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 the 12-month period ended February 28, 1998.
Your Fund produced a yield of 5.22% and, after taking into account the effect
of compounding, the effective yield was 5.35%.*
Economic Review
Accumulating evidence indicates that the economy may have started a shift
toward slower growth this winter. Unlike the late phases of other postwar
business cycles, this year's shift to slower real economic growth is
occurring in tandem with decelerating price inflation. Hence, growth in the
nominal dollar economy (before adjusting for inflation), which determines
overall corporate revenues, could slow considerably. Meanwhile, wage growth
began to accelerate last fall. Slower revenue growth and rising costs have
begun to squeeze profit margins in some sectors, although overall corporate
profit growth has stayed positive. Earlier this year, the Federal Reserve
Board (the "Fed") shifted to a neutral policy stance, abandoning last year's
tightening bias. This stable policy has kept short-term rates steady,
thwarting market expectations for a sustained drop in long-term rates.
The shift to slower economic growth is not broad based. Rather, the
available evidence shows that it predominantly affects manufacturers. This is
indicated by falling export orders, sluggish capital goods orders, weak
automobile production and a shorter manufacturing workweek. By contrast,
strength in the service-producing sector persists unabated. While employment
costs seem well controlled in the manufacturing sector, wages and benefits
paid to service sector workers began to accelerate last fall. The picture
emerging is of late-cycle inflation pressures developing for services in the
domestic economy alongside deterioration in the traded goods economy.
Overall corporate profits posted positive surprises throughout 1997. For
manufacturers, profits were boosted by strong demand as well as higher
productivity and lower unit labor costs. This year, many manufacturers face a
deterioration of their gross revenues. For service sector companies, last
year's profits were boosted by strong demand growth. This year, some service
companies may enjoy a window of opportunity to raise prices, but the risk to
profit growth is that power to counteract rising labor costs by raising
prices may be diminished.
The above hot and cold mix to slower economic growth has kept the Fed's
policy neutral, at least for now. Although long-term bond yields are below
levels of a year ago, substantially lower yields have proven difficult to
attain in the absence of lower short-term rates.
This kind of environment can foster a healthy economic outlook for the
long run, but may be vulnerable to short-term surprises.
The Market Environment
Money market rates have remained within a narrow trading range. With the
Fed apparently content to leave the Federal Funds rate unchanged, market
participants have watched two opposing economic forces-an Asian
crisis-spurred slowdown versus wage inflation caused by tight labor
markets-for clues as to future policy directives. To date, neither the
trade-related slowdown due to the financial problems in Asia nor the
traditional late business cycle inflation upturn has occurred. Until the
effects of the competing economic currents become clear, short-term rates can
be expected to remain in their narrow range.
In March 1997, when the Fed raised short-term rates by a quarter point,
the market began to expect a series of tightenings, and rates reflected those
expectations. As the year progressed, the chief influences on rates continued
to be labor market tightness and corporate productivity. As economic growth
continued without rising inflation, the market began to speak of a "new
paradigm": growth without inflation due to technological advances.
In one speech, Fed Chairman Alan Greenspan appeared to support the
validity of the new paradigm, only to clarify his position at a later date,
saying that he was not an adherent to this new school of thought. As a
result, interest rates at first fell, then rose as the Fed Chairman's
position was clarified.
Indeed, until the economic fallout in Asia, the money market was
expecting a move by the Fed to raise interest rates. Given the current market
environment, it is unclear what the next move by the Fed might be.
Portfolio Focus
With so many cross-currents at work in the money market, we have
maintained longer maturities, a strategy which we feel has been beneficial to
the Fund. Our focus is to maintain that posture as long as it corresponds
with market conditions, while bearing in mind that a change in Fed policy or
external conditions affecting the market could require a different approach.
Of course, we will continue to monitor these market forces on a constant
basis, alert for any changes in the prevailing environment.
Sincerely,
{Patricia A. Larkin signature}
Patricia A. Larkin
Senior Portfolio Manager
March 17, 1998
New York, N.Y.
* Effective yield is based on dividends declared daily and reinvested
monthly.
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DREYFUS BASIC U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF INVESTMENTS FEBRUARY 28, 1998
Annualized
Yield on
Date of Principal
U.S. Government Agencies-102.4% Purchase Amount Value
__________ ____________ ______________
<S> <C> <C> <C>
Federal Farm Credit Banks, Consolidated Systemwide Discount Notes
4/30/98.................................................... 6.00% $ 14,000,000 $ 13,867,933
9/14/98.................................................... 5.70 8,700,000 8,440,773
9/15/98.................................................... 5.69 25,000,000 24,252,000
9/17/98.................................................... 5.70 11,185,000 10,846,964
10/5/98.................................................... 5.72 4,380,000 4,235,581
11/13/98................................................... 5.72 10,000,000 9,613,786
Federal Farm Credit Banks, Consolidated Systemwide Floating Rate Notes
6/8/98 (a)................................................. 5.75 50,000,000 50,000,000
6/19/98 (a)................................................ 5.60 50,000,000 49,988,355
6/18/99 (a)................................................ 5.60 50,000,000 50,000,000
1/28/2000 (a).............................................. 5.56 50,000,000 49,977,253
Federal Home Loan Banks, Discount Notes
3/2/98..................................................... 5.59 136,000,000 135,978,883
4/24/98.................................................... 6.00 12,700,000 12,592,177
7/27/98.................................................... 5.62 13,095,000 12,804,830
1/29/99.................................................... 5.42 25,000,000 23,807,806
Federal Home Loan Banks, Notes
6/9/98..................................................... 5.93 10,000,000 10,000,824
6/23/98.................................................... 5.59 25,000,000 25,000,447
9/8/98..................................................... 5.80 10,000,000 9,996,232
9/24/98.................................................... 5.65 35,000,000 34,996,606
10/2/98.................................................... 5.67 5,000,000 4,997,585
12/18/98................................................... 5.85 7,950,000 7,950,000
3/2/99..................................................... 5.51 22,950,000 22,948,404
3/12/99.................................................... 5.57 23,100,000 23,085,563
Federal Home Loan Mortgage Corp., Discount Notes
3/27/98.................................................... 6.04 17,000,000 16,930,017
Federal Home Loan Mortgage Corp., Notes
3/17/98.................................................... 5.76 25,000,000 24,997,743
Federal Home Loan Mortgage Corp., Floating Rate Notes
6/30/98 (a)................................................ 6.03 10,000,000 9,994,583
Federal National Mortgage Association, Discount Notes
7/24/98.................................................... 5.61 25,000,000 24,465,313
8/21/98.................................................... 5.67 19,800,000 19,288,093
10/16/98................................................... 5.75 25,000,000 24,134,889
Federal National Mortgage Association, Notes
6/18/98.................................................... 5.61 55,000,000 55,015,460
7/31/98.................................................... 5.68 10,000,000 9,995,128
Federal National Mortgage Association, Floating Rate Notes
6/19/98 (a)................................................ 5.70 100,000,000 99,994,480
6/29/98 (a)................................................ 5.72 100,000,000 99,994,050
7/10/98 (a)................................................ 5.60 60,000,000 59,983,354
DREYFUS BASIC U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF INVESTMENTS (CONTINUED) FEBRUARY 28, 1998
Annualized
Yield on
Date of Principal
U.S. Government Agencies (continued) Purchase Amount Value
__________ _______________ ________
_______
Federal National Mortgage Association, Floating Rate Notes (continued):
9/15/98 (a)................................................ 5.58% $ 25,000,000 $ 24,989,380
1/6/99 (a)................................................. 5.61 50,000,000 49,972,948
10/20/99 (a)............................................... 5.52 50,000,000 50,000,000
1/21/2000 (a).............................................. 5.57 50,000,000 50,000,000
Student Loan Marketing Association, Notes
5/15/98.................................................... 5.88 25,000,000 25,000,737
9/16/98.................................................... 5.83 25,000,000 24,989,369
9/16/98.................................................... 5.72 25,000,000 25,007,365
Student Loan Marketing Association, Floating Rate Notes
2/10/99 (a)................................................ 5.33 50,000,000 49,976,569
_______________
TOTAL U.S. GOVERNMENT AGENCIES (cost $1,340,111,480)........... $1,340,111,480
================
Repurchase Agreements-.1%
SBC Warburg Dillon Read
dated 2/27/98, due 3/2/98 in the amount of $787,357
(fully collateralized by $814,000 U.S. Treasury Bills due 5/28/98,
value $803,790) (cost $787,000)............................ 5.45% $ 787,000 $ 787,000
===============
TOTAL INVESTMENTS (cost $1,340,898,480).............. 102.5% $1,340,898,480
====== ==============
LIABILITIES, LESS CASH AND RECEIVABLES............... (2.5%) $ (32,251,061)
====== ==============
NET ASSETS........................................... 100.0% $1,308,647,419
====== ==============
Notes to Statement of Investments:
(a) Variable interest rate-subject to periodic change.
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS BASIC U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES FEBRUARY 28, 1998
Cost Value
_______________ _______________
ASSETS: Investments in securities-See Statement
of Investments-Note 1(b).................... $1,340,898,480 $1,340,898,480
Cash....................................... 3,191,482
Interest receivable........................ 11,030,433
Prepaid expenses and other assets.......... 133,134
_______________
1,355,253,529
_______________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 444,957
Payable for investment securities purchased 46,033,966
Accrued expenses and other liabilities..... 127,187
_______________
46,606,110
_______________
NET ASSETS.................................................................. $1,308,647,419
===============
REPRESENTED BY: Paid-in capital............................ $1,309,077,862
Accumulated undistributed investment income-net.......... 186,543
Accumulated net realized gain (loss) on investments (616,986)
_______________
NET ASSETS.................................................................. $1,308,647,419
==============
SHARES OUTSTANDING
(UNLIMITED NUMBER OF $.001 PAR VALUE SHARES OF BENEFICIAL INTEREST
AUTHORIZED) ........................................... 1,309,077,862
NET ASSET VALUE, offering and redemption price per share.................... $1.00
=====
SEE NOTES TO FINANCIAL STATEMENTS.
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DREYFUS BASIC U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF OPERATIONS YEAR ENDED FEBRUARY 28, 1998
INVESTMENT INCOME
<S> <C> <C>
INCOME Interest Income................................ $76,678,163
EXPENSES: Management fee-Note 2(a)....................... $ 6,756,753
Shareholder servicing costs-Note 2(b).......... 1,276,563
Registration fees.............................. 118,046
Custodian fees................................. 115,794
Professional fees.............................. 59,729
Prospectus and shareholders' reports........... 23,360
Trustees' fees and expenses-Note 2(c).......... 23,197
Miscellaneous.................................. 29,638
____________
Total Expenses.............................. 8,403,080
Less-reduction in management fee due to
undertaking-Note 2(a)..................... (2,331,991)
____________
Net Expenses........................... 6,071,089
____________
INVESTMENT INCOME-NET ............................................... 70,607,074
NET REALIZED GAIN (LOSS) ON INVESTMENTS-Note 1(b)........................... (89,610)
____________
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $70,517,464
============
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, 1998 February 28, 1997
_________________ _________________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................... $ 70,607,074 $ 71,619,751
Net realized gain (loss) on investments................................. (89,610) (527,166)
_________________ _________________
Net Increase (Decrease) in Net Assets Resulting from Operations....... 70,517,464 71,092,585
_________________ _________________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net................................................... (70,420,531) (71,619,751)
_________________ _________________
BENEFICIAL INTEREST TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold........................................... 1,279,726,698 1,673,931,454
Dividends reinvested.................................................... 66,574,075 67,642,692
Cost of shares redeemed................................................. (1,497,699,684) (1,647,153,837)
_________________ _________________
Increase (Decrease) in Net Assets from Beneficial Interest Transactions (151,398,911) 94,420,309
_________________ _________________
Total Increase (Decrease) in Net Assets............................. (151,301,978) 93,893,143
NET ASSETS:
Beginning of Period..................................................... 1,459,949,397 1,366,056,254
_________________ _________________
End of Period........................................................... $1,308,647,419 $1,459,949,397
================= =================
UNDISTRIBUTED INVESTMENT INCOME-NET....................................... $ 186,543 ----
_________________ _________________
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: 1998 1997 1996 1995 1994
______ ______ ______ ______ ______
<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........................ .052 .051 .058 .046 .032
______ ______ ______ ______ ______
Distributions:
Dividends from investment income-net......... (.052) (.051) (.058) (.046) (.032)
______ ______ ______ ______ ______
Net asset value, end of period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN.......................... 5.33% 5.20% 5.94% 4.67% 3.30%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... .45% .45% .31% .17% .02%
Ratio of net investment income
to average net assets...................... 5.22% 5.09% 5.79% 5.05% 3.24%
Decrease reflected in above expense ratios due to
undertakings by the Manager................ .17% .20% .36% .44% .64%
Net Assets, end of period (000's Omitted).... $1,308,647 $1,459,949 $1,366,056 $1,041,722 $265,691
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
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 in securities 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, 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. 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.
On March 2, 1998, the Fund declared a cash dividend of approximately
$.0001 per share from undistributed investment income-net which includes
investment income-net for Saturday February 28, 1998.
(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.
DREYFUS BASIC U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Fund has an unused capital loss carryover of approximately $566,500
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to February 28, 1998. The
carryover does not include net realized securities losses from November 1,
1997 through February 28, 1998 which are treated, for Federal income tax
purposes, as arising in fiscal 1999. If not applied, $200 of the carryover
expires in fiscal 2003, $523,000 expires in fiscal 2005 and $43,300 expires
in fiscal 2006.
At February 28, 1998, 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 $2,331,991 during the period ended February 28, 1998.
(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, 1998, the Fund was charged $1,069,991
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. During the
period ended February 28, 1998, the Fund was charged $167,875 pursuant to the
transfer agency agreement.
(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, 1998, 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, 1998 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,
1998, 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, 1998
IMPORTANT TAX INFORMATION (UNAUDITED)
For State individual income tax purposes, the Fund hereby designates
48.74% of the ordinary income dividends paid during its fiscal year ended
February 28, 1998 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.
Registration Mark
[Dreyfus lion "d" logo]
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. 124AR982
Registration Mark
[Dreyfus logo]
BASIC
U.S. Government
Money Market Fund
Annual Report
February 28, 1998
