NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus Cash Management, Dreyfus Government Cash Management, Dreyfus Government Securities Cash Management, Dreyfus Treasury & Agency Cash Management, Dreyfus Treasury Securities Cash Management, Dreyfus Municipal Cash Management Plus, Dreyfus New York Municipal Cash Management, Dreyfus Tax Exempt Cash Management and Dreyfus California AMT-Free Municipal Cash Management (each, a “fund” and collectively, the “funds”) are open-end management investment companies registered under the Investment Company Act of 1940, as amended (the “Act”). Dreyfus Cash Management, Dreyfus Government Cash Management, Dreyfus Government Securities Cash Management, Dreyfus Treasury & Agency Cash Management, Dreyfus Treasury Securities Cash Management, Dreyfus Municipal Cash Management Plus and Dreyfus Tax Exempt Cash Management are diversified funds. Dreyfus New York Municipal Cash Management and Dreyfus California AMT-Free Municipal Cash Management are non-diversified. Dreyfus Government Cash Management and Dreyfus Government Securities Cash Management are each a separate series of Dreyfus Government Cash Management Funds (the “Company”) and Dreyfus Tax Exempt Cash Management and Dreyfus California AMT-Free Municipal Cash Management are separate series of Dreyfus Tax Exempt Cash Management Funds (the “Trust”).
Each 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. Dreyfus Municipal Cash Management Plus and Dreyfus Tax Exempt Cash Management are exempt from federal income tax; Dreyfus New York Municipal Cash Management is exempt from federal, New York state and New York city personal income taxes and Dreyfus California AMT-Free Municipal Cash Management is exempt from federal and California state personal income taxes. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as each fund’s investment adviser.
The funds’ Boards of Trustees (the “Board”) approved, effective April 15, 2016, a proposal to change the names of “Dreyfus Government Prime Cash Management” and “Dreyfus Treasury Prime Cash Management” to “Dreyfus Government Securities Cash Management” and “Dreyfus Treasury Securities Cash Management”, respectively.
The Board approved, effective March 1, 2016, the termination of Dreyfus Treasury & Agency Cash Management’s Service Shares and Select Shares. The Board also approved, effective April 29, 2016, the termination of Dreyfus California AMT-Free Municipal Cash Management’s Administrative Shares.
As of the close of business on June 19, 2015, pursuant to an Agreement and Plan of Reorganization previously approved by the Board, all of the assets, subject to the liabilities, of Touchstone Institutional Money Market Fund were transferred to Dreyfus Cash Management in exchange for shares of Beneficial Interest of equal value. The purpose of the transaction was to combine two funds with comparable investment objectives and strategies. Shareholders of Touchstone Institutional Money Market Fund received Dreyfus Cash Management Institutional Shares in an amount equal to the aggregate net asset value of their investment in Touchstone Institutional Money Market Fund at the time of the exchange. The net asset value of Dreyfus Cash Management’s shares on the close of business on June 19, 2015, after the reorganization was $1.00, and a total of 518,912,697 shares were issued to shareholders of Touchstone Institutional Money Market Fund in the exchange.
As of the close of business on September 4, 2015, pursuant to an Agreement and Plan of Reorganization previously approved by the Board, all of the assets, subject to the liabilities, of Dreyfus New York AMT-Free Municipal Cash Management were transferred to Dreyfus New York Municipal Cash Management in exchange for shares of Beneficial Interest of equal value. The purpose of the transaction was to combine two funds with comparable investment objectives and strategies. Shareholders of Dreyfus New York AMT-Free Municipal Cash Management’s Institutional, Investor, Administrative and Classic Shares received Dreyfus New York Municipal Cash Management’s Institutional, Investor, Administrative and Participant Shares, respectively, in an amount equal to the aggregate net asset value of their investment in Dreyfus New York AMT-Free Municipal Cash Management at the time of the exchange. The net asset value of Dreyfus New York Municipal Cash Management’s shares on the close of business on September 4, 2015, after the reorganization was $1.00, and a total of 20,719,739 Institutional, 18,378,257 Investor, 0 Administrative and 23,612 Participant Shares were issued to shareholders of Dreyfus New York AMT-Free Municipal Cash Management in the exchange.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of each fund’s shares, which are sold to the public without a sales charge. Each fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest. Each fund offers
61
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Institutional Shares, Investor Shares, Administrative Shares, Participant Shares and Agency Shares with the exception of Dreyfus Municipal Cash Management Plus, Dreyfus New York Municipal Cash Management, Dreyfus Tax Exempt Cash Management and Dreyfus California AMT-Free Municipal Cash Management which do not offer Agency Shares. Dreyfus California AMT-Free Municipal Cash Management does not offer Administrative Shares. In addition, Dreyfus Treasury & Agency Cash Management offers Premier Shares. Each share class, except Institutional Shares, is subject to a Service Plan adopted pursuant to Rule 12b-1 under the Act. Other differences between the classes include the services offered (by Service Agents receiving Rule 12b-1 fees) to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. 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.
It is each fund’s policy to maintain a continuous net asset value per share of $1.00; the funds have adopted certain investment, portfolio valuation and dividend and distribution policies to enable it to do so. There is no assurance, however, that the funds will be able to maintain a stable net asset value per share of $1.00.
The Company and the Trust account separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. 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 Company and the Trust enter into contracts that contain a variety of indemnifications. The funds’ maximum exposure under these arrangements is unknown. The funds do 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 supervision 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 each 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 funds’ 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 within Level 2 of the fair value hierarchy.
At July 31, 2016, all of the securities in each fund were considered Level 2 of the fair value hierarchy.
At July 31, 2016, there were no transfers between levels of the fair value hierarchy.
(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.
62
Realized gains and losses from securities transactions are recorded on the identified cost basis. Cost of investments represents amortized cost.
Dreyfus New York Municipal Cash Management and Dreyfus California AMT-Free Municipal Cash Management each follow an investment policy of investing primarily in municipal obligations of one state. Economic changes affecting the state and certain of its public bodies and municipalities may affect the ability of issuers within the state to pay interest on, or repay principal of, municipal obligations held by the funds.
Dreyfus Cash Management, Dreyfus Government Cash Management and Dreyfus Treasury & Agency Cash Management may enter into repurchase agreements with financial institutions, deemed to be creditworthy by Dreyfus, subject to the seller’s agreement to repurchase and each 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, each 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, each fund maintains its right to sell the underlying securities at market value and may claim any resulting loss against the seller. Each fund may also jointly enter into one or more repurchase agreements with other Dreyfus-managed funds 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 to shareholders: It is the policy of each 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 each 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 each fund not to distribute such gains.
(d) Federal income taxes: It is the policy of Dreyfus Cash Management, Dreyfus Government Cash Management, Dreyfus Government Securities Cash Management, Dreyfus Treasury & Agency Cash Management and Dreyfus Treasury Securities Cash Management to continue to qualify as a regulated investment company if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
It is the policy of Dreyfus Municipal Cash Management Plus, Dreyfus New York Municipal Cash Management, Dreyfus Tax Exempt Cash Management and Dreyfus California AMT-Free Municipal Cash Management to continue to qualify as a regulated investment company, which can distribute tax-exempt dividends, by complying with the applicable provisions of the Code and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
For federal income tax purposes, each fund is treated as a separate entity for the purpose of determining such qualification.
As of and during the period ended July 31, 2016, the funds did not have any liabilities for any uncertain tax positions. Each fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statements of Operations. During the period ended July 31, 2016, the funds did not incur any interest or penalties.
Each tax year in the three-year period ended January 31, 2016 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010, each fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
Table 1 summarizes each relevant fund’s unused capital loss carryover available for federal income tax purposes to be applied against future net realized capital gains, realized subsequent to January 31, 2016.
Table 2 summarizes each fund’s tax character of distributions paid to shareholders during the fiscal year ended January 31, 2016. The tax character of current year distributions will be determined at the end of the current fiscal year.
At July 31, 2016, the cost of investments for federal income tax purposes for each fund was substantially the same as the cost for financial reporting purposes (see the Statements of Investments).
63
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 2—Mangement Fee and Other Transactions with Affiliates:
(a) Pursuant to separate management agreements with Dreyfus, the management fee of each fund is computed at the annual rate of .20% of the value of each fund’s average daily net assets and is payable monthly. For the funds listed in Table 3 below, with the exception of Dreyfus Municipal Cash Management Plus, Dreyfus had agreed, from February 1, 2016 through July 31, 2016, to waive receipt of its fee and/or assume the expenses of each fund so that the direct expenses of the Institutional shares of each fund do not exceed .18% of the value of the respective fund’s average daily net assets, provided that such expense limitation will be implemented for each fund only when the fund’s current gross one-day yield (before deducting fees and expenses from the yield) is 18 basis points or higher. This direct expense limitation was maintained at .18% during the period ended July 31, 2016. Effective August 8, 2016, the direct expenses of Dreyfus Government Cash Management’s Institutional Shares (in accordance with certain provisions as described above) do not exceed .13% of the value of the fund’s average daily net assets when the fund’s current gross one-day yield is 13 basis points or higher. To the extent that it is necessary for Dreyfus to waive receipt of its management fee (or reimburse a fund’s custody expense), the amount of the waiver will be applied equally to each share class of the fund. These expense limitations and waivers are voluntary, not contractual, and may be terminated by Dreyfus at any time. Effective June 2, 2016, Dreyfus has also agreed to assume .10% of management fees for Dreyfus Municipal Cash Management Plus. Table 3 summarizes the reduction in expenses for each fund, pursuant to these undertakings, during the period ended July 31, 2016.
| | |
Table 3—Fee Waivers | |
| | |
Dreyfus Government Cash Management | $2,856,584 |
Dreyfus Government Securities
Cash Management | 632,186 |
Dreyfus Treasury & Agency
Cash Management | 2,569,481 |
Dreyfus Treasury Securities
Cash Management | 4,711,319 |
Dreyfus Municipal
Cash Management Plus | 15,709 |
| | | | | | | |
Table 1—Capital Loss Carryover | | | | | | |
| | | | | | Short-Term Losses ($)† | |
Dreyfus Cash Management | | | | | - | †† |
Dreyfus Government Cash Management | | | | | 323,739 | |
Dreyfus Government Securities Cash Management | | | | | 19,964 | |
Dreyfus Treasury & Agency Cash Management | | | | | 400,101 | |
Dreyfus Treasury Securities Cash Management | | | | | 58,925 | |
† Short-term capital losses can be carried forward for an unlimited period.
†† In addition, the fund had $36,320 of capital losses realized after October 31, 2015, which were deferred for tax purposes to the first day of the following fiscal year.
| | | | | | | | | | | | | | | | | | |
Table 2—Tax Character of Distributions Paid | | | | | | | | |
| | | | 2016 |
| | | | | | Tax-Exempt Income ($) | | Ordinary Income ($) | Long-Term
Capital
Gains ($) |
Dreyfus Cash Management | | | | | | – | | 14,384,873 | – |
Dreyfus Government Cash Management | | | | | | – | | 4,559,717 | – |
Dreyfus Government Securities Cash Management | | | | | | – | | 262,307 | – |
Dreyfus Treasury & Agency Cash Management | | | | | | – | | 3,922,611 | – |
Dreyfus Treasury Securities Cash Management | | | | | | – | | 1,768,699 | – |
Dreyfus Municipal Cash Management Plus | | | | | | 3,468 | | 25,894 | – |
Dreyfus New York Municipal Cash Management | | | | | | 5,424 | | 2,277 | – |
Dreyfus Tax Exempt Cash Management | | | | | | 25,823 | | 62,057 | 77,779 |
Dreyfus California AMT-Free Municipal Cash Management | | | | | | 5,881 | | – | 8,385 |
64
Dreyfus has undertaken to waive receipt of the management fee and/or reimburse operating expenses in order to facilitate a daily yield at or above a certain level which may change from time to time. This undertaking is voluntary and not contractual, and may be terminated at any time. Table 4 summarizes the reduction in expenses for each fund, pursuant to these undertakings, during the period ended July 31, 2016.
| | |
Table 4—Expense Reductions | |
| | |
Dreyfus Cash Management | $415,028 |
Dreyfus Government Cash Management | 423,183 |
Dreyfus Government Securities
Cash Management | 567,992 |
Dreyfus Treasury & Agency
Cash Management | 1,620,228 |
Dreyfus Treasury Securities
Cash Management | 5,787,522 |
Dreyfus Municipal
Cash Management Plus | 190,094 |
Dreyfus New York Municipal
Cash Management | 265,620 |
Dreyfus Tax Exempt Cash Management | 686,496 |
Dreyfus California AMT-Free
Municipal Cash Management | 336,254 |
(b) Under each fund’s Service Plan adopted pursuant to Rule 12b-1 under the Act, with respect to each fund’s applicable Investor Shares, Administrative Shares, Participant Shares, Agency Shares and Premier Shares, each fund pays (and with respect to Dreyfus Treasury & Agency Cash Management’s Service Shares and Select Shares paid) the Distributor for distributing such classes of shares, for advertising and marketing and for providing certain services relating to shareholders of the respective class of shares. Investor Shares, Administrative Shares, Participant Shares, Agency Shares and Premier Shares pay the Distributor at annual rates of .25%, .10%, .40%, .06% and .31%, respectively, of the value of the applicable share class’ average daily net assets. Service Shares and Select Shares paid the Distributor as described above at annual rates of .50% and .80%, respectively. These services include answering shareholder inquiries regarding the funds and providing reports and other information and services related to the maintenance of shareholder accounts (“Servicing”). Under the Service Plan, as to each class, the Distributor may make payments to Service Agents with respect to these services. Generally, the Service Agent may provide holders of Investor Shares, Administrative Shares, Participant Shares, Agency Shares and Premier Shares a consolidated statement. The Service Agent will generally also provide the holders of Investor Shares, Participant Shares and/or Premier Shares automated teller check writing privileges and, in the case of Participant Shares and Premier Shares, automated teller machine access and bill paying services. The amount paid under the Service Plan for Servicing is intended to be a “service fee” as defined under the Conduct Rules of the Financial Industry Regulatory Authority (“FINRA”), and at no time will such amount exceed the maximum amount permitted to be paid under the FINRA Conduct Rules as a service fee. The fees payable under the Service Plan are payable without regard to actual expenses incurred. Table 5 summarizes the amount each fund was charged pursuant to the Service Plan during the period ended July 31, 2016.
| | | | | | | | | |
Table 5—Service Plan Fees | | | | | | | | |
| | | | | | | | | |
| | Investor
Shares ($) | Administrative
Shares ($) | Participant
Shares ($) | Service
Shares ($) | Select
Shares ($) | Agency
Shares ($) | Premier
Shares ($) |
Dreyfus Cash Management | | 1,545,527 | 896,438 | 1,587,444 | - | - | 52,932 | - |
Dreyfus Government Cash Management | | 1,566,123 | 381,087 | 83,508 | - | - | 23,336 | - |
Dreyfus Government
Securities Cash Management | | 594,701 | 239,323 | 591,213 | - | - | 4,219 | - |
Dreyfus Treasury & Agency
Cash Management | | 2,934,045 | 152,000 | 1,174,259 | 1,091 | 3,290 | 2,690 | 42,603 |
Dreyfus Treasury Securities
Cash Management | | 4,368,667 | 514,419 | 5,485,802 | - | - | 6,888 | - |
Dreyfus Municipal Cash
Management Plus | | 63,985 | 2,655 | 30,236 | - | - | - | - |
Dreyfus New York Municipal
Cash Management | | 225,349 | 7,710 | 2,306 | - | - | - | - |
Dreyfus Tax Exempt
Cash Management | | 363,513 | 13,728 | 67,859 | - | - | - | - |
Dreyfus California AMT-Free
Municipal Cash Management | | 273,798 | - | 29,238 | - | - | - | - |
65
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(c) Each fund has adopted a Shareholder Services Plan with respect to its Institutional Shares. Each fund reimburses the Distributor at an amount not to exceed an annual rate of .25% of the value of each fund’s average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the funds and providing reports and other information, and services related to the maintenance of shareholder accounts. Table 6 summarizes the amount each fund’s Institutional Shares were charged pursuant to the Shareholder Services Plan during the period ended July 31, 2016.
| | |
Table 6—Shareholder Services Plan Fees | |
| |
Dreyfus Cash Management | $138,569 |
Dreyfus Government Cash Management | 76,076 |
Dreyfus Government Securities Cash Management | 4,539 |
Dreyfus Treasury & AgencyCash Management | 66,138 |
Dreyfus Treasury Securities Cash Management | 82,337 |
Dreyfus Municipal Cash Management Plus | 5,152 |
Dreyfus New York Municipal Cash Management | 2,912 |
Dreyfus Tax Exempt Cash Management | 22,212 |
Dreyfus California AMT-Free
Municipal Cash Management | 11,265 |
The funds have arrangements with the transfer agent and the custodian whereby the funds may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the funds include net earnings credits as expense offsets in the Statements of Operations.
Each fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the funds. 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. Table 7 summarizes the amount each fund was charged during the period ended July 31, 2016 for cash management services, which is included in Shareholder servicing costs in the Statements of Operations. Cash management fees were partially offset by earnings credits, also summarized in Table 7.
Each fund compensates The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, under a custody agreement for providing custodial services for each fund. These fees are determined based on net assets, geographic region and transaction activity. Table 8 summarizes the amount each fund was charged during the period ended July 31, 2016 pursuant to the custody agreement. These fees were partially offset by earnings credits for each relevant fund, also summarized in Table 8.
During the period ended July 31, 2016, each fund was charged $4,812 for services performed by the Chief Compliance Officer and his staff.
Table 9 summarizes the components of “Due to The Dreyfus Corporation and affiliates” in the Statements of Assets and Liabilities for each fund.
| | | | | |
Table 7—Transfer Agency Agreement Fees and Cash Management Agreement Fees | | |
| Transfer Agency
Fees ($) | Dreyfus Transfer, Inc.
Cash Management Fees ($) | Dreyfus Transfer, Inc.
Earnings Credits ($) | |
Dreyfus Cash Management | 61,527 | 686 | (329) | |
Dreyfus Government Cash Management | 2,899 | 428 | (203) | |
Dreyfus Government Securities Cash Management | 9,878 | 99 | (48) | |
Dreyfus Treasury & Agency Cash Management | 23 | 172 | (82) | |
Dreyfus Treasury Securities Cash Management | 252,571 | 8,554 | (4,310) | |
Dreyfus Municipal Cash Management Plus | 647 | 33 | (16) | |
Dreyfus New York Municipal Cash Management | 1,175 | 65 | (31) | |
Dreyfus Tax Exempt Cash Management | 1,656 | 85 | (41) | |
Dreyfus California AMT-Free Municipal Cash Management | 304 | 14 | (7) | |
66
(d) 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—Securities Transactions:
The funds are permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted by the Board. The procedures have been designed to ensure that any purchase or sale of securities by the funds from or to another fund or portfolio that are, or could be, considered an affiliate by virtue of having a common investment adviser (or affiliated investment adviser), common Trustees and/or common officers, complies with Rule 17a-7 under the Act. Table 10 summarizes the amounts of purchases and sales of securities engaged in by each relevant fund pursuant to Rule 17a-7 under the Act during the period ended July 31, 2016.
NOTE 4—Regulatory Developments:
On July 23, 2014, the SEC adopted amendments to the rules that govern the operations of money market mutual funds. The degree to which a fund will be impacted by the amendments will depend upon the type of fund and the type of investors (retail or institutional). The amendments have staggered compliance dates, but funds must be in compliance with all amendments by October 14, 2016. At this time, management continues to evaluate the implications of the amendments and their impact to the funds’ operations, financial statements and accompanying notes.
| | | | |
Table 8—Custody Agreement Fees | | | |
| Custody Fees ($) | Earnings Credits ($) | |
Dreyfus Cash Management | 326,008 | (24,072) | |
Dreyfus Government Cash Management | 289,454 | - | |
Dreyfus Government Securities Cash Management | 83,400 | (849) | |
Dreyfus Treasury & Agency Cash Management | 305,536 | (612) | |
Dreyfus Treasury Securities Cash Management | 510,451 | (39,044) | |
Dreyfus Municipal Cash Management Plus | 10,001 | (85) | |
Dreyfus New York Municipal Cash Management | 16,372 | – | |
Dreyfus Tax Exempt Cash Management | 53,530 | (7,811) | |
Dreyfus California AMT-Free Municipal Cash Management | 18,305 | – | |
| | | | | | | | |
Table 9—Due to The Dreyfus Corporation and Affiliates |
| Management
Fees ($) | Service Plan
Fees ($) | Custodian
Fees ($) | Shareholder
Service
Plan Fees ($) | Chief
Compliance
Officer
Fees ($) | Transfer
Agency
Fees ($) | Less Expense
Reimbursement ($) |
Dreyfus Cash Management | 3,432,755 | 659,330 | 299,364 | 43,000 | 5,614 | 8,050 | (85,584) |
Dreyfus Government
Cash Management | 4,485,895 | 444,330 | 224,874 | 22,000 | 5,614 | 4,077 | (664,212) |
Dreyfus Government
Securities Cash Management | 743,949 | 239,692 | 64,916 | 1,000 | 5,614 | 2,441 | (206,991) |
Dreyfus Treasury & Agency
Cash Management | 3,165,564 | 722,070 | 249,992 | 21,000 | 5,614 | 2,033 | (683,788) |
Dreyfus Treasury Securities
Cash Management | 5,676,735 | 1,490,451 | 395,368 | 26,000 | 5,614 | 91,601 | (1,529,566) |
Dreyfus Municipal
Cash Management Plus | 13,246 | 11,302 | 10,005 | 1,000 | 5,614 | 240 | (20,294) |
Dreyfus New York Municipal Cash Management | 51,656 | 37,336 | 15,154 | 1,000 | 5,614 | 452 | (16,157) |
Dreyfus Tax Exempt
Cash Management | 330,410 | 72,217 | 37,683 | 6,000 | 5,614 | 563 | (20,439) |
Dreyfus California AMT-Free
Municipal Cash Management | 59,304 | 42,795 | 15,623 | 3,000 | 5,614 | 114 | (19,501) |
67
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 5—Subsequent Event:
Beginning October 10, 2016, each of Dreyfus Cash Management and Dreyfus Tax Exempt Cash Management will calculate its net asset value (NAV) to four decimals (e.g., $1.0000) and the fund’s NAV will “float,” meaning that it will fluctuate with changes in the values of the fund’s portfolio securities.
| | | |
Table 10—Affiliated Portfolio Holdings Transactions | |
| Purchases ($) | Sales ($) |
Dreyfus Municipal Cash Management Plus | 90,535,000 | 205,925,000 |
Dreyfus New York Municipal Cash Management | 153,320,000 | 239,750,000 |
Dreyfus Tax Exempt Cash Management | 859,745,000 | 572,780,000 |
Dreyfus California AMT-Free Municipal Cash Management | 340,893,000 | 306,785,000 |
68
INFORMATION ABOUT THE RENEWAL OF EACH FUND’S MANAGEMENT AGREEMENT (Unaudited)
At a meeting of the funds’ Boards of Trustees (the “Board”) held on April 26, 2016, the Board considered the renewal of each fund’s Management Agreement pursuant to which Dreyfus provides the fund with investment advisory and administrative services (each, 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 funds, were assisted in their review by independent legal counsel and met with counsel in executive session separate from Dreyfus representatives. In considering the renewal of each 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 Funds. The Board considered information provided to them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. For each fund, Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ 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 funds.
The Board also considered research support available to, and portfolio management capabilities of, each fund’s portfolio management personnel and that Dreyfus 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 Dreyfus’ extensive administrative, accounting and compliance infrastructures.
Comparative Analysis of the Funds’ Performance and Management Fee and Expense Ratio. For each fund, 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 February 29, 2016, 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. Dreyfus previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Groups and Performance Universes and the Expense Groups and Expense Universes.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to each fund and its comparison funds. The Board discussed with representatives of Dreyfus the results of the performance comparisons for each fund and noted the following:
For Dreyfus Cash Management, the fund’s total return performance was below the Performance Group median and above the Performance Universe median for the various periods;
For Dreyfus Government Cash Management, the fund’s total return performance was at or within two basis points of the Performance Group median and at or above the Performance Universe median for the various periods;
For Dreyfus Government Securities Cash Management, the fund’s total return performance was within four basis points of the Performance Group median and above or within one basis point of the Performance Universe median for the various periods;
For Dreyfus Treasury & Agency Cash Management, the fund’s total return performance was at or within three basis points of the Performance Group median and above the Performance Universe median for the various periods;
For Dreyfus Treasury Securities Cash Management, the fund’s total return performance was at or within one basis point of the Performance Group median and at or within one basis point of the Performance Universe median for the various periods;
For Dreyfus Tax Exempt Cash Management, the fund’s total return performance was within three basis points of the Performance Group median and above or within one basis point of the Performance Universe median for the various periods;
For Dreyfus Municipal Cash Management Plus, the fund’s total return performance was above or within two basis points of the Performance Group median and above or within one basis point of the Performance Universe median for the various periods;
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INFORMATION ABOUT THE RENEWAL OF EACH FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
For Dreyfus New York Municipal Cash Management, the fund’s total return performance was above or within one basis point of the Performance Group median and Performance Universe median for the various periods;
For Dreyfus California AMT-Free Cash Management, the fund’s total return performance was at or within one basis point of the Performance Group median and Performance Universe median for the various periods.
For each fund, the Board also reviewed the range of actual and contractual management fees and total expenses of the fund’s Expense Group and Expense Universe funds and discussed the results of the comparisons.
For Dreyfus Cash Management, the fund’s contractual management fee was below the Expense Group median and the actual management fee and total expenses were above the Expense Group and Expense Universe medians (total expenses were approximately equal to the Expense Universe median);
For Dreyfus Government Cash Management, the fund’s contractual management fee was at the Expense Group median and the actual management fee and total expenses were approximately equal to the Expense Group medians and above the Expense Universe medians;
For Dreyfus Government Securities Cash Management, the fund’s contractual management fee was above the Expense Group median, the actual management fee was above the Expense Group and Expense Universe medians and the total expenses were approximately equal to and below the Expense Group and Expense Universe medians, respectively;
For Dreyfus Treasury & Agency Cash Management, the fund’s contractual management fee was above the Expense Group median and the actual management fee and total expenses were approximately equal to and above the Expense Group and Expense Universe medians, respectively;
For Dreyfus Treasury Securities Cash Management, the fund’s contractual management fee was at the Expense Group median, the actual management fee was above the Expense Group median and below the Expense Universe median and the total expenses were below the Expense Group and Expense Universe medians;
For Dreyfus Tax Exempt Cash Management, the fund’s contractual management fee was below the Expense Group median, the actual management fee was above the Expense Group and Expense Universe medians and the total expenses were at the Expense Group median and above the Expense Universe median;
For Dreyfus Municipal Cash Management Plus, the fund’s contractual management fee was below the Expense Group median, the actual management fee was above the Expense Group median and below the Expense Universe median and the total expenses were above the Expense Group and Expense Universe medians;
For Dreyfus New York Municipal Cash Management, the fund’s contractual management fee was below the Expense Group median, the actual management fee was above the Expense Group and Expense Universe medians and the total expenses were above the Expense Group and Expense Universe medians;
For Dreyfus California AMT-Free Cash Management, the fund’s contractual management fee was below the Expense Group median, the actual management fee was at the Expense Group and Expense Universe medians and the total expenses were slightly above the Expense Group and Expense Universe medians.
For each fund, the Board considered the current fee waiver and expense reimbursement arrangement undertaken by Dreyfus.
For each fund, Dreyfus representatives reviewed with the Board the management or investment advisory fees paid by funds advised or administered by Dreyfus that are in the same Broadridge 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. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing each fund and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus. The Board also noted the fee waiver and expense reimbursement arrangement for each fund and its effect on the profitability of Dreyfus and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex. The consulting firm also had analyzed where any economies of
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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 each Agreement, considered in relation to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant circumstances for each 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. Dreyfus representatives noted 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 Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus 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 Dreyfus from acting as investment adviser and noted that there were no soft dollar arrangements in effect for trading the funds’ 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 each Agreement. Based on the discussions and considerations as described above, the Board concluded and determined, as to each fund, as follows.
The Board concluded that the nature, extent and quality of the services provided by Dreyfus are adequate and appropriate.
The Board generally was satisfied with the fund’s relative performance.
The Board concluded that the fee paid to Dreyfus supported the renewal of the Agreement in light of the considerations described above.
The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were 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 each Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with Dreyfus and its affiliates, of the fund and the services provided to the fund by Dreyfus. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of each fund and the investment management and other services provided under the relevant 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 each fund had the benefit of a number of years of reviews of prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. 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 same or similar arrangements in prior years. The Board determined to renew each Agreement.
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Dreyfus Cash Management Funds
200 Park Avenue
New York, NY 1016
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 1016
Custodian
The Bank of New York Mellon
225 Liberty Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
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Ticker Symbols: | Institutional | Investor | Administrative | Participant | Agency | Premier |
Dreyfus Cash Management | DICXX | DVCXX | DSCXX | DPCXX | DMCXX | |
Dreyfus Government Cash Management | DGCXX | DGVXX | DAGXX | DPGXX | DGMXX | |
Dreyfus Government Securities Cash Management | DIPXX | DVPXX | DAPXX | DGPXX | DRPXX | |
Dreyfus Treasury & Agency Cash Management | DTRXX | DTVXX | DTAXX | DTPXX | DYAXX | DYPXX |
Dreyfus Treasury Securities Cash Management | DIRXX | DVRXX | DARXX | DPRXX | DSAXX | |
Dreyfus Municipal Cash Management Plus | DIMXX | DVMXX | DAMXX | DMPXX | | |
Dreyfus New York Municipal Cash Management | DIYXX | DVYXX | DAYXX | DPYXX | | |
Dreyfus Tax Exempt Cash Management | DEIXX | DEVXX | DEAXX | DEPXX | | |
Dreyfus California AMT-Free Municipal Cash Management | DIIXX | DAIXX | | DFPXX | | |
Telephone Call your Dreyfus Cash Investment Services Division representative or 1-800-346-3621
Mail Dreyfus Investments Division, 144 Glen Curtiss Boulevard, Uniondale, NY 11556-0144
Internet Access Dreyfus Investments Division at www.dreyfus.com
You can obtain product information and e-mail requests for information or literature
Each fund will disclose daily, on www.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 until the fund files its Form N-Q or Form N-CSR for the period that includes the date of the posted holdings.
Each fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that each fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-DREYFUS.
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© 2016 MBSC Securities Corporation
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