with a sales load, and the applicable
sales load will be deducted.
C. Shares of funds purchased with a sales load may be exchanged without
a sales load for shares of other funds sold without a sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a
sales load and additional shares acquired through reinvestment of
dividends or distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), but if the sales load applicable to the
Offered Shares exceeds the maximum sales load that could have
been imposed in connection with the Purchased Shares (at the time
the Purchased Shares were acquired), without giving effect to any
reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, you must notify the Transfer
Agent of your prior ownership of fund shares and your account number.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. The ability to issue exchange
instructions by telephone is given to all Fund shareholders automatically,
unless you check the applicable "No" box on the Account Application, indicating
that you specifically refuse this Privilege. By using the Telephone Exchange
Privilege, you authorize the Transfer Agent to act on telephonic instructions
(including over The Dreyfus Touch(R) automated telephone system) from any person
representing himself or herself to be you, and reasonably believed by the
Transfer Agent to be genuine. Telephone exchanges may be subject to limitations
as to the amount involved or the number of telephone exchanges permitted. Shares
issued in certificate form are not eligible for telephone exchange. You will be
charged a $5.00 fee for each exchange made out of the Fund, which will be
deducted from your account and paid to the Transfer Agent; however, the Fund
will waive this fee if the closing balance in your account on the business day
immediately preceeding the effective date of such transaction is $50,000 or
more.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject any
exchange request in whole or in part. Shares may be exchanged only between
accounts having identical names and other identifying designations. The Fund
Exchanges service may be modified or terminated at any time upon notice to
shareholders.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows you to invest
automatically your dividends or dividends and capital gain distributions, if
any, from a Portfolio in shares of another fund in the Dreyfus Family of Funds
of which you are a shareholder. Shares of other funds purchased pursuant to this
privilege will be purchased on the basis of relative net asset value per share
as follows:
A. Dividends and distributions paid by a fund may be invested without
imposition of a sales load in shares of other funds offered without
a sales load.
B. Dividends and distributions paid by a fund which does not charge a
sales load may be invested in shares of other funds sold with a
sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a sales
load may be invested in shares of other funds sold with a sales load
(referred to herein as "Offered Shares"), but if the sales load
applicable to the Offered Shares exceeds the maximum sales load
charged by the fund from which dividends or distributions are being
swept (without giving effect to any reduced loads), the difference
will be deducted.
D. Dividends and distributions paid by a fund may be invested in shares
of other funds that impose a contingent deferred sales charge
("CDSC") and the applicable CDSC, if any, will be imposed upon
redemption of such shares.
DETERMINATION OF NET ASSET VALUE
Amortized Cost Pricing. (Short Term Portfolios only) The valuation of each
Short Term Portfolio's portfolio securities is based upon their amortized cost
which does not take into account unrealized capital gains or losses. This
involves valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
Portfolio would receive if it sold the instrument.
The Fund's Board has established, as a particular responsibility within
the overall duty of care owed to the Short Term Portfolios' investors,
procedures reasonably designed to stabilize each Portfolio's price per share as
computed for purposes of purchases and redemptions at $1.00. Such procedures
include review of each Short Term Portfolio's portfolio holdings by the Fund's
Board at such intervals as it deems appropriate, to determine whether such
Portfolio's net asset value calculated by using available market quotations or
market equivalents deviates from $1.00 per share based on amortized cost. Market
quotations and market equivalents used in such review are obtained from an
independent pricing service (the "Service") approved by the Fund's Board. The
Service values each Short Term Portfolio's investments based on methods which
include consideration of: yields or prices of municipal bonds of comparable
quality, coupon, maturity and type; indications of values from dealers; and
general market conditions. The Service also may employ electronic data
processing techniques and/or a matrix system to determine valuations.
The extent of any deviation between a Short Term Portfolio's net asset
value based upon available market quotations or market equivalents and $1.00 per
share based on amortized cost will be examined by the Fund's Board. If such
deviation exceeds 1/2%, the Fund's Board will consider what actions, if any,
will be initiated. In the event the Fund's Board determines that a deviation
exists which may result in material dilution or other unfair results to
investors or existing shareholders, it has agreed to take such corrective action
as it regards as necessary and appropriate, including: selling portfolio
instruments prior to maturity to realize capital gains or losses or to shorten
average portfolio maturity; withholding dividends or paying distributions from
capital or capital gains; redeeming shares in kind; or establishing a net asset
value per share by using available market quotations or market equivalents.
Valuation of Portfolio Securities. (Longer Term Portfolios only) The
investments of each Longer Term Portfolio are valued each business day by an
independent pricing service (the "Service") approved by the Fund's Board of
Directors. When, in the judgment of the Service, quoted bid prices for
investments are readily available and are representative of the bid side of the
market, these investments are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked prices
(as calculated by the Service based upon its evaluation of the market for such
securities). Other investments (which constitute a majority of the portfolio
securities) are carried at fair value as determined by the Service, based on
methods which include consideration of: yields or prices of municipal bonds of
comparable quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. The Service may employ electronic data
processing techniques and/or a matrix system to determine valuations. The
Service's procedures are reviewed by the Portfolio's officers under the general
supervision of the Fund's Board. Expenses and fees, including the management fee
(reduced by the expense limitation, if any), are accrued daily and are taken
into account for the purpose of determining the net asset value of Portfolio
shares.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day, Martin
Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Management believes that each Portfolio qualified as a "regulated
investment company" under the Code for the fiscal year ended August 31, 1999.
Each Portfolio intends to continue to so qualify if such qualification is in the
best interests of its shareholders. Qualification as a regulated investment
company relieves a Portfolio from any liability for Federal income taxes to the
extent its earnings are distributed in accordance with applicable provisions of
the Code. If a Portfolio did not qualify as a regulated investment company, it
would be treated for tax purposes as an ordinary corporation subject to Federal
income tax. The term "regulated investment company" does not imply the
supervision of management or investment practices or policies by any government
agency.
Each Portfolio ordinarily declares dividends from its net investment
income on each day the New York Stock Exchange is open for business. Dividends
usually are paid on the last business day (calendar day in the case of each
Short Term Portfolio) of each month and are automatically reinvested in
additional Portfolio shares at net asset value or, at your option, paid in cash.
The Portfolio's earnings for Saturdays, Sundays and holidays are declared as
dividends on the preceding business day in the case of each Short Term Portfolio
and on the next business day in the case of each Longer Term Portfolio. With
respect to each Longer Term Portfolio, Portfolio shares begin earning income
dividends on the day following the date of purchase. If you redeem all shares in
your account at any time during the month, all dividends to which you are
entitled will be paid to you along with the proceeds of the redemption, after
deduction of any fees. If you are an omnibus accountholder and indicate in a
partial redemption request that a portion of any accrued dividends to which such
account is entitled belongs to an underlying accountholder who has redeemed all
shares in his or her account, such portion of the accrued dividends will be paid
to you along with the proceeds of the redemption, after the deduction of any
fees. Distributions from net realized securities gains, if any, generally are
declared and paid once a year, but each Portfolio may make distributions on a
more frequent basis to comply with the distribution requirements of the Code, in
all events in a manner consistent with the provisions of the 1940 Act.
If you elect to receive dividends and distributions in cash, and your
dividend or distribution check is returned to the Fund as undeliverable or
remains uncashed for six months, the Fund reserves the right to reinvest such
dividend or distribution and all future dividends and distributions payable to
you in additional Portfolio shares at net asset value. No interest will accrue
on amounts represented by uncashed distribution or redemption checks. All
expenses are accrued daily and deducted before declaration of dividends to
investors.
Management of the Fund believes that the New Jersey Portfolio has
qualified as a "qualified investment fund" within the meaning of the New Jersey
gross income tax. The primary criteria for constituting the New Jersey Portfolio
a "qualified investment fund" are that (i) the Portfolio is an investment
company registered with the Securities and Exchange Commission which, for the
calendar year in which the dividends and distributions (if any) are paid, has no
investments other than interest-bearing obligations, obligations issued at a
discount, and cash and cash items, including receivables, and financial options,
futures and forward contracts, or other similar financial instruments relating
to interest-bearing obligations, obligations issued at a discount or bond
indices related thereto and (ii) at the close of each quarter of the taxable
year, the Portfolio has not less than 80% of the aggregate principal amount of
all of its investments, excluding financial options, futures and forward
contracts, or other similar financial instruments, related to interest-bearing
obligations, obligations issued at a discount or bond indices related thereto,
cash and cash items, which cash items shall include receivables, in New Jersey
Municipal Obligations, including obligations of Puerto Rico, the Virgin Islands
and other territories and possessions of the United States and certain other
specified securities exempt from Federal and New Jersey income taxes.
Additionally, a qualified investment fund must comply with certain continuing
reporting requirements.
If the New Jersey Portfolio continues to qualify as a qualified investment
fund and complies with its reporting obligations, (a) dividends and
distributions by the New Jersey Portfolio to a New Jersey resident individual
shareholder will not be subject to New Jersey gross income tax to the extent
that the dividends and distributions are attributable to income earned by the
New Jersey Portfolio as interest on or gain from New Jersey Municipal
Obligations, and (b) gain from the sale of New Jersey Portfolio shares by a New
Jersey resident individual shareholder will not be subject to the New Jersey
gross income tax. Shares of the New Jersey Portfolio are not subject to property
taxation by New Jersey or its political subdivisions. To the extent that you are
subject to state and local taxes outside of New Jersey, dividends and
distributions earned by an investment in the New Jersey Portfolio may represent
taxable income.
In the case of a Short Term Portfolio's shares redeemed in connection with
any exchange or redemption fees, a shareholder will recognize a capital loss in
the amount of the fee paid. In the case of Longer Term Portfolio's shares
redeemed in connection with any exchange or redemption fees, such fees will
either decrease a capital gain or increase a capital loss realized in such
disposition. In general, such loss will be treated as a short-term capital loss
if the shares were held for one year or less, or, in the case of shares held for
greater than one year, a long-term capital loss.
The Code provides that if a shareholder has not held his Fund shares for
more than six months (or such shorter time as the Internal Revenue Service may
prescribe by regulation) and has received an exempt-interest dividend with
respect to such shares, any loss incurred on the sale of such shares will be
disallowed to the extent of the exempt-interest dividend received.
Ordinarily, gains and losses realized from portfolio transactions will be
treated as capital gain or loss. However, all or a portion of the gain realized
from the disposition of certain market discount bonds will be treated as
ordinary income under Section 1276 of the Code. In addition, all or a portion of
the gain realized from engaging in "conversion transactions" may be treated as
ordinary income under Section 1258 of the Code. "Conversion transactions" are
defined to include certain forward, futures, option and "straddle" transactions,
transactions marketed or sold to produce capital gains, or transactions
described in Treasury regulations to be issued in the future.
Under Section 1256 of the Code, gain or loss realized by the Longer Term
Portfolio from certain financial futures and options transactions will be
treated as 60% long-term capital gain or loss and 40% short-term capital gain or
loss. Gain or loss will arise upon exercise or lapse of such futures and options
as well as from closing transactions. In addition, such futures and options
remaining unexercised at the end of a Longer Term Portfolio's taxable year will
be treated as sold for their fair market value, resulting in additional gain or
loss to a Longer Term Portfolio characterized as described above.
Offsetting positions held by a Longer Term Portfolio involving certain
futures and options transactions may be considered, for tax purposes, to
constitute "straddles." "Straddles" are defined to include "offsetting
positions" in actively traded personal property. The tax treatment of
"straddles" is governed by Sections 1092 and 1258 of the Code, which, in certain
circumstances, overrides or modify the provisions of Section 1256. As such, all
or a portion of any short or long-term capital gain from certain "straddle"
transactions may be recharacterized to ordinary income.
If a Longer Term Portfolio were treated as entering into "straddles" by
reason of its engaging in certain futures or options transactions, such
"straddles" would be characterized as "mixed straddles" if the futures or
options transactions comprising a part of such "straddles" were governed by
Section 1256 of the Code. The Portfolio may make one or more elections with
respect to "mixed straddles." Depending on which election is made, if any, the
results to the Portfolio may differ. If no election is made, to the extent the
"straddle" rules apply to positions established by the Portfolio, losses
realized by the Portfolio will be deferred to the extent of unrealized gain in
any offsetting positions. Moreover, as a result of the "straddle" and
"conversion transaction" rules, short-term capital losses on "straddle"
positions may be recharacterized as long-term capital losses and long-term
capital gains may be recharacterized to short-term capital gains or ordinary
income.
The Taxpayer Relief Act of 1997 included constructive sale provisions that
generally apply if a Portfolio either (1) holds an appreciated financial
position with respect to stock, certain debt obligations, or partnership
interests ("appreciated financial position") and then enters into a short sale,
futures, forward, or offsetting notional principal contract (collectively, a
"Contract") respecting the same or substantially identical property or (2) holds
an appreciated financial position that is a Contract and then acquires property
that is the same as, or substantially identical to, the underlying property. In
each instance, with certain exceptions, the Portfolio generally will be taxed as
if the appreciated financial position were sold at fair market value on the date
the Portfolio enters into the financial position or acquires the property,
respectively. Transactions that are identified hedging or straddle transactions
under other provisions of the Code can be subject to the constructive sale
provisions.
Investment by the Longer Term Portfolio in securities issued at a discount
or providing for deferred interest or for payment of interest in the form of
additional obligations could, under special tax rules, affect the amount, timing
and character of distributions to shareholders. For example, a Longer Term
Portfolio could be required to take into account annually a portion of the
discount (or deemed discount) at which such securities were issued and to
distribute such portion in order to maintain its qualifications as a regulated
investment company. In that case, the Portfolio may have to dispose of
securities which it might otherwise have continued to hold in order to generate
cash to satisfy these distribution requirements.
PORTFOLIO TRANSACTIONS
Portfolio securities ordinarily are purchased from and sold to parties
acting as either principal or agent. Newly-issued securities ordinarily are
purchased directly from the issuer or from an underwriter; other purchases and
sales usually are placed with those dealers from which it appears that the best
price or execution will be obtained. Usually no brokerage commissions, as such,
are paid by a Portfolio for such purchases and sales, although the price paid
usually includes an undisclosed compensation to the dealer acting as agent. The
prices paid to underwriters of newly-issued securities usually include a
concession paid by the issuer to the underwriter, and purchases of after-market
securities from dealers ordinarily are executed at a price between the bid and
asked price. No brokerage commissions have been paid by any Portfolio to date.
Transactions are allocated to various dealers by a Portfolio's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and analysis
with the views and information of other securities firms and may be selected
based upon their sales of shares of the Portfolios or other funds advised by the
Manager or its affiliates.
Research services furnished by brokers through which a Portfolio effects
securities transactions may be used by the Manager in advising other funds it
advises and, conversely, research services furnished to the Manager by brokers
in connection with other funds the Manager advises may be used by the Manager in
advising a Portfolio. Although it is not possible to place a dollar value on
these services, it is the opinion of the Manager that the receipt and study of
such services should not reduce the overall expenses of its research department.
PERFORMANCE INFORMATION
Money Market Portfolio. For the seven-day period ended August 31, 1999,
the Money Market Portfolio's yield was ____%, and its effective yield was ____%.
Based upon the highest 1999 Federal income tax rate of ____%, the Money
Market Portfolio's tax equivalent yield for the seven-day period ended August
31, 1999 was ____%.
New Jersey Portfolio. For the seven-day period ended August 31, 1999, the
New Jersey Portfolio's yield was ____% and effective yield was ____%.
Based upon the highest combined 1999 Federal and New Jersey income tax
rate of _____%, the New Jersey Portfolio's tax equivalent yield for the
seven-day period ended August 31, 1999 was _____%.
Longer Term Portfolios. The Intermediate Bond Portfolio's 30-day yield for
the period ended August 31, 1999 was _____%. The Bond Portfolio's 30-day yield
for the period ended August 31, 1999 was _____%.
Based upon the highest 1999 Federal income tax rate of _____%, the
Intermediate Bond Portfolio's and Bond Portfolio's tax equivalent 30-day yield
for the period ended August 31, 1999 was _____% and _____%, respectively.
For the one- and five-year periods ended August 31, 1999, and for the
period from the Portfolio's commencement of operations (May 4, 1994) through
August 31, 1999 the average annual total return of the Intermediate Bond
Portfolio was _____%, _____% and _____%, respectively. For the one- and
five-year periods ended August 31, 1999, and for the period from the Portfolio's
commencement of operations (May 6, 1994) through August 31, 1999, the average
annual total return of the Bond Portfolio was _____%, _____% and _____%,
respectively. During the period, the Manager waived receipt of the management
fee and/or absorbed certain Portfolio expenses, without which returns would have
been lower.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000 payment
made at the beginning of the period (assuming the reinvestment of dividends and
distributions), dividing by the amount of the initial investment, taking the
"n"th root of the quotient (where "n" is the number of years in the period) and
subtracting 1 from the result.
For the period from the Intermediate Bond Portfolio's commencement of
operations (May 4, 1994) through August 31, 1999, the total return of the
Portfolio was ____%. For the period from the Bond Portfolio's commencement of
operations (May 6, 1994) through August 31, 1999, the total return of the
Portfolio was ____%, respectively. During the period, the Manager waived receipt
of the management fee and/or absorbed certain Portfolio expenses, without which
returns would have been lower.
Total return is calculated by subtracting the amount of the Portfolio's
net asset value per share at the beginning of a stated period from the net asset
value per share at the end of the period (after giving effect to the
reinvestment of dividends and distributions during the period), and dividing the
result by the net asset value per share at the beginning of the period.
Computation of Yield. Current yield for a Short Term Portfolio is computed
in accordance with a standardized method which involves determining the net
change in the value of a hypothetical pre-existing Fund account having a balance
of one share at the beginning of a seven calendar day period for which yield is
to be quoted, dividing the net change by the value of the account at the
beginning of the period to obtain the base period return, and annualizing the
results (i.e., multiplying the base period return by 365/7). The net change in
the value of the account reflects the value of additional shares purchased with
dividends declared on the original share and any such additional shares and fees
that may be charged to shareholder accounts, in proportion to the length of the
base period and the Portfolio's average account size, but does not include
realized gains and losses or unrealized appreciation and depreciation. Effective
yield is computed by adding 1 to the base period return (calculated as described
above), raising that sum to a power equal to 365 divided by 7, and subtracting 1
from the result.
Current yield for a Longer Term Portfolio is computed pursuant to a
formula which operates as follows: the amount of the Portfolio's expenses
accrued for a 30-day period (net of reimbursements) is subtracted from the
amount of the dividends and interest earned (computed in accordance with
regulatory requirements) by it during the period. That result is then divided by
the product of: (a) the average daily number of shares outstanding during the
period that were entitled to receive dividends and distributions, and (b) the
net asset value per share on the last day of the period less any undistributed
earned income per share reasonably expected to be declared as a dividend shortly
thereafter. The quotient is then added to 1, and that sum is raised to the 6th
power, after which 1 is subtracted. The current yield is then arrived at by
multiplying the result by 2.
All Portfolios. Tax equivalent yield is computed by dividing that portion
of the yield or effective yield (calculated as described above) which is tax
exempt by 1 minus a stated tax rate and adding the quotient to that portion, if
any, of the yield of the Portfolio that is not tax exempt.
The tax equivalent yield noted above represents the application of the
highest Federal marginal personal income tax rate presently in effect. The tax
equivalent figure, however, does not include the potential effect of any state
(except with respect to the New Jersey Portfolio) or local (including, but not
limited to, county, district or city) taxes, including applicable surcharges. In
addition, there may be pending legislation which could affect such stated tax
rate or yields. Each investor should consult its tax adviser, and consider its
own factual circumstances and applicable tax laws, in order to ascertain the
relevant tax equivalent yield.
Yields will fluctuate and are not necessarily representative of future
results. Each investor should remember that yield is a function of the type and
quality of the instruments in the portfolio, portfolio maturity and operating
expenses. An investor's principal in a Portfolio is not guaranteed. See
"Determination of Net Asset Value" for a discussion of the manner in which a
Portfolio's price per share is determined.
From time to time, a Portfolio may use hypothetical tax equivalent yields
or charts in its advertising. These hypothetical yields or charts will be used
for illustrative purposes only and are not representative of the Portfolio's
past or future performance.
Comparative performance information may be used from time to time in
advertising or marketing a Portfolio's shares, including data from CDA
Investment Technologies, Inc., Lipper Analytical Services, Inc., Bank Rate
Monitor(TM), N. Palm Beach, Fla. 33408, IBC's Money Fund Report(TM), Moody's
Bond Survey Bond Index, Lehman Brothers Municipal Bond Index, Morningstar, Inc.
and other industry publications. From time to time, advertising materials for a
Portfolio also may refer to or discuss then current or past economic conditions,
developments, and/or events, to actual or proposed legislation or to statistical
or other information concerning trends relating to investment companies, as
compiled by industry associations such as the Investment Company Institute. From
time to time, advertising materials for a Portfolio may refer to Morningstar,
Inc. ratings and related analysis supporting the ratings. In addition,
advertising materials for a Portfolio may, from time to time include
biographical information relating to its portfolio managers and may refer to, or
include commentary by a portfolio manager relating to investment strategy, asset
growth, current or past business, political, economic or financial conditions
and other matters of general interest to investors.
INFORMATION ABOUT THE FUND AND PORTFOLIOS
Each Portfolio share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and non-assessable.
Portfolio shares are of one class and have equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights and
are freely transferable.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
shareholders may not consider each year the election of Board members or the
appointment of auditors. However, the holders of at least 10% of the shares
outstanding and entitled to vote may require the Fund to hold a special meeting
of shareholders for purposes of removing a Board member from office.
Shareholders may remove a Board member by the affirmative vote of a majority of
the Fund's outstanding voting shares. In addition, the Board will call a meeting
of shareholders for the purpose of electing Board members if, at any time, less
than a majority of the Board members then holding office have been elected by
shareholders.
The Fund is a "series fund," which is a mutual fund divided into separate
portfolios, each of which is treated as a separate entity for certain matters
under the 1940 Act and for other purposes. A shareholders of one portfolio is
not deemed to be a shareholder of any other portfolio. For certain matters
shareholders vote together as a group; as to others they vote separately by
portfolio.
To date, the Board has authorized the creation of four series of shares.
All consideration received by the Fund for shares of one of the series and all
assets in which such consideration is invested will belong to that series
(subject only to the rights of creditors of the Fund) and will be subject to the
liabilities related thereto. The income attributable to, and the expenses of,
one series are treated separately from those of the other series. The Fund has
the ability to create, from time to time, new series without shareholder
approval.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted under the provisions of the 1940 Act or applicable state law or
otherwise to the holders of the outstanding voting securities of an investment
company, such as the Fund, will not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each series, such as the Portfolios, affected by such matter. Rule 18f-2 further
provides that a series shall be deemed to be affected by a matter unless it
clear that the interests of each series in the matter are identical or that the
matter does not affect any interest of such series. However, the Rule exempts
the selection of independent accountants and the election of Board members from
the separate voting requirements of the Rule.
With respect to the Longer Term Portfolios only, each of these Portfolios
is intended to be a long-term investment vehicle and is not designed to provide
investors with a means of speculating on short-term market movements. A pattern
of frequent purchases and exchanges can be disruptive to efficient portfolio
management and, consequently, can be detrimental to the Portfolio's performance
and its shareholders. Accordingly, if the Fund's management determines that an
investor is following a market-timing strategy or is otherwise engaging in
excessive trading, the Fund, with or without prior notice, may temporarily or
permanently terminate the availability of Fund Exchanges, or reject in whole or
part any purchase or exchange request, with respect to such investor's account.
Such investors also may be barred from purchasing other funds in the Dreyfus
Family of Funds. Generally, an investor who makes more than four exchanges out
of a Portfolio during any calendar year or who makes exchanges that appear to
coincide with a market-timing strategy may be deemed to be engaged in excessive
trading. Accounts under common ownership or control will be considered as one
account for purposes of determining a pattern of excessive trading. In addition,
the Fund may refuse or restrict purchase or exchange requests for Portfolio
shares by any person or group if, in the judgment of the Fund's management, the
Portfolio would be unable to invest the money effectively in accordance with its
investment objective and policies or could otherwise be adversely affected or if
the Portfolio receives or anticipates receiving simultaneous orders that may
significantly affect the Portfolio (e.g., amounts equal to 1% or more of the
Portfolio's total assets). If an exchange request is refused, the Fund will take
no other action with respect to the Portfolio shares until it receives further
instructions from the investor. A Portfolio may delay forwarding redemption
proceeds for up to seven days if the investor redeeming shares is engaged in
excessive trading or if the amount of the redemption request otherwise would be
disruptive to efficient portfolio management or would adversely affect the
Portfolio. The Fund's policy on excessive trading applies to investors who
invest in a Portfolio directly or through financial intermediaries, but does not
apply to the Auto-Exchange Privilege, to any automatic investment or withdrawal
privilege described herein, or to participants in employer-sponsored retirement
plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components--redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Portfolio's next determined net asset value
but the purchase order would be effective only at the net asset value next
determined after the fund being purchased receives the proceeds of the
redemption, which may result in the purchase being delayed.
To offset the relatively higher costs of servicing smaller accounts, the
Fund charges regular accounts with balances below $2,000 (which have not been
redeemed by the Fund) an annual account fee of $12. The valuation of accounts
and the imposition of the fee will occur during the fourth quarter of each
calendar year. The fee will be waived for any investor whose aggregate Dreyfus
mutual fund investments total at least $25,000, and will not apply to IRA
accounts, accounts participating in automatic investment programs or accounts
opened by a securities dealer, bank or other financial institution.
The Fund sends annual and semi-annual financial statements to
shareholders.
COUNSEL AND INDEPENDENT AUDITORS
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the shares
being sold pursuant to each Portfolio's Prospectus.
Ernst & Young LLP, 787 Seventh Avenue, New York, New York 10019,
independent auditors, have been selected as independent auditors of the Fund.
<PAGE>
APPENDIX A
(NEW JERSEY PORTFOLIO ONLY)
RISK FACTORS -- INVESTING IN NEW JERSEY MUNICIPAL OBLIGATIONS.
The following information constitutes only a brief summary, does not
purport to be a complete description, and is based on information drawn from
official statements relating to securities offerings of the State of New Jersey
and various local agencies available as of the date of this Statement of
Additional Information. While the Fund has not independently verified this
information, it has no reason to believe that such information is not correct in
all material respects.
New Jersey's economic base is diversified, consisting of a variety of
manufacturing, construction and service industries, supplemented by rural areas
with selective commercial agriculture. New Jersey's principal manufacturing
industries produce chemicals, pharmaceuticals, electrical equipment and
instruments, printing machinery, business and health and retail trade, food
products, and printing. Other economic activities include services, wholesale
and retail trade, insurance, tourism, petroleum refining and truck farming.
In its seventh year of expansion, New Jersey has benefited and will
continue to benefit from national growth. While the latest national indicators
show that economic growth strongly accelerated in the first quarter of 1998, the
inflation rate remained low. After a very robust economic growth of 5.5% in the
first quarter for 1998, inflation-adjusted gross domestic product slowed to 1.4%
in the second quarter. This second quarter pace is slower, but is positive and
more sustainable.
Business investment expenditures and consumer spending have increased
substantially in the nation as well as in the State. Capital and consumer
spending may continue to rise due to the sustained character of economic growth
and the interest-sensitive homebuilding industry may continue to provide
stimulus both nationally and in New Jersey. It is expected that the employment
and income growth that has and is taking place will lead to further growth in
consumer outlays. Reasons for continued optimism in New Jersey include
increasing employment levels and higher-than-national level of per capita
personal income. Also, several expansions of existing hotel-casinos and plans
for several new casinos in Atlantic City will mean additional job creation.
While growth is likely to be slower than in the nation, the advantages
afforded by its geographic location that have served New Jersey well for many
years will still be there. Structural changes that have been occurring for years
can be expected to continue, with job creation concentrated most heavily in the
service industries.
In July 1991, S&P lowered New Jersey's general obligation bond rating
from "AAA" to "AA+." As of June 30, 1997, S&P, Moody's and Fitch rate New
Jersey's long-term general obligations "AA+," "Aa1" and "AA+," respectively.
In 1998, New Jersey's employment growth of 2% drove employment to a level
of 3.82 million, more than 116,000 jobs above the 1989 pre-recession high.
Personal income grew 5.5%, better than the 5.3% growth in 1997. Real Gross State
Product increased 3.5% in 1998, the highest growth in 10 years. Employment
growth during 1997-1998 ranged between 1.7 and 2.4%. Construction jobs grew 4.6%
in 1998 continuing the 5% growth seen in 1997. Manufacturing jobs declined by
0.45% in 1998. In 1998, aggregate growth in the service sector remained at 3%
for the second straight year.
The revised estimate as shown in the Governor's fiscal year 2000 Budget
forecasts Sales and Use Tax collections for fiscal year 1995 as $5.01 billion.
The fiscal year 2000 estimate of $5.3 billion, is a 4.8% increase from the
fiscal year 1999 estimate.
The revised estimate as shown in the Governor's fiscal year 1999 Budget
forecasts Gross Income Tax collections for fiscal year 1999 of $6.1 billion. The
estimate for fiscal year 2000 as shown in the Governor's fiscal year 2000 Budget
of $6.5 billion, is a 6.8% increase from the fiscal year 1999 estimate.
The revised estimate as shown in the Governor's fiscal year 2000 Budget
forecasts Corporation Business Tax collections for fiscal year 1999 of $1.5
billion. Included in the Corporation Business Tax forecast is a reduction in the
Corporation Business Tax rate from 9.375% to 9.0% of net New Jersey income as
well as two policy changes enacted into law in 1995 which (i) effective June 30,
1997, allow corporations with multi-state operations to allocate income to New
Jersey using a formula which double weights the sales receipts factor to give a
tax preference to corporations that have a higher concentration of payroll and
facilities in New Jersey and (ii) provide a 7.5% rather than a 9% tax rate for
corporations that have net income up to $100,000. The fiscal year 2000 forecast
as shown in the Governor's Fiscal 2000 Budget of $1.6 billion, represents a 5.3%
increase from the fiscal year 1999 estimate.
Should revenues be less than the amount anticipated in the budget for a
fiscal year, the Governor may, pursuant to statutory authority, prevent any
expenditure under any appropriation. There are additional means by which the
Governor may ensure that the State is operated efficiently and does not incur a
deficit. No supplemental appropriation may be enacted after adoption of an
appropriations act except where there are sufficient revenues on hand or
anticipated, as certified by the Governor, to meet such appropriation. In the
past when actual revenues have been less than the amount anticipated in the
budget, the Governor has exercised her plenary powers leading to, among other
actions, implementation of a hiring freeze for all State departments and the
discontinuation of programs for which appropriations were budgeted but not yet
spent.
The State appropriated approximately $17.158 billion and $18.363 billion
for Fiscal 1998 and 1999, respectively. Of the $18.363 billion appropriated in
fiscal year 1999 from the General Fund, the Property Tax Relief Fund, the Casino
Control Fund, the Casino Revenue Fund and Gubernatorial Elections Fund, $7.515
billion was appropriated for State aid to local governments, $5.014 billion was
appropriated for grants-in-aid (payments to individuals or public or private
agencies for benefits to which a recipient is entitled by law or for the
provision of service on behalf of the State), $4.667 billion for Direct State
services, $501.1 million for debt service on State general obligation bonds and
$667.1 million for capital construction.
Should tax revenues be less than the amount anticipated in the Budget for
a fiscal year, the Governor may, pursuant to statutory authority, prevent any
expenditure under any appropriation. The appropriations for fiscal year 1998 and
for fiscal year 1999 reflect the amounts contained in the Governor's fiscal year
1999 Budget.
The State has made appropriations for principal and interest payments for
general obligation bonds for fiscal years 1996 through 1999 in the amounts of
$446.3 million, $446.9 million, $483.7 million and $501.1 million, respectively.
The Governor's fiscal year 2000 Budget for fiscal year 2000 includes an
appropriation in the amount of $518.7 million for principal and interest
payments for general obligations bonds.
<PAGE>
APPENDIX B
Description of certain S&P, Moody's and Fitch ratings:
S&P
Municipal Bond Ratings
An S&P municipal bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation.
The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable, and will include: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature and provisions of the obligation; and (3) protection
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
AAA
Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA
Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A
Principal and interest payments on bonds in this category are regarded as
safe. This rating describes the third strongest capacity for payment of debt
service. It differs from the two higher ratings because:
General Obligation Bonds -- There is some weakness in the local economic
base, in debt burden, in the balance between revenues and expenditures, or in
quality of management. Under certain adverse circumstances, any one such
weakness might impair the ability of the issuer to meet debt obligations at some
future date.
Revenue Bonds -- Debt service coverage is good, but not exceptional.
Stability of the pledged revenues could show some variations because of
increased competition or economic influences on revenues. Basic security
provisions, while satisfactory, are less stringent. Management performance
appears adequate.
<PAGE>
BBB
Of the investment grade, this is the lowest.
General Obligation Bonds -- Under certain adverse conditions, several of
the above factors could contribute to a lesser capacity for payment of debt
service. The difference between A and BBB rating is that the latter shows more
than one fundamental weakness, or one very substantial fundamental weakness,
whereas the former shows only one deficiency among the factors considered.
Revenue Bonds -- Debt coverage is only fair. Stability of the pledged
revenues could show substantial variations with the revenue flow possibly being
subject to erosion over time. Basic security provisions are no more than
adequate. Management performance could be stronger.
BB, B, CCC, CC
Debt rated BB, B, CCC or CC is regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal. BB indicates the lowest degree of speculation and CC the highest
degree of speculation. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
BB
Debt rated BB has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payment.
B
Debt rated B has a greater vulnerability to default but presently has the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions would likely impair capacity or willingness to
pay interest and repay principal.
CCC
Debt rated CCC has a current identifiable vulnerability to default, and is
dependent upon favorable business, financial and economic conditions to meet
timely payments of principal. In the event of adverse business, financial or
economic conditions, it is not likely to have the capacity to pay interest and
repay principal.
CC
The rating CC is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC rating.
C
The rating C typically is applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating.
D
Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
S&P's letter ratings may be modified by the addition of a plus or minus
sign designation, which is used to show relative standing within the major
rating categories, except in the AAA (Prime Grade) category.
Municipal Note Ratings
SP-1
The issuers of these municipal notes exhibit very strong or strong
capacity to pay principal and interest. Those issues determined to possess
overwhelming safety characteristics are given a plus (+) sign designation.
SP-2
The issuers of these municipal notes exhibit satisfactory capacity to pay
principal and interest.
Commercial Paper Ratings
The rating A is the highest rating and is assigned by S&P to issues that
are regarded as having the greatest capacity for timely payment. Issues in this
category are delineated with the numbers 1, 2 and 3 to indicate the relative
degree of safety. Paper rated A-1 indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign
designation.
Moody's
Municipal Bond Ratings
Aaa
Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa
Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what generally are known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A
Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa
Bonds rated Baa are considered as medium-grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba
Bonds rated Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate, and therefore not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B
Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small.
Caa
Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca
Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked shortcomings.
C
Bonds rated C are the lowest rated class of bonds, and issues so rated can
be regarded as having extremely poor prospects of ever attaining any real
investment standing.
Generally, Moody's provides either a generic rating or a rating with a
numerical modifier of 1 for bonds in each of the generic rating categories Aa,
A, Baa, Ba and B. Moody's also provides numerical modifiers of 2 and 3 in each
of these categories for bond issues in the health care, higher education and
other not-for-profit sectors; the modifier 1 indicates that the issue ranks in
the higher end of its generic rating category; the modifier 2 indicates that the
issue is in the mid-range of the generic category; and the modifier 3 indicates
that the issue is in the low end of the generic category.
Municipal Note Ratings
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade (MIG). Such ratings recognize the
difference between short-term credit risk and long-term risk. Factors affecting
the liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important over the short run.
A short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as VMIG or, if the demand feature is
not rated, as NR. Short-term ratings on issues with demand features are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payment
relying on external liquidity. Additionally, investors should be alert to the
fact that the source of payment may be limited to the external liquidity with no
or limited legal recourse to the issuer in the event the demand is not met.
Moody's short-term ratings are designated Moody's Investment Grade as MIG
1 or VMIG 1 through MIG 4 or VMIG 4. As the name implies, when Moody's assigns a
MIG or VMIG rating, all categories define an investment grade situation.
<PAGE>
MIG 1/VMIG 1
This description denotes best quality. There is present strong protection
by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG 2/VMIG 2
This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest commercial paper rating assigned
by Moody's. Issuers of P-1 paper must have a superior capacity for repayment of
short-term promissory obligations, and ordinarily will be evidenced by leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structures with moderate reliance on debt
and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation and well established access
to a range of financial markets and assured sources of alternate liquidity.
Issuers (or related supporting institutions) rated Prime-2 (P-2) have a
strong capacity for repayment of short-term promissory obligations. This
ordinarily will be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
Fitch
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to meet
the obligations of a specific debt issue or class of debt. The ratings take into
consideration special features of the issue, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's future financial strength
and credit quality.
AAA
Bonds rated AAA are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably foreseeable
events.
AA
Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1+.
<PAGE>
A
Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is considered
to be strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB
Bonds rated BBB are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these bonds
and, therefore, impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
BB
Bonds rated BB are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B
Bonds rated B are considered highly speculative. While bonds in this class
are currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited margin
of safety and the need for reasonable business and economic activity throughout
the life of the issue.
CCC
Bonds rated CCC have certain identifiable characteristics, which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC
Bonds rated CC are minimally protected. Default in payment of interest
and/or principal seems probable over time.
C
Bonds rated C are in imminent default in payment of interest or principal.
DDD, DD and D
Bonds rated DDD, DD and D are in actual or imminent default of interest
and/or principal payments. Such bonds are extremely speculative and should be
valued on the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. DDD represents the highest potential for recovery
on these bonds and D represents lowest potential for recovery.
Plus (+) and minus (-) signs are used with a rating symbol to indicate the
relative position of a credit within the rating category. Plus and minus signs,
however, are not used in the AAA category covering 12-36 months or the DDD, DD
or D categories.
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the existence
of liquidity necessary to meet the issuer's obligations in a timely manner.
F-1+
Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1
Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2
Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as the F-1+ and F-1 categories.
<PAGE>
DREYFUS BASIC MUNICIPAL FUND, INC.
PART C. OTHER INFORMATION
-------------------------
Item 23. Exhibits.
(a) Articles of Incorporation dated August 8, 1991 and Articles of
Amendment are incorporated by reference to Exhibit (1) of
Post-Effective Amendment No. 10 to the Registration Statement on
Form N-1A, filed on April 1, 1996.
(b) By-Laws dated August 8, 1991, as amended January 8, 1992 are
incorporated by reference to Exhibit (2) of Post-Effective Amendment
No. 11 to the Registration Statement, filed on April 29, 1996.
(d) Management Agreement dated August 24, 1994, as amended October 11,
1995 is incorporated by reference to Exhibit (5) of Post-Effective
Amendment No. 9 to the Registration Statement on Form N-1A, filed on
December 29, 1995.
(e) Distribution Agreement dated August 24, 1994, as amended October 11,
1995 is incorporated by reference to Exhibit (6) of Post-Effective
Amendment No. 9 to the Registration Statement on Form N-1A, filed on
December 29, 1995.
(f) Custody Agreement is incorporated by reference to Exhibit (8)(a) of
Post-Effective Amendment No. 10 to the Registration Statement on
Form N-1A, filed on April 1, 1996. Forms of Sub-Custodian Agreements
are incorporated by reference to Exhibit 8(b) of Post-Effective
Amendment No. 3 to the Registration Statement, filed on December 15,
1993.
(g) Shareholder Services Plan dated August 24, 1994, as amended October
11, 1995 is incorporated by reference to Exhibit (9) of Post
Effective Amendment No. 9 to the Registration Statement, filed on
December 29, 1995.
(i) Opinion and consent of Registrant's counsel is incorporated by
reference to Exhibit (10) of Post Effective Amendment No. 19 to the
Registration Statement on Form N-1A, filed on April 1, 1996.
(j) Consent of Independent Auditors.
<PAGE>
Item 24. Persons Controlled by or under Common Control with Registrant.
- ------- --------------------------------------------------------------
Not Applicable
Item 25. Indemnification
- ------- ---------------
Reference is made to Article VIII of the Registrant's Articles
of Incorporation, dated August 7, 1991, as amended on October
19, 1994, filed as Exhibit (1) of Post-Effective Amendment No.
10 to the Registration Statement on Form N-1A, filed on April 1,
1996. The application of these provisions is limited by Article
VIII of the Registrant's By-Laws incorporated by reference to
Exhibit (2) of Post-Effective Amendment No. 11 to the
Registration Statement on Form N-1A, filed on April 29, 1996,
and by the following undertaking set forth in the rules
promulgated by the Securities and Exchange Commission:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the
event that a claim for indemnification is against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any such
action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in such Act and will be governed by the
final adjudication of such issue.
Reference is also made to the Distribution Agreement attached as
Exhibit (6) of Post-Effective Amendment No. 9 to the Registration
Statement on Form N-1A, filed on November 29, 1995.
Item 26. Business and Other Connections of Investment Adviser.
- ------- ----------------------------------------------------
The Dreyfus Corporation ("Dreyfus") and subsidiary companies
comprise a financial service organization whose business consists
primarily of providing investment management services as the
investment adviser, manager and distributor for sponsored
investment companies registered under the Investment Company Act
of 1940 and as an investment adviser to institutional and
individual accounts. Dreyfus also serves as sub-investment
adviser to and/or administrator of other investment companies.
Dreyfus Service Corporation, a wholly-owned subsidiary of
Dreyfus, serves primarily as a registered broker-dealer of shares
of investment companies sponsored by Dreyfus and of other
investment companies for which Dreyfus acts as investment
adviser, sub-investment adviser or administrator. Dreyfus
Management, Inc., another wholly-owned subsidiary, provides
investment management services to various pension plans,
institutions and individuals.
SIGNATURES
---------------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York on the
28th day of October, 1999.
DREYFUS BASIC MUNICIPAL FUND, INC.
BY: /s/Marie E. Connolly*
----------------------------------
MARIE E. CONNOLLY, PRESIDENT
<TABLE>
<CAPTION>
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signatures Title Date
- --------------------------- ----------------------------- ---------
<S> <C> <C>
/s/Marie E. Connolly* President and Treasurer 10/28/99
____________________________ (Principal Executive, Financial
Marie E Connolly and Accounting Officer)
/s/Samuel Chase* Director 10/28/99
- ----------------------------
Samuel Chase
/s/Gordon J. Davis* Director 10/28/99
- ----------------------------
Gordon J. Davis
/s/Joseph S. DiMartino* Director 10/28/99
- ----------------------------
Joseph S. DiMartino
/s/Joni Evans* Director 10/28/99
- ----------------------------
Joni Evans
/s/Arnold S. Hiatt* Director 10/28/99
- ----------------------------
Arnold S. Hiatt
/s/Burton Wallack* Director 10/28/99
- ----------------------------
Burton Wallack
</TABLE>
*BY: /s/Elba Vasquez
--------------------------
Elba Vasquez,
Attorney-in-Fact
October 28, 1999
Office of Records
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Dreyfus BASIC Municipal Fund, Inc.
Registration Statement File Nos. 33-42162, 811-6377
Dear Sir or Madam:
Transmitted for filing is one (1) copy of an EDGARized version of
Post-Effective Amendment No. 16 to the above-referenced Fund's Registration
Statement. This filing is made pursuant to Rule 485(a) under the Securities Act
of 1933, as amended, to become effective on January 1, 2000, as this
Registration Statement has been prepared in accordance with Form N-1A as amended
June 1, 1998. Parts B and C of the document have been marked to show changes
from Post-Effective No. 15. Part A is entirely new, reflecting the Form N-1A
amendments and plain English requirements.
Please address any comments or questions to my attention at (212)
922-6801.
Sincerely,
Christine Brennan
CB
Enc.
Cc: Ernst & Young, LLP
Stroock & Stroock & Lavan, LLP
