DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
LETTER TO SHAREHOLDERS
Dear Shareholder:
We are pleased to report the performance for Dreyfus Institutional Short
Term Treasury Fund for the six-month period ended March 31, 1998 as shown in
the following table:
<TABLE>
Income Dividends Per Annualized
Total Return* Share (Approximate) Distribution Rate Per Share**
___________ _____________________ ___________________________
<S> <C> <C> <C>
Institutional Shares 2.96% $.058 5.87%
Investor Shares 2.84% $.056 5.63%
</TABLE>
THE ECONOMY
The United States economy appears to be well on the track to its eighth
consecutive year of expansion. Low interest rates, restrained inflation and
plentiful jobs have driven measures of consumer confidence to record levels.
Personal income has grown strongly over the reporting period and consumer
spending, after a sluggish holiday season, has picked up sharply this year.
The production side of the economy has remained strong as well, although
signs of leveling off were seen early in the year, perhaps due to the
economic problems in Asia. The first effects of the Asian economic crisis
were felt at the end of last year when after-tax corporate profits fell in
the fourth quarter, the first decline since the third quarter of 1996.
Balance of Trade figures for January (the latest data available) provided
additional evidence that the economic difficulties in Asia may be affecting
the U.S. economy.
The Federal Reserve Board expects that a reduction in demand for U.S.
exports will result from turmoil in Asia and dampen our domestic economic
growth as a result. Currency devaluations throughout Asia, in turn, have made
imports into the United States less expensive. Cheaper imports and waning
demand for U.S. exports should place additional downward pressure on domestic
prices, helping further to control inflation. The year-long decline in oil
prices has also helped. A restrained rate of inflation, in turn, would ease
some of the strains on the labor market, and help keep labor costs under
control. The upward pressure on wages has been a paramount concern of the Fed
because of the risk it poses for rekindling inflation. Wage costs have been
rising at about 4% over the reporting period, a rate that has significantly
outpaced inflation. New job creation has been strong over the reporting
period with the unemployment rate remaining at or near 25-year lows. Yet
inflation has stayed tame. The Consumer Price Index has risen 1.6% over the
past 12 months and a broader measure of the cost of living, the Gross
Domestic Product Price Deflator, has grown at the 1.4% level for the last two
quarters of last year. The Producer Price Index actually declined over the
reporting period.
Restrained inflation has kept the Fed from increasing interest rates. The
last increase in short-term rates came in March 1997 when the Federal Open
Market Committee (the policy-making arm of the Federal Reserve), hiked the
Federal Funds rate by one quarter of a percent to 5.5%. (The Federal Funds
rate is the rate of interest that banks charge one another for overnight
loans.)
Low interest rates have provided a strong fundamental underpinning for
interest rate-sensitive sectors of the economy such as housing. In this case,
the Asian crisis has actually proven a stimulus to consumer spending since
international bond investors have sought the safety of U.S. Government
securities, causing interest rates to fall. This reduction in borrowing costs
has spurred mortgage refinancing, thus giving consumers additional spending
power. Mortgage rates have been at levels not seen since the 1960s. The
housing market, a critical segment of the economy, has responded accordingly.
New housing starts rose to their highest annual level in over ten years,
while resale rates of existing homes set records during the reporting period.
Overall spending on construction, both residential and commercial, has been
solid.
So far, the economy has remained remarkably robust and inflation-free. We
are sensitive to the longevity of this extraordinary economic advance and are
alert to evidence of a potential reversal in direction or an upsurge in
inflation.
MARKET ENVIRONMENT
The Treasury market can be viewed in two ways: the first is supply, and
the second is the Fed's policy direction. The supply of Treasuries has
decreased at a higher than expected pace. This would have driven the price of
Treasuries higher which, in turn, would keep rates low. However, the Fed has
indicated that any change in rates would be higher. This expectation of an
interest rate hike has kept the price of Treasuries from rising any further.
At the time of this letter, considering the current Asian situation, we
believe the Fed will not tighten interest rates. Instead, we feel that the
Fed may leave rates unchanged for some time to come. This in turn should
cause the shorter maturity Treasuries to remain in a tight trading range, not
moving very far from current levels.
PORTFOLIO OVERVIEW
We have positioned the Fund with what we would consider a neutral to
slightly bullish stance in the Fund's duration, which was 1.82 years at the
end of the reporting period. Duration is a measure of volatility - it helps
determine how much bonds will rise or fall in price when interest rates
change. The Fund's duration reaffirms our stance that the Fed is less likely
to tighten than is currently priced into the market.
This Fund, to the minimal degree that it can, has emphasized a curve
flattening bias throughout the reporting period. This is accomplished by
utilizing a "barbell" approach, where most of the portfolio is concentrated
around two separate maturity levels. For the Fund, we have focused on
two-year and three-year Treasury notes. This has worked out well as the curve
has flattened, and three-year Treasury notes have performed well.
Part of the reason three year Treasury notes have performed well is that
the part of the Treasuries' debt reduction plan was to discontinue their
issuance. We believe they should continue to trade well, but over time they
should perform like other Treasuries that were discontinued; strong at first,
then weaker because of liquidity reasons.
We appreciate your participation in the Fund and look forward to
continuing to serve your investment needs.
Very truly yours,
[Gerald E. Thunelius signature logo]
Gerald E. Thunelius
Portfolio Manager
April 17, 1998
New York, N.Y.
* Total return includes reinvestment of dividends and any capital gains
paid.
** Distribution rate per share is based upon dividends per share paid from net
investment income during the period (annualized), divided by the net asset
value per share at the end of the period.
<TABLE>
DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
STATEMENT OF INVESTMENTS MARCH 31, 1998 (UNAUDITED)
Principal
U.S. Treasury Notes-93.9% Amount Value
______________ ____________
<S> <C> <C>
5.625%, 12/31/1999........................................................ $ 88,000,000 $ 88,069,520
8.50%, 11/15/2000......................................................... 15,000,000 16,034,100
5.375%, 2/15/2001......................................................... 15,000,000 14,910,450
_____________
TOTAL U.S. TREASURY NOTES
(cost $119,254,495)....................................................... $119,014,070
=============
Short-Term Investments-4.7%
Repurchase Agreements;
Aubrey G. Lanston & Co., 5.75%
dated 3/31/1998, due 4/1/1998 in the amount of $5,891,941
(fully collateralized by $5,982,000 U.S. Treasury Notes, 4.75%,
9/30/1998, value $5,959,568)
(cost $5,891,000)......................................................... $ 5,891,000 $ 5,891,000
=============
TOTAL INVESTMENTS
(cost $125,145,495)....................................................... 98.6% $124,905,070
====== ============
CASH AND RECEIVABLES (NET).................................................. 1.4% $ 1,827,149
====== ============
NET ASSETS.................................................................. 100.0% $126,732,219
====== ============
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1998 (UNAUDITED)
Cost Value
_____________ _____________
<S> <C> <C>
ASSETS: Investments in securities-See Statement of
Investments-Note 1(b).............. $125,145,495 $124,905,070
Cash....................................... 126,047
Interest receivable........................ 1,827,998
Receivable for shares of Beneficial Interest 21,909
subscribed................................. ____________
126,881,024
_____________
LIABILITIES: Due to The Dreyfus Corporation and affiliates 22,062
Due to Distributor......................... 5,207
Payable for shares of Beneficial Interest 121,536
redeemed...................................
_____________
148,805
_____________
NET ASSETS.................................................................. $126,732,219
=============
REPRESENTED BY: Paid-in capital............................ $130,105,868
Accumulated net realized gain (loss)
on investments............................. (3,133,224)
Accumulated gross unrealized
(depreciation) on investments.............. (240,425)
_____________
$126,732,219
NET ASSETS.................................................................. =============
NET ASSET VALUE PER SHARE
_____________________________
Institutional Investor
Shares Shares
______________ ____________
Net Assets.................................................................. $101,988,464 $ 24,743,755
Shares Outstanding.......................................................... 51,571,122 12,431,313
NET ASSET VALUE PER SHARE................................................... $1.98 $1.99
===== =====
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
STATEMENT OF OPERATIONS SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
INVESTMENT INCOME
<S> <C> <C>
INCOME Interest Income............................ $4,578,827
EXPENSES: Management fee-Note 3(a)................... $ 150,732
Distribution fees (Investor Shares)-
Note 3(b)............................ 43,989
Loan commitment fees-Note 2............... 1,572
___________
Total Expenses....................... 196,293
___________
INVESTMENT INCOME-NET....................................................... 4,382,534
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS-Note 4:
Net realized gain (loss) on investments.... $ 413,397
Net unrealized appreciation (depreciation)
on investments....................... (383,307)
____________
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... 30,090
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $4,412,624
===========
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended
March 31, 1998 Year Ended
(Unaudited) September 30, 1997*
________________ __________________
<S> <C> <C>
OPERATIONS:
Investment income-net................................................. $ 4,382,534 $8,870,115
Net realized gain (loss) on investments............................... 413,397 (311,069)
Net unrealized appreciation (depreciation) on investments............. (383,307) 272,387
______________ ____________
Net Increase (Decrease) in Net Assets Resulting from
Operations............................................. 4,412,624 8,831,433
______________ ___________
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income-net:
Institutional Shares................................................ (3,392,662) (7,804,323)
Investor Shares..................................................... (989,872) (1,065,792)
______________ ____________
Total Dividends................................................. (4,382,534) (8,870,115)
______________ _____________
BENEFICIAL INTEREST TRANSACTIONS:
Net proceeds from shares sold:
Institutional Shares................................................ 18,003,032 60,840,986
Investor Shares..................................................... 19,014,203 36,151,101
Dividends reinvested:
Institutional Shares................................................ 2,320,793 5,040,848
Investor Shares..................................................... 831,876 946,148
Cost of shares redeemed:
Institutional Shares................................................ (36,436,387) (117,988,964)
Investor Shares..................................................... (30,429,355) (26,333,284)
______________ ____________
Increase (Decrease) in Net Assets from
Beneficial Interest Transactions............................ (26,695,838) (41,343,165)
______________ ____________
Total Increase (Decrease) in Net Assets....................... (26,665,748) (41,381,847)
NET ASSETS:
Beginning of Period................................................... 153,397,967 194,779,814
______________ _____________
End of Period......................................................... $ 126,732,219 $153,397,967
============== ==============
Shares Shares
______________ ______________
CAPITAL SHARE TRANSACTIONS:
Institutional Shares
___________________
Shares sold........................................................... 9,080,170 30,764,445
Shares issued for dividends reinvested................................ 1,171,083 2,545,900
Shares redeemed....................................................... (18,349,729) (59,534,619)
______________ ______________
Net Increase (Decrease) in Shares Outstanding................... (8,098,476) (26,224,274)
============== ===============
Investor Shares
_______________
Shares sold........................................................... 9,550,026 18,164,991
Shares issued for dividends reinvested................................ 417,689 475,461
Shares redeemed....................................................... (15,252,526) (13,222,748)
______________ ______________
Net Increase (Decrease) in Shares Outstanding................... (5,284,811) 5,417,704
============== ===============
*Effective February 2, 1997, Class A shares were redesignated as
Institutional Shares and Class B shares were redesignated
as Investor Shares.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
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.
Institutional Shares
______________________________________________________
Six Months Ended
March 31, 1998 Year Ended September 30,
____________________________________
PER SHARE DATA: (Unaudited) 1997(1) 1996 1995 1994(2)
________________ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 1.98 $ 1.98 $ 1.99 $ 1.96 $ 2.00
_______ _______ _______ _______ _______
Investment Operations:
Investment income-net........................ .06 .12 .13 .13 .10
Net realized and unrealized gain (loss)
on investments............................. - - (.01) .03 (.04)
_______ _______ _______ _______ _______
Total from Investment Operations............. .06 .12 .12 .16 .06
_______ _______ _______ _______ _______
Distributions:
Dividends from investment income-net......... (.06) (.12) (.13) (.13) (.10)
_______ _______ _______ _______ _______
Net asset value, end of period............... $ 1.98 $ 1.98 $ 1.98 $ 1.99 $ 1.96
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN.......................... 5.94%(3) 6.23% 6.03% 8.45% 3.08%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... .20%(3) .20% .20% .20% .20%(3)
Ratio of net investment income
to average net assets...................... 5.87%(3) 6.04% 6.40% 6.48% 5.41%(3)
Portfolio Turnover Rate...................... 459.90%(4) 952.81% 694.24% 1,926.32% 4,125.54%(4)
Net Assets, end of period (000's Omitted).... $101,988 $118,102 $170,290 $160,748 $90,421
(1) Effective February 2, 1997, Class A shares were redesignated as Institutional Shares.
(2) From October 29, 1993 (commencement of operations) to September 30, 1994.
(3) Annualized.
(4) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
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.
Investor Shares
______________________________________________________
Six Months Ended
March 31, 1998 Year Ended September 30,
____________________________________
PER SHARE DATA: (Unaudited) 1997(1) 1996 1995 1994(2)
________________ _______ _______ _______ _______
Net asset value, beginning of period......... $ 1.99 $ 1.99 $ 2.00 $ 1.97 $ 2.00
_______ _______ _______ _______ _______
Investment Operations:
Investment income-net........................ .06 .12 .12 .13 .09
Net realized and unrealized gain (loss)
on investments............................. - - (.01) .03 (.03)
_______ _______ _______ _______ _______
Total from Investment Operations............. .06 .12 .11 .16 .06
_______ _______ _______ _______ _______
Distributions:
Dividends from investment income-net......... (.06) (.12) (.12) (.13) (.09)
_______ _______ _______ _______ _______
Net asset value, end of period............... $ 1.99 $ 1.99 $ 1.99 $ 2.00 $ 1.97
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN.......................... 5.70%(3) 5.97% 5.76% 8.17% 3.39%(3)
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... .45%(3) .45% .45% .45% .45%(3)
Ratio of net investment income
to average net assets...................... 5.63%(3) 5.83% 6.13% 6.35% 5.01%(3)
Portfolio Turnover Rate...................... 459.90%(4) 952.81% 694.24% 1,926.32% 4,125.54%(4)
Net Assets, end of period (000's Omitted).... $24,744 $35,296 $24,490 $5,964 $23,147
(1) Effective February 2, 1997, Class B shares were redesignated as Investor Shares.
(2) From October 29, 1993 (commencement of operations) to September 30, 1994.
(3) Annualized.
(4) Not annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
</TABLE>
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.
("Mellon").
Premier Mutual Fund Services, Inc. (the "Distributor") is the distributor
of the Fund's shares, which are sold without a sales load. The Fund is
authorized to issue an unlimited number of $.001 par value shares in the
following classes of shares: Institutional Shares and Investor Shares.
Investor Shares are subject to a Service Plan adopted pursuant to Rule 12b-1
under the Act. Other differences between the classes include the services
offered to and the expenses borne by each class and certain voting rights.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management
estimates and assumptions. Actual results could differ from those estimates.
(a) Portfolio valuation: Investments in securities (excluding short-term
investments) are valued each business day by an independent pricing service
("Service") approved by the Board of Trustees. Investments for which quoted
bid prices are readily available and are representative of the bid side of
the market in the judgement of the Service are valued at the mean between the
quoted bid prices (as obtained by the Service from dealers in such
securities) and asked prices (as calculated by the Service based upon its
evaluation of the market for such securities). Other investments are carried
at fair value as determined by the Service, based on methods which include
consideration of: yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and general
market conditions. Short-term investments, excluding U.S. Treasury Bills, are
carried at amortized cost, which approximates value.
(b) Securities transactions and investment income: Securities
transactions are recorded on a trade date basis. 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 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.
DREYFUS INSTITUTIONAL SHORT TERM TREASURY FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
The Fund has an unused capital loss carryover of approximately $2,832,000
available for Federal income tax purposes to be
applied against future net securities profits, if any, realized subsequent to
September 30, 1997. The carryover does not include net realized securities
losses from November 1, 1996 through September 30, 1997 which are treated,
for Federal income tax purposes, as arising in fiscal 1998. If not applied,
$728,000 of the carryover expires in fiscal 2003, $49,000 expires in fiscal
2004 and $2,055,000 expires in fiscal 2005.
NOTE 2-BANK LINE OF CREDIT:
The Fund participates with other Dreyfus-managed funds in a $600 million
redemption credit facility ("Facility") to be utilized for temporary or
emergency purposes, including the financing of redemptions. In connection
therewith, the Fund has agreed to pay commitment fees on its pro rata portion
of the Facility. Interest is charged to the Fund at rates based on prevailing
market rates in effect at the time of borrowings. During the period ended
March 31, 1998, the Fund did not borrow under the Facility.
NOTE 3-MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(a) Pursuant to a management agreement with the Manager, the management
fee is computed at the annual rate of .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, commitment fees and
extraordinary expenses, other than the following expenses, which will be
borne by the Fund: the management fee, and with respect to the Fund's
Investor Shares, Rule 12b-1 Service Plan expenses.
The Manager 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.
The Manager compensates Mellon under a custody agreement to provide
custodial services for the Fund.
(b) Under the Investor Shares Service Plan (the "Plan") adopted pursuant
to Rule 12b-1 under the Act, the Fund (a) reimburses the Distributor for
distributing the Fund's Investor Shares and (b) pays the Manager, Dreyfus
Service Corporation, a wholly-owned subsidiary of the Manager, and any
affiliate of either of them (collectively, "Dreyfus") for advertising and
marketing relating to the Fund's Investor Shares and for providing certain
services relating to Investor Shares 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 Investor Shares. Both the Distributor and Dreyfus
may pay one or more Service Agents (a securities dealer, financial
institution or other industry professional) a fee in respect of the Fund's
Investor 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 determine 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 period ended March 31, 1998, the Fund
was charged $43,989 for Investor Shares pursuant to the Plan.
(c) Each trustee 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 4-SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales of investment securities,
excluding short-term securities, during the period ended March 31, 1998,
amounted to $661,032,233 and $691,347,349, respectively.
At March 31, 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).
Registration Mark
[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
Mellon Bank, N.A..
One Mellon Bank Center
Pittsburgh, PA 15258
TRANSFER AGENT &
DIVIDEND DISBURSING AGENT
Dreyfus Transfer, Inc.
P.O. Box 9671
Providence, RI 02940
Printed in U.S.A. 721/680SA983
Registration Mark
[Dreyfus logo]
Institutional
Short Term
Treasury Fund
Semi-Annual
Report
March 31, 1998
