We are pleased to present this semiannual report for Dreyfus International Bond Fund, covering the six-month period from November 1, 2016 through April 30, 2017. 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.
Stocks advanced solidly but higher-quality bonds lost a degree of value over the reporting period amid heightened market volatility stemming from various economic and political developments. After giving back a portion of their previous gains due to uncertainty in advance of U.S. elections, equity markets rallied to a series of new highs in the wake of the election’s unexpected outcome as investors revised their expectations for U.S. fiscal, regulatory, and tax policies. Generally strong economic data and corporate earnings continued to support stock prices over the first four months of 2017. In the bond market, yields of U.S. government securities moved higher and prices fell in response to two short-term interest-rate hikes and rising longer-term rates, while lower-rated corporate-backed bonds continued to advance in anticipation of a more business-friendly market environment.
Some asset classes and industry groups seem likely to continue to benefit from a changing economic and geopolitical landscape, while others probably will face challenges as conditions evolve. Consequently, selectivity seems likely to be an important determinant of investment success in the months ahead. As always, we encourage you to discuss the implications of our observations with your financial advisor.
Thank you for your continued confidence and support.
DISCUSSION OF FUND PERFORMANCE
For the period from November 1, 2016 through April 30, 2017, as provided by David Leduc, CFA, Brendan Murphy, CFA, and Raman Srivastava, CFA, Portfolio Managers
Market and Fund Performance Overview
For the six-month period ended April 30, 2017, Dreyfus International Bond Fund’s Class A shares produced a total return of 1.37%, Class C shares returned 1.13%, Class I shares returned 1.57%, and Class Y shares returned 1.69%.1 In comparison, the fund’s benchmark, the Bloomberg Barclays Global Aggregate ex USD Index (unhedged) (the “Index”), produced a total return of -2.48% for the same period.2
Returns from international bonds generally were constrained during the reporting period by rising interest rates and currency fluctuations. The fund’s currency, interest-rate, and security-selection strategies enabled it to outperform its benchmark.
The Fund’s Investment Approach
The fund seeks to maximize total return through capital appreciation and income. To pursue its goal, the fund normally invests at least 80% of its net assets in fixed-income securities, and at least 65% of its assets in non-U.S.-dollar-denominated fixed-income securities of foreign governments and companies located in various countries, including emerging markets.
Generally, the fund seeks to maintain investment-grade average credit quality. We focus on identifying undervalued government bond markets, currencies, sectors, and securities. We look for fixed-income securities with the most potential for added value, such as those involving the potential for credit upgrades, unique structural characteristics, or innovative features. We use fundamental economic research and quantitative analysis to allocate assets among countries and currencies. We then focus on sectors and individual securities that appear to be relatively undervalued.
Economic and Political Factors Drove Market Performance
The reporting period began on a weak note as sovereign bonds in most global markets lost value in the weeks after the U.S. election in November 2016. Bond yields climbed and prices fell when investors looked forward to the stimulative impact of a new presidential administration’s more business-friendly fiscal, tax, and regulatory policies. These policies were widely expected to boost global economic growth and inflationary pressures.
In addition, most developed economies have demonstrated improvement after an extended period of persistent sluggishness, largely due to aggressively accommodative monetary policies from central banks in Europe, Japan, and China. In contrast, the Federal Reserve Board (the “Fed”) twice raised short-term U.S. interest rates during the reporting period. Higher U.S. interest rates compared to most other developed regions helped support capital flows into the United States, and the U.S. dollar generally gained value against most other major currencies.
Fund Strategies Supported Gains
In contrast to the Index’s negative returns for the reporting period, the fund achieved positive absolute and relative results on the strength of several investment strategies. Most notably, we maintained underweighted positions in the euro and Japanese yen, and overweighted exposure to Latin American currencies, particularly those of Mexico, Argentina, and Brazil. This positioning enabled the fund to benefit from fluctuating currency values against the U.S. dollar.
Our interest-rate strategies also added value during the reporting period. Through the use of futures contracts, we established underweighted exposure to rising short-term U.S. interest rates. In addition, we emphasized intermediate-term sovereign bonds in Japan while de-emphasizing longer-term bonds, which enabled the fund to profit from widening yield differences along the Japanese market’s maturity
3
DISCUSSION OF FUND PERFORMANCE (continued)
spectrum. A short average duration compared to that of the Index helped cushion the impact of rising interest rates.
From a security selection perspective, the fund’s positions in sovereign bonds in Portugal, Russia, Brazil, and Argentina fared particularly well, as did high yield and investment-grade corporate-backed securities issued on behalf of financial companies. Inflation-linked bonds in Mexico gained value when local inflation expectations increased and the peso depreciated against the U.S. dollar.
Disappointments during the reporting period proved to be relatively mild. The only material detractor from relative results was the fund’s position in Japanese inflation-indexed bonds, which struggled when local inflation expectations moderated.
At times during the reporting period, we employed futures contracts, forward contracts, and swap options to establish the fund’s currency and interest-rate strategies.
Market Outlook Varies by Region
As of the reporting period’s end, prospects for international bonds appear to us to be mixed. The U.S. bond market seems already to reflect additional rate hikes from the Fed, and we expect domestic bond prices and the U.S. dollar to remain relatively stable over the foreseeable future. We also expect sovereign bonds in certain emerging markets to continue to benefit from easing global economic concerns. In contrast, European bonds currently seem overvalued to us in light of recent economic data.
Therefore, we recently have maintained relatively heavy positions in corporate-backed bonds and lighter exposure to sovereign bonds. Regionally, we have favored emerging market debt securities, including bonds denominated both in local currencies and the U.S. dollar, and we have established underweighted positions in European bonds. We have retained a relatively defensive interest-rate strategy, including an average duration that is shorter than that of the Index.
May 15, 2017
Bonds are subject generally to interest-rate, credit, liquidity, and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
High yield bonds are subject to increased credit risk and are considered speculative in terms of the issuer’s perceived ability to continue making interest payments on a timely basis and to repay principal upon maturity.
Foreign bonds are subject to special risks including exposure to currency fluctuations, changing political and economic conditions, and potentially less liquidity. These risks are generally greater with emerging market countries than with more economically and politically established foreign countries.
The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets. Derivatives can be highly volatile, illiquid, and difficult to value, and there is the risk that changes in the value of a derivative held by the fund will not correlate with the underlying instruments or the fund’s other investments.
Investments in foreign currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedged positions, that the U.S. dollar will decline relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time. A decline in the value of foreign currencies relative to the U.S. dollar will reduce the value of securities held by the fund and denominated in those currencies. The use of leverage may magnify the fund’s gains or losses. For derivatives with a leveraging component, adverse changes in the value or level of the underlying asset can result in a loss that is much greater than the original investment in the derivative.
1 Total return includes reinvestment of dividends and any capital gains paid and does not take into consideration the maximum initial sales charge in the case of Class A shares or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Class I and Class Y shares are not subject to any initial or deferred sales charge. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost.
2 Source: Lipper Inc. — The Bloomberg Barclays Global Aggregate ex USD Index is a flagship measure of global investment-grade debt from 24 local currency markets, excluding U.S.-dollar-denominated bonds. This multi-currency benchmark includes Treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging market issuers. Investors cannot invest directly in any index.
4
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 International Bond Fund from November 1, 2016 to April 30, 2017. 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 April 30, 2017 |
| | | | | | | | |
| | | | Class A | Class C | Class I | Class Y |
Expenses paid per $1,000† | | $6.74 | | $8.98 | | $3.80 | | $3.45 |
Ending value (after expenses) | | $1,013.70 | | $1,011.30 | | $1,015.70 | | $1,016.90 |
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 April 30, 2017 |
| | | | | | | | |
| | | | Class A | Class C | Class I | Class Y |
Expenses paid per $1,000† | | $6.76 | | $9.00 | | $3.81 | $ | $3.46 |
Ending value (after expenses) | | $1,018.10 | | $1,015.87 | | $1,021.03 | $ | $1,021.37 |
† Expenses are equal to the fund’s annualized expense ratio of 1.35% for Class A, 1.80% for Class C, .76% for Class I and .69% for Class Y, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
April 30, 2017 (Unaudited)
| | | | | | | | | | |
| |
Bonds and Notes - 94.2% | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | a | Value ($) | |
Argentina - 3.8% | | | | | |
Argentine Government,
Sr. Unscd. Bonds | | 6.88 | | 1/26/27 | | 6,700,000 | b | 7,095,300 | |
Argentine Government,
Sr. Unscd. Notes | ARS | 5.83 | | 12/31/33 | | 9,200,000 | c | 4,551,296 | |
Argentine Government,
Unscd. Bonds | ARS | 21.20 | | 9/19/18 | | 135,050,000 | | 9,263,579 | |
Buenos Aires Province,
Sr. Unscd. Notes | | 5.75 | | 6/15/19 | | 2,650,000 | d | 2,746,063 | |
Buenos Aires Province,
Sr. Unscd. Notes | | 9.13 | | 3/16/24 | | 2,775,000 | d | 3,157,950 | |
City of Buenos Aires Argentina,
Unscd. Bonds, Ser. 22 | ARS | 22.63 | | 3/29/24 | | 68,200,000 | c | 4,557,373 | |
| | 31,371,561 | |
Bahrain - .1% | | | | | |
Bahraini Government,
Sr. Unscd. Bonds | | 7.00 | | 10/12/28 | | 400,000 | d | 416,486 | |
Brazil - 1.2% | | | | | |
Brazilian Government,
Notes | BRL | 10.00 | | 1/1/21 | | 30,000,000 | | 9,785,640 | |
Canada - 3.9% | | | | | |
BMW Canada Auto Trust,
Ser. 2016-1A, Cl. A1 | CAD | 1.37 | | 9/20/18 | | 957,888 | d | 702,411 | |
BMW Canada Auto Trust,
Ser. 2017-1A, Cl. A2 | CAD | 1.68 | | 5/20/20 | | 3,775,000 | d | 2,772,408 | |
Canadian Government,
Unscd. Bonds | CAD | 3.50 | | 12/1/45 | | 9,355,000 | | 8,744,035 | |
Cenovus Energy,
Sr. Unscd. Notes | | 4.25 | | 4/15/27 | | 3,275,000 | d | 3,259,745 | |
CNH Capital Canada Receivables Trust,
Ser. 2014-1A, Cl. A2 | CAD | 1.80 | | 10/15/20 | | 4,399,064 | d | 3,236,335 | |
CNH Capital Canada Receivables Trust,
Ser. 2017-1A, Cl. A2 | CAD | 1.71 | | 5/15/23 | | 3,300,000 | d | 2,426,680 | |
GMF Canada Leasing Trust,
Ser. 16-1A, Cl. A1 | CAD | 1.38 | | 8/20/18 | | 800,606 | d | 586,667 | |
GMF Canada Leasing Trust,
Ser. 16-1A, Cl. A2 | CAD | 1.64 | | 3/20/19 | | 1,650,000 | d | 1,210,149 | |
GMF Canada Leasing Trust,
Ser. 16-1A, Cl. A3 | CAD | 1.83 | | 6/21/21 | | 1,900,000 | d | 1,393,825 | |
MBARC Credit Canada,
Ser. 2016-AA, Cl. A1 | CAD | 1.26 | | 9/17/18 | | 3,526,958 | d | 2,585,463 | |
MBARC Credit Canada,
Ser. 2016-AA, Cl. A2 | CAD | 1.53 | | 6/17/19 | | 3,750,000 | d | 2,751,520 | |
MBARC Credit Canada,
Ser. 2016-AA. Cl. A3 | CAD | 1.72 | | 7/15/21 | | 1,075,000 | d | 790,147 | |
Teck Resources,
Gtd. Notes | | 6.25 | | 7/15/41 | | 1,150,000 | | 1,224,750 | |
| | 31,684,135 | |
Colombia - .5% | | | | | |
Colombian Government,
Bonds, Ser. B | COP | 10.00 | | 7/24/24 | | 9,603,300,000 | | 4,002,572 | |
6
| | | | | | | | | | |
| |
Bonds and Notes - 94.2% (continued) | Coupon
Rate (%) | | Maturity Date | | Principal
Amount ($) | a | Value ($) | |
Czech Republic - .2% | | | | | |
Czech Republic Government,
Bonds, Ser. 100 | CZK | 0.25 | | 2/10/27 | | 36,000,000 | | 1,365,577 | |
France - 1.1% | | | | | |
Bavarian Sky,
Ser. FRE1, Cl. A | EUR | 0.00 | | 4/20/24 | | 693,057 | c | 755,351 | |
French Government,
Bonds | EUR | 0.50 | | 5/25/26 | | 6,850,000 | | 7,342,771 | |
SFR Group,
Sr. Scd. Notes | | 7.38 | | 5/1/26 | | 1,125,000 | d | 1,188,281 | |
| | 9,286,403 | |
Germany - 1.5% | | | | | |
Allianz,
Sub. Notes | EUR | 5.63 | | 10/17/42 | | 5,400,000 | c | 7,092,169 | |
Globaldrive Auto Receivables,
Ser. 2016-B, Cl. A | EUR | 0.13 | | 8/20/24 | | 4,029,962 | c | 4,418,893 | |
Volkswagen Car Lease,
Ser. 21, Cl. A | EUR | 0.00 | | 2/21/21 | | 755,510 | c | 824,021 | |
| | 12,335,083 | |
Hungary - .3% | | | | | |
Hungarian Development Bank,
Govt. Gtd. Notes | | 6.25 | | 10/21/20 | | 2,100,000 | d | 2,317,627 | |
Indonesia - 1.2% | | | | | |
Indonesian Government,
Sr. Unscd. Notes | EUR | 2.63 | | 6/14/23 | | 400,000 | d | 457,054 | |
Indonesian Government,
Sr. Unscd. Notes | EUR | 3.75 | | 6/14/28 | | 3,675,000 | d | 4,305,489 | |
Indonesian Government,
Sr. Unscd. Notes | | 6.75 | | 1/15/44 | | 4,100,000 | b | 5,271,505 | |
| | 10,034,048 | |
Ireland - 1.9% | | | | | |
AerCap Ireland Capital,
Gtd. Notes | | 4.50 | | 5/15/21 | | 1,775,000 | | 1,878,184 | |
AerCap Ireland Capital,
Gtd. Notes | | 5.00 | | 10/1/21 | | 725,000 | | 785,057 | |
Irish Government,
Bonds | EUR | 2.40 | | 5/15/30 | | 6,370,000 | | 7,858,424 | |
Irish Government,
Bonds | EUR | 2.00 | | 2/18/45 | | 1,610,000 | | 1,773,147 | |
MMC Norilsk Nickel,
Sr. Unscd. Notes | | 4.10 | | 4/11/23 | | 2,900,000 | d | 2,894,603 | |
Park Aerospace Holdings,
Gtd. Notes | | 5.50 | | 2/15/24 | | 675,000 | d | 715,500 | |
| | 15,904,915 | |
Israel - .2% | | | | | |
Israeli Government,
Bonds, Ser. 0327 | ILS | 2.00 | | 3/31/27 | | 6,900,000 | | 1,869,885 | |
Italy - 4.7% | | | | | |
Enel,
Sr. Unscd. Bonds | EUR | 4.88 | | 2/20/18 | | 6,285,000 | | 7,122,831 | |
Intesa Sanpaolo,
Sr. Unscd. Notes | EUR | 3.00 | | 1/28/19 | | 3,565,000 | | 4,080,108 | |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Bonds and Notes - 94.2% (continued) | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | a | Value ($) | |
Italy - 4.7% (continued) | | | | | |
Italian government,
Bonds | EUR | 1.25 | | 12/1/26 | | 26,950,000 | | 27,221,520 | |
| | 38,424,459 | |
Japan - 19.1% | | | | | |
Japanese Government,
Sr. Unscd. Bonds, Ser. 128 | JPY | 0.10 | | 6/20/21 | | 5,200,000,000 | | 47,162,169 | |
Japanese Government,
Sr. Unscd. Bonds, Ser. 156 | JPY | 0.40 | | 3/20/36 | | 2,300,500,000 | | 20,218,377 | |
Japanese Government,
Sr. Unscd. Bonds, Ser. 307 | JPY | 1.30 | | 3/20/20 | | 2,897,050,000 | | 27,104,225 | |
Japanese Government,
Sr. Unscd. Bonds, Ser. 44 | JPY | 1.70 | | 9/20/44 | | 1,088,550,000 | | 12,094,081 | |
Japanese Government CPI Linked Bond,
Sr. Unscd. Bonds, Ser. 21 | JPY | 0.10 | | 3/10/26 | | 5,072,000,000 | | 47,828,256 | |
OSCAR US Funding Trust VI,
Ser. 2017-1A, Cl. A2A | | 2.30 | | 5/11/20 | | 900,000 | d | 902,278 | |
OSCAR US Funding Trust VI,
Ser. 2017-1A, Cl. A4 | | 3.30 | | 5/10/24 | | 1,080,000 | d | 1,086,780 | |
| | 156,396,166 | |
Kuwait - .6% | | | | | |
Kuwaiti International Bond,
Sr. Unscd. Notes | | 3.50 | | 3/20/27 | | 5,100,000 | d | 5,222,660 | |
Luxembourg - .2% | | | | | |
Altice Financing,
Sr. Scd. Bonds | | 7.50 | | 5/15/26 | | 1,125,000 | d | 1,217,813 | |
Mexico - 3.4% | | | | | |
Banco Nacional de Comercio Exterior,
Sr. Unscd. Notes | | 4.38 | | 10/14/25 | | 5,100,000 | d | 5,202,000 | |
Mexican Bonos,
Bonds, Ser. M | MXN | 8.00 | | 11/7/47 | | 112,900,000 | | 6,277,361 | |
Mexican Government,
Bonds, Ser. S | MXN | 4.50 | | 12/4/25 | | 24,975,000 | e | 8,360,565 | |
Mexican Government,
Sr. Unscd. Bonds, Ser. M | MXN | 7.75 | | 11/13/42 | | 142,000,000 | | 7,668,652 | |
| | 27,508,578 | |
Morocco - 2.1% | | | | | |
Moroccan Government,
Sr. Unscd. Bonds | EUR | 3.50 | | 6/19/24 | | 8,975,000 | | 10,685,150 | |
Moroccan Government,
Sr. Unscd. Notes | EUR | 4.50 | | 10/5/20 | | 5,000,000 | | 6,111,877 | |
| | 16,797,027 | |
Netherlands - 4.6% | | | | | |
ABN AMRO Bank,
Sub. Notes | | 4.75 | | 7/28/25 | | 7,250,000 | d | 7,599,029 | |
ABN AMRO Bank,
Sub. Notes | EUR | 2.88 | | 1/18/28 | | 1,100,000 | c | 1,287,461 | |
Equate Petrochemical,
Gtd. Notes | | 3.00 | | 3/3/22 | | 2,425,000 | d | 2,416,270 | |
ING Bank,
Sub. Notes | EUR | 3.00 | | 4/11/28 | | 700,000 | | 810,617 | |
Lukoil International Finance,
Gtd. Notes | | 4.75 | | 11/2/26 | | 4,275,000 | d | 4,378,169 | |
Petrobras Global Finance,
Gtd. Notes | | 6.13 | | 1/17/22 | | 1,415,000 | | 1,486,245 | |
8
| | | | | | | | | | |
| |
Bonds and Notes - 94.2% (continued) | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | a | Value ($) | |
Netherlands - 4.6% (continued) | | | | | |
Rabobank Nederland,
Sub. Bonds | EUR | 2.50 | | 5/26/26 | | 1,816,000 | c | 2,087,340 | |
Schaeffler Finance,
Sr. Scd. Notes | | 4.75 | | 5/15/23 | | 1,125,000 | d | 1,178,438 | |
Teva Pharmaceutical Finance Netherlands III,
Gtd. Notes | | 2.80 | | 7/21/23 | | 1,200,000 | | 1,157,335 | |
Teva Pharmaceutical Finance Netherlands III,
Gtd. Notes | | 3.15 | | 10/1/26 | | 1,275,000 | b | 1,189,486 | |
Volkswagen International Finance,
Gtd. Bonds | EUR | 3.75 | | 12/31/49 | | 4,500,000 | c | 5,166,353 | |
Volkswagen International Finance,
Gtd. Notes | | 1.60 | | 11/20/17 | | 280,000 | d | 279,819 | |
Vonovia Finance,
Gtd. Notes | EUR | 1.63 | | 12/15/20 | | 4,100,000 | | 4,674,166 | |
Vonovia Finance,
Gtd. Notes | EUR | 3.63 | | 10/8/21 | | 1,575,000 | | 1,953,254 | |
WPC Eurobond,
Gtd. Bonds | EUR | 2.25 | | 7/19/24 | | 1,850,000 | | 2,084,221 | |
| | 37,748,203 | |
New Zealand - 1.8% | | | | | |
New Zealand Government,
Sr. Unscd. Bonds, Ser. 0925 | NZD | 2.00 | | 9/20/25 | | 20,754,000 | f | 15,079,264 | |
Norway - .3% | | | | | |
Norwegian Government,
Bonds, Ser. 474 | NOK | 3.75 | | 5/25/21 | | 17,145,000 | d | 2,217,907 | |
Peru - .4% | | | | | |
Peruvian Government,
Sr. Unscd. Bonds | EUR | 2.75 | | 1/30/26 | | 2,600,000 | | 3,140,465 | |
Poland - 2.4% | | | | | |
Polish Government,
Bonds, Ser. 0727 | PLN | 2.50 | | 7/25/27 | | 54,750,000 | | 13,055,205 | |
Polish Government,
Sr. Unscd. Notes | EUR | 1.50 | | 9/9/25 | | 1,975,000 | | 2,239,274 | |
Polish Government,
Unscd. Notes | EUR | 2.00 | | 10/25/46 | | 3,975,000 | | 4,065,869 | |
| | 19,360,348 | |
Portugal - 3.6% | | | | | |
Portuguese Government ,
Sr. Unscd. Bonds | EUR | 2.88 | | 7/21/26 | | 8,675,000 | d | 9,184,669 | |
Portuguese Government ,
Sr. Unscd. Bonds | EUR | 4.13 | | 4/14/27 | | 17,800,000 | d | 20,331,403 | |
| | 29,516,072 | |
Romania - 1.1% | | | | | |
Romanian Government,
Sr. Unscd. Notes | EUR | 2.75 | | 10/29/25 | | 3,200,000 | d | 3,684,451 | |
Romanian Government,
Unscd. Notes | EUR | 2.88 | | 5/26/28 | | 4,750,000 | d | 5,332,638 | |
| | 9,017,089 | |
Russia - 1.5% | | | | | |
Russian Government,
Bonds, Ser. 6215 | RUB | 7.00 | | 8/16/23 | | 725,000,000 | | 12,365,412 | |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Bonds and Notes - 94.2% (continued) | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | a | Value ($) | |
Serbia - .4% | | | | | |
Serbian Government,
Sr. Unscd. Notes | | 7.25 | | 9/28/21 | | 2,500,000 | | 2,883,757 | |
South Africa - .4% | | | | | |
South African Government,
Bonds, Ser. R186 | ZAR | 10.50 | | 12/21/26 | | 36,000,000 | | 3,009,448 | |
Spain - 4.8% | | | | | |
BBVA Subordinated Capital,
Gtd. Notes | EUR | 3.50 | | 4/11/24 | | 2,300,000 | c | 2,642,495 | |
Driver Espana,
Ser. 3, Cl. A | EUR | 0.68 | | 12/21/26 | | 2,216,025 | c | 2,436,700 | |
Santander Issuances,
Gtd. Notes | EUR | 2.50 | | 3/18/25 | | 2,800,000 | | 3,103,806 | |
Spanish Government,
Unscd. Bonds | EUR | 1.50 | | 4/30/27 | | 27,250,000 | d | 29,328,316 | |
Telefonica Emisiones,
Gtd. Notes | EUR | 1.53 | | 1/17/25 | | 1,600,000 | | 1,781,922 | |
| | 39,293,239 | |
Sri Lanka - .6% | | | | | |
Sri Lankan Government,
Sr. Unscd. Bonds | | 5.75 | | 1/18/22 | | 4,715,000 | d | 4,886,334 | |
Supranational - 3.8% | | | | | |
European Investment Bank,
Sr. Unscd. Bonds | JPY | 1.40 | | 6/20/17 | | 36,300,000 | | 326,127 | |
European Investment Bank,
Sr. Unscd. Notes | CAD | 1.13 | | 9/16/21 | | 2,975,000 | d | 2,159,651 | |
International Bank for Reconstruction & Development,
Sr. Unscd. Notes | NZD | 3.50 | | 1/22/21 | | 24,875,000 | | 17,372,979 | |
International Finance,
Sr. Unscd. Notes | INR | 6.30 | | 11/25/24 | | 96,070,000 | | 1,497,001 | |
Nordic Investment Bank,
Sr. Unscd. Notes | NOK | 1.38 | | 7/15/20 | | 85,000,000 | | 9,995,172 | |
| | 31,350,930 | |
Sweden - 1.4% | | | | | |
Swedish Government,
Bonds, Ser. 1047 | SEK | 5.00 | | 12/1/20 | | 86,125,000 | | 11,607,355 | |
Switzerland - .3% | | | | | |
Credit Suisse Group,
Sr. Unscd. Notes | | 4.28 | | 1/9/28 | | 2,700,000 | d | 2,747,858 | |
Thailand - .5% | | | | | |
Thai Government,
Sr. Unscd. Bonds | THB | 2.13 | | 12/17/26 | | 139,000,000 | | 3,820,519 | |
Turkey - .6% | | | | | |
Turkish Government,
Unscd. Bonds | TRY | 2.00 | | 9/18/24 | | 15,200,000 | | 5,094,390 | |
Ukraine - .0% | | | | | |
Ukrainian Government,
Sr. Unscd. Notes | | 0.00 | | 5/31/40 | | 1,100,000 | c | 389,576 | |
United Kingdom - 7.7% | | | | | |
Barclays,
Jr. Sub. Bonds | | 7.88 | | 12/31/49 | | 2,325,000 | c | 2,499,933 | |
10
| | | | | | | | | | |
| |
Bonds and Notes - 94.2% (continued) | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | a | Value ($) | |
United Kingdom - 7.7% (continued) | | | | | |
Barclays,
Sub. Notes | | 5.20 | | 5/12/26 | | 2,925,000 | | 3,048,906 | |
Diageo Finance,
Gtd. Notes | EUR | 2.38 | | 5/20/26 | | 3,050,000 | | 3,698,905 | |
E-Carat,
Ser. 16-1, Cl. A | EUR | 0.08 | | 10/18/24 | | 2,594,681 | c | 2,838,567 | |
HSBC Holdings,
Sub. Notes | | 4.38 | | 11/23/26 | | 1,875,000 | | 1,924,104 | |
International Game Technology,
Sr. Scd. Notes | | 6.25 | | 2/15/22 | | 1,075,000 | d | 1,177,125 | |
Lloyds Banking Group,
Sr. Unscd. Notes | | 3.75 | | 1/11/27 | | 2,225,000 | | 2,223,507 | |
Royal Bank of Scotland Group,
Sr. Unscd. Notes | | 3.88 | | 9/12/23 | | 8,675,000 | | 8,702,673 | |
Santander UK Group Holdings,
Sr. Unscd. Notes | | 3.57 | | 1/10/23 | | 1,975,000 | | 1,997,513 | |
United Kingdom Gilt,
Unscd. Bonds | GBP | 3.50 | | 1/22/45 | | 18,075,000 | | 32,344,295 | |
Vodafone Group,
Sr. Unscd. Notes | EUR | 1.25 | | 8/25/21 | | 2,400,000 | | 2,705,491 | |
| | 63,161,019 | |
United States - 12.0% | | | | | |
Abbott Laboratories,
Sr. Unscd. Notes | | 3.75 | | 11/30/26 | | 925,000 | | 938,158 | |
AbbVie,
Sr. Unscd. Bonds | EUR | 1.38 | | 5/17/24 | | 2,650,000 | | 2,940,700 | |
Ally Financial,
Gtd. Notes | | 3.50 | | 1/27/19 | | 3,415,000 | | 3,466,225 | |
Ally Financial,
Gtd. Notes | | 8.00 | | 11/1/31 | | 1,125,000 | | 1,344,375 | |
AMC Networks,
Gtd. Notes | | 5.00 | | 4/1/24 | | 840,000 | | 853,146 | |
American Homes 4 Rent,
Ser. 2014-SFR3, Cl. A | | 3.68 | | 12/17/36 | | 766,468 | d | 798,350 | |
Amgen,
Sr. Unscd. Notes | | 4.40 | | 5/1/45 | | 1,075,000 | | 1,065,899 | |
Antero Resources,
Gtd. Notes | | 5.63 | | 6/1/23 | | 300,000 | | 310,125 | |
Antero Resources,
Gtd. Notes | | 5.00 | | 3/1/25 | | 925,000 | d | 915,750 | |
Bear Stearns ALT-A Trust,
Ser. 2004-2, Cl. 2A1 | | 3.31 | | 3/25/34 | | 1,687,063 | c | 1,668,152 | |
Bear Stearns Commercial Mortgage Securities Trust,
Ser. 2005-PWR10, Cl. AJ | | 5.59 | | 12/11/40 | | 752,346 | c | 821,394 | |
Bear Stearns Commercial Mortgage Securities Trust,
Ser. 2007-PWR18, Cl. AJ | | 6.22 | | 6/11/50 | | 3,300,000 | c | 3,316,850 | |
BWAY Holding,
Sr. Scd. Notes | | 5.50 | | 4/15/24 | | 2,074,000 | d | 2,102,517 | |
CCO Holdings,
Sr. Unscd. Notes | | 5.88 | | 4/1/24 | | 1,125,000 | d | 1,206,563 | |
Citigroup,
Sr. Unscd. Notes | | 4.65 | | 7/30/45 | | 2,250,000 | | 2,354,823 | |
Citigroup,
Sub. Bonds | | 4.40 | | 6/10/25 | | 4,650,000 | | 4,792,150 | |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Bonds and Notes - 94.2% (continued) | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | a | Value ($) | |
United States - 12.0% (continued) | | | | | |
Colony Starwood Homes,
Ser. 2016-2A, Cl. A | | 2.24 | | 12/17/33 | | 4,190,393 | c,d | 4,223,395 | |
Countrywide Alternative Loan Trust,
Ser. 2004-18CB, Cl. 4A1 | | 5.50 | | 9/25/34 | | 2,479,476 | | 2,540,333 | |
Cox Communications,
Sr. Unscd. Notes | | 3.35 | | 9/15/26 | | 1,150,000 | d | 1,132,284 | |
DaVita,
Gtd. Notes | | 5.00 | | 5/1/25 | | 1,175,000 | | 1,186,750 | |
Digital Euro Finco,
Gtd. Bonds | EUR | 2.63 | | 4/15/24 | | 975,000 | | 1,120,952 | |
DISH DBS,
Gtd. Notes | | 5.88 | | 11/15/24 | | 1,125,000 | | 1,184,063 | |
Duke Energy,
Sr. Unscd. Notes | | 3.75 | | 9/1/46 | | 2,050,000 | | 1,885,516 | |
Dynegy,
Gtd. Notes | | 7.38 | | 11/1/22 | | 630,000 | b | 606,375 | |
Dynegy,
Gtd. Notes | | 7.63 | | 11/1/24 | | 570,000 | b | 524,400 | |
Energy Transfer Partners,
Sr. Unscd. Notes | | 4.75 | | 1/15/26 | | 880,000 | | 921,085 | |
Energy Transfer Partners,
Sr. Unscd. Notes | | 4.20 | | 4/15/27 | | 600,000 | b | 607,810 | |
First Data,
Scd. Notes | | 5.75 | | 1/15/24 | | 1,125,000 | d | 1,171,406 | |
Freeport-McMoRan,
Gtd. Notes | | 5.45 | | 3/15/43 | | 1,375,000 | | 1,179,063 | |
GAHR Commercial Mortgage Trust,
Ser. 2015-NRF, Cl. EFX | | 3.49 | | 12/15/34 | | 3,260,000 | c,d | 3,252,896 | |
Genesis Energy,
Gtd. Notes | | 6.75 | | 8/1/22 | | 695,000 | | 718,456 | |
Goldman Sachs Group,
Sr. Unscd. Notes | | 3.50 | | 11/16/26 | | 3,415,000 | | 3,391,232 | |
Great Plains Energy,
Sr. Unscd. Notes | | 3.90 | | 4/1/27 | | 900,000 | | 912,330 | |
Icahn Enterprises,
Gtd. Notes | | 5.88 | | 2/1/22 | | 1,225,000 | | 1,266,344 | |
International Game Technology,
Sr. Scd. Notes | | 9.25 | | 5/15/23 | | 1,075,000 | d | 1,177,125 | |
JP Morgan Chase Commercial Mortgage Securities Trust,
Ser. 2006-CB17, Cl. AM | | 5.46 | | 12/12/43 | | 166,264 | | 166,229 | |
KeyCorp Student Loan Trust,
Ser. 1999-B, Cl. CTFS | | 1.83 | | 11/25/36 | | 1,753,175 | c | 1,696,640 | |
Kinder Morgan,
Gtd. Notes | | 4.30 | | 6/1/25 | | 575,000 | | 599,919 | |
Kinder Morgan,
Gtd. Notes | | 5.55 | | 6/1/45 | | 900,000 | | 956,577 | |
Kraft Heinz Foods,
Gtd. Notes | EUR | 2.25 | | 5/25/28 | | 5,075,000 | | 5,622,497 | |
Long Beach Mortgage Loan Trust,
Ser. 2004-1, Cl. M2 | | 1.81 | | 2/25/34 | | 581,118 | c | 576,394 | |
Morgan Stanley Capital I Trust,
Ser. 2007-IQ14, Cl. AM | | 5.74 | | 4/15/49 | | 1,660,474 | c | 1,658,599 | |
Morgan Stanley Mortgage Loan Trust,
Ser. 2005-1, Cl. 4A1 | | 1.28 | | 3/25/35 | | 825,698 | c | 772,068 | |
12
| | | | | | | | | | |
| |
Bonds and Notes - 94.2% (continued) | Coupon
Rate (%) | | Maturity
Date | | Principal
Amount ($) | a | Value ($) | |
United States - 12.0% (continued) | | | | | |
Reynolds Group Issuer,
Gtd. Notes | | 7.00 | | 7/15/24 | | 1,095,000 | b,d | 1,180,547 | |
Scientific Games International,
Gtd. Notes | | 10.00 | | 12/1/22 | | 2,560,000 | | 2,782,720 | |
Springleaf Funding Trust,
Ser. 2016-AA, Cl. A | | 2.90 | | 11/15/29 | | 3,900,000 | d | 3,922,012 | |
Sprint Communications,
Sr. Unscd. Notes | | 7.00 | | 8/15/20 | | 1,335,000 | | 1,450,144 | |
Sprint Spectrum,
Sr. Scd. Notes | | 3.36 | | 3/20/23 | | 3,250,000 | d | 3,286,562 | |
Targa Resources Partners,
Gtd. Notes | | 5.13 | | 2/1/25 | | 1,125,000 | d | 1,165,781 | |
T-Mobile USA,
Gtd. Notes | | 6.00 | | 3/1/23 | | 3,825,000 | | 4,082,002 | |
Verizon Communications,
Sr. Unscd. Notes | | 4.13 | | 3/16/27 | | 1,125,000 | | 1,149,443 | |
Zayo Group,
Gtd. Notes | | 5.75 | | 1/15/27 | | 940,000 | d | 999,925 | |
ZFS Finance (USA) Trust V,
Jr. Sub. Cap. Secs. | | 6.50 | | 5/9/37 | | 7,785,000 | c,d | 7,813,026 | |
| | 97,778,077 | |
Total Bonds and Notes
(cost $771,928,196) | | 770,407,897 | |
Options Purchased - .4% | | | | | Face Amount Covered by Contracts | | Value ($) | |
Put Options - .4% | | | | | |
Euro,
May 2017 @ EUR 1.08 | | | | | | 74,600,000 | | 853,345 | |
Japanese Yen,
May 2017 @ JPY 110 | | | | | | 82,000,000 | | 414,218 | |
Japanese Yen,
May 2017 @ JPY 110 | | | | | | 81,000,000 | | 237,109 | |
South African Rand,
July 2017 @ ZAR 13.17 | | | | | | 24,100,000 | | 380,817 | |
Turkish Lira,
June 2017 @ TRY 3.73 | | | | | | 24,100,000 | | 1,030,718 | |
Total Options Purchased
(cost $4,172,518) | | 2,916,207 | |
Short-Term Investments - .7% | Yield at
Date of
Purchase (%) | | Maturity Date | | Principal Amount ($) | | Value ($) | |
U.S. Treasury Bills
(cost $5,993,228) | | 0.87 | | 9/28/17 | | 6,015,000 | g | 5,993,256 | |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | | | | | |
| |
Other Investment - 2.6% | | | | | Shares | | Value ($) | |
Registered Investment Company; | | | | | |
Dreyfus Institutional Preferred Government Plus Money Market Fund
(cost $21,384,468) | | | | | | 21,384,468 | h | 21,384,468 | |
Investment of Cash Collateral for Securities Loaned - 1.3% | | | | | | | | |
Registered Investment Company; | | | | | |
Dreyfus Institutional Preferred Money Market Fund, Hamilton Shares
(cost $10,747,052) | | | | | | 10,747,052 | h | 10,747,052 | |
Total Investments (cost $814,225,462) | | 99.2% | 811,448,880 | |
Cash and Receivables (Net) | | 0.8% | 6,382,284 | |
Net Assets | | 100.0% | 817,831,164 | |
a Principal amount stated in U.S. Dollars unless otherwise noted.
ARS—Argentine Peso
BRL—Brazilian Real
CAD—Canadian Dollar
COP—Colombian Peso
EUR—Euro
GBP—British Pound
INR—Indian Rupee
JPY—Japanese Yen
MXN—Mexican Peso
NOK—Norwegian Krone
NZD—New Zealand Dollar
PLN—Polish Zloty
RUB—Russian Ruble
SEK—Swedish Krona
THB—Thai Baht
TRY—Turkish Lira
ZAR—South African Rand
b Security, or portion thereof, on loan. At April 30, 2017, the value of the fund’s securities on loan was $10,717,447 and the value of the collateral held by the fund was $11,792,113, consisting of cash collateral of $10,747,052 and U.S. Government & Agency securities valued at $1,045,061.
c Variable rate security—rate shown is the interest rate in effect at period end.
d 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 April 30, 2017, these securities were valued at $184,796,150 or 22.6% of net assets.
e Principal amount for accrual purposes is periodically adjusted based on changes in the Mexican Consumer Price Index.
f Principal amount for accrual purposes is periodically adjusted based on changes in the New Zealand Consumer Price Index.
g Held by or on behalf of a counterparty for open futures contracts.
h Investment in affiliated money market mutual fund.
14
| | |
Portfolio Summary (Unaudited) † | Value (%) |
Non-U.S. Government | 65.7 |
Corporate-Investment Grade | 16.2 |
Securitized | 7.0 |
Corporate-High Yield | 5.3 |
Cash & Equivalents | 3.9 |
U.S. Government | .7 |
Options Purchased | .4 |
| | 99.2 |
† Based on net assets.
See notes to financial statements.
15
STATEMENT OF FUTURES
April 30, 2017 (Unaudited)
| | | | | | | |
| | Contracts | Market Value Covered by Contracts ($) | Expiration | Unrealized Appreciation (Depreciation) ($) | |
| | | | | | |
Futures Long | | |
Australian 10 Year Bond | 69 | | 6,702,226 | June 2017 | 204,776 | |
Australian 3 Year Bond | 926 | | 77,742,028 | June 2017 | 685,914 | |
Canadian 10 year Bond | 96 | | 9,814,849 | June 2017 | 265,026 | |
Japanese 10 Year Bond | 23 | | 31,159,094 | June 2017 | 156,623 | |
Long Gilt | 35 | | 5,814,747 | June 2017 | 121,900 | |
Long Term French Government Bond | 155 | | 25,299,231 | June 2017 | 135,683 | |
U.S. Treasury 10 Year Notes | 303 | | 38,092,781 | June 2017 | 35,508 | |
U.S. Treasury 5 Year Notes | 17 | | 2,012,906 | June 2017 | 11,529 | |
Futures Short | | |
Euro-Bond | 587 | | (103,445,305) | June 2017 | (693,149) | |
U.S. Treasury Ultra Long Bond | 69 | | (11,242,687) | June 2017 | (51,329) | |
Gross Unrealized Appreciation | | 1,616,959 | |
Gross Unrealized Depreciation | | (744,478) | |
See notes to financial statements.
16
STATEMENT OF OPTIONS WRITTEN
April 30, 2017 (Unaudited)
| | | | | | |
| | | Face Amount Covered by Contracts ($) | | Value ($) | |
Call Options: | | | | | |
South African Rand | | | | | |
July 2017 @ ZAR 15.06 | | 24,100,000 | | (105,726) | |
Total Options Written (premiums received $279,825) | | | | (105,726) | |
See notes to financial statements.
17
STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS April 30, 2017 (Unaudited)
| | | | | |
Forward Foreign Currency Exchange Contracts | Foreign Currency
Amounts | Cost/
Proceeds ($) | Value ($) | Unrealized Appreciation (Depreciation)($) |
Purchases: | | | |
Bank of America | | | |
Australian Dollar, | | | |
Expiring | | | |
5/31/2017 | 4,945,000 | 3,711,766 | 3,700,594 | (11,172) |
South Korean Won, | | | |
Expiring | | | |
6/15/2017 | 20,526,245,000 | 18,330,606 | 18,048,383 | (282,223) |
Thai Baht, | | | |
Expiring | | | |
6/15/2017 | 14,325,000 | 413,742 | 414,000 | 258 |
Citigroup | | | |
Egyptian Pound, | | | |
Expiring | | | |
5/23/2017 | 32,000,000 | 1,753,424 | 1,761,912 | 8,488 |
Indonesian Rupiah, | | | |
Expiring | | | |
6/15/2017 | 113,733,955,000 | 8,497,120 | 8,484,569 | (12,551) |
Mexican New Peso, | | | |
Expiring | | | |
6/15/2017 | 442,490,000 | 23,128,266 | 23,311,768 | 183,502 |
Nigerian Naira, | | | |
Expiring | | | |
6/8/2017 | 628,000,000 | 1,779,037 | 2,009,248 | 230,211 |
South African Rand, | | | |
Expiring | | | |
6/15/2017 | 4,280,000 | 327,705 | 317,551 | (10,154) |
Goldman Sachs International | | | |
British Pound, | | | |
Expiring | | | |
5/31/2017 | 6,520,000 | 8,382,300 | 8,452,922 | 70,622 |
Euro, | | | |
Expiring | | | |
5/31/2017 | 52,245,000 | 56,040,600 | 57,009,339 | 968,739 |
Japanese Yen, | | | |
Expiring | | | |
5/31/2017 | 910,455,000 | 8,199,086 | 8,177,770 | (21,316) |
HSBC | | | |
British Pound, | | | |
Expiring | | | |
5/31/2017 | 29,060,000 | 37,306,763 | 37,675,138 | 368,375 |
Canadian Dollar, | | | |
Expiring | | | |
5/31/2017 | 8,760,000 | 6,508,917 | 6,420,409 | (88,508) |
18
| | | | | | | | |
Forward Foreign Currency Exchange Contracts | Foreign Currency
Amounts | Cost/
Proceeds ($) | Value ($) | Unrealized Appreciation (Depreciation)($) |
Purchases: (continued) |
HSBC (continued) |
Japanese Yen, | | | |
Expiring | | | |
5/31/2017 | 11,281,125,000 | 104,198,225 | 101,327,842 | (2,870,383) |
Singapore Dollar, | | | |
Expiring | | | |
6/15/2017 | 3,515,000 | 2,525,750 | 2,517,115 | (8,635) |
JP Morgan Chase Bank | | | |
British Pound, | | | |
Expiring | | | |
5/31/2017 | 6,590,000 | 8,477,811 | 8,543,674 | 65,863 |
Indian Rupee, | | | |
Expiring | | | |
6/15/2017 | 2,244,585,000 | 34,079,088 | 34,648,015 | 568,927 |
Russian Ruble, | | | |
Expiring | | | |
6/15/2017 | 749,680,000 | 12,900,716 | 13,023,191 | 122,475 |
Swiss Franc, | | | |
Expiring | | | |
5/31/2017 | 1,850,000 | 1,853,356 | 1,863,409 | 10,053 |
Turkish Lira, | | | |
Expiring | | | |
6/15/2017 | 100,575,000 | 27,206,036 | 27,917,229 | 711,193 |
UBS | | | |
Swedish Krona, | | | |
Expiring | | | |
5/31/2017 | 71,715,000 | 8,109,988 | 8,111,330 | 1,342 |
Sales: | | | |
Bank of America | | | |
Taiwanese Dollar, | | | |
Expiring | | | |
6/15/2017 | 487,130,000 | 16,131,201 | 16,177,379 | (46,178) |
Citigroup | | | |
Brazilian Real, | | | |
Expiring | | | |
6/2/2017 | 30,485,000 | 9,600,970 | 9,516,278 | 84,692 |
Goldman Sachs International | | | |
Czech Koruna, | | | |
Expiring | | | |
6/15/2017 | 34,260,000 | 1,381,785 | 1,394,602 | (12,817) |
Polish Zloty, | | | |
Expiring | | | |
6/14/2017 | 36,670,000 | 9,259,634 | 9,448,644 | (189,010) |
Swedish Krona, | | | |
Expiring | | | |
5/31/2017 | 13,095,000 | 1,460,701 | 1,481,111 | (20,410) |
19
STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (Unaudited) (continued)
| | | | | | | | |
Forward Foreign Currency Exchange Contracts | Foreign Currency
Amounts | Cost/
Proceeds ($) | Value ($) | Unrealized Appreciation (Depreciation)($) |
Sales: (continued) |
HSBC | | | |
Mexican New Peso, | | | |
Expiring | | | |
6/15/2017 | 27,365,000 | 1,446,251 | 1,441,674 | 4,577 |
New Zealand Dollar, | | | |
Expiring | | | |
5/31/2017 | 79,120,000 | 55,570,011 | 54,277,661 | 1,292,350 |
JP Morgan Chase Bank | | | |
Israeli Shekel | | | |
Expiring | | | |
6/15/2017 | 6,740,000 | 1,871,827 | 1,863,906 | 7,921 |
UBS | | | |
Mexican New Peso, | | | |
Expiring | | | |
6/15/2017 | 451,595,000 | 23,726,324 | 23,791,448 | (65,124) |
Norwegian Krone, | | | |
Expiring | | | |
5/31/2017 | 93,170,000 | 10,931,790 | 10,856,057 | 75,733 |
Gross Unrealized Appreciation | | | 4,775,321 |
Gross Unrealized Depreciation | | | (3,638,481) |
See notes to financial statements.
20
STATEMENT OF SWAP AGREEMENTS
April 30, 2017 (Unaudited)
| | | | | | | |
Centrally Cleared Interest Rate Swaps | |
| | | | | | |
Notional
Amount($)† | Currency/ Floating Rate | Counterparty | (Pay)
Receive
Fixed
Rate (%) | Expiration | Unrealized Appreciation (Depreciation) ($) |
50,300,000 | USD - 6 Month Libor | Deutsche Bank | 2.48 | 1/10/2021 | (1,570,561) |
36,000,000 | USD - 3 Month Libor | Morgan Stanley Capital Services | 1.79 | 10/3/2046 | 5,724,249 |
5,300,000,000 | JPY - 6 Month Libor | Citigroup | 0.08 | 11/4/2026 | (526,975) |
Gross Unrealized Appreciation | 5,724,249 |
Gross Unrealized Depreciation | (2,097,536) |
JPY—Japanese Yen
USD—United States Dollar
† Clearing House-Chicago Mercantile Exchange
See notes to financial statements.
21
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2017 (Unaudited)
| | | | | | | |
| | | | | | |
| | | Cost | | Value | |
Assets ($): | | | | |
Investments in securities—See Statement of Investments
(including securities on loan, valued at $10,717,447)—Note 1(c): | | | | |
Unaffiliated issuers | | 782,093,942 | | 779,317,360 | |
Affiliated issuers | | 32,131,520 | | 32,131,520 | |
Cash | | | | | 4,124,679 | |
Cash denominated in foreign currency | | | 6,142,208 | | 6,141,464 | |
Dividends, interest and securities lending income receivable | | | | | 7,349,561 | |
Unrealized appreciation on forward foreign
currency exchange contracts—See Statement of
Forward Foreign Currency Exchange Contracts—Note 4 | | | | | 4,775,321 | |
Cash collateral held by broker—Note 4 | | | | | 2,608,936 | |
Receivable for investment securities sold | | | | | 2,212,503 | |
Receivable for shares of Beneficial Interest subscribed | | | | | 835,420 | |
Prepaid expenses | | | | | 54,771 | |
| | | | | 839,551,535 | |
Liabilities ($): | | | | |
Due to The Dreyfus Corporation and affiliates—Note 3(c) | | | | | 541,171 | |
Liability for securities on loan—Note 1(c) | | | | | 10,747,052 | |
Payable for investment securities purchased | | | | | 4,525,966 | |
Unrealized depreciation on forward foreign
currency exchange contracts—See Statement of
Forward Foreign Currency Exchange Contracts—Note 4 | | | | | 3,638,481 | |
Payable for shares of Beneficial Interest redeemed | | | | | 1,370,963 | |
Payable for swap variation margin—Note 4 | | | | | 378,613 | |
Payable for futures variation margin—Note 4 | | | | | 122,711 | |
Outstanding options written, at value (premiums received
$279,825)—See Statement of Options Written—Note 4 | | | | | 105,726 | |
Accrued expenses | | | | | 289,688 | |
| | | | | 21,720,371 | |
Net Assets ($) | | | 817,831,164 | |
Composition of Net Assets ($): | | | | |
Paid-in capital | | | | | 935,632,096 | |
Accumulated distributions in excess of investment income—net | | | | | (1,679,678) | |
Accumulated net realized gain (loss) on investments | | | | | (119,055,901) | |
Accumulated net unrealized appreciation (depreciation)
on investments, options transactions and foreign currency
transactions (including $872,481 net unrealized
appreciation on futures and $3,626,713
net unrealized appreciation on centrally cleared swap
agreements) | | | | 2,934,647 | |
Net Assets ($) | | | 817,831,164 | |
| | | | | | |
Net Asset Value Per Share | Class A | Class C | Class I | Class Y | |
Net Assets ($) | 79,739,177 | 43,049,224 | 644,575,093 | 50,467,670 | |
Shares Outstanding | 5,142,518 | 2,844,586 | 41,196,709 | 3,224,660 | |
Net Asset Value Per Share ($) | 15.51 | 15.13 | 15.65 | 15.65 | |
| | | | | | |
See notes to financial statements. | | | | | |
22
STATEMENT OF OPERATIONS
Six Months Ended April 30, 2017 (Unaudited)
| | | | | | | |
| | | | | | | |
| | | | | | |
| | | | | | |
Investment Income ($): | | | | |
Income: | | | | |
Interest (net of $5,658 foreign taxes withheld at source) | | | 11,182,867 | |
Dividends from affiliated issuers | | | 26,386 | |
Income from securities lending—Note 1(c) | | | 7,859 | |
Total Income | | | 11,217,112 | |
Expenses: | | | | |
Management fee—Note 3(a) | | | 2,483,521 | |
Shareholder servicing costs—Note 3(c) | | | 719,159 | |
Distribution fees—Note 3(b) | | | 170,335 | |
Custodian fees—Note 3(c) | | | 99,966 | |
Prospectus and shareholders’ reports | | | 41,371 | |
Registration fees | | | 40,991 | |
Professional fees | | | 40,746 | |
Trustees’ fees and expenses—Note 3(d) | | | 35,510 | |
Loan commitment fees—Note 2 | | | 10,204 | |
Miscellaneous | | | 35,618 | |
Total Expenses | | | 3,677,421 | |
Less—reduction in fees due to earnings credits—Note 3(c) | | | (5,020) | |
Net Expenses | | | 3,672,401 | |
Investment Income—Net | | | 7,544,711 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | | |
Net realized gain (loss) on investments and foreign currency transactions | (14,871,876) | |
Net realized gain (loss) on options transactions | (10,586) | |
Net realized gain (loss) on futures | (1,830,971) | |
Net realized gain (loss) on swap agreements | 998,688 | |
Net realized gain (loss) on forward foreign currency exchange contracts | 5,081,441 | |
Net Realized Gain (Loss) | | | (10,633,304) | |
Net unrealized appreciation (depreciation) on investments
and foreign currency transactions | | | 2,114,292 | |
Net unrealized appreciation (depreciation) on options transactions | | | (2,072,840) | |
Net unrealized appreciation (depreciation) on futures | | | 2,769,517 | |
Net unrealized appreciation (depreciation) on swap agreements | | | 7,418,459 | |
Net unrealized appreciation (depreciation) on
forward foreign currency exchange contracts | | | 2,251,603 | |
Net Unrealized Appreciation (Depreciation) | | | 12,481,031 | |
Net Realized and Unrealized Gain (Loss) on Investments | | | 1,847,727 | |
Net Increase in Net Assets Resulting from Operations | | 9,392,438 | |
| | | | | | | |
See notes to financial statements. | | | | | |
23
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | | | |
| | | | | | | | | | |
| | | | Six Months Ended
April 30, 2017 (Unaudited) | | | | Year Ended
October 31, 2016 | |
Operations ($): | | | | | | | | |
Investment income—net | | | 7,544,711 | | | | 16,029,501 | |
Net realized gain (loss) on investments | | (10,633,304) | | | | (30,131,052) | |
Net unrealized appreciation (depreciation)
on investments | | 12,481,031 | | | | 50,153,726 | |
Net Increase (Decrease) in Net Assets
Resulting from Operations | 9,392,438 | | | | 36,052,175 | |
Distributions to Shareholders from ($): | | | | | | | | |
Investment income—net: | | | | | | | | |
Class A | | | (411,576) | | | | (6,641,676) | |
Class C | | | (29,428) | | | | (2,006,675) | |
Class I | | | (3,999,721) | | | | (27,979,522) | |
Class Y | | | (193,011) | | | | (1,081,049) | |
Total Distributions | | | (4,633,736) | | | | (37,708,922) | |
Beneficial Interest Transactions ($): | | | | | | | | |
Net proceeds from shares sold: | | | | | | | | |
Class A | | | 11,145,086 | | | | 36,491,285 | |
Class C | | | 778,689 | | | | 3,976,649 | |
Class I | | | 161,376,226 | | | | 339,427,283 | |
Class Y | | | 23,462,818 | | | | 6,724,870 | |
Distributions reinvested: | | | | | | | | |
Class A | | | 387,398 | | | | 6,358,838 | |
Class C | | | 21,407 | | | | 1,418,925 | |
Class I | | | 2,821,805 | | | | 20,342,406 | |
Class Y | | | 161,297 | | | | 905,486 | |
Cost of shares redeemed: | | | | | | | | |
Class A | | | (66,888,053) | | | | (120,738,766) | |
Class C | | | (10,409,612) | | | | (21,996,065) | |
Class I | | | (223,561,544) | | | | (479,398,390) | |
Class Y | | | (4,813,174) | | | | (7,822,862) | |
Increase (Decrease) in Net Assets
from Beneficial Interest Transactions | (105,517,657) | | | | (214,310,341) | |
Total Increase (Decrease) in Net Assets | (100,758,955) | | | | (215,967,088) | |
Net Assets ($): | | | | | | | | |
Beginning of Period | | | 918,590,119 | | | | 1,134,557,207 | |
End of Period | | | 817,831,164 | | | | 918,590,119 | |
Distributions in excess of investment income—net | (1,679,678) | | | | (4,590,653) | |
24
| | | | | | | | | | |
| | | | Six Months Ended
April 30, 2017 (Unaudited) | | | | Year Ended
October 31, 2016 | |
Capital Share Transactions (Shares): | | | | | | | | |
Class Aa | | | | | | | | |
Shares sold | | | 750,515 | | | | 2,386,978 | |
Shares issued for distributions reinvested | | | 25,738 | | | | 434,242 | |
Shares redeemed | | | (4,490,185) | | | | (7,967,669) | |
Net Increase (Decrease) in Shares Outstanding | (3,713,932) | | | | (5,146,449) | |
Class Ca | | | | | | | | |
Shares sold | | | 53,192 | | | | 265,437 | |
Shares issued for distributions reinvested | | | 1,446 | | | | 99,037 | |
Shares redeemed | | | (717,006) | | | | (1,483,126) | |
Net Increase (Decrease) in Shares Outstanding | (662,368) | | | | (1,118,652) | |
Class Ia | | | | | | | | |
Shares sold | | | 10,757,893 | | | | 21,928,494 | |
Shares issued for distributions reinvested | | | 186,629 | | | | 1,381,261 | |
Shares redeemed | | | (14,904,669) | | | | (31,023,950) | |
Net Increase (Decrease) in Shares Outstanding | (3,960,147) | | | | (7,714,195) | |
Class Ya | | | | | | | | |
Shares sold | | | 1,536,321 | | | | 426,395 | |
Shares issued for distributions reinvested | | | 10,667 | | | | 61,541 | |
Shares redeemed | | | (315,487) | | | | (516,603) | |
Net Increase (Decrease) in Shares Outstanding | 1,231,501 | | | | (28,667) | |
| | | | | | | | | | |
aDuring the period ended April 30, 2017, 379 Class C shares representing $5,415 were exchanged for 368 Class I shares and 5,730 Class Y shares representing $85,134 were exchanged for 5,730 Class I shares. During the period ended October 31, 2016, 513 Class A shares representing $7,943 were exchanged for 509 Class I shares, 2,600 Class C shares representing $36,634 were exchanged for 2,548 Class A shares and 150,972 Class I shares representing $2,379,285 were exchanged for 150,971 Class Y shares. | |
See notes to financial statements. | | | | | | | | |
25
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
| | | | | | | |
| | | |
Six Months Ended
April 30, 2017 | Year Ended October 31, |
Class A Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 15.35 | 15.38 | 16.75 | 16.53 | 17.48 | 16.85 |
Investment Operations: | | | | | | |
Investment income—neta | .10 | .19 | .31 | .39 | .39 | .34 |
Net realized and unrealized
gain (loss) on investments | .11 | .30 | (1.03) | .06 | (.75) | .65 |
Total from Investment Operations | .21 | .49 | (.72) | .45 | (.36) | .99 |
Distributions: | | | | | | |
Dividends from Investment
income—net | (.05) | (.52) | (.65) | (.23) | (.37) | (.19) |
Dividends from net realized
gain on investments | - | - | - | - | (.22) | (.17) |
Total Distributions | (.05) | (.52) | (.65) | (.23) | (.59) | (.36) |
Net asset value, end of period | 15.51 | 15.35 | 15.38 | 16.75 | 16.53 | 17.48 |
Total Return (%)b | 1.37c | 3.38 | (4.45) | 2.77 | (2.14) | 6.04 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses
to average net assets | 1.35d | 1.23 | 1.12 | 1.08 | 1.07 | 1.02 |
Ratio of net expenses
to average net assets | 1.35d | 1.23 | 1.12 | 1.08 | 1.07 | 1.02 |
Ratio of net investment income
to average net assets | 1.30d | 1.27 | 1.93 | 2.31 | 2.28 | 2.02 |
Portfolio Turnover Rate | 68.97c | 126.57 | 216.56 | 209.53 | 169.41 | 192.50 |
Net Assets, end of period ($ x 1,000) | 79,739 | 135,947 | 215,337 | 319,588 | 552,695 | 683,387 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
26
| | | | | | | |
| | | |
Six Months Ended
April 30, 2017 | Year Ended October 31, |
Class C Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 14.97 | 15.05 | 16.39 | 16.17 | 17.11 | 16.54 |
Investment Operations: | | | | | | |
Investment income—neta | .06 | .11 | .20 | .27 | .26 | .21 |
Net realized and unrealized
gain (loss) on investments | .11 | .29 | (1.01) | .07 | (.72) | .64 |
Total from Investment Operations | .17 | .40 | (.81) | .34 | (.46) | .85 |
Distributions: | | | | | | |
Dividends from investment
income—net | (.01) | (.48) | (.53) | (.12) | (.26) | (.11) |
Dividends from net realized
gain on investments | - | - | - | - | (.22) | (.17) |
Total Distributions | (.01) | (.48) | (.53) | (.12) | (.48) | (.28) |
Net asset value, end of period | 15.13 | 14.97 | 15.05 | 16.39 | 16.17 | 17.11 |
Total Return (%)b | 1.13c | 2.78 | (5.09) | 2.09 | (2.78) | 5.23 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses
to average net assets | 1.80d | 1.78 | 1.77 | 1.76 | 1.75 | 1.76 |
Ratio of net expenses
to average net assets | 1.80d | 1.78 | 1.77 | 1.76 | 1.75 | 1.76 |
Ratio of net investment income
to average net assets | .90d | .71 | 1.29 | 1.63 | 1.60 | 1.31 |
Portfolio Turnover Rate | 68.97c | 126.57 | 216.56 | 209.53 | 169.41 | 192.50 |
Net Assets, end of period ($ x 1,000) | 43,049 | 52,516 | 69,609 | 104,681 | 152,333 | 198,824 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
27
FINANCIAL HIGHLIGHTS (continued)
| | | | | | | | |
| | | |
Six Months Ended
April 30, 2017 | Year Ended October 31, |
Class I Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 15.48 | 15.48 | 16.86 | 16.65 | 17.58 | 16.94 |
Investment Operations: | | | | | | |
Investment income—neta | .15 | .27 | .38 | .44 | .44 | .39 |
Net realized and unrealized
gain (loss) on investments | .11 | .29 | (1.04) | .07 | (.74) | .64 |
Total from Investment Operations | .26 | .56 | (.66) | .51 | (.30) | 1.03 |
Distributions: | | | | | | |
Dividends from Investment
income—net | (.09) | (.56) | (.72) | (.30) | (.41) | (.22) |
Dividends from net realized
gain on investments | - | - | - | - | (.22) | (.17) |
Total Distributions | (.09) | (.56) | (.72) | (.30) | (.63) | (.39) |
Net asset value, end of period | 15.65 | 15.48 | 15.48 | 16.86 | 16.65 | 17.58 |
Total Return (%) | 1.57b | 3.90 | (4.07) | 3.08 | (1.78) | 6.27 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses
to average net assets | .76c | .75 | .74 | .75 | .74 | .80 |
Ratio of net expenses
to average net assets | .76c | .75 | .74 | .75 | .74 | .80 |
Ratio of net investment income
to average net assets | 1.96c | 1.74 | 2.32 | 2.65 | 2.60 | 2.29 |
Portfolio Turnover Rate | 68.97b | 126.57 | 216.56 | 209.53 | 169.41 | 192.50 |
Net Assets, end of period ($ x 1,000) | 644,575 | 699,253 | 818,322 | 1,230,266 | 875,269 | 934,809 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
28
| | | | | | | |
| | | Year Ended October 31, |
| | Six Months Ended
April 30, 2017 |
Class Y Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | a |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 15.49 | 15.48 | 16.86 | 16.65 | 16.33 | |
Investment Operations: | | | | | | |
Investment income—netb | .16 | .28 | .39 | .47 | .14 | |
Net realized and unrealized
gain (loss) on investments | .10 | .30 | (1.03) | .05 | .26 | |
Total from Investment Operations | .26 | .58 | (.64) | .52 | .40 | |
Distributions: | | | | | | |
Dividends from Investment
income—net | (.10) | (.57) | (.74) | (.31) | (.08) | |
Net asset value, end of period | 15.65 | 15.49 | 15.48 | 16.86 | 16.65 | |
Total Return (%) | 1.69c | 3.94 | (3.98) | 3.13 | 2.43 | c |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses
to average net assets | .69d | .67 | .67 | .68 | .74 | d |
Ratio of net expenses
to average net assets | .69d | .67 | .67 | .68 | .74 | d |
Ratio of net investment income
to average net assets | 2.10d | 1.82 | 2.39 | 2.71 | 2.63 | d |
Portfolio Turnover Rate | 68.97c | 126.57 | 216.56 | 209.53 | 169.41 | |
Net Assets, end of period ($ x 1,000) | 50,468 | 30,875 | 31,290 | 30,278 | 1 | |
a From July 1, 2013 (commencement of initial offering) to October 31, 2013.
b Based on average shares outstanding.
c Not annualized.
d Annualized.
See notes to financial statements.
29
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus International Bond Fund (the “fund”) is a separate non-diversified series of The Dreyfus/Laurel Funds Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering five series, including the fund. The fund’s investment objective is to seek to maximize total return through capital appreciation and income. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
Effective March 31, 2017, the fund authorized the issuance of Class T shares, but, as of the date of this report, the fund did not offer Class T shares for purchase.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C, Class I, Class T and Class Y. Class A, Class C and Class T shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A and Class T shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered 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.
30
The Trust accounts 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.
(a) Portfolio valuation: 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).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
31
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Registered investment companies that are not traded on an exchange are valued at their net asset value and are generally categorized within Level 1 of the fair value hierarchy.
Investments in securities, excluding short-term investments (other than U.S. Treasury Bills), futures, options and forward foreign currency exchange contracts (“forward contracts”) are valued each business day by an independent pricing service (the “Service”) approved by the Trust’s Board of Trustees (the “Board”). Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are valued as determined by the Service, based on methods which include consideration of the following: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. These securities are generally categorized within Level 2 of the fair value hierarchy.
U.S. Treasury Bills are valued at the mean price between quoted bid prices and asked prices by the Service. These securities are generally categorized within Level 2 of the fair value hierarchy.
The Service is engaged under the general supervision of the Board.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
32
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Futures and options, which are traded on an exchange, are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day and are generally categorized within Level 1 of the fair value hierarchy. Options traded over-the-counter (“OTC”) are valued at the mean between the bid and asked price and are generally categorized within Level 2 of the fair value hierarchy. Investments in swap agreements are valued each business day by the Service. Swaps are valued by the Service by using a swap pricing model which incorporates among other factors, default probabilities, recovery rates, credit curves of the underlying issuer and swap spreads on interest rates and are generally categorized within Level 2 of the fair value hierarchy. Forward contracts are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of April 30, 2017 in valuing the fund’s investments:
| | | | | |
| | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total |
Assets ($) | | | | |
Investments in Securities: | | | | |
Asset-Backed | - | 34,818,798 | - | 34,818,798 |
Commercial Mortgage-Backed | - | 17,332,156 | - | 17,332,156 |
Corporate Bonds† | - | 175,923,732 | - | 175,923,732 |
Foreign Government | - | 537,352,658 | - | 537,352,658 |
Registered Investment Companies | 32,131,520 | - | - | 32,131,520 |
Residential Mortgage-Backed | - | 4,980,553 | - | 4,980,553 |
U.S. Treasury | - | 5,993,256 | - | 5,993,256 |
Other Financial Instruments: | | | | |
Futures†† | 1,616,959 | - | - | 1,616,959 |
33
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
| | | | | |
| | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total |
Assets ($) | | | | |
Forward Foreign Currency Exchange Contracts†† | - | 4,775,321 | - | 4,775,321 |
Options Purchased | - | 2,916,207 | - | 2,916,207 |
Swaps†† | - | 5,724,249 | - | 5,724,249 |
Liabilities ($) | | | | |
Other Financial Instruments: | | | | |
Futures†† | (744,478) | - | - | (744,478) |
Forward Foreign Currency Exchange Contracts†† | - | (3,638,481) | - | (3,638,481) |
Options Written | - | (105,726) | - | (105,726) |
Swaps†† | - | (2,097,536) | - | (2,097,536) |
† See Statement of Investments for additional detailed categorizations.
†† Amount shown represents unrealized appreciation (depreciation) at period end.
At April 30, 2017, there were no transfers between levels of the fair value hierarchy.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis.
34
Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by Dreyfus, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended April 30, 2017, The Bank of New York Mellon earned $1,769 from lending portfolio securities, pursuant to the securities lending agreement.
(d) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended April 30, 2017 were as follows:
| | | | | | |
Affiliated Investment Company | Value
10/31/2016 ($) | Purchases ($) | Sales ($) | Value
4/30/2017 ($) | Net
Assets (%) |
Dreyfus Institutional Preferred Government Plus Money Market Fund | 10,733,441 | 269,073,860 | 258,422,833 | 21,384,468 | 2.6 |
35
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
| | | | | | |
Affiliated Investment Company | Value
10/31/2016 ($) | Purchases ($) | Sales ($) | Value
4/30/2017 ($) | Net
Assets (%) |
Dreyfus Institutional Preferred Money Market Fund, Hamilton Shares | 6,497,500 | 42,933,072 | 38,683,520 | 10,747,052 | 1.3 |
Total | 17,230,941 | 312,006,932 | 297,106,353 | 32,131,520 | 3.9 |
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S.
The fund invests primarily in debt securities. Failure of an issuer of the debt securities to make timely interest or principal payments, or a decline or the perception of a decline in the credit quality of a debt security, can cause the debt security’s price to fall, potentially lowering the fund’s share price. In addition, the value of debt securities may decline due to general market conditions that are not specifically related to a particular issuer, such as real or perceived adverse economic conditions, changes in outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment. They may also decline because of factors that affect a particular industry or country.
(f) Dividends and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net are normally declared and paid quarterly. 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. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
36
(g) 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 sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended April 30, 2017, 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 April 30, 2017, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended October 31, 2016 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010, the 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.
The fund has an unused capital loss carryover of $108,967,586 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to October 31, 2016. If not applied, the fund has $64,215,267 of short-term capital losses and $44,752,319 of long-term capital losses which can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2016 was as follows: ordinary income $37,708,922. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in an $810 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended April 30, 2017, the fund did not borrow under the Facilities.
37
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 3—Management Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement with the Dreyfus and the Trust, the Trust has agreed to pay Dreyfus a management fee computed at the annual rate of .60% of the value of the fund’s average daily net assets and is payable monthly.
During the period ended April 30, 2017, the Distributor retained $215 from commissions earned on sales of the fund’s Class A shares and $348 from CDSCs on redemptions of the fund’s Class C shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended April 30, 2017, Class C shares were charged $170,335 pursuant to the Distribution Plan.
(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their 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 fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2017, Class A and Class C shares were charged $132,091 and $56,778, respectively, pursuant to the Shareholder Services Plan.
Under its terms, the Distribution Plan and Shareholder Services Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of a majority of those Trustees who are not “interested persons” of the Trust and who have no direct or indirect financial interest in the operation of or in any agreement related to the Distribution Plan or Shareholder Services Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund 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 fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer
38
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 April 30, 2017, the fund was charged $71,713 for transfer agency services and $4,361 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $3,854.
The fund compensates The Bank of New York Mellon 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 April 30, 2017, the fund was charged $99,966 pursuant to the custody agreement. These fees were partially offset by earnings credits of $1,166.
During the period ended April 30, 2017, the fund was charged $5,751 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $401,658, Distribution Plan fees $26,668, Shareholder Services Plan fees $25,362, custodian fees $64,464, Chief Compliance Officer fees $3,861 and transfer agency fees $19,158.
(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 4—Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of investment securities, excluding short-term securities, forward contracts, futures, options transactions and swap agreements, during the period ended April 30, 2017, amounted to $554,124,525 and $660,684,993, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instrument’s payables and/or
39
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
receivables with collateral held and/or posted and create one single net payment in the event of default or termination.
Each type of derivative instrument that was held by the fund during the period ended April 30, 2017 is discussed below.
Futures: In the normal course of pursuing its investment objective, the fund is exposed to market risk, including interest rate risk, as a result of changes in value of underlying financial instruments. The fund invests in futures in order to manage its exposure to or protect against changes in the market. A futures contract represents a commitment for the future purchase or a sale of an asset at a specified date. Upon entering into such contracts, these investments require initial margin deposits with a counterparty, which consist of cash or cash equivalents. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses which are recorded in the Statement of Operations. When the contracts are closed, the fund recognizes a realized gain or loss which is reflected in the Statement of Operations. There is minimal counterparty credit risk to the fund with futures since they are exchange traded, and the exchange guarantees the futures against default. Futures open at April 30, 2017 are set forth in the Statement of Futures.
Options Transactions: The fund purchases and writes (sells) put and call options to hedge against changes in foreign currencies, or as a substitute for an investment. The fund is subject to market risk and currency risk in the course of pursuing its investment objectives through its investments in options contracts. A call option gives the purchaser of the option the right (but not the obligation) to buy, and obligates the writer to sell, the underlying financial instrument at the exercise price at any time during the option period, or at a specified date. Conversely, a put option gives the purchaser of the option the right (but not the obligation) to sell, and obligates the writer to buy the underlying financial instrument at the exercise price at any time during the option period, or at a specified date.
As a writer of call options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument decreases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument increases between those dates.
40
As a writer of put options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument increases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument decreases between those dates.
As a writer of an option, the fund has no control over whether the underlying financial instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the financial instrument underlying the written option. There is a risk of loss from a change in value of such options which may exceed the related premiums received. This risk is mitigated by Master Agreements between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. The Statement of Operations reflects any unrealized gains or losses which occurred during the period as well as any realized gains or losses which occurred upon the expiration or closing of the option transaction.
The following summarizes the fund’s call/put options written during the period ended April 30, 2017:
| | | | | |
| | Face Amount | | Options Terminated |
| | Covered by | Premiums | | Net Realized |
Options Written: | Contracts ($) | Received ($) | Cost ($) | Gain ($) |
Contracts outstanding
October 31, 2016 | 65,100,000 | 867,324 | | |
Contracts written | 161,900,000 | 445,185 | | |
Contracts terminated: | | | | |
Contracts closed | 137,800,000 | 165,360 | 40,192 | 125,168 |
Contracts expired | 65,100,000 | 867,324 | - | 867,324 |
Total contracts
terminated | 202,900,000 | 1,032,684 | 40,192 | 992,492 |
Contracts outstanding
April 30, 2017 | 24,100,000 | 279,825 | | |
Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of
41
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. Forward contracts open at April 30, 2017 are set forth in the Statement of Forward Foreign Currency Exchange Contracts.
Swap Agreements: The fund enters into swap agreements to exchange the interest rate on, or return generated by, one nominal instrument for the return generated by another nominal instrument. Swap agreements are privately negotiated in the OTC market or centrally cleared. The fund enters into these agreements to hedge certain market or interest rate risks, to manage the interest rate sensitivity (sometimes called duration) of fixed income securities, to provide a substitute for purchasing or selling particular securities or to increase potential returns.
For OTC swaps, the fund accrues for interim payments on a daily basis, with the net amount recorded within unrealized appreciation (depreciation) on swap agreements in the Statement of Assets and Liabilities. Once the interim payments are settled in cash, the net amount is recorded as a realized gain (loss) on swaps, in addition to realized gain (loss) recorded upon the termination of swap agreements in the Statement of Operations. Upfront payments made and/or received by the fund, are recorded as an asset and/or liability in the Statement of Assets and Liabilities and are recorded as a realized gain or loss ratably over the agreement’s term/event with the exception of forward starting interest rate swaps which are recorded as realized gains or losses on the termination date.
Upon entering into centrally cleared swap agreements, an initial margin deposit is required with a counterparty, which consists of cash or cash equivalents. The amount of these deposits is determined by the exchange on which the agreement is traded and is subject to change. The change in valuation of centrally cleared swaps is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities. Payments
42
received from (paid to) the counterparty, including upon termination, are recorded as realized gain (loss) in the Statement of Operations.
Fluctuations in the value of swap agreements are recorded for financial statement purposes as unrealized appreciation or depreciation on swap agreements.
Interest Rate Swaps: Interest rate swaps involve the exchange of commitments to pay and receive interest based on a notional principal amount. The fund may elect to pay a fixed rate and receive a floating rate, or receive a fixed rate and pay a floating rate on a notional principal amount. The net interest received or paid on interest rate swap agreements is included within realized gain (loss) on swap agreements in the Statement of Operations. Interest rate swap agreements are subject to general market risk, liquidity risk, counterparty risk and interest rate risk.
For OTC swaps, the fund’s maximum risk of loss from counterparty risk is the discounted value of the cash flows to be received from the counterparty over the agreement’s remaining life, to the extent that the amount is positive. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. There is minimal counterparty risk to the fund with centrally cleared swaps since they are exchange traded and the exchange guarantees these swaps against default. Interest rate swaps open at April 30, 2017 are set forth in the Statement of Swap Agreements.
Credit Default Swaps: Credit default swaps involve commitments to pay a fixed interest rate in exchange for payment if a credit event affecting a third party (the referenced obligation or index) occurs. Credit events may include a failure to pay interest or principal, bankruptcy, or restructuring. The fund enters into these agreements to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. For those credit default swaps in which the fund is paying a fixed rate, the fund is buying credit protection on the instrument. In the event of a credit event, the fund would receive the full notional amount for the reference obligation. For those credit default swaps in which the fund is receiving a fixed rate, the fund is selling credit protection on the underlying instrument. The maximum payouts for these agreements are limited to the notional amount of each swap. Credit default swaps may involve greater risks than if the fund had invested in the reference obligation directly and are subject to general market risk, liquidity risk, counterparty risk and credit risk. This risk may be mitigated by Master Agreements, if any, between the
43
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. At April 30, 2017, there were no credit default swap agreements outstanding.
The following tables show the fund’s exposure to different types of market risk as it relates to the Statement of Assets and Liabilities and the Statement of Operations, respectively.
Fair value of derivative instruments as of April 30, 2017 is shown below:
| | | | | | | | |
| | Derivative
Assets ($) | | | | Derivative
Liabilities ($) | |
Interest rate risk | 7,341,208 | 1,2 | Interest rate risk | | (2,842,014) | 1,2 |
Foreign exchange risk | 7,691,528 | 3,4 | Foreign exchange risk | | (3,744,207) | 4,5 |
Gross fair value of
derivative contracts | 15,032,736 | | | | (6,586,221) | |
| | | | | | | |
Statement of Assets and Liabilities location: | |
1Includes cumulative appreciation (depreciation) on futures as reported in the Statement
of Futures, but only the unpaid variation margin is reported in the Statement of
Assets and Liabilities. |
2Includes cumulative appreciation (depreciation) on swap agreements as reported in the
swap tables in Note 4. Unrealized appreciation (depreciation) on OTC swap agreements
and only unpaid variation margin on cleared swap agreements, are reported in the
Statement of Assets and Liabilities. |
3Options purchased are included in Investments in securities—Unaffiliated issuers, at value. |
4Unrealized appreciation (depreciation) on forward foreign currency exchange contracts. |
5Outstanding options written, at value. | |
The effect of derivative instruments in the Statement of Operations during the period ended April 30, 2017 is shown below:
| | | | | | | | | | | |
Amount of realized gain (loss) on derivatives recognized in income ($) | |
Underlying
risk | Futures | 1 | Options
Transactions | 2 | Forward
Contracts | 3 | Swap
Agreements | 4 | Total | |
Interest
rate | (1,830,971) | | 82,297 | | - | | 1,120,982 | | (627,692) | |
Foreign
exchange | - | | (92,883) | | 5,081,441 | | - | | 4,988,558 | |
Credit | - | | - | | - | | (122,294) | | (122,294) | |
Total | (1,830,971) | | (10,586) | | 5,081,441 | | 998,688 | | 4,238,572 | |
| | | | | | | | | | | |
44
| | | | | | | | | | | | |
Change in unrealized appreciation (depreciation) on derivatives recognized in income ($) | |
Underlying
risk | Futures | 5 | Options
Transactions | 6 | Forward
Contracts | 7 | Swap
Agreements | 8 | Total | |
Interest
rate | 2,769,517 | | - | | - | | 7,418,459 | | 10,187,976 | |
Foreign
exchange | - | | (2,072,840) | | 2,251,603 | | - | | 178,763 | |
Total | 2,769,517 | | (2,072,840) | | 2,251,603 | | 7,418,459 | | 10,366,739 | |
| | | | | | | | | | | | |
Statement of Operations location: | |
1Net realized gain (loss) on futures. | | |
2Net realized gain (loss) on options transactions. |
3Net realized gain (loss) on forward foreign currency exchange contracts. | | |
4Net realized gain (loss) on swap agreements. | | |
5Net unrealized appreciation (depreciation) on futures. | | |
6Net unrealized appreciation (depreciation) on options transactions. | | |
7Net unrealized appreciation (depreciation) on forward foreign currency exchange contracts. | |
8Net unrealized appreciation (depreciation) on swap agreements. | | |
The provisions of ASC Topic 210 “Disclosures about Offsetting Assets and Liabilities” require disclosure on the offsetting of financial assets and liabilities. These disclosures are required for certain investments, including derivative financial instruments subject to Master Agreements which are eligible for offsetting in the Statement of Assets and Liabilities and require the fund to disclose both gross and net information with respect to such investments. For financial reporting purposes, the fund does not offset derivative assets and derivative liabilities that are subject to Master Agreements in the Statement of Assets and Liabilities.
At April 30, 2017, derivative assets and liabilities (by type) on a gross basis are as follows:
| | | | | | |
Derivative Financial Instruments: | | Assets ($) | | Liabilities ($) | |
Futures | | 1,616,959 | | (744,478) | |
Options | | 2,916,207 | | (105,726) | |
Forward contracts | | 4,775,321 | | (3,638,481) | |
Swaps | | 5,724,249 | | (2,097,536) | |
Total gross amount of derivative | | | | | |
assets and liabilities in the | | | | | |
Statement of Assets and Liabilities | | 15,032,736 | | (6,586,221) | |
Derivatives not subject to | | | | | |
Master Agreements | | (7,341,208) | | 2,842,014 | |
Total gross amount of assets | | | | | |
and liabilities subject to | | | | | |
Master Agreements | | 7,691,528 | | (3,744,207) | |
45
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The following tables present derivative assets and liabilities net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of April 30, 2017:†
| | | | | | | |
| | | | Financial | | | |
| | | | Instruments | | | |
| | | | and Derivatives | | | |
| | Gross Amount of | | Available | Collateral | | Net Amount of |
Counterparty | Assets ($) | 1 | for Offset ($) | Received ($) | 2 | Assets ($) |
Bank of America | 258 | | (258) | - | | - |
Barclays Bank | 853,345 | | - | (586,000) | | 267,345 |
Citigroup | 921,111 | | (22,705) | (898,406) | | - |
Goldman Sachs
International | 1,657,287 | | (349,279) | - | | 1,308,008 |
HSBC | 1,665,302 | | (1,665,302) | - | | - |
JP Morgan
Chase Bank | 2,517,150 | | - | (2,190,000) | | 327,150 |
UBS | 77,075 | | (65,124) | (11,951) | | - |
Total | 7,691,528 | | (2,102,668) | (3,686,357) | | 1,902,503 |
| | | | | | | |
| | | | Financial | | | |
| | | | Instruments | | | |
| | | | and Derivatives | | | |
| | Gross Amount of | | Available | Collateral | | Net Amount of |
Counterparty | Liabilities ($) | 1 | for Offset ($) | Pledged ($) | 2 | Liabilities ($) |
Bank of America | (339,573) | | 258 | 339,315 | | - |
Citigroup | (22,705) | | 22,705 | - | | - |
Goldman Sachs
International | (349,279) | | 349,279 | - | | - |
HSBC | (2,967,526) | | 1,665,302 | - | | (1,302,224) |
UBS | (65,124) | | 65,124 | - | | - |
Total | (3,744,207) | | 2,102,668 | 339,315 | | (1,302,224) |
| | | | | | | |
1 Absent a default event or early termination, OTC derivative assets and liabilities are presented at gross amounts and are not offset in the Statement of Assets and Liabilities. |
2 In some instances, the actual collateral received and/or pledged may be more than the amount shown due to over collateralization. |
† See Statement of Investments for detailed information regarding collateral held for open futures contracts. |
The following summarizes the average market value of derivatives outstanding during the period ended April 30, 2017:
| | | |
| | Average Market Value ($) |
Interest rate futures | | 353,438,927 |
Foreign currency options contracts | | 1,645,850 |
Forward contracts | | 1,016,637,213 |
| | | |
The following summarizes the average notional value of swap agreements outstanding during the period ended April 30, 2017:
46
| | | |
| | Average Notional Value ($) |
Interest rate swap agreements | | 202,750,356 |
Credit default swap agreements | | 2,413,908 |
| | | |
At April 30, 2017, accumulated net unrealized depreciation on investments was $2,776,582, consisting of $21,121,156 gross unrealized appreciation and $23,897,738 gross unrealized depreciation.
At April 30, 2017, 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).
47
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 22-23, 2017, the Board considered the renewal of the fund’s Management Agreement pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the “Agreement”). The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from Dreyfus representatives. 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 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. 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 fund.
The Board also considered research support available to, and portfolio management capabilities of, the 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 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 December 31, 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 Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be
48
applicable to the fund and comparison funds. They also considered that performance generally should be considered over longer periods of time, although it is possible that long-term performance can be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect disproportionately long-term performance. The Board discussed with representatives of Dreyfus and/or its affiliates the results of the comparisons and considered that the fund’s total return performance was at or above the Performance Group and Performance Universe medians for the various periods, except for the one-year period when it was below the Performance Group and Performance Universe medians and the five-year and two-year periods when it was below the performance Group and Performance Universe medians, respectively. The Board also noted that the fund’s yield performance was below the Performance Group median for six of the ten one-year periods ended December 31st and below the Performance Universe median for seven of the ten one-year periods ended December 31st. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index.
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 below the Expense Group median and the fund’s actual management fee and total expenses were above the Expense Group and Expense Universe medians.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Broadridge category as the fund and (2) paid to Dreyfus or the Dreyfus-affiliated primary employer of the fund’s primary portfolio manager(s) for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. 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 Clients 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 the 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 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 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
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
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 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. Dreyfus representatives 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 Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also stated 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 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 Dreyfus are adequate and appropriate.
· The Board was somewhat concerned about the fund’s recent total return performance and the fund’s yield and determined to closely monitor 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 the 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 Dreyfus 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 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 indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the
50
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 Dreyfus funds that the Board oversees, 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 fund’s arrangements, or similar arrangements for other Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreement.
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NOTES
52
NOTES
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Dreyfus International Bond Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York 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: | Class A: DIBAX Class C: DIBCX Class I: DIBRX Class Y: DIBYX |
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
The 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 www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. (phone 1-800-SEC-0330 for information).
A description of the policies and procedures that the 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 www.dreyfus.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
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© 2017 MBSC Securities Corporation
6091SA0417 | 
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