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 |
Strategic Funds, Inc.
(formerly, Dreyfus Premier New Leaders Fund, Inc.)
(Exact name of Registrant as specified in charter)
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
(Address of principal executive offices) (Zip code)
Michael A. Rosenberg, Esq.
200 Park Avenue
New York, New York 10166
(Name and address of agent for service)
| Registrant's telephone number, including area code: | | (212) 922-6000 |
| Date of fiscal year end: | | 5/31 |
| Date of reporting period: | | 11/30/07 |
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.
Emerging Markets Opportunity Fund
FORM N-CSR
| Item 1. | | Reports to Stockholders. |
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The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value
| | | Contents |
| |
| | | THE FUND |
| |
|
| 2 | | A Letter from the 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 |
| 12 | | Statement of Assets and Liabilities |
| 13 | | Statement of Operations |
| 14 | | Statement of Changes in Net Assets |
| 16 | | Financial Highlights |
| 20 | | Notes to Financial Statements |
| 29 | | Information About the Review and Approval |
| | | of the Fund’s Management Agreement |
| | | FOR MORE INFORMATION |
| |
|
| | | Back Cover |
The Fund
| Emerging Markets |
| Opportunity Fund |
A LETTER FROM THE CEO
Dear Shareholder:
We are pleased to present this semiannual report for Emerging Markets Opportunity Fund, covering the six-month period from June 1, 2007, through November 30, 2007.
After an extended period of steady gains, turmoil in U.S. credit markets over the summer of 2007 led to bouts of heightened volatility in many international equity markets. Nonetheless, fundamentals in the global economy have remained relatively robust, and recent shifts in monetary policy from several major central banks helped spark market rebounds in many regions of the world.
While we expect the global expansion to continue, it seems reasonable to expect to see some moderation as U.S. consumer spending wanes and some high-flying emerging markets, notably China, continue to take steps to reduce unsustainably high growth rates.With regard to the currency markets, we have seen weakness in the U.S. dollar for most of the reporting period, making investments denominated in foreign currencies more valuable for U.S. residents. Lastly, a stubborn U.S. trade deficit and stronger economic growth in overseas markets continue to attract global capital away from U.S. markets and toward those with higher potential returns.As always, we encourage you to discuss these trends and opportunities with your financial advisor, who can help you consider if any portfolio adjustments might be right for your investment needs.
For information about how the fund performed during the reporting period, as well as market perspectives, we have provided a Discussion of Fund Performance given by the fund’s Portfolio Managers.
Thank you for your continued confidence and support.
| | Thomas F. Eggers
Chief Executive Officer
The Dreyfus Corporation
December 17, 2007
|
DISCUSSION OF FUND PERFORMANCE
For the period of June 1,2007,through November 30,2007,as provided by Hugh Hunter,Tony Hann, Richard Fairgrieve and Bill Rudman, Portfolio Managers, WestLB Mellon Asset Management (USA) LLC, Sub-Investment Adviser
Fund and Market Performance Overview
Stocks of companies based in the world’s emerging markets continued to advance strongly during the reporting period, primarily as a result of an expanding global economy and robust demand for natural resources.The fund produced higher returns than its benchmark, which we attribute to the success of the fund’s security selection strategy in developing markets such as South Korea, South Africa and India.
For the six-month period ended November 30, 2007, Emerging Markets Opportunity Fund’s Class A shares achieved a total return of 24.57%, Class C shares returned 24.00%, Class I shares returned 24.63% and Class T shares returned 24.32% .1 In comparison, the fund’s benchmark, the Morgan Stanley Capital International Emerging Markets Index (the “Index”), produced a 23.88% total return for the same period.2
Effective June 1, 2007, Class R shares were renamed Class I shares.
The Fund’s Investment Approach
The fund seeks long-term capital appreciation by investing at least 80% of its assets in the stocks of companies organized, or with a majority of their assets and operations, in emerging market countries. Normally, the fund will invest in at least ten emerging markets countries. The fund may invest in companies of any size.We allocate the fund’s assets among emerging market countries using a top-down, quantitative model that incorporates valuation, currency, momentum, growth, interest-rate and risk factors to determine each country’s weighting relative to the Index. We also consider qualitative factors, such as political and economic developments, and market factors, such as liquidity.To select individual stocks, our bottom-up process focuses on fundamental analysis, including assessments of each company’s management, product lines and competitive positions.
The Fund 3
D I S C U S S I O N O F F U N D P E R F O R M A N C E (continued)
Emerging Markets Advanced Amid Strong Global Growth
Emerging equity markets posted attractive returns during the reporting period, generally outpacing stocks in the United States, Europe and other developed markets. Gains were fueled by robust exports of consumer goods, manufactured items and natural resources to developed nations, as well as increased local consumption by a growing middle class. Gains were particularly robust among commodities producers, as a number of former third-world countries continued to build out their industrial infrastructures. In addition, relatively low interest rates, generally benign inflation, rising disposable incomes and long-awaited economic reforms have enabled many developing markets to become more substantial contributors to the global economy.
Global equity markets encountered heightened turbulence during the reporting period as turmoil in the U.S. sub-prime mortgage market, an ensuing credit crisis in fixed-income markets and mounting economic concerns sent repercussions around the world. However, because few companies based in the developing markets had exposure to troubled U.S. sub-prime mortgages or related securities, emerging-markets stocks generally rebounded by the reporting period’s end.
The Fund’s Security Selection Strategy Bolstered Returns
In this environment, our security selection strategy contributed positively to the fund’s relative performance, while our country allocation strategy had a more muted effect. For example, South Korean asset management company Mirae Asset Securities almost doubled in value over the reporting period when local investors increasingly turned to the company’s international funds and more Wall Street analysts and institutional investors discovered the growing investment firm. In South Africa, infrastructure builder Murray & Roberts Holdings won lucrative contracts in the Middle East and benefited from local construction in preparation for the 2010 World Cup, while coal producer Exxaro Resources flourished amid robust customer demand and rising commodity prices. Finally, in India, conglomerate Reliance Industries gained value along with the broader energy sector as it capitalized on new natural gas discoveries.
While disappointments during the reporting period proved to be relatively mild, some of our strategies detracted from the fund’s performance. Most significantly, the fund maintained relatively light exposure to India stocks, which generally did not meet our valuation criteria but continued to advance strongly. An underweighted position in high-flying Russian oil producer Gazprom also hindered returns, as did relatively heavy exposure to technology stocks in Taiwan. However, these shortfalls were largely offset by better allocation-related results in other regions, such as overweighted positions in Hungary and Malaysia, and underweighted exposure to South Africa and Mexico.
Our Long-Term Outlook Has Remained Positive
As of the reporting period’s end, we have remained optimistic regarding the long-term prospects for developing equity markets, where, in our view, regional economies have continued to expand, corporate earnings growth has been robust and equity valuations have remained attractive. However, we are more cautious over the near term, as the possibility of a U.S. recession has made investors more risk averse, especially with regard to markets and companies that rely on exports to the United States. In addition, market volatility could intensify if a broad global economic slowdown causes commodity prices to retreat from recent highs. Accordingly, we have continued to employ our disciplined investment process,which is designed to produce attractive results over the long term.
December 17, 2007
| 1 | | Total return includes reinvestment of dividends and any capital gains paid, and does not take into |
| | | consideration the maximum initial sales charges in the case of Class A and Class T shares, or the |
| | | applicable contingent deferred sales charges 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 in effect through September 30, |
| | | 2008, 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 reinvestment of net dividends and, where applicable, |
| | | capital gain distributions.The Morgan Stanley Capital International Emerging Markets (MSCI |
| | | EM) Index is a market capitalization-weighted index composed of companies representative of the |
| | | market structure of 26 emerging market countries in Europe, Latin America and the Pacific Basin. |
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 Emerging Markets Opportunity Fund from June 1, 2007 to November 30, 2007. 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 November 30, 2007 | | |
| | | Class A | | Class C | | Class I | | Class T |
| |
| |
| |
| |
|
| Expenses paid per $1,000 † | | $ 11.23 | | $ 15.40 | | $ 9.66 | | $ 12.56 |
| Ending value (after expenses) | | $1,245.70 | | $1,240.00 | | $1,246.30 | | $1,243.20 |
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 November 30, 2007 |
| | | Class A | | Class C | | Class I | | Class T |
| |
| |
| |
| |
|
| Expenses paid per $1,000 † | | $ 10.08 | | $ 13.83 | | $ 8.67 | | $ 11.28 |
| Ending value (after expenses) | | $1,015.00 | | $1,011.25 | | $1,016.40 | | $1,013.80 |
† Expenses are equal to the fund’s annualized expense ratio of 2.00% for Class A, 2.75% for Class C, 1.72% for Class I and 2.24% for Class T, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period).
STATEMENT OF INVESTMENTS
N o v e m b e r 3 0 , 2 0 0 7 ( U n a u d i t e d )
|
| Common Stocks—77.6% | | Shares | | Value ($) |
| |
| |
|
| Brazil—10.6% | | | | |
| Banco Bradesco, ADR | | 7,400 | | 237,910 |
| Brascan Residential Properties | | 17,200 | | 105,287 |
| Cia Brasileira de Distribuicao Grupo Pao de Acucar, ADR | | 4,300 | | 141,986 |
| Cia de Bebidas das Americas (AmBev), ADR (Preferred) | | 1,700 | | 127,636 |
| Cia Vale do Rio Doce (CVRD), ADR | | 6,400 | | 221,312 |
| Cia Vale do Rio Doce, ADR | | 20,700 | | 598,851 |
| Equatorial Energia | | 14,200 | | 137,891 |
| GVT Holding | | 5,900 a | | 123,778 |
| Petroleo Brasileiro, ADR (Preferred) | | 11,200 | | 909,104 |
| Satipel Industrial | | 29,500 a | | 201,920 |
| Unibanco—Uniao de Bancos Brasileiros, GDR | | 1,300 | | 194,636 |
| | | | | 3,000,311 |
| China—6.4% | | | | |
| Angang Steel, Cl. H | | 74,000 | | 229,991 |
| China Life Insurance, Cl. H | | 68,000 | | 370,287 |
| China Merchants Bank, Cl. H | | 59,500 | | 275,095 |
| China Shenhua Energy, Cl. H | | 37,201 | | 220,490 |
| Datang International Power Generation, Cl. H | | 259,752 | | 235,853 |
| PetroChina, Cl. H | | 128,000 | | 246,913 |
| Sinotras Shipping | | 253,977 a | | 223,760 |
| | | | | 1,802,389 |
| Egypt—3.4% | | | | |
| Commercial International Bank, GDR | | 14,600 | | 206,590 |
| Orascom Construction, GDR | | 1,200 | | 218,400 |
| Orascom Telecom Holdings, GDR | | 1,900 | | 148,010 |
| Talaat Moustafa Group | | 173,000 a | | 403,198 |
| | | | | 976,198 |
| Hong Kong—3.0% | | | | |
| China Mobile | | 27,000 | | 486,849 |
| China Mobile, ADR | | 1,300 | | 119,158 |
| China Overseas Land & Investment | | 106,000 | | 239,053 |
| | | | | 845,060 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| Common Stocks (continued) | | Shares | | | | Value ($) |
| |
| |
| |
|
| Hungary—2.3% | | | | | | |
| Magyar Telekom, ADR | | 3,700 | | | | 99,567 |
| MOL Hungarian Oil, ADR | | 1,150 | | | | 168,762 |
| OTP Bank, GDR | | 4,100 | | | | 394,625 |
| | | | | | | 662,954 |
| India—2.0% | | | | | | |
| Bharat Heavy Electricals | | 2,325 a | | | | 148,701 |
| iPath MSCI India Index ETN | | 2,313 | | | | 224,361 |
| Reliance Industries | | 1,584 | | | | 107,753 |
| Reliance Industries, GDR | | 400b | | | | 58,500 |
| Reliance Industries, GDR | | 200 b | | | | 28,920 |
| | | | | | | 568,235 |
| Luxembourg—.9% | | | | | | |
| Tenaris, ADR | | 5,200 | | | | 245,336 |
| Malaysia—3.8% | | | | | | |
| Bumiputra-Commerce Holdings | | 84,800 | | | | 269,686 |
| IOI | | 107,935 | | | | 216,544 |
| KNM Group | | 98,800 | | | | 192,344 |
| Public Bank | | 63,500 | | | | 201,947 |
| YTL | | 87,600 | | | | 206,991 |
| | | | | | | 1,087,512 |
| Mexico—3.5% | | | | | | |
| America Movil, ADR, Ser. L | | 7,400 | | | | 456,284 |
| Grupo Televisa, ADR | | 8,100 | | | | 195,777 |
| Megacable Holdings | | 43,200 a | | | | 142,442 |
| Wal-Mart de Mexico, Ser. V | | 56,200 | | | | 203,014 |
| | | | | | | 997,517 |
| Russia—9.3% | | | | | | |
| Cherepovets MK Severstal, GDR | | 8,550 | | | | 196,009 |
| Gazprom, ADR | | 19,930 | | | | 1,049,314 |
| Integra Group Holdings, GDR | | 10,550 a | | | | 158,250 |
| LSR Group, GDR | | 7,400 a | | | | 98,050 |
| LUKOIL, ADR | | 4,500 | | | | 389,114 |
| MMC Norilsk Nickel, ADR | | 1,230 | | | | 362,046 |
| Mobile Telesystems, ADR | | 2,900 | | | | 263,030 |
| VTB Bank, GDR | | 11,200 a | | | | 102,509 |
| | | | | | | 2,618,322 |
8
| Common Stocks (continued) | | Shares | | | | Value ($) |
| |
| |
| |
|
| South Africa—7.0% | | | | | | |
| AngloGold Ashanti | | 4,400 | | | | 207,873 |
| ArcelorMittal South Africa | | 9,545 | | | | 192,244 |
| Aveng | | 11,520 | | | | 97,847 |
| Discovery Holdings | | 4,013 | | | | 16,158 |
| Exxaro Resources | | 13,563 | | | | 197,612 |
| FirstRand | | 68,216 | | | | 215,521 |
| Impala Platinum Holdings | | 5,816 | | | | 203,134 |
| MTN Group | | 15,178 | | | | 304,113 |
| Murray & Roberts Holdings | | 10,792 | | | | 146,693 |
| Pretoria Portland Cement | | 29,700 | | | | 207,046 |
| Sasol | | 3,857 | | | | 191,884 |
| | | | | | | 1,980,125 |
| South Korea—13.1% | | | | | | |
| Daelim Industrial | | 1,341 | | | | 235,851 |
| Dongbu Insurance | | 1,600 | | | | 81,120 |
| GS Engineering & Construction | | 1,383 | | | | 242,487 |
| GS Holdings | | 3,120 | | | | 210,687 |
| Hana Financial Group | | 2,410 | | | | 113,423 |
| Hanjin Heavy Industries and Construction | | 1,338 a | | | | 111,996 |
| Hyundai Heavy Industries | | 674 | | | | 343,915 |
| Hyundai Motor | | 1,125 | | | | 84,641 |
| Infopia | | 1,710 a | | | | 98,950 |
| Kookmin Bank, ADR | | 1,500 | | | | 108,750 |
| Korea Exchange Bank | | 7,870 | | | | 123,035 |
| LG | | 2,320 | | | | 197,468 |
| LG Electronics | | 2,462 | | | | 256,063 |
| LG.Philips LCD, ADR | | 8,000 a | | | | 224,640 |
| Mirae Asset Securities | | 603 | | | | 102,780 |
| POSCO, ADR | | 2,300 | | | | 363,101 |
| Samsung Electronics | | 325 | | | | 199,354 |
| Samsung Electronics, GDR (Common) | | 806 b | | | | 243,816 |
| Samsung Electronics, GDR (Preferred) | | 798 b | | | | 178,417 |
| Shinsegae | | 237 | | | | 187,058 |
| | | | | | | 3,707,552 |
| Taiwan—5.5% | | | | | | |
| Asustek Computer | | 64,000 | | | | 200,279 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| Common Stocks (continued) | | Shares | | | | Value ($) |
| |
| |
| |
|
| Taiwan (continued) | | | | | | |
| Cathay Financial Holding | | 116,889 | | | | 262,208 |
| Delta Electronics | | 48,250 | | | | 165,941 |
| HON HAI Precision Industry | | 28,190 | | | | 179,927 |
| NAN YA Plastic | | 41,000 | | | | 106,454 |
| President Chain Store | | 75,000 | | | | 203,331 |
| Taiwan Fertilizer | | 84,000 | | | | 192,074 |
| Taiwan Semiconductor Manufacturing, ADR | | 19,909 | | | | 197,497 |
| Vanguard International Semiconductor | | 73,930 | | | | 58,182 |
| | | | | | | 1,565,893 |
| Thailand—3.2% | | | | | | |
| Banpu Public | | 9,700 | | | | 137,759 |
| Kasikornbank | | 73,900 | | | | 207,016 |
| PTT | | 17,300 | | | | 214,137 |
| Siam Commercial Bank | | 52,700 | | | | 147,629 |
| Thai Oil | | 68,600 | | | | 192,169 |
| | | | | | | 898,710 |
| Turkey—3.2% | | | | | | |
| Arcelik | | 19,155 | | | | 132,706 |
| KOC Holding | | 33,428 a | | | | 169,456 |
| Turk Hava Yollari Anonim Ortakligi | | 22,983 a | | | | 153,401 |
| Turkiye Garanti Bankasi | | 32,004 | | | | 282,562 |
| Turkiye Halk Bankasi | | 18,896 a | | | | 159,649 |
| | | | | | | 897,774 |
| United States—.4% | | | | | | |
| iShares MSCI Emerging Markets Index Fund | | 800 a | | | | 123,144 |
| Total Common Stocks | | | | | | |
| (cost $16,708,695) | | | | | | 21,977,032 |
| |
| |
| |
|
| |
| Preferred Stocks—.9% | | | | | | |
| |
| |
| |
|
| Brazil | | | | | | |
| Investimentos Itau | | | | | | |
| (cost $161,607) | | 36,058 | | | | 260,854 |
| Other Investment—3.2% | | Shares | | Value ($) |
| |
| |
|
| Registered Investment Company; | | | | |
| Dreyfus Institutional Preferred Plus Money Market Fund | | |
| (cost $900,000) | | 900,000 c | | 900,000 |
| |
| |
|
| Total Investments (cost $17,770,302) | | 81.7% | | 23,137,886 |
| Cash and Receivables (Net) | | 18.3% | | 5,165,931 |
| Net Assets | | 100.0% | | 28,303,817 |
| ADR—American Depository Receipts |
| GDR—Global Depository Receipts |
| a Non-income producing security. |
| b Securities exempt from registration under Rule 144A of the Securities Act of 1933.These securities may be resold in |
| transactions exempt from registration, normally to qualified institutional buyers. At November 30, 2007, these |
| securities amounted to $509,653 or 1.8% of net assets. |
| c Investment in affiliated money market mutual fund. |
| Portfolio Summary (Unaudited) † | | | | |
| |
| | | Value (%) | | | | Value (%) |
| |
| |
| |
|
| Energy | | 17.5 | | Consumer Discretionary | | 2.8 |
| Financial | | 16.8 | | Consumer Staples | | 2.6 |
| Industrial | | 13.2 | | Utilities | | 1.3 |
| Basic Materials | | 12.1 | | Health Care | | .4 |
| Telecommunication Services | | 7.1 | | Index | | .4 |
| Information Technology | | 4.3 | | | | |
| Money Market Investment | | 3.2 | | | | 81.7 |
| |
| † Based on net assets. | | | | | | |
| See notes to financial statements. | | | | | | |
The Fund 11
| STATEMENT OF ASSETS AND LIABILITIES | | | | |
| N o v e m b e r 3 0 , 2 0 0 7 ( U n a u d i t e d ) | | | | | | |
| |
| |
| |
|
| |
| |
| |
| |
| | | | | | | Cost | | Value |
| |
| |
| |
| |
|
| Assets ($): | | | | | | | | |
| Investments in securities—See Statement of Investments: | | | | |
| Unaffiliated issuers | | | | 16,870,302 | | 22,237,886 |
| Affiliated issuers | | | | | | 900,000 | | 900,000 |
| Cash | | | | | | | | 258,940 |
| Cash denominated in foreign currencies | | | | 330,615 | | 325,988 |
| Receivable for investment securities sold | | | | | | 4,830,696 |
| Receivable for shares of Common Stock subscribed | | | | | | 78,699 |
| Dividends and interest receivable | | | | | | | | 21,860 |
| Prepaid expenses | | | | | | | | 16,681 |
| | | | | | | | | 28,670,750 |
| |
| |
| |
| |
|
| Liabilities ($): | | | | | | | | |
| Due to The Dreyfus Corporation and affiliates—Note 3(c) | | | | 72,934 |
| Payable for investment securities purchased | | | | | | 234,126 |
| Payable for shares of Common Stock redeemed | | | | | | 22,691 |
| Unrealized depreciation on forward | | | | | | |
| currency exchange contracts—Note 4 | | | | | | 7,874 |
| Interest payable—Note 2 | | | | | | | | 1,908 |
| Accrued expenses | | | | | | | | 27,400 |
| | | | | | | | | 366,933 |
| |
| |
| |
| |
|
| Net Assets ($) | | | | | | | | 28,303,817 |
| |
| |
| |
| |
|
| Composition of Net Assets ($): | | | | | | | | |
| Paid-in capital | | | | | | | | 19,760,631 |
| Accumulated undistributed investment income—net | | | | | | 18,085 |
| Accumulated net realized gain (loss) on investments | | | | | | 3,162,297 |
| Accumulated net unrealized appreciation (depreciation) | | | | |
| on investments and foreign currency transactions | | | | | | 5,362,804 |
| |
| |
| |
|
| Net Assets ($) | | | | | | | | 28,303,817 |
| |
| |
| |
| |
|
| |
| |
| Net Asset Value Per Share | | | | | | | | |
| | | Class A | | Class C | | Class I | | Class T |
| |
| |
| |
| |
|
| Net Assets ($) | | 24,208,151 | | 2,415,014 | | 1,124,883 | | 555,769 |
| Shares Outstanding | | 1,156,205 | | 116,537 | | 53,554 | | 26,637 |
| |
| |
| |
| |
|
| Net Asset Value Per Share ($) | | 20.94 | | 20.72 | | 21.00 | | 20.86 |
See notes to financial statements.
STATEMENT OF OPERATIONS
Six Months Ended November 30, 2007 (Unaudited)
|
| Investment Income ($): | | |
| Income: | | |
| Cash dividends (net of $29,373 foreign taxes withheld at source): | | |
| Unaffiliated issuers | | 199,974 |
| Affiliated issuers | | 13,806 |
| Total Income | | 213,780 |
| Expenses: | | |
| Management fee—Note 3(a) | | 146,732 |
| Custodian fees—Note 3(c) | | 53,377 |
| Registration fees | | 36,797 |
| Shareholder servicing costs—Note 3(c) | | 33,510 |
| Auditing fees | | 28,198 |
| Distribution fees—Note 3(b) | | 7,229 |
| Prospectus and shareholders’ reports | | 4,716 |
| Interest expense—Note 2 | | 1,908 |
| Directors’ fees and expenses—Note 3(d) | | 1,158 |
| Loan commitment fees—Note 2 | | 120 |
| Miscellaneous | | 4,415 |
| Total Expenses | | 318,160 |
| Less—reduction in management fee | | |
| due to undertaking—Note 3(a) | | (74,131) |
| Less—reduction in custody fees | | |
| due to earnings credits—Note 1(c) | | (3,121) |
| Net Expenses | | 240,908 |
| Investment (Loss)—Net | | (27,128) |
| |
|
| Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
| Net realized gain (loss) on investments and foreign currency transactions | | 2,423,076 |
| Net realized gain (loss) on forward currency exchange contracts | | (2,703) |
| Net Realized Gain (Loss) | | 2,420,373 |
| Net unrealized appreciation (depreciation) on | | |
| investments and foreign currency transactions | | 2,489,352 |
| Net Realized and Unrealized Gain (Loss) on Investments | | 4,909,725 |
| Net Increase in Net Assets Resulting from Operations | | 4,882,597 |
| |
| See notes to financial statements. | | |
The Fund 13
STATEMENT OF CHANGES IN NET ASSETS
| | | Six Months Ended | | |
| | | November 30, 2007 | | Year Ended |
| | | (Unaudited) a | | May 31, 2007 b |
| |
| |
|
| Operations ($): | | | | |
| Investment income (loss)—net | | (27,128) | | 16,393 |
| Net realized gain (loss) on investments | | 2,420,373 | | 834,514 |
| Net unrealized appreciation | | | | |
| (depreciation) on investments | | 2,489,352 | | 2,873,452 |
| Net Increase (Decrease) in Net Assets | | | | |
| Resulting from Operations | | 4,882,597 | | 3,724,359 |
| |
| |
|
| Dividends to Shareholders from ($): | | | | |
| Net realized gain on investments: | | | | |
| Class A shares | | — | | (60,722) |
| Class C shares | | — | | (3,052) |
| Class I shares | | — | | (1,651) |
| Class T shares | | — | | (1,448) |
| Total Dividends | | — | | (66,873) |
| |
| |
|
| Capital Stock Transactions ($): | | | | |
| Net proceeds from shares sold: | | | | |
| Class A shares | | 9,032,509 | | 12,979,345 |
| Class C shares | | 1,479,630 | | 808,849 |
| Class I shares | | 875,598 | | 413,053 |
| Class T shares | | 136,485 | | 265,107 |
| Dividends reinvested: | | | | |
| Class A shares | | — | | 27,531 |
| Class C shares | | — | | 1,539 |
| Class I shares | | — | | 1,651 |
| Class T shares | | — | | 1,448 |
| Cost of shares redeemed: | | | | |
| Class A shares | | (4,850,883) | | (607,338) |
| Class C shares | | (390,118) | | (95) |
| Class I shares | | (319,274) | | (75,000) |
| Class T shares | | (16,303) | | — |
| Increase (Decrease) in Net Assets | | | | |
| from Capital Stock Transactions | | 5,947,644 | | 13,816,090 |
| Total Increase (Decrease) in Net Assets | | 10,830,241 | | 17,473,576 |
| |
| |
|
| Net Assets ($): | | | | |
| Beginning of Period | | 17,473,576 | | — |
| End of Period | | 28,303,817 | | 17,473,576 |
| Undistributed investment income—net | | 18,085 | | 45,213 |
14
| | | Six Months Ended | | |
| | | November 30, 2007 | | Year Ended |
| | | (Unaudited) a | | May 31, 2007 b |
| |
| |
|
| Capital Share Transactions: | | | | |
| Class A | | | | |
| Shares sold | | 475,140 | | 971,989 |
| Shares issued for dividends reinvested | | — | | 1,815 |
| Shares redeemed | | (252,287) | | (40,452) |
| Net Increase (Decrease) in Shares Outstanding | | 222,853 | | 933,352 |
| |
| |
|
| Class C | | | | |
| Shares sold | | 76,679 | | 58,918 |
| Shares issued for dividends reinvested | | — | | 102 |
| Shares redeemed | | (19,155) | | (7) |
| Net Increase (Decrease) in Shares Outstanding | | 57,524 | | 59,013 |
| |
| |
|
| Class I | | | | |
| Shares sold | | 43,705 | | 30,464 |
| Shares issued for dividends reinvested | | — | | 109 |
| Shares redeemed | | (16,270) | | (4,454) |
| Net Increase (Decrease) in Shares Outstanding | | 27,435 | | 26,119 |
| |
| |
|
| Class T | | | | |
| Shares sold | | 6,564 | | 20,990 |
| Shares issued for dividends reinvested | | — | | 96 |
| Shares redeemed | | (1,013) | | — |
| Net Increase (Decrease) in Shares Outstanding | | 5,551 | | 21,086 |
| a | | Effective June 1, 2007, Class R shares were redesignated as Class I shares. |
| b | | From July 13, 2006 (commencement of operations) to May 31, 2007. |
| See notes to financial statements. |
The Fund 15
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 | | |
| | | November 30, 2007 | | Year Ended |
| Class A Shares | | (Unaudited) | | May 31, 2007 a |
| |
| |
|
| Per Share Data ($): | | | | |
| Net asset value, beginning of period | | 16.81 | | 12.50 |
| Investment Operations: | | | | |
| Investment income (loss)—net b | | (.02) | | .02 |
| Net realized and unrealized | | | | |
| gain (loss) on investments | | 4.15 | | 4.36 |
| Total from Investment Operations | | 4.13 | | 4.38 |
| Distributions: | | | | |
| Dividends from net realized | | | | |
| gain on investments | | — | | (.07) |
| Net asset value, end of period | | 20.94 | | 16.81 |
| |
| |
|
| Total Return (%) c,d | | 24.57 | | 35.12 |
| |
| |
|
| Ratios/Supplemental Data (%): | | | | |
| Ratio of total expenses to average net assets | | 2.65e | | 3.46d |
| Ratio of net expenses to average net assets | | 2.00e | | 1.73d |
| Ratio of net investment income | | | | |
| (loss) to average net assets | | (.17)e | | .17d |
| Portfolio Turnover Rate d | | 125.05 | | 140.52 |
| |
| |
|
| Net Assets, end of period ($ x 1,000) | | 24,208 | | 15,694 |
| a | | From July 13, 2006 (commencement of operations) to May 31, 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. |
| | | Six Months Ended | | |
| | | November 30, 2007 | | Year Ended |
| Class C Shares | | (Unaudited) | | May 31, 2007 a |
| |
| |
|
| Per Share Data ($): | | | | |
| Net asset value, beginning of period | | 16.70 | | 12.50 |
| Investment Operations: | | | | |
| Investment (loss)—net b | | (.10) | | (.07) |
| Net realized and unrealized | | | | |
| gain (loss) on investments | | 4.12 | | 4.34 |
| Total from Investment Operations | | 4.02 | | 4.27 |
| Distributions: | | | | |
| Dividends from net realized | | | | |
| gain on investments | | — | | (.07) |
| Net asset value, end of period | | 20.72 | | 16.70 |
| |
| |
|
| Total Return (%) c,d | | 24.00 | | 34.32 |
| |
| |
|
| Ratios/Supplemental Data (%): | | | | |
| Ratio of total expenses to average net assets | | 3.44e | | 4.17d |
| Ratio of net expenses to average net assets | | 2.75e | | 2.38d |
| Ratio of net investment (loss) | | | | |
| to average net assets | | (1.00)e | | (.46)d |
| Portfolio Turnover Rate d | | 125.05 | | 140.52 |
| |
| |
|
| Net Assets, end of period ($ x 1,000) | | 2,415 | | 986 |
| a | | From July 13, 2006 (commencement of operations) to May 31, 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 17
| | F I N A N C I A L H I G H L I G H T S (continued)
|
| | | Six Months Ended | | |
| | | November 30, 2007 | | Year Ended |
| Class I Shares | | (Unaudited) a | | May 31, 2007 b |
| |
| |
|
| Per Share Data ($): | | | | |
| Net asset value, beginning of period | | 16.85 | | 12.50 |
| Investment Operations: | | | | |
| Investment income—net c | | .00d | | .05 |
| Net realized and unrealized | | | | |
| gain (loss) on investments | | 4.15 | | 4.37 |
| Total from Investment Operations | | 4.15 | | 4.42 |
| Distributions: | | | | |
| Dividends from net realized | | | | |
| gain on investments | | — | | (.07) |
| Net asset value, end of period | | 21.00 | | 16.85 |
| |
| |
|
| Total Return (%) e | | 24.63 | | 35.44 |
| |
| |
|
| Ratios/Supplemental Data (%): | | | | |
| Ratio of total expenses to average net assets | | 2.44f | | 3.43e |
| Ratio of net expenses to average net assets | | 1.72f | | 1.51e |
| Ratio of net investment income | | | | |
| to average net assets | | .04f | | .36e |
| Portfolio Turnover Rate e | | 125.05 | | 140.52 |
| |
| |
|
| Net Assets, end of period ($ x 1,000) | | 1,125 | | 440 |
| a | | Effective June 1, 2007, Class R shares were redesignated as Class I shares. |
| b | | From July 13, 2006 (commencement of operations) to May 31, 2007. |
| c | | Based on average shares outstanding at each month end. |
| d | | Amount represents less than $.01 per share. |
| e | | Not annualized. |
| f | | Annualized. |
| See notes to financial statements. |
| | | Six Months Ended | | |
| | | November 30, 2007 | | Year Ended |
| Class T Shares | | (Unaudited) | | May 31, 2007 a |
| |
| |
|
| Per Share Data ($): | | | | |
| Net asset value, beginning of period | | 16.78 | | 12.50 |
| Investment Operations: | | | | |
| Investment (loss)—net b | | (.04) | | (.01) |
| Net realized and unrealized | | | | |
| gain (loss) on investments | | 4.12 | | 4.36 |
| Total from Investment Operations | | 4.08 | | 4.35 |
| Distributions: | | | | |
| Dividends from net realized | | | | |
| gain on investments | | — | | (.07) |
| Net asset value, end of period | | 20.86 | | 16.78 |
| |
| |
|
| Total Return (%) c,d | | 24.32 | | 34.88 |
| |
| |
|
| Ratios/Supplemental Data (%): | | | | |
| Ratio of total expenses to average net assets | | 2.92e | | 3.92d |
| Ratio of net expenses to average net assets | | 2.24e | | 1.96d |
| Ratio of net investment (loss) | | | | |
| to average net assets | | (.43)e | | (.10)d |
| Portfolio Turnover Rate d | | 125.05 | | 140.52 |
| |
| |
|
| Net Assets, end of period ($ x 1,000) | | 556 | | 354 |
| a | | From July 13, 2006 (commencement of operations) to May 31, 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 19
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Emerging Markets Opportunity 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 a diversified open-end management investment company and operates as a series company currently offering five series, including the fund.The fund’s investment objective seeks long-term capital appreciation by investing in stocks of companies in emerging market countries. The Dreyfus Corporation (the “Manager” or “Dreyfus”) serves as the fund’s investment adviser. WestLB Mellon Asset Management (USA) LLC (“WMAM US”) serves as the fund’s sub-investment adviser.
On July 1,2007,Mellon Financial Corporation (“Mellon Financial”) and The Bank of New York Company, Inc. merged, forming The Bank of New York Mellon Corporation (“BNY Mellon”). As part of this transaction, Dreyfus became a wholly-owned subsidiary of BNY Mellon.
The fund’s Board of Directors approved the redesignation of the fund’s Class R shares as Class I shares, effective June 1, 2007. The eligibility requirements for Class I shares remained the same as for Class R shares.
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, Class I and Class T. Class A and Class T 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 November 30, 2007, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held 341,623 of the outstanding Class A shares, 20,095 of the outstanding Class I shares and 20,096 of the outstanding Class C and Class T shares of the fund.
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 fund’s financial statements are prepared in accordance with U.S. generally accepted accounting principles, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The fund enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: Investments in securities are valued at 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 open-end investment companies that are not traded on an exchange are valued at their net asset value.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
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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. 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 ADR’s and futures contracts. For other securities that are fair valued by the Board of Directors, certain factors may be considered 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. Financial futures are valued at the last sales price. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward currency exchange contracts are valued at the forward rate.
The Financial Accounting Standards Board (“FASB”) released Statement of Financial Accounting Standards No. 157 “Fair Value Measurements” (“FAS 157”). FAS 157 establishes an authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair-value measurements. The application of FAS 157 is required for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Management does not believe that the application of this standard will have a material impact on the financial statements of the fund.
(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 gains or losses on investments.
Net realized foreign exchange gains or losses arise from sales and maturities of short-term securities, sales of foreign currencies, currency gains or losses realized on securities transactions 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 in securities, resulting from changes in exchange rates. Such gains and losses are included with net realized and unrealized gains or losses 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.
The fund has an arrangement with the custodian bank whereby the fund receives earnings credits from the custodian when positive cash balances are maintained, which are used to offset custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
(d) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” in the Act.
(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, if any, 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 U.S. generally accepted accounting principles.
(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 pro-
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
visions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
The FASB released FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (FIN 48). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year.Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Management does not believe that the application of this standard will have a material impact on the financial statements of the fund.
The tax characters of distributions paid to shareholders during the fiscal year ended May 31, 2007 was as follows: ordinary income $66,873. The tax character of current year distributions, if any, will be determined at the end of the current fiscal year.
NOTE 2—Bank Line of Credit:
The fund participates with other Dreyfus-managed funds in a $350 million redemption credit facility (the “Facility”) to be utilized for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay commitment fees on its pro rata portion of the Facility. Interest is charged to the fund based on prevailing market rates in effect at the time of borrowing.
The average daily amount of borrowings outstanding under the Facility during the period ended November 30, 2007 was approximately $67,200, with a related weighted average annualized interest rate of 5.68% .
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement (“Agreement”) with Dreyfus, the management fee is computed at the annual rate of 1.25% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus has contractually agreed to waive receipt of its fees and/or assume the expenses of the fund, until September 30, 2008, so that annual fund operating expenses (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed 1.75% of the fund’s average daily net assets. The reduction in management fee, pursuant to the undertaking,amounted to $74,131 during the period ended November 30, 2007.
During the period ended November 30, 2007, the Distributor retained $3,778 and $15 from commissions earned on sales of the fund’s Class A and Class T shares, respectively.
Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and WMAM US, Dreyfus pays WMAM US 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 and Class T shares pay the Distributor for distributing their shares at an annual rate of .75% of the value of the average daily net assets of Class C shares and .25% of the value of the average daily net assets of Class T shares. During the period ended November 30, 2007, Class C and Class T shares were charged $6,700 and $529, respectively, pursuant to the Plan.
(c) Under the Shareholder Services Plan, Class A, Class C and Class T 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
The Fund 25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding Class A, Class C and Class T 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 November 30, 2007, Class A, Class C and Class T shares were charged $25,924, $2,233 and $529, 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 services for the fund. During the period ended November 30, 2007, the fund was charged $2,087 pursuant to the transfer agency agreement.
Effective July 1, 2007, the fund’s custodian, The Bank of New York, became an affiliate of Dreyfus. Under the fund’s pre-existing custody agreement with The Bank of New York, the fund was charged $42,809 for providing custodial services for the fund for the five months ended November 30, 2007. Prior to becoming an affiliate,The Bank of New York was paid $10,568 for custody services to the fund for the one month ended June 30, 2007.
During the period ended November 30, 2007, the fund was charged $2,411 for services performed by the Chief Compliance Officer.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $28,563, Rule 12b-1 distribution plan fees $1,565, shareholder services plan fees $5,579, custodian fees $38,677, chief compliance officer fees $3,214 and transfer agency per account fees $330,which are offset against an expense reimbursement currently in effect in the amount of $4,994.
(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 currency exchange contracts, during the period ended November 30, 2007, amounted to $28,292,091 and $28,016,894, respectively.
The fund enters into forward currency exchange contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings and to settle foreign currency transactions. When executing forward currency exchange contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward currency exchange contracts, the fund would incur a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract decreases between those dates.With respect to purchases of forward currency exchange contracts, the fund would incur a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward currency exchange contracts which is typically limited to the unrealized gain on each open contract.The following summarizes open forward currency exchange contracts at November 30, 2007:
| | | Foreign | | | | | | |
| Forward Currency | | Currency | | | | | | Unrealized |
| Exchange Contracts | | Amounts | | Proceeds ($) | | Value ($) | | (Depreciation) ($) |
| |
| |
| |
| |
|
| Sales: | | | | | | | | |
| Mexican New Peso, | | | | | | | | |
| expiring 12/3/2007 | | 921,693 | | 84,242 | | 84,419 | | (177) |
| South African Rand, | | | | | | | | |
| expiring 12/4/2007 | | 1,258,308 | | 180,119 | | 184,907 | | (4,788) |
| South African Rand, | | | | | | | | |
| expiring 12/5/2007 | | 3,211,978 | | 469,087 | | 471,996 | | (2,909) |
| Total | | | | | | | | (7,874) |
The Fund 27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
At November 30, 2007, accumulated net unrealized appreciation on investments was $5,367,584, consisting of $5,659,843 gross unrealized appreciation and $292,259 gross unrealized depreciation.
At November 30, 2007, 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).
INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited)
At a Meeting of the fund’s Board of Directors held on October 29, 2007 and October 30, 2007, the Board considered the re-approval for an annual period of the fund’s Management Agreement, pursuant to which the Manager provides the fund with investment advisory and administrative services.The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Manager.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board members received a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus fund complex, and discussed the nature, extent, and quality of the services provided to the fund pursuant to its Management Agreement.The Manager’s representatives reviewed the fund’s distribution of accounts and the relationships the Manager has with various intermediaries and the different needs of each.The Manager’s representatives noted the diversity of distribution of the fund as well as among the funds in the Dreyfus fund complex, and the Manager’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each of the fund’s distribution channels. The Board also reviewed the number of shareholder accounts in the fund, as well as the fund’s asset size.
The Board members also considered the Manager’s research and portfolio management capabilities and that the Manager also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements.The Board members also considered the Manager’s extensive administrative, accounting, and compliance infrastructure.
The Fund 29
INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
Comparative Analysis of the Fund’s Management Fee and Expense Ratio and Performance. The Board members reviewed reports prepared by Lipper, Inc., an independent provider of investment company data, which included information comparing the fund’s management fee and expense ratio with a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”) that were selected by Lipper. Included in the fund’s reports were comparisons of contractual and actual management fee rates and total operating expenses.
The Board members also reviewed the reports prepared by Lipper that presented the fund’s performance for various periods ended September 30, 2007, and comparisons of total return performance for the fund to the same group of funds as the Expense Group (the “Performance Group”) and to a group of funds that was broader than the Expense Universe (the “Performance Universe”) that also were selected by Lipper. The Manager previously had furnished the Board with a description of the methodology Lipper used to select the fund’s Expense Group and Expense Universe, and Performance Group and Performance Universe.
The Board reviewed the results of the Expense Group and Expense Universe comparisons for various periods ended September 30, 2007. The Board reviewed the range of management fees and expense ratios of the funds in the Expense Group and Expense Universe, and noted that the fund’s contractual management fee was higher than the Expense Group median and that the fund’s actual management fee was lower than the Expense Group and Expense Universe medians, based on an existing undertaking by the Manager.The Board also noted that the fund’s total expense ratio was slightly higher than the Expense Group and Expense Universe medians.
With respect to the fund’s performance, the Board noted that the fund’s high absolute 1-year total return was at the Performance Group median and was higher than the Performance Universe median. The Board noted that the fund only commenced operations in May 2006.
Representatives of the Manager reviewed with the Board members the fee paid to the Manager or its affiliates by the mutual funds managed by the Manager or its affiliates that were reported in the same Lipper category as the fund (the “Similar Funds”), and explained the nature of the Similar Funds and the differences, from the Manager’s perspective, in providing services to the Similar Funds as compared to the fund.The Manager’s representatives also reviewed the costs associated with distribution through intermediaries.The Board analyzed differences in fees paid to the Manager and discussed the relationship of the management fees paid in light of the services provided.The Board members considered the relevance of the fee information provided for the Similar Funds to evaluate the appropriateness and reasonableness of the fund’s management fee.The Manager’s representatives noted that there were no similarly managed institutional separate accounts or wrap fee accounts managed by the Manager or its affiliates with similar investment objectives, policies, and strategies as the fund.
Analysis of Profitability and Economies of Scale. The Manager’s representatives reviewed the dollar amount of expenses allocated and profit received by the Manager for the fund and the method used to determine such expenses and profit. The Board considered information, previously provided and discussed, with information prepared by an independent consulting firm regarding the Manager’s approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus mutual fund complex.The Board also had been informed that the methodology had also been reviewed by an independent registered public accounting firm which, like the consultant, found the methodology to be reasonable.The consulting firm also analyzed where any economies of scale might emerge in connection with the management of the fund.The Board members evaluated the profitability analysis in light of the relevant circumstances for the fund, including the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders.The Board members also consid-
The Fund 31
INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
ered potential benefits to the Manager from acting as investment adviser to the fund and noted that there were no soft dollar arrangements in effect with respect to trading the fund’s portfolio.
It was noted that the Board members should consider the Manager’s profitability with respect to the fund as part of their evaluation of whether the fees under the Management Agreement bear a reasonable relationship to the mix of services provided by the Manager, including the nature, extent, and quality of such services and that a discussion of economies of scale is predicated on increasing assets and that, if the fund’s assets had been decreasing, the possibility that the Manager may have realized any economies of scale would be less. It was noted that the profitability percentage for managing the fund was within the range determined by appropriate court cases to be reasonable given the services rendered and that the profitability percentage for managing the fund was reasonable given the generally superior service levels provided.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to continuation of the fund’s Management Agreement. Based on the discussions and considerations as described above, the Board reached the following conclusions and determinations.
- The Board concluded that the nature, extent, and quality of the ser- vices provided by the Manager are adequate and appropriate.
- The Board was satisfied with the fund’s performance.
- The Board concluded that the fee paid to the Manager by the fund was reasonable in light of the services provided, comparative perfor- mance and expense and management fee information, costs of the services provided and profits to be realized and benefits derived or to be derived by the Manager from its relationship with the fund.
- The Board determined that the economies of scale which may accrue to the Manager and its affiliates in connection with the management of the fund had been adequately considered by the Manager in con- nection with the management fee rate charged to the fund, and that, to the extent in the future it were to be determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
The Board members considered these conclusions and determinations, along with the information received on a routine and regular basis throughout the year, and, without any one factor being dispositive, the Board determined that re-approval of the fund’s Management Agreement was in the best interests of the fund and its shareholders.
The Fund 33
Telephone Call your financial representative or 1-800-554-4611
| Mail | | The Dreyfus Premier 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 1-202-551-8090.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities 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 1-800-645-6561.
| 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. | | Schedule of Investments. |
| | | 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. |
| Item 10. | | Submission of Matters to a Vote of Security Holders. |
The Registrant has a Nominating Committee (the "Committee"), which is responsible for selecting and nominating persons for election or appointment by the Registrant's Board as Board members. The Committee has adopted a Nominating Committee Charter (the "Charter"). Pursuant to the Charter, the Committee will consider recommendations for nominees from shareholders submitted to the Secretary of the Registrant, c/o The Dreyfus Corporation Legal Department, 200 Park Avenue, 8th Floor East, New York, New York 10166. A nomination submission must include information regarding the recommended nominee as specified in the Charter. This information includes all information relating to a recommended nominee that is required to be disclosed in solicitations or proxy statements for the election of Board members, as well as information sufficient to evaluate the factors to be considered by the Committee, including character and integrity, business and professional experience, and whether the person has the ability to apply sound and independent business judgment and would act in the interests of the Registrant and its shareholders.
Nomination submissions are required to be accompanied by a written consent of the individual to stand for election if nominated by the Board and to serve if elected by the shareholders, and such additional information must be provided regarding the recommended nominee as reasonably requested by the Committee.
| Item 11. | | Controls and Procedures. |
(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes to the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
(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.
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.
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.
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)
