DREYFUS BASIC U.S. GOVERNMENT MONEY MARKET FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report the performance for Dreyfus BASIC U.S.
Government Money Market Fund for its fiscal year ended February 28, 1997.
Your Fund produced a yield of 5.08% and after taking into account the effect
of compounding, the effective yield was 5.20%.*
ECONOMIC REVIEW
Economic evidence in early 1997 indicates that real GDP growth has not
slowed significantly from the 3.2% reported for the four quarters of 1996. A
key economic risk now developing lies in a further escalation of labor market
tightness which could fuel faster wage inflation. This is reigniting fears of
higher future price inflation, even while current prices are held low by the
strong dollar. Market interest rates have recently been led higher by rising
expectations for a Federal Reserve tightening in coming months, which could
help temper demand and would support our view that we are still in a long
economic cycle.
In the household sector, confidence is soaring, job insecurity is
disappearing and real wages are rising. Hence, consumer spending growth
appears fairly solid in early 1997. Simultaneously, a rebound in production
of consumer goods is underway, both to meet the demand and replenish
inventories left depleted at year-end. Elsewhere, capital goods orders have
been slowing since last fall, while export orders are less strong in early
1997, somewhat hurt by the higher dollar. However, a rise in demand for consum
er goods typically will attract imports, bolstering growth overseas; better
foreign economic growth may help offset the higher dollar to sustain demand
for U.S. exports.
Although wages have been on the rise since the fall of 1996, price
inflation has continued to decelerate. The risks for the future from wage
hikes that are driven by labor shortages are twofold: first, they may fuel
overheating in the economy, ultimately promoting price inflation; second,
they may slow profits for some companies. Profits are also vulnerable this
year for import-competing companies and at multinationals that have not
hedged their foreign currency exposure. Nonetheless, we expect overall
profits to sustain steady growth in 1997.
Market interest rates have shifted higher recently. Short term rates are
taking their cue from the Fed, expecting a tightening within a few months.
Long term rates, still within the trading range established over the last 12
months, have nevertheless trended higher. Announcement of a balanced Federal
budget agreement would represent a positive development that could curtail
the rise in bond yields.
The economy will shortly begin its seventh expansion year, a trend that
we believe could continue. A step by the Federal Reserve to tighten interest
rates could prolong this favorable business cycle.
MONEY MARKET OVERVIEW
This past year was a volatile one for the money market. However the net
change in rates from one end of the fiscal year to the other was not very
great.
The condition of the U.S. economy, the outlook for inflation, and what _
if anything_ the Federal Reserve might do about it were the overriding
influences on the credit markets.
Early in the fiscal period, rates generally rose, especially after strong
employment reports in late spring and early summer convinced the market that
the Fed would need to tighten money rates in order to prevent a recurrence of
inflation. By late summer, however, it became clear that inflation was not an
immediate threat. The Fed acknowledged as much by taking no preemptive
action. Furthermore, the economy was a constructive influence, providing
continued yet moderate growth without exerting undue upward pressure on wage
levels or general price indicators. Thus, in the latter part of the calendar
year, interest rates simmered down.
In early 1997, however, the money market developed a case of jittery
nerves, especially in the face of warnings from the Chairman of the Federal
Reserve Board that something might need to be done to curb excessive stock
market speculation. There has been no action by the Fed to affect interest
rates since late January, 1996, when the Fed lowered the discount rate by a
modest 0.25%.
In spite of the nervousness, the market was essentially neutral on
interest rates until February of this year when Chairman Greenspan became
more outspoken about the possibility of tightening interest rates. At the
same time, some fairly robust economic numbers began to edge rates higher.
The market's present posture, as of mid-March, is to position itself for
higher rates but drastic changes in the climate are not being discounted as
yet.
PORTFOLIO TACTICS
During most of the past year we tried to keep average maturities in the
portfolio longer than the industry average. The purpose, of course, was to
augment yields to the investor. Our maturity structure is designed to deal
with changeable eventualities. Lately, this has resulted in a somewhat less
aggressive posture. We believe this approach confers some defensive benefits
while seeking superior yields.
Sincerely,
[Patricia A. Larkin signature logo]
Patricia A. Larkin
Senior Portfolio Manager
March 17, 1997
New York, N.Y.
* Effective yield is based upon dividends declared daily and reinvested
monthly.
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DREYFUS BASIC U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF INVESTMENTS FEBRUARY 28, 1997
Annualized
Yield on
Date of Principal
U.S. Treasury Bills_7.4% Purchase Amount Value
_________ ___________ ____________
<S> <C> <C> <C>
5/29/97.................................................... 5.81% $ 50,000,000 $ 49,320,139
9/18/97.................................................... 5.77 40,000,000 38,781,577
2/5/98..................................................... 5.45 20,000,000 19,021,519
____________
TOTAL U.S. TREASURY BILLS (cost $107,123,235).................. $ 107,123,235
===============
U.S. Government Agencies_90.6%
Federal Farm Credit Banks, Consolidated Systemwide Discount Notes
1/21/98.................................................... 5.64% $ 30,000,000 $ 28,549,300
Federal Farm Credit Banks, Consolidated Systemwide Medium Term Notes
5/23/97.................................................... 5.40 (a) 24,000,000 24,017,939
6/13/97.................................................... 5.39 (a) 19,500,000 19,496,384
7/25/97.................................................... 5.33 (a) 50,000,000 49,992,356
8/14/97.................................................... 5.35 (a) 75,000,000 74,994,678
9/15/97.................................................... 5.38 (a) 20,000,000 19,994,924
1/30/98.................................................... 5.34 (a) 50,000,000 49,974,064
6/8/98..................................................... 5.50 (a) 50,000,000 50,000,000
Federal Home Loan Banks, Discount Notes
3/14/97.................................................... 5.65 13,900,000 13,873,096
Federal Home Loan Banks, Notes
3/6/97..................................................... 5.22 25,000,000 24,999,919
11/6/97.................................................... 5.77 18,000,000 18,000,000
11/18/97................................................... 5.70 24,220,000 24,220,000
12/9/97.................................................... 5.57 50,000,000 49,990,308
1/22/98.................................................... 5.86 50,000,000 49,961,790
2/12/98.................................................... 5.80 25,000,000 25,000,000
Federal Home Loan Mortgage Corp., Discount Notes
3/3/97..................................................... 5.30 22,810,000 22,803,398
4/1/97..................................................... 5.42 4,109,000 4,090,318
Federal Home Loan Mortgage Corp., Floating Rate Notes
6/30/98.................................................... 5.78 (a) 10,000,000 9,978,243
Federal Home Loan Mortgage Corp., Notes
6/6/97..................................................... 5.89 50,000,000 49,964,013
Federal National Mortgage Association, Discount Notes
3/6/97..................................................... 5.60 10,000,000 9,992,431
3/17/97.................................................... 5.49 10,000,000 9,976,222
6/9/97..................................................... 5.89 50,000,000 49,226,389
6/13/97.................................................... 5.90 23,945,000 23,559,698
7/22/97.................................................... 5.95 15,000,000 14,665,142
9/8/97..................................................... 5.40 4,265,000 4,148,012
10/24/97................................................... 5.41 25,000,000 24,152,396
11/6/97.................................................... 5.52 25,000,000 24,092,014
11/24/97................................................... 5.39 15,000,000 14,428,267
1/16/98.................................................... 5.51 15,000,000 14,299,150
DREYFUS BASIC U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1997
Annualized
Yield on
Date of Principal
U.S. Government Agencies (continued) Purchase Amount Value
____________ _____________ ____________
________
Federal National Mortgage Association, Floating Rate Notes
3/27/97.................................................... 5.30% (a) $ 5,000,000 $ 5,000,000
4/11/97.................................................... 5.30 (a) 20,000,000 19,998,923
6/20/97.................................................... 5.43 (a) 70,000,000 70,002,478
7/24/97.................................................... 5.36 (a) 25,000,000 25,000,000
6/19/98.................................................... 5.45 (a) 100,000,000 99,976,164
6/29/98.................................................... 5.47 (a) 100,000,000 99,975,950
Student Loan Marketing Association, Discount Notes
3/3/97..................................................... 5.30 185,000,000 184,945,530
Student Loan Marketing Association, Floating Rate Notes
1/27/98.................................................... 5.82 (a) 20,000,000 19,936,091
_________________
TOTAL U.S. GOVERNMENT AGENCIES (cost $1,323,275,587)........... $1,323,275,587
=================
Repurchase Agreements_.9%
SBC Capital Corp.
dated 2/28/97, due 3/3/97 in the amount of
$13,708,995 (fully collateralized by
$14,351,000 U.S. Treasury Bills due
8/28/97, value $13,977,966)
(cost $13,703,000)......................................... 5.25 % $ 13,703,000 $ 13,703,000
=================
TOTAL INVESTMENTS (cost $1,444,101,822).............. 98.9% $1,444,101,822
======== =================
CASH AND RECEIVABLES (NET)........................... 1.1% $ 15,847,575
======== =================
NET ASSETS........................................... 100.0% $1,459,949,397
======== =================
Notes to Statement of Investments:
(a) Variable interest-rate subject to periodic change.
SEE NOTES TO FINANCIAL STATEMENTS.
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DREYFUS BASIC U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1997
Cost Value
_______________ _______________
<S> <C> <C> <C>
ASSETS: Investments in securities_See Statement of
Investments_Note 1(b) $1,444,101,822 $1,444,101,822
Cash....................................... 7,638,440
Interest receivable........................ 8,745,319
Prepaid expenses and other assets.......... 73,865
_______________
1,460,559,446
_______________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 439,438
Accrued expenses and other liabilities..... 170,611
_______________
610,049
_______________
NET ASSETS.................................................................. $1,459,949,397
=================
REPRESENTED BY: Paid-in capital............................ $1,460,476,773
Accumulated net realized gain (loss) on investments (527,376)
_______________
NET ASSETS.................................................................. $1,459,949,397
=================
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST
AUTHORIZED) ........................................... 1,460,476,773
NET ASSET VALUE, offering and redemption price per share.................... $1.00
========
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS BASIC U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1997
INVESTMENT INCOME
INCOME Interest Income................................ $77,943,222
EXPENSES: Management fee_Note 2(a)....................... $ 7,033,547
Shareholder servicing costs_Note 2(b).......... 1,719,785
Registration fees.............................. 120,831
Custodian fees................................. 110,425
Professional fees.............................. 59,658
Prospectus and shareholders' reports........... 28,491
Trustees' fees and expenses_Note 2(c).......... 25,629
Miscellaneous.................................. 34,664
_____________
Total Expenses 9,133,030
Less_reduction in management fee due to
undertaking_Note 2(a) (2,809,559)
_____________
Net Expenses 6,323,471
_____________
INVESTMENT INCOME_NET....................................................... 71,619,751
NET REALIZED GAIN (LOSS) ON INVESTMENTS_Note 1(b)........................... (527,166)
_____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $71,092,585
==============
SEE NOTES TO FINANCIAL STATEMENTS.
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DREYFUS BASIC U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
February 28, 1997 February 29, 1996
__________________ ____________________
<S> <C> <C>
OPERATIONS:
Investment income_net............................................. $ 71,619,751 $ 72,622,855
Net realized gain (loss) on investments........................... (527,166) 100,431
__________________ ____________________
Net Increase (Decrease) in Net Assets Resulting from Operations. 71,092,585 72,723,286
__________________ ____________________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income_net............................................. (71,619,751) (72,622,855)
__________________ ____________________
BENEFICIAL INTEREST TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold..................................... 1,673,931,454 1,786,037,880
Dividends reinvested.............................................. 67,642,692 68,115,281
Cost of shares redeemed........................................... (1,647,153,837) (1,529,919,393)
__________________ ____________________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions 94,420,309 324,233,768
__________________ ____________________
Total Increase (Decrease) in Net Assets..................... 93,893,143 324,334,199
NET ASSETS:
Beginning of Period............................................... 1,366,056,254 1,041,722,055
__________________ ____________________
End of Period..................................................... $ 1,459,949,397 $ 1,366,056,254
================ =================
SEE NOTES TO FINANCIAL STATEMENTS.
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DREYFUS BASIC U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Beneficial Interest outstanding, total investment return, ratios to average
net assets and other supplemental data for each period indicated. This
information has been derived from the Fund's financial statements.
Fiscal Year Ended February,
_________________________________________________________________________
PER SHARE DATA: 1997 1996 1995 1994 1993(1)
________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
________ ________ ________ ________ ________
Investment Operations:
Investment income_net...................... .051 .058 .046 .032 .031
________ ________ ________ ________ ________
Distributions:
Dividends from investment income_net....... (.051) (.058) (.046) (.032) (.031)
________ ________ ________ ________ ________
Net asset value, end of period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======== ========= ========= =========
TOTAL INVESTMENT RETURN....................... 5.20% 5.94% 4.67% 3.30% 3.69%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... .45% .31% .17% .02% ._
Ratio of net investment income
to average net assets..................... 5.09% 5.79% 5.05% 3.24% 3.58%(2)
Decrease reflected in above expense ratios
due to undertakings by the Manager........ .20% .36% .44% .64% .75%(2)
Net Assets, end of period (000's Omitted)... .$1,459,949 $1,366,056 $1,041,722 $265,691 $116,696
(1) From April 24, 1992 (commencement of operations) to February 28, 1993.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
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DREYFUS BASIC U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1_SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus BASIC U.S. Government Money Market Fund (the "Fund") is
registered under the Investment Company Act of 1940 ("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 and the maintenance of liquidity. The
Dreyfus Corporation ("Manager") serves as the Fund's investment adviser. The
Manager is a direct subsidiary of Mellon Bank, N.A. Premier Mutual Fund
Services, Inc. is the distributor of the Fund's shares, which are sold to the
public without a sales charge.
It is the Fund's policy to maintain a continuous net asset value per
share of $1.00; the Fund has adopted certain investment, portfolio valuation
and dividend and distribution policies to enable it to do so. There is no
assurance, however, that the Fund will be able to maintain a stable net asset
value per share of $1.00.
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 are valued at amortized cost, which
has been determined by the Fund's Board of Trustees to represent the fair
value of the Fund's investments.
(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 is recognized on the accrual basis. Cost of investments represents
amortized cost.
The Fund may enter into repurchase agreements with financial
institutions, deemed to be creditworthy by the Fund's Manager, subject to the
seller's agreement to repurchase and the Fund's agreement to resell such
securities at a mutually agreed upon price. Securities purchased subject to
repurchase agreements are deposited with the Fund's custodian and, pursuant
to the terms of the repurchase agreement, must have an aggregate market value
greater than or equal to the repurchase price plus accrued interest at all
times. If the value of the underlying securities falls below the value of the
repurchase price plus accrued interest, the Fund will require the seller to
deposit additional collateral by the next business day. If the request for
additional collateral is not met, or the seller defaults on its repurchase
obligation, the Fund maintains the right to sell the underlying securities at
market value and may claim any resulting loss against the seller.
(c) Dividends to shareholders: It is the policy of the Fund to declare
dividends daily from investment income-net. Such dividends are paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. 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 Internal Revenue 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 $523,200
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to February 28, 1997. The
carryover does not include net realized securities losses from November 1,
1996 through February 28, 1997 which are treated, for Federal income tax
purposes, as arising in fiscal 1998. If not applied, $200 of the carryover
expires in fiscal 2003 and $523,000 expires in fiscal 2005.
DREYFUS BASIC U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At February 28, 1997, 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).
NOTE 2_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 .50 of 1% of the value of the Fund'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 Fund, to the extent that
the Fund's aggregate expenses, exclusive of taxes, brokerage, interest on
borrowings and extraordinary expenses, exceed an annual rate of .45 of 1% of
the value of the Fund's average daily net assets. The reduction in management
fee, pursuant to the undertaking, amounted to $2,809,559 during the period
ended February 28, 1997.
(b) Under the Shareholder Services Plan, the Fund reimburses Dreyfus
Service Corporation, a wholly-owned subsidiary of the Manager, an amount not
to exceed an annual rate of .25 of 1% of the value of the Fund's average
daily net assets for 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 February 28, 1997, the Fund was charged an aggregate
of $1,420,118 pursuant to the Shareholder Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such
compensation amounted to $123,395 during the period ended February 28, 1997.
(c) Each trustee who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $1,500 and an attendance fee of $250
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
DREYFUS BASIC U.S. GOVERNMENT MONEY MARKET FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Trustees
Dreyfus BASIC U.S. Government Money Market Fund
We have audited the accompanying statement of assets and liabilities of
Dreyfus BASIC U.S. Government Money Market Fund, including the statement of
investments, as of February 28, 1997, and the related statement of operations
for the year then ended, the statement of changes in net assets for each of
the two years in the period then ended, and financial highlights for each of
the years indicated therein. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements and financial highlights. Our procedures included
confirmation of securities owned as of February 28, 1997 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 U.S. Government Money Market Fund at February 28,
1997, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the indicated years, in conformity with
generally accepted accounting principles.
[Ernst & Young LLP signature logo]
New York, New York
March 31, 1997
IMPORTANT TAX INFORMATION (UNAUDITED)
For State individual income tax purposes, the Fund hereby designates
56.49% of the ordinary income dividends paid during its fiscal year ended
February 28, 1997 as attributable to interest income from direct obligations
of the United States. Such dividends are currently exempt from taxation for
individual income tax purposes in most states, including New York, California
and the District of Columbia.
[Dreyfus lion "d" logo]
Registration Mark
DREYFUS BASIC U.S. GOVERNMENT
MONEY MARKET FUND
200 Park Avenue
New York, NY 10166
MANAGER
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
CUSTODIAN
The Bank of New York
90 Washington Street
New York, NY 10286
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 124AR972
[Dreyfus logo]
Registration Mark
BASIC
U.S. Government
Money Market Fund
Annual Report
February 28, 1997
