Dreyfus BASIC
U.S. Government
Money Market Fund
ANNUAL REPORT February 29, 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
Year 2000 Issues (Unaudited)
The fund could be adversely affected if the computer systems used by Dreyfus and
the fund's other service providers do not properly process and calculate
date-related information from and after January 1, 2000. Dreyfus has taken steps
designed to avoid year 2000-related problems in its systems and to monitor the
readiness of other service providers. In addition, issuers of securities in
which the fund invests may be adversely affected by year 2000-related problems.
This could have an impact on the value of the fund's investments and its share
price.
Contents
THE FUND
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2 Letter from the President
3 Discussion of Fund Performance
6 Statement of Investments
8 Statement of Assets and Liabilities
9 Statement of Operations
10 Statement of Changes in Net Assets
11 Financial Highlights
12 Notes to Financial Statements
16 Report of Independent Auditors
17 Important Tax Information
FOR MORE INFORMATION
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Back Cover
The Fund
Dreyfus BASIC U.S. Government Money Market Fund
LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this annual report for Dreyfus BASIC U.S. Government
Money Market Fund, covering the 12-month period from March 1, 1999 through
February 29, 2000. Inside, you'll find valuable information about how the fund
was managed during the reporting period, including a discussion with the fund's
portfolio manager, Thomas S. Riordan.
When the reporting period began, it became apparent that international and
domestic economies were growing faster than analysts expected, giving rise to
concerns that long-dormant inflationary pressures might re-emerge. Consumers
continued to spend heavily, unemployment levels reached new lows and the stock
market continued to climb.
Because unsustainable economic growth may trigger unwanted inflationary
pressures, the Federal Reserve Board raised key short-term interest rates four
times during the reporting period. In total, the Federal Reserve Board raised
short-term interest rates by 1.00 percentage point since late June 1999. In this
environment, yields on money market securities rose.
We appreciate your confidence over the past year, and we look forward to your
continued participation in Dreyfus BASIC U.S. Government Money Market Fund
Sincerely,
Stephen E. Canter
President and Chief Investment Officer
The Dreyfus Corporation
March 23, 2000
DISCUSSION OF FUND PERFORMANCE
Thomas S. Riordan, Portfolio Manager
How did Dreyfus BASIC U.S. Government Money Market Fund perform during the
period?
For the 12-month reporting period ended February 29, 2000, the fund produced an
annualized yield of 4.74%. Taking into account the effect of compounding, the
fund's annualized effective yield was 4.84%.(1)
What is the fund's investment approach?
There are many factors we consider when managing the fund. We closely monitor
the outlook for economic growth and inflation. We follow overseas developments
for any influence they may have on the domestic economy. The posture of the
Federal Reserve Board is also a key determinant in our decision as to how best
to structure the portfolio at any particular point in time.
Based upon our economic outlook, we actively manage the average maturity of the
fund in an effort to take advantage of forecasted changes in interest rates. For
example, if we believe that interest rates are likely to fall, we typically will
lengthen our average maturity in order to lock in today's higher rates.
Conversely, in a rising interest-rate environment, we typically will shorten our
maturities in order to be able to reinvest at higher rates in the future.
In terms of investments, the fund invests only in securities issued or
guaranteed as to principal and interest by the U.S. government, its agencies and
instrumentalities, as well as repurchase agreements backed by such securities
What other factors influenced the fund's performance?
The fund' s performance was primarily affected by rising interest rates during
the 12-month reporting period.
The performance of the U.S. economy during the first few months of 1999 was much
stronger than expected in the wake of 1998' s global The Fun
DISCUSSION OF FUND PERFORMANCE (CONTINUED)
financial crisis. Gross Domestic Product (GDP) grew at a rate of 4.3% during the
first quarter of 1999, yet inflation remained benign. Despite concerns that
faster growth might rekindle long-dormant inflationary pressures, the Federal
Reserve Board held steady on rates.
In May, a surprisingly large jump in the Consumer Price Index pushed
policymakers to adopt a bias towards tightening monetary policy, which caused a
shift in market psychology. As a result, market participants began to anticipate
higher rates.
In late June, the Fed raised short-term rates 25 basis points. At the same time,
it announced that it was shifting its bias back to neutral, indicating no
intention of further rate increases in the immediate future. As the summer
progressed, strong economic growth with rising wages reinforced the Fed's
inflation concerns. At its August meeting, the Fed raised the federal funds rate
by another 25 basis points, and signaled added resolve by also raising the
discount rate.
In the third quarter, GDP growth accelerated back to a rapid 4.8%, yet key
indicators of employment costs, job creation and inflation remained relatively
low. Nonetheless, the Fed implemented a third 25 basis point rate hike in
November. The Fed took no action at its December meeting in an apparent attempt
to quiet markets concerned with potential Y2K-related disruptions. In addition,
the Fed added liquidity to the banking system over year-end, leading to
temporary fluctuations of short-term interest rates. Despite this short-lived
market volatility, few significant Y2K problems were reported when the new year
began.
Concerned by evidence that the economy was gaining momentum, the Fed raised
interest rates for a fourth time in early February, for a total rate increase of
100 basis points during the 12-month reporting period. Furthermore, while the
Fed maintained an officially neutral bias after its February rate hike, the Fed
indicated that its inflation-fighting resolve is undiminished. Accordingly,
fixed-income investors widely expected further short-term interest-rate
increases at subsequent Fed meetings.
What is the fund's current strategy?
In anticipation of rising interest rates, the fund adopted a somewhat defensive
strategy. Most significantly, we reduced the fund's average maturity in order to
build in a liquidity cushion. Shorter maturities were designed to help the fund
benefit from any additional interest-rate increases, as well as to protect the
fund from potential volatility.
As of February 29, 2000, the fund's average maturity remained relatively short.
However, we are prepared to extend the fund's average maturity if evidence
appears that the economy is slowing in response to the Fed's previous moves. By
extending the fund' s average maturity when the Fed is near the end of the
current series of rate hikes, we expect to be able to lock in prevailing high
current yields.
In addition, we are carefully monitoring changing supply-and-demand factors. The
U.S. Treasury recently announced its intention to reduce the issuance of
one-year Treasury bills from a monthly auction schedule to a quarterly schedule.
While less supply of one-year Treasury bills may affect the fund's mix of
holdings, we currently expect to continue to find opportunities for attractive
yields and price stability among money market securities from other issuers,
such as U.S. government agencies.
March 23, 2000
(1) ANNUALIZED EFFECTIVE YIELD IS BASED UPON DIVIDENDS DECLARED DAILY AND
REINVESTED MONTHLY. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. YIELDS
FLUCTUATE. AN INVESTMENT IN THE FUND IS NOT INSURED OR GUARANTEED BY THE FDIC OR
ANY OTHER GOVERNMENT AGENCY. ALTHOUGH THE FUND SEEKS TO PRESERVE THE VALUE OF
YOUR INVESTMENT AT $1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN
THE FUND.
The Fund
<TABLE>
<CAPTION>
STATEMENT OF INVESTMENTS
STATEMENT OF INVESTMENTS
February 29, 2000
Annualized
Yield on
Date of Principal
U.S. GOVERNMENT AGENCIES--87.0% Purchase (%) Amount ($) Value ($)
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Federal Farm Credit Bank,
Consolidated Systemwide Medium Term Notes
<S> <C> <C> <C>
6/29/2000 5.80(a) 40,000,000 39,996,251
Federal Home Loan Banks, Discount Notes
3/29/2000 4.95 25,000,000 24,999,616
4/5/2000 5.75 48,619,000 48,350,042
4/7/2000 5.62 42,270,000 42,238,621
4/12/2000 5.76 15,000,000 14,900,250
4/13/2000 5.90 25,000,000 24,827,104
5/26/2000 5.24 5,000,000 4,999,548
5/31/2000 5.77 50,000,000 49,290,326
7/14/2000 5.50 25,000,000 24,999,539
7/19/2000 5.51 49,760,000 49,746,536
12/1/2000 5.91 32,000,000 31,960,809
Federal Home Loan Banks, Floating Rate Notes
6/21/2000 5.85(a) 165,000,000 164,980,193
9/20/2000 5.91(a) 150,000,000 149,975,874
9/25/2000 5.91(a) 50,000,000 49,991,697
Federal Home Loan Banks, Notes
4/26/2000 4.94 11,000,000 11,000,438
Federal Home Loan Mortgage Corporation,
Discount Notes
4/4/2000 5.77 50,000,000 49,729,653
Federal National Mortgage Association, Discount Notes
4/5/2000 5.77 50,000,000 49,722,431
4/20/2000 4.96 10,000,000 9,999,206
Federal National Mortgage Association, Notes
5/12/2000 5.06 25,000,000 25,000,146
TOTAL U.S. GOVERNMENT AGENCIES
(cost $866,708,280) 866,708,280
Annualized
Yield on
Date of Principal
REPURCHASE AGREEMENTS--12.3% Purchase (%) Amount ($) Value ($)
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ABN AMRO Inc.
dated 2/29/2000, due 3/1/2000 in the amount of
$39,006,229 (fully collateralized by
U.S. Treasury Notes 4.50% to 8.50%
due from 11/15/2000 to
1/31/2001, value $39,781,583) 5.75 39,000,000 39,000,000
Barclays Capital Inc.
dated 2/29/2000, due 3/1/2000 in the
amount of $28,487,154 (fully collateralized by
U.S. Treasury Bills, due 6/15/2000,
value $29,071,197) 5.25 28,483,000 28,483,000
Donaldson, Lufkin & Jenrette Securities Inc.
dated 2/29/2000, due 3/1/2000 in the
amount of $55,008,815 (fully collateralized by
U.S. Treasury Notes 5.00% to 8.50%
due from 11/15/2000 to
2/28/2001, value $55,689,710) 5.77 55,000,000 55,000,000
TOTAL REPURCHASE AGREEMENTS
(cost $122,483,000) 122,483,000
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TOTAL INVESTMENTS
(cost $989,191,280) 99.3% 989,191,280
CASH AND RECEIVABLES (NET) .7% 7,105,520
NET ASSETS 100.0% 996,296,800
(A) VARIABLE INTEREST RATE-SUBJECT TO PERIODIC CHANGE.
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2000
Cost Value
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ASSETS ($):
Investments in securities--See Statement of Investments
(including repurchase agreements of
$122,483,000)--Note 1(b) 989,191,280 989,191,280
Interest receivable 7,681,781
Prepaid expenses 28,609
996,901,670
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LIABILITIES ($):
Due to The Dreyfus Corporation and affiliates 223,338
Cash overdraft due to Custodian 272,988
Accrued expenses and other liabilities 108,544
604,870
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NET ASSETS ($) 996,296,800
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COMPOSITION OF NET ASSETS ($):
Paid-in capital 996,915,460
Accumulated net realized gain (loss) on investments (618,660)
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NET ASSETS ($) 996,296,800
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SHARES OUTSTANDING
(unlimited number of $.001 par value shares of Beneficial Interest authorized)
996,915,460
NET ASSET VALUE, offering and redemption price per share ($) 1.00
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
Year Ended February 29, 2000
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INVESTMENT INCOME ($):
INTEREST INCOME 56,905,388
EXPENSES:
Management fee--Note 2(a) 5,473,309
Shareholder servicing costs--Note 2(b) 1,046,339
Custodian fees 89,598
Registration fees 38,906
Professional fees 35,897
Prospectus and shareholders' reports 25,884
Trustees' fees and expenses--Note 2(c) 24,771
Miscellaneous 13,686
TOTAL EXPENSES 6,748,390
Less--reduction in management fee due to
undertaking--Note 2(a) (1,824,495)
NET EXPENSES 4,923,895
INVESTMENT INCOME--NET 51,981,493
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NET REALIZED GAIN (LOSS) ON INVESTMENTS--NOTE 1(B) ($) 9,654
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 51,991,147
SEE NOTES TO FINANCIAL STATEMENTS.
The Fund
STATEMENT OF CHANGES IN NET ASSETS
Year Ended
------------------------------------------
February 29, 2000 February 28, 1999
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OPERATIONS ($):
Investment income--net 51,981,493 61,063,913
Net realized gain (loss) from investments 9,654 (11,328)
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 51,991,147 61,052,585
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DIVIDENDS TO SHAREHOLDERS FROM ($):
INVESTMENT INCOME--NET (52,276,234) (60,955,715)
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BENEFICIAL INTEREST TRANSACTIONS ($1.00 per share):
Net proceeds from shares sold 805,249,908 1,024,399,996
Dividends reinvested 49,748,818 57,885,133
Cost of shares redeemed (1,041,015,631) (1,208,430,626)
INCREASE (DECREASE) IN NET ASSETS
FROM BENEFICIAL INTEREST TRANSACTIONS (186,016,905) (126,145,497)
TOTAL INCREASE (DECREASE) IN NET ASSETS (186,301,992) (126,048,627)
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NET ASSETS ($):
Beginning of period 1,182,598,792 1,308,647,419
END OF PERIOD 996,296,800 1,182,598,792
Undistributed investment income-net -- 294,741
SEE NOTES TO FINANCIAL STATEMENTS.
<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.
Fiscal Year Ended February,
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2000 1999 1998 1997 1996
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PER SHARE DATA ($):
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period 1.00 1.00 1.00 1.00 1.00
Investment Operations:
Investment income--net .048 .049 .052 .051 .058
Distributions:
Dividends from investment income--net (.048) (.049) (.052) (.051) (.058)
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00
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TOTAL RETURN (%) 4.88 5.06 5.33 5.20 5.94
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RATIOS/SUPPLEMENTAL DATA (%):
Ratio of expenses to average net assets .45 .45 .45 .45 .31
Ratio of net investment income
to average net assets 4.75 4.97 5.22 5.09 5.79
Decrease reflected in above expense
ratios due to undertakings by
The Dreyfus Corporation .17 .16 .17 .20 .36
Net Assets, end of period ($ x 1,000) 996,297 1,182,599 1,308,647 1,459,949 1,366,056
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
The 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, 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 and the maintenance of liquidity. The Dreyfus
Corporation (the "Manager") serves as the fund's investment adviser. The Manager
is a direct subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary
of Mellon Financial Corporation ("Mellon"). 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.
Under the terms of the custody agreement, the fund received net earnings credits
of $2,659 based on available cash balances left on deposit. Income earned under
this arrangement is included in interest income.
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 of 1986, as amended (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 $619,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to February 29, 2000. If not
applied, $200 of the carryover expires in fiscal 2003, $523,000 expires in
fiscal 2005, $43,300 expires in fiscal 2006, $52,000 expires in fiscal 2007 and
$500 expires in fiscal 2008.
The Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At February 29, 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).
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 fees, 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 $1,824,495 during the period ended February 29,
2000.
(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 29, 2000, the fund was charged $825,168 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 29, 2000, the fund was charged $155,703 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.
NOTE 3--Subsequent Event:
At a meeting of the fund's Board of Trustees held on February 9, 2000, the Board
approved the termination of the fund' s Distribution Agreement with Premier
Mutual Fund Services, Inc., and approved a new Distribution Agreement with
Dreyfus Service Corporation. The new Distribution Agreement with Dreyfus Service
Corporation became effective on March 22, 2000.
The Fund
REPORT OF 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 29, 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 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 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 February 29, 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 U.S. Government Money Market Fund at February 29, 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.
New York, New York
April 3, 2000
IMPORTANT TAX INFORMATION (Unaudited)
For state individual income tax purposes, the fund hereby designates 75.56% of
the ordinary income dividends paid during its fiscal year ended February 29,
2000 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.
The Fund
For More Information
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
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 124AR002
