We are pleased to present this semiannual report for Dreyfus Liquid Assets, Inc., covering the six-month period from January 1, 2019 through June 30, 2019. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
U.S. equity markets experienced a rally during the first several months of 2019, which was a welcome reprieve after the volatility observed in the fourth quarter of 2018. The recovery was stoked by comments made by the U.S. Federal Reserve (the “Fed”), indicating its willingness to slow the pace of interest-rate increases. Supportive central bank policy, a robust labor market, strong corporate fundamentals, and optimism regarding a possible resolution of the U.S.-China trade dispute buoyed the markets for much of the reporting period. However, in May, escalating trade tensions once again disrupted equity market progress, causing stock prices to pull back. The dip was short-lived, as markets rose once again in June. To end the period, the S&P 500 Index posted its best return for the first half of the year since 1997.
Fixed-income markets also benefited during the six months. Supportive policies from the Fed, as well as other global central banks, coupled with falling rates throughout the first half of the year, led to strong bond market returns. During its May meeting, the Fed reiterated its patient stance regarding future rate hikes and its willingness to take action to support economic growth rates.
We remain positive on the near-term economic outlook for the U.S. but will monitor relevant data for any signs of a change. As always, we encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from January 1, 2019 through June 30, 2019, as provided by Patricia A. Larkin, Senior Portfolio Manager
Market and Fund Performance Overview
For the six-month period ended June 30, 2019, Dreyfus Liquid Assets, Inc.’s Class 1 shares produced an annualized yield of 1.87%, Class 2 shares yielded 2.12%, and Class Z shares yielded 1.82%. Taking into account the effects of compounding, the fund’s Class 1, Class 2, and Class Z shares provided annualized effective yields of 1.88%, 2.14%, and 1.83%, respectively, for the same period.1
Yields of money market instruments climbed over the reporting period, amid sustained economic growth and a dovish shift in interest-rate policy by the Federal Reserve Board (the “Fed”).
The Fund’s Investment Approach
The fund seeks as high a level of current income as is consistent with the preservation of capital. To pursue its goal, the fund invests in a diversified portfolio of high-quality, short-term, dollar-denominated debt securities, including: securities issued or guaranteed as to principal and interest by the U.S. government or its agencies or instrumentalities; certificates of deposit, time deposits, bankers’ acceptances and other short-term securities issued by domestic or foreign banks or thrifts or their subsidiaries or branches; repurchase agreements, including tri-party repurchase agreements; asset-backed securities; municipal securities; domestic and dollar-denominated foreign commercial paper and other short-term corporate obligations, including those with floating or variable rates of interest; and dollar-denominated obligations issued or guaranteed by one or more foreign governments or any of their political subdivisions or agencies.
Normally, the fund invests at least 25% of its assets in domestic or dollar-denominated foreign bank obligations.
The fund is a money market fund subject to the maturity, quality, liquidity, and diversification requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended, and seeks to maintain a stable share price of $1.00.
Fed Puts Rate Hikes on Pause; Economic Growth Remains Steady
The reporting period began amid a dovish shift in the Fed’s stance on interest-rate hikes and investor concerns about wavering economic growth. The Fed last raised short-term interest rates in December, prior to shifting to its more accommodative stance. That rate hike brought the federal funds target range to 2.25%-2.50%.
In January, the unemployment rate rose to 4.0%, and the economy generated 312,000 new jobs, while the core PCE Price Index fell to 1.8% from 2.0% in December. In addition, the Fed indicated that it would pause its interest-rate-hike plans, making future hikes more data-dependent.
In February, unemployment fell to 3.8%, and job creation fell to just 56,000. The unemployment rate remained unchanged in March, while new jobs rebounded to 153,000,
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DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
and the PCE Price Index fell further to 1.5%. GDP for the fourth quarter of 2018 came in at 2.2%, while GDP for the year rose 2.9%.
Also in March, the yield curve inverted, with the yield on the 10-year Treasury note falling below that of the three-month Treasury bill. An inverted yield curve is widely believed to be an indicator of recession, though the economic downturn typically is not imminent and may not arrive for a year or longer.
April experienced a further drop in unemployment to 3.6%, while job creation improved to 216,000. The third estimate for first-quarter 2019 GDP showed that the economy grew at a rate of 3.1%. In May, the unemployment rate held steady at 3.6%, but job creation slumped to just an estimated 72,000. In June, the unemployment rate edged up to 3.7%, and job creation rebounded, with new jobs totaling an estimated 224,000.
Interest-Rate Cut Anticipated
Fed officials indicated early in the reporting period that further interest-rate increases would be “data-dependent.” Investors, however, began to expect a reduction in the federal funds rate, though perhaps not until the September 2019 meeting. Although the Fed has continued to tighten monetary conditions by further reducing its balance sheet through the sale of U.S. government securities, it also indicated that this program would end in September 2019.
In this interest-rate environment, we have maintained the fund’s weighted-average maturity in a range that is in line with industry averages. As always, we have retained our longstanding focus on quality and liquidity.
July 15, 2019
1 Annualized effective yield is based upon dividends declared daily and reinvested monthly. Past performance is no guarantee of future results. Yields fluctuate. Yields provided for the fund reflect the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an undertaking in effect that may be extended, terminated, or modified at any time. Had these expenses not been absorbed, fund yields would have been lower, and in some cases, seven-day yields during the reporting period would have been negative absent the expense absorption.
You could lose money by investing in a money market fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. The fund may impose a fee upon the sale of your shares or may temporarily suspend your ability to sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.
Short-term corporate and asset-backed securities holdings, while rated in the highest rating category by one or more nationally recognized, statistical rating organizations (or unrated, if deemed of comparable quality by BNY Mellon Investment Adviser, Inc.), involve credit and liquidity risks and risk of principal loss.
The personal consumption expenditures (PCE) Price Index reflects changes in the prices of goods and services purchased by consumers in the United States. It is known for capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior.
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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 Liquid Assets, Inc. from January 1, 2019 to June 30, 2019. 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 June 30, 2019 |
| | | Class 1 | Class 2 | Class Z |
Expenses paid per $1,000† | | $3.69 | | $2.39 | | $3.94 |
Ending value (after expenses) | | $1,009.30 | | $1,010.60 | | $1,009.00 |
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 June 30, 2019 |
| | | Class 1 | Class 2 | Class Z |
Expenses paid per $1,000† | | $3.71 | | $2.41 | | $3.96 |
Ending value (after expenses) | | $1,021.12 | | $1,022.41 | | $1,020.88 |
† Expenses are equal to the fund’s annualized expense ratio of .74% for Class 1, .48% for Class 2 and .79% for Class Z, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
June 30, 2019 (Unaudited)
| | | | | | | | | |
| |
Description | Annualized
Yield (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Commercial Paper - 33.3% | | | | | |
Antalis | 2.62 | | 7/11/19 | | 10,000,000 | a,b | 9,992,833 | |
Bedford Row Funding, 3 Month LIBOR +.07% | 2.66 | | 7/3/19 | | 10,000,000 | a,c | 10,000,000 | |
Collateralized Commercial Paper, 3 Month LIBOR +.05% | 2.61 | | 8/8/19 | | 6,000,000 | c | 6,000,000 | |
HSBC Bank, 1 Month LIBOR +.13% | 2.53 | | 7/29/19 | | 25,000,000 | a,c | 25,000,000 | |
JP Morgan Securities, 3 Month LIBOR +.15% | 2.74 | | 7/1/19 | | 20,000,000 | a,c | 20,000,000 | |
Lloyds Bank, 3 Month LIBOR +.02% | 2.54 | | 8/29/19 | | 25,000,000 | c | 25,000,000 | |
Matchpoint Finance | 2.65 | | 8/19/19 | | 21,000,000 | a,b | 20,925,683 | |
Mitsubishi UFJ Trust and Banking/NY | 2.48 | | 7/30/19 | | 25,000,000 | a,b | 24,950,861 | |
Swedbank | 2.62 | | 11/21/19 | | 25,000,000 | b | 24,745,778 | |
Toronto-Dominion Bank, 3 Month LIBOR +.10% | 2.55 | | 9/11/19 | | 10,000,000 | a,c | 10,000,000 | |
TotalCommercial Paper
(cost $176,615,155) | | 176,615,155 | |
Negotiable Bank Certificates of Deposit - 28.3% | | | | | |
Bank of Nova Scotia, 3 Month LIBOR +.03% | 2.60 | | 8/7/19 | | 2,000,000 | c | 2,000,000 | |
Bank of Nova Scotia, 1 Month LIBOR +.31% | 2.72 | | 7/12/19 | | 25,000,000 | c | 25,000,000 | |
Canadian Imperial Bank of Commerce/NY, 3 Month LIBOR +.17% | 2.57 | | 9/18/19 | | 6,000,000 | c | 6,005,605 | |
Credit Suisse AG/NY, SOFR+.24% | 2.66 | | 7/2/19 | | 25,000,000 | c | 25,000,000 | |
Mizuho Bank | 2.58 | | 7/3/19 | | 25,000,000 | | 25,000,000 | |
Norinchukin Bank | 2.57 | | 7/3/19 | | 25,000,000 | | 25,000,000 | |
Oversea Chinese Banking/NY | 2.58 | | 10/2/19 | | 2,000,000 | a | 2,000,000 | |
Skandinaviska Enskilda Banken AB/NY, 1 Month LIBOR+.11% | 2.51 | | 7/26/19 | | 15,000,000 | c | 15,000,000 | |
Wells Fargo Bank, 3 Month LIBOR +.06% | 2.58 | | 8/22/19 | | 25,000,000 | c | 25,000,000 | |
TotalNegotiable Bank Certificates of Deposit
(cost $150,005,605) | | 150,005,605 | |
Time Deposits - 12.4% | | | | | |
Australia & New Zealand Banking Group Ltd (Cayman) | 2.39 | | 7/1/19 | | 26,000,000 | | 26,000,000 | |
DNB Bank ASA (Cayman) | 2.32 | | 7/1/19 | | 25,000,000 | | 25,000,000 | |
Northern Trust Company (Cayman) | 2.20 | | 7/1/19 | | 15,000,000 | | 15,000,000 | |
TotalTime Deposits
(cost $66,000,000) | | 66,000,000 | |
6
| | | | | | | | | |
| |
Description | Annualized
Yield (%) | | Maturity
Date | | Principal
Amount ($) | | Value ($) | |
Repurchase Agreements - 25.5% | | | | | |
Bank of Nova Scotia/NY, Tri-Party Agreement thru BNY Mellon, dated 6/28/19, due at maturity date in the amount of $35,007,146 (fully collateralized by $33,826,357 U.S. Treasuries (including strips), 0%-7.25%, due 6/30/19-11/15/48, value $35,706,652) | 2.45 | | 7/1/19 | | 35,000,000 | | 35,000,000 | |
Barclays Bank, Tri-Party Agreement thru BNY Mellon, dated 6/28/19, due at maturity date in the amount of $100,020,417 (fully collateralized by $86,131,900 U.S. Treasuries (including strips), 0.13%-3.38%, due 7/15/20-2/15/48, value $102,000,433) | 2.45 | | 7/1/19 | | 100,000,000 | | 100,000,000 | |
TotalRepurchase Agreements
(cost $135,000,000) | | 135,000,000 | |
Total Investments(cost $527,620,760) | | 99.5% | 527,620,760 | |
Cash and Receivables (Net) | | .5% | 2,726,088 | |
Net Assets | | 100.0% | 530,346,848 | |
LIBOR—London Interbank Offered Rate
SOFR—Secured Overnight Financing Rate
a Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2019, these securities amounted to $122,869,377 or 23.17% of net assets.
b Security is a discount security. Income is recognized through the accretion of discount.
c Variable rate security—rate shown is the interest rate in effect at period end. Date shown represents the earlier of the next interest reset date or ultimate maturity date.
| | |
Portfolio Summary (Unaudited)† | Value (%) |
Banks | 74.0 |
Repurchase Agreements | 25.5 |
| | 99.5 |
† Based on net assets.
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2019 (Unaudited)
| | | | | | | |
| | | | | | |
| | | Cost | | Value | |
Assets ($): | | | | |
Investments in securities—See Statement of Investments
(including repurchase agreements of $135,000,000)
—Note 1(b) | 527,620,760 | | 527,620,760 | |
Cash | | | | | 1,959,599 | |
Interest receivable | | 908,065 | |
Receivable for shares of Common Stock subscribed | | 412,143 | |
Prepaid expenses | | | | | 36,298 | |
| | | | | 530,936,865 | |
Liabilities ($): | | | | |
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 2(b) | | 367,016 | |
Payable for shares of Common Stock redeemed | | 150,913 | |
Directors fees and expenses payable | | 508 | |
Accrued expenses | | | | | 71,580 | |
| | | | | 590,017 | |
Net Assets ($) | | | 530,346,848 | |
Composition of Net Assets ($): | | | | |
Paid-in capital | | | | | 530,346,598 | |
Total distributable earnings (loss) | | | | | 250 | |
Net Assets ($) | | | 530,346,848 | |
| | | | | |
Net Asset Value Per Share | Class 1 | Class 2 | Class Z | |
Net Assets ($) | 390,861,225 | 26,371,963 | 113,113,660 | |
Shares Outstanding | 391,221,020 | 26,395,846 | 113,105,267 | |
Net Asset Value Per Share ($) | 1.00 | 1.00 | 1.00 | |
| | | | |
See notes to financial statements. | | | | |
8
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2019 (Unaudited)
| | | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
Investment Income ($): | | | | |
Interest Income | | | 6,994,865 | |
Expenses: | | | | |
Management fee—Note 2(a) | | | 1,342,976 | |
Shareholder servicing costs—Note 2(b) | | | 995,276 | |
Professional fees | | | 46,711 | |
Registration fees | | | 35,285 | |
Prospectus and shareholders’ reports | | | 19,798 | |
Directors’ fees and expenses—Note 2(c) | | | 18,207 | |
Custodian fees—Note 2(b) | | | 16,101 | |
Miscellaneous | | | 11,017 | |
Total Expenses | | | 2,485,371 | |
Less—reduction in expenses due to undertaking—Note 2(a) | | | (508,315) | |
Less—reduction in fees due to earnings credits—Note 2(b) | | | (2,224) | |
Net Expenses | | | 1,974,832 | |
Investment Income—Net, representing net increase in
net assets resulting from operations | | | 5,020,033 | |
| | | | | | |
See notes to financial statements. | | | | | |
9
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | | | |
| | | | | | | | | |
| | | | Six Months Ended
June 30, 2019 (Unaudited) | | Year Ended
December 31, 2018 | |
Operations ($): | | | | | | | | |
Investment income—net | | | 5,020,033 | | | | 7,128,395 | |
Net realized gain (loss) on investments | | - | | | | 250 | |
Net Increase (Decrease) in Net Assets
Resulting from Operations | 5,020,033 | | | | 7,128,645 | |
Distributions ($): | |
Distributions to shareholders: | | | | | | | | |
Class 1 | | | (3,678,780) | | | | (5,233,243) | |
Class 2 | | | (282,640) | | | | (445,472) | |
Class Z | | | (1,058,613) | | | | (1,450,024) | |
Total Distributions | | | (5,020,033) | | | | (7,128,739) | |
Capital Stock Transactions ($1.00 per share): | |
Net proceeds from shares sold: | | | | | | | | |
Class 1 | | | 61,511,512 | | | | 139,713,568 | |
Class 2 | | | 12,527,102 | | | | 35,810,822 | |
Class Z | | | 13,550,091 | | | | 29,794,403 | |
Distributions reinvested: | | | | | | | | |
Class 1 | | | 3,607,094 | | | | 5,128,954 | |
Class 2 | | | 278,408 | | | | 438,052 | |
Class Z | | | 1,036,946 | | | | 1,422,374 | |
Cost of shares redeemed: | | | | | | | | |
Class 1 | | | (83,469,296) | | | | (172,079,510) | |
Class 2 | | | (14,131,335) | | | | (34,984,597) | |
Class Z | | | (21,869,669) | | | | (41,030,190) | |
Increase (Decrease) in Net Assets
from Capital Stock Transactions | (26,959,147) | | | | (35,786,124) | |
Total Increase (Decrease) in Net Assets | (26,959,147) | | | | (35,786,218) | |
Net Assets ($): | |
Beginning of Period | | | 557,305,995 | | | | 593,092,213 | |
End of Period | | | 530,346,848 | | | | 557,305,995 | |
| | | | | | | | | |
See notes to financial statements. | | | | | | | | |
10
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information reflects financial results for a single fund share. 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
June 30, 2019 | Year Ended December 31, |
Class 1 Shares | (Unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
Investment Operations: | | | | | | |
Investment income—net | .009 | .013 | .003 | .000a | .000a | .000a |
Distributions: | | | | | | |
Dividends from
investment income—net | (.009) | (.013) | (.003) | (.000)a | (.000)a | (.000)a |
Net asset value, end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
Total Return (%) | .93b | 1.27 | .31 | .02 | .00c | .00c |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses
to average net assets | .93d | .92 | .92 | .90 | .90 | .91 |
Ratio of net expenses
to average net assets | .74d | .83 | .91 | .61 | .22 | .15 |
Ratio of net investment income
to average net assets | 1.87d | 1.26 | .31 | .01 | .00c | .00c |
Net Assets, end of period ($ x 1,000) | 390,861 | 409,212 | 436,447 | 484,531 | 547,380 | 594,393 |
a Amount represents less than $.001 per share.
b Not annualized.
c Amount represents less than .01%.
d Not annualized.
See notes to financial statements.
11
FINANCIAL HIGHLIGHTS (continued)
| | | | | | | | |
| | |
Six Months Ended
June 30, 2019 | Year Ended December 31, |
Class 2 Shares | (Unaudited) | 2018 | 2017 | 2016 | 2015 | 2014 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
Investment Operations: | | | | | | |
Investment income—net | .011 | .016 | .006 | .001 | .000a | .000a |
Distributions: | | | | | | |
Dividends from
investment income—net | (.011) | (.016) | (.006) | (.001) | (.000)a | (.000)a |
Net asset value, end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
Total Return (%) | 1.06b | 1.59 | .61 | .09 | .01 | .00c |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses
to average net assets | .61d | .59 | .61 | .60 | .58 | .58 |
Ratio of net expenses
to average net assets | .48d | .50 | .60 | .55 | .20 | .16 |
Ratio of net investment income
to average net assets | 2.13d | 1.58 | .58 | .05 | .01 | .00c |
Net Assets, end of period ($ x 1,000) | 26,372 | 27,698 | 26,435 | 48,107 | 187,062 | 193,655 |
a Amount represents less than $.001 per share.
b Not annualized.
c Amount represents less than .01%.
d Not annualized.
See notes to financial statements.
12
| | | | | | | |
| | | | | |
| | | Six Months Ended
June 30, 2019 | Year Ended December 31, |
Class Z Shares | | (Unaudited) | 2018 | 2017 | 2016 | 2015a |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
Investment Operations: | | | | | | |
Investment income—net | | .009 | .012 | .002 | .000b | .000b |
Distributions: | | | | | | |
Dividends from
investment income—netb | | (.009) | (.012) | (.002) | (.000)b | (.000)b |
Net asset value, end of period | | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 |
Total Return (%) | | .90c | 1.19 | .22 | .01 | .00c,d |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses
to average net assets | | 1.00e | 1.00 | 1.01 | .99 | 1.03e |
Ratio of net expenses
to average net assets | | .79e | .91 | 1.00 | .60 | .32e |
Ratio of net investment income
to average net assets | | 1.82e | 1.17 | .21 | .01 | .00d,e |
Net Assets, end of period ($ x 1,000) | | 113,114 | 120,396 | 130,210 | 143,809 | 181,574 |
a From September 18, 2015 (commencement of initial offering) to December 31, 2015.
b Amount represents less than $.001 per share.
c Not annualized.
d Amount represents less than .01%.
e Annualized.
See notes to financial statements.
13
NOTES TO FINANCIAL STATEMENTS(Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus Liquid Assets, Inc. (the “fund”) is registered under the Investment Company Act of 1940, as amended (the “Act”), is a diversified open-end management investment company. The fund’s investment objective is to seek as high a level of current income as is consistent with the preservation of capital. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
Effective June 3, 2019, The Dreyfus Corporation, the fund’s investment adviser and administrator, changed its name to “BNY Mellon Investment Adviser, Inc.”, MBSC Securities Corporation, the fund’s distributor, changed its name to “BNY Mellon Securities Corporation” and Dreyfus Transfer, Inc., the fund’s transfer agent, changed its name to “BNY Mellon Transfer, Inc.”
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares, which are sold to the public without a sales charge. The fund is authorized to issue 30 billion shares of $.001 par value Common Stock. The fund currently has authorized three classes of shares: Class 1 (21 billion shares authorized), Class 2 (6.5 billion shares authorized) and Class Z (2.5 billion shares authorized). Each class of shares are identical except for the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Class 2 shares are offered only to certain eligible financial institutions. Class Z shares generally are not available for new accounts. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The fund operates as a “retail money market fund” as that term is defined in Rule 2a-7 under the Act (a “Retail Fund”). It is the fund’s policy to maintain a constant net asset value (“NAV”) per share of $1.00, and 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 constant NAV per share of $1.00. As a Retail Fund, the fund may, or in certain circumstances, must impose a fee upon the sale of shares or may temporarily suspend redemptions if the fund’s weekly liquid assets fall below required minimums because of market conditions or other factors.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification is the exclusive reference of authoritative U.S.
14
generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The fundenters 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 under the Act. If amortized cost is determined not to approximate market value, the fair value of the portfolio securities will be determined by procedures established by and under the general oversight of the Board.
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted 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).
15
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
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 within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of June 30, 2019in valuing the fund’s investments:
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Valuation Inputs | Short-Term Investments ($)† |
Level 1 - Unadjusted Quoted Prices | - |
Level 2 - Other Significant Observable Inputs | 527,620,760 |
Level 3 - Significant Unobservable Inputs | - |
Total | 527,620,760 |
† See Statement of Investments for additional detailed categorizations.
(b) Securities transactions and investment income:Securities transactions are recorded on a trade date basis. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and is recognized on the accrual basis. Realized gains and losses 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 Adviser, subject to the seller’s agreement to repurchase and the fund’s agreement to resell such securities at a mutually agreed upon price. Pursuant to the terms of the repurchase agreement, such securities must have an aggregate market value greater than or equal to the terms of 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 its right to sell the underlying securities at market value and may claim any resulting loss against the seller. The collateral is held on behalf of the fund by the tri-party administrator with respect to any tri-party agreement. The fund may also jointly enter into one or more repurchase agreements with other funds managed by the Adviser in accordance with an exemptive order granted by the SEC pursuant to section 17(d) and Rule 17d-1 under the Act. Any joint repurchase agreements must be collateralized fully by U.S. Government securities.
(c) Dividends and distributions to shareholders:It is the policy of the fund to declare dividends daily from investment income-net. Such
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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 provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended June 30, 2019, 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 ended June 30, 2019, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended December 31, 2018 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2018 was all ordinary income. The tax character of current year distributions will be determined at the end of the current fiscal year.
At June 30, 2019, 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) New Accounting Pronouncements: Effective June 1, 2019, the fund adopted Accounting Standards Update 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization On Purchased Callable Debt Securities (“ASU 2017-08”). The update shortens the amortization period for the premium on certain purchased callable debt securities to the earliest call date.
Also effective June 1, 2019, the fund adopted Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The update provides guidance that modifies certain disclosure requirements for fair value measurements.
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NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
NOTE 2—Management Fee and Other Transactions with Affiliates:
(a)Pursuant to a management agreement (the “Agreement”) with the Adviser, the management fee is based on the value of the fund’s average daily net assets and is computed at the following annual rates: .50% of the first $1.5 billion; .48% of the next $500 million; .47% of the next $500 million; and .45% over $2.5 billion. The fee is payable monthly. The effective management fee rate during the period ended December 31, 2018 was .41%. The Agreement provides that if in any full fiscal year the aggregate expenses, excluding taxes, brokerage fees and extraordinary expenses exceed 1% of the value of the fund’s average daily net assets, the Adviser will reimburse the fund, or bear the excess expense over 1%. During the period ended June 30, 2019, there were no reimbursements, pursuant to the Agreement.
The Adviser had contractually agreed, from January 1, 2019 through May 1, 2019, to waive receipt of a portion of its management fees in the amount of .13% of the value of the fund’s average daily net assets. On May 1, 2019, the Adviser had terminated this waiver agreement.
The Adviser has contractually agreed, from May 2, 2019 through May 1, 2020, to waive receipt of its fees and/or assume the expenses of the fund’s Class 1 and Class Z shares so that the direct expenses of the Class 1 and Class Z shares (excluding taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed .64% for Class 1 and .68% for Class Z shares of the value of the respective class' average daily net assets. On or after May 1, 2020, the Adviser may terminate this expense limitation at any time.
Effective May 2, 2019, The Adviser has also agreed to waive receipt of its fees and/or assume the expenses of the fund’s Class 2 shares, so that the total annual fund operating expenses of the Class 2 shares (excluding taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed .50% of the value of the of the Class 2 shares average daily net assets. These expense limitations and waivers are voluntary, not contractual, and may be terminated by the Adviser at any time. The reduction in expenses, pursuant to the undertakings, amounted to $508,315 during the period ended June 30, 2019.
(b)Under the Shareholder Services Plan, Class 1 and Class Z shares reimburse the Distributor at an amount not to exceed at an annual rate of .25% of their average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder
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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 June 30, 2019,Class 1 and Class Z shares were charged $440,014 and $137,742, respectively, pursuant to the Shareholder Services Plan.
The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. The fund had an arrangement with the custodian to receive earnings credits when positive cash balances were maintained, which were used to offset custody fees. Effective February 1, 2019, the arrangement with the custodian changed whereby the fund will no longer receive earnings credits to offset its custody fees and will receive interest income or overdraft fees going forward. For financial reporting purposes, the fund includes net earnings credits, if any, as an expense offset in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended June 30, 2019, the fund was charged $344,155 for transfer agency services. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended June 30, 2019, the fund was charged $16,101 pursuant to the custody agreement. These fees were partially offset by earnings credits of $2,185.
The fund compensates The Bank of New York Mellon under a shareholder redemption draft processing agreement for providing certain services related to the fund’s check writing privilege. During the period ended June 30, 2019, the fund was charged $17,081 pursuant to the agreement, which is included in Shareholder servicing costs in the Statement of Operations. These fees were partially offset by earnings credits of $39.
During the period ended June 30, 2019, the fund was charged $4,090 for services performed by the Chief Compliance Officer and his staff. These fees are included in Miscellaneous in the Statement of Operations.
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NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: management fees $218,237, shareholder services plan fees $96,848, custodian fees $14,000, Chief Compliance Officer fees $2,347 and transfer agency fees $171,990, which are offset against an expense reimbursement currently in effect in an amount of $136,406.
(c) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Directors held on May 1, 2019, the Board considered the renewal of the fund’s Management Agreement pursuant to which the Adviser provides the fund with investment advisory and administrative services (the “Agreement”). The Board members, a majority of whom are not “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 Adviser. In considering the renewal of the Agreement, the Board considered all factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended March 31, 2019, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds. The Board discussed with representatives of the Adviser and/or its affiliates the results of the comparisons and considered that the fund’s gross total return performance (without including fees and expenses) was at or above the Performance Group and Performance Universe medians for all periods except for the ten-year period when it was three and four basis points below the Performance Group and Performance Universe medians, respectively. The Board also considered that the fund’s net total return performance (including fees and expenses) was below the Performance Group and Performance Universe medians for all periods.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was above the Expense Group median and the fund’s actual management fee and total expenses were above the Expense Group and the Expense Universe medians.
Representatives of the Adviser stated that the Adviser had contractually agreed to waive receipt of a portion of its management fees in the amount of .13% of the value of the fund’s average daily net assets from May 2, 2018 through May 1, 2019. In addition, the Adviser has contractually agreed, until May 1, 2020, to waive receipt of its fees and/or assume the direct expenses attributable to Class 1 and Class Z shares so that the direct expenses of such classes (excluding taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed .64% and .68% of Class 1 shares and Class Z shares, respectively, of such class’ average daily net assets.
Representatives of the Adviser stated that the Adviser also has agreed to waive receipt of its fees and/or assume the expenses of the fund’s Class 2 shares, so that the total annual fund operating expenses of the Class 2 shares (excluding taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed 0.50%. This expense limitation and waiver is voluntary, not contractual, and may be terminated by the Adviser at any time.
Representatives of the Adviser reviewed with the Board the management or investment advisory fees paid by funds advised or administered by the Adviser that are in the same Lipper category as the fund (the “Similar Funds”), and explained the nature of the Similar Funds. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Funds to evaluate the appropriateness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit.
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The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by the Adviser. The Board also considered the fee waiver and expense reimbursement arrangements and their effect on the profitability of the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement, considered in relation to the mix of services provided by the Adviser, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant 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. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser from acting as investment adviser and took into consideration that there were no soft dollar arrangements in effect for trading the fund’s investments.
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 the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by the Adviser are adequate and appropriate.
· The Board was satisfied with the fund’s gross performance.
· The Board concluded that the fee paid to the Adviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
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.
In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates, of the Adviser and the services provided to the fund by the Adviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreement, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance measures; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of the Agreement for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreement.
24
NOTES
25
Dreyfus Liquid Assets, Inc.
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
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Ticker Symbols: | Class 1: DLAXX Class 2: DLBXX Class Z: DLZXX |
Telephone Call your representative or 1-800-373-9387
Mail BNY Mellon Family of Funds to: BNY Mellon Institutional Services, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request toinstserv@bnymellon.com
Internet Access Dreyfus Money Market Funds atwww.dreyfus.com
The fund will disclose daily, onwww.dreyfus.com, the fund’s complete schedule of holdings as of the end of the previous business day. The schedule of holdings will remain on the website for a period of five months. The fund files a monthly schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) on Form N-MFP. The fund’s Forms N-MFP are available on the SEC’s website atwww.sec.gov.
Information regarding how the fund voted proxies related to portfolio securities for the most recent 12-month period ended June 30 is available atwww.dreyfus.com and on the SEC’s website atwww.sec.gov and without charge, upon request, by calling 1-800-373-9387.
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© 2019 BNY Mellon Securities Corporation
0039SA0619 
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June 30, 2019