UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 |
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: | 10/31 | |
| Date of reporting period: | 4/30/09 | |
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.
| Systematic International Equity Fund |
Item 1. Reports to Stockholders.
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 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 |
| 14 | Statement of Financial Futures |
| 15 | Statement of Assets and Liabilities |
| 16 | Statement of Operations |
| 17 | Statement of Changes in Net Assets |
| 19 | Financial Highlights |
| 22 | Notes to Financial Statements |
| 32 | Information About the Review and Approval of the Fund’s Management Agreement |
| | FOR MORE INFORMATION |
| | Back Cover |
Systematic
International Equity Fund |
A LETTER FROM THE CEO
Dear Shareholder: |
We present to you this semiannual report for Systematic International Equity Fund, covering the six-month period from November 1, 2008, through April 30, 2009.
The international equities markets went on a wild ride over the past six months, with stocks in most regions plummeting during most of the reporting period and then rebounding late in the reporting period. In supporting the recent rally, investors apparently shrugged off more bad economic news,including rising unemployment,damaged credit markets and economic contraction in many regions of the world.Yet,the rebound proved to be robust, particularly in the emerging markets, which posted double-digit returns over the final two months of the reporting period.
These enormous swings have left investors wondering if the equities market is forecasting sustainable economic improvement, or whether these events represent what many call a bear market rally.We generally have remained cautious in the absence of real global economic progress, but the market’s gyrations illustrate an important feature of many market rallies—when they begin to snap back, the rebounds are often quick and sharp, usually leaving most investors on the sidelines. That’s why we encourage you to speak regularly with your financial consultant, who can discuss with you the potential benefits of adhering to a long-term investment strategy tailored to your current investment needs and future goals.
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.
Jonathan R. Baum
Chairman and Chief Executive Officer
The Dreyfus Corporation
May 15, 2009 |
2
DISCUSSION OF FUND PERFORMANCE
For the period of November 1, 2008, through April 30, 2009, as provided by Peter Goslin and Jocelin Reed, Portfolio Managers
Fund and Market Performance Overview
For the six-month period ended April 30, 2009, Systematic International Equity Fund’s Class A shares produced a –4.63% total return, Class C shares returned –4.96% and Class I shares returned –4.50%.1 The fund’s benchmark, the Morgan Stanley Capital International Europe, Australasia, Far East Index (“MSCI EAFE Index”), produced a total return of –2.64% for the same period.2
International stocks declined precipitously over the first four months of the reporting period due to a severe recession and global financial crisis. However, the markets rebounded strongly over the reporting period’s final two months as investors took advantage of historically low valuations and looked forward to a potential economic recovery. The fund produced lower returns than its benchmark, primarily due to relative weakness among its investments in Japan, Sweden and Australia.
The Fund’s Investment Approach
The fund seeks long-term capital growth by normally investing at least 80% of its assets in equity securities. The fund normally invests primarily in equity securities of foreign companies.The fund invests in at least 10 different countries and may invest up to 25% of its assets in emerging market countries, but no more than 10% of its assets may be invested in any one emerging market country.
When selecting securities, we use a quantitative model to identify and rank stocks within geographic regions and economic sectors based on six factor classifications: value, stewardship, growth, accruals, market sentiment and analysts’ expectations. We generally select higher ranked securities as identified by the quantitative model.We attempt to manage risk through diversification across regions, countries, sectors and industries in proportions that are similar to those of the MSCI EAFE Index. The fund’s currency exposure typically is unhedged to the U.S. dollar.
The Fund 3
| DISCUSSION OF FUND PERFORMANCE (continued) |
Late Rally Offset an Earlier Slump in Global Markets
Stock markets throughout the world fell sharply over the first four months of the reporting period, adding substantially to earlier declines in the wake of the failures of some of the world’s major financial insti-tutions.The financial crisis marked the escalation of a credit crisis that had originated in the U.S. sub-prime mortgage market and nearly led to the collapse of the global banking system in the fall of 2008. The markets’ credit-related struggles were intensified by a deepening global recession as unemployment rates climbed, housing markets struggled and consumer confidence plunged worldwide.
Adverse economic and financial developments were addressed aggressively by government and monetary authorities in both developed and emerging markets, as central banks reduced interest rates and injected liquidity into their banking systems. Government officials rescued a number of troubled corporations and enacted fiscal stimulus packages in an attempt to forestall further economic deterioration.These measures appeared to bolster investor sentiment, and most markets rallied strongly over the reporting period’s second half as investors took advantage of low prices among beaten-down stocks and looked forward to better economic times despite little actual improvement in economic data.
Stock Selections Produced Mixed Results
Although the fund participated substantially in the global rally later in the reporting period, its performance compared to the benchmark was undermined by relative weakness among its holdings in a handful of regions. In Japan, financial stocks struggled with ongoing credit and systemic issues. In Australia, the fund encountered weakness among diversified financial services companies and producers of precious metals. The fund’s investments in Sweden also generally lagged market averages.
However, relative weakness in these markets was largely offset by successes in other areas. From a market sector perspective, the fund received positive contributions to performance from its security selection strategy in the energy sector, where a number of exploration-and-production companies and integrated oil producers bolstered results. In the utilities sector, electricity producers and natural gas distributors held up well
4
during the downturn. Among consumer non-durables companies, the fund participated in gains posted by Australian brewer Lion Nathan, which was acquired by a Japan-based rival. Conversely, the fund did not hold some of the weaker performing beverage companies, such as Diageo,Asahi Breweries and Heineken.
From a regional standpoint, the fund scored successes from a diverse array of stocks in Germany. In the United Kingdom, winners were particularly notable among consumer services and energy companies In France, the fund’s positions in the financials, energy and technology sectors also fared relatively well.
Finding Opportunities in Fundamentally Sound Stocks
Although we are encouraged by attractive valuations among international stocks and the aggressive responses of governments and central banks to the economic downturn, our systematic approach to investing generally disregards macroeconomic factors in favor of quantitative measures of the strengths and weaknesses of individual companies Therefore, we have maintained our disciplined stock selection process, which seeks high-quality companies with strong financial profiles. In our view, this approach can help minimize unrewarded risks while identifying companies that may be poised to benefit as investors return to a focus on fundamentals.
May 15, 2009
Investing in foreign companies involves special risks, including changes in currency 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 charges in the case of Class A 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 pursuant to an agreement in effect through March 1, 2010, 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 Europe, Australasia, Far East (MSCI EAFE) Free Index is an unmanaged index composed of a sample of companies representative of the market structure of European and Pacific Basin countries.The index reflects actual investable opportunities for global investors for stocks that are free of foreign ownership limits or legal restrictions at the country level.
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 Systematic International Equity Fund from November 1, 2008 to April 30, 2009. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| | | |
| Expenses and Value of a $1,000 Investment | | |
| assuming actual returns for the six months ended April 30, 2009 | | |
| | Class A | Class C | Class I |
| Expenses paid per $1,000† | $ 6.78 | $ 10.40 | $ 5.57 |
| Ending value (after expenses) | $953.70 | $950.40 | $955.00 |
COMPARING YOUR FUND’S EXPENSES WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| | | |
| Expenses and Value of a $1,000 Investment | | |
| assuming a hypothetical 5% annualized return for the six months ended April 30, 2009 |
| | Class A | Class C | Class I |
| Expenses paid per $1,000† | $ 7.00 | $ 10.74 | $ 5.76 |
| Ending value (after expenses) | $1,017.85 | $1,014.13 | $1,019.09 |
† Expenses are equal to the fund’s annualized expense ratio of 1.40% for Class A, 2.15% for Class C and 1.15% for Class I shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
6
STATEMENT OF INVESTMENTS
April 30, 2009 (Unaudited) |
| | |
| Common Stocks—98.2% | Shares | Value ($) |
| Australia—6.2% | | |
| AXA Asia Pacific Holdings | 7,350 | 20,832 |
| BHP Billiton | 810 | 19,585 |
| Brambles | 5,880 | 25,297 |
| Coca-Cola Amatil | 4,245 | 28,197 |
| Cochlear | 677 | 24,453 |
| Computershare | 5,489 | 36,460 |
| Foster’s Group | 7,859 | 30,100 |
| James Hardie Industries | 6,990 | 23,368 |
| Lion Nathan | 5,550 | 47,312 |
| Newcrest Mining | 1,300 | 28,286 |
| Santos | 2,657 | 31,706 |
| Woodside Petroleum | 1,200 | 33,471 |
| | | 349,067 |
| Belgium—2.8% | | |
| Ackermans & Van Haaren | 370 | 21,590 |
| Anheuser-Busch InBev | 870 | 26,554 |
| Bekaert | 250 | 23,207 |
| Delhaize Group | 481 | 32,369 |
| Mobistar | 550 | 32,974 |
| Umicore | 1,050 | 20,578 |
| | | 157,272 |
| China—.7% | | |
| Tencent Holdings | 4,400 | 39,174 |
| Finland—1.5% | | |
| Konecranes | 1,635 | 33,190 |
| Nokia | 1,045 | 14,894 |
| Tieto | 1,540 | 19,762 |
| Wartsila | 550 | 18,096 |
| | | 85,942 |
| France—11.2% | | |
| Accor | 670 | 28,441 |
| Air Liquide | 528 | 43,062 |
| AXA | 3,210 | 53,490 |
| CNP Assurances | 409 | 32,299 |
| Eutelsat Communications | 1,112 a | 24,069 |
| Fonciere des Regions | 317 | 17,348 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | |
| Common Stocks (continued) | Shares | Value ($) |
| France (continued) | | |
| France Telecom | 565 | 12,537 |
| Gecina | 570 | 30,878 |
| Hermes International | 301 | 39,795 |
| Iliad | 297 | 31,225 |
| Maurel et Prom | 1,706 | 25,204 |
| Neopost | 320 | 27,041 |
| Pernod-Ricard | 483 | 28,485 |
| Sanofi-Aventis | 1,223 | 70,392 |
| Societe Des Autoroutes Paris-Rhin-Rhone | 300 | 19,347 |
| Technip | 640 | 27,420 |
| Total | 1,200 | 60,010 |
| Vallourec | 260 | 28,234 |
| Wendel | 340 | 12,429 |
| Zodiac | 760 | 22,101 |
| | | 633,807 |
| Germany—5.6% | | |
| Allianz | 369 | 33,857 |
| Aurubis | 629 | 17,802 |
| Deutsche Euroshop | 765 | 21,692 |
| E.ON | 870 | 29,385 |
| Fraport | 390 | 15,720 |
| Munchener Ruckversicherungs | 425 | 58,662 |
| Puma | 135 | 28,821 |
| Siemens | 1,011 | 67,862 |
| Software | 160 | 9,979 |
| Solarworld | 1,180 | 33,662 |
| | | 317,442 |
| Greece—.8% | | |
| OPAP | 1,400 | 43,350 |
| Hong Kong—4.2% | | |
| Cheung Kong Holdings | 4,000 | 41,651 |
| Hang Lung Group | 9,000 | 33,271 |
| Henderson Land Development | 7,000 | 32,968 |
| Hong Kong Exchanges & Clearing | 3,100 | 36,160 |
| Hopewell Holdings | 7,000 | 18,155 |
| Hutchison Whampoa | 5,000 | 29,677 |
8
| | |
| Common Stocks (continued) | Shares | Value ($) |
| Hong Kong (continued) | | |
| Link REIT | 12,000 | 23,411 |
| Wheelock & Co. | 10,000 | 21,677 |
| | | 236,970 |
| Ireland—1.2% | | |
| CRH | 1,450 | 37,750 |
| Kerry Group, Cl. A | 1,461 | 28,168 |
| | | 65,918 |
| Italy—1.9% | | |
| Atlantia | 1,400 | 24,665 |
| ENI | 872 | 18,898 |
| Fondiaria-SAI | 1,070 | 17,779 |
| Lottomatica | 1,270 | 26,162 |
| Snam Rete Gas | 4,535 | 17,997 |
| | | 105,501 |
| Japan—20.3% | | |
| Acom | 800 | 19,185 |
| Astellas Pharma | 1,000 | 32,549 |
| Bank of Kyoto | 3,000 | 23,971 |
| Central Japan Railway | 5 | 29,558 |
| Chubu Electric Power | 1,400 | 30,805 |
| eAccess | 41 | 26,690 |
| Electric Power Development | 1,000 | 29,051 |
| Gunma Bank | 6,000 | 29,690 |
| Hankyu Hashin Holdings | 6,000 | 28,047 |
| Hiroshima Bank | 5,000 | 18,860 |
| Hokuhoku Financial Group | 17,000 | 29,822 |
| Honda Motor | 400 | 11,539 |
| Itochu | 3,000 | 16,001 |
| Iyo Bank | 2,000 | 19,935 |
| Japan Steel Works | 2,000 | 21,497 |
| JGC | 1,000 | 13,030 |
| Jupiter Telecommunications | 23 | 16,162 |
| KDDI | 8 | 35,855 |
| Kubota | 5,000 | 29,811 |
| Kyushu Electric Power | 1,300 | 26,825 |
| Makita | 1,000 | 22,866 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | |
| Common Stocks (continued) | Shares | Value ($) |
| Japan (continued) | | |
| Mitsubishi Estate | 3,000 | 39,029 |
| Mitsubishi UFJ Financial Group | 3,800 | 20,614 |
| Mitsui OSK Lines | 5,000 | 28,443 |
| Mizuho Financial Group | 16,000 | 33,421 |
| Nippon Yusen | 7,000 | 28,534 |
| Nishi-Nippon City Bank | 14,000 | 27,966 |
| Nisshinbo Industries | 3,000 | 31,424 |
| Nitori | 400 | 22,511 |
| Oriental Land | 500 | 31,484 |
| ORIX | 970 | 45,343 |
| Point | 190 | 8,477 |
| Rakuten | 66 | 33,328 |
| Resona Holdings | 2,000 | 26,688 |
| Sapporo Hokuyo Holdings | 5,000 a | 14,399 |
| Seven & I Holdings | 1,800 | 40,610 |
| Shimachu | 1,500 | 26,131 |
| Sony Financial Holdings | 9 | 28,199 |
| Sumitomo | 4,000 | 34,597 |
| Sumitomo Metal Industries | 10,000 | 23,322 |
| Suruga Bank | 2,000 | 16,974 |
| Toyota Motor | 1,410 | 55,045 |
| Yamaguchi Financial Group | 2,000 | 19,246 |
| | | 1,147,534 |
| Luxembourg—.6% | | |
| Tenaris | 2,800 | 35,317 |
| Netherlands—2.5% | | |
| Corio | 530 | 23,468 |
| Gemalto | 900 a | 28,283 |
| Koninklijke DSM | 915 | 28,280 |
| KONINKLIJKE KPN | 2,860 | 34,362 |
| Koninklijke Vopak | 590 a | 25,977 |
| | | 140,370 |
| Norway—2.6% | | |
| Fred Olsen Energy | 800 | 25,483 |
| Frontline | 800 | 16,048 |
| Norsk Hydro | 3,500 | 15,454 |
10
| | |
| Common Stocks (continued) | Shares | Value ($) |
| Norway (continued) | | |
| Prosafe | 8,500 a | 35,350 |
| SeaDrill | 3,100 | 33,562 |
| Tandberg | 1,700 | 24,088 |
| | | 149,985 |
| Portugal—.4% | | |
| Portugal Telecom | 3,401 | 26,026 |
| Spain—4.4% | | |
| ACS Actividades de Construccion y Servicios | 684 | 34,220 |
| Banco Santander | 3,057 | 28,860 |
| Criteria Caixacorp | 4,400 | 16,554 |
| Enagas | 1,600 | 27,968 |
| Red Electrica | 750 | 31,498 |
| Telefonica | 4,243 | 80,565 |
| Zardoya Otis | 1,450 | 29,677 |
| | | 249,342 |
| Sweden—1.0% | | |
| Kungsleden | 4,700 | 23,505 |
| Swedish Match | 2,200 | 31,480 |
| | | 54,985 |
| Switzerland—7.0% | | |
| Baloise Holding | 397 | 29,058 |
| Banque Cantonale Vaudoise | 60 | 20,516 |
| Nestle | 2,390 | 77,730 |
| Novartis | 2,369 | 89,472 |
| Roche Holding | 343 | 43,342 |
| Schindler Holding | 600 | 31,464 |
| Sonova Holding | 390 | 25,542 |
| Synthes | 255 | 25,896 |
| Zurich Financial Services | 300 | 55,407 |
| | | 398,427 |
| United Kingdom—23.3% | | |
| Admiral Group | 1,740 | 23,214 |
| Aggreko | 4,000 | 33,840 |
| Amlin | 5,377 | 28,603 |
| AstraZeneca | 415 | 14,553 |
| BG Group | 4,630 | 74,447 |
The Fund 11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | |
| Common Stocks (continued) | Shares | Value ($) |
| United Kingdom (continued) | | |
| BHP Billiton | 2,445 | 51,365 |
| BP | 11,478 | 81,390 |
| British American Tobacco | 2,400 | 58,238 |
| Cable & Wireless | 11,850 | 26,082 |
| Cadbury | 4,200 | 31,476 |
| Drax Group | 2,739 | 20,747 |
| Fresnillo | 1,000 | 7,837 |
| GlaxoSmithKline | 5,890 | 90,955 |
| Greene King | 4,777 | 43,340 |
| Hiscox | 5,007 | 24,765 |
| HSBC Holdings | 5,321 | 37,799 |
| Inmarsat | 3,897 | 27,970 |
| Intercontinental Hotels Group | 3,339 | 31,733 |
| Intertek Group | 2,150 | 32,241 |
| Man Group | 5,000 | 18,435 |
| Meggitt | 6,175 | 16,337 |
| Next | 1,301 | 31,122 |
| Northumbrian Water Group | 6,000 | 19,695 |
| Premier Oil | 1,330 a | 20,327 |
| Reckitt Benckiser Group | 963 | 37,925 |
| Royal Dutch Shell, Cl. A | 1,965 | 45,528 |
| Royal Dutch Shell, Cl. B | 2,030 | 46,559 |
| Schroders | 2,080 | 25,341 |
| SOCO International | 1,554 a | 28,340 |
| Standard Life | 9,700 | 26,972 |
| Tesco | 2,000 | 9,929 |
| Thomas Cook Group | 3,050 | 11,738 |
| Ultra Electronics Holdings | 720 | 12,599 |
| Unilever | 1,350 | 26,348 |
| United Business Media | 4,218 | 28,619 |
| Vedanta Resources | 1,100 | 17,234 |
| Venture Production | 2,400 | 28,316 |
| Vodafone Group | 31,000 | 56,941 |
| VT Group | 3,350 | 22,840 |
12
| | |
| Common Stocks (continued) | Shares | Value ($) |
| United Kingdom (continued) | | |
| Whitbread | 2,068 | 28,693 |
| William Hill | 5,800 | 18,785 |
| | | 1,319,218 |
| Total Common Stocks | | |
| (cost $7,193,967) | | 5,555,647 |
| | Principal | |
| Short-Term Investments—.3% | Amount ($) | Value ($) |
| U.S. Treasury Bills; | | |
| 0.22%, 6/25/09 | | |
| (cost $16,994) | 17,000 b | 16,998 |
| |
| Total Investments (cost $7,210,961) | 98.5% | 5,572,645 |
| Cash and Receivables (Net) | 1.5% | 85,133 |
| Net Assets | 100.0% | 5,657,778 |
| a | Non-income producing security. |
| b | All or partially held by a broker as collateral for open financial futures positions. |
| | | |
| Portfolio Summary (Unaudited)† | | |
| |
| | Value (%) | | Value (%) |
| Finance | 23.0 | Industrial Services | 4.8 |
| Consumer Non-Durables | 9.2 | Non-Energy Minerals | 4.4 |
| Energy Minerals | 8.7 | Transportation | 3.8 |
| Producer Manufacturing | 7.5 | Utilities | 3.3 |
| Health Care Technology | 7.4 | Short-Term Investment | .3 |
| Communications | 6.4 | Other | 13.5 |
| Consumer Services | 6.2 | | 98.5 |
| |
| † Based on net assets. | | | |
| See notes to financial statements. | | | |
The Fund 13
STATEMENT OF FINANCIAL FUTURES
April 30, 2009 (Unaudited)
| | | | |
| | | Market Value | | Unrealized |
| | | Covered by | | (Depreciation) |
| | Contracts | Contracts ($) | Expiration | at 4/30/2009 ($) |
| Financial Futures Long | | | | |
| Japanese Yen | 1 | 126,712 | June 2009 | (98) |
| Financial Futures Short | | | | |
| British Pound | 2 | (185,250) | June 2009 | (12,670) |
| | | | | (12,768) |
| |
| See notes to financial statements. | | | | |
14
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2009 (Unaudited)
| | | |
| | | Cost | Value |
| Assets ($): | | | |
| Investments in securities—See Statement of Investments | 7,210,961 | 5,572,645 |
| Cash | | | 32,960 |
| Cash denominated in foreign currencies | | 21,838 | 21,965 |
| Dividends and interest receivable | | | 48,379 |
| Receivable for investment securities sold | | | 3,754 |
| Prepaid expenses | | | 16,894 |
| | | | 5,696,597 |
| Liabilities ($): | | | |
| Due to The Dreyfus Corporation and affiliates—Note 3(c) | | 12,400 |
| Payable for futures variation margin—Note 4 | | | 2,038 |
| Accrued expenses | | | 24,381 |
| | | | 38,819 |
| Net Assets ($) | | | 5,657,778 |
| Composition of Net Assets ($): | | | |
| Paid-in capital | | | 10,590,865 |
| Accumulated undistributed investment income—net | | | 45,374 |
| Accumulated net realized gain (loss) on investments | | | (3,327,251) |
| Accumulated net unrealized appreciation (depreciation) | | |
| on investments and foreign currency transactions [including | | |
| ($12,768) net unrealized (depreciation) on financial futures] | | (1,651,210) |
| Net Assets ($) | | | 5,657,778 |
| |
| |
| Net Asset Value Per Share | | | |
| | Class A | Class C | Class I |
| Net Assets ($) | 4,523,019 | 575,428 | 559,331 |
| Shares Outstanding | 670,977 | 85,214 | 83,015 |
| Net Asset Value Per Share ($) | 6.74 | 6.75 | 6.74 |
| |
| See notes to financial statements. | | | |
The Fund 15
| |
| STATEMENT OF OPERATIONS | |
| Six Months Ended April 30, 2009 (Unaudited) | |
| |
| |
| |
| |
| Investment Income ($): | |
| Income: | |
| Cash dividends (net of $9,772 foreign taxes withheld at source) | 104,222 |
| Interest | 57 |
| Total Income | 104,279 |
| Expenses: | |
| Management fee—Note 3(a) | 21,856 |
| Registration fees | 34,601 |
| Auditing fees | 26,860 |
| Custodian fees—Note 3(c) | 20,939 |
| Shareholder servicing costs—Note 3(c) | 7,867 |
| Prospectus and shareholders’ reports | 4,505 |
| Distribution fees—Note 3(b) | 2,442 |
| Directors’ fees and expenses—Note 3(d) | 1,030 |
| Legal fees | 195 |
| Loan commitment fees—Note 2 | 102 |
| Miscellaneous | 14,515 |
| Total Expenses | 134,912 |
| Less—expense reimbursement from The Dreyfus | |
| Corporation due to undertaking—Note 3(a) | (94,872) |
| Less—reduction in fees due to earnings credits—Note 1(c) | (21) |
| Net Expenses | 40,019 |
| Investment Income—Net | 64,260 |
| Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | |
| Net realized gain (loss) on investments and foreign currency transactions | (2,069,268) |
| Net realized gain (loss) on financial futures | 55,582 |
| Net realized gain (loss) on forward currency exchange contracts | 8,325 |
| Net Realized Gain (Loss) | (2,005,361) |
| Net unrealized appreciation (depreciation) on investments and | |
| foreign currency transactions [including ($39,840) | |
| net unrealized (depreciation) on financial futures] | 1,658,309 |
| Net Realized and Unrealized Gain (Loss) on Investments | (347,052) |
| Net (Decrease) in Net Assets Resulting from Operations | (282,792) |
| |
| See notes to financial statements. | |
16
STATEMENT OF CHANGES IN NET ASSETS
| | |
| | Six Months Ended | |
| | April 30, 2009 | Year Ended |
| | (Unaudited)a | October 31, 2008 |
| Operations ($): | | |
| Investment income—net | 64,260 | 213,252 |
| Net realized gain (loss) on investments | (2,005,361) | (1,310,894) |
| Net unrealized appreciation | | |
| (depreciation) on investments | 1,658,309 | (5,352,267) |
| Net Increase (Decrease) in Net Assets | | |
| Resulting from Operations | (282,792) | (6,449,909) |
| Dividends to Shareholders from ($): | | |
| Investment income—net: | | |
| Class A Shares | (111,373) | (149,503) |
| Class C Shares | (8,092) | (13,752) |
| Class I Shares | (17,976) | (23,617) |
| Class T Shares | (12,951) | (18,400) |
| Net realized gain on investments: | | |
| Class A Shares | — | (243,805) |
| Class C Shares | — | (35,553) |
| Class I Shares | — | (34,060) |
| Class T Shares | — | (33,920) |
| Total Dividends | (150,392) | (552,610) |
| Capital Stock Transactions ($): | | |
| Net proceeds from shares sold: | | |
| Class A Shares | 543,875 | 38,435 |
| Class C Shares | 255 | 46,248 |
| Class I Shares | 1,000 | — |
| Dividends reinvested: | | |
| Class A Shares | 2,800 | 247,661 |
| Class C Shares | — | 36,035 |
| Class I Shares | 75 | 34,158 |
| Class T Shares | — | 33,920 |
| Cost of shares redeemed: | | |
| Class A Shares | (48,657) | (25,462) |
| Class C Shares | (20) | (33,124) |
| Class T Shares | (531,262) | — |
| Increase (Decrease) in Net Assets | | |
| from Capital Stock Transactions | (31,934) | 377,871 |
| Total Increase (Decrease) in Net Assets | (465,118) | (6,624,648) |
| Net Assets ($): | | |
| Beginning of Period | 6,122,896 | 12,747,544 |
| End of Period | 5,657,778 | 6,122,896 |
| Undistributed investment income—net | 45,374 | 131,506 |
The Fund 17
STATEMENT OF CHANGES IN NET ASSETS (continued)
| | |
| | Six Months Ended | |
| | April 30, 2009 | Year Ended |
| | (Unaudited)a | October 31, 2008 |
| Capital Share Transactions: | | |
| Class Ab | | |
| Shares sold | 84,459 | 2,955 |
| Shares issued for dividends reinvested | 406 | 18,197 |
| Shares redeemed | (7,478) | (2,530) |
| Net Increase (Decrease) in Shares Outstanding | 77,387 | 18,622 |
| Class C | | |
| Shares sold | 36 | 3,344 |
| Shares issued for dividends reinvested | — | 2,651 |
| Shares redeemed | (3) | (2,825) |
| Net Increase (Decrease) in Shares Outstanding | 33 | 3,170 |
| Class I | | |
| Shares sold | 164 | — |
| Shares issued for dividends reinvested | 11 | 2,509 |
| Net Increase (Decrease) in Shares Outstanding | 175 | 2,509 |
| Class Tb | | |
| Shares issued for dividends reinvested | — | 2,494 |
| Shares redeemed | (82,494) | — |
| Net Increase (Decrease) in Shares Outstanding | (82,494) | 2,494 |
| a | Effective close of business on February 4, 2009, the fund no longer offers Class T shares. |
| b | On the close of business on February 4, 2009, 82,494 Class T shares representing $531,262 were automatically converted to 82,494 Class A shares. |
| See notes to financial statements. |
18
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
| | | |
| | Six Months Ended | | |
| | April 30, 2009 | Year Ended October 31, |
| Class A Shares | (Unaudited) | 2008 | 2007a |
| Per Share Data ($): | | | |
| Net asset value, beginning of period | 7.26 | 15.61 | 12.50 |
| Investment Operations: | | | |
| Investment income—netb | .08 | .26 | .17 |
| Net realized and unrealized | | | |
| gain (loss) on investments | (.41) | (7.93) | 2.94 |
| Total from Investment Operations | (.33) | (7.67) | 3.11 |
| Distributions: | | | |
| Dividends from investment income—net | (.19) | (.26) | — |
| Dividends from net realized gain on investments | — | (.42) | — |
| Total Distributions | (.19) | (.68) | — |
| Net asset value, end of period | 6.74 | 7.26 | 15.61 |
| Total Return (%)c | (4.63)d | (51.12) | 24.80d |
| Ratios/Supplemental Data (%): | | | |
| Ratio of total expenses to average net assets | 4.86e | 2.78 | 2.60e |
| Ratio of net expenses to average net assets | 1.40e | 1.39 | 1.34e |
| Ratio of net investment income | | | |
| to average net assets | 2.54e | 2.15 | 1.35e |
| Portfolio Turnover Rate | 39.67d | 110.40 | 85.40d |
| Net Assets, end of period ($ x 1,000) | 4,523 | 4,309 | 8,974 |
| a | From November 30, 2006 (commencement of operations) to October 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
| FINANCIAL HIGHLIGHTS (continued) |
| | | |
| | Six Months Ended | | |
| | April 30, 2009 | Year Ended October 31, |
| Class C Shares | (Unaudited) | 2008 | 2007a |
| Per Share Data ($): | | | |
| Net asset value, beginning of period | 7.20 | 15.50 | 12.50 |
| Investment Operations: | | | |
| Investment income—netb | .05 | .17 | .08 |
| Net realized and unrealized | | | |
| gain (loss) on investments | (.40) | (7.89) | 2.92 |
| Total from Investment Operations | (.35) | (7.72) | 3.00 |
| Distributions: | | | |
| Dividends from investment income—net | (.10) | (.16) | — |
| Dividends from net realized gain on investments | — | (.42) | — |
| Total Distributions | (.10) | (.58) | — |
| Net asset value, end of period | 6.75 | 7.20 | 15.50 |
| Total Return (%)c | (4.96)d | (51.54) | 24.00d |
| Ratios/Supplemental Data (%): | | | |
| Ratio of total expenses to average net assets | 5.63e | 3.55 | 3.35e |
| Ratio of net expenses to average net assets | 2.15e | 2.15 | 2.09e |
| Ratio of net investment income | | | |
| to average net assets | 1.67e | 1.41 | .61e |
| Portfolio Turnover Rate | 39.67d | 110.40 | 85.40d |
| Net Assets, end of period ($ x 1,000) | 575 | 614 | 1,271 |
| a | From November 30, 2006 (commencement of operations) to October 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. |
20
| | | |
| | Six Months Ended | | |
| | April 30, 2009 | Year Ended October 31, |
| Class I Shares | (Unaudited) | 2008 | 2007a,b |
| Per Share Data ($): | | | |
| Net asset value, beginning of period | 7.28 | 15.64 | 12.50 |
| Investment Operations: | | | |
| Investment income—netc | .09 | .29 | .21 |
| Net realized and unrealized | | | |
| gain (loss) on investments | (.41) | (7.94) | 2.93 |
| Total from Investment Operations | (.32) | (7.65) | 3.14 |
| Distributions: | | | |
| Dividends from investment income—net | (.22) | (.29) | — |
| Dividends from net realized gain on investments | — | (.42) | — |
| Total Distributions | (.22) | (.71) | — |
| Net asset value, end of period | 6.74 | 7.28 | 15.64 |
| Total Return (%) | (4.50)d | (51.00) | 25.12d |
| Ratios/Supplemental Data (%): | | | |
| Ratio of total expenses to average net assets | 4.63e | 2.55 | 2.35e |
| Ratio of net expenses to average net assets | 1.15e | 1.14 | 1.09e |
| Ratio of net investment income | | | |
| to average net assets | 2.67e | 2.40 | 1.60e |
| Portfolio Turnover Rate | 39.67d | 110.40 | 85.40d |
| Net Assets, end of period ($ x 1,000) | 559 | 603 | 1,257 |
| a | From November 30, 2006 (commencement of operations) to October 31, 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 21
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Systematic International Equity 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 seven series, including the fund. The fund’s investment objective is to pursue long-term capital growth. 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. Mellon Capital Management Corporation (“Mellon Capital”), a subsidiary of BNY Mellon, 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.
Effective December 3, 2008, investments for new accounts were no longer permitted in ClassT of the fund, except that participants in certain group retirement plans were able to open a new account in Class T of the fund, provided that the fund was established as an investment option under the plans before December 3, 2008. On February 4, 2009, the fund issued to each holder of its Class T shares, in exchange for said shares, Class A shares of the fund having an aggregate net asset
22
value equal to the aggregate net asset value of the shareholder’s Class T shares. Subsequent investments in the fund’s Class A shares made by prior holders of the fund’s Class T shares who received Class A shares of the fund in exchange for their Class T shares are subject to the front-end sales load schedule that was in effect for Class T shares at the time of the exchange. Otherwise, all other Class A share attributes will be in effect. Effective close of business on February 4, 2009, the fund no longer offers Class T shares.
As of April 30, 2009, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held 659,940 Class A, 82,496 Class C and 82,492 Class I 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 valu-
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
ation 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. 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. 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. 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 fund adopted Statement of Financial Accounting Standards No. 157 “FairValue 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.
Various inputs are used in determining the value of the fund’s investments relating to FAS 157.These inputs are summarized in the three broad levels listed below.
Level 1—quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar securities, 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).
24
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of April 30, 2009 in valuing the fund’s investments:
| | | | |
| | | Level 2—Other | Level 3— | |
| | Level 1— | Significant | Significant | |
| | Quoted | Observable | Unobservable | |
| | Prices | Inputs | Inputs | Total |
| Assets ($) | | | | |
| Investments in | | | | |
| Securities | 1,772,745 | 3,799,900 | — | 5,572,645 |
| Other Financial | | | | |
| Instruments† | — | — | — | — |
| Liabilities ($) | | | | |
| Other Financial | | | | |
| Instruments† | (12,768) | — | — | (12,768) |
† Other financial instruments include derivative instruments such as futures, forward currency exchange contracts, swap contracts and options contracts. Amounts shown represent unrealized appreciation (depreciation) at period end.
In April 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No. 157-4,“Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP 157-4”). FSP 157-4 provides additional guidance for estimating fair value in accordance with FAS 157, when the volume and level of activity for the asset or liability have significantly decreased as well as guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 is effective for fiscal years and interim periods ending after June 15, 2009. Management is currently evaluating the impact the adoption of FSP 157-4 will have on the fund’s financial statement disclosures.
(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.
The Fund 25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Net realized foreign exchange gains or losses arise from 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 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.
The fund has arrangements with the custodian and cash management bank whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset custody and cash management fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
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: 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 annu-
26
ally, 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 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 provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended April 30, 2009, 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 two-year period ended October 31, 2008 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The fund has an unused capital loss carryover of $1,294,818 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to October 31, 2008. If not applied, the carryover expires in fiscal 2016.
The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2008 was as follows: ordinary income $533,448 and long-term capital gains $19,162.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 $145 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York
The Fund 27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 Facility 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 the borrowing. During the period ended April 30, 2009, 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 (“Agreement”) with Dreyfus, the management fee is computed at the annual rate of .80% 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 March 1, 2010, 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 1.15% of the value of the fund’s average daily net assets.The expense reimbursement, pursuant to the undertaking, amounted to $94,872 during the period ended April 30, 2009.
Pursuant to a Sub-Investment Advisory Agreement between Dreyfus and Mellon Capital, Dreyfus pays Mellon Capital an annual fee at the rate of .45% of the value 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 April 30, 2009, Class C and Class T shares were charged $2,071 and $371, 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 services
28
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 April 30, 2009, Class A, Class C and Class T shares were charged $5,096, $691 and $371, 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 April 30, 2009, the fund was charged $495 pursuant to the transfer agency agreement.
The fund compensates The Bank of NewYork Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, under a cash management agreement for performing cash management services related to fund subscriptions and redemptions. During the period ended April 30, 2009, the fund was charged $21 pursuant to the cash management agreement.These fees were offset by earnings credits pursuant to the cash management agreement.
The fund also compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. During the period ended April 30, 2009, the fund was charged $20,939 pursuant to the custody agreement.
During the period ended April 30, 2009, the fund was charged $2,394 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 $3,598, Rule 12b-1 distribution plan fees $343, shareholder services plan fees $1,013, custodian fees $18,003, chief compliance officer
The Fund 29
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
fees $2,793 and transfer agency per account fees $110, which are offset against an expense reimbursement currently in effect in the amount of $13,460.
(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.
(e) A 2% redemption fee was charged and retained by the fund on certain shares redeemed within sixty days following the date of issuance, subject to exceptions, including redemptions made through the use of the fund’s exchange privilege. During the period ended April 30, 2009, no redemption fees were charged and retained by the fund.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, financial futures and forward currency exchange contracts, during the period ended April 30, 2009, amounted to $2,163,209 and $2,276,235, respectively.
The fund may invest in financial futures contracts in order to gain exposure to or protect against changes in the market. The fund is exposed to market risk as a result of changes in the value of the underlying financial instruments. These investments require initial margin deposits with a broker, which consist of cash or cash equivalents.The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Investments in financial futures require the fund to “mark to market” on a daily basis, which reflects the change in market value of the contracts at the close of each day’s trading. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses. When the contracts are closed, the fund recognizes a realized gain or loss. Contracts open at April 30, 2009, are set forth in the Statement of Financial Futures.
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 transac-
30
tions.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. At April 30, 2009, there were no forward currency exchange contracts outstanding.
At April 30, 2009, accumulated net unrealized depreciation on investments was $1,638,316, consisting of $222,424 gross unrealized appreciation and $1,860,740 gross unrealized depreciation.
At April 30, 2009, 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 FASB released Statement of Financial Accounting Standards No. 161 “Disclosures about Derivative Instruments and Hedging Activities” (“FAS 161”). FAS 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments and disclosures about credit-risk-related contingent features in derivative agree-ments.The application of FAS 161 is required for fiscal years and interim periods beginning after November 15, 2008. At this time, management is evaluating the implications of FAS 161 and its impact on the financial statements and the accompanying notes has not yet been determined.
The Fund 31
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 November 10-11, 2008, 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, and of the Manager’s Sub-Advisory Agreement with Mellon Capital, pursuant to which Mellon Capital serves as sub-investment adviser and provides day-to-day management of the fund’s portfolio.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 considered information previously provided to them in a presentation from representatives of the Manager regarding services provided to the fund and other funds in the Dreyfus complex, and representatives of the Manager confirmed that there had been no material changes in the information. The Board also discussed the nature, extent, and quality of the services provided to the fund pursuant to the fund’s 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 and Mellon Capital’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, as well as the Manager’s supervisory activities over Mellon Capital.
32
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 August 31, 2008, 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 August 31, 2008.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 lower than the Expense Group median and that the fund’s actual management fee was lower than the Expense Group and Expense Universe medians. The Board also noted that the fund’s total expense ratio was lower than the Expense Group and Expense Universe medians.
With respect to the fund’s performance, the Board noted that the fund’s total return was lower than the Performance Group median and higher than the Performance Universe median for the reported 1-year period. The Board noted that the fund commenced operations on November 30, 2006 and was small in asset size with limited distribution to date.
The Fund 33
INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE
FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued) |
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 Mellon Capital, or other Dreyfus affiliate 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-
34
ered potential benefits to the Manager and Mellon Capital from acting as investment adviser to the fund and noted the 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. Since the Manager, and not the fund, pays Mellon Capital the sub-advisory fee, the Board did not consider Mellon Capital’s profitability to be relevant to the deliberations. 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. The Board also noted the Manager’s absorption of certain expenses of the fund over the past year and its effect on the profitability of the Manager.
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 and Mellon Capital are adequate and appropriate.
- The Board was satisfied with the fund’s performance, noting the fund’s relatively short track record and small asset size.
The Fund 35
INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
- The Board concluded that the fee paid to the Manager by the fund was reasonable in light of the services provided, comparative performance 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 or Mellon Capital 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, and Sub-Investment Advisory Agreement with Mellon Capital, was in the best interests of the fund and its shareholders.
36
| |
| 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. |
| 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.
(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. |
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/ J. David Officer |
| | J. David Officer |
| President |
|
| |
| Date: | June 29, 2009 |
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/ J. David Officer |
| | J. David Officer |
| President |
|
| |
| Date: | June 29, 2009 |
| |
| By: | /s/ James Windels |
| | James Windels |
| Treasurer |
|
| |
| Date: | June 29, 2009 |
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) |
