Dreyfus
BASIC 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
16 Statement of Assets and Liabilities
17 Statement of Operations
18 Statement of Changes in Net Assets
19 Financial Highlights
20 Notes to Financial Statements
24 Report of Independent Auditors
25 Important Tax Information
FOR MORE INFORMATION
---------------------------------------------------------------------------
Back Cover
The Portfolio
Dreyfus BASIC Municipal Bond Portfolio
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus BASIC 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 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 Municipal Bond Portfolio perform during the period?
For the 12-month period ended August 31, 2000, the portfolio achieved a 6.41%
total return.(1) In comparison, the Lipper General Municipal Debt Funds category
average produced a return of 5.10% 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 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 potentially can 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?
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 some
municipal bonds during the first half of the reporting period. This erosion had
a strong negative influence among 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 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.
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 20-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 Municipal
Bond Portfolio and the Lehman Brothers 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 5/6/94 6.41% 6.26% 6.93%
</TABLE>
((+)) SOURCE: LIPPER INC.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
THE ABOVE GRAPH COMPARES A $10,000 INVESTMENT MADE IN DREYFUS BASIC MUNICIPAL
BOND PORTFOLIO ON 5/6/94 (INCEPTION DATE) TO A $10,000 INVESTMENT MADE IN THE
LEHMAN BROTHERS MUNICIPAL BOND INDEX ON THAT DATE. FOR COMPARATIVE PURPOSES, THE
VALUE OF THE INDEX ON 4/30/94 IS USED AS THE BEGINNING VALUE ON 5/6/94. ALL
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS ARE REINVESTED.
THE PORTFOLIO INVESTS PRIMARILY IN MUNICIPAL SECURITIES AND ITS PERFORMANCE
SHOWN IN THE LINE GRAPH TAKES INTO ACCOUNT FEES AND EXPENSES. THE LEHMAN
BROTHERS MUNICIPAL BOND INDEX, UNLIKE THE PORTFOLIO, IS AN UNMANAGED TOTAL
RETURN PERFORMANCE BENCHMARK FOR THE LONG-TERM, INVESTMENT-GRADE, TAX-EXEMPT
BOND MARKET, CALCULATED BY USING MUNICIPAL BONDS SELECTED TO BE REPRESENTATIVE
OF THE MUNICIPAL MARKET OVERALL. THE INDEX DOES NOT TAKE INTO ACCOUNT CHARGES,
FEES AND OTHER EXPENSES WHICH CAN CONTRIBUTE TO THE INDEX POTENTIALLY
OUTPERFORMING OR UNDERPERFORMING THE PORTFOLIO. FURTHER INFORMATION RELATING TO
PORTFOLIO PERFORMANCE, INCLUDING EXPENSE REIMBURSEMENTS, IF APPLICABLE, IS
CONTAINED IN THE FINANCIAL HIGHLIGHTS SECTION OF THE PROSPECTUS AND ELSEWHERE IN
THIS REPORT.
STATEMENT OF INVESTMENTS
August 31, 2000
<TABLE>
<CAPTION>
Principal
LONG-TERM MUNICIPAL INVESTMENTS--95.3% Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ALABAMA--.3%
Alabama Water Pollution Control Authority,
Revolving Fund Loan
6.25%, 8/15/2014 (Insured; AMBAC) 750,000 762,428
ARIZONA--.9%
Tempe, GO 4%, 7/1/2016 2,500,000 2,096,275
CALIFORNIA--7.8%
California Community College Financing Authority, LR
4.625%, 10/1/2019 (Insured; MBIA) 4,000,000 3,666,880
Culver City Redevelopment Finance Authority,
Revenue 4.60%, 11/1/2020 (Insured; AMBAC) 3,500,000 3,164,280
Kings River Conservation District,
Pine Flat Power Revenue
4.75%, 1/1/2020 5,250,000 4,822,598
Los Angeles County, COP
(Disney Parking Referendum Project)
4.75%, 3/1/2023 (Insured; AMBAC) 2,000,000 1,818,520
Placer Union High School District
Zero Coupon, 8/1/2019 (Insured; FGIC) 1,700,000 608,566
San Mateo County, JT Powers Authority, LR
4.75%, 7/15/2023 2,000,000 1,819,300
Walnut Valley, Unified School District
6.50%, 8/1/2019 (Insured; FGIC) 1,765,000 1,885,532
COLORADO--4.2%
Colorado Springs, Utility Revenue 6.75%, 11/15/2021 500,000 522,860
Denver City and County, Airport Revenue
7%, 11/15/2025 820,000 836,703
Jefferson County, Open Space Sales Tax Revenue
4.625%, 11/1/2016 6,900,000 6,275,619
Lakewood, COP 4.75%, 12/1/2012 (Insured; MBIA) 1,990,000 1,915,574
FLORIDA--11.1%
Florida State Board of Education Capital Outlay (Public Education):
4.50%, 6/1/2018 (Insured; MBIA) 1,250,000 1,102,262
4.50%, 6/1/2020 (Insured; MBIA) 7,625,000 6,625,667
4.50%, 6/1/2021 3,000,000 2,573,100
4.50%, 6/1/2022 (Insured; FSA) 5,810,000 4,969,235
Florida State Municipal Loan Council Revenue
4.75%, 4/1/2019 (Insured; MBIA) 3,990,000 3,646,421
Miramar, Public Service Tax Revenue
6.15%, 10/1/2024 (Insured; FGIC) 1,000,000 1,025,060
The Portfolio
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
FLORIDA (CONTINUED)
Palm Beach County, Solid Waste IDR
(Osceola Power Limited Partnership)
6.85%, 1/1/2014 200,000 (a) 114,000
Polk County Industrial Development Authority, IDR
(IMC Fertilizer)
7.525%, 1/1/2015 5,000,000 5,117,650
ILLINOIS--.6%
Illinois Development Finance Authority, Revenue
(Steppenwolf Theatre Company) 5.50%, 10/1/2028 1,500,000 1,439,505
KANSAS--1.3%
Johnson County Union School District No. 512 (Shawnee Mission)
4.50%, 10/1/2019 2,370,000 2,060,336
Wyandotte County Unified Government,
Utility Systems Revenue
4.75%, 9/1/2018 1,000,000 912,320
KENTUCKY--1.2%
Lexington-Fayette Urban County Government
(County Detention Center)
4.75%, 5/1/2020 1,965,000 1,761,858
Trimble County, PCR (Louisville Gas and Electric Co.)
7.625%, 11/1/2020 1,000,000 1,023,990
LOUISIANA--1.1%
Louisiana Stadium and Expo District,
Hotel Occupancy Tax and Stadium Revenue
4.75%, 7/1/2021 (Insured; FGIC) 2,850,000 2,539,606
MAINE--2.0%
Maine Housing Authority, Mortgage Purchase
5.85%, 11/15/2020 1,350,000 1,367,685
Maine Health and Higher Educational
Facilities Authority, Revenue
4.625%, 7/1/2015 (Insured; MBIA) 3,370,000 3,082,977
MARYLAND--6.6%
Baltimore County, PCR (Bethlehem Steel Corp.)
7.55%, 6/1/2017 1,150,000 1,160,591
Maryland Community Development Administration
(Department of Housing and Community Development)
5.95%, 7/1/2023 4,255,000 4,327,803
Maryland Health and Higher Educational
Facilities Authority, Revenue
(Doctors Community Hospital) 5.50%, 7/1/2024 3,500,000 2,796,185
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MARYLAND (CONTINUED)
Northeast Waste Disposal Authority, Solid Waste Revenue
(Montgomery Resource Recovery Project) :
6.20%, 7/1/2010 3,130,000 3,275,889
6.30%, 7/1/2016 310,000 319,539
Prince Georges County, Revenue
(Dimensions Health Corp.) 5.30%, 7/1/2024 5,485,000 3,091,895
MASSACHUSETTS--2.4%
Boston 4.25%, 11/1/2018 (Insured; MBIA) 2,840,000 2,396,136
Massachusetts Health and Educational
Facilities Authority, Revenue
(Mount Auburn Hospital Issue)
6.30%, 8/15/2024 (Insured; MBIA) 750,000 775,448
Massachusetts Housing Finance Agency,
SFHR 7.125%, 6/1/2025 460,000 473,828
Massachusetts Industrial Finance Agency, Health Care
Facility Revenue (Metro Health Foundation Inc. Project)
6.75%, 12/1/2027 1,000,000 920,860
Taunton 4.75%, 5/1/2017 (Insured; FSA) 1,000,000 918,260
MICHIGAN--5.4%
Fenton Area Public School 4.70%, 5/1/2013 (Insured; FGIC) 1,865,000 1,766,696
Hazel Park Building Authority (Ice Arena)
4.625%, 4/1/2019 (Insured; AMBAC) 1,600,000 1,415,264
Kalamazoo Hospital Finance Authority, Hospital Facility Revenue
(Burgess Medical Center) 6.25%, 6/1/2014 (Insured; FGIC) 1,000,000 1,105,770
Michigan Building Authority, Revenue (Facilities Program)
4.75%, 10/15/2021 4,355,000 3,867,458
Michigan Municipal Bond Authority
(Local Government Loan Program)
6.125%, 12/1/2018 (Insured; FGIC) 750,000 780,660
Plymouth-Canton Community School District:
4.75%, 5/1/2021 1,365,000 1,213,922
4.75%, 5/1/2023 (Insured; FSA) 2,320,000 2,053,432
MINNESOTA--1.4%
Minnesota Housing Finance Agency, SFHR 6.90%, 7/1/2022 185,000 190,615
Minneapolis and Saint Paul Housing and
Redevelopment Authority, Health Care System Revenue
(Healthspan) 4.75%, 11/15/2018 (Insured; AMBAC) 3,300,000 2,990,856
MISSISSIPPI--1.5%
Mississippi (Capital Improvements)
4.50%, 11/1/2017 (Insured; FGIC) 3,955,000 3,476,880
The Portfolio
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
MISSOURI--2.1%
Cape Girardeau County Industrial Development Authority, MFHR
(Cape La Croix) 6.40%, 6/20/2031 1,245,000 1,277,084
Missouri State Environmental Improvement
and Energy Resource Authority,
Water Pollution Control Revenue
(State Revolving Funds Program) 4.50%, 1/1/2017 3,965,000 3,515,488
NEVADA--1.9%
Clark County IDR (Nevada Power Co. Project):
7.20%, 10/1/2022 250,000 260,145
5.60%, 10/1/2030 2,000,000 1,716,740
5.90%, 10/1/2030 2,500,000 2,242,425
NEW HAMPSHIRE--.7%
New Hampshire Higher Educational and
Health Facilities Authority, HR
(Androscoggin Valley Hospital) 5.75%, 11/1/2017 1,475,000 1,422,667
New Hampshire Housing Finance Authority 6.85%, 7/1/2014 200,000 205,768
NEW JERSEY--3.5%
New Jersey GO, 4.75%, 8/1/2015 4,840,000 4,603,663
New Jersey Housing and Mortgage Finance Agency,
Home Buyer Revenue
6.70%, 4/1/2016 (Insured; MBIA) 500,000 521,460
New Jersey Transportation Trust Fund Authority
(Transportation System) 4.50%, 6/15/2019 (Insured; FSA) 1,965,000 1,735,429
New Jersey Turnpike Authority, Turnpike Revenue
6.50%, 1/1/2016 1,000,000 1,125,140
NEW YORK--3.1%
Long Island Power Authority, Electric System General Revenue
4.625%, 4/1/2016 (Insured; MBIA) 3,395,000 3,101,604
New York City Municipal Water Finance Authority,
Water and Sewer Systems Revenue
6%, 6/15/2017 (Insured; MBIA) 3,000,000 3,082,050
New York City Transitional Finance Authority
(Future Secured Tax)
4.75%, 11/15/2016 (Insured; FGIC) 1,000,000 930,820
NORTH DAKOTA--1.5%
North Dakota State Municipal Bond Bank
(State Revolving Fund Program) 4.625%, 10/1/2019 3,920,000 3,452,187
OHIO--1.4%
Franklin County Convention Facilities Authority,
Tax and Lease Revenue Anticipation Bonds
5.85%, 12/1/2019 (Insured; MBIA) 1,000,000 1,019,410
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
OHIO (CONTINUED)
Hamilton County, Hospital Facilities Revenue
(Bethesda Hospital) 6.25%, 1/1/2012 1,000,000 1,045,510
Lorain, Hospital Improvement Revenue
(Lakeland Community Hospital, Inc.)
6.50%, 11/15/2012 1,000,000 1,093,670
OREGON--.4%
Oregon Housing and Community Services Department,
SFMR (Mortgage Program)
6.45%, 7/1/2026 820,000 850,102
PENNSYLVANIA--19.5%
Allegheny County Hospital Development Authority, Revenue:
(Health System--Catholic Health East)
4.875%, 11/15/2015 (Insured; AMBAC) 950,000 881,419
(Health System--University of Pennsylvania Medical Center)
4.75%, 12/15/2016 (Insured; AMBAC) 6,000,000 5,426,460
Allentown School District
Zero Coupon, 2/15/2016 (Insured; FGIC) 2,500,000 1,063,875
Bulter Area School District 4.75%, 10/1/2022 5,105,000 4,532,117
Delaware County, Pennsylvania Authority
Health Systems Revenue
(Catholic Health East) 4.875%, 11/15/2015
(Insured; AMBAC) 1,550,000 1,438,105
Dauphin County General Authority, Office and
Packaging Revenue (Riverfront Office)
6%, 1/1/2025 2,000,000 1,900,600
Harrisburg Authority, Office and Packaging Revenue
6%, 5/1/2019 1,000,000 932,990
Northhampton County Industrial Development Authority, PCR
(Bethlehem Steel) 7.55%, 6/1/2017 250,000 253,060
Pennsylvania, COP 5%, 7/1/2015 (Insured; AMBAC) 540,000 518,908
Pennsylvania Economic Development Financing Authority
RRR (Northampton Generating) 6.50%, 1/1/2013 3,000,000 2,954,760
Pennsylvania Housing Finance Agency, Single Family Mortgage:
6.75%, 4/1/2016 2,700,000 2,818,854
6.875%, 10/1/2024 4,000,000 4,198,080
Philadelphia, Gas Works Revenue:
5%, 7/1/2018 (Insured; FSA) 3,440,000 3,240,274
6.375%, 7/1/2026 (Insured; CMAC) 2,685,000 2,799,462
Philadelphia Hospitals and Higher Education
Facilities Authority, Revenue (Jefferson Health Systems)
5%, 5/15/2011 1,410,000 1,327,825
The Portfolio
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
PENNSYLVANIA (CONTINUED)
Philadelphia Hospitals and Higher Education
Facilities Authority, HR
(Temple University Hospital) 6.625%, 11/15/2023 7,925,000 7,334,033
Washington County Industrial Development Authority,
PCR (West Penn Power Co.)
6.05%, 4/1/2014 (Insured; AMBAC) 2,500,000 2,633,425
RHODE ISLAND--.1%
Rhode Island Housing and Mortgage Finance Corp.
(Homeownership Opportunity)
6.50%, 4/1/2027 200,000 204,430
SOUTH CAROLINA--1.3%
Charleston County, Revenue (Alliance Health Services)
4.60%, 8/15/2011 (Insured; FSA) 2,000,000 1,899,240
Florence County, HR (McLeod Regional Medical Center Project)
4.90%, 11/1/2014 (Insured; MBIA) 1,100,000 1,040,215
TENNESSEE--.6%
Sullivan County Industrial Board, Revenue 6.35%, 7/20/2027 1,000,000 1,022,05
Tennessee Housing Development Agency,
Mortgage Finance 6.90%, 7/1/2025 240,000 248,803
TEXAS--6.2%
Alliance Airport Authority, Special Facilities Revenue
(American Airlines Inc., Project) 7.50%, 12/1/2029 500,000 511,625
Brazos River Authority, Revenue
(Houston Industries Inc. Project)
5.125%, 5/1/2019 1,750,000 1,659,210
Crosby Independent School District
(Permanent School Fund Guaranteed)
Zero Coupon, 2/15/2017 1,655,000 656,356
Frisco Independent School District
(Permanent School Fund Guaranteed)
4.625%, 8/15/2022 3,745,000 3,242,121
Irving Independent School District
(Permanent School Fund Guaranteed)
5%, 2/15/2021 525,000 488,418
Lamar Consolidated Independent School District
(Permanent School Fund Guaranteed)
5%, 2/15/2017 1,500,000 1,432,725
Principal
LONG-TERM MUNICIPAL INVESTMENTS (CONTINUED) Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
TEXAS (CONTINUED)
Mesquite, Health Facilities Development
(Christian Retirement Facility)
6.40%, 2/15/2020 1,500,000 1,357,245
Northside Independent School District
(Permanent School Fund Guaranteed)
4.75%, 8/15/2024 4,000,000 3,509,040
Spring Independent School District
(Permanent School Fund Guaranteed)
4.50%, 8/15/2020 1,365,000 1,171,948
VIRGINIA--2.1%
Hampton Redevelopment and Housing Authority,
Senior Living Association Revenue
5.875%, 7/20/2016 1,885,000 1,910,372
Riverside Regional Jail Authority, Jail Facilities Revenue
5.875%, 7/1/2014 (Insured; MBIA) 1,050,000 1,096,064
Virginia Beach Development Authority,
Health Care Facilities Revenue
(Sentara Health System) 4.75%, 11/1/2021 2,000,000 1,735,840
WASHINGTON--.7%
Seatac Local Option Transportation, Tax Revenue:
6.50%, 12/1/2013 (Insured; MBIA) 45,000 48,383
Tacoma, Conservation Systems Project Revenue
(Tacoma Public Utilities Division)
6.60%, 1/1/2015 1,000,000 1,064,960
Washington, Public Power Supply System,
Nuclear Project No. 2, Revenue
6.25%, 7/1/2012 315,000 328,901
WEST VIRGINIA--.5%
Pleasants County, PCR (West Penn Power Co.)
6.15%, 5/1/2015 (Insured; AMBAC) 1,000,000 1,054,470
WYOMING--.1%
Sweetwater County, SWDR
(FMC Corp. Project) 7%, 6/1/2024 200,000 203,558
U.S. RELATED--1.8%
Guam Power Authority Revenue
5.125%, 10/1/2029 (Insured MBIA) 4,250,000 4,034,567
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (cost $219,947,967) 216,250,944
The Portfolio
STATEMENT OF INVESTMENTS (CONTINUED)
Principal
SHORT-TERM MUNICIPAL INVESTMENTS--2.3% Amount ($) Value ($)
-----------------------------------------------------------------------------------------------------------------------------------
IOWA--.5%
Iowa Finance Authority, SWDR
VRDN (Cedar River Paper Co. Project)
4.45% (LOC; Union Bank of Switzerland) 1,100,000 (b) 1,100,000
MINNESOTA--.7%
Minneapolis and Saint Paul Housing and
Redevelopment Authority, Health Care Systems Revenue
VRDN (Childrens Health Care) 4.35% (Insured; FSA) 1,700,000 (b) 1,700,000
TEXAS--1.1%
Gulf Coast Waste Disposal Authority,
Environmental Facilities Revenue
VRDN (Amoco Oil Co. Project) 4.45% 2,500,000 (b) 2,500,000
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (cost $5,300,000) 5,300,000
------------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT (cost $225,247,967) 97.6% 221,550,944
CASH AND RECEIVABLES (NET) 2.4% 5,459,129
NET ASSETS 100.0% 227,010,073
</TABLE>
Summary of Abbreviations
AMBAC American Municipal Bond
Assurance Corporation
CMAC Capital Market Assurance
Corporation
COP Certificate of Participation
FGIC Financial Guaranty Insurance
Company
FSA Financial Security Assurance
GO General Obligation
HR Hospital Revenue
IDR Industrial Development Revenue
LOC Letter of Credit
LR Lease Revenue
MBIA Municipal Bond Investors
Assurance Insurance Corporation
MFHR Multi-Family Housing Revenue
PCR Pollution Control Revenue
RRR Resources Recovery Revenue
SFHR Single Family Housing Revenue
SFMR Single Family Mortgage Revenue
<TABLE>
<CAPTION>
Summary of Combined Ratings (Unaudited)
Fitch or Moody's or Standard & Poor's Value (%)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AAA Aaa AAA 56.6
AA Aa AA 21.6
A A A 4.7
BBB Baa BBB 12.3
F1 MIG1/P1 SP1/A1 2.4
Not Rated(c) Not Rated(c) Not Rated(c) 2.4
100.0
(A) NON-INCOME PRODUCING SECURITY; INTEREST PAYMENTS IN DEFAULT.
(B) SECURITIES PAYABLE ON DEMAND. VARIABLE INTEREST RATE-SUBJECT TO PERIODIC
CHANGE.
(C) SECURITIES WHICH, WHILE NOT RATED BY FITCH, MOODY'S AND STANDARD & POOR'S
HAVE BEEN DETERMINED BY THE MANAGER TO BE OF COMPARABLE QUALITY TO THOSE
SECURITIES IN WHICH THE PORTFOLIO MAY INVEST.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Portfolio
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2000
Cost Value
--------------------------------------------------------------------------------
ASSETS ($):
Investments in securities--See Statement of
Investments 225,247,967 221,550,944
Cash 180,977
Interest receivable 3,158,718
Receivable for investment securities sold 2,196,272
Prepaid expenses 8,505
227,095,416
--------------------------------------------------------------------------------
LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 57,953
Accrued expenses 27,390
85,343
--------------------------------------------------------------------------------
NET ASSETS ($) 227,010,073
--------------------------------------------------------------------------------
COMPOSITION OF NET ASSETS ($):
Paid-in capital 235,529,524
Accumulated net realized gain (loss) on investments (4,822,428)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (3,697,023)
--------------------------------------------------------------------------------
NET ASSETS ($) 227,010,073
--------------------------------------------------------------------------------
SHARES OUTSTANDING
(500 million shares of $.001 par value Common Stock authorized) 17,310,360
NET ASSET VALUE, offering and redemption price per share ($) 13.11
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Year Ended August 31, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME ($):
INTEREST INCOME 12,722,350
EXPENSES:
Management fee--Note 3(a) 1,346,219
Shareholder servicing costs--Note 3(b) 282,953
Registration fees 30,888
Professional fees 29,436
Custodian fees 26,600
Prospectus and shareholders' reports 18,161
Directors' fees and expenses--Note 3(c) 4,356
Loan commitment fees--Note 2 2,275
Miscellaneous 20,146
TOTAL EXPENSES 1,761,034
Less--reduction in management fee due to
undertaking--Note 3(a) (749,094)
NET EXPENSES 1,011,940
INVESTMENT INCOME--NET 11,710,410
--------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (3,588,985)
Net unrealized appreciation (depreciation) on investments 4,833,779
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 1,244,794
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 12,955,204
SEE NOTES TO FINANCIAL STATEMENTS.
The Portfolio
STATEMENT OF CHANGES IN NET ASSETS
Year Ended August 31,
-----------------------------------
2000 1999
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 11,710,410 10,931,567
Net realized gain (loss) on investments (3,588,985) (314,074)
Net unrealized appreciation (depreciation)
on investments 4,833,779 (16,411,327)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 12,955,204 (5,793,834)
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
Investment income--net (11,710,410) (10,931,567)
Net realized gain on investments (3,777) (2,472,375)
TOTAL DIVIDENDS (11,714,187) (13,403,942)
--------------------------------------------------------------------------------
CAPITAL STOCK TRANSACTIONS ($):
Net proceeds from shares sold 82,422,288 150,648,882
Dividends reinvested 7,588,743 9,582,880
Cost of shares redeemed (111,102,592) (84,130,784)
INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL STOCK TRANSACTIONS (21,091,561) 76,100,978
TOTAL INCREASE (DECREASE) IN NET ASSETS (19,850,544) 56,903,202
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 246,860,617 189,957,415
END OF PERIOD 227,010,073 246,860,617
--------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 6,527,492 10,921,658
Shares issued for dividends reinvested 600,074 698,197
Shares redeemed (8,835,021) (6,160,143)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (1,707,455) 5,459,712
SEE NOTES TO FINANCIAL STATEMENTS.
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 ($):
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 12.98 14.01 13.60 13.03 13.01
Investment Operations:
Investment income--net .66 .66 .69 .74 .73
Net realized and unrealized
gain (loss) on investments .13 (.86) .60 .66 .06
Total from Investment Operations .79 (.20) 1.29 1.40 .79
Distributions:
Dividends from investment income--net (.66) (.66) (.69) (.74) (.72)
Dividends from net realized
gain on investments .00(a) (.17) (.19) (.09) (.05)
Total Distributions (.66) (.83) (.88) (.83) (.77)
Net asset value, end of period 13.11 12.98 14.01 13.60 13.03
------------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) 6.41 (1.63) 9.78 11.03 6.17
------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .45 .45 .45 .26 .39
Ratio of net investment income
to average net assets 5.22 4.79 4.97 5.50 5.52
Decrease reflected in above expense ratios
due to the undertakings by
The Dreyfus Corporation .33 .31 .36 .58 .52
Portfolio Turnover Rate 58.05 87.54 43.39 101.27 59.23
------------------------------------------------------------------------------------------------------------------------------------
Net Assets, end of period ($ x 1,000) 227,010 246,861 189,957 114,268 56,449
(A) AMOUNT REPRESENTS LESS THAN $.01 PER SHARE.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The Portfolio
NOTES TO FINANCIAL STATEMENTS
NOTE 1--Significant Accounting Policies:
Dreyfus BASIC 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 (" 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 fund's shares, which are sold to
the public without a sales charge. 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 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 $8,803 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
The Portfolio
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Code, and to make distributions of income and net realized capital gain
sufficient to relieve it from substantially all Federal income and excise taxes
The Fund has an unused capital loss carryover of approximately $1,648,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to August 31, 2000. This amount
is calculated based on federal income tax regulations which may differ from
financial reporting in accordance with generally accepted accounting principles.
If not applied, the carryover expires in fiscal 2008.
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 the 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 expenses, 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 undertaking, amounted to $749,094
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 certain allocated expenses of providing personal
services and/or maintaining shareholder accounts. The services provided may
include personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the 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 $205,918
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 $54,773 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
$125,295,158, and $150,981,397, respectively.
At August 31, 2000, accumulated net unrealized depreciation on investments was
$3,697,023, consisting of $3,022,517 gross unrealized appreciation and
$6,719,540 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).
The Portfolio
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors Dreyfus BASIC Municipal Bond Portfolio
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of Dreyfus BASIC Municipal Bond Portfolio (one of
the Series constituting Dreyfus BASIC Municipal Fund, Inc.) as of August 31,
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 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
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.
The Portfolio
For More Information
Dreyfus BASIC Municipal Bond Portfolio
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York
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 125AR008
