Dreyfus
BASIC Intermediate
Municipal Bond Portfolio
ANNUAL REPORT August 31, 2000
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the portfolio are subject to change at any time based on
market and other conditions.
* Not FDIC-Insured * Not Bank-Guaranteed * May Lose Value
Contents
THE PORTFOLIO
------------------------------------------------------------
2 Letter from the President
3 Discussion of Performance
6 Portfolio Performance
7 Statement of Investments
13 Statement of Assets and Liabilities
14 Statement of Operations
15 Statement of Changes in Net Assets
16 Financial Highlights
17 Notes to Financial Statements
21 Report of Independent Auditors
22 Important Tax Information
FOR MORE INFORMATION
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Back Cover
The Portfolio
Dreyfus BASIC
Intermediate Municipal Bond Portfolio
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus BASIC Intermediate
Municipal Bond Portfolio, covering the 12-month period from September 1, 1999
through August 31, 2000. Inside, you'll find valuable information about how the
portfolio was managed during the reporting period, including a discussion with
the portfolio manager, Douglas Gaylor.
The U.S. economy grew strongly over the past year in an environment
characterized by high levels of consumer spending and low levels of
unemployment. Concerns that inflationary pressures might reemerge caused the
Federal Reserve Board to raise short-term interest rates four times during the
reporting period before signs of moderation began to appear in June 2000.
Although higher interest rates led to lower municipal bond prices during the
first half of the reporting period, supply-and-demand factors unique to the
municipal bond market helped promote price improvement over the last six months
of the period. Because of robust economic growth, many municipalities had little
need to borrow during the reporting period, creating a reduced supply of new
issues, while demand from individual investors strengthened.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus BASIC Intermediate Municipal Bond Portfolio.
Sincerely,
/s/Stephen E. Canter
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
September 15, 2000
DISCUSSION OF PERFORMANCE
Douglas Gaylor, Portfolio Manager
How did Dreyfus BASIC Intermediate Municipal Bond Portfolio perform during the
period?
For the 12-month period ended August 31, 2000, the portfolio achieved a 6.36%
total return.(1) In comparison, the Lipper Intermediate Municipal Debt Funds
category average produced a return of 4.97% for the same period.(2)
We attribute the portfolio's good relative performance to our security selection
strategy, which emphasized investments -- such as discount bonds -- that
performed particularly well during the second half of the reporting period as
the overall municipal bond market rallied.
What is the portfolio's investment approach?
The portfolio's goal is to earn a high level of federally tax-exempt income from
a diversified portfolio of intermediate-term municipal bonds. In pursuit of this
objective, we conduct rigorous analysis of each individual bond's structure.
Within the context of our bond structure analyses, we strive to maximize income
and achieve a competitive total return, which is the combination of income
earned and bond price changes over a period of time.
First, we try to allocate between one-quarter and one-half of the total
portfolio to bonds that we believe have the potential to offer attractive total
returns. We typically look for bonds that are selling at a discount to face
value because they may be temporarily out of favor among investors. Our belief
is that these bonds' prices will rise as they return to favor over time.
We also look for bonds that can potentially provide consistently high current
yields. We often find such opportunities in modest premium bonds. We not only
look for bonds that we expect to provide highly
The Portfolio
DISCUSSION OF PERFORMANCE (CONTINUED)
competitive yields, but we try to ensure that we select bonds that are most
likely to obtain attractive prices if and when we decide to sell them in the
secondary market.
What other factors influenced the portfolio's performance?
The portfolio was alternately unfavorably and favorably influenced over the past
year by changing economic and market conditions.
When the reporting period began on September 1, 1999, the U.S. economy was
growing strongly, raising concerns that long-dormant inflationary pressures
might reemerge. In response, the Federal Reserve Board (the "Fed") raised
short-term interest rates once in late 1999 and three times during the first
half of 2000 for a total increase of 1.25 percentage points during the reporting
period. Higher interest rates and inflation fears eroded the prices of most
municipal bonds during the first half of the reporting period. This erosion was
especially severe among the out-of-favor discount bonds that comprised the
portfolio's core holdings.
However, those out-of-favor bonds recovered strongly during the second half of
the reporting period, when the municipal bond market rallied. The rally was
caused in part by signs of an economic slowdown: fewer housing starts,
moderating growth and little change in the core inflation rate suggested that
the Fed's restrictive monetary policies could be near an end.
In addition, the market rally was partly the result of the ongoing strength of
the national, state and local economies, which helped keep municipal bond yields
relatively low, and prices high, compared to taxable bonds for much of the
reporting period. Many states and municipalities enjoyed higher tax revenues and
budget surpluses. This curtailed their need to borrow and resulted in a sharply
reduced supply of securities. At the same time, demand for municipal bonds has
been strong from individuals seeking to protect wealth created by the strong
economy and rising stock market. When demand rises and supply falls, prices of
existing bonds tend to move higher.
What is the portfolio's current strategy?
We have recently been rebalancing the portfolio' s holdings. As previously
out-of-favor bonds appreciated during the recent market rally, we have attempted
to lock in gains by selling them at attractive prices. We have found the
greatest demand -- and therefore the most attractive prices -- among bonds in
the 10- to 15-year maturity range. For the most part, we have replaced those
bonds with income-oriented bonds, especially those from areas with high state
income taxes, in the same maturity range. However, because these new holdings
generally were not purchased at deep discounts to their face value, their
sensitivity to changing interest rates -- also referred to as duration -- is not
as great as the bonds they replaced.
Accordingly, the portfolio' s average effective duration has recently been
modestly reduced from the very long posture reached during the winter of 2000.
This position reflects the current structure of the bonds within the portfolio,
and is not the result of interest-rate forecasting, which we prefer to avoid. Of
course, the portfolio' s composition and maturity structure are subject to
change.
September 15, 2000
(1) TOTAL RETURN INCLUDES REINVESTMENT OF DIVIDENDS AND ANY CAPITAL GAINS PAID.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SHARE PRICE, YIELD AND
INVESTMENT RETURN FLUCTUATE SUCH THAT UPON REDEMPTION, PORTFOLIO SHARES MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. INCOME MAY BE SUBJECT TO STATE AND
LOCAL TAXES, AND SOME INCOME MAY BE SUBJECT TO THE FEDERAL ALTERNATIVE MINIMUM
TAX (AMT) FOR CERTAIN INVESTORS. CAPITAL GAINS, IF ANY, ARE FULLY TAXABLE.
(2) SOURCE: LIPPER INC.
The Portfolio
PORTFOLIO PERFORMANCE
Comparison of change in value of $10,000 investment in Dreyfus BASIC
Intermediate Municipal Bond Portfolio and the Lehman Brothers 10-Year Municipal
Bond Index
--------------------------------------------------------------------------------
Average Annual Total Returns AS OF 8/31/00
<TABLE>
<CAPTION>
Inception From
Date 1 Year 5 Years Inception
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
FUND 5/4/94 6.36% 5.55% 6.16%
</TABLE>
((+)) SOURCE: LIPPER INC.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN DREYFUS BASIC INTERMEDIATE
MUNICIPAL BOND PORTFOLIO ON 5/4/94 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE
IN THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX ON THAT DATE. FOR
COMPARATIVE PURPOSES, THE VALUE OF THE INDEX ON 4/30/94 IS USED AS THE BEGINNING
VALUE ON 5/4/94. ALL DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED.
THE PORTFOLIO INVESTS PRIMARILY IN MUNICIPAL SECURITIES AND MAINTAINS A
PORTFOLIO WITH A WEIGHTED-AVERAGE MATURITY RANGING BETWEEN 3 AND 10 YEARS. THE
PORTFOLIO'S PERFORMANCE SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT FEES AND
EXPENSES. THE LEHMAN BROTHERS 10-YEAR MUNICIPAL BOND INDEX, UNLIKE THE
PORTFOLIO, IS AN UNMANAGED TOTAL RETURN PERFORMANCE BENCHMARK FOR THE
INVESTMENT-GRADE, 10-YEAR TAX-EXEMPT BOND MARKET, CONSISTING OF MUNICIPAL BONDS
WITH MATURITIES OF 9-12 YEARS. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES,
FEES AND OTHER EXPENSES. THESE FACTORS, COUPLED WITH THE POTENTIALLY LONGER
MATURITY OF THE INDEX, CAN CONTRIBUTE TO THE INDEX POTENTIALLY OUTPERFORMING OR
UNDERPERFORMING THE PORTFOLIO. FURTHER INFORMATION RELATING TO PORTFOLIO
PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS CONTAINED IN
THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN THIS REPORT
STATEMENT OF INVESTMENTS
August 31, 2000
<TABLE>
<CAPTION>
Principal
LONG-TERM MUNICIPAL INVESTMENTS--98.7% Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CALIFORNIA--.2%
Hemet, COP (Capital Projects) 6.50%, 2/1/2003 200,000 207,638
COLORADO--4.5%
Arapahoe County (School District Number 1, Englewood)
4.50%, 12/1/2016 (Insured; FSA) 1,710,000 1,523,473
Denver City and County, Airport Revenue
7.25%, 11/15/2007 180,000 191,063
Lower Colorado River Authority, Revenue
Zero Coupon, 1/1/2003 (Insured; AMBAC) 1,000,000 899,520
Westminster, MFHR (Semper Village Apartments)
5.95%, 9/1/2006 (Guaranteed; AXA Reinsurance) 1,830,000 1,874,359
DELAWARE--3.9%
Delaware Economic Development Authority, Revenue
(Delaware State University Project):
4%, 10/1/2010 (Insured; MBIA) 805,000 738,523
4.10%, 10/1/2011 (Insured; MBIA) 835,000 761,161
4.20%, 10/1/2012 (Insured; MBIA) 830,000 751,399
4.30%, 10/1/2013 (Insured; MBIA) 905,000 815,658
4.40%, 10/1/2014 (Insured; MBIA) 915,000 823,601
FLORIDA--1.5%
Palm Beach County, Criminal Justice Facilities Revenue
5.90%, 6/1/2008 (Insured; FGIC) 1,400,000 1,486,282
HAWAII--4.7%
Hawaii 5.80%, 1/1/2005 1,000,000 1,045,590
Hawaii Harbor, Capital Improvement Revenue
6.20%, 7/1/2008 (Insured; FGIC) 1,000,000 1,060,200
Hawaii Housing & Community Development Corp.
Single Family Mortgage Purchase Revenue
6.05%, 7/1/2010 1,490,000 1,554,457
Honolulu City and County, Wastewater System Revenue
4.40%, 7/1/2011 (Insured; FGIC) 1,100,000 1,031,646
INDIANA--1.1%
Indiana Transportation Finance Authority,
Airport Facilities LR (United Air) 6.25%, 11/1/2003 1,000,000 1,046,080
KANSAS--1.7%
Dodge Unified School District
(Ford County Number 443)
4.50%, 9/1/2015 (Insured; FSA) 1,855,000 1,673,340
LOUISIANA --.9%
Jefferson Parish Hospital Service District, HR
4.85%, 7/1/2013 950,000 910,062
The Portfolio
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MAINE--1.9%
Maine Health and Higher Educational Facilities Authority,
Revenue 4.625%, 7/1/2015 (Insured; MBIA) 2,090,000 1,911,995
MARYLAND--2.5%
Northeast Waste Disposal Authority, RRR
(Baltimore Resco Retrofit Project) 4.75%, 1/1/2012 2,910,000 2,478,592
MICHIGAN-4.1%
Greater Detroit Resource Recovery Authority, Revenue
6.25%, 12/13/2008 (Insured; AMBAC) 1,000,000 1,104,170
Michigan Hospital Finance Authority, HR
(Genesys Health System) 7.10%, 10/1/2002 860,000 906,664
Taylor Tax Increment Finance Authority
(Tax Increment) 4.50%, 5/1/2011 (Insured; FSA) 2,180,000 2,072,417
MINNESOTA--1.7%
Minneapolis and St. Paul Metropolitan Apartments Commission
4.50%, 1/1/2015 1,890,000 1,704,988
MISSOURI--3.5%
Branson Reorganization School District Number R-4
(School District Direct Deposit Program)
4.375%, 3/1/2018 (Insured; AMBAC) 1,350,000 1,168,385
Jackson County, Leasehold Revenue
(Truman Sports Complex)
4.25%, 12/1/2011 (Insured; AMBAC) 1,250,000 1,151,238
North Kansas City, HR 4.50%, 11/15/2015 (Insured; AMBAC) 1,325,000 1,178,892
NEW JERSEY--2.5%
Essex County Utilities Authority, Solid Waste Revenue
Hamilton Township 4.30%, 10/1/2010 (Insured; FGIC) 1,025,000 974,683
Zero Coupon, 4/1/2011 (Insured; FSA) 1,000,000 587,150
New Jersey 4.75%, 8/1/2015 1,000,000 951,170
NEW YORK--4.9%
Monroe County 4.375%, 3/1/2010 1,000,000 966,400
New York State Housing Corp., Revenue 6%, 11/1/2003 1,500,000 1,564,935
New York State Thruway Authority
Service Contract Revenue
(Local Highway and Bridge) 5.75%, 4/1/2006 1,000,000 1,051,750
Oyster Bay, Public Improvement 4.15%, 2/15/2009 1,315,000 1,249,197
NORTH CAROLINA--1.4%
North Carolina Eastern Municipal Power Agency,
Power System Revenue 7%, 1/1/2008 1,250,000 1,370,463
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
OHIO--2.2%
Alliance, Sewer System Revenue 6%, 10/15/2010 2,060,000 2,196,393
PENNSYLVANIA--27.0%
Allegheny County Hospital Development
Authority, Revenue (UPMC Health Systems)
4.625%, 12/15/2015 4,000,000 3,593,080
Berks County Municipal Authority, Revenue
(Phoebe--Devitt Homes Project) 5.50%, 5/15/2011 1,000,000 902,500
Butler County Hospital Authority,
Health Center Revenue
(St. Francis Health Care Project) 6%, 5/1/2008 1,860,000 1,737,798
Cambria County 6.625%, 8/15/2014 3,550,000 3,864,494
Coatesville Area School District
4.60%, 10/1/2012 (Insured; FSA) 1,360,000 1,297,630
Crawford School District
4.40%, 2/15/2012 1,480,000 1,378,605
Dubois Area School District
3.40%, 11/15/2001 (Insured; FSA) 1,140,000 1,123,778
Harrisburg Authority, Office and Parking Revenue
5.50%, 5/1/2005 650,000 636,110
5.75%, 5/1/2008 1,000,000 971,580
Harrisburg Redevelopment Authority, Revenue
Zero Coupon, 11/1/2017 (Insured; FSA) 2,750,000 1,040,930
Lancaster County Hospital Authority, Revenue
(Lancaster General Hospital Project)
4.75%, 7/1/2011 800,000 772,664
Northhampton County Hospital Authority, Revenue
(Easton Hospital) 6.90%, 1/1/2002 1,015,000 1,019,344
Pennsylvania Convention Center Authority, Revenue
6.25%, 9/1/2004 200,000 205,098
Pennsylvania Economic Development Financing Authority,
RRR (Northampton Generating A) 6.40%, 1/1/2009 1,000,000 989,110
Pennsylvania Higher Educational Facilities Authority, Revenue:
University Health Services 5.35%, 1/1/2008 4,500,000 4,348,035
UPMC Health System 4.65%, 8/1/2012 1,920,000 1,794,086
Philadelphia Hospitals and Higher Education Facilities
Authority, Revenue (Northwestern Corp.)
6.50%, 6/1/2004 (Prerefunded 6/1/2003) 1,055,000 (a) 1,120,357
The Portfolio
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
RHODE ISLAND--1.1%
Rhode Island, Consolidated Capital Development Loan
5.95%, 8/1/2013 (Insured; MBIA) 1,000,000 1,037,290
SOUTH CAROLINA--1.5%
Charleston County, Alliance Health Services Revenue Care
4.80%, 8/15/2013 (Insured; FSA) 1,600,000 1,513,456
TENNESSEE--3.0%
Blount County, HR 4.50%, 7/1/2011 (Insured; AMBAC) 1,000,000 941,330
Memphis 4.50%, 10/1/2011 2,135,000 2,042,298
TEXAS--4.7%
Brazos Higher Education Authority, Student Loan Revenue
6.20%, 12/1/2002 180,000 185,989
Irving Hospital Authority, HR (Irving Healthcare Systems)
5.70%, 7/1/2008 (Insured; FSA) 1,675,000 1,738,114
Mesquite Health Facilities Development Corporation
Retirement Facilities Revenue (Christian Retirement Facility):
5.70%, 2/15/2002 285,000 285,832
5.80%, 2/15/2003 315,000 316,244
San Antonio, Water Revenue:
6.30%, 5/15/2004 (Insured; FGIC, Escrowed to Maturity) 100,000 106,300
6.30%, 5/15/2004 (Insured; FGIC) 900,000 943,227
Waco 6%, 2/1/2004 (Insured; FGIC) 1,070,000 1,120,429
UTAH--1.6%
Salt Lake County Municipal Building Authority, LR
6.15%, 10/1/2010 (Insured; MBIA) 1,450,000 1,542,003
VIRGINIA--2.4%
Brunswick County Industrial Development Authority,
Correctional Facility LR 5.55%, 7/1/2008 (Insured; MBIA) 1,325,000 1,398,445
Virginia Housing Development Authority
Commonwealth Mortgage 5.75%, 1/1/2001 1,000,000 1,003,560
WASHINGTON--1.2%
Washington Health Care Facilities Authority, Revenue
(Gray Harbor Community Hospital)
5.75%, 7/1/2010 (Insured; Asset Guaranty) 1,180,000 1,229,312
WEST VIRGINIA--1.4%
West Virginia Hospital Finance Authority, HR
(West Virginia University Hospital)
4.40%, 6/1/2010 (Insured; AMBAC) 1,490,000 1,401,688
WISCONSIN--2.4%
Kenosha Zero Coupon, 10/15/2008 (Insured; FSA) 2,000,000 1,326,480
Wisconsin, Transportation Revenue 5.40%, 7/1/2004 1,000,000 1,015,340
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
WYOMING--.8%
Wyoming Farm Loan Board, Capital Facilities Revenue
Zero Coupon, 10/1/2004 1,000,000 823,920
U.S. RELATED--8.4%
Puerto Rico Commonwealth Highway and Transportation
Authority, Highway Revenue
5.40%, 7/1/2006 8,000,000 8,286,320
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(cost $98,032,779) 98,036,310
------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL INVESTMENTS--2.0%
--------------------------------------------------------------------------------
TEXAS--1.0%
Gulf Coast Waste Disposal Authority, SWDR, VRDN
(Amoco Oil Co. Project) 4.35% 1,000,000 (b) 1,000,000
VIRGINIA--1.0%
Roanoke Industrial Development Authority, HR, VRDN
(Roanoke Memorial Hospitals) 4.25% 1,000,000 (b) 1,000,000
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(cost $2,000,000) 2,000,000
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $100,032,779) 100.7% 100,036,310
LIABILITIES, LESS CASH AND RECEIVABLES (.7%) (723,716)
NET ASSETS 100.0% 99,312,594
</TABLE>
The Portfolio
STATEMENT OF INVESTMENTS (CONTINUED)
Summary of Abbreviations
AMBAC American Municipal Bond
Assurance Corporation
COP Certificate of Participation
FGIC Financial Guaranty
Insurance Company
FSA Financial Security Assurance
HR Hospital Revenue
LR Lease Revenue
MBIA Municipal Bond Investors
Assurance Insurance Corporation
MFHR Multi-Family Housing Revenue
RRR Resources Recovery Revenue
SWDR Solid Waste Disposal Revenue
VRDN Variable Rate Demand Notes
Summary of Combined Ratings (Unaudited)
<TABLE>
<CAPTION>
Fitch or Moody's or Standard & Poor's Value (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AAA Aaa AAA 61.0
AA Aa AA 11.0
A A A 16.5
BBB Baa BBB 5.3
BB Ba BB 1.7
F-1+ & F-1 MIG1, VMIG1, & P1 SP1 & A1 2.0
Not Rated (c) Not Rated (c) Not Rated (c) 2.5
100.0
(A) BONDS WHICH ARE PREREFUNDED ARE COLLATERALIZED BY U.S. GOVERNMENT
SECURITIES WHICH ARE HELD IN ESCROW AND ARE USED TO PAY PRINCIPAL AND
INTEREST ON THE MUNICIPAL ISSUE AND TO RETIRE THE BONDS IN FULL AT THE
EARLIEST REFUNDING DATE.
(B) SECURITIES PAYABLE ON DEMAND. THE INTEREST RATE, WHICH IS SUBJECT TO
CHANGE, IS BASED UPON BANK PRIME RATES OR AN INDEX OF MARKET INTEREST
RATES.
(C) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE
RATED SECURITIES IN WHICH THE PORTFOLIO MAY INVEST.
(D) AT AUGUST 31, 2000, THE PORTFOLIO HAD $26,883,339 (27.1% OF NET ASSETS)
INVESTED IN SECURITIES WHOSE PAYMENT OF PRINCIPAL AND INTEREST IS DEPENDENT
UPON REVENUES GENERATED FROM HEALTH CARE PROJECTS.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2000
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 100,032,779 100,036,310
Cash 466,721
Interest receivable 1,199,595
Prepaid expenses 6,116
101,708,742
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 25,909
Payable for investment securities purchased 2,241,040
Payable for shares of Common Stock redeemed 100,077
Accrued expenses and other liabilities 29,122
2,396,148
--------------------------------------------------------------------------------
NET ASSETS ($) 99,312,594
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 99,290,975
Accumulated net realized gain (loss) on investments 18,088
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 3,531
--------------------------------------------------------------------------------
NET ASSETS ($) 99,312,594
--------------------------------------------------------------------------------
SHARES OUTSTANDING
(500 million shares of $.001 par value Common Stock authorized) 7,618,218
NET ASSET VALUE, offering and redemption price per share ($) 13.04
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio
STATEMENT OF OPERATIONS
Year Ended August 31, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 5,288,715
EXPENSES:
Management fee--Note 3(a) 597,088
Shareholder servicing costs--Note 3(b) 109,621
Auditing fees 24,729
Registration fees 17,146
Custodian fees 10,588
Prospectus and shareholders' reports 8,129
Legal fees 2,205
Directors' fees and expenses--Note 3(c) 1,880
Loan commitment fees--Note 2 1,006
Miscellaneous 15,292
TOTAL EXPENSES 787,684
Less--reduction in management fee due to
undertaking--Note 3(a) (338,862)
NET EXPENSES 448,822
INVESTMENT INCOME--NET 4,839,893
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments 32,925
Net unrealized appreciation (depreciation) on investments 1,015,414
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1,048,339
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 5,888,232
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended August 31,
-----------------------------------
2000 1999
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 4,839,893 4,620,307
Net realized gain (loss) on investments 32,925 440,113
Net unrealized appreciation (depreciation)
on investments 1,015,414 (5,337,383)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 5,888,232 (276,963)
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (4,839,893) (4,620,307)
Net realized gain on investments (77,216) (664,088)
TOTAL DIVIDENDS (4,917,109) (5,284,395)
--------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Net proceeds from shares sold 20,024,320 44,457,031
Dividends reinvested 3,723,719 4,182,372
Cost of shares redeemed (35,750,983) (25,394,294)
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL STOCK TRANSACTIONS (12,002,944) 23,245,109
TOTAL INCREASE (DECREASE) IN NET ASSETS (11,031,821) 17,683,751
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 110,344,415 92,660,664
END OF PERIOD 99,312,594 110,344,415
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 1,579,596 3,315,861
Shares issued for dividends reinvested 293,677 312,283
Shares redeemed (2,819,002) (1,895,459)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (945,729) 1,732,685
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the portfolio would have
increased (or decreased) during each period, assuming you had reinvested all
dividends and distributions. These figures have been derived from the
portfolio's financial statements.
<TABLE>
<CAPTION>
Year Ended August 31,
--------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA ($):
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 12.88 13.56 13.25 12.83 12.95
Investment Operations:
Investment income--net .62 .61 .63 .66 .65
Net realized and unrealized
gain (loss) on investments .17 (.58) .47 .45 (.12)
Total from Investment Operations .79 .03 1.10 1.11 .53
Distributions:
Dividends from investment income--net (.62) (.61) (.63) (.66) (.65)
Dividends from net realized
gain on investments (.01) (.10) (.16) (.03) --
Total Distributions (.63) (.71) (.79) (.69) (.65)
Net asset value, end of period 13.04 12.88 13.56 13.25 12.83
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 6.36 .11 8.51 8.95 4.07
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .45 .45 .45 .24 .39
Ratio of net investment income
to average net assets 4.86 4.55 4.68 5.07 5.01
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation .34 .33 .36 .56 .46
Portfolio Turnover Rate 40.46 60.65 15.38 64.65 54.99
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 99,313 110,344 92,661 66,372 46,598
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
Dreyfus BASIC Intermediate Municipal Bond Portfolio (the "portfolio") is a
separate non-diversified series of Dreyfus BASIC Municipal Fund, Inc. (the
" fund" ), which is registered under the Investment Company Act of 1940, as
amended (the "Act"), as an open-end management investment company and operates
as a series company currently offering four series, including the portfolio. The
portfolio's investment objective is to provide investors with as high a level of
current income exempt from Federal income tax as is consistent with the
preservation of capital. The Dreyfus Corporation (the "Manager") serves as the
portfolio' s investment adviser. The Manager is a direct subsidiary of Mellon
Bank, N.A., which is a wholly-owned subsidiary of Mellon Financial Corporation.
Effective March 22, 2000, Dreyfus Service Corporation ("DSC"), a wholly-owned
subsidiary of the Manager, became the distributor of the portfolio's shares.
Prior to March 22, 2000, Premier Mutual Fund Services, Inc. was the distributor
The fund accounts separately for the assets, liabilities and operations of each
series. Expenses directly attributable to each series are charged to that
series' operations; expenses which are applicable to all series are allocated
among them on a pro rata basis.
The portfolio' s financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management estimates
and assumptions. Actual results could differ from those estimates.
(a) Portfolio valuation: Investments in securities (excluding options and
financial futures on municipal and U.S. treasury securities) are valued each
business day by an independent pricing service ("Service") approved by the Board
of Directors. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the Service
are valued at the mean between the quoted bid prices (as obtained by the Service
from dealers in such securities) and asked prices (as calculated by the Service
based upon its evaluation of the market for such securities). Other The
Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
investments (which constitute a majority of the portfolio securities) are
carried at fair value as determined by the Service, based on methods which
include consideration of: yields or prices of municipal securities of comparable
quality, coupon, maturity and type; indications as to values from dealers; and
general market conditions. Options and financial futures on municipal and U.S.
treasury securities are valued at the last sales price on the securities
exchange on which such securities are primarily traded or at the last sales
price on the national securities market on each business day. Investments not
listed on an exchange or the national securities market, or securities for which
there were no transactions, are valued at the average of the most recent bid and
asked prices. Bid price is used when no asked price is available.
(b) Securities transactions and investment income: Securities transactions are
recorded on a trade date basis. Realized gain and loss from securities
transactions are recorded on the identified cost basis. Interest income,
adjusted for amortization of premiums and original issue discounts on
investments, is earned from settlement date and recognized on the accrual basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date. Under the terms of the custody
agreement, the portfolio received net earnings credits of $4,638 during the
period ended August 31, 2000 based on available cash balances left on deposit.
Income earned under this arrangement is included in interest income.
(c) Dividends to shareholders: It is the policy of the portfolio to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the portfolio may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code of 1986,
as amended (the "Code" ). To the extent that net realized capital gain can be
offset by capital loss carryovers, if any, it is the policy of the portfolio not
to distribute such gain.
(d) Federal income taxes: It is the policy of the portfolio to continue to
qualify as a regulated investment company, which can distribute tax
exempt dividends, by complying with the applicable provisions of the Code, and
to make distributions of income and net realized capital gain sufficient to
relieve it from substantially all Federal income and excise taxes.
NOTE 2--Bank Line of Credit:
The portfolio participates with other Dreyfus-managed funds in a $500 million
redemption credit facility (the "Facility" ) to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the portfolio has agreed to pay commitment fees on its pro rata
portion of the Facility. Interest is charged to the portfolio at rates based on
prevailing market rates in effect at the time of borrowings. During the period
ended August 31, 2000, the portfolio did not borrow under the Facility.
NOTE 3--Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement with the Manager, the management fee is
computed at the annual rate of .60 of 1% of the value of the portfolio's average
daily net assets and is payable monthly. The Manager has undertaken, until such
time as it gives shareholders at least 90 days' notice to the contrary, to
reduce the management fee paid by the portfolio, to the extent that the
portfolio' s aggregate expense, exclusive of taxes, brokerage fees, interest on
borrowings, commitment fees and extraordinary expenses, exceed an annual rate of
. 45 of 1% of the value of the portfolio's average daily net assets. The
reduction in management fee, pursuant to the undertakings, amounted to $338,862
during the period ended August 31, 2000.
(b) Under the Shareholder Services Plan, the portfolio reimburses DSC an amount
not to exceed an annual rate of .25 of 1% of the value of the portfolio's
average daily net assets for the certain allocated expenses of providing
personal services and/or maintaining shareholder accounts. The services provided
may include personal services relating to shareholder accounts, such as
answering shareholder The Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
inquiries regarding the portfolio and providing reports and other information,
and services related to the maintenance of shareholder accounts. During the
period ended August 31, 2000, the portfolio was charged $79,275 pursuant to the
Shareholder Services Plan.
The portfolio compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the portfolio. During the
period ended August 31, 2000, the portfolio was charged $20,290 pursuant to the
transfer agency agreement.
(c) Each director who is not an "affiliated person" as defined in the Act
receives from the fund an annual fee of $1,000 and an attendance fee of $250 per
meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding
short-term securities, during the period ended August 31, 2000, amounted to
$38,913,399 and $47,684,471, respectively.
At August 31, 2000, accumulated net unrealized appreciation on investments was
$3,531, consisting of $1,984,214 gross unrealized appreciation and $1,980,683
gross unrealized depreciation.
At August 31, 2000, the cost of investments for Federal income tax purposes was
substantially the same as the cost for financial reporting purposes (see the
Statement of Investments).
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors Dreyfus BASIC Intermediate Municipal Bond
Portfolio
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Dreyfus BASIC Intermediate Municipal Bond
Portfolio (one of the Series constituting Dreyfus BASIC Municipal Fund, Inc.) as
of August 31, 2000, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and financial highlights for each of the years indicated
therein. These financial statements and financial highlights are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of August 31, 2000 by correspondence with
the custodian and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Dreyfus BASIC Intermediate Municipal Bond Portfolio at August 31, 2000, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the indicated years, in conformity with accounting principles
generally accepted in the United States.
/s/Ernst & Young LLP
New York, New York
October 9, 2000
The Portfolio
IMPORTANT TAX INFORMATION (Unaudited)
In accordance with Federal tax law, the portfolio hereby designates all the
dividends paid from investment income-net during its fiscal year ended August
31, 2000 as "exempt-interest dividends" (not generally subject to regular
Federal income tax).
As required by Federal tax law rules, shareholders will receive notification of
their portion of the portfolio's taxable ordinary dividends (if any) and capital
gain distributions (if any) paid for the 2000 calendar year on Form 1099-DIV
which will be mailed by January 31, 2001.
NOTES
For More Information
Dreyfus BASIC Intermediate Municipal Bond Portfolio
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York
100 Church Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Distributor
Dreyfus Service Corporation
200 Park Avenue
New York, NY 10166
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 Information can be viewed online or downloaded from:
http://www.dreyfus.com
(c) 2000 Dreyfus Service Corporation 126AR008
