Dreyfus U.S. Treasury
Short Term Fund
SEMIANNUAL REPORT June 30, 2000
(reg.tm)
The views expressed herein are current to the date of this report. These views
and the composition of the fund's 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 FUND
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2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
7 Statement of Assets and Liabilities
8 Statement of Operations
9 Statement of Changes in Net Assets
10 Financial Highlights
11 Notes to Financial Statements
FOR MORE INFORMATION
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Back Cover
The Fund
Dreyfus U.S. Treasury
Short Term Fund
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus U.S. Treasury Short
Term Fund, covering the six-month period from January 1, 2000 through June 30,
2000. Inside, you' ll find valuable information about how the fund was managed
during the reporting period, including a discussion with Gerald Thunelius,
portfolio manager and a member of the Dreyfus Taxable Fixed Income Team that
manages the fund.
Tighter monetary policy adversely affected most -- but not all -- sectors of the
bond market over the past six months. This was primarily a result of efforts by
the Federal Reserve Board (the "Fed" ) to forestall potential inflationary
pressures. The Fed raised short-term interest rates three times during the
reporting period, for a total increase of 1.00 percentage points. These rate
hikes contributed to a total interest-rate increase of 1.75 percentage points
since late June 1999, before the reporting period began.
Higher interest rates led to an erosion of most bond prices, especially among
higher yielding securities. U.S. Treasury securities represented a notable
exception. Prices of these direct obligations of the federal government rose
primarily because of reduced supply amid robust demand from domestic and foreign
investors.
We appreciate your confidence over the past six months, and we look forward to
your continued participation in Dreyfus U.S. Treasury Short Term Fund.
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
July 17, 2000
DISCUSSION OF FUND PERFORMANCE
Gerald Thunelius, Portfolio Manager Dreyfus Taxable Fixed Income Team
How did Dreyfus U.S. Treasury Short Term Fund perform relative to its benchmark?
During the six-month reporting period ended June 30, 2000, the fund produced a
total return of 3.31%.(1) In comparison, the fund's benchmark, the Merrill Lynch
Governments, U.S. Treasury, Short-Term (1-3 Years) Index, provided a total
return of 2.99% for the same time period.(2)
We attribute the fund' s good relative performance to our security selection
strategy, which included U.S. Treasury Inflation Protected Securities, as well
as U.S. Government Agency Inflation Protected Securities. The value of these
securities adjusted upward to keep pace with rising inflation. In addition, the
fund benefited from unusual market conditions in the short-term U.S. Treasury
securities market. For most of the reporting period, there was an inverted yield
curve, which depicts yield differences by maturity, for these types of
securities. This inverted yield curve illustrated that shorter term instruments
provided higher yields than longer term instruments.
What is the fund's investment approach?
As a U.S. Treasury securities fund, our goal is to provide shareholders with
current income through an investment vehicle that is composed of U.S. Treasury
bills, notes and other securities that are issued or guaranteed by the United
States Government, its agencies or instrumentalities. The fund may also enter
into repurchase agreements with securities dealers that are backed by U.S.
Treasuries.
Because U.S. Treasury bills and notes are backed by the full faith and credit of
the U.S. Government, they are considered to rank among the highest quality
investments available. By investing in these obligations, the fund seeks to
maintain a high degree of credit safety. Of course, the market value of the
fund's securities and the value of fund shares are
The Fund
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
not insured or guaranteed by the U.S. Government. The fund generally maintains
an average dollar-weighted maturity of between two and three years.
What other factors influenced the fund's performance?
First, the fund was influenced by inflation fears and rising interest rates.
When the reporting period began on January 1, 2000, investors were relieved that
Y2K-related concerns proved unfounded. However, investors soon became worried
that robust economic growth might rekindle long-dormant inflationary pressures,
especially since both energy prices and wages in a tight job market were rising.
In an attempt to relieve these pressures, the Federal Reserve Board has raised
short-term interest rates three times during the reporting period.
Second, the fund responded to forces that are unique to the U.S. Treasury
securities marketplace, which recently provided attractive returns compared to
other market sectors. In mid-January the government announced that it would use
a portion of the budget surplus to initiate a buyback program for U.S. Treasury
securities. This announcement triggered a wave of purchases of long-term U.S.
Treasury securities. Yields for these long-term securities were driven down past
yields of short-term securities and as a result created what is called an
inverted yield curve.
What is the fund's current strategy?
We are continuing our efforts to invest the fund's assets in areas of the
short-term U.S. Treasury securities market that we believe offer attractive
opportunities. Accordingly, we have established the fund's average duration -- a
measure of sensitivity to changing interest rates -- at about 1.7 years, a level
that we consider neutral relative to the fund's peer group. This duration
management strategy was designed to help us balance the benefits of locking in
prevailing yields while maintaining the flexibility to capture higher yields if
they become available. In addition, we believe that a neutral duration
management strategy
enables us to derive greater value from other fixed-income investment
strategies, such as yield curve risk-reward analysis, for as long as the future
direction of interest rates remains uncertain.
Accordingly, we employed a barbell strategy in an attempt to maximize returns
without substantially increasing interest-rate risk. As its name implies, a
barbell strategy involves focusing on securities at the short and long ends of
our maturity spectrum in order to construct a portfolio that has a neutral
average duration.
From a security selection standpoint, more than 32% of the fund's assets were
invested in U.S. Government Agency Inflation Protected Securities. These
instruments provide a value that adjusts to changing consumer inflation, better
enabling the fund' s value to keep pace with inflation. The remainder of the
portfolio was primarily invested in U.S. Treasury notes.
July 17, 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, FUND SHARES MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST. TOTAL RETURN INCLUDES REINVESTMENT OF
DIVIDENDS. RETURN FIGURES PROVIDED REFLECT THE ABSORPTION OF FUND EXPENSES BY
THE DREYFUS CORPORATION PURSUANT TO AN UNDERTAKING IN EFFECT THAT MAY BE
EXTENDED, TERMINATED OR MODIFIED AT ANY TIME. HAD THESE EXPENSES NOT BEEN
ABSORBED, THE FUND'S RETURN WOULD HAVE BEEN LOWER.
(2) SOURCE: LIPPER INC. -- REFLECTS REINVESTMENT OF DIVIDENDS AND, WHERE
APPLICABLE, CAPITAL GAIN DISTRIBUTIONS. THE MERRILL LYNCH GOVERNMENTS, U.S.
TREASURY, SHORT-TERM (1-3 YEARS) INDEX IS AN UNMANAGED PERFORMANCE BENCHMARK FOR
TREASURY SECURITIES WITH MATURITIES OF ONE TO THREE YEARS; ISSUES IN THE INDEX
MUST HAVE PAR AMOUNTS OUTSTANDING GREATER THAN OR EQUAL TO $1 BILLION.
The Fund
<TABLE>
<CAPTION>
June 30, 2000 (Unaudited)
STATEMENT OF INVESTMENTS
Principal
BONDS AND NOTES--85.4% Amount ($) Value ($)
------------------------------------------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES--20.0%
Federal Home Loan Banks,
<S> <C> <C>
Medium-Term Notes, 5.86%, 4/28/2003 10,000,000 9,719,300
Tennessee Valley Authority,
Valley Indexed Principal Securities,
3.375%, 1/15/2007 17,500,000 (a) 17,539,651
27,258,951
U.S. TREASURY BONDS--21.6%
10.75%, 8/15/2005 7,000,000 8,345,260
12%, 5/15/2005 1,000,000 1,236,250
12.375%, 5/15/2004 16,500,000 19,872,105
29,453,615
U.S. TREASURY INFLATION PROTECTION SECURITIES--19.5%
3.625%, 7/15/2002 25,000,000 (a) 26,545,690
U.S. TREASURY NOTES--24.3%
5.75%, 11/30/2002 12,500,000 12,317,500
6.375%, 6/30/2002 1,000,000 1,000,620
6.75%, 5/15/2005 9,000,000 9,213,750
7.5%, 2/15/2005 10,000,000 10,490,600
33,022,470
TOTAL BONDS AND NOTES
(cost $116,552,272) 116,280,726
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SHORT-TERM INVESTMENTS--15.4%
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U.S. TREASURY BILLS:
5.46%, 8/3/2000 6,630,000 6,598,508
5.6%, 8/17/2000 14,530,000 14,428,435
TOTAL SHORT-TERM INVESTMENTS
(cost $21,020,496) 21,026,943
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TOTAL INVESTMENTS
(cost $137,572,768) 100.8% 137,307,669
LIABILITIES, LESS CASH AND RECEIVABLES (.8%) (1,129,852)
NET ASSETS 100.0% 136,177,817
(A) PRINCIPAL AMOUNT FOR ACCRUAL PURPOSES IS PERIODICALLY ADJUSTED BASED ON CHANGES TO THE CONSUMER PRICE INDEX.
SEE FINANCIAL STATEMENTS.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000 (Unaudited)
Cost Value
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ASSETS ($):
Investments in securities--See Statement of
Investments 137,572,768 137,307,669
Interest receivable 1,807,281
Receivable for shares of Beneficial Interest subscribed 14,199
139,129,149
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LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 68,823
Cash overdraft due to Custodian 61,930
Payable for shares of Beneficial Interest redeemed 2,748,817
Accrued expenses 71,762
2,951,332
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NET ASSETS ($) 136,177,817
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COMPOSITION OF NET ASSETS ($):
Paid-in capital 159,869,507
Accumulated net realized gain (loss) on investments (23,426,591)
Accumulated net unrealized appreciation (depreciation)
on investments--Note 4 (265,099)
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NET ASSETS ($) 136,177,817
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SHARES OUTSTANDING
(unlimited number of $.001 par value shares of Beneficial
Interest authorized) 9,584,459
NET ASSET VALUE, offering and redemption price per share ($) 14.21
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2000 (Unaudited)
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INVESTMENT INCOME ($):
INTEREST INCOME 5,006,070
EXPENSES:
Management fee--Note 3(a) 451,637
Shareholder servicing costs--Note 3(b) 171,261
Professional fees 21,065
Trustees' fees and expenses--Note 3(c) 19,869
Registration fees 10,819
Custodian fees--Note 3(b) 8,703
Prospectus and shareholders' reports 3,827
Miscellaneous 704
TOTAL EXPENSES 687,885
Less--reduction in management fee due to
undertaking--Note 3(a) (85,697)
NET EXPENSES 602,188
INVESTMENT INCOME--NET 4,403,882
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REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 4 ($):
Net realized gain (loss) on investments (3,338,227)
Net unrealized appreciation (depreciation) on investments 3,769,318
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 431,091
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 4,834,973
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
June 30, 2000 Year Ended
(Unaudited) December 31, 1999
--------------------------------------------------------------------------------
OPERATIONS ($):
Investment income--net 4,403,882 9,846,245
Net realized gain (loss) on investments (3,338,227) (4,633,209)
Net unrealized appreciation (depreciation)
on investments 3,769,318 (2,850,088)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 4,834,973 2,362,948
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (4,403,882) (9,846,245)
--------------------------------------------------------------------------------
BENEFICIAL INTEREST TRANSACTIONS ($):
Net proceeds from shares sold 14,662,476 46,404,112
Dividends reinvested 3,634,392 8,093,872
Cost of shares redeemed (47,014,892) (68,458,107)
INCREASE (DECREASE) IN NET ASSETS FROM
BENEFICIAL INTEREST TRANSACTIONS (28,718,024) (13,960,123)
TOTAL INCREASE (DECREASE) IN NET ASSETS (28,286,933) (21,443,420)
--------------------------------------------------------------------------------
NET ASSETS ($):
Beginning of Period 164,464,750 185,908,170
END OF PERIOD 136,177,817 164,464,750
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CAPITAL SHARE TRANSACTIONS (SHARES):
Shares sold 1,038,853 3,205,363
Shares issued for dividends reinvested 257,436 560,525
Shares redeemed (3,328,979) (4,724,607)
NET INCREASE (DECREASE) IN SHARES OUTSTANDING (2,032,690) (958,719)
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated.
Total return shows how much your investment in the fund would have increased (or
decreased) during each period, assuming you had reinvested all dividends and
distributions. These figures have been derived from the fund's financial
statements.
Six Months Ended
June 30, 2000 Year Ended December 31,
---------------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
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PER SHARE DATA ($):
Net asset value,
<S> <C> <C> <C> <C> <C> <C>
beginning of period 14.16 14.78 14.77 14.82 15.14 14.55
Investment Operations:
Investment income--net .41 .82 .87 .93 .90 1.03
Net realized and unrealized
gain (loss) on investments .05 (.62) .01 (.05) (.32) .59
Total from Investment Operations .46 .20 .88 .88 .58 1.62
Distributions:
Dividends from investment
income--net (.41) (.82) (.87) (.93) (.90) (1.03)
Net asset value,
end of period 14.21 14.16 14.78 14.77 14.82 15.14
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TOTAL RETURN (%) 6.64(a) 1.39 6.14 6.12 4.07 11.38
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RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to
average net assets .80(a) .80 .79 .70 .70 .65
Ratio of net investment income
to average net assets 5.83(a) 5.68 5.91 6.29 6.04 6.90
Decrease reflected in above
expense ratios due to
undertakings by
The Dreyfus Corporation .11(a) .12 .14 .31 .27 .29
Portfolio Turnover Rate 513.75(b) 1,007.65 773.31 563.77 539.38 480.44
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Net Assets, end of period
($ x 1,000) 136,178 164,465 185,908 195,398 187,826 188,726
(A) ANNUALIZED.
(B) NOT ANNUALIZED.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1--Significant Accounting Policies:
Dreyfus U.S. Treasury Short Term Fund (the "fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified
open-end management investment company. The fund's investment objective is to
provide investors with as high a level of current income as is consistent with
the preservation of capital. The Dreyfus Corporation (the "Manager") serves as
the fund' s investment adviser. The Manager is a direct subsidiary of Mellon
Bank, N.A. (" Mellon"), 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' 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 short-term
investments other than U.S. Treasury Bills) are valued each business day by an
independent pricing service (" Service" ) approved by the Board of Trustees.
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 securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions.
Securities for which there are no such valuations are valued at fair value as
determined in good faith under the directions of the Board
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
of Trustees. Short-term investments, excluding U.S. Treasury Bills, are carried
at amortized cost, which approximates value.
(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,
including, where applicable, amortization of discount on investments, is
recognized on the accrual basis. Under the terms of the custody agreement, the
fund receives net earnings credits based on available cash balances left on
deposit.
(c) Dividends to shareholders: It is the policy of the fund to declare dividends
daily from investment income-net. Such dividends are paid monthly. Dividends
from net realized capital gain, if any, are normally declared and paid annually,
but the fund may make distributions on a more frequent basis to comply with the
distribution requirements of the Internal Revenue Code of 1986, (the "Code"). To
the extent that net realized capital gain can be offset by capital loss
carryovers, it is the policy of the fund not to distribute such gain.
(d) Federal income taxes: It is the policy of the fund to continue to qualify as
a regulated investment company, if such qualification is in the best interests
of its shareholders, by complying with the applicable provisions of the Code,
and to make distributions of taxable income sufficient to relieve it from
substantially all Federal income and excise taxes.
The fund has an unused capital loss carryover of approximately $19,441,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to December 31, 1999. 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, $9,564,000 of the carryover expires in fiscal 2002,
$2,004,000 expires in fiscal 2003, $2,702,000 expires in fiscal 2004, $717,000
expires in fiscal 2005 and $4,454,000 expires in fiscal 2007.
NOTE 2--Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $100 million
unsecured line of credit primarily to be utilized for temporary or emergency
purposes, including the financing of redemptions. Interest is charged to the
fund at rates which are related to the Federal Funds rate in effect at the time
of borrowing. During the period ended June 30, 2000, the fund did not borrow
under the line of credit.
NOTE 3--Management Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement with the Manager, the management fee is
computed at the annual rate of .60 of 1% of the value of the fund's average
daily net assets and is payable monthly. The Manager had undertaken from January
1, 2000 through June 30, 2000 to reduce the management fee paid by the fund, to
the extent that the fund's aggregate expenses, exclusive of taxes, brokerage
fees, interest on borrowings and extraordinary expenses, exceeded an annual rate
of .80 of 1% of the value of the fund's average daily net assets. The reduction
in management fee, pursuant to the undertaking, amounted to $85,697 during the
period ended June 30, 2000.
(b) Under the Shareholder Services Plan, the fund reimburses DSC an amount not
to exceed an annual rate of .25 of 1% of the value of the fund's average daily
net assets for certain allocated expenses of providing personal services and/or
maintaining shareholder accounts. The services provided may include personal
services relating to shareholder accounts, such as answering shareholder
inquiries regarding the fund and providing reports and other information, and
services related to the maintenance of shareholder accounts. During the period
ended June 30, 2000, the fund was charged $118,144 pursuant to the Shareholder
Services Plan.
The Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (CONTINUED)
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the fund. During the period
ended June 30, 2000, the fund was charged $38,994 pursuant to the transfer
agency agreement.
The fund compensates Mellon under a custody agreement for providing custodial
services for the fund. During the period ended June 30, 2000, the fund was
charged $8,703 pursuant to the custody agreement.
(c) Each Board member also serves as a Board member of other funds within the
Dreyfus complex (collectively, the "Fund Group"). Effective April 11, 2000, each
Board member who is not an "affiliated person" as defined in the Act receives an
annual fee of $30,000 and an attendance fee of $4,000 for each in person meeting
and $500 for telephone meetings. These fees are allocated among the funds in the
Fund Group. The Chairman of the Board receives an additional 25% of such
compensation. Prior to April 11, 2000, each Board member who was not an
" affiliated person" as defined in the Act received from the fund an annual fee
of $2,500 and an attendance fee of $250 per meeting. The Chairman of the Board
received an additional 25% of such compensation. Subject to the fund's Emeritus
Program Guidelines, Emeritus Board members, if any, receive 50% of the fund's
annual retainer fee and per meeting fee paid at the time the Board member
achieves emeritus status.
NOTE 4--Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of investment
securities, excluding short-term securities, during the period ended June 30,
2000, amounted to $670,237,857 and $722,708,838, respectively.
At June 30, 2000, accumulated net unrealized depreciation on investments was
$265,099, consisting of $693,146 gross unrealized appreciation and $958,245
gross unrealized depreciation.
At June 30, 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 Fund
Notes
For More Information
Dreyfus U.S. Treasury Short-Term Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
Mellon Bank, N.A.
One Mellon Bank Center
Pittsburgh, PA 15258
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 081SA006
