UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number | 811-3940 | |||||
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| Strategic Funds, Inc |
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| (Exact name of Registrant as specified in charter) |
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c/o The Dreyfus Corporation 200 Park Avenue New York, New York 10166 |
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| (Address of principal executive offices) (Zip code) |
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| Janette E. Farragher, Esq. 200 Park Avenue New York, New York 10166 |
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| (Name and address of agent for service) |
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Registrant's telephone number, including area code: | (212) 922-6000 | |||||
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Date of fiscal year end:
| 11/30 |
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Date of reporting period: | 5/31/12 |
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The following N-CSR relates only to the Registrant’s series listed below and does not affect the other series of the Registrant, which have different fiscal year ends and, therefore, different N-CSR reporting requirements. Separate N-CSR Forms will be filed for these series, as appropriate.
Dreyfus Select Managers Small Cap Value Fund
Dreyfus U.S. Equity Fund
Global Stock Fund
International Stock Fund
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Dreyfus |
U.S. Equity Fund |
SEMIANNUAL REPORT May 31, 2012
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The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents | |
THE FUND | |
2 | A Letter from the Chairman and CEO |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
10 | Statement of Assets and Liabilities |
11 | Statement of Operations |
12 | Statement of Changes in Net Assets |
14 | Financial Highlights |
17 | Notes to Financial Statements |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus
U.S. Equity Fund
The Fund
A LETTER FROM THE CHAIRMAN AND CEO
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus U.S. Equity Fund, covering the six-month period from December 1, 2011, through May 31, 2012. 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.
The market rebound that drove stock prices higher early in the reporting period seemed to sputter toward the end of the first quarter 2012, primarily due to a resurgent European debt crisis and renewed U.S. economic concerns, including disappointing employment data. Consequently, stocks gave back many of the gains they previously had achieved, but still ended the reporting period with positive returns, on average.
Despite the market’s recent swoon, we believe that trends in many of the more economically sensitive areas of the U.S. economy remain favorable. For example, in the automobile industry, new cars offer improved gas mileage, the average age of the auto fleet is old, and credit is widely available at a time when household debt-service ratios have dropped sharply. Even residential construction has moved into a sustainable uptrend, in our opinion, as employment expands and homebuilders see a rise in orders. On the other hand, net exports may prove to be a slight drag on domestic growth since the economy in the United States is stronger than in many of its trading partners. On the whole, we expect near-trend growth in the U.S. economy for the remainder of 2012.
As always, we encourage you to discuss our observations with your financial advisor.
Thank you for your continued confidence and support.
Jonathan R. Baum
Chairman and Chief Executive Officer
The Dreyfus Corporation
June 15, 2012
2
DISCUSSION OF FUND PERFORMANCE
For the period of December 1, 2011, through May 31, 2012, as provided by Charlie Macquaker and Roy Leckie of Walter Scott & Partners Limited (Walter Scott), Sub-investment adviser
Fund and Market Performance Overview
For the six-month period ended May 31, 2012, Dreyfus U.S. Equity Fund’s Class A shares achieved a return of 1.55%, Class C shares returned 1.15% and Class I shares returned 1.76%.1 In comparison, the fund’s benchmark, the Morgan Stanley Capital International USA Index (“MSCI USA Index”), achieved a 5.91% return over the same period.2
U.S. stocks generally rebounded over the reporting period’s first half amid encouraging macroeconomic developments, but renewed global concerns later moderated those gains, leading to modestly positive returns for the MSCI USA Index overall. The fund produced lower returns than the benchmark, primarily due to shortfalls stemming from falling commodity prices in the energy sector.
The Fund’s Investment Approach
The fund seeks long-term real returns by investing in stocks of companies that are located in the United States.When selecting stocks,Walter Scott seeks companies with fundamental strengths that indicate the potential for sustainable growth. The firm focuses on individual stock selection through extensive fundamental research. Candidates are initially selected for research if they meet certain broad absolute and trend criteria. Financial statements are analyzed in an effort to identify the nature of their cash generation and to understand the variables that add value to their businesses. Companies meeting the financial criteria are subjected to a detailed investigation of their products, costs and pricing, competition, industry position and outlook.
Macroeconomic Developments Fueled Market Volatility
The reporting period began in the midst of a strong rally among U.S. stocks, as investors responded to employment gains and other encourag-
The Fund | 3 |
DISCUSSION OF FUND PERFORMANCE (continued)
ing domestic economic news. In addition, a quantitative easing program in Europe appeared to forestall a more severe banking crisis in the region, and monetary policymakers in China seemed to have engineered a “soft landing” and lower inflation in a major engine of global growth. As a result, investors grew more tolerant of risks, and shifted their attention from traditional safe havens to stocks and other assets expected to benefit from better business conditions throughout the world.
These positive influences were called into question in the spring, when the U.S. labor market’s rebound slowed substantially as the public sector shed jobs and the private sector’s employment gains proved more anemic than expected. At the same time, austerity measures designed to relieve fiscal pressures in Europe encountered political resistance in several countries, threatening proposed bailout programs and raising questions about the region’s economic prospects. These headwinds caused most stock market averages, including the MSCI USA Index, to decline in April and May, partly offsetting previous gains.
Energy Sector Selections Hindered Fund Performance
In this challenging environment, our bottom-up security selection process identified a number of fundamentally strong companies. The consumer discretionary sector produced several healthy performers during the reporting period, including U.S. discount apparel retailerTJX, which encountered rising demand in part due to new customers who arrived during the economic downturn and stayed through the recovery. Ubiquitous coffee seller Starbucks continued to exhibit strong underlying business fundamentals, and a strong management team has helped the company withstand the challenges of an uncertain U.S. economy. Farming goods retailer Tractor Supply reported strong financial results stemming from rising demand from agricultural hobbyists as amateur farming has gained popularity. In the health care sector, sleep disorders specialist ResMed encountered rising sales of sleep apnea equipment as diagnoses increased.
Disappointments during the reporting period were concentrated primarily in the energy sector, where a number of companies were hurt by lower commodity prices. Most notably, plunging natural gas prices
4
prompted some exploration-and-production companies to move resources to oil fields, reducing demand for the hydraulic fracturing products made by CARBO Ceramics for natural gas extraction. The share prices of oil and gas independents Apache, Occidental Petroleum and EOG Resources have all been impacted by the decline in oil-related commodity prices rather than any particular stock-specific news. Similarly, the share price of oil services company Schlumberger has come under pressure.
Finding Attractive Opportunities in U.S. Markets
As of the reporting period’s end, we have remained cautious with regard to the global economy, as ongoing deleveraging among governments, businesses and individuals seems likely to constrain economic activity for some time to come. While these factors are likely to weigh on U.S. economic growth, we are more optimistic about U.S. economic prospects than much of the rest of the world. In addition, we have focused our research-intensive approach on companies with the ability to produce steady earnings growth in a sluggish economic environment. We have found a number of these opportunities in the information technology sector, but none in the financials sector, where we remain concerned about a lack of transparency in financial reporting. In our judgment, these strategies position the fund to participate in gains among fundamentally strong businesses that can grow independent of broader economic trends.
June 15, 2012
Equity funds are subject generally to market, market sector, market liquidity, issuer and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
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. 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. – Reflects reinvestment of net dividends and, where applicable, |
capital gain distributions.The Morgan Stanley Capital International USA (MSCI USA) Index | |
is an unmanaged, market capitalization weighted index that is designed to measure the | |
performance of publicly traded stocks issued by companies in the United States. Investors cannot | |
invest directly in any index. |
The Fund | 5 |
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus U.S. Equity Fund from December 1, 2011 to May 31, 2012. 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 May 31, 2012
Class A | Class C | Class I | ||||
Expenses paid per $1,000† | $ | 6.40 | $ | 10.56 | $ | 4.09 |
Ending value (after expenses) | $ | 1,015.50 | $ | 1,011.50 | $ | 1,017.60 |
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 May 31, 2012
Class A | Class C | Class I | ||||
Expenses paid per $1,000† | $ | 6.41 | $ | 10.58 | $ | 4.09 |
Ending value (after expenses) | $ | 1,018.65 | $ | 1,014.50 | $ | 1,020.95 |
† Expenses are equal to the fund’s annualized expense ratio of 1.27% for Class A, 2.10% for Class C and .81% |
for Class I, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half |
year period). |
6
STATEMENT OF INVESTMENTS
May 31, 2012 (Unaudited)
Common Stocks—96.2% | Shares | Value ($) | |
Consumer Discretionary—19.8% | |||
Coach | 145,500 | 9,813,975 | |
Family Dollar Stores | 176,900 | 11,984,975 | |
McDonald’s | 112,100 | 10,015,014 | |
NIKE, Cl. B | 104,300 | 11,283,174 | |
Panera Bread, Cl. A | 54,700a | 8,038,165 | |
Starbucks | 194,400 | 10,670,616 | |
TJX | 315,300 | 13,387,638 | |
Tractor Supply | 104,400 | 9,536,940 | |
Urban Outfitters | 354,200a | 9,906,974 | |
94,637,471 | |||
Consumer Staples—6.6% | |||
Coca-Cola | 134,700 | 10,066,131 | |
Colgate-Palmolive | 101,900 | 10,016,770 | |
Wal-Mart Stores | 173,000 | 11,386,860 | |
31,469,761 | |||
Energy—9.9% | |||
Apache | 113,300 | 9,220,354 | |
CARBO Ceramics | 119,100b | 9,689,976 | |
EOG Resources | 90,860 | 9,022,398 | |
Occidental Petroleum | 121,100 | 9,599,597 | |
Schlumberger | 149,450 | 9,452,712 | |
46,985,037 | |||
Health Care—12.3% | |||
C.R. Bard | 32,450 | 3,153,815 | |
Celgene | 139,400a | 9,514,050 | |
Johnson & Johnson | 146,700 | 9,158,481 | |
Meridian Bioscience | 410,300 | 7,771,082 | |
ResMed | 356,800a | 11,053,664 | |
Stryker | 185,600 | 9,549,120 | |
Varian Medical Systems | 146,400a | 8,587,824 | |
58,788,036 | |||
Industrial—18.8% | |||
Boeing | 134,200 | 9,341,662 | |
C.H. Robinson Worldwide | 162,300 | 9,455,598 | |
Donaldson | 293,900 | 10,512,803 |
The Fund | 7 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Industrial (continued) | |||
Emerson Electric | 217,200 | 10,158,444 | |
Expeditors International of Washington | 106,000 | 4,054,500 | |
Fastenal | 225,300 | 9,965,019 | |
Flowserve | 86,900 | 8,931,582 | |
MSC Industrial Direct, Cl. A | 113,500 | 8,139,085 | |
Precision Castparts | 62,060 | 10,314,993 | |
Rockwell Collins | 176,000 | 8,865,120 | |
89,738,806 | |||
Information Technology—22.4% | |||
Adobe Systems | 291,300a | 9,044,865 | |
Amphenol, Cl. A | 123,300 | 6,558,327 | |
Automatic Data Processing | 175,800 | 9,167,970 | |
Cisco Systems | 554,100 | 9,048,453 | |
FLIR Systems | 187,500 | 3,999,375 | |
Google, Cl. A | 16,960a | 9,851,386 | |
Intel | 373,600 | 9,653,824 | |
MasterCard, Cl. A | 28,370 | 11,532,689 | |
Microsoft | 311,300 | 9,086,847 | |
Oracle | 351,100 | 9,293,617 | |
Paychex | 326,000 | 9,770,220 | |
QUALCOMM | 174,100 | 9,977,671 | |
106,985,244 | |||
Materials—6.4% | |||
Monsanto | 139,100 | 10,738,520 | |
Praxair | 95,100 | 10,103,424 | |
Sigma-Aldrich | 139,900 | 9,704,863 | |
30,546,807 | |||
Total Common Stocks | |||
(cost $424,005,149) | 459,151,162 |
8
Other Investment—3.4% | Shares | Value ($) | ||
Registered Investment Company; | ||||
Dreyfus Institutional Preferred | ||||
Plus Money Market Fund | ||||
(cost $16,346,000) | 16,346,000 | c | 16,346,000 | |
Investment of Cash Collateral | ||||
for Securities Loaned—1.9% | ||||
Registered Investment Company; | ||||
Dreyfus Institutional Cash | ||||
Advantage Fund | ||||
(cost $9,008,622) | 9,008,622 | c | 9,008,622 | |
Total Investments (cost $449,359,771) | 101.5 | % | 484,505,784 | |
Liabilities, Less Cash and Receivables | (1.5 | %) | (7,385,882 | ) |
Net Assets | 100.0 | % | 477,119,902 |
a Non-income producing security. |
b Security, or portion thereof, on loan.At May 31, 2012, the value of the fund’s securitiy on loan was $8,572,415 |
and the value of the collateral held by the fund was $9,008,622. |
c Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Information Technology | 22.4 | Consumer Staples | 6.6 |
Consumer Discretionary | 19.8 | Materials | 6.4 |
Industrial | 18.8 | Money Market Investments | 5.3 |
Health Care | 12.3 | ||
Energy | 9.9 | 101.5 | |
† Based on net assets. | |||
See notes to financial statements. |
The Fund | 9 |
STATEMENT OF ASSETS AND LIABILITIES |
May 31, 2012 (Unaudited) |
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments (including | ||||
securities on loan, valued at $8,572,415)—Note 1(b): | ||||
Unaffiliated issuers | 424,005,149 | 459,151,162 | ||
Affiliated issuers | 25,354,622 | 25,354,622 | ||
Cash | 658,764 | |||
Dividends, interest and securities lending income receivable | 1,001,405 | |||
Receivable for shares of Common Stock subscribed | 301,009 | |||
Prepaid expenses | 35,716 | |||
486,502,678 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 319,221 | |||
Liability for securities on loan—Note 1(b) | 9,008,622 | |||
Accrued expenses | 54,933 | |||
9,382,776 | ||||
Net Assets ($) | 477,119,902 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 441,435,733 | |||
Accumulated undistributed investment income—net | 1,858,114 | |||
Accumulated net realized gain (loss) on investments | (1,319,958) | |||
Accumulated net unrealized appreciation | ||||
(depreciation) on investments | 35,146,013 | |||
Net Assets ($) | 477,119,902 | |||
Net Asset Value Per Share | ||||
Class A | Class C | Class I | ||
Net Assets ($) | 1,262,155 | 294,729 | 475,563,018 | |
Shares Outstanding | 87,519 | 20,999 | 32,900,266 | |
Net Asset Value Per Share ($) | 14.42 | 14.04 | 14.45 | |
See notes to financial statements. |
10
STATEMENT OF OPERATIONS | ||
Six Months Ended May 31, 2012 (Unaudited) | ||
Investment Income ($): | ||
Income: | ||
Cash dividends: | ||
Unaffiliated issuers | 3,504,475 | |
Affiliated issuers | 8,595 | |
Income from securities lending—Note 1(b) | 266,571 | |
Total Income | 3,779,641 | |
Expenses: | ||
Management fee—Note 3(a) | 1,684,286 | |
Directors’ fees and expenses—Note 3(d) | 34,454 | |
Registration fees | 30,097 | |
Professional fees | 28,682 | |
Custodian fees—Note 3(c) | 21,556 | |
Prospectus and shareholders’ reports | 6,193 | |
Shareholder servicing costs—Note 3(c) | 4,251 | |
Loan commitment fees—Note 2 | 1,346 | |
Distribution fees—Note 3(b) | 1,048 | |
Miscellaneous | 5,833 | |
Total Expenses | 1,817,746 | |
Less—reduction in fees due to earnings credits—Note 3(c) | (4) | |
Net Expenses | 1,817,742 | |
Investment Income—Net | 1,961,899 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments | 1,350,939 | |
Net unrealized appreciation (depreciation) on investments | 1,156,700 | |
Net Realized and Unrealized Gain (Loss) on Investments | 2,507,639 | |
Net Increase in Net Assets Resulting from Operations | 4,469,538 | |
See notes to financial statements. |
The Fund | 11 |
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
May 31, 2012 | Year Ended | |||
(Unaudited) | November 30, 2011 | |||
Operations ($): | ||||
Investment income—net | 1,961,899 | 1,851,998 | ||
Net realized gain (loss) on investments | 1,350,939 | (2,670,897) | ||
Net unrealized appreciation | ||||
(depreciation) on investments | 1,156,700 | 25,300,645 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 4,469,538 | 24,481,746 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class I Shares | (1,914,449) | (274,865) | ||
Net realized gain on investments: | ||||
Class A Shares | — | (11,303) | ||
Class C Shares | — | (1,516) | ||
Class I Shares | — | (752,726) | ||
Total Dividends | (1,914,449) | (1,040,410) | ||
Capital Stock Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A Shares | 667,748 | 460,558 | ||
Class C Shares | 107,994 | 150,798 | ||
Class I Shares | 127,961,476 | 249,266,465 | ||
Dividends reinvested: | ||||
Class A Shares | — | 1,717 | ||
Class C Shares | — | 322 | ||
Class I Shares | 606,842 | 668,490 | ||
Cost of shares redeemed: | ||||
Class A Shares | (385,432) | (2,101,246) | ||
Class C Shares | (27,700) | (281,394) | ||
Class I Shares | (32,058,211) | (41,422,323) | ||
Increase (Decrease) in Net Assets | ||||
from Capital Stock Transactions | 96,872,717 | 206,743,387 | ||
Total Increase (Decrease) in Net Assets | 99,427,806 | 230,184,723 | ||
Net Assets ($): | ||||
Beginning of Period | 377,692,096 | 147,507,373 | ||
End of Period | 477,119,902 | 377,692,096 | ||
Undistributed investment income—net | 1,858,114 | 1,810,664 |
12
Six Months Ended | ||||
May 31, 2012 | Year Ended | |||
(Unaudited) | November 30, 2011 | |||
Capital Share Transactions: | ||||
Class A | ||||
Shares sold | 44,485 | 33,007 | ||
Shares issued for dividends reinvested | — | 127 | ||
Shares redeemed | (26,540) | (152,404) | ||
Net Increase (Decrease) in Shares Outstanding | 17,945 | (119,270) | ||
Class C | ||||
Shares sold | 7,576 | 11,125 | ||
Shares issued for dividends reinvested | — | 24 | ||
Shares redeemed | (1,980) | (20,449) | ||
Net Increase (Decrease) in Shares Outstanding | 5,596 | (9,300) | ||
Class I | ||||
Shares sold | 8,653,043 | 18,119,105 | ||
Shares issued for dividends reinvested | 42,645 | 49,481 | ||
Shares redeemed | (2,169,807) | (3,038,221) | ||
Net Increase (Decrease) in Shares Outstanding | 6,525,881 | 15,130,365 | ||
See notes to financial statements. |
The Fund | 13 |
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||
May 31, 2012 | Year Ended November 30, | |||||||||
Class A Shares | (Unaudited) | 2011 | 2010 | 2009 | 2008a | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 14.20 | 12.83 | 11.68 | 9.14 | 12.50 | |||||
Investment Operations: | ||||||||||
Investment income—netb | .03 | .04 | .01 | .04 | .02 | |||||
Net realized and unrealized | ||||||||||
gain (loss) on investments | .19 | 1.39 | 1.16 | 2.53 | (3.38) | |||||
Total from Investment Operations | .22 | 1.43 | 1.17 | 2.57 | (3.36) | |||||
Distributions: | ||||||||||
Dividends from investment income—net | — | — | (.02) | (.03) | — | |||||
Dividends from net realized | ||||||||||
gain on investments | — | (.06) | — | — | — | |||||
Total Distributions | — | (.06) | (.02) | (.03) | — | |||||
Net asset value, end of period | 14.42 | 14.20 | 12.83 | 11.68 | 9.14 | |||||
Total Return (%)c | 1.55d | 11.17 | 10.01 | 28.19 | (26.88)d | |||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | ||||||||||
to average net assets | 1.27e | 1.15 | 1.76 | 4.65 | 5.54e | |||||
Ratio of net expenses | ||||||||||
to average net assets | 1.27e | 1.15 | 1.40 | 1.40 | 1.40e | |||||
Ratio of net investment income | ||||||||||
to average net assets | .45e | .29 | .04 | .42 | .33e | |||||
Portfolio Turnover Rate | 5.35d | 10.61 | 13.62 | 31.79 | 7.98d | |||||
Net Assets, end of period ($ x 1,000) | 1,262 | 988 | 2,424 | 3,884 | 2,618 |
a | From May 30, 2008 (commencement of operations) to November 30, 2008. |
b | Based on average shares outstanding at each month end. |
c | Exclusive of sales charge. |
d | Not annualized. |
e | Annualized. |
See notes to financial statements.
14
Six Months Ended | ||||||||||
May 31, 2012 | Year Ended November 30, | |||||||||
Class C Shares | (Unaudited) | 2011 | 2010 | 2009 | 2008a | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 13.88 | 12.65 | 11.58 | 9.11 | 12.50 | |||||
Investment Operations: | ||||||||||
Investment (loss)—netb | (.03) | (.06) | (.09) | (.03) | (.02) | |||||
Net realized and unrealized | ||||||||||
gain (loss) on investments | .19 | 1.35 | 1.16 | 2.50 | (3.37) | |||||
Total from Investment Operations | .16 | 1.29 | 1.07 | 2.47 | (3.39) | |||||
Distributions: | ||||||||||
Dividends from net realized | ||||||||||
gain on investments | — | (.06) | — | — | — | |||||
Net asset value, end of period | 14.04 | 13.88 | 12.65 | 11.58 | 9.11 | |||||
Total Return (%)c | 1.15d | 10.22 | 9.24 | 27.11 | (27.12)d | |||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | ||||||||||
to average net assets | 2.10e | 1.94 | 2.52 | 5.83 | 6.30e | |||||
Ratio of net expenses | ||||||||||
to average net assets | 2.10e | 1.94 | 2.15 | 2.15 | 2.14e | |||||
Ratio of net investment (loss) | ||||||||||
to average net assets | (.41)e | (.47) | (.71) | (.27) | (.41)e | |||||
Portfolio Turnover Rate | 5.35d | 10.61 | 13.62 | 31.79 | 7.98d | |||||
Net Assets, end of period ($ x 1,000) | 295 | 214 | 312 | 497 | 374 |
a | From May 30, 2008 (commencement of operations) to November 30, 2008. |
b | Based on average shares outstanding at each month end. |
c | Exclusive of sales charge. |
d | Not annualized. |
e | Annualized. |
See notes to financial statements.
The Fund | 15 |
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||
May 31, 2012 | Year Ended November 30, | |||||||||
Class I Shares | (Unaudited) | 2011 | 2010 | 2009 | 2008a | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 14.27 | 12.88 | 11.70 | 9.16 | 12.50 | |||||
Investment Operations: | ||||||||||
Investment income—netb | .07 | .09 | .07 | .05 | .03 | |||||
Net realized and unrealized | ||||||||||
gain (loss) on investments | .18 | 1.38 | 1.15 | 2.54 | (3.37) | |||||
Total from Investment Operations | .25 | 1.47 | 1.22 | 2.59 | (3.34) | |||||
Distributions: | ||||||||||
Dividends from investment income—net | (.07) | (.02) | (.04) | (.05) | — | |||||
Dividends from net realized | ||||||||||
gain on investments | — | (.06) | — | — | — | |||||
Total Distributions | (.07) | (.08) | (.04) | (.05) | — | |||||
Net asset value, end of period | 14.45 | 14.27 | 12.88 | 11.70 | 9.16 | |||||
Total Return (%) | 1.76c | 11.46 | 10.47 | 28.36 | (26.72)c | |||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | ||||||||||
to average net assets | .81d | .82 | .94 | 3.77 | 5.25d | |||||
Ratio of net expenses | ||||||||||
to average net assets | .81d | .82 | .94 | 1.15 | 1.14d | |||||
Ratio of net investment income | ||||||||||
to average net assets | .88d | .67 | .56 | .54 | .59d | |||||
Portfolio Turnover Rate | 5.35c | 10.61 | 13.62 | 31.79 | 7.98c | |||||
Net Assets, end of period ($ x 1,000) | 475,563 | 376,490 | 144,771 | 1,870 | 366 |
a | From May 30, 2008 (commencement of operations) to November 30, 2008. |
b | Based on average shares outstanding at each month end. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
16
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus U.S. Equity Fund (the “fund”) is a separate diversified series of Strategic Funds, Inc. (the “Company”) 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 nine series, including the fund.The fund’s investment objective is to seek long-term total return. 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. Walter Scott & Partners Limited (“Walter Scott”), a subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser.
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 100 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class C and Class I. Class A shares are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) on Class C shares redeemed within one year of purchase. Class I shares are sold at net asset value per share only to institutional investors. 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.
As of May 31, 2012, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held 1,991 Class A and 894 Class C shares of the fund.
The Fund | 17 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The Company 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 is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates.
The Company enters into contracts that contain a variety of indemnifications.The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: 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.
18
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.
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:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are categorized within Level 1 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securi-
The Fund | 19 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
ties and other appropriate indicators, such as prices of relevant American Depository Receipts and futures contracts. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
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 of Directors. 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 as Level 2 or 3 depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of May 31, 2012 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities— | ||||
Domestic† | 459,151,162 | — | — | 459,151,162 |
Mutual Funds | 25,354,622 | — | — | 25,354,622 |
† | See Statement of Investments for additional detailed categorizations. |
20
In May 2011, FASB issued Accounting Standards Update (“ASU”) No. 2011-04 “Amendments to Achieve Common FairValue Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards (“IFRS”)” (“ASU 2011-04”). ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between GAAP and IFRS. ASU 2011-04 will require reporting entities to disclose the following information for fair value measurements categorized within Level 3 of the fair value hierarchy: quantitative information about the unobservable inputs used in the fair value measurement, the valuation processes used by the reporting entity and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements.The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU 2011-04 and its impact on the financial statements.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. 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 withThe Bank of NewYork Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, 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
The Fund | 21 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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, U.S. Government and Agency securities or letters of credit.The fund is entitled to receive all income on securities loaned, in addition to income earned as a result of the lending transaction. Although each security loaned is fully collateralized, the fund bears the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner. During the period ended May 31, 2012, The Bank of New York Mellon earned $114,245 from lending portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Other investment companies advised by Dreyfus are considered to be “affiliated” with the fund.
The fund may invest in shares of certain affiliated investment companies also advised or managed by Dreyfus. Investments in affiliated investment companies for the period ended May 31, 2012 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 11/30/2011 ($) | Purchases ($) | Sales ($) | 5/31/2012 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Preferred | |||||
Plus Money | |||||
Market | |||||
Fund | 19,448,000 | 98,186,000 | 101,288,000 | 16,346,000 | 3.4 |
Dreyfus | |||||
Institutional | |||||
Cash | |||||
Advantage | |||||
Fund | — | 19,374,046 | 10,365,424 | 9,008,622 | 1.9 |
Total | 19,448,000 | 117,560,046 | 111,653,424 | 25,354,622 | 5.3 |
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and 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 real-
22
ized 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.
(e) 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 May 31, 2012, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period, the fund did not incur any interest or penalties.
Each of the tax years in the three-year period ended November 30, 2011 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010 (the “2010 Act”), the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 (“post-enactment losses”) for an unlimited period. Furthermore, post-enactment capital loss carryovers retain their character as either short-term or long-term capital losses rather than short-term as they were under previous statute.The 2010 Act requires post-enactment losses to be utilized before the utilization of losses incurred in taxable years prior to the effective date of the 2010 Act (“pre-enactment losses”).As a result of this ordering rule, pre-enactment losses may be more likely to expire unused.
The fund has an unused capital loss carryover of $1,927,220 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to November 30, 2011. If not applied, the carryover expires in fiscal 2019.
The Fund | 23 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The tax character of distributions paid to shareholders during the fiscal year ended November 30, 2011 was as follows: ordinary income $1,040,410. 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 a $225 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus (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 May 31, 2012, the fund did not borrow under the Facilities.
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .75% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus has contractually agreed, until April 1, 2013, to waive receipt of its fees and/or assume the expenses of the fund so that the expenses of none of the classes (excluding Rule 12b-1 distribution plan fees, shareholder services plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 1.15% of the value of the fund’s average daily net assets. During the period ended May 31, 2012, there was no expense reimbursement pursuant to the undertaking.
Pursuant to a sub-investment advisory agreement between Dreyfus and Walter Scott, Dreyfus pays Walter Scott a monthly fee at an annual percentage of the fund’s average daily net assets.
24
During the period ended May 31, 2012, the Distributor retained $620 from commissions earned on sales of the fund’s Class A shares.
(b) Under the Distribution Plan (the “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 the average daily net assets of Class C shares. During the period ended May 31, 2012, Class C shares were charged $1,048 pursuant to the 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 Class A and Class C shares and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (a securities dealer, financial institution or other industry professional) in respect of these services.The Distributor determines the amounts to be paid to Service Agents. During the period ended May 31, 2012, Class A and Class C shares were charged $1,355 and $349, respectively, pursuant to the Shareholder Services Plan.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency and cash management services for the fund. During the period ended May 31, 2012, the fund was charged $1,300 pursuant to the transfer agency agreement, which is included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. During the period ended May 31, 2012, the fund was charged $21,556 pursuant to the custody agreement.
The Fund | 25 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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.
Prior to May 29, 2012, the fund compensated The Bank of NewYork Mellon under a cash management agreement for performing cash management services related to fund subscriptions and redemptions. During the period ended May 31, 2012, the fund was charged $84 pursuant to the cash management agreement, which is included in Shareholder servicing costs in the Statement of Operations.These fees were partially offset by earnings credits of $4.
During the period ended May 31, 2012, the fund was charged $3,183 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 $305,250, Rule 12b-1 distribution plan fees $192, shareholder services plan fees $336, custodian fees $10,168, chief compliance officer fees $2,652 and transfer agency per account fees $623.
(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 of investment securities, excluding short-term securities, during the period ended May 31, 2012, amounted to $124,505,609 and $22,873,293, respectively.
At May 31, 2012, the accumulated net unrealized appreciation on investments was $35,146,013, consisting of $52,680,702 gross unrealized appreciation and $17,534,689 gross unrealized depreciation.
At May 31, 2012, 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).
26
NOTES
For More Information
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
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 http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that 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 http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-DREYFUS.
Dreyfus |
Select Managers |
Small Cap Value Fund |
SEMIANNUAL REPORT May 31, 2012
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes.
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents | |
THE FUND | |
2 | A Letter from the Chairman and CEO |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
19 | Statement of Assets and Liabilities |
20 | Statement of Operations |
21 | Statement of Changes in Net Assets |
23 | Financial Highlights |
26 | Notes to Financial Statements |
36 | Information About the Approval of an Additional Sub-Investment Advisory Agreement |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus
Select Managers
Small Cap Value Fund
The Fund
A LETTER FROM THE CHAIRMAN AND CEO
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Select Managers Small CapValue Fund, covering the six-month period from December 1, 2011, through May 31, 2012. 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.
The market rebound that drove stock prices higher early in the reporting period seemed to sputter toward the end of the first quarter 2012, primarily due to a resurgent European debt crisis and renewed U.S. economic concerns, including disappointing employment data. Consequently, stocks gave back many of the gains they previously had achieved, but still ended the reporting period with positive returns, on average.
Despite the market’s recent swoon, we believe that trends in many of the more economically sensitive areas of the U.S. economy remain favorable. For example, in the automobile industry, new cars offer improved gas mileage, the average age of the auto fleet is old, and credit is widely available at a time when household debt-service ratios have dropped sharply. Even residential construction has moved into a sustainable uptrend, in our opinion, as employment expands and homebuilders see a rise in orders. On the other hand, net exports may prove to be a slight drag on domestic growth since the economy in the United States is stronger than in many of its trading partners. On the whole, we expect near-trend growth in the U.S. economy for the remainder of 2012.
As always, we encourage you to discuss our observations with your financial advisor.
Thank you for your continued confidence and support.
Jonathan R. Baum
Chairman and Chief Executive Officer
The Dreyfus Corporation
June 15, 2012
2
DISCUSSION OF FUND PERFORMANCE
For the period of December 1, 2011, through May 31, 2012, as provided by Keith L. Stransky and Robert B. Mayerick, Portfolio Allocation Managers, EACM Advisors LLC
Fund and Market Performance Overview
For the six-month period ended May 31, 2012, Dreyfus Select Managers Small CapValue Fund’s Class A shares produced a total return of 3.73%, Class C shares returned 3.29% and Class I shares returned 3.87%.1 In comparison, the total return of the Russell 2000Value Index (the “Index”), the fund’s benchmark, was 4.87% for the same period.2
Although improving economic fundamentals boosted stock prices early in the reporting period, disappointing employment data and a worsening European debt crisis caused small-cap stocks to give back some of their earlier gains.The fund achieved lower returns than the Index, mainly due to underweighted exposure to the financials sector.
The Fund’s Investment Approach
The fund seeks capital appreciation. To pursue its goal, the fund normally invests at least 80% of its net assets in the stocks of small-cap companies. The fund uses a “multi-manager” approach by selecting one or more sub-advisers to manage its assets. As the fund’s portfolio allocation managers, we seek sub-advisers that complement one another’s style of investing, consistent with the fund’s investment goal. We monitor and evaluate the performance of the sub-advisers and will make corresponding recommendations to Dreyfus and the fund’s Board based on our evaluations.
The fund’s assets are currently under the day-to-day portfolio management of six sub-advisers, each acting independently of one another and using its own methodology to select portfolio investments. As of the end of the reporting period, 20% of the fund’s assets are under the management of Thompson, Siegel and Walmsley, LLC, which employs a combination of quantitative and qualitative security selection methods based on a four-factor valuation model. Approximately 23% of the fund’s assets are under the management of Walthausen & Co.,
The Fund | 3 |
DISCUSSION OF FUND PERFORMANCE (continued)
LLC, which uses a proprietary valuation model to identify companies that are trading at a discount to their intrinsic values. Approximately 13% of the fund’s assets are under the management of Neuberger Berman Management LLC, which uses fundamental analysis and a bottom-up stock selection process to identify publicly traded small-cap companies selling at a material discount to their intrinsic value. Approximately 31% of the fund’s assets are under the management of Lombardia Capital Partners, which uses fundamental analysis and a bottom-up value-oriented approach in seeking stocks trading below their intrinsic values.Approximately 12% of the fund’s assets are under the management of Iridian Asset Management LLC, which employs bottom-up stock selection and a disciplined valuation process to identify and invest in corporate change. Finally, toward the end of the reporting period, the fund added a new sub-adviser,VulcanValue Partners, which seeks companies with sustainable competitive advantages that may enable them to earn superior cash returns on capital – as of the end of the reporting period, approximately 1% of the fund’s assets are under their management. These percentages can change over time, within ranges described in the prospectus.
Mixed Economic Data Fueled Market Volatility
U.S. equities were in the midst of a rally at the start of the reporting period, as investors responded to a recovering U.S. economy and what seemed to be credible measures by European policymakers to address the region’s sovereign debt crisis. Consequently, investors grew more tolerant of risks, and they shifted their attention to riskier assets, including small-cap stocks.
However, new developments in the spring of 2012 called these positive influences into question. The U.S. labor market’s rebound slowed markedly as the public sector shed jobs and employment gains in the private sector proved more anemic than expected. Austerity measures designed to relieve debt pressures in Europe were resisted by voters in France, Greece and Germany, raising questions regarding the region’s fiscal and economic prospects. These threats to global growth caused most stock market averages, including the Index, to decline in April and May, partly erasing earlier gains. Small-cap stocks generally trailed their large-cap counterparts, but value-oriented stocks outperformed growth-oriented equities.
4
Financial Stocks Dampened Fund Performance
The fund’s relative performance was undermined by relatively light exposure (25%) to financial stocks. The financials sector comprises approximately 37% of the Index, but we believe it is not prudent to allocate such a large percentage of the fund’s assets to a single market segment.To a lesser degree, the fund also was hurt by shortfalls in the health care sector, where nursing homes operator Kindred Healthcare struggled with proposed Medicare cuts, and health insurer Universal American disappointed investors with an acquisition that reduced the likelihood that the company might be a takeover candidate.
The fund achieved better relative results in the materials sector. Agricultural chemicals producer American Vanguard achieved record earnings amid strong demand for its products, and polymers manufacturer Omnova Solutions reported better-than-expected earnings.
Positioned for Continued Volatility
Issues arising from Congressional gridlock, the U.S presidential election and the European sovereign debt crisis may continue to produce bouts of heightened volatility in equity markets. Therefore, we have maintained the fund’s focus on attractively valued small-cap companies with track records of consistent growth in businesses that tend to be relatively insensitive to overseas turmoil and a changing domestic economy.
June 15, 2012
Equity funds are subject generally to market, market sector, market liquidity, issuer and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
The prices of small company stocks tend to be more volatile than the prices of large company stocks, mainly because these companies have less established and more volatile earnings histories. They also tend to be less liquid than larger company stocks.
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. 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. Return figures provided reflect the absorption of certain | |
fund expenses by The Dreyfus Corporation pursuant to an undertaking in effect through April 1, | |
2013, at which time it may be extended, terminated or modified. Had these expenses not been | |
absorbed, the fund’s returns would have been lower. | |
2 | SOURCE: LIPPER INC. — Reflects the reinvestment of dividends and, where applicable, |
capital gain distributions.The Russell 2000 Value Index is an unmanaged index, which measures | |
the performance of those Russell 2000 companies with lower price-to-book ratios and lower | |
forecasted growth values. Investors cannot invest directly in any index. |
The Fund | 5 |
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Select Managers Small CapValue Fund from December 1, 2011 to May 31, 2012. 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 May 31, 2012
Class A | Class C | Class I | ||||
Expenses paid per $1,000† | $ | 6.93 | $ | 10.88 | $ | 5.10 |
Ending value (after expenses) | $ | 1,037.30 | $ | 1,032.90 | $ | 1,038.70 |
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 May 31, 2012
Class A | Class C | Class I | ||||
Expenses paid per $1,000† | $ | 6.86 | $ | 10.78 | $ | 5.05 |
Ending value (after expenses) | $ | 1,018.20 | $ | 1,014.30 | $ | 1,020.00 |
† Expenses are equal to the fund’s annualized expense ratio of 1.36% for Class A, 2.14% for Class C and 1.00% |
for Class I, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half |
year period). |
6
STATEMENT OF INVESTMENTS |
May 31, 2012 (Unaudited) |
Common Stocks—95.8% | Shares | Value ($) | |
Consumer Discretionary—13.0% | |||
ACCO Brands | 61,300a | 559,056 | |
American Eagle Outfitters | 41,020 | 792,096 | |
Amerigon | 56,600a | 678,068 | |
Asbury Automotive Group | 31,300a | 836,649 | |
Ascena Retail Group | 90,260a | 1,708,622 | |
Avery Dennison | 32,600 | 948,986 | |
Barrett Business Services | 40,523 | 800,329 | |
Bebe Stores | 89,466 | 570,793 | |
Cabela’s | 20,950a | 740,373 | |
Chico’s FAS | 86,420 | 1,262,596 | |
Coinstar | 11,400a,b | 700,302 | |
Convergys | 149,550 | 2,086,223 | |
Cracker Barrel Old Country Store | 22,487 | 1,377,778 | |
CSS Industries | 40,200 | 765,408 | |
Delta Apparel | 25,175a | 356,730 | |
Ennis | 52,170 | 741,857 | |
Exide Technologies | 163,010a | 378,183 | |
Finish Line, Cl. A | 24,700 | 509,314 | |
FTI Consulting | 51,330a | 1,620,488 | |
G-III Apparel Group | 16,100a | 397,831 | |
Helen of Troy | 30,250a | 952,270 | |
Interval Leisure Group | 6,976 | 116,150 | |
JAKKS Pacific | 36,068b | 666,897 | |
Jarden | 3,763 | 152,966 | |
JOS. A. Bank Clothiers | 26,919a | 1,194,127 | |
Korn/Ferry International | 138,081a | 1,877,902 | |
Krispy Kreme Doughnuts | 80,970a | 509,301 | |
Lifetime Brands | 49,415 | 554,436 | |
M/I Homes | 54,040a | 811,681 | |
Men’s Wearhouse | 24,600 | 885,354 | |
Meredith | 73,623b | 2,178,505 | |
Multimedia Games Holding Company | 56,600a | 713,726 | |
Nathan’s Famous | 4,193a | 102,729 | |
Nu Skin Enterprises, Cl. A | 40,847 | 1,751,519 | |
OfficeMax | 203,700a | 992,019 |
The Fund | 7 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Consumer Discretionary (continued) | |||
PEP Boys-Manny Moe & Jack | 7,100 | 65,888 | |
PHH | 74,130a,b | 1,228,334 | |
Pier 1 Imports | 68,500 | 1,116,550 | |
Quiksilver | 114,600a | 315,150 | |
RadioShack | 56,900b | 264,016 | |
Rent-A-Center | 134,446 | 4,526,797 | |
Ruby Tuesday | 71,070a | 510,283 | |
Ruth’s Hospitality Group | 82,371a | 540,354 | |
Select Comfort | 23,200a | 634,752 | |
Shuffle Master | 33,900a | 537,654 | |
Shutterfly | 25,300a | 697,521 | |
Sonic | 13,939a | 118,900 | |
Talbots | 22,000a,b | 53,680 | |
TiVo | 101,700a | 868,518 | |
Universal Technical Institute | 12,391 | 151,046 | |
Valassis Communications | 52,730a,b | 1,049,854 | |
Visteon | 7,960a | 318,400 | |
VOXX International | 46,700a | 460,462 | |
Wendy’s | 119,100 | 546,669 | |
Wet Seal, Cl. A | 143,912a | 408,710 | |
45,704,802 | |||
Consumer Staples—.9% | |||
Andersons | 22,000 | 958,100 | |
Constellation Brands, Cl. A | 40,800a | 787,032 | |
Nash Finch | 57,556 | 1,186,229 | |
Overhill Farms | 41,025a | 182,561 | |
Smithfield Foods | 8,060a | 158,540 | |
3,272,462 | |||
Energy—5.1% | |||
Atmos Energy | 79,668 | 2,640,198 | |
Berry Petroleum, Cl. A | 55,034 | 2,141,373 | |
Bolt Technology | 5,330 | 65,932 | |
Cal Dive International | 346,880a | 891,482 | |
Callon Petroleum | 147,638a | 636,320 | |
Covanta Holding | 50,600 | 791,384 | |
Energy Partners | 33,970a | 536,386 |
8
Common Stocks (continued) | Shares | Value ($) | |
Energy (continued) | |||
Energy XXI | 23,000 | 714,150 | |
GeoResources | 36,320a | 1,296,624 | |
Gulfport Energy | 47,530a | 878,354 | |
ION Geophysical | 80,100a | 485,406 | |
McDermott International | 46,320a | 470,148 | |
Newpark Resources | 198,090a | 1,146,941 | |
Northern Oil and Gas | 29,292a,b | 525,206 | |
PetroQuest Energy | 171,875a,b | 850,782 | |
Stone Energy | 37,969a | 894,549 | |
Synergy Resources | 130,120a | 352,625 | |
Tetra Technologies | 99,800a | 637,722 | |
TransGlobe Energy | 50,700a | 522,210 | |
Warren Resources | 244,669a | 526,038 | |
Western Refining | 48,800 | 943,792 | |
17,947,622 | |||
Exchange Traded Funds—1.2% | |||
iShares Russell 2000 Index Fund | 56,612b | 4,308,739 | |
Financial—27.3% | |||
Alterra Capital Holdings | 38,300 | 850,643 | |
Altisource Portfolio Solutions | 37,233a | 2,154,301 | |
American Equity Investment Life Holding | 221,276 | 2,341,100 | |
Ares Capital | 169,121 | 2,552,036 | |
Aspen Insurance Holdings | 23,510 | 664,393 | |
Assurant | 4,310 | 143,868 | |
Asta Funding | 60,630 | 531,119 | |
Astoria Financial | 56,000 | 503,440 | |
BancorpSouth | 101,559b | 1,370,031 | |
Bank of Hawaii | 35,355 | 1,638,351 | |
BankUnited | 8,500 | 200,515 | |
BBCN Bancorp | 162,610a | 1,754,562 | |
Brandywine Realty Trust | 50,300c | 564,869 | |
Brookline Bancorp | 66,844 | 587,559 | |
Bryn Mawr Bank | 53,520 | 1,095,554 | |
Capstead Mortgage | 74,800c | 1,029,996 | |
Cash America International | 15,200 | 676,096 | |
CBIZ | 201,147a | 1,134,469 |
The Fund | 9 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Financial (continued) | |||
Centerstate Banks | 83,670 | 605,771 | |
City Holding | 25,100b | 807,718 | |
City National | 2,400 | 119,232 | |
Columbia Banking System | 111,555 | 2,021,377 | |
Comerica | 26,227 | 797,825 | |
Community Bank System | 99,349 | 2,643,677 | |
CoreLogic | 64,900a | 1,102,651 | |
Cullen/Frost Bankers | 20,587 | 1,171,194 | |
CVB Financial | 125,100 | 1,362,339 | |
Deluxe | 109,633 | 2,534,715 | |
DFC Global | 2,150a | 35,432 | |
Dime Community Bancshares | 67,230 | 878,024 | |
Donegal Group, Cl. A | 52,552 | 781,448 | |
Eaton Vance | 6,767 | 164,709 | |
Encore Capital Group | 36,200a | 877,488 | |
Endurance Specialty Holdings | 3,792 | 148,116 | |
Everest Re Group | 1,328 | 135,615 | |
F.N.B | 139,272 | 1,479,069 | |
FBL Financial Group, Cl. A | 24,059 | 614,226 | |
Fidelity National Financial, Cl. A | 41,120 | 774,700 | |
Fifth Street Finance | 86,393b | 821,597 | |
First Bancorp | 20,700 | 192,303 | |
First Cash Financial Services | 22,500a | 842,850 | |
First Commonwealth Financial | 99,000 | 620,730 | |
First Financial Bankshares | 34,620b | 1,109,917 | |
First Financial Holdings | 58,696 | 563,482 | |
First Merchants | 61,257 | 718,545 | |
First Midwest Bancorp | 61,168 | 617,185 | |
First Niagara Financial Group | 85,000 | 685,950 | |
First Potomac Realty Trust | 66,399c | 796,788 | |
Flushing Financial | 41,365 | 533,609 | |
Glimcher Realty Trust | 117,300c | 1,079,160 | |
Hancock Holding | 43,116 | 1,314,607 | |
HCC Insurance Holdings | 83,136 | 2,598,831 | |
Heritage Financial Group | 47,744 | 586,296 | |
Horace Mann Educators | 31,500 | 538,965 |
10
Common Stocks (continued) | Shares | Value ($) | |
Financial (continued) | |||
Huntington Bancshares | 125,200 | 818,808 | |
IBERIABANK | 27,100 | 1,314,079 | |
Independent Bank/MA | 5,740 | 155,152 | |
Investment Technology Group | 94,232a | 893,319 | |
Investors Bancorp | 21,392a | 319,596 | |
Janus Capital Group | 18,487 | 134,955 | |
Knight Capital Group, Cl. A | 74,231a | 933,084 | |
LaSalle Hotel Properties | 27,000c | 744,660 | |
Lender Processing Services | 112,010 | 2,585,191 | |
Medical Properties Trust | 242,350c | 2,181,150 | |
MGIC Investment | 83,900a | 213,106 | |
MoneyGram International | 37,400a | 520,982 | |
NASDAQ OMX Group | 6,850 | 149,878 | |
National Western Life Insurance | 6,100 | 771,162 | |
Navigators Group | 3,053a | 147,918 | |
Netspend Holdings | 20,800a | 154,128 | |
Ocwen Financial | 228,010a | 3,655,000 | |
Omega Healthcare Investors | 174,206c | 3,677,489 | |
Parkway Properties | 24,184c | 254,899 | |
Piper Jaffray | 27,230a | 596,609 | |
Platinum Underwriters Holdings | 18,566 | 673,946 | |
Primerica | 77,390 | 1,862,777 | |
ProAssurance | 1,141 | 100,568 | |
PS Business Parks | 13,000c | 856,570 | |
Ramco-Gershenson Properties | 54,095c | 644,271 | |
RLI | 16,800 | 1,119,552 | |
Rockville Financial | 49,148 | 552,915 | |
SVB Financial Group | 22,000a | 1,312,520 | |
TCF Financial | 59,700 | 703,863 | |
Texas Capital Bancshares | 39,000a | 1,512,420 | |
Tower Group | 145,011 | 2,846,566 | |
Trustmark | 41,796 | 1,020,658 | |
Umpqua Holdings | 57,100 | 732,593 | |
Union First Market Bankshares | 45,434 | 634,259 | |
Validus Holdings | 36,917 | 1,158,455 | |
Waddell & Reed Financial, Cl. A | 65,587 | 1,883,003 |
The Fund | 11 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Financial (continued) | |||
Walter Investment Management | 57,610 | 1,090,557 | |
Washington Federal | 33,238 | 545,436 | |
Wintrust Financial | 39,500 | 1,343,395 | |
World Acceptance | 42,618a,b | 2,916,776 | |
96,201,308 | |||
Health Care—7.1% | |||
Accuray | 85,930a | 538,781 | |
Affymetrix | 81,900a | 388,206 | |
Air Methods | 12,300a | 1,121,145 | |
Alkermes | 33,590a | 524,676 | |
AmSurg | 80,381a | 2,196,009 | |
AngioDynamics | 33,417a | 402,341 | |
Atrion | 1,280 | 257,114 | |
Cambrex | 142,100a | 1,021,699 | |
Charles River Laboratories International | 27,200a | 907,936 | |
Chemed | 7,200b | 399,960 | |
CryoLife | 114,552a | 529,230 | |
Flamel Technologies, ADR | 112,052a | 482,944 | |
Halozyme Therapeutics | 49,330a,b | 376,881 | |
Health Management Associates, Cl. A | 149,800a | 960,218 | |
Hill-Rom Holdings | 79,929 | 2,350,712 | |
IRIS International | 48,964a | 521,956 | |
Kindred Healthcare | 211,744a | 1,751,123 | |
Lincare Holdings | 54,550 | 1,250,832 | |
Magellan Health Services | 32,900a | 1,387,393 | |
MAP Pharmaceuticals | 16,800a,b | 197,736 | |
Medicis Pharmaceutical, Cl. A | 32,100 | 1,158,810 | |
Merit Medical Systems | 55,909a | 726,817 | |
Metropolitan Health Networks | 74,900a | 651,630 | |
Natus Medical | 55,866a | 625,699 | |
Nektar Therapeutics | 61,176a,b | 409,879 | |
Questcor Pharmaceuticals | 14,200a,b | 587,880 | |
Rigel Pharmaceuticals | 38,898a | 289,012 | |
Symmetry Medical | 241,322a | 1,867,832 | |
Syneron Medical | 59,410a | 631,528 | |
Universal American | 65,500 | 643,865 | |
25,159,844 |
12
Common Stocks (continued) | Shares | Value ($) | |
Industrial—17.3% | |||
AAON | 38,147 | 714,875 | |
Actuant, Cl. A | 52,350 | 1,369,999 | |
Aegion | 52,515a | 828,162 | |
Aerovironment | 6,650a | 148,162 | |
Air Transport Services Group | 130,675a | 662,522 | |
Altra Holdings | 6,810a | 114,204 | |
American Reprographics | 260,068a | 1,344,551 | |
Arkansas Best | 31,120 | 393,668 | |
Atlas Air Worldwide Holdings | 14,500a | 658,590 | |
Avis Budget Group | 35,700a | 530,145 | |
Bristow Group | 54,736 | 2,192,177 | |
CAI International | 77,050a | 1,428,507 | |
CDI | 48,130 | 807,621 | |
Ceco Environmental | 8,700 | 61,596 | |
Ceradyne | 21,100 | 531,509 | |
Columbus McKinnon | 19,200a | 296,448 | |
Cooper Tire & Rubber | 119,366 | 1,847,786 | |
Crown Holdings | 24,400a | 831,796 | |
CTS | 167,022 | 1,566,666 | |
Danaos | 104,800a | 434,920 | |
Donaldson | 2,719 | 97,259 | |
DXP Enterprises | 16,800a | 789,600 | |
EnerSys | 40,952a | 1,350,597 | |
ESCO Technologies | 24,300 | 848,070 | |
Flow International | 148,160a | 437,072 | |
Foster Wheeler | 16,088a | 287,814 | |
Franklin Electric | 19,174 | 937,992 | |
Gardner Denver | 1,488 | 80,471 | |
Gibraltar Industries | 51,477a | 526,095 | |
Global Power Equipment Group | 53,320a | 982,688 | |
GrafTech International | 133,458a | 1,423,997 | |
Granite Construction | 17,382 | 398,395 | |
Greif, Cl. A | 25,019 | 1,094,331 | |
Harsco | 24,400 | 490,440 | |
Hawaiian Holdings | 101,800a | 588,404 | |
Heartland Payment Systems | 20,644 | 602,392 | |
Hexcel | 95,242a | 2,322,000 |
The Fund | 13 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Industrial (continued) | |||
IDEX | 1,976 | 78,506 | |
iRobot | 29,900a,b | 633,282 | |
ITT | 25,300 | 519,409 | |
Ituran Location and Control | 11,948 | 142,420 | |
John Bean Technologies | 46,750 | 651,228 | |
KBR | 30,200 | 769,194 | |
Kelly Services, Cl. A | 51,400 | 600,866 | |
LeCroy | 13,300a | 188,727 | |
LSI Industries | 65,035 | 398,014 | |
Lydall | 74,930a | 932,879 | |
Manitowoc | 37,500 | 390,000 | |
McGrath Rentcorp | 30,380 | 767,095 | |
Medifast | 47,300a,b | 854,238 | |
Myers Industries | 42,550 | 715,691 | |
NACCO Industries, Cl. A | 10,260 | 1,076,582 | |
Navistar International | 19,300a | 539,242 | |
Nordson | 971 | 52,055 | |
Old Dominion Freight Line | 30,750a | 1,339,470 | |
Orion Marine Group | 78,150a | 522,042 | |
Pall | 12,390 | 689,627 | |
Park Electrochemical | 61,528 | 1,443,447 | |
Pulse Electronics | 245,928 | 482,019 | |
Ryder System | 16,600 | 717,286 | |
Sauer-Danfoss | 26,700 | 964,671 | |
School Specialty | 28,570a,b | 85,996 | |
Sealed Air | 45,900 | 718,335 | |
Shaw Group | 80,815a | 2,052,701 | |
SkyWest | 108,466 | 764,685 | |
Sonoco Products | 32,251 | 992,363 | |
Spirit Aerosystems Holdings, Cl. A | 31,400a | 724,398 | |
Standex International | 47,200 | 1,920,568 | |
Teledyne Technologies | 12,500a | 744,750 | |
Tennant | 25,700 | 1,084,540 | |
Textron | 27,300 | 645,099 | |
Thor Industries | 62,921 | 1,934,821 | |
Towers Watson & Co., Cl. A | 2,184 | 131,608 | |
TriMas | 57,180a | 1,144,172�� |
14
Common Stocks (continued) | Shares | Value ($) | |
Industrial (continued) | |||
Tutor Perini | 156,194a | 1,755,621 | |
Twin Disc | 45,750b | 871,995 | |
61,061,163 | |||
Information Technology—12.9% | |||
Acacia Research | 24,650a | 857,080 | |
Accelrys | 72,000a | 561,600 | |
Acxiom | 104,584a | 1,471,497 | |
American Software, Cl. A | 136,104 | 1,083,388 | |
Anixter International | 9,816 | 564,518 | |
AXT | 80,900a | 311,465 | |
Benchmark Electronics | 53,923a | 730,117 | |
Brocade Communications Systems | 172,000a | 799,800 | |
CACI International, Cl. A | 40,070a | 1,714,996 | |
Cadence Design Systems | 42,600a | 434,520 | |
Cardtronics | 44,900a | 1,258,098 | |
Ceva | 18,100a | 314,578 | |
DDI | 96,790 | 1,257,302 | |
Digital River | 48,600a | 709,560 | |
Dolby Laboratories, Cl. A | 14,100a | 604,749 | |
DST Systems | 14,900 | 761,390 | |
Dun & Bradstreet | 2,995 | 202,372 | |
Electronics for Imaging | 51,705a | 762,132 | |
Emulex | 112,630a | 756,874 | |
Fair Isaac | 2,873 | 116,816 | |
FalconStor Software | 230,428a | 617,547 | |
FormFactor | 140,152a | 839,510 | |
Freescale Semiconductor | 43,170b | 397,164 | |
GSI Group | 39,429a | 457,771 | |
GT Advanced Technologies | 177,690a,b | 746,298 | |
Integrated Silicon Solution | 78,829a | 737,839 | |
Internap Network Services | 73,969a | 527,399 | |
International Rectifier | 95,147a | 1,792,570 | |
Itron | 16,340a | 585,462 | |
Kulicke & Soffa Industries | 58,900a | 619,628 | |
Lexmark International, Cl. A | 47,080 | 1,177,471 | |
Lincoln Electric Holdings | 992 | 47,199 | |
Logitech International | 74,600a,b | 763,158 |
The Fund | 15 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Information Technology (continued) | |||
LTX-Credence | 73,652a | 522,929 | |
MagicJack VocalTec | 44,450a,b | 639,635 | |
Magnachip Semiconductor | 61,350a | 584,052 | |
Mercury Computer Systems | 27,200a | 322,320 | |
Methode Electronics | 19,500 | 146,445 | |
Monster Worldwide | 67,360a | 579,296 | |
NetScout Systems | 39,500a | 791,975 | |
Online Resources | 171,830a | 381,463 | |
Plexus | 27,489a | 769,692 | |
Power-One | 412,730a,b | 1,712,830 | |
Quantum | 241,510a | 470,945 | |
Radisys | 77,917a | 455,035 | |
Rovi | 23,560a | 575,571 | |
Schawk | 24,430 | 272,395 | |
Scientific Games, Cl. A | 62,300a | 532,042 | |
SeaChange International | 60,400a | 488,636 | |
Silicon Graphics International | 72,730a,b | 428,380 | |
Silicon Image | 196,000a | 866,320 | |
Spansion, Cl. A | 37,140a | 401,112 | |
SYNNEX | 37,280a | 1,243,288 | |
Teradyne | 26,700a | 385,815 | |
Tyler Technologies | 13,900a | 518,470 | |
Ultratech | 21,200a | 642,784 | |
Unwired Planet | 191,302a | 451,473 | |
Veeco Instruments | 15,560a,b | 539,621 | |
Verint Systems | 30,700a | 881,704 | |
Vishay Intertechnology | 289,640a | 3,075,977 | |
Vishay Precision Group | 61,020a | 848,788 | |
Zebra Technologies, Cl. A | 40,784a | 1,365,040 | |
45,475,901 | |||
Materials—5.6% | |||
American Vanguard | 42,200 | 1,137,290 | |
Carpenter Technology | 3,110 | 140,137 | |
Chemtura | 50,900a | 769,099 | |
Cytec Industries | 8,000 | 483,680 | |
Ferro | 121,990a | 541,636 | |
Glatfelter | 136,056 | 2,061,248 |
16
Common Stocks (continued) | Shares | Value ($) | |
Materials (continued) | |||
Haynes International | 9,250 | 471,750 | |
Horsehead Holding | 46,666a | 413,461 | |
Kaiser Aluminum | 30,877 | 1,481,787 | |
KMG Chemicals | 7,731 | 132,045 | |
Kraton Performance Polymers | 51,160a | 977,668 | |
Lawson Products | 17,676 | 173,402 | |
LSB Industries | 22,920a | 637,634 | |
Mercer International | 129,880a | 840,324 | |
Metalico | 113,680a | 287,610 | |
Metals USA Holdings | 76,910a | 1,116,733 | |
Olympic Steel | 23,340 | 386,977 | |
Omnova Solutions | 150,860a | 1,086,192 | |
PolyOne | 100,060 | 1,323,794 | |
RPM International | 42,734 | 1,126,468 | |
Schweitzer-Mauduit International | 13,204 | 883,348 | |
Sensient Technologies | 29,546 | 1,079,020 | |
Stillwater Mining | 32,530a | 276,180 | |
TPC Group | 25,700a | 811,863 | |
Worthington Industries | 60,530 | 983,613 | |
19,622,959 | |||
Telecommunications—2.5% | |||
Arris Group | 70,000a | 863,100 | |
Aviat Networks | 221,862a | 574,623 | |
Black Box | 67,428 | 1,509,039 | |
Ciena | 38,800a | 525,740 | |
Comverse Technology | 39,400a | 240,734 | |
DigitalGlobe | 53,700a,b | 867,792 | |
Infinera | 94,200a,b | 603,822 | |
Oplink Communications | 105,183a | 1,348,446 | |
Plantronics | 41,820 | 1,258,364 | |
RF Micro Devices | 119,700a | 451,269 | |
Sierra Wireless | 49,900a | 448,102 | |
8,691,031 | |||
Utilities—2.9% | |||
Cleco | 26,000 | 1,061,840 | |
Empire District Electric | 66,409 | 1,331,500 | |
GenOn Energy | 386,140a | 664,161 |
The Fund | 17 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | ||
Utilities (continued) | ||||
Hawaiian Electric Industries | 24,438 | 674,733 | ||
NorthWestern | 36,600 | 1,299,666 | ||
Ormat Technologies | 37,000b | 751,470 | ||
Pike Electric | 58,770a | 424,319 | ||
PNM Resources | 39,600 | 738,540 | ||
Portland General Electric | 74,532 | 1,874,480 | ||
UNS Energy | 38,000 | 1,424,620 | ||
10,245,329 | ||||
Total Common Stocks | ||||
(cost $333,020,300) | 337,691,160 | |||
Investment of Cash Collateral | ||||
for Securities Loaned—5.3% | ||||
Registered Investment Company; | ||||
Dreyfus Institutional Cash Advantage Fund | ||||
(cost $18,537,641) | 18,537,641d | 18,537,641 | ||
Total Investments (cost $351,557,941) | 101.1% | 356,228,801 | ||
Liabilities, Less Cash and Receivables | (1.1%) | (3,816,990) | ||
Net Assets | 100.0% | 352,411,811 |
ADR—American Depository Receipts
a Non-income producing security. |
b Security, or portion thereof, on loan.At May 31, 2012, the value of the fund’s securities on loan was $18,033,880 |
and the value of the collateral held by the fund was $18,537,641. |
c Investment in real estate investment trust. |
d Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Financial | 27.3 | Energy | 5.1 |
Industrial | 17.3 | Utilities | 2.9 |
Consumer Discretionary | 13.0 | Telecommunications | 2.5 |
Information Technology | 12.9 | Exchange Traded Funds | 1.2 |
Health Care | 7.1 | Consumer Staples | .9 |
Materials | 5.6 | ||
Money Market Investment | 5.3 | 101.1 | |
† Based on net assets. | |||
See notes to financial statements. |
18
STATEMENT OF ASSETS AND LIABILITIES |
May 31, 2012 (Unaudited) |
Cost | Value | ||
Assets ($): | |||
Investments in securities—See Statement of Investments (including | |||
securities on loan, valued at $18,033,880)—Note 1(b): | |||
Unaffiliated issuers | 333,020,300 | 337,691,160 | |
Affiliated issuers | 18,537,641 | 18,537,641 | |
Cash | 16,313,242 | ||
Receivable for investment securities sold | 3,211,461 | ||
Receivable for shares of Common Stock subscribed | 437,600 | ||
Dividends and securities lending income receivable | 333,959 | ||
Prepaid expenses | 23,491 | ||
376,548,554 | |||
Liabilities ($): | |||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 301,210 | ||
Liability for securities on loan—Note 1(b) | 18,537,641 | ||
Payable for investment securities purchased | 5,058,547 | ||
Payable for shares of Common Stock redeemed | 179,564 | ||
Accrued expenses | 59,781 | ||
24,136,743 | |||
Net Assets ($) | 352,411,811 | ||
Composition of Net Assets ($): | |||
Paid-in capital | 342,038,639 | ||
Accumulated undistributed investment income—net | 628,235 | ||
Accumulated net realized gain (loss) on investments | 5,074,077 | ||
Accumulated net unrealized appreciation | |||
(depreciation) on investments | 4,670,860 | ||
Net Assets ($) | 352,411,811 | ||
Net Asset Value Per Share | |||
Class A | Class C | Class I | |
Net Assets ($) | 802,780 | 162,084 | 351,446,947 |
Shares Outstanding | 45,392 | 9,431 | 19,688,339 |
Net Asset Value Per Share ($) | 17.69 | 17.19 | 17.85 |
See notes to financial statements. |
The Fund | 19 |
STATEMENT OF OPERATIONS | ||
Six Months Ended May 31, 2012 (Unaudited) | ||
Investment Income ($): | ||
Income: | ||
Cash dividends | 2,246,061 | |
Income from securities lending—Note 1(b) | 64,494 | |
Total Income | 2,310,555 | |
Expenses: | ||
Management fee—Note 3(a) | 1,497,049 | |
Custodian fees—Note 3(c) | 50,554 | |
Professional fees | 34,547 | |
Directors’ fees and expenses—Note 3(d) | 29,480 | |
Registration fees | 29,035 | |
Prospectus and shareholders’ reports | 8,807 | |
Shareholder servicing costs—Note 3(c) | 4,219 | |
Loan commitment fees—Note 2 | 1,645 | |
Distribution fees—Note 3(b) | 655 | |
Miscellaneous | 8,896 | |
Total Expenses | 1,664,887 | |
Less—reduction in management fee due to undertaking—Note 3(a) | (378) | |
Less—reduction in fees due to earnings credits—Note 3(c) | (4) | |
Net Expenses | 1,664,505 | |
Investment Income—Net | 646,050 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments | 6,502,557 | |
Net unrealized appreciation (depreciation) on investments | 303,152 | |
Net Realized and Unrealized Gain (Loss) on Investments | 6,805,709 | |
Net Increase in Net Assets Resulting from Operations | 7,451,759 | |
See notes to financial statements. |
20
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
May 31, 2012 | Year Ended | |||
(Unaudited) | November 30, 2011 | |||
Operations ($): | ||||
Investment income—net | 646,050 | 573,823 | ||
Net realized gain (loss) on investments | 6,502,557 | 24,412,345 | ||
Net unrealized appreciation | ||||
(depreciation) on investments | 303,152 | (24,681,280) | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 7,451,759 | 304,888 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class I Shares | (639,291) | — | ||
Net realized gain on investments: | ||||
Class A Shares | (75,831) | (443,790) | ||
Class C Shares | (14,596) | (61,614) | ||
Class I Shares | (25,288,419) | (14,742,480) | ||
Total Dividends | (26,018,137) | (15,247,884) | ||
Capital Stock Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A Shares | 48,868 | 830,601 | ||
Class C Shares | — | 146,384 | ||
Class I Shares | 85,676,637 | 119,134,231 | ||
Dividends reinvested: | ||||
Class A Shares | 75,831 | 43,161 | ||
Class C Shares | 14,596 | 15,022 | ||
Class I Shares | 13,220,617 | 6,759,296 | ||
Cost of shares redeemed: | ||||
Class A Shares | (351,968) | (7,562,568) | ||
Class C Shares | (7,875) | (958,764) | ||
Class I Shares | (26,019,597) | (56,671,319) | ||
Increase (Decrease) in Net Assets | ||||
from Capital Stock Transactions | 72,657,109 | 61,736,044 | ||
Total Increase (Decrease) in Net Assets | 54,090,731 | 46,793,048 | ||
Net Assets ($): | ||||
Beginning of Period | 298,321,080 | 251,528,032 | ||
End of Period | 352,411,811 | 298,321,080 | ||
Undistributed investment income—net | 628,235 | 621,176 |
The Fund | 21 |
STATEMENT OF CHANGES IN NET ASSETS (continued)
Six Months Ended | ||||
May 31, 2012 | Year Ended | |||
(Unaudited) | November 30, 2011 | |||
Capital Share Transactions: | ||||
Class A | ||||
Shares sold | 2,608 | 40,242 | ||
Shares issued for dividends reinvested | 4,401 | 2,167 | ||
Shares redeemed | (19,016) | (357,221) | ||
Net Increase (Decrease) in Shares Outstanding | (12,007) | (314,812) | ||
Class C | ||||
Shares sold | — | 7,198 | ||
Shares issued for dividends reinvested | 869 | 766 | ||
Shares redeemed | (438) | (46,318) | ||
Net Increase (Decrease) in Shares Outstanding | 431 | (38,354) | ||
Class I | ||||
Shares sold | 4,533,107 | 6,040,831 | ||
Shares issued for dividends reinvested | 761,028 | 337,627 | ||
Shares redeemed | (1,380,695) | (2,940,158) | ||
Net Increase (Decrease) in Shares Outstanding | 3,913,440 | 3,438,300 | ||
See notes to financial statements. |
22
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||
May 31, 2012 | Year Ended November 30, | |||||||
Class A Shares | (Unaudited) | 2011 | 2010 | 2009a | ||||
Per Share Data ($): | ||||||||
Net asset value, beginning of period | 18.66 | 19.63 | 15.24 | 12.50 | ||||
Investment Operations: | ||||||||
Investment income (loss)—netb | .00c | (.04) | (.05) | (.00)c | ||||
Net realized and unrealized | ||||||||
gain (loss) on investments | .65 | .23 | 4.47 | 2.74 | ||||
Total from Investment Operations | .65 | .19 | 4.42 | 2.74 | ||||
Distributions: | ||||||||
Dividends from net realized | ||||||||
gain on investments | (1.62) | (1.16) | (.03) | — | ||||
Net asset value, end of period | 17.69 | 18.66 | 19.63 | 15.24 | ||||
Total Return (%)d | 3.73e | .62 | 29.05 | 21.92e | ||||
Ratios/Supplemental Data (%): | ||||||||
Ratio of total expenses | ||||||||
to average net assets | 1.43f | 1.29 | 1.34 | 2.94f | ||||
Ratio of net expenses | ||||||||
to average net assets | 1.36f | 1.27 | 1.32 | 1.40f | ||||
Ratio of net investment income (loss) | ||||||||
to average net assets | .02f | (.18) | (.27) | (.02)f | ||||
Portfolio Turnover Rate | 45.34e | 67.49 | 56.03 | 48.43e | ||||
Net Assets, end of period ($ x 1,000) | 803 | 1,071 | 7,308 | 6,289 |
a | From December 17, 2008 (commencement of operations) to November 30, 2009. |
b | Based on average shares outstanding at each month end. |
c | Amount represents less than $.01 per share. |
d | Exclusive of sales charge. |
e | Not annualized. |
f | Annualized. |
See notes to financial statements.
The Fund | 23 |
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||
May 31, 2012 | Year Ended November 30, | |||||||
Class C Shares | (Unaudited) | 2011 | 2010 | 2009a | ||||
Per Share Data ($): | ||||||||
Net asset value, beginning of period | 18.25 | 19.34 | 15.13 | 12.50 | ||||
Investment Operations: | ||||||||
Investment (loss)—netb | (.07) | (.18) | (.18) | (.10) | ||||
Net realized and unrealized | ||||||||
gain (loss) on investments | .63 | .25 | 4.42 | 2.73 | ||||
Total from Investment Operations | .56 | .07 | 4.24 | 2.63 | ||||
Distributions: | ||||||||
Dividends from net realized | ||||||||
gain on investments | (1.62) | (1.16) | (.03) | — | ||||
Net asset value, end of period | 17.19 | 18.25 | 19.34 | 15.13 | ||||
Total Return (%)c | 3.29d | (.03) | 28.07 | 21.04d | ||||
Ratios/Supplemental Data (%): | ||||||||
Ratio of total expenses | ||||||||
to average net assets | 2.20e | 2.03 | 2.10 | 3.70e | ||||
Ratio of net expenses | ||||||||
to average net assets | 2.14e | 2.02 | 2.08 | 2.15e | ||||
Ratio of net investment (loss) | ||||||||
to average net assets | (.76)e | (.92) | (1.02) | (.77)e | ||||
Portfolio Turnover Rate | 45.34d | 67.49 | 56.03 | 48.43d | ||||
Net Assets, end of period ($ x 1,000) | 162 | 164 | 916 | 617 |
a | From December 17, 2008 (commencement of operations) to November 30, 2009. |
b | Based on average shares outstanding at each month end. |
c | Exclusive of sales charge. |
d | Not annualized. |
e | Annualized. |
See notes to financial statements.
24
Six Months Ended | ||||||||
May 31, 2012 | Year Ended November 30, | |||||||
Class I Shares | (Unaudited) | 2011 | 2010 | 2009a | ||||
Per Share Data ($): | ||||||||
Net asset value, beginning of period | 18.83 | 19.72 | 15.28 | 12.50 | ||||
Investment Operations: | ||||||||
Investment income—netb | .04 | .04 | .00c | .03 | ||||
Net realized and unrealized | ||||||||
gain (loss) on investments | .64 | .23 | 4.47 | 2.75 | ||||
Total from Investment Operations | .68 | .27 | 4.47 | 2.78 | ||||
Distributions: | ||||||||
Dividends from investment income—net | (.04) | — | (.00)c | — | ||||
Dividends from net realized | ||||||||
gain on investments | (1.62) | (1.16) | (.03) | — | ||||
Total Distributions | (1.66) | (1.16) | (.03) | — | ||||
Net asset value, end of period | 17.85 | 18.83 | 19.72 | 15.28 | ||||
Total Return (%) | 3.87d | 1.04 | 29.32 | 22.24d | ||||
Ratios/Supplemental Data (%): | ||||||||
Ratio of total expenses | ||||||||
to average net assets | 1.00e | .99 | 1.07 | 1.91e | ||||
Ratio of net expenses | ||||||||
to average net assets | 1.00e | .99 | 1.06 | 1.15e | ||||
Ratio of net investment income | ||||||||
to average net assets | .39e | .20 | .02 | .26e | ||||
Portfolio Turnover Rate | 45.34d | 67.49 | 56.03 | 48.43d | ||||
Net Assets, end of period ($ x 1,000) | 351,447 | 297,086 | 243,304 | 63,379 |
a | From December 17, 2008 (commencement of operations) to November 30, 2009. |
b | Based on average shares outstanding at each month end. |
c | Amount represents less than $.01 per share. |
d | Not annualized. |
e | Annualized. |
See notes to financial statements.
The Fund | 25 |
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus Select Managers Small CapValue Fund (the “fund”) is a separate non-diversified series of Strategic Funds, Inc. (the “Company”) 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 nine series, including the fund.The fund’s investment objective is to seek capital appreciation.The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of NewYork Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. EACM Advisors LLC (“EACM”), a subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s portfolio allocation manager. Thompson, Seigel and Walmsley, LLC (“TS&W”),Walthausen & Co., LLC (“Walthausen”), Neuberger Berman Management LLC (“Neuberger Berman”), Lombardia Capital Partners, LLC (“Lombardia”), Iridian Asset Management LLC (“Iridian”) and VulcanValue Partners, LLC (“Vulcan”) serve as the fund’s sub-investment advisers, each managing an allocated portion of the fund’s portfolio. Effective May 10, 2012, the Board of Directors approved a new sub-investment advisory agreement withVulcan.
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 100 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class C and Class I. Class A shares 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 at net asset value per share only to institutional investors. 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.
26
The Company 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 is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates.
The Company enters into contracts that contain a variety of indemnifications.The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: 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.
The Fund | 27 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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.
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:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are categorized within Level 1 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures contracts. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
28
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 of Directors. 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 as Level 2 or 3 depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of May 31, 2012 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities— | ||||
Domestic† | 326,734,673 | — | — | 326,734,673 |
Equity Securities— | ||||
Foreign† | 6,647,748 | — | — | 6,647,748 |
Mutual Funds/ | ||||
Exchange | ||||
Traded Funds | 22,846,380 | — | — | 22,846,380 |
† See Statement of Investments for additional detailed categorizations. |
In May 2011, FASB issued Accounting Standards Update (“ASU”) No.
2011-04 “Amendments to Achieve Common FairValue Measurement
The Fund | 29 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
and Disclosure Requirements in GAAP and International Financial Reporting Standards (“IFRS”)” (“ASU 2011-04”). ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between GAAP and IFRS. ASU 2011-04 will require reporting entities to disclose the following information for fair value measurements categorized within Level 3 of the fair value hierarchy: quantitative information about the unobservable inputs used in the fair value measurement, the valuation processes used by the reporting entity and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements.The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU 2011-04 and its impact on the financial statements.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. 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, a subsidiary of BNY Mellon and an affiliate of Dreyfus, 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, U.S. Government and Agency securities or letters of credit.The fund is entitled to receive all income on securities loaned, in addition to income earned as a result
30
of the lending transaction. Although each security loaned is fully collateralized, the fund bears the risk of delay in recovery of, or loss of rights in, the securities loaned should a borrower fail to return the securities in a timely manner. During the period ended May 31, 2012, The Bank of NewYork Mellon earned $21,498 from lending portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Other investment companies advised by Dreyfus are considered to be “affiliated” with the fund.
The fund may invest in shares of certain affiliated investment companies also advised or managed by Dreyfus. Investments in affiliated investment companies for the period ended May 31, 2012 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 11/30/2011 ($) | Purchases ($) | Sales ($) | 5/31/2012 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Cash | |||||
Advantage | |||||
Fund | 11,415,857 | 65,238,831 | 58,117,047 | 18,537,641 | 5.3 |
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and 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.
(e) 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.
The Fund | 31 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
As of and during the period ended May 31, 2012, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period, the fund did not incur any interest or penalties.
Each of the tax years in the three-year period ended November 30, 2011 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The tax character of distributions paid to shareholders during the fiscal year ended November 30, 2011 was as follows: ordinary income $11,066,759 and long-term capital gains $4,181,125.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 a $225 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 May 31, 2012, the fund did not borrow under the Facilities.
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .90% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus has contractually agreed, until April 1, 2013, to waive receipt of its fees and/or
32
assume the expenses of the fund so that the direct expenses of none of the classes (excluding Rule 12b-1 distribution plan fees, shareholder services fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 1.15% of the value of the fund’s average daily net assets.The reduction in management fee, pursuant to the undertaking amounted to $378 during the period ended May 31, 2012.
Pursuant to separate Sub-Investment Advisory Agreements between Dreyfus and TS&W, Walthausen, Neuberger Berman, Lombardia, Iridian and Vulcan, Dreyfus pays TS&W, Walthausen, Neuberger Berman, Lombardia, Iridian and Vulcan separate monthly fees at an annual percentage of the fund’s average daily net assets.
(b) Under the Distribution Plan (the “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 the average daily net assets of Class C shares. During the period ended May 31, 2012, Class C shares were charged $655 pursuant to the 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 Class A and Class C shares and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (a securities dealer, financial institution or other industry professional) in respect of these services.The Distributor determines the amounts to be paid to Service Agents. During the period ended May 31, 2012, Class A and Class C shares were charged $1,092 and $218, respectively, pursuant to the Shareholder Services Plan.
The Fund | 33 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The fund compensates DreyfusTransfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency and cash management services for the fund. During the period ended May 31, 2012, the fund was charged $1,738 pursuant to the transfer agency agreement, which is included in Shareholder servicing costs in the Statement of Operations.
The fund compensatesThe Bank of NewYork Mellon under a custody agreement for providing custodial services for the fund. During the period ended May 31, 2012, the fund was charged $50,554 pursuant to the custody agreement.
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.
Prior to May 29, 2012, the fund compensated The Bank of NewYork Mellon under a cash management agreement for performing cash management services related to fund subscriptions and redemptions. During the period ended May 31, 2012, the fund was charged $108 pursuant to the cash management agreement, which is included in Shareholder servicing costs in the Statement of Operations.These fees were partially offset by earnings credits of $4.
During the period ended May 31, 2012, the fund was charged $3,183 for services performed by the Chief Compliance Officer and his staff.
The components of “Due toThe Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $270,706, Rule 12b-1 distribution plan fees $105, shareholder services plan fees $209, custodian fees $26,676, chief compliance officer fees $2,652 and transfer agency per account fees $885, which are offset against an expense reimbursement currently in effect in the amount of $23.
34
(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 of investment securities, excluding short-term securities, during the period ended May 31, 2012, amounted to $184,404,922 and $144,954,502, respectively.
At May 31, 2012, accumulated net unrealized appreciation on investments was $4,670,860, consisting of $34,941,872 gross unrealized appreciation and $30,271,012 gross unrealized depreciation.
At May 31, 2012, 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).
The Fund | 35 |
INFORMATION ABOUT THE APPROVAL OF AN ADDITIONAL |
SUB-INVESTMENT ADVISORY AGREEMENT (Unaudited) |
At a meeting of the fund’s Board of Directors held on April 30, 2012, the Board considered the approval of a Sub-Investment Advisory Agreement withVulcanValue Partners, LLC (the “Sub-Adviser”), pursuant to which the Sub-Adviser would serve as an additional sub-investment adviser and provide day-to-day management of a percentage of the fund’s portfolio (the “Sub-Advisory 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 representatives of Dreyfus and EACM. In considering approval of the Sub-Advisory 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 to be Provided to the Fund.The Board considered information previously provided to them in a presentation from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex, and representatives of Dreyfus confirmed that there had been no material changes in this information. 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 distribution channel, including the distribution channel(s) for the fund.
The Board considered the portfolio management and research capabilities of the Sub-Adviser, the Sub-Adviser’s portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution, and that Dreyfus and EACM would supervise the Sub-Adviser’s activities with respect to the fund.
36
Comparative Analysis of Performance and Fees. Representatives of Dreyfus and EACM reviewed the investment strategies to be employed by the Sub-Adviser in managing its portion of the fund’s assets. The Board considered EACM’s presentation regarding the Sub-Adviser’s portfolio management and research resources and capabilities, experience in managing small cap equity funds, historical investment performance in the strategy to be employed for the fund, reputation and financial condition, brokerage and trading policies and practices, and internal compliance programs, as well as Dreyfus’ and EACM’s recommendation and supervision of, and relationship with, the Sub-Adviser.
Dreyfus representatives reviewed with the Board members the advisory fees paid to the Sub-Adviser for funds in the same Lipper category as the fund, or by separate accounts and/or other types of client portfolios managed by the Sub-Adviser considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. Dreyfus representatives noted that neither Dreyfus nor EACM advise any separate accounts and/or other types of client portfolios considered to have similar investment strategies and policies as the fund.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 fee to the Sub-Adviser in relation to the fee paid to Dreyfus by the fund and the respective services to be provided by the Sub-Adviser and Dreyfus.The Board noted the Sub-Adviser’s fee would be paid by Dreyfus (out of its fee from the fund) and not the fund and would be at the same rate as that payable to the fund’s other sub-advisers.
Analysis of Profitability. Since Dreyfus, and not the fund, would pay the Sub-Adviser, the Board did not consider the Sub-Adviser’s profitability to be relevant to its deliberations.
The Fund | 37 |
INFORMATION ABOUT THE APPROVAL OF AN ADDITIONAL |
SUB-INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued) |
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 approval of the Sub-Advisory 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 ser- vices to be provided by the Sub-Adviser are adequate and appropriate, in light of the considerations described above.
The Board concluded that the fee to be paid to the Sub-Adviser is reasonable, in light of the considerations described above, and that consideration of total expense ratios, profitability, and economies of scale were not relevant to the determination.
The Board considered these conclusions and determinations and, without any one factor being dispositive, determined that approval of the Sub-Advisory Agreement was in the best interests of the fund and its shareholders.
38
NOTES
For More Information
International |
Stock Fund |
SEMIANNUAL REPORT May 31, 2012
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes.
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents | |
THE FUND | |
2 | A Letter from the Chairman and CEO |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
11 | Statement of Assets and Liabilities |
12 | Statement of Operations |
13 | Statement of Changes in Net Assets |
15 | Financial Highlights |
18 | Notes to Financial Statements |
FOR MORE INFORMATION | |
Back Cover |
International
Stock Fund
The Fund
A LETTER FROM THE CHAIRMAN AND CEO
Dear Shareholder:
We are pleased to present this semiannual report for International Stock Fund, covering the six-month period from December 1, 2011, through May 31, 2012. 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.
The global market rebound that drove stock prices higher during the opening months of 2012 seemed to sputter and die in the spring, primarily due to a resurgent European debt crisis and renewed economic concerns in the United States and China. Consequently, international stocks ended the reporting period with negative returns, on average, with steeper declines among value-oriented stocks in European markets.
Despite the markets’ recent swoon and Europe’s persistent debt crisis, we do not anticipate a global recession. Instead, we continue to expect worldwide economic growth of about 3% for 2012, with an economic decline in Southern Europe, slight declines or slight growth for several quarters in the United Kingdom and much of Northern Europe, near-trend growth in the United States, and sustained but slower growth in China and other emerging market countries.
As always, we encourage you to discuss our observations with your financial advisor.
Thank you for your continued confidence and support.
Jonathan R. Baum
Chairman and Chief Executive Officer
The Dreyfus Corporation
June 15, 2012
2
DISCUSSION OF FUND PERFORMANCE
For the period of December 1, 2011, through May 31, 2012, as provided by Charlie Macquaker and Roy Leckie of Walter Scott & Partners Limited (Walter Scott), Sub-investment adviser
Fund and Market Performance Overview
For the six-month period ended May 31, 2012, International Stock Fund’s Class A shares achieved a return of –0.97%, Class C shares returned –1.39% and Class I shares returned –0.86%.1 In comparison, the fund’s benchmark index, the Morgan Stanley Capital International Europe,Australasia, Far East Index (the “MSCI EAFE Index”), achieved a –4.70% return over the same period.2
International equities generally rebounded over the reporting period’s first half, but renewed macroeconomic concerns later erased those gains, leading to negative returns for both the fund and the MSCI EAFE Index. The fund produced better relative returns than the benchmark, primarily due to the success of our stock selection strategy in the health care and consumer discretionary sectors.
The Fund’s Investment Approach
The fund seeks long-term real return by investing in high-quality companies capable of sustainable growth and wealth creation over a long time horizon.The fund invests in stocks of foreign companies that are predominantly located in the world’s developed markets outside of the United States.When selecting stocks,Walter Scott seeks companies with fundamental strengths that indicate the potential for sustainable growth.The firm focuses on individual stock selection through extensive fundamental research. Candidates are initially selected for research if they meet certain broad absolute and trend criteria. Financial statements are analyzed in an effort to identify the nature of their cash generation and to understand the variables that add value to their businesses. Companies meeting the financial criteria are subjected to a detailed investigation of products, costs and pricing, competition, industry position and outlook.
The Fund | 3 |
DISCUSSION OF FUND PERFORMANCE (continued)
Macroeconomic Developments Fueled Market Volatility
Stocks throughout the world rallied from depressed levels soon after the start of the reporting period, when investors responded to a quantitative easing program in Europe that appeared to forestall a more severe banking crisis in the region, employment gains in the United States, and the growing likelihood of a “soft landing” and lower inflation in China. As a result, investors grew more tolerant of risks, and they shifted their attention from traditional safe havens to stocks and other assets expected to benefit from better global business conditions.
However, these positive influences were called into question in the spring of 2012, when austerity measures designed to relieve fiscal pressures in Europe encountered political resistance in some countries, raising questions about the region’s economic prospects. At the same time, U.S. economic data proved more disappointing than expected. These threats to global growth caused most international stock market averages, including the MSCI EAFE Index, to decline in April and May, more than offsetting earlier gains.
Stock Selections Buoyed Relative Fund Performance
In this challenging environment, our bottom-up security selection process identified a number of fundamentally strong companies in industry groups that tend to be less vulnerable to changes in economic conditions.Winners in the health care sector included Australia-based blood plasma specialist CSL, where sales and earnings increased along with medical demand for plasma components, and Denmark-based diabetes treatment specialist Novo Nordisk saw sales increase along with the prevalence of this obesity-related disease. The fund also received a strongly positive contribution to performance from Japanese drug maker Chugai Pharmaceutical. In the consumer discretionary sector, fashion and household goods company Shimamura proved to be well managed through the disruptions caused by the nation’s 2011 earthquake and tsunami.
Disappointments during the reporting period were concentrated primarily in the capital goods sector, where pipe manufacturers Tenaris and Vallourec, based in Luxembourg and France, respectively, suffered due to sluggish demand from customers in the energy production industry as oil
4
prices declined. However, we believe that this setback is temporary, and that long-term trends remain favorable for both companies. In addition, U.K.-based international supermarket chain Tesco was hurt by a weak holiday season in 2011 and costs related to accelerated investments in refurbishing its branded stores. Another U.K. grocery operator, WM Morrison Supermarkets, was hurt by negative investor sentiment toward the industry despite relatively strong operating results.
Finding Attractive Opportunities Throughout the World
As of the reporting period’s end, we have remained cautious with regard to the global economy, as ongoing deleveraging among governments, businesses and individuals seems likely to constrain economic activity for some time to come. Nonetheless, our research-intensive approach has continued to identify companies likely to benefit from secular growth trends. For example, we have found a number of these opportunities among multinational companies — such as food giant Nestle and cosmetics seller L’Oreal — that have achieved higher earnings through a growing presence in the emerging markets. In our judgment, the fund is well positioned to participate in gains among fundamentally strong businesses while managing the various risks stemming from sluggish global economic growth.
June 15, 2012
Equity funds are subject generally to market, market sector, market liquidity, issuer and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
Investing internationally involves special risks, including changes in currency exchange rates, political, economic and social instability, a lack of comprehensive company information, differing auditing and legal standards and less market liquidity.
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. 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. – Reflects reinvestment of net dividends and, where applicable, |
capital gain distributions.The Morgan Stanley Capital International Europe,Australasia, Far | |
East (MSCI EAFE) Index is an unmanaged index composed of a sample of companies | |
representative of the market structure of European and Pacific Basin countries. Returns are | |
calculated on a month-end basis. Investors cannot invest directly in any index. |
The Fund | 5 |
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in International Stock Fund from December 1, 2011 to May 31, 2012. 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 May 31, 2012
Class A | Class C | Class I | ||||
Expenses paid per $1,000† | $ | 6.52 | $ | 10.23 | $ | 4.68 |
Ending value (after expenses) | $ | 990.30 | $ | 986.10 | $ | 991.40 |
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 May 31, 2012
Class A | Class C | Class I | ||||
Expenses paid per $1,000† | $ | 6.61 | $ | 10.38 | $ | 4.75 |
Ending value (after expenses) | $ | 1,018.45 | $ | 1,014.70 | $ | 1,020.30 |
for Class I , multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half |
year period). |
6
STATEMENT OF INVESTMENTS |
May 31, 2012 (Unaudited) |
Common Stocks—96.5% | Shares | Value ($) |
Australia—9.4% | ||
Coca-Cola Amatil | 2,546,000 | 31,868,711 |
Cochlear | 280,800 | 17,155,608 |
CSL | 877,400 | 32,178,484 |
Woodside Petroleum | 1,057,000 | 33,122,951 |
Woolworths | 1,228,000 | 31,627,349 |
145,953,103 | ||
Belgium—1.9% | ||
Colruyt | 740,800 | 29,751,813 |
Brazil—2.1% | ||
Petroleo Brasileiro, ADR | 1,730,800 | 32,712,120 |
Canada—1.9% | ||
Suncor Energy | 1,089,600 | 29,570,110 |
China—1.1% | ||
China Shenhua Energy, Cl. H | 4,670,000 | 16,456,056 |
Denmark—2.3% | ||
Novo Nordisk, Cl. B | 265,000 | 35,254,842 |
Finland—1.0% | ||
Kone, Cl. B | 276,000 | 15,401,778 |
France—5.9% | ||
Cie Generale d’Optique Essilor International | 286,000 | 24,429,513 |
Danone | 487,000 | 31,247,054 |
L’Oreal | 263,600 | 29,634,751 |
Vallourec | 143,800 | 5,369,851 |
90,681,169 | ||
Germany—4.0% | ||
Adidas | 422,000 | 31,407,491 |
SAP | 520,000 | 29,834,432 |
61,241,923 | ||
Hong Kong—7.7% | ||
China Mobile | 3,094,500 | 31,297,647 |
CLP Holdings | 3,214,000 | 26,170,649 |
The Fund | 7 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) |
Hong Kong (continued) | ||
CNOOC | 17,181,000 | 31,079,003 |
Hong Kong & China Gas | 12,652,915 | 29,702,329 |
118,249,628 | ||
Japan—24.3% | ||
AEON Mall | 764,400 | 15,012,910 |
Canon | 770,600 | 30,977,412 |
Chugai Pharmaceutical | 628,000 | 11,340,225 |
Daikin Industries | 361,800 | 9,331,263 |
Daito Trust Construction | 356,200 | 31,365,237 |
Denso | 994,900 | 30,078,077 |
FANUC | 194,600 | 33,575,702 |
Honda Motor | 934,700 | 29,963,839 |
Hoya | 588,300 | 12,620,371 |
INPEX | 5,625 | 32,518,185 |
Keyence | 83,820 | 18,976,095 |
Komatsu | 1,274,500 | 30,545,061 |
Mitsubishi Estate | 877,000 | 13,642,968 |
Shimamura | 204,300 | 23,177,986 |
Shin-Etsu Chemical | 613,700 | 31,562,162 |
Tokio Marine Holdings | 899,000 | 19,583,882 |
374,271,375 | ||
Luxembourg—.8% | ||
Tenaris, ADR | 388,800 | 12,122,784 |
Singapore—1.9% | ||
DBS Group Holdings | 1,406,338 | 14,427,897 |
Oversea-Chinese Banking | 2,269,061 | 14,720,899 |
29,148,796 |
8
Common Stocks (continued) | Shares | Value ($) |
Spain—1.9% | ||
Inditex | 348,000 | 28,752,934 |
Sweden—1.9% | ||
Hennes & Mauritz, Cl. B | 984,100 | 29,233,778 |
Switzerland—8.2% | ||
Nestle | 528,000 | 29,923,714 |
Novartis | 590,000 | 30,643,434 |
Roche Holding | 124,500 | 19,430,895 |
SGS | 8,290 | 14,943,934 |
Syngenta | 100,000 | 32,017,295 |
126,959,272 | ||
Taiwan—1.9% | ||
Taiwan Semiconductor | ||
Manufacturing, ADR | 2,179,900 | 29,930,027 |
United Kingdom—18.3% | ||
BG Group | 1,555,000 | 29,777,106 |
Burberry Group | 1,441,000 | 30,359,051 |
Centrica | 6,856,000 | 32,692,400 |
HSBC Holdings | 3,950,000 | 31,016,799 |
Reckitt Benckiser Group | 583,000 | 30,944,779 |
SABMiller | 859,000 | 31,706,943 |
Smith & Nephew | 3,150,000 | 29,419,742 |
Standard Chartered | 1,427,000 | 28,788,518 |
Tesco | 6,446,000 | 30,056,828 |
WM Morrison Supermarkets | 1,945,000 | 8,279,402 |
283,041,568 | ||
Total Common Stocks | ||
(cost $1,493,311,484) | 1,488,733,076 |
The Fund | 9 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Other Investment—2.0% | Shares | Value ($) | |
Registered Investment Company; | |||
Dreyfus Institutional Preferred | |||
Plus Money Market Fund | |||
(cost $31,000,000) | 31,000,000a | 31,000,000 | |
Total Investments (cost $1,524,311,484) | 98.5% | 1,519,733,076 | |
Cash and Receivables (Net) | 1.5% | 22,402,157 | |
Net Assets | 100.0% | 1,542,135,233 |
ADR—American Depository Receipts |
a Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Consumer Staples | 18.5 | Industrial | 7.9 |
Energy | 13.3 | Utilities | 5.7 |
Consumer Discretionary | 13.2 | Materials | 4.1 |
Health Care | 13.0 | Telecommunication Services | 2.0 |
Financial | 10.9 | Money Market Investment | 2.0 |
Information Technology | 7.9 | 98.5 |
† Based on net assets. |
See notes to financial statements. |
10
STATEMENT OF ASSETS AND LIABILITIES |
May 31, 2012 (Unaudited) |
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments: | ||||
Unaffiliated issuers | 1,493,311,484 | 1,488,733,076 | ||
Affiliated issuers | 31,000,000 | 31,000,000 | ||
Cash | 11,852,054 | |||
Cash denominated in foreign currencies | 1,563,625 | 1,534,594 | ||
Dividends receivable | 9,835,187 | |||
Receivable for shares of Common Stock subscribed | 1,894,242 | |||
Prepaid expenses | 53,437 | |||
1,544,902,590 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 1,296,796 | |||
Payable for shares of Common Stock redeemed | 1,281,899 | |||
Accrued expenses | 188,662 | |||
2,767,357 | ||||
Net Assets ($) | 1,542,135,233 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 1,578,267,709 | |||
Accumulated undistributed investment income—net | 20,283,848 | |||
Accumulated net realized gain (loss) on investments | (51,716,884) | |||
Accumulated net unrealized appreciation (depreciation) | ||||
on investments and foreign currency transactions | (4,699,440) | |||
Net Assets ($) | 1,542,135,233 | |||
Net Asset Value Per Share | ||||
Class A | Class C | Class I | ||
Net Assets ($) | 154,597,238 | 20,326,929 | 1,367,211,066 | |
Shares Outstanding | 12,532,723 | 1,674,003 | 109,983,238 | |
Net Asset Value Per Share ($) | 12.34 | 12.14 | 12.43 | |
See notes to financial statements. |
The Fund | 11 |
STATEMENT OF OPERATIONS | ||
Six Months Ended May 31, 2012 (Unaudited) | ||
Investment Income ($): | ||
Income: | ||
Cash dividends (net of $1,974,412 foreign taxes withheld at source): | ||
Unaffiliated issuers | 29,958,339 | |
Affiliated issuers | 20,709 | |
Total Income | 29,979,048 | |
Expenses: | ||
Management fee—Note 3(a) | 6,345,709 | |
Shareholder servicing costs—Note 3(c) | 457,283 | |
Custodian fees—Note 3(c) | 200,893 | |
Directors’ fees and expenses—Note 3(d) | 109,069 | |
Professional fees | 87,258 | |
Distribution fees—Note 3(b) | 84,772 | |
Registration fees | 68,735 | |
Prospectus and shareholders’ reports | 28,192 | |
Loan commitment fees—Note 2 | 6,166 | |
Miscellaneous | 56,964 | |
Total Expenses | 7,445,041 | |
Less—reduction in fees due to earnings credits—Note 3(c) | (144) | |
Net Expenses | 7,444,897 | |
Investment Income—Net | 22,534,151 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments and foreign currency transactions | (10,838,581) | |
Net realized gain (loss) on forward foreign currency exchange contracts | (893,760) | |
Net Realized Gain (Loss) | (11,732,341) | |
Net unrealized appreciation (depreciation) on | ||
investments and foreign currency transactions | (31,737,938) | |
Net unrealized appreciation (depreciation) on | ||
forward foreign currency exchange contracts | 14,241 | |
Net Unrealized Appreciation (Depreciation) | (31,723,697) | |
Net Realized and Unrealized Gain (Loss) on Investments | (43,456,038) | |
Net (Decrease) in Net Assets Resulting from Operations | (20,921,887) | |
See notes to financial statements. |
12
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
May 31, 2012 | Year Ended | |||
(Unaudited) | November 30, 2011 | |||
Operations ($): | ||||
Investment income—net | 22,534,151 | 15,717,906 | ||
Net realized gain (loss) on investments | (11,732,341) | (19,894,512) | ||
Net unrealized appreciation | ||||
(depreciation) on investments | (31,723,697) | (41,774,228) | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | (20,921,887) | (45,950,834) | ||
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A Shares | (1,727,130) | (891,065) | ||
Class C Shares | (33,444) | (62,687) | ||
Class I Shares | (14,304,931) | (5,951,410) | ||
Total Dividends | (16,065,505) | (6,905,162) | ||
Capital Stock Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A Shares | 35,984,874 | 141,281,526 | ||
Class C Shares | 2,631,884 | 15,822,744 | ||
Class I Shares | 412,833,304 | 597,266,958 | ||
Dividends reinvested: | ||||
Class A Shares | 1,702,274 | 878,594 | ||
Class C Shares | 23,020 | 42,711 | ||
Class I Shares | 7,414,889 | 2,081,783 | ||
Cost of shares redeemed: | ||||
Class A Shares | (73,135,727) | (64,098,053) | ||
Class C Shares | (5,376,458) | (4,950,839) | ||
Class I Shares | (134,827,907) | (130,894,151) | ||
Increase (Decrease) in Net Assets | ||||
from Capital Stock Transactions | 247,250,153 | 557,431,273 | ||
Total Increase (Decrease) in Net Assets | 210,262,761 | 504,575,277 | ||
Net Assets ($): | ||||
Beginning of Period | 1,331,872,472 | 827,297,195 | ||
End of Period | 1,542,135,233 | 1,331,872,472 | ||
Undistributed investment income—net | 20,283,848 | 13,815,202 |
The Fund | 13 |
STATEMENT OF CHANGES IN NET ASSETS (continued)
Six Months Ended | ||||
May 31, 2012 | Year Ended | |||
(Unaudited) | November 30, 2011 | |||
Capital Share Transactions: | ||||
Class A | ||||
Shares sold | 2,788,032 | 10,369,700 | ||
Shares issued for dividends reinvested | 140,566 | 64,508 | ||
Shares redeemed | (5,683,376) | (4,837,020) | ||
Net Increase (Decrease) in Shares Outstanding | (2,754,778) | 5,597,188 | ||
Class C | ||||
Shares sold | 205,688 | 1,171,466 | ||
Shares issued for dividends reinvested | 1,923 | 3,178 | ||
Shares redeemed | (424,487) | (387,816) | ||
Net Increase (Decrease) in Shares Outstanding | (216,876) | 786,828 | ||
Class I | ||||
Shares sold | 31,990,670 | 44,375,224 | ||
Shares issued for dividends reinvested | 608,776 | 151,955 | ||
Shares redeemed | (10,519,625) | (9,928,482) | ||
Net Increase (Decrease) in Shares Outstanding | 22,079,821 | 34,598,697 | ||
See notes to financial statements. |
14
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 | ||||||||||||
May 31, 2012 | Year Ended November 30, | |||||||||||
Class A Shares | (Unaudited) | 2011 | 2010 | 2009 | 2008 | 2007a | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 12.58 | 12.83 | 11.97 | 8.43 | 13.72 | 12.50 | ||||||
Investment Operations: | ||||||||||||
Investment income—netb | .16 | .15 | .09 | .05 | .09 | .07 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (.28) | (.31) | .86 | 3.58 | (5.28) | 1.15 | ||||||
Total from Investment Operations | (.12) | (.16) | .95 | 3.63 | (5.19) | 1.22 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.12) | (.09) | (.09) | (.09) | (.02) | — | ||||||
Dividends from net realized | ||||||||||||
gain on investments | — | — | — | — | (.08) | — | ||||||
Total Distributions | (.12) | (.09) | (.09) | (.09) | (.10) | — | ||||||
Net asset value, end of period | 12.34 | 12.58 | 12.83 | 11.97 | 8.43 | 13.72 | ||||||
Total Return (%)c | (.97)d | (1.32) | 7.99 | 43.33 | (38.07) | 9.76d | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.31e | 1.27 | 1.34 | 1.43 | 1.43 | 1.75e | ||||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.31e | 1.27 | 1.34 | 1.42 | 1.41 | 1.47e | ||||||
Ratio of net investment income | ||||||||||||
to average net assets | 2.49e | 1.08 | .69 | .50 | .79 | .50e | ||||||
Portfolio Turnover Rate | 3.79d | 5.07 | 5.91 | 21.67 | 13.18 | 13.34d | ||||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 154,597 | 192,351 | 124,347 | 18,059 | 1,126 | 1,396 |
a | From December 29, 2006 (commencement of operations) to November 30, 2007. |
b | Based on average shares outstanding at each month end. |
c | Exclusive of sales charge. |
d | Not annualized. |
e | Annualized. |
See notes to financial statements.
The Fund | 15 |
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||||
May 31, 2012 | Year Ended November 30, | |||||||||||
Class C Shares | (Unaudited) | 2011 | 2010 | 2009 | 2008 | 2007a | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 12.33 | 12.64 | 11.83 | 8.32 | 13.64 | 12.50 | ||||||
Investment Operations: | ||||||||||||
Investment income (loss)—netb | .12 | .04 | (.02) | (.01) | .00c | (.04) | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (.29) | (.30) | .87 | 3.53 | (5.24) | 1.18 | ||||||
Total from Investment Operations | (.17) | (.26) | .85 | 3.52 | (5.24) | 1.14 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.02) | (.05) | (.04) | (.01) | — | — | ||||||
Dividends from net realized | ||||||||||||
gain on investments | — | — | — | — | (.08) | — | ||||||
Total Distributions | (.02) | (.05) | (.04) | (.01) | (.08) | — | ||||||
Net asset value, end of period | 12.14 | 12.33 | 12.64 | 11.83 | 8.32 | 13.64 | ||||||
Total Return (%)d | (1.39)e | (2.08) | 7.18 | 42.31 | (38.58) | 9.04e | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 2.06f | 2.05 | 2.13 | 2.25 | 2.24 | 2.50f | ||||||
Ratio of net expenses | ||||||||||||
to average net assets | 2.06f | 2.05 | 2.13 | 2.22 | 2.20 | 2.21f | ||||||
Ratio of net investment income | ||||||||||||
(loss) to average net assets | 1.83f | .33 | (.12) | (.13) | .03 | (.31)f | ||||||
Portfolio Turnover Rate | 3.79e | 5.07 | 5.91 | 21.67 | 13.18 | 13.34e | ||||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 20,327 | 23,319 | 13,959 | 1,224 | 197 | 445 |
a | From December 29, 2006 (commencement of operations) to November 30, 2007. |
b | Based on average shares outstanding at each month end. |
c | Amount represents less than $.01 per share. |
d | Exclusive of sales charge. |
e | Not annualized. |
f | Annualized. |
See notes to financial statements.
16
Six Months Ended | ||||||||||||
May 31, 2012 | Year Ended November 30, | |||||||||||
Class I Shares | (Unaudited) | 2011 | 2010 | 2009 | 2008 | 2007a,b | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 12.70 | 12.93 | 12.04 | 8.47 | 13.76 | 12.50 | ||||||
Investment Operations: | ||||||||||||
Investment income—netc | .20 | .19 | .14 | .12 | .14 | .11 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (.31) | (.31) | .86 | 3.57 | (5.30) | 1.15 | ||||||
Total from | ||||||||||||
Investment Operations | (.11) | (.12) | 1.00 | 3.69 | (5.16) | 1.26 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.16) | (.11) | (.11) | (.12) | (.05) | — | ||||||
Dividends from net realized | ||||||||||||
gain on investments | — | — | — | — | (.08) | — | ||||||
Total Distributions | (.16) | (.11) | (.11) | (.12) | (.13) | — | ||||||
Net asset value, end of period | 12.43 | 12.70 | 12.93 | 12.04 | 8.47 | 13.76 | ||||||
Total Return (%) | (.86)d | (1.01) | 8.38 | 43.98 | (37.82) | 10.08d | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .94e | .93 | .97 | 1.01 | 1.03 | 1.38e | ||||||
Ratio of net expenses | ||||||||||||
to average net assets | .94e | .93 | .97 | 1.01 | 1.02 | 1.16e | ||||||
Ratio of net investment income | ||||||||||||
to average net assets | 3.11e | 1.41 | 1.11 | 1.18 | 1.19 | .81e | ||||||
Portfolio Turnover Rate | 3.79d | 5.07 | 5.91 | 21.67 | 13.18 | 13.34d | ||||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 1,367,211 | 1,116,202 | 688,992 | 339,535 | 119,650 | 69,201 |
a | From December 29, 2006 (commencement of operations) to November 30, 2007. |
b | Effective June 1, 2007, Class R shares were redesignated as Class I shares. |
c | Based on average shares outstanding at each month end. |
d | Not annualized. |
e | Annualized. |
See notes to financial statements.
The Fund | 17 |
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
International Stock Fund (the “fund”) is a separate diversified series of Strategic Funds, Inc. (the “Company”) 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 nine series, including the fund.The fund’s investment objective is to seek long-term total return. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of NewYork Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Walter Scott & Partners Limited (“Walter Scott”), a subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser.
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 400 million shares of $.001 par value Common Stock. The fund currently offers three classes of shares: Class A (100 million shares authorized), Class C (100 million shares authorized) and Class I (200 million shares authorized). Class A shares are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) on Class C shares redeemed within one year of purchase. Class I shares are sold at net asset value per share only to institutional investors. 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.
The Company 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.
18
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates.
The Company enters into contracts that contain a variety of indemnifications.The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: 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.
The Fund | 19 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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.
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:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are categorized within Level 1 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures contracts. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
20
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 of Directors. 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 as Level 2 or 3 depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are 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.
Forward foreign currency exchange contracts (“forward contracts”) are valued at the forward rate. These securities are generally categorized within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of May 31, 2012 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities— | ||||
Foreign† | 1,488,733,076 | — | — | 1,488,733,076 |
Mutual Funds | 31,000,000 | — | — | 31,000,000 |
† | See Statement of Investments for additional detailed categorizations. |
The Fund | 21 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
In May 2011, FASB issued Accounting Standards Update (“ASU”) No. 2011-04 “Amendments to Achieve Common FairValue Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards (“IFRS”)” (“ASU 2011-04”). ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between GAAP and IFRS. ASU 2011-04 will require reporting entities to disclose the following information for fair value measurements categorized within Level 3 of the fair value hierarchy: quantitative information about the unobservable inputs used in the fair value measurement, the valuation processes used by the reporting entity and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements.The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU 2011-04 and its impact on the financial statements.
(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 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 or 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 investments are included with net realized and unrealized gain or loss on investments.
22
(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. 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.
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.
(d) Affiliated issuers: Other investment companies advised by Dreyfus are considered to be “affiliated” with the fund.
The fund may invest in shares of certain affiliated investment companies also advised or managed by Dreyfus. Investments in affiliated investment companies for the period ended May 31, 2012 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 11/30/2011 ($) | Purchases ($) | Sales ($) | 5/31/2012 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Preferred | |||||
Plus Money | |||||
Market | |||||
Fund | 25,700,000 | 305,110,000 | 299,810,000 | 31,000,000 | 2.0 |
(e) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and 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 real-
The Fund | 23 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
ized 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.
(f) 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 May 31, 2012, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period, the fund did not incur any interest or penalties.
Each of the tax years in the three-year period ended November 30, 2011 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010 (the “2010 Act”), the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 (“post-enactment losses”) for an unlimited period. Furthermore, post-enactment capital loss carryovers retain their character as either short-term or long-term capital losses rather than short-term as they were under previous statute.The 2010 Act requires post-enactment losses to be utilized before the utilization of losses incurred in taxable years prior to the effective date of the 2010 Act (“pre-enactment losses”).As a result of this ordering rule, pre-enactment losses may be more likely to expire unused.
The fund has an unused capital loss carryover of $32,011,135 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to November 30, 2011. If not applied, $598,805 of the carryover expires in fiscal 2016, $15,114,500 expires in fiscal 2017 and $16,297,830 expires in fiscal 2019.
24
The tax character of distributions paid to shareholders during the fiscal year ended November 30, 2011 was as follows: ordinary income $6,905,162. 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 a $225 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus (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 May 31, 2012, the fund did not borrow under the Facilities.
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .85% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus had contractually agreed, until April 1, 2012, to waive receipt of its fees and/or assume the expenses of the fund so that the direct expenses of none of the classes (excluding Rule 12b-1 distribution plan fees, shareholder services plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 1.25% of the value of the fund’s average daily net assets. During the period ended May 31, 2012, there was no reduction in management fee pursuant to the undertaking.
The Fund | 25 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
During the period ended May 31, 2012, the Distributor retained $9,116 from commissions earned on sales of the fund’s Class A shares and $6,890 from CDSCs on redemptions of the fund’s Class C shares.
Pursuant to a sub-investment advisory agreement between Dreyfus and Walter Scott, Dreyfus pays Walter Scott a monthly fee at an annual percentage of the fund’s average daily net assets.
(b) Under the Distribution Plan (the “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 the average daily net assets of Class C shares. During the period ended May 31, 2012, Class C shares were charged $84,772, pursuant to the 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 (a securities dealer, financial institution or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended May 31, 2012, Class A and Class C shares were charged $216,722 and $28,257, respectively, pursuant to the Shareholder Services Plan.
The fund compensates DreyfusTransfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency and cash management services for the fund. During the period ended May 31, 2012, the fund was charged $21,375 pursuant to the transfer agency agreement, which is included in Shareholder servicing costs in the Statement of Operations.
The fund compensatesThe Bank of NewYork Mellon under a custody agreement for providing custodial services for the fund. During the period ended May 31, 2012, the fund was charged $200,893 pursuant to the custody agreement.
26
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.
Prior to May 29, 2012, the fund compensated The Bank of NewYork Mellon under a cash management agreement for performing cash management services related to fund subscriptions and redemptions. During the period ended May 31, 2012, the fund was charged $3,344 pursuant to the cash management agreement, which is included in Shareholder servicing costs in the Statement of Operations.These fees were partially offset by earnings credits of $144.
During the period ended May 31, 2012, the fund was charged $3,183 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 $1,131,140, Rule 12b-1 distribution plan fees $13,540, shareholder services plan fees $38,570, custodian fees $103,244, chief compliance officer fees $2,652 and transfer agency per account fees $7,650.
(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 of investment securities, excluding short-term securities and forward contracts, during the period ended May 31, 2012, amounted to $288,056,470 and $54,542,405, respectively.
Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy.
The Fund | 27 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract decreases between those dates.With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract increases between those dates. Any realized gain or loss which occurred during the period is reflected in the Statement of Operations.The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is typically limited to the unrealized gain on each open contract. At May 31, 2012, there were no forward contracts outstanding.
The following summarizes the average market value of derivatives outstanding during the period ended May 31, 2012:
Average Market Value ($) | |
Forward contracts | 9,533,282 |
At May 31, 2012, accumulated net unrealized depreciation on investments was $4,578,408, consisting of $102,972,203 gross unrealized appreciation and $107,550,611 gross unrealized depreciation.
At May 31, 2012, 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).
28
For More Information
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
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 http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that 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 http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-DREYFUS.
Global Stock Fund
SEMIANNUAL REPORT May 31, 2012
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes.
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents | |
THE FUND | |
2 | A Letter from the Chairman and CEO |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
10 | Statement of Assets and Liabilities |
11 | Statement of Operations |
12 | Statement of Changes in Net Assets |
14 | Financial Highlights |
17 | Notes to Financial Statements |
FOR MORE INFORMATION | |
Back Cover |
Global Stock Fund
The Fund
A LETTER FROM THE CHAIRMAN AND CEO
Dear Shareholder:
We are pleased to present this semiannual report for Global Stock Fund, covering the six-month period from December 1, 2011, through May 31, 2012. 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.
The global market rebound that drove stock prices higher during the opening months of 2012 seemed to sputter and die in the spring, primarily due to a resurgent European debt crisis and renewed economic concerns in the United States and China. Consequently, international stocks ended the reporting period with negative returns, on average, with steeper declines among value-oriented stocks in European markets.
Despite the markets’ recent swoon and Europe’s persistent debt crisis, we do not anticipate a global recession. Instead, we continue to expect worldwide economic growth of about 3% for 2012, with an economic decline in Southern Europe, slight declines or slight growth for several quarters in the United Kingdom and much of Northern Europe, near-trend growth in the United States, and sustained but slower growth in China and other emerging market countries.
As always, we encourage you to discuss our observations with your financial advisor.
Thank you for your continued confidence and support.
Jonathan R. Baum
Chairman and Chief Executive Officer
The Dreyfus Corporation
June 15, 2012
2
DISCUSSION OF FUND PERFORMANCE
For the period of December 1, 2011, through May 31, 2012, as provided by Charlie Macquaker and Roy Leckie of Walter Scott & Partners Limited (Walter Scott), Sub-investment adviser
Fund and Market Performance Overview
For the six-month period ended May 31, 2012, Global Stock Fund’s Class A shares produced a total return of 1.03%, Class C shares returned 0.69% and Class I shares returned 1.21%.1 In comparison, the fund’s benchmark index, the Morgan Stanley Capital International World Index (the “MSCIWorld Index”), achieved a 0.72% return over the same period.2
Global equities generally rebounded over the reporting period’s first half, but renewed macroeconomic concerns later erased those gains, leading to flat returns for the MSCI World Index overall. The fund’s Class A and Class I shares produced higher returns than the benchmark, primarily due to the success of our stock selection strategy in the health care and consumer discretionary sectors.
The Fund’s Investment Approach
The fund seeks long-term real returns by investing in high-quality companies capable of sustainable growth and wealth creation over a long time horizon. The firm focuses on individual stock selection through extensive fundamental research. Candidates are initially selected for research if they meet certain broad absolute and trend criteria. Financial statements are analyzed in an effort to identify the nature of the cash generation that is looked for in any investment and to understand the variables that demonstrate robust financial health and define long-term competitive advantage. Companies meeting the financial criteria are then subjected to a detailed investigation of products, costs and pricing, competition, industry position and outlook.
Macroeconomic Developments Fueled Market Volatility
Stocks throughout the world rallied soon after the start of the reporting period, when investors responded to a quantitative easing program in
The Fund | 3 |
DISCUSSION OF FUND PERFORMANCE (continued)
Europe that appeared to forestall a more severe banking crisis in the region, employment gains in the United States, and the growing likelihood of a “soft landing” and lower inflation in China. As a result, investors grew more tolerant of risks, and they shifted their attention from traditional safe havens to stocks and other assets expected to benefit from better global business conditions.
However, these positive influences were called into question in the spring, when austerity measures designed to relieve fiscal pressures in Europe encountered political resistance, raising questions about the region’s economic prospects. At the same time, U.S. economic data proved more disappointing than expected.These threats to global growth caused most international stock market averages, including the MSCI World Index, to decline in April and May, offsetting previous gains.
Stock Selections Buoyed Fund Performance
In this challenging environment, our bottom-up security selection process identified a number of fundamentally strong companies in industry groups that tend to be less vulnerable to changes in economic conditions.Winners in the health care sector included Denmark-based diabetes treatment specialist Novo Nordisk as sales continued to increase along with the prevalence of this obesity-related disease. French optical lens maker Cie Generale d’Optique Essilor International entered new markets and captured greater market share as lens technologies grew more sophisticated.The fund also received a strongly positive contribution to performance from Japanese drug maker Chugai Pharmaceuticals.
Top performers in the consumer discretionary sector included U.S. discount apparel retailer TJX, which encountered rising demand in part due to new customers who arrived during the economic downturn and stayed through the recovery. Footwear maker NIKE gained value when it captured a larger share of the global market for athletic apparel and equipment. Among individual stocks, electrical components company Amphenol benefited from rising demand for the electrical and fiber optic connectors used in various high-tech military applications.
Disappointments during the reporting period included several stocks in the traditionally defensive consumer staples sector, where U.K.-based international supermarket chain Tesco was hurt by lack of investment
4
in its branded stores, a situation management began to address in 2012. Another U.K. grocery operator,WM Morrison Supermarkets, was hurt by negative investor sentiment toward the industry despite relatively strong operating results. The fund’s relative performance also was undermined by U.S. technology firm FLIR Systems, which lost value amid worries regarding likely reductions in U.S. defense spending.
Finding Attractive Opportunities Throughout the World
As of the reporting period’s end, we have remained cautious with regard to the global economy, as ongoing deleveraging among governments, businesses and individuals seems likely to constrain global economic activity for some time to come. Nonetheless, our research-intensive approach has continued to identify companies likely to benefit from secular growth trends.We have found a number of these opportunities in the United States but relatively few in Japan. We also have found opportunities among multinational companies—such as food giant Nestle, cosmetics seller L’Oreal and household goods provider Colgate-Palmolive—that have achieved higher earnings through a growing presence in the emerging markets. In our judgment, these strategies position the fund to participate in gains among fundamentally strong businesses while managing risks stemming from ongoing economic instability.
June 15, 2012
Equity funds are subject generally to market, market sector, market liquidity, issuer and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
Investing internationally involves special risks, including changes in currency exchange rates, political, economic and social instability, a lack of comprehensive company information, differing auditing and legal standards and less market liquidity.These risks generally are greater with emerging market countries than with more economically and politically established foreign countries.
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. 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. — Reflects reinvestment of net dividends and, where applicable, |
capital gain distributions.The Morgan Stanley Capital International (MSCI) World Index is an | |
unmanaged index of global stock market performance, including the United States, Canada, | |
Europe,Australia, New Zealand and the Far East. Investors cannot invest directly in any index. |
The Fund | 5 |
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Global Stock Fund from December 1, 2011 to May 31, 2012. 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 May 31, 2012
Class A | Class C | Class I | ||||
Expenses paid per $1,000† | $ | 6.43 | $ | 10.34 | $ | 4.68 |
Ending value (after expenses) | $ | 1,010.30 | $ | 1,006.90 | $ | 1,012.10 |
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 May 31, 2012
Class A | Class C | Class I | ||||
Expenses paid per $1,000† | $ | 6.46 | $ | 10.38 | $ | 4.70 |
Ending value (after expenses) | $ | 1,018.60 | $ | 1,014.70 | $ | 1,020.35 |
† Expenses are equal to the fund’s annualized expense ratio of 1.28% for Class A, 2.06% for Class C and .93% |
for Class I, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half |
year period). |
6
STATEMENT OF INVESTMENTS |
May 31, 2012 (Unaudited) |
Common Stocks—97.7% | Shares | Value ($) |
Australia—3.9% | ||
CSL | 305,300 | 11,196,821 |
Woodside Petroleum | 368,000 | 11,531,926 |
22,728,747 | ||
Brazil—2.0% | ||
Petroleo Brasileiro, ADR | 631,800 | 11,941,020 |
Canada—2.0% | ||
Suncor Energy | 431,100 | 11,699,407 |
China—.8% | ||
China Shenhua Energy, Cl. H | 1,430,000 | 5,039,006 |
Denmark—2.0% | ||
Novo Nordisk, Cl. B | 90,900 | 12,093,076 |
France—3.6% | ||
Cie Generale d’Optique Essilor International | 115,000 | 9,823,056 |
L’Oreal | 102,100 | 11,478,407 |
21,301,463 | ||
Hong Kong—6.0% | ||
China Mobile | 1,082,000 | 10,943,304 |
CLP Holdings | 940,500 | 7,658,213 |
CNOOC | 6,380,000 | 11,540,891 |
Hong Kong & China Gas | 2,107,880 | 4,948,183 |
35,090,591 | ||
Japan—13.4% | ||
Canon | 244,700 | 9,836,715 |
Chugai Pharmaceutical | 371,100 | 6,701,206 |
Daikin Industries | 183,200 | 4,724,951 |
Denso | 376,900 | 11,394,539 |
FANUC | 72,000 | 12,422,665 |
Honda Motor | 363,000 | 11,636,753 |
Keyence | 22,957 | 5,197,259 |
Mitsubishi Estate | 337,000 | 5,242,509 |
Shin-Etsu Chemical | 224,600 | 11,551,021 |
78,707,618 | ||
Singapore—1.0% | ||
DBS Group Holdings | 553,285 | 5,676,259 |
The Fund | 7 |
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Spain—1.8% | |||
Inditex | 130,500 | 10,782,350 | |
Sweden—1.9% | |||
Hennes & Mauritz, Cl. B | 374,000 | 11,110,083 | |
Switzerland—6.3% | |||
Nestle | 199,000 | 11,278,067 | |
Novartis | 100,600 | 5,224,965 | |
SGS | 5,000 | 9,013,229 | |
Syngenta | 35,400 | 11,334,123 | |
36,850,384 | |||
United Kingdom—10.2% | |||
BG Group | 539,700 | 10,334,858 | |
HSBC Holdings | 1,352,000 | 10,616,383 | |
Reckitt Benckiser Group | 215,600 | 11,443,730 | |
Standard Chartered | 545,000 | 10,994,914 | |
Tesco | 2,430,000 | 11,330,762 | |
WM Morrison Supermarkets | 1,200,500 | 5,110,243 | |
59,830,890 | |||
United States—42.8% | |||
Adobe Systems | 372,300a | 11,559,915 | |
Amphenol, Cl. A | 165,400 | 8,797,626 | |
Automatic Data Processing | 225,900 | 11,780,685 | |
C.R. Bard | 79,700 | 7,746,043 | |
Cisco Systems | 722,200 | 11,793,526 | |
Colgate-Palmolive | 123,900 | 12,179,370 | |
EOG Resources | 119,400 | 11,856,420 | |
Fastenal | 210,000 | 9,288,300 | |
FLIR Systems | 151,500 | 3,231,495 | |
Google, Cl. A | 19,800a | 11,501,028 | |
Intel | 445,300 | 11,506,552 | |
Johnson & Johnson | 186,100 | 11,618,223 | |
MasterCard, Cl. A | 27,700 | 11,260,327 | |
Microsoft | 376,700 | 10,995,873 | |
NIKE, Cl. B | 110,900 | 11,997,162 | |
Oracle | 447,400 | 11,842,678 | |
Praxair | 109,200 | 11,601,408 | |
Precision Castparts | 67,400 | 11,202,554 |
8
Common Stocks (continued) | Shares | Value ($) | |
United States (continued) | |||
QUALCOMM | 198,500 | 11,376,035 | |
Schlumberger | 177,900 | 11,252,175 | |
Sigma-Aldrich | 166,400 | 11,543,168 | |
TJX | 326,800 | 13,875,928 | |
Wal-Mart Stores | 185,200 | 12,189,864 | |
251,996,355 | |||
Total Common Stocks | |||
(cost $516,633,366) | 574,847,249 | ||
Other Investment—1.0% | |||
Registered Investment Company; | |||
Dreyfus Institutional Preferred | |||
Plus Money Market Fund | |||
(cost $6,100,000) | 6,100,000b | 6,100,000 | |
Total Investments (cost $522,733,366) | 98.7% | 580,947,249 | |
Cash and Receivables (Net) | 1.3% | 7,658,335 | |
Net Assets | 100.0% | 588,605,584 |
ADR—American Depository Receipts | |
a | Non-income producing security. |
b | Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Information Technology | 22.2 | Materials | 7.8 |
Energy | 14.5 | Financial | 5.5 |
Consumer Staples | 12.8 | Utilities | 2.2 |
Consumer Discretionary | 12.0 | Telecommunication Services | 1.9 |
Health Care | 10.9 | Money Market Investment | 1.0 |
Industrial | 7.9 | 98.7 |
† Based on net assets. |
See notes to financial statements. |
The Fund | 9 |
STATEMENT OF ASSETS AND LIABILITIES |
May 31, 2012 (Unaudited) |
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments: | ||||
Unaffiliated issuers | 516,633,366 | 574,847,249 | ||
Affiliated issuers | 6,100,000 | 6,100,000 | ||
Cash | 134,076 | |||
Cash denominated in foreign currencies | 407,375 | 403,480 | ||
Receivable for shares of Common Stock subscribed | 5,193,295 | |||
Dividends receivable | 3,174,767 | |||
Prepaid expenses | 48,405 | |||
589,901,272 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 489,946 | |||
Payable for shares of Common Stock redeemed | 732,151 | |||
Accrued expenses | 73,591 | |||
1,295,688 | ||||
Net Assets ($) | 588,605,584 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 529,724,064 | |||
Accumulated undistributed investment income—net | 4,871,130 | |||
Accumulated net realized gain (loss) on investments | (4,184,413) | |||
Accumulated net unrealized appreciation (depreciation) | ||||
on investments and foreign currency transactions | 58,194,803 | |||
Net Assets ($) | 588,605,584 | |||
Net Asset Value Per Share | ||||
Class A | Class C | Class I | ||
Net Assets ($) | 52,428,914 | 14,481,914 | 521,694,756 | |
Shares Outstanding | 3,906,704 | 1,097,588 | 38,399,610 | |
Net Asset Value Per Share ($) | 13.42 | 13.19 | 13.59 | |
See notes to financial statements. |
10
STATEMENT OF OPERATIONS | ||
Six Months Ended May 31, 2012 (Unaudited) | ||
Investment Income ($): | ||
Income: | ||
Cash dividends (net of $477,609 foreign taxes withheld at source): | ||
Unaffiliated issuers | 7,720,634 | |
Affiliated issuers | 7,112 | |
Total Income | 7,727,746 | |
Expenses: | ||
Management fee—Note 3(a) | 2,454,983 | |
Shareholder servicing costs—Note 3(c) | 145,297 | |
Custodian fees—Note 3(c) | 56,536 | |
Distribution fees—Note 3(b) | 55,345 | |
Directors’ fees and expenses—Note 3(d) | 47,193 | |
Professional fees | 41,360 | |
Registration fees | 18,437 | |
Prospectus and shareholders’ reports | 12,447 | |
Loan commitment fees—Note 2 | 1,965 | |
Miscellaneous | 17,230 | |
Total Expenses | 2,850,793 | |
Less—reduction in fees due to earnings credits—Note 3(c) | (32) | |
Net Expenses | 2,850,761 | |
Investment Income—Net | 4,876,985 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments and foreign currency transactions | (824,253) | |
Net realized gain (loss) on forward foreign currency exchange contracts | (93,741) | |
Net Realized Gain (Loss) | (917,994) | |
Net unrealized appreciation (depreciation) on | ||
investments and foreign currency transactions | (153,168) | |
Net unrealized appreciation (depreciation) on | ||
forward foreign currency exchange contracts | 5,785 | |
Net Unrealized Appreciation (Depreciation) | (147,383) | |
Net Realized and Unrealized Gain (Loss) on Investments | (1,065,377) | |
Net Increase in Net Assets Resulting from Operations | 3,811,608 | |
See notes to financial statements. |
The Fund | 11 |
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
May 31, 2012 | Year Ended | |||
(Unaudited) | November 30, 2011 | |||
Operations ($): | ||||
Investment income—net | 4,876,985 | 5,368,888 | ||
Net realized gain (loss) on investments | (917,994) | 1,843,441 | ||
Net unrealized appreciation | ||||
(depreciation) on investments | (147,383) | 11,848,076 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 3,811,608 | 19,060,405 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A Shares | (361,165) | (217,775) | ||
Class C Shares | (5,282) | (10,303) | ||
Class I Shares | (5,003,982) | (2,828,840) | ||
Net realized gain on investments: | ||||
Class A Shares | (446,761) | (121,894) | ||
Class C Shares | (130,675) | (33,756) | ||
Class I Shares | (4,313,537) | (1,159,738) | ||
Total Dividends | (10,261,402) | (4,372,306) | ||
Capital Stock Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A Shares | 15,159,672 | 22,110,809 | ||
Class C Shares | 1,900,129 | 6,607,448 | ||
Class I Shares | 126,446,294 | 183,142,487 | ||
Dividends reinvested: | ||||
Class A Shares | 778,549 | 326,342 | ||
Class C Shares | 91,613 | 32,739 | ||
Class I Shares | 4,912,547 | 1,452,989 | ||
Cost of shares redeemed: | ||||
Class A Shares | (11,799,069) | (12,193,628) | ||
Class C Shares | (1,293,700) | (3,247,869) | ||
Class I Shares | (76,531,059) | (89,612,012) | ||
Increase (Decrease) in Net Assets | ||||
from Capital Stock Transactions | 59,664,976 | 108,619,305 | ||
Total Increase (Decrease) in Net Assets | 53,215,182 | 123,307,404 | ||
Net Assets ($): | ||||
Beginning of Period | 535,390,402 | 412,082,998 | ||
End of Period | 588,605,584 | 535,390,402 | ||
Undistributed investment income—net | 4,871,130 | 5,364,574 |
12
Six Months Ended | ||||
May 31, 2012 | Year Ended | |||
(Unaudited) | November 30, 2011 | |||
Capital Share Transactions: | ||||
Class A | ||||
Shares sold | 1,085,163 | 1,631,287 | ||
Shares issued for dividends reinvested | 59,568 | 24,013 | ||
Shares redeemed | (854,642) | (898,291) | ||
Net Increase (Decrease) in Shares Outstanding | 290,089 | 757,009 | ||
Class C | ||||
Shares sold | 138,237 | 487,100 | ||
Shares issued for dividends reinvested | 7,107 | 2,439 | ||
Shares redeemed | (95,202) | (243,895) | ||
Net Increase (Decrease) in Shares Outstanding | 50,142 | 245,644 | ||
Class I | ||||
Shares sold | 8,934,536 | 13,282,493 | ||
Shares issued for dividends reinvested | 371,881 | 105,749 | ||
Shares redeemed | (5,413,411) | (6,619,481) | ||
Net Increase (Decrease) in Shares Outstanding | 3,893,006 | 6,768,761 | ||
See notes to financial statements. |
The Fund | 13 |
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 | ||||||||||||
May 31, 2012 | Year Ended November 30, | |||||||||||
Class A Shares | (Unaudited) | 2011 | 2010 | 2009 | 2008 | 2007a | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 13.51 | 12.99 | 12.23 | 8.91 | 13.73 | 12.50 | ||||||
Investment Operations: | ||||||||||||
Investment income—netb | .10 | .11 | .07 | .06 | .05 | .04 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .03 | .52 | .75 | 3.28 | (4.70) | 1.19 | ||||||
Total from Investment Operations | .13 | .63 | .82 | 3.34 | (4.65) | 1.23 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.10) | (.07) | (.06) | (.02) | (.08) | — | ||||||
Dividends from net realized | ||||||||||||
gain on investments | (.12) | (.04) | — | — | (.09) | — | ||||||
Total Distributions | (.22) | (.11) | (.06) | (.02) | (.17) | — | ||||||
Net asset value, end of period | 13.42 | 13.51 | 12.99 | 12.23 | 8.91 | 13.73 | ||||||
Total Return (%)c | 1.03d | 4.86 | 6.70 | 37.57 | (34.32) | 9.92d | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.28e | 1.27 | 1.32 | 1.38 | 1.59 | 2.40e | ||||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.28e | 1.27 | 1.32 | 1.38 | 1.47 | 1.46e | ||||||
Ratio of net investment income | ||||||||||||
to average net assets | 1.38e | .80 | .56 | .53 | .44 | .29e | ||||||
Portfolio Turnover Rate | 6.34d | 8.54 | 7.50 | 12.75 | 15.54 | 14.53d | ||||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 52,429 | 48,872 | 37,152 | 8,212 | 3,329 | 5,132 |
a | From December 29, 2006 (commencement of operations) to November 30, 2007. |
b | Based on average shares outstanding at each month end. |
c | Exclusive of sales charge. |
d | Not annualized. |
e | Annualized. |
See notes to financial statements.
14
Six Months Ended | ||||||||||||
May 31, 2012 | Year Ended November 30, | |||||||||||
Class C Shares | (Unaudited) | 2011 | 2010 | 2009 | 2008 | 2007a | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 13.24 | 12.78 | 12.07 | 8.83 | 13.64 | 12.50 | ||||||
Investment Operations: | ||||||||||||
Investment income (loss)—netb | .04 | .01 | (.02) | (.01) | (.04) | (.06) | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .04 | .50 | .73 | 3.25 | (4.68) | 1.20 | ||||||
Total from Investment Operations | .08 | .51 | .71 | 3.24 | (4.72) | 1.14 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.01) | (.01) | (.00)c | — | — | — | ||||||
Dividends from net realized | ||||||||||||
gain on investments | (.12) | (.04) | — | — | (.09) | — | ||||||
Total Distributions | (.13) | (.05) | (.00)c | — | (.09) | — | ||||||
Net asset value, end of period | 13.19 | 13.24 | 12.78 | 12.07 | 8.83 | 13.64 | ||||||
Total Return (%)d | .69e | 4.01 | 5.90 | 36.69 | (34.82) | 9.12e | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 2.06f | 2.03 | 2.09 | 2.12 | 2.36 | 3.16f | ||||||
Ratio of net expenses | ||||||||||||
to average net assets | 2.06f | 2.03 | 2.09 | 2.09 | 2.22 | 2.20f | ||||||
Ratio of net investment income | ||||||||||||
(loss) to average net assets | .60f | .05 | (.17) | (.11) | (.29) | (.46)f | ||||||
Portfolio Turnover Rate | 6.34e | 8.54 | 7.50 | 12.75 | 15.54 | 14.53e | ||||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 14,482 | 13,872 | 10,243 | 1,873 | 695 | 925 |
a | From December 29, 2006 (commencement of operations) to November 30, 2007. |
b | Based on average shares outstanding at each month end. |
c | Amount represents less than $.01 per share. |
d | Exclusive of sales charge. |
e | Not annualized. |
f | Annualized. |
See notes to financial statements.
The Fund | 15 |
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||||
May 31, 2012 | Year Ended November 30, | |||||||||||
Class I Shares | (Unaudited) | 2011 | 2010 | 2009 | 2008 | 2007a,b | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 13.70 | 13.15 | 12.36 | 8.99 | 13.76 | 12.50 | ||||||
Investment Operations: | ||||||||||||
Investment income—netc | .12 | .16 | .12 | .11 | .10 | .07 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .03 | .53 | .76 | 3.31 | (4.76) | 1.19 | ||||||
Total from Investment Operations | .15 | .69 | .88 | 3.42 | (4.66) | 1.26 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.14) | (.10) | (.09) | (.05) | (.02) | — | ||||||
Dividends from net realized | ||||||||||||
gain on investments | (.12) | (.04) | — | — | (.09) | — | ||||||
Total Distributions | (.26) | (.14) | (.09) | (.05) | (.11) | — | ||||||
Net asset value, end of period | 13.59 | 13.70 | 13.15 | 12.36 | 8.99 | 13.76 | ||||||
Total Return (%) | 1.21d | 5.23 | 7.12 | 38.22 | (34.12) | 10.08d | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .93e | .93 | .96 | .99 | 1.17 | 2.05e | ||||||
Ratio of net expenses | ||||||||||||
to average net assets | .93e | .93 | .96 | .99 | 1.15 | 1.18e | ||||||
Ratio of net investment income | ||||||||||||
to average net assets | 1.75e | 1.13 | .94 | 1.05 | .83 | .58e | ||||||
Portfolio Turnover Rate | 6.34d | 8.54 | 7.50 | 12.75 | 15.54 | 14.53d | ||||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 521,695 | 472,646 | 364,688 | 263,694 | 72,656 | 18,312 |
a | From December 29, 2006 (commencement of operations) to November 30, 2007. |
b | Effective June 1, 2007, Class R shares were redesignated as Class I shares. |
c | Based on average shares outstanding at each month end. |
d | Not annualized. |
e | Annualized. |
See notes to financial statements.
16
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Global Stock Fund (the “fund”) is a separate diversified series of Strategic Funds, Inc. (the “Company”) 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 nine series, including the fund.The fund’s investment objective is to seek long-term total return. 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. Walter Scott & Partners Limited (“Walter Scott”), a subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser.
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 100 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class C and Class I. Class A shares are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) on Class C shares redeemed within one year of purchase. Class I shares are sold at net asset value per share only to institutional investors. 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.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are
The Fund | 17 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates.
The Company enters into contracts that contain a variety of indemnifications.The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: 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.
18
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.
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:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are categorized within Level 1 of the fair value hierarchy.
The Fund | 19 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures contracts. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
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 of Directors. 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 as Level 2 or 3 depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are 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.
Forward foreign currency exchange contracts (“forward contracts”) are valued at the forward rate. These securities are generally categorized within Level 2 of the fair value hierarchy.
20
The following is a summary of the inputs used as of May 31, 2012 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities— | ||||
Domestic† | 251,996,355 | — | — | 251,996,355 |
Equity Securities— | ||||
Foreign† | 322,850,894 | — | — | 322,850,894 |
Mutual Funds | 6,100,000 | — | — | 6,100,000 |
† See Statement of Investments for additional detailed categorizations. |
In May 2011, FASB issued Accounting Standards Update (“ASU”) No. 2011-04 “Amendments to Achieve Common FairValue Measurement and Disclosure Requirements in GAAP and International Financial Reporting Standards (“IFRS”)” (“ASU 2011-04”). ASU 2011-04 includes common requirements for measurement of and disclosure about fair value between GAAP and IFRS. ASU 2011-04 will require reporting entities to disclose the following information for fair value measurements categorized within Level 3 of the fair value hierarchy: quantitative information about the unobservable inputs used in the fair value measurement, the valuation processes used by the reporting entity and a narrative description of the sensitivity of the fair value measurement to changes in unobservable inputs and the interrelationships between those unobservable inputs. In addition, ASU 2011-04 will require reporting entities to make disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value
The Fund | 21 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
measurements.The new and revised disclosures are effective for interim and annual reporting periods beginning after December 15, 2011. At this time, management is evaluating the implications of ASU 2011-04 and its impact on the financial statements.
(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 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 or 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 investments are 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. 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.
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.
22
(d) Affiliated issuers: Other investment companies advised by Dreyfus are considered to be “affiliated” with the fund.
The fund may invest in shares of certain affiliated investment companies also advised or managed by Dreyfus. Investments in affiliated investment companies for the period ended May 31, 2012 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 11/30/2011 ($) | Purchases ($) | Sales ($) | 5/31/2012 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Preferred | |||||
Plus Money | |||||
Market | |||||
Fund | 9,200,000 | 118,720,000 | 121,820,000 | 6,100,000 | 1.0 |
(e) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and 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.
(f) 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 May 31, 2012, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period, the fund did not incur any interest or penalties.
The Fund | 23 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Each of the tax years in the three-year period ended November 30, 2011 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The tax character of distributions paid to shareholders during the fiscal year ended November 30, 2011 was as follows: ordinary income $3,941,459 and long-term capital gains $430,847.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 a $225 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus (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 May 31, 2012, the fund did not borrow under the Facilities.
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .85% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus had contractually agreed, until April 1, 2012, to waive receipt of its fees and/or assume the expenses of the fund so that the direct expenses of none of the classes (excluding Rule 12b-1 distribution plan fees, shareholder services plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 1.25% of the value of the fund’s average daily net assets. During the period ended May 31, 2012, there was no reduction in management fee pursuant to the undertaking.
24
During the period ended May 31, 2012, the Distributor retained $2,998 from commissions earned on sales of the fund’s Class A shares and $1,400 from CDSCs on redemptions of the fund’s Class C shares.
Pursuant to a sub-investment advisory agreement between Dreyfus and Walter Scott, Dreyfus pays Walter Scott a monthly fee at an annual percentage of the fund’s average daily net assets.
(b) Under the Distribution Plan (the “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 the average daily net assets of Class C shares. During the period ended May 31, 2012, Class C shares were charged $55,345, pursuant to the 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 (a securities dealer, financial institution or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended May 31, 2012, Class A and Class C shares were charged $64,680 and $18,448, respectively, pursuant to the Shareholder Services Plan.
The fund compensates DreyfusTransfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency and cash management services for the fund. During the period ended May 31, 2012, the fund was charged $8,392 pursuant to the transfer agency agreement, which is included in Shareholder servicing costs in the Statement of Operations.
The fund compensatesThe Bank of NewYork Mellon under a custody agreement for providing custodial services for the fund. During the period ended May 31, 2012, the fund was charged $56,536 pursuant to the custody agreement.
The Fund | 25 |
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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.
Prior to May 29, 2012, the fund compensated The Bank of NewYork Mellon under a cash management agreement for performing cash management services related to fund subscriptions and redemptions. During the period ended May 31, 2012, the fund was charged $745 pursuant to the cash management agreement, which is included in Shareholder servicing costs in the Statement of Operations.These fees were partially offset by earnings credits of $32.
During the period ended May 31, 2012, the fund was charged $3,183 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 $429,628, Rule 12b-1 distribution plan fees $9,447, shareholder services plan fees $14,552, custodian fees $29,987, chief compliance officer fees $2,652 and transfer agency per account fees $3,680.
(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 of investment securities, excluding short-term securities and forward contracts, during the period ended May 31, 2012, amounted to $92,400,799 and $35,469,422, respectively.
Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy.
26
When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract decreases between those dates.With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract increases between those dates. Any realized gain or loss which occurred during the period is reflected in the Statement of Operations.The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is typically limited to the unrealized gain on each open contract. At May 31, 2012, there were no forward contracts outstanding.
The following summarizes the average market value of derivatives outstanding during the period ended May 31, 2012:
Average Market Value ($) | |
Forward contracts | 808,823 |
At May 31, 2012, accumulated net unrealized appreciation on investments was $58,213,883, consisting of $81,719,600 gross unrealized appreciation and $23,505,717 gross unrealized depreciation.
At May 31, 2012, 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).
The Fund | 27 |
NOTES
For More Information
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
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 http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that 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 http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-DREYFUS.
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.
Not applicable. [CLOSED END FUNDS ONLY]
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures applicable to Item 10.
Item 11. Controls and Procedures.
(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
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(b) There were no changes to the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable.
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.
(a)(3) Not applicable.
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Strategic Funds, Inc.
By: /s/Bradley J. Skapyak | |
Bradley J. Skapyak, President
| |
Date: | July 24, 2012 |
| |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. | |
| |
By: /s/Bradley J. Skapyak | |
Bradley J. Skapyak, President
| |
Date: | July 24, 2012 |
| |
By: /s/ James Windels | |
James Windels, Treasurer
| |
Date: | July 24, 2012 |
|
|
EXHIBIT INDEX
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940. (EX-99.CERT)
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940. (EX-99.906CERT)