Dreyfus Basic U S Government Money Market Fund Inactive
Filed: 29 Oct 09, 12:00am
| UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 |
| FORM N-CSR |
| CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES |
| Investment Company Act file number | 811-6606 |
| Dreyfus BASIC U.S. Government Money Market Fund (Exact name of Registrant as specified in charter) |
| c/o The Dreyfus Corporation 200 Park Avenue New York, New York 10166 (Address of principal executive offices) (Zip code) |
| Michael A. Rosenberg, Esq. 200 Park Avenue New York, New York 10166 (Name and address of agent for service) |
| Registrant's telephone number, including area code: | (212) 922-6000 | |
| Date of fiscal year end: | 02/28 | |
| Date of reporting period: | 08/31/09 | |
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| FORM N-CSR |
| Item 1. | Reports to Stockholders. |
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The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value
| Contents | |
| THE FUND | |
| 2 | A Letter from the Chairman and CEO |
| 3 | Discussion of Fund Performance |
| 6 | Understanding Your Fund’s Expenses |
| 6 | Comparing Your Fund’s Expenses With Those of Other Funds |
| 7 | Statement of Investments |
| 9 | Statement of Assets and Liabilities |
| 10 | Statement of Operations |
| 11 | Statement of Changes in Net Assets |
| 12 | Financial Highlights |
| 13 | Notes to Financial Statements |
| 20 | Information About the Review and Approval of the Fund’s Management Agreement |
| FOR MORE INFORMATION | |
| Back Cover |
| Dreyfus BASIC U.S. Government Money Market Fund |
| The Fund |
A LETTER FROM THE CHAIRMAN AND CEO
Dear Shareholder:
We present to you this semiannual report for Dreyfus BASIC U.S. Government Money Market Fund, covering the six-month period from March 1, 2009, through August 31, 2009.
At long last, the current recession cycle appears to be winding down. After generally slumping since December 2007, we expect U.S. economic growth to pick up during the third quarter of 2009. Highly stimulative monetary and fiscal policies domestically and throughout the world, combined with the low cost of debt and equity capital compared to historical norms, already have sparked a rebound in industrial production as manufacturers replenish their depleted inventories. However, we continue to anticipate a slower-than-average recovery, with the unemployment rate likely to remain elevated over the next several quarters.
Both the taxable and tax-exempt short-term money markets have continued to reflect historically low short-term interest rates.As longer-term fixed income asset classes rallied strongly during the spring and summer of 2009, yields of money market funds remained at low levels despite significant outflows in recent months. Nonetheless, the need for daily liquidity can never be understated, and true money market mutual funds have continued to provide the safety of principal and liquidity that many investors expect. In these times of market flux, we urge you to speak with your financial adviser about your specific need for liquidity and the potential opportunities and obstacles that come with investing in today’s changing investment environment.
For information about how the fund performed during the reporting period, as well as market perspectives, we have provided a Discussion of Fund Performance given by the Portfolio Manager.
Thank you for your continued confidence and support.
| Jonathan R. Baum Chairman & Chief Executive Officer The Dreyfus Corporation September 15, 2009 |
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DISCUSSION OF FUND PERFORMANCE
For the period of March 1, 2009, through August 31, 2009, as provided by Bernard W. Kiernan, Jr., Portfolio Manager
Fund and Market Performance Overview
For the six-month period ended August 31, 2009, Dreyfus BASIC U.S. Government Money Market Fund produced an annualized yield of 0.05%. Taking into account the effects of compounding, the fund produced an annualized effective yield of 0.05%.1
The Fund’s Investment Approach
The fund seeks as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity.To pursue this goal, the fund invests exclusively in securities issued or guaranteed as to principal and interest by the U.S. government or its agencies or instrumentalities, and in repurchase agreements (including tri-party repurchase agreements).The securities in which the fund invests include those backed by the full faith and credit of the U.S. government and those that are neither insured nor guaranteed by the U.S. government.
When managing the fund, we closely monitor the outlook for economic growth and inflation, follow overseas developments and consider the posture of the Federal Reserve Board (the “Fed”) in our decisions as to how to structure the fund. Based upon our economic outlook, we actively manage the fund’s average maturity in looking for opportunities that may present themselves in light of possible changes in interest rates.
Money Market Yields Plunged During the Downturn
The reporting period began in the midst of a global financial crisis and a severe recession. In the months prior to the reporting period, the Fed attempted to restore stability to the credit markets by pumping enormous amounts of liquidity into the banking system.The Fed also eased monetary policy aggressively, driving its target for the overnight federal funds rate to an unprecedented low of 0% to 0.25%. In addition
The Fund 3
| DISCUSSION OF FUND PERFORMANCE (continued) |
to the Fed’s actions, the U.S. Department of the Treasury responded with a number of its own remedial measures in 2008, including the Temporary Guarantee Program for Money Market Funds, which remained in effect through the end of reporting period. As a result, yields of money market instruments began the reporting period near historical lows. Instruments issued by the U.S. government and its agencies encountered additional downward pressure stemming from robust demand from investors engaged in a “flight to quality,” which drove their yields nearly to zero.
Investor sentiment began to improve markedly just days after the start of the reporting period. After hitting multi-year lows in early March, the U.S. stock market and corporate bond market staged impressive rebounds through the reporting period’s end. Despite a –6.4% annualized GDP growth rate over the first quarter of 2009, the markets were buoyed by signs that the economic downturn might be decelerating, including lower-than-expected numbers of jobless claims in April and May. A decline in the three-month London Interbank Offered Rate (LIBOR) below 1% provided evidence of improvement in the global credit markets.
The U.S. economy sent mixed signals in June. For example, the National Association of Realtors reported that existing home sales rose 2.4% and the average sale price increased almost 4% in May, but the absolute number of sales and the average sale price remained 15% and 20% below their peaks, respectively. Perhaps most significant, the unemployment rate rose to 9.5%, its highest level in 26 years.
In July, it was announced that the U.S. economy produced a better-than-expected annualized growth rate of –0.1% during the second quarter, supported by government spending and consumption as the economic stimulus program took hold. Residential construction increased by 0.5% in June, marking the second gain in three months. Perhaps most encouraging, the unemployment rate fell slightly to 9.4% in July when job losses moderated.
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August continued to show signs of economic improvement. The Institute for Supply Management’s manufacturing index indicated the first expansion of manufacturing activity in more than 18 months.The U.S. Department of Commerce reported that new factory orders jumped 1.3% in July, the fourth consecutive month of increases. The housing market also posted gains as pending home sales rose in July for the sixth month in a row. However, these positive indicators were tempered by persistent economic headwinds, including a jump in the unemployment rate to 9.7%, a new high for the current cycle, in August.
Focusing on Quality and Liquidity
Most money market funds remained on a relatively defensive footing during the reporting period. The fund was no exception; we maintained its weighted average maturity in a position that was roughly in line with industry averages.
Despite recent signs of potential economic improvement, the Fed has repeatedly indicated that “economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” Therefore, until we see more convincing evidence that the Fed is prepared to raise interest rates, we intend to maintain the fund’s focus on liquidity.
September 15, 2009
| 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. | |
| 1 | Annualized effective yield is based upon dividends declared daily and reinvested monthly. Past |
| performance is no guarantee of future results.Yields fluctuate.Yield provided reflects the absorption | |
| of certain fund expenses by The Dreyfus Corporation pursuant to an agreement in which | |
| shareholders will be given at least 90 days’ notice prior to the time such absorption may be | |
| terminated. Had these expenses not been absorbed, the fund’s annualized yield would have been | |
| –0.16% and the fund’s annualized effective yield would have been –0.16%. |
The Fund 5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus BASIC U.S. Government Money Market Fund from March 1, 2009 to August 31, 2009. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| Expenses and Value of a $1,000 Investment | |
| assuming actual returns for the six months ended August 31, 2009 | |
| Expenses paid per $1,000† | $2.32 |
| Ending value (after expenses) | $1,000.30 |
| COMPARING YOUR FUND’S EXPENSES |
| WITH THOSE OF OTHER FUNDS (Unaudited) |
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| Expenses and Value of a $1,000 Investment | |
| assuming a hypothetical 5% annualized return for the six months ended August 31, 2009 | |
| Expenses paid per $1,000† | $2.35 |
| Ending value (after expenses) | $1,022.89 |
† Expenses are equal to the fund’s annualized expense ratio of .46%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
| STATEMENT OF INVESTMENTS |
| August 31, 2009 (Unaudited) |
| Annualized | |||
| Yield on | |||
| Date of | Principal | ||
| U.S. Government Agencies—83.8% | Purchase (%) | Amount ($) | Value ($) |
| Federal Farm Credit Bank: | |||
| 9/15/09 | 0.30 | 50,000,000 a | 49,999,908 |
| 3/12/10 | 0.45 | 25,000,000 a | 24,988,209 |
| Federal Home Loan Bank: | |||
| 9/18/09 | 0.39 | 15,000,000 a | 15,000,069 |
| 9/30/09 | 0.45 | 23,850,000 | 23,841,354 |
| 10/2/09 | 0.38 | 13,840,000 | 13,835,531 |
| 12/30/09 | 0.61 | 25,000,000 | 24,949,167 |
| 5/11/10 | 0.64 | 15,000,000 | 15,000,000 |
| Federal Home Loan Mortgage Corp.: | |||
| 9/14/09 | 0.70 | 25,000,000 b | 24,993,680 |
| 5/17/10 | 0.43 | 25,000,000 b | 24,922,958 |
| Federal National Mortgage Association | |||
| 9/1/09 | 0.38 | 25,000,000 a,b | 25,000,000 |
| Total U.S. Government Agencies | |||
| (cost $242,530,876) | 242,530,876 | ||
| U.S. Treasury Notes—7.0% | |||
| 12/31/09 | |||
| (cost $20,191,207) | 0.33 | 20,000,000 | 20,191,207 |
| Repurchase Agreements—9.0% | |||
| Deutsche Bank Securities | |||
| dated 8/31/09, due 9/1/09 in the | |||
| amount of $20,000,106 (fully | |||
| collateralized by $20,255,000 | |||
| Federal Home Loan Mortgage Corp., | |||
| 0%-2.91%, due 11/13/09-3/26/14, | |||
| value $20,400,024) | 0.19 | 20,000,000 | 20,000,000 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| Annualized | |||
| Yield on | |||
| Date of | Principal | ||
| Repurchase Agreements (continued) | Purchase (%) | Amount ($) | Value ($) |
| Goldman, Sachs & Co. | |||
| dated 8/31/09, due 9/1/09 in the�� | |||
| amount of $6,000,017 (fully collateralized | |||
| by $4,324,500 U.S. Treasury Bonds, | |||
| 8%, due 11/15/21, value $6,120,025) | 0.10 | 6,000,000 | 6,000,000 |
| Total Repurchase Agreements | |||
| (cost $26,000,000) | 26,000,000 | ||
| Total Investments (cost $288,722,083) | 99.8% | 288,722,083 | |
| Cash and Receivables (Net) | .2% | 632,587 | |
| Net Assets | 100.0% | 289,354,670 | |
| a Variable rate security—interest rate subject to periodic change. |
| b On September 7, 2008, the Federal Housing Finance Agency (FHFA) placed Federal National Mortgage |
| Association and Federal Home Loan Mortgage Corporation into conservatorship with FHFA as the conservator. As |
| such, the FHFA will oversee the continuing affairs of these companies. |
| Portfolio Summary (Unaudited)† | |||
| Value (%) | Value (%) | ||
| Federal Home Loan Bank | 32.0 | Federal National Mortgage Association | 8.6 |
| Federal Farm Credit Bank | 25.9 | U.S. Treasury Notes | 7.0 |
| Federal Home Loan Mortgage Corp. | 17.3 | ||
| Repurchase Agreements | 9.0 | 99.8 | |
| † Based on net assets. | |||
| See notes to financial statements. | |||
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| STATEMENT OF ASSETS AND LIABILITIES |
| August 31, 2009 (Unaudited) |
| Cost | Value | |
| Assets ($): | ||
| Investments in securities—See Statement of | ||
| Investments—Note 1(b) | 288,722,083 | 288,722,083 |
| Cash | 655,101 | |
| Interest receivable | 231,811 | |
| Prepaid expenses | 18,875 | |
| 289,627,870 | ||
| Liabilities ($): | ||
| Due to The Dreyfus Corporation and affiliates—Note 2(b) | 115,907 | |
| Payable for shares of Beneficial Interest redeemed | 99,997 | |
| Accrued expenses | 57,296 | |
| 273,200 | ||
| Net Assets ($) | 289,354,670 | |
| Composition of Net Assets ($): | ||
| Paid-in capital | 289,375,064 | |
| Accumulated net realized gain (loss) on investments | (20,394) | |
| Net Assets ($) | 289,354,670 | |
| Shares Outstanding | ||
| (unlimited number of $.001 par value shares of Beneficial interest authorized) | 289,375,064 | |
| Net Asset Value, offering and redemption price per share ($) | 1.00 | |
| See notes to financial statements. | ||
The Fund 9
| STATEMENT OF OPERATIONS |
| Six Months Ended August 31, 2009 (Unaudited) |
| Investment Income ($): | |
| Interest Income | 822,986 |
| Expenses: | |
| Management fee—Note 2(a) | 807,125 |
| Shareholder servicing costs—Note 2(b) | 131,518 |
| Professional fees | 46,916 |
| Custodian fees—Note 2(b) | 29,142 |
| Treasury insurance expense—Note 1(e) | 26,057 |
| Registration fees | 21,488 |
| Trustees’ fees and expenses—Note 2(c) | 10,216 |
| Prospectus and shareholders’ reports | 5,898 |
| Miscellaneous | 8,916 |
| Total Expenses | 1,087,276 |
| Less—reduction in management fee | |
| due to undertaking—Note 2(a) | (331,336) |
| Less—reduction in expenses due to | |
| undertaking—Note 2(a) | (15,385) |
| Less—reduction in fees due to | |
| earnings credits—Note 1(b) | (4,104) |
| Net Expenses | 736,451 |
| Investment Income—Net, representing net increase | |
| in net assets resulting from operations | 86,535 |
| See notes to financial statements. | |
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STATEMENT OF CHANGES IN NET ASSETS
| Six Months Ended | ||
| August 31, 2009 | Year Ended | |
| (Unaudited) | February 28, 2009 | |
| Operations ($): | ||
| Investment income—net | 86,535 | 6,405,372 |
| Net realized gain (loss) on investments | — | 24,666 |
| Net Increase (Decrease) in Net Assets | ||
| Resulting from Operations | 86,535 | 6,430,038 |
| Dividends to Shareholders from ($): | ||
| Investment income—net | (89,378) | (6,402,529) |
| Beneficial Interest Transactions ($1.00 per share): | ||
| Net proceeds from shares sold | 51,899,124 | 254,178,679 |
| Dividends reinvested | 84,755 | 6,075,558 |
| Cost of shares redeemed | (107,918,530) | (314,918,733) |
| Increase (Decrease) in Net Assets from | ||
| Beneficial Interest Transactions | (55,934,651) | (54,664,496) |
| Total Increase (Decrease) in Net Assets | (55,937,494) | (54,636,987) |
| Net Assets ($): | ||
| Beginning of Period | 345,292,164 | 399,929,151 |
| End of Period | 289,354,670 | 345,292,164 |
| Undistributed investment income—net | — | 2,843 |
| See notes to financial statements. | ||
The Fund 11
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.
| Six Months Ended | ||||||
| Augusr 31, 2009 | Year Ended February 28/29, | |||||
| (Unaudited) | 2009 | 2008 | 2007 | 2006 | 2005 | |
| Per Share Data ($): | ||||||
| Net asset value, | ||||||
| beginning of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
| Investment Operations: | ||||||
| Investment income—net | .000a | .016 | .045 | .047 | .031 | .011 |
| Distributions: | ||||||
| Dividends from | ||||||
| investment income—net | (.000)a | (.016) | (.045) | (.047) | (.031) | (.011) |
| Net asset value, end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
| Total Return (%) | .06b | 1.64 | 4.56 | 4.79 | 3.11 | 1.12 |
| Ratios/Supplemental Data (%): | ||||||
| Ratio of total expenses | ||||||
| to average net assets | .67b | .65 | .63 | .63 | .62 | .63 |
| Ratio of net expenses | ||||||
| to average net assets | .46b | .46 | .45 | .45 | .45 | .45 |
| Ratio of net investment income | ||||||
| to average net assets | .05b | 1.67 | 4.46 | 4.67 | 3.05 | 1.08 |
| Net Assets, end of period | ||||||
| ($ x 1,000) | 289,355 | 345,292 | 399,929 | 391,079 | 465,315 | 474,353 |
| a | Amount represents less than $.001 per share. |
| b | Annualized. |
| See notes to financial statements. | |
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NOTES TO FINANCIAL STATEMENTS (Unaudited)
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” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Manager, 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 U.S. generally accepted accounting principles, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The fund enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: Investments in securities are valued at amortized cost in accordance with Rule 2a-7 of the Act, which has been determined by the Board of Trustees to represent the fair value of the fund’s investments.
The Fund 13
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The fund adopted Statement of Financial Accounting Standards No. 157 “FairValue Measurements” (“FAS 157”). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair value measurements.
Various inputs are used in determining the value of the fund’s investments relating to FAS 157.These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. For example, money market securities are valued using amortized cost, in accordance with rules under the Act. Generally, amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected as Level 2.
The following is a summary of the inputs used as of August 31, 2009 in valuing the fund’s investments:
| Investments in | |
| Valuation Inputs | Securities ($) |
| Level 1—Quoted Prices | — |
| Level 2—Other Significant Observable Inputs | 288,722,083 |
| Level 3—Significant Unobservable Inputs | — |
| Total | 288,722,083 |
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income, adjusted for accretion of discount and amortization of pre-
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mium on investments, is earned from settlement date and is recognized on the accrual basis. Cost of investments represents amortized cost.
The fund has arrangements with the custodian and cash management bank whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset custody and cash management fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund may enter into repurchase agreements with financial institutions, deemed to be creditworthy by the 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 ag ainst 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, 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 of 1986, as amended (the “Code”).To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains.
(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 pro-
The Fund 15
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
visions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended August 31, 2009, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period, the fund did not incur any interest or penalties.
Each of the tax years in the three-year period ended February 28, 2009 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The fund has an unused capital loss carryover of $20,394 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to February 28, 2009. If not applied, $18,325 of the carryover expires in fiscal 2013 and $2,069 expires in fiscal 2014.
The tax character of distributions paid to shareholders during the fiscal year ended February 28, 2009 were all ordinary income.The tax character of current year distributions will be determined at the end of the current fiscal year.
At August 31, 2009, 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).
(e) Treasury’s Temporary Guarantee Program: The fund entered into a Guarantee Agreement with the United States Department of the Treasury (the “Treasury”) to participate in the Treasury’s Temporary Guarantee Program for Money Market Funds (the “Program”).
Under the Program, the Treasury guaranteed the share price of shares of the fund held by shareholders as of September 19, 2008 at $1.00 per share if the fund’s net asset value per share fell below $0.995 (a “Guarantee Event”) and the fund liquidated. Recovery under the Program was subject to certain conditions and limitations.
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Fund shares acquired by investors after September 19, 2008 that increased the number of fund shares the investor held at the close of business on September 19, 2008 were not eligible for protection under the Program. In addition, fund shares acquired by investors who did not hold fund shares at the close of business on September 19, 2008 were not eligible for protection under the Program.
The Program, which was originally set to expire on December 18, 2008, was initially extended by the Treasury until April 30, 2009 and had been further extended by the Treasury until September 18, 2009, at which time the Secretary of the Treasury terminated the Program. The fund’s participation in the Program expired effective May 1, 2009. As a result, shareholder assets in the fund that were covered under the Program, since September 19, 2008, were no longer covered effective May 1, 2009. Participation in the initial term and the April 30, 2009 extension period of the Program required a payment to the Treasury in the amount of .010% and .015%, respectively, of the fund’s shares outstanding as of September 19, 2008 (valued at $1.00 per share).This expense was borne by the fund without regard to any expense limitation in effect.
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 .50% 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, if the fund’s aggregate expenses, exclusive of taxes, brokerage fees and extraordinary expenses, exceed an annual rate of .45% of the value of the fund’s average daily net assets, the fund may deduct from the payment to be made to the Manager under the Agreement, or the Manager will bear, such excess expense.
The Fund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The reduction in management fee, pursuant to the undertaking, amounted to $331,336 during the period ended August 31, 2009.
The Manager has undertaken to reimburse expenses in the event that current yields drop below a certain level.This undertaking is voluntary and not contractual and may be terminated at any time.The reduction in expense, pursuant to the undertaking, amounted to $15,385 during the period ended August 31, 2009.
(b) Under the Shareholder Services Plan, the fund reimburses the Distributor an amount not to exceed an annual rate of .25% 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 August 31, 2009, the fund was charged $82,640 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 August 31, 2009, the fund was charged $28,121 pursuant to the transfer agency agreement.
The fund compensates The Bank of NewYork Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, under a cash management agreement for performing cash management services related to fund subscriptions and redemptions. During the period ended August 31, 2009, the fund was charged $3,044 pursuant to the cash management agreement.These fees were offset by earnings credits pursuant to the cash management agreement.
18
The fund also compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. During the period ended August 31, 2009, the fund was charged $29,142 pursuant to the custody agreement.
During the period ended August 31, 2009, the fund was charged $3,341 for services performed by the Chief Compliance Officer.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $123,655, custodian fees $15,318, chief compliance officer fees $2,784, shareholder services plan fees $13,000 and transfer agency per account fees $20,780, which are offset against an expense reimbursement currently in effect in the amount of $59,630.
(c) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 3—Subsequent Events Evaluation:
Dreyfus has evaluated the need for disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued.This evaluation did not result in any subsequent events that necessitated disclosures and/or adjustments other than the termination of the Treasury’s Temporary Guarantee Program by the Treasury as of the close of business on September 18, 2009. See Note 1(e).
The Fund 19
| INFORMATION ABOUT THE REVIEW AND APPROVAL |
| OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) |
At a meeting of the Board of Trustees held on July 21, 2009, the Board considered the re-approval for an annual period of the fund’s Management Agreement, pursuant to which the Manager provides the fund with investment advisory and administrative services. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.
Analysis of Nature, Extent and Quality of Services Provided to the Fund. The Board members considered information previously provided to them in a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and representatives of the Manager confirmed that there had been no material changes in this information. The Board also discussed the nature, extent and quality of the services provided to the fund pursuant to its Management Agreement.The Manager’s representatives reviewed the fund’s distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each. The Manager’s representatives noted that the fund is serviced predominantly by Dreyfus’s retail servicing division. The Manager’s representatives noted the distribution ch annels for the fund as well as the diversity of distribution among the funds in the Dreyfus fund complex, and the Manager’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services in each distribution channel, including those of the fund.The Manager provided the number of shareholder accounts in the fund, as well as the fund’s asset size.
The Board members also considered the Manager’s research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board members also considered the Manager’s extensive administrative, accounting and compliance infrastructure.
20
Comparative Analysis of the Fund’s Performance, Management Fee and Expense Ratio. The Board members reviewed the fund’s performance and comparisons to a group of comparable funds (the “Performance Group”) and to a broader group of funds (the “Performance Universe”) selected and provided by Lipper, Inc., an independent provider of investment company data.The Board was provided with a description of the methodology Lipper used to select the Performance Group and Performance Universe, as well as the Expense Group and Expense Universe (discussed below).The Board members discussed the results of the comparisons for various periods ended May 31, 2009 and noted that the fund’s total return performance was above the Performance Group median for the ten-year period, equal to the median for the four-year period, and below the median for the other one - -, two-, three-and five-year periods. The Board members noted the close proximity (within 2 basis points) of the fund’s total return performance to the Performance Group median for the three- and five-year periods ended May 31, 2009. The Board members also noted that the fund’s total return performance was above the Performance Universe median for each reported time period.
The Board members also discussed the fund’s contractual and actual management fee and total expense ratio as compared to a comparable group of funds (the “Expense Group”) that was composed of the same funds included in the Performance Group and a broader group of funds (the “Expense Universe”), each selected and provided by Lipper. The Board noted that the fund’s contractual management fee was above the Expense Group median, and that the fund’s actual management fee was above the Expense Group median and below the Expense Universe median.The Board also noted that the fund’s total expense ratio was equal to the Expense Group median and below the Expense Universe median. The Board members also discussed the Manager’s undertaking to limit fund expenses over the past year.
The Fund 21
| INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE |
| FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued) |
Representatives of the Manager reviewed with the Board members the fees paid to the Manager or its affiliates by a mutual fund managed by the Manager or its affiliates with similar investment objectives, policies and strategies, and included in the same Lipper category, as the fund (the “Similar Fund”).The Board members considered the relevance of the fee information provided for the Similar Fund to evaluate the appropriateness and reasonableness of the fund’s management fee. Representatives of the Manager informed the Board members that there were no separate accounts or wrap fee accounts managed by the Manager or its affiliates with similar investment objectives, policies and strategies as the fund.
Analysis of Profitability and Economies of Scale. The Manager’s representatives reviewed the dollar amount of expenses allocated and profit received by the Manager and the method used to determine such expenses and profit. The Board previously had been provided with information prepared by an independent consulting firm regarding the Manager’s approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex. The Board members also had been informed that the methodology also had been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable. The consulting firm also analyzed where any economies of scale might emerge in connection with the management of a fund. The Board members evaluated the profitability analysis in light of the re levant circumstances for the fund, and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders.The Board members also considered potential benefits to the Manager and its affiliates from acting as investment adviser to the fund and noted that there were no soft dollar arrangements with respect to trading the fund’s portfolio.
22
It was noted that the Board members should consider the Manager’s profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if a fund’s assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It was also noted that the profitability percentage for managing the fund was within the range determined by appropriate court cases to be reasonable given the services rendered and generally superior service levels provided by the Manager.The Board also noted the fund’s expense limitation over the past year and its effect on the profitability of the Manager.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund’s Management Agreement. Based on the discussions and considerations as described above, the Board made the following conclusions and determinations.
- The Board concluded that the nature, extent and quality of the services provided by the Manager to the fund are adequate and appropriate.
- The Board was generally satisfied with the fund’s overall performance.
- The Board concluded that the fee paid to the Manager by the fund was reasonable in light of the services provided, comparative per- formance and expense and management fee information, including the extension of the Manager’s undertaking to waive or reimburse certain fees and expenses of the fund, costs of the services provided, and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.
The Fund 23
| INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE |
| FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued) |
- The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the management of the fund had been adequately considered by the Manager in con- nection with the management fee rate charged to the fund, and that, to the extent in the future it were to be determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
The Board members considered these conclusions and determinations, along with the information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund’s Management Agreement was in the best interests of the fund and its shareholders.
24
| Item 2. | Code of Ethics. |
| Not applicable. | |
| Item 3. | Audit Committee Financial Expert. |
| Not applicable. | |
| Item 4. | Principal Accountant Fees and Services. |
| Not applicable. | |
| Item 5. | Audit Committee of Listed Registrants. |
| Not applicable. | |
| Item 6. | Investments. |
| (a) | Not applicable. |
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management |
| Investment Companies. | |
| Not applicable. | |
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
| Not applicable. | |
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Companies and |
| Affiliated Purchasers. | |
| Not applicable. [CLOSED END FUNDS ONLY] | |
| Item 10. | Submission of Matters to a Vote of Security Holders. |
| There have been no material changes to the procedures applicable to Item 10. | |
| Item 11. | Controls and Procedures. |
(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes to the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
3
| Item 12. | Exhibits. |
(a)(1) Not applicable.
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.
(a)(3) Not applicable.
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.
4
| SIGNATURES |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dreyfus BASIC U.S. Government Money Market Fund
| By: | /s/ J. David Officer |
| J. David Officer, | |
| President | |
| Date: | October 28, 2009 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| By: | /s/ J. David Officer |
| J. David Officer, | |
| President | |
| Date: | October 28, 2009 |
| By: | /s/ James Windels |
| James Windels, | |
| Treasurer | |
| Date: | October 28, 2009 |
5
| EXHIBIT INDEX |
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940. (EX-99.CERT)
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940. (EX-99.906CERT)
6