DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to provide you with this report on Dreyfus Institutional
Short Term Treasury Fund. For its semi-annual reporting period ended March
31, 1996, your Fund produced a total return of 3.17% per share for Class A
shares and 3.04% for Class B shares.* Income dividends of approximately $.063
per share were paid for Class A shares and $.060 for Class B shares which is
equivalent to an annualized distribution rate per share of 6.31% and 6.06%
for Class A and Class B shares, respectively.**
THE ECONOMY
Fresh signs of economic growth appeared in the first quarter of this
year. There were encouraging reports of strength in the housing market -
sales of new homes and new home construction surged in February. Factory
orders increased and order backlogs rose in January for the fifth consecutive
month. On the consumer level, retail sales were marginally stronger although
consumer installment debt remained at near-record proportions as a percentage
of disposable income. Presently, there are indications that the labor market
may be tightening. Employment is rising and initial claims for unemployment
insurance are lessening. Some increases in real wages may result, a
possibility well worth noting since worker wages are emerging as a political
issue in this year's election. The surprisingly strong employment figures in
February caused a sharp rise in interest rates. As a result, fixed-income
returns for the first quarter of this year were negative.
Several factors that temporarily depressed economic activity have ended.
With the arrival of spring, the severe winter weather which suppressed
construction and discouraged consumer shopping is over. Additionally, the
17-day strike at two General Motors brake-parts plants that nearly resulted
in a complete shutdown of GM North American manufacturing has been settled.
Apparently satisfied with the pace of economic growth, the Federal
Reserve Board left the Federal Funds rate unchanged in March. Over the past
12 months, the Fed has reduced the level of short-term interest rates three
times to spur the sluggish economy, the last reduction occurring on January
31, 1996.
Nevertheless, we remain reluctant to paint an overly optimistic business
picture since economic data still remain mixed. Business capital spending has
been an important stimulant to economic growth over the past few years,
particularly in light of the retrenchment in consumer spending. A recently
released survey by the Commerce Department revealed that businesses plan only
modest increases in spending on new buildings and equipment this year
compared to 1995. Overall, the survey indicated that capital spending would
rise only 1.5% compared to last year's growth rate of 8.1%. The survey also
points out a significant divergence in spending plans of manufacturing
companies relative to retailers and wholesalers. Influenced by strong export
growth, capital spending by manufacturers is estimated to rise 7.2%.
Conversely, weak consumer spending has resulted in retailers and wholesalers
cutting their capital spending estimates by 4%. The more cautious approach to
business spending may be an indication that overall economic growth in 1996
will be modest, most likely in the 2% to 2.5% range.
THE MARKET
The yield on the two-year Treasury note (a good comparison because the
Fund's average maturity never exceeds two years) has increased dramatically.
In January 1996 the yield was about 4.93%; it is now yielding 6.20%. Clearly
the market is now pricing in the assumption that the Federal Reserve will not
reduce rates further. It is also starting to price in the worst of all
scenarios. Many participants in the short-term Treasury market have yielded
to this pressure and have sold their positions, resulting in significant
losses. They are anticipating that the prevalently bad news for bonds will
continue forever. We believe that the recent dramatic swings in market prices
are just cycles that are becoming closer in time. Therefore with rates rising
up over 100 basis points we believe that this may start to drag on the economy.
THE PORTFOLIO
As you know, we were very early with our anticipation of higher rates for
1996. We positioned the Fund defensively (currently the Fund has a one-year
average life), and, based on our current view of the economy, will continue
to stay defensive for the foreseeable future. However, we do see value and
buying opportunities arising from the significant increase in rates. We will
be monitoring these opportunities and will attempt to take advantage of any
that are consistent with the Fund's objective. Our primary task - to earn a
high level of current income to the extent consistent with preservation of
capital - continues to guide our portfolio management decisions. The high
level of volatility exhibited by the market in recent years underscores the
need to maintain a disciplined and long-term focus. This was the case last
year, as long-term investors were rewarded with solid market performance in
1995.
Included in this report is a series of detailed statements about your
Fund's holdings and its financial condition. We hope they are informative.
Please know that we appreciate greatly your continued confidence in the Fund
and in The Dreyfus Corporation.
Very truly yours,
[Gerald E. Thunelius signature logo]
Gerald E. Thunelius
Portfolio Manager
May 1, 1996
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid.
**Annualized distribution rate per share is based upon dividends per share
paid from net investment income during the period, divided by the net asset
value per share at the end of the period.
<TABLE>
<CAPTION>
DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
STATEMENT OF INVESTMENTS MARCH 31, 1996 (UNAUDITED)
PRINCIPAL
U.S. TREASURY NOTES-84.9% AMOUNT VALUE
_______ _______
<S> <C> <C>
9 3/8%, 4/15/1996....................................................... $ 3,000,000 $ 3,004,219
8 1/2%, 7/15/1997....................................................... 92,950,000 96,246,825
6 %, 8/31/1997.......................................................... 40,000,000 40,168,752
8 3/4%, 10/15/1997...................................................... 25,000,000 26,105,470
5 5/8%, 10/31/1997...................................................... 10,000,000 9,989,063
5 3/8%, 11/30/1997...................................................... 10,000,000 9,943,750
8 1/8%, 2/15/1998....................................................... 24,600,000 25,607,062
5 1/8%, 2/28/1998....................................................... 20,000,000 19,773,438
______
TOTAL U.S. TREASURY NOTES
(cost $232,546,272)..................................................... $230,838,579
=======
SHORT-TERM INVESTMENTS-12.8%
REPURCHASE AGREEMENTS:
Nikko Securities Co. International, Inc., 5%
dated 3/29/1996, due 4/1/1996 in the amount of $14,710,127
(fully collateralized by $14,482,000 U.S. Treasury Notes,
7 1/2%, 1/31/1997, value $14,888,075)................................... $ 14,704,000 $14,704,000
SBC Capital Markets, 5 1/4%
dated 3/29/1996, due 4/1/1996 in the amount of $20,008,750
(fully collateralized by $20,648,000 U.S. Treasury Bills,
6/20/1996, value $20,400,224)........................................... 20,000,000 20,000,000
______
TOTAL SHORT-TERM INVESTMENTS
(cost $34,704,000)...................................................... $ 34,704,000
=======
TOTAL INVESTMENTS
(cost $267,250,272)..................................................... 97.7% $265,542,579
===== =======
CASH AND RECEIVABLES (NET).................................................. 2.3% $ 6,229,290
===== =======
NET ASSETS ........................................................... 100.0% $271,771,869
===== =======
See independent accountants' review report and notes to financial statements.
DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1996 (UNAUDITED)
ASSETS:
Investments in securities, at value (cost $267,250,272)-see statement
(including repurchase agreements of $34,704,000)-Note 1(a,b).......... $265,542,579
Cash.................................................................... 2,495,796
Interest receivable..................................................... 3,793,701
______
271,832,076
LIABILITIES:
Due to The Dreyfus Corporation.......................................... $46,329
Due to Distributor...................................................... 1,526
Payable for shares of Beneficial Interest redeemed...................... 12,352 60,207
_____ _____
NET ASSETS ................................................................ $271,771,869
=======
REPRESENTED BY:
Paid-in capital......................................................... $274,147,252
Accumulated undistributed investment income-net......................... 99,985
Accumulated net realized (loss) on investments.......................... (767,675)
Accumulated net unrealized (depreciation) on investments-Note 3......... (1,707,693)
______
NET ASSETS at value......................................................... $271,771,869
=======
Shares of Beneficial Interest outstanding:
Class A Shares
(unlimited number of $.001 par value shares authorized)............... 127,441,772
=======
Class B Shares
(unlimited number of $.001 par value shares authorized)............... 9,137,158
=======
NET ASSET VALUE per share:
Class A Shares
($253,515,338 / 127,441,772 shares)................................... $1.99
=======
Class B Shares
($18,256,531 / 9,137,158 shares)...................................... $2.00
=======
See independent accountants' review report and notes to financial statements.
DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
STATEMENT OF OPERATIONS SIX MONTHS ENDED MARCH 31, 1996 (UNAUDITED)
INVESTMENT INCOME:
INTEREST INCOME......................................................... $ 6,453,956
EXPENSES:
Management fee-Note 2(a).............................................. $ 196,700
Distribution fees (Class B shares)-Note 2(b).......................... 11,676
_____
TOTAL EXPENSES.................................................... 208,376
_____
INVESTMENT INCOME-NET............................................. 6,245,580
REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS:
Net realized (loss) on investments-Note 3............................... $ (16,208)
Net unrealized (depreciation) on investments............................ (1,593,084)
_____
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS................. (1,609,292)
_____
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 4,636,288
=======
</TABLE>
See independent accountants' review report and notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31, 1996
1995 (UNAUDITED)
_______ _________
OPERATIONS:
<S> <C> <C>
Investment income-net................................................ $ 6,040,397 $ 6,245,580
Net realized gain (loss) on investments.............................. 17,213 (16,208)
Net unrealized appreciation (depreciation) on investments for the period 487,103 (1,593,084)
______ ______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........... 6,544,713 4,636,288
______ ______
DIVIDENDS TO SHAREHOLDERS FROM;
Investment income-net:
Class A shares..................................................... (5,125,168) (5,894,574)
Class B shares..................................................... (886,038) (280,212)
______ ______
TOTAL DIVIDENDS................................................ (6,011,206) (6,174,786)
______ ______
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Class A shares..................................................... 205,025,138 218,047,359
Class B shares..................................................... 9,691,420 16,448,924
Dividends reinvested:
Class A shares..................................................... 2,977,656 4,195,556
Class B shares..................................................... 735,883 277,426
Cost of shares redeemed:
Class A shares..................................................... (138,068,260) (127,971,404)
Class B shares..................................................... (27,751,723) (4,399,209)
______ ______
INCREASE IN NET ASSETS FROM BENEFICIAL INTEREST TRANSACTIONS... 52,610,114 106,598,652
______ ______
TOTAL INCREASE IN NET ASSETS................................. 53,143,621 105,060,154
NET ASSETS:
Beginning of period.................................................. 113,568,094 166,711,715
______ ______
End of period (including undistributed investment income-net:
$29,191 in 1995 and $99,985 in 1996)............................... $ 166,711,715 $ 271,771,869
======= =======
</TABLE>
<TABLE>
<CAPTION>
SHARES
________________________________________________________________________________
CLASS A CLASS B
___________________ ___________________
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31, 1996 SEPTEMBER 30, MARCH 31, 1996
1995 (UNAUDITED) 1995 (UNAUDITED)
_______ _________ _______ _________
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Shares sold................... 103,232,663 108,524,771 4,898,778 8,205,569
Shares issued for dividends reinvested 1,502,166 2,097,712 372,428 137,963
Shares redeemed............... (70,202,557) (63,865,711) (14,048,233) (2,182,232)
_______ ________ ________ _______
NET INCREASE (DECREASE) IN
SHARES OUTSTANDING.... 34,532,272 46,756,772 (8,777,027) 6,161,300
======= ======== ======== =======
</TABLE>
See independent accountants' review report and notes to financial statements.
<TABLE>
<CAPTION>
DREYFUS INSTITUTIONAL SHORT TERM TREASURY 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.
CLASS A SHARES CLASS B SHARES
__________________________________ _____________________________________
SIX MONTHS SIX MONTHS
YEAR ENDED ENDED YEAR ENDED ENDED
SEPTEMBER 30, MARCH 31, 1996 SEPTEMBER 30, MARCH 31, 1996
PER SHARE DATA: 1994(1) 1995 (UNAUDITED) 1994(1) 1995 (UNAUDITED)
__________________ _____________ __________________ ______________
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 2.00 $ 1.96 $ 1.99 $ 2.00 $ 1.97 $ 2.00
---- ---- ---- ---- ---- -----
INVESTMENT OPERATIONS:
Investment income-net.......... .10 .13 .06 .09 .13 .06
Net realized and unrealized gain (loss)
on investments............... (.04) .03 -- (.03) .03 --
---- ---- ---- ---- ---- -----
TOTAL FROM INVESTMENT
OPERATIONS............... .06 .16 .06 .06 .16 .06
---- ---- ---- ---- ---- -----
DISTRIBUTIONS;
Dividends from investment
income-net................... (.10) (.13) (.06) (.09) (.13) (.06)
---- ---- ---- ---- ---- -----
Net asset value, end of period. $ 1.96 $ 1.99 $ 1.99 $ 1.97 $ 2.00 $ 2.00
==== ==== ==== ==== ==== ====
TOTAL INVESTMENT RETURN............ 3.08%(2) 8.45% 6.32%(2) 3.39%(2) 8.17% 6.06%(2)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets .20%(2) .20% .20%(2) .45%(2) .45% .45%(2)
Ratio of net investment income to
average net assets........... 5.41%(2) 6.48% 6.36%(2) 5.01%(2) 6.35% 6.10%(2)
Portfolio Turnover Rate........ 4,125.54%(3) 1,926.32% 308.59%(3) 4,125.54%(3) 1,926.32% 308.59%(3)
Net Assets, end of period
(000's Omitted).............. $90,421 $160,748 $253,515 $23,147 $5,964 $18,257
(1) From October 29, 1993 (commencement of operations) to September 30, 1994.
(2) Annualized.
(3) Not annualized.
</TABLE>
See independent accountants' review report and notes to financial statements.
DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus Institutional Short Term Treasury 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 a high level of current income with minimum fluctuation of
principal value. 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. (the "Distributor") acts as the
distributor of the Fund's shares, which are sold without a sales load. The
Fund offers both Class A and Class B shares. Class B shares are subject to a
Service Plan adopted pursuant to Rule 12b-1 under the Act. Other differences
between the two Classes include the services offered to and the expenses
borne by each Class and certain voting rights.
(A) PORTFOLIO VALUATION: The Fund's investments (excluding short-term
investments) are valued at the mean between the quoted bid prices and asked
prices. Short-term investments are carried at amortized cost, which
approximates value.
(B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities
transactions are recorded on a trade date basis. Interest income, including,
where applicable, amortization of discount on investments, is recognized on
the accrual basis. Realized gain and loss from securities transactions are
recorded on the identified cost basis.
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 time and 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 gains 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 interest 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 $728,000
available for Federal income tax purposes to be applied against future net
securities profits, if any, realized subsequent to September 30, 1995. If not
applied, the carryover expires in fiscal 2003.
DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 2-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(A) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .20 of 1% of the value
of the Fund's average daily net assets and is payable monthly.
Unless the Manager gives the Fund's investors 90 days' notice to the
contrary, the Manager, and not the Fund, will be liable for Fund expenses
(exclusive of taxes, brokerage, interest on borrowings and with the prior
written consent of the necessary state securities commissions, extraordinary
expenses) other than the following expenses, which will be borne by the Fund:
the management fee, and with respect to the Fund's Class B shares, Rule 12b-1
Service Plan expenses.
(B) Under the Class B Service Plan (the" Plan") adopted pursuant to Rule
12b-1 under the Act, the Fund (a) reimburses the Distributor for distributing
the Fund's Class B shares and (b) pays the Manager, Dreyfus Service
Corporation, a wholly-owned subsidiary of the Manager, and their affiliates
(collectively, "Dreyfus") for advertising and marketing relating to the
Fund's Class B shares and for providing certain services relating to Class B
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 ("Servicing"), at an aggregate annual
rate of .25 of 1% of the value of the average daily net assets of Class B
shares. Both the Distributor and Dreyfus may pay one or more Service Agents a
fee in respect of the Fund's Class B shares owned by shareholders with whom
the Service Agent has a Servicing relationship or for whom the Service Agent
is the dealer or holder of record. Both the Distributor and Dreyfus
determines the amounts, if any, to be paid to Service Agents under the Plan
and the basis on which such payments are made. The fees payable under the
Plan are payable without regard to actual expenses incurred. During the six
months ended March 31, 1996, $11,676 was charged to the Fund pursuant to the
Plan.
Effective December 1, 1995, the Fund entered into a transfer agency
agreement with Dreyfus Transfer, Inc., a wholly-owned subsidiary of the
Manager, to provide personnel and facilities to perform transfer agency
services for the Fund.
(C) Each trustee who is not an "affiliated person" as defined in the Act
receives an annual fee of $1,000 and an attendance fee of $250 per meeting.
The Chairman of the Board receives an additional 25% of such compensation.
NOTE 3-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the six months ended March 31, 1996,
amounted to $669,354,779 and $549,563,276, respectively.
At March 31, 1996, accumulated net unrealized depreciation on investments
was $1,707,693, consisting of $15,801 gross unrealized appreciation and
$1,723,494 gross unrealized depreciation.
At March 31, 1996, 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).
DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
REVIEW REPORT OF ERNST & YOUNG LLP, INDEPENDENT ACCOUNTANTS
SHAREHOLDERS AND BOARD OF TRUSTEES
DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
We have reviewed the accompanying statement of assets and liabilities of
Dreyfus Institutional Short Term Treasury Fund, including the statement of
investments, as of March 31, 1996, and the related statements of operations
and changes in net assets and financial highlights for the six month period
ended March 31, 1996. These financial statements and financial highlights are
the responsibility of the Fund's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements and financial highlights taken as
a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the interim financial statements and financial highlights
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the statement of changes in net assets for the year ended
September 30, 1995 and financial highlights for each of the two years in the
period ended September 30, 1995 and in our report dated November 1, 1995, we
expressed an unqualified opinion on such statement of changes in net assets
and financial highlights.
[Ernst and Young LLP signature logo]
New York, New York
April 30, 1996
[Dreyfus lion "d" logo]
DREYFUS INSTITUTIONAL
SHORT TERM
TREASURY 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.
One American Express Plaza
Providence, RI 02903
Further information is contained
in the Prospectus, which must
precede or accompany this report.
Printed in U.S.A. 721/680SA963
[Dreyfus logo]
Institutional
Short Term
Treasury Fund
Semi-Annual
Report
March 31, 1996
