UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number | 811-3940 | |||||
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| Strategic Funds, Inc. (formerly, Dreyfus Premier New Leaders Fund, Inc.) |
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| (Exact name of Registrant as specified in charter) |
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c/o The Dreyfus Corporation 200 Park Avenue New York, New York 10166 |
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| (Address of principal executive offices) (Zip code) |
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| Michael A. Rosenberg, Esq. 200 Park Avenue New York, New York 10166 |
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| (Name and address of agent for service) |
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Registrant's telephone number, including area code: | (212) 922-6000 | |||||
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Date of fiscal year end:
| 5/31 |
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Date of reporting period: | 11/30/2010 |
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The following N-CSR relates only to the Registrant’s series listed below and does not affect the other series of the Registrant, which have different fiscal year ends and, therefore, different N-CSR reporting requirements. Separate N-CSR Forms will be filed for these series, as appropriate.
Dreyfus Select Managers Large Cap Growth Fund
Dreyfus Select Managers Small Cap Growth Fund
Emerging Markets Opportunity Fund
1 |
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The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value
Contents | |
THE FUND | |
2 | A Letter from the Chairman and CEO |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
11 | Statement of Assets and Liabilities |
12 | Statement of Operations |
13 | Statement of Changes in Net Assets |
14 | Financial Highlights |
15 | Notes to Financial Statements |
24 | Information About the Review and Approval of the Fund’s Management Agreement, Portfolio Allocation Management Agreement and Sub-Investment Advisory Agreements |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus
Select Managers
Large Cap Growth Fund
The Fund
A LETTER FROM THE CHAIRMAN AND CEO
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Select Managers Large Cap Growth Fund, covering the period since the fund’s inception on July 1, 2010, through November 30, 2010.
Stocks throughout the global markets delivered respectable returns during the reporting period, despite periodic bouts of market volatility stemming from economic uncertainty and events. Although GDP growth in most countries was positive throughout the reporting period, the global economic recovery has been milder than historical averages, in particular in the U.S. Most notably, heavy sovereign debt burdens recently renewed credit concerns in Europe, effectively barring some governments from adopting more stimulative fiscal policies. However, robust demand from the world’s emerging markets has taken up some of the slack, supporting corporate earnings and stock prices.
We are cautiously optimistic regarding global economic and market prospects in 2011. Global expansion should gain a degree of momentum, led by financially strong emerging markets countries, while “debt hangover” countries in the developed world may face continued economic challenges. Monetary policy remains stimulative in most markets, and inflation-adjusted interest rates and inflation remain low. So is your portfolio positioned accordingly given these recent global economic events?Talk with your financial advisor, who can help you evaluate your portfolio investments within the new global economic framework to help meet your individual investment needs and future capital goals.
For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
Thank you for your continued confidence and support.
Jonathan R. Baum
Chairman and Chief Executive Officer
The Dreyfus Corporation
December 15, 2010
2
DISCUSSION OF FUND PERFORMANCE
For the period of July 1, 2010, through November 30, 2010, as provided by Keith L. Stransky and Robert B. Mayerick, Portfolio Allocation Managers, EACM Advisors LLC
Market and Fund Performance Overview
For the period from the fund’s inception on July 1, 2010, through the end of its semiannual reporting period on November 30, 2010, Dreyfus Select Managers Large Cap Growth Fund’s Class A shares produced a total return of 20.40%, Class C shares returned 20.00% and Class I shares returned 20.48%.1 In comparison, the total return of the Russell 1000 Growth Index (the “Index”), the fund’s benchmark, was 19.99% for the same period.2
Large-cap stocks generally encountered heightened volatility amid global economic concerns, but rising corporate earnings and the prospect of further easing of U.S. monetary policy helped the Index end the reporting period with substantial gains. The fund produced returns that were roughly in line with its benchmark, as strong results in the information technology and consumer discretionary sectors were offset by weaker results in the financials sector.
The Fund’s Investment Approach
The fund seeks long-term capital appreciation. To pursue its goal, the fund normally invests at least 80% of its assets in the stocks of companies with market capitalizations of $10 billion or more at the time of purchase.
The fund uses a “multi-manager” approach by selecting one or more subadvisers to manage the fund’s assets.We seek subadvisers that complement one another’s styles of investing.We monitor and evaluate the performance of the subadvisers and recommend any changes to Dreyfus and the fund’s board.
As of November 30, 2010, the fund’s assets were allocated among three subadvisers, each of which acts independently and uses its own methodology to select investments. Currently 42% of the fund’s assets
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
are allocated to Cupps Capital Management, LLC, which employs a proprietary investment framework to evaluate the attractiveness of stocks. Approximately 39% of the fund’s assets are allocated to Goldman Sachs Asset Management, LP, which employs a bottom-up approach to stock selection. Approximately 19% of the fund’s assets are allocated to Mar Vista Investment Partners, LLC, which employs a bottom-up approach to stock selection, seeking high quality growth companies whose stocks are trading at discounts to fair value.
Economic Concerns Sparked Heightened Market Volatility
In the weeks before the fund’s inception on July 1, 2010, investors faced greater economic uncertainty as Europe was roiled by a sovereign debt crisis and inflation-fighting measures in China potentially threatened a major engine of global growth. In the United States, mixed data regarding unemployment and housing markets suggested that stubborn economic headwinds might constrain already mild economic growth. As a result, the U.S. stock market had recently posted sharp declines.
Fortunately, the fund’s launch coincided with the bottom of the market for the current cycle. Indeed, losses posted just prior to the fund’s launch proved temporary as rising corporate earnings and greater consumer spending—as well as anticipation of reduced political uncertainty and new monetary stimulus from the Federal Reserve Board— sparked a broad-based market rally, enabling the fund and the Index to advance strongly by the reporting period’s end.
Fund Added Value in Technology and Consumer Areas
The fund participated fully in the market’s gains since its inception. Relative performance was particularly strong in the information technology sector, which represents a sizeable portion of the fund’s growth-oriented benchmark.The fund benefited from overweighted exposure to technology companies as well as favorable stock selections, such as “cloud computing” specialist Salesforce.com and wireless telecommunications chipset developer QUALCOMM. The fund’s position in consumer discretionary stocks also contributed positively; internet retailer Amazon.com continued to attract consumers to the convenience and price benefits of online shopping.
4
The fund’s successes in the information technology and consumer discretionary sectors were somewhat offset by shortfalls stemming from an overweighted position in the financials sector. In addition, unfortunate stock selections in the financials sector included commodities exchange CME Group, which was hurt by concerns regarding the impact of U.S. regulatory reform on commodities traders.
Positioned for a Slow Recovery
Although we expect the U.S. economy to remain sluggish, we are optimistic about the prospects of U.S. stocks. In our judgment, rising corporate earnings could lead to an increase in mergers-and-acquisitions activity as companies begin to deploy some of their massive cash reserves. In addition, we expect earnings growth to become increasingly scarce in a slow-growth environment, potentially placing a premium on stocks of companies able to deliver consistent earnings improvement. We believe that these factors—as well as the fund’s exposure to some of the industry’s top portfolio managers—make the fund an attractive investment vehicle in today’s marketplace.
December 15, 2010
Equity funds are subject generally to market, market sector, market liquidity, issuer and investment | |
style risks, among other factors, to varying degrees, all of which are more fully described in the | |
fund’s prospectus. | |
1 | Total return includes reinvestment of dividends and any capital gains paid, and does not take |
into consideration the maximum initial sales charge in the case of Class A shares, or the | |
applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. | |
Had these charges been reflected, returns would have been lower. Past performance is no guarantee | |
of future results. Share price and investment return fluctuate such that upon redemption, fund | |
shares may be worth more or less than their original cost. Return figures provided reflect the | |
absorption of certain fund expenses by The Dreyfus Corporation pursuant to an undertaking in | |
effect through October 1, 2011, at which time it may be extended, terminated or modified. Had | |
these expenses not been absorbed, the fund’s returns would have been lower. | |
2 | SOURCE: LIPPER INC. — Reflects the monthly reinvestment of dividends and, where |
applicable, capital gain distributions.The Russell 1000 Growth Index is an unmanaged index | |
that measures the performance of those Russell 1000 companies with higher price-to-book ratios | |
and higher forecasted growth values.The index does not take into account fees and expenses to | |
which the fund is subject. Investors cannot invest directly in any index. |
The Fund 5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Select Managers Large Cap Growth Fund from July 1, 2010 to November 30, 2010 (commencement of operations). 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, 2010 | |||
Class A | Class C | Class I | |
Expenses paid per $1,000† | $ 5.77 | $ 9.22 | $ 4.62 |
Ending value (after expenses) | $1,204.00 | $1,200.00 | $1,204.80 |
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, 2010†† | |||
Class A | Class C | Class I | |
Expenses paid per $1,000††† | $ 6.33 | $ 10.10 | $ 5.06 |
Ending value (after expenses) | $1,018.80 | $1,015.04 | $1,020.05 |
† | Expenses are equal to the fund’s annualized expense ratio of 1.25% for Class A, 2.00% for Class C and 1.00% |
for Class I, multiplied by the average account value over the period, multiplied by 153/365 (to reflect the actual days | |
in the period. | |
†† | Please note that while Class A, Class C and Class I shares commenced operations on July 1, 2010, the hypothetical |
expenses paid during the period reflect projected activity for the full six months period for purposes of comparability.This | |
projection assumes that annualized expenses ratios were in effect during the period June 1, 2010 to November 30, 2010. | |
††† Expenses are equal to the fund’s annualized expense ratio of 1.25% for Class A, 2.00% for Class C and 1.00% for | |
Class I, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS |
November 30, 2010 (Unaudited) |
Common Stocks—97.2% | Shares | Value ($) | |
Consumer Discretionary—14.6% | |||
Avon Products | 2,591 | 73,999 | |
Ford Motor | 7,995 a | 127,440 | |
Johnson Controls | 2,060 | 75,066 | |
Las Vegas Sands | 950 a | 47,576 | |
Lowe’s | 7,051 | 160,058 | |
MasterCard, Cl. A | 492 | 116,619 | |
NIKE, Cl. B | 650 | 55,984 | |
Nordstrom | 1,125 | 48,150 | |
Omnicom Group | 1,015 | 46,122 | |
Paychex | 2,414 | 68,896 | |
Polo Ralph Lauren | 455 | 49,704 | |
Staples | 4,496 | 98,957 | |
Stericycle | 765 a | 56,533 | |
Visa, Cl. A | 373 | 27,545 | |
1,052,649 | |||
Consumer Staples—4.5% | |||
Anheuser-Bush, ADR | 337 | 18,515 | |
Costco Wholesale | 1,510 | 102,091 | |
PepsiCo | 1,590 | 102,762 | |
Procter & Gamble | 1,070 | 65,345 | |
Yum! Brands | 745 | 37,310 | |
326,023 | |||
Energy—7.5% | |||
Chevron | 795 | 64,371 | |
Exxon Mobil | 875 | 60,865 | |
Halliburton | 2,193 | 82,983 | |
Occidental Petroleum | 640 | 56,429 | |
Schlumberger | 2,108 | 163,033 | |
Southwestern Energy | 1,810 a | 65,522 | |
Transocean | 720 a | 48,262 | |
541,465 | |||
Financial—7.9% | |||
Berkshire Hathaway, Cl. B | 779 | a | 62,071 |
CB Richard Ellis Group, Cl. A | 4,510 | a | 86,547 |
Charles Schwab | 4,460 | 67,034 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Financial (continued) | |||
CME Group | 379 | 109,175 | |
First American Financial | 3,345 | 47,399 | |
Goldman Sachs Group | 290 | 45,281 | |
ICICI Bank, ADR | 670 | 33,527 | |
JPMorgan Chase & Co. | 770 | 28,783 | |
Northern Trust | 1,080 | 54,324 | |
Wells Fargo & Co. | 1,360 | 37,006 | |
571,147 | |||
Health Care—7.6% | |||
Baxter International | 2,409 | 116,957 | |
Gilead Sciences | 1,190 | a | 43,435 |
Illumina | 465 a | 27,956 | |
Intuitive Surgical | 280 | a | 72,881 |
Johnson & Johnson | 2,215 | 136,333 | |
Novartis, ADR | 850 | 45,398 | |
St. Jude Medical | 1,916 a | 74,130 | |
Teva Pharmaceutical Industries, ADR | 620 | 31,025 | |
548,115 | |||
Industrial—9.8% | |||
Caterpillar | 500 | 42,300 | |
Cummins | 560 | 54,387 | |
Deere & Co. | 530 | 39,591 | |
FedEx | 776 | 70,709 | |
General Dynamics | 1,001 | 66,156 | |
Goodrich | 670 | 57,466 | |
Parker Hannifin | 565 | 45,330 | |
Tata Motors, ADR | 730 | 23,878 | |
Thermo Fisher Scientific | 2,585 | a | 131,473 |
Union Pacific | 345 | 31,088 | |
United Continential Holdings | 5,315 | a | 147,119 |
709,497 |
8
Common Stocks (continued) | Shares | Value ($) |
Information Technology—30.5% | ||
Altera | 2,310 | 81,058 |
Amazon.com | 720 a | 126,288 |
Apple | 1,129 a | 351,288 |
ASML Holding (NY Shares) | 1,570 | 51,229 |
Broadcom, Cl. A | 3,535 | 157,272 |
Cisco Systems | 7,758 a | 148,643 |
Citrix Systems | 1,345 a | 89,335 |
Cognizant Technology | ||
Solutions, Cl. A | 375 a | 24,367 |
EMC | 2,145 a | 46,096 |
Equinix | 627 a | 48,655 |
Google, Cl. A | 394 a | 218,950 |
Hewlett-Packard | 1,192 | 49,981 |
Intel | 3,730 | 78,778 |
Intuit | 880 a | 39,503 |
Microsoft | 5,165 | 130,210 |
Oracle | 7,665 | 207,262 |
Salesforce.com | 1,105 a | 153,838 |
Texas Instruments | 2,730 | 86,814 |
VMware, Cl. A | 770 a | 62,770 |
Xilinx | 2,083 | 56,491 |
2,208,828 | ||
Materials—5.8% | ||
Cameco | 2,395 | 86,867 |
Cliffs Natural Resources | 455 | 31,095 |
Freeport-McMoRan Copper & Gold | 1,050 | 106,386 |
Ivanhoe Mines | 2,820 a | 68,244 |
Praxair | 845 | 77,782 |
Precision Castparts | 345 | 47,634 |
418,008 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Telecommunications—9.0% | |||
American Tower, Cl. A | 4,516 a | 228,374 | |
Crown Castle International | 2,012 a | 83,578 | |
Juniper Networks | 1,525 a | 51,880 | |
QUALCOMM | 6,071 | 283,758 | |
647,590 | |||
Total Investments (cost $6,018,924) | 97.2% | 7,023,322 | |
Cash and Receivables (Net) | 2.8% | 199,844 | |
Net Assets | 100.0% | 7,223,166 | |
ADR—American Depository Receipts | |||
a Non-income producing security. | |||
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Information Technology | 30.5 | Health Care | 7.6 |
Consumer Discretionary | 14.6 | Energy | 7.5 |
Industrial | 9.8 | Materials | 5.8 |
Telecommunications | 9.0 | Consumer Staples | 4.5 |
Financial | 7.9 | 97.2 | |
† Based on net assets. | |||
See notes to financial statements. |
10
STATEMENT OF ASSETS AND LIABILITIES |
November 30, 2010 (Unaudited) |
Cost | Value | ||
Assets ($): | |||
Investments in securities—See Statement of Investments | 6,018,924 | 7,023,322 | |
Cash | 158,215 | ||
Receivable for investment securities sold | 24,196 | ||
Dividends and interest receivable | 8,265 | ||
Deferred assets | 80,262 | ||
Due from The Dreyfus Corporation and affiliates—Note 3(c) | 7,806 | ||
7,302,066 | |||
Liabilities ($): | |||
Accrued expenses | 78,900 | ||
Net Assets ($) | 7,223,166 | ||
Composition of Net Assets ($): | |||
Paid-in capital | 6,000,000 | ||
Accumulated Investment (loss)—net | (6,034) | ||
Accumulated net realized gain (loss) on investments | 224,802 | ||
Accumulated net unrealized appreciation | |||
(depreciation) on investments | 1,004,398 | ||
Net Assets ($) | 7,223,166 | ||
Net Asset Value Per Share | |||
Class A | Class C | Class I | |
Net Assets ($) | 1,203,637 | 1,199,860 | 4,819,669 |
Shares Outstanding | 80,000 | 80,000 | 320,000 |
Net Asset Value Per Share ($) | 15.05 | 15.00 | 15.06 |
See notes to financial statements. |
The Fund 11
STATEMENT OF OPERATIONS |
From July 1, 2010 (commencement of operations) |
to November 30, 2010 (Unaudited) |
Investment Income ($): | |
Income: | |
Cash dividends (net of $162 foreign taxes withheld at source) | 28,151 |
Expenses: | |
Management fee—Note 3(a) | 21,200 |
Legal fees | 40,989 |
Registration fees | 20,899 |
Auditing fees | 18,613 |
Custodian fees—Note 3(c) | 5,920 |
Distribution fees—Note 3(b) | 3,527 |
Directors’ fees and expenses—Note 3(d) | 2,700 |
Prospectus and shareholders’ reports | 1,263 |
Loan commitment fees—Note 2 | 250 |
Shareholder servicing costs—Note 3(c) | 2,559 |
Miscellaneous | 4,282 |
Total Expenses | 122,202 |
Less—expense reimbursement from The Dreyfus | |
Corporation due to undertaking—Note 3(a) | (88,017) |
Net Expenses | 34,185 |
Investment (Loss)—Net | (6,034) |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | |
Net realized gain (loss) on investments | 224,802 |
Net unrealized appreciation (depreciation) on investments | 1,004,398 |
Net Realized and Unrealized Gain (Loss) on Investments | 1,229,200 |
Net Increase in Net Assets Resulting from Operations | 1,223,166 |
See notes to financial statements. |
12
STATEMENT OF CHANGES IN NET ASSETS |
From July 1, 2010 (commencement of operations) |
to November 30, 2010 (Unaudited) |
Operations ($): | |
Investment (loss)—net | (6,034) |
Net realized gain (loss) on investments | 224,802 |
Net unrealized appreciation | |
(depreciation) on investments | 1,004,398 |
Net Increase (Decrease) in Net Assets | |
Resulting from Operations | 1,223,166 |
Capital Stock Transactions ($): | |
Net proceeds from shares sold: | |
Class A Shares | 1,000,000 |
Class C Shares | 1,000,000 |
Class I Shares | 4,000,000 |
Increase (Decrease) in Net Assets | |
from Capital Stock Transactions | 6,000,000 |
Total Increase (Decrease) in Net Assets | 7,223,166 |
Net Assets ($): | |
Beginning of Period | — |
End of Period | 7,223,166 |
Accumulated investment (loss)—net | (6,034) |
Capital Share Transactions (Shares): | |
Class A | |
Shares sold | 80,000 |
Class C | |
Shares sold | 80,000 |
Class I | |
Shares sold | 320,000 |
See notes to financial statements. |
The Fund 13
FINANCIAL HIGHLIGHTS (Unaudited)
The following table describes the performance for each share class for the period from July 1, 2010 (commencement of operations) to November 30, 2010.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distri-butions.These figures have been derived from the fund’s financial statements.
Class A | Class C | Class I | |
Shares | Shares | Shares | |
Per Share Data ($): | |||
Net asset value, beginning of period | 12.50 | 12.50 | 12.50 |
Investment Operations: | |||
Investment (loss)—neta | (.02) | (.06) | (.00)b |
Net realized and unrealized gain (loss) on investments | 2.57 | 2.56 | 2.56 |
Total from Investment Operations | 2.55 | 2.50 | 2.56 |
Net asset value, end of period | 15.05 | 15.00 | 15.06 |
Total Return (%)c | 20.40d | 20.00d | 20.48 |
Ratios/Supplemental Data (%): | |||
Ratio of total expenses to average net assetse | 4.37 | 5.12 | 4.11 |
Ratio of net expenses to average net assetse | 1.25 | 2.00 | 1.00 |
Ratio of net investment (loss) to average net assetse | (.26) | (1.01) | (.00)f |
Portfolio Turnover Ratec | 61.23 | 61.23 | 61.23 |
Net Assets, end of period ($ x 1,000) | 1,204 | 1,200 | 4,820 |
a | Based on average shares outstanding at each month end. |
b | Amount represents less than $.01 per share. |
c | Not annualized. |
d | Exclusive of sales charge. |
e | Annualized. |
f | Amount represents less than .01%. |
See notes to financial statements. |
14
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus Select Managers Large Cap Growth Fund (the “fund”) is a separate diversified series of Strategic Funds, Inc. (the “Company”) which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering ten series, including the fund, which commenced operations on July 1, 2010.The fund’s investment objective is to seek capital appreciation.The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of NewYork Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. EACM Advisors LLC (“EACM”), a subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s portfolio allocation manager. Cupps Capital Management, LLC (“CCM”), Goldman Sachs Asset Mana gement, L.P. (GSAM”) and Mar Vista Investment Partners, LLC (“Mar Vista”), serve as the fund’s sub-investment advisers, each managing an allocated portion of the fund’s portfo-lio.The fiscal year end of the fund is May 31.
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 75 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class C and Class I. Class A shares are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I shares are sold at net asset value per share only to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments ar e allocated to each class of shares based on its relative net assets.
The Fund 15
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
As of November 30, 2010, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held 80,000 Class A, 80,000 Class C and 320,000 of Class I shares.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates.
The Company 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 investment companies that are not traded on an
16
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: fundam ental 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.
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value.This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
The Fund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of November 30, 2010, in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities— | ||||
Domestic† | 6,664,639 | — | — | 6,664,639 |
Equity Securities— | ||||
Foreign† | 358,683 | — | — | 358,683 |
† See Statement of Investments for additional detailed categorizations. |
In January 2010, FASB issued Accounting Standards Update (“ASU”) No. 2010-06 “Improving Disclosures about FairValue Measurements”. The portions of ASU No. 2010-06 which require reporting entities to prepare new disclosures surrounding amounts and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements as well as inputs and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3 have been adopted by the fund. No significant transfers between Level 1 or Level 2 fair value measure-
18
ments occurred at November 30, 2010.The remaining portion of ASU No. 2010-06 requires reporting entities to make new disclosures about information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of activity in Level 3 fair value measurements. These new and revised disclosures are required to be implemented for fiscal years beginning after December 15, 2010. Management is currently evaluating the impact that the adoption of this remaining portion of ASU No. 2010-06 may have on the fund’s financial statement disclosures.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
(c) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” in the Act.
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”).To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(e) Federal income taxes: It is the policy of the fund to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
As of and during the period ended November 30, 2010, 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.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $225 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended November 30, 2010, the fund did not borrow under the Facilities.
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions With Affiliates:
(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .75% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus has contractually agreed, until October 1, 2011, to waive receipt of its fees and/or assume the expenses of the fund 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% of the value of the fund’s average daily net assets. The expense reimbursement, pursuant to the undertaking, amounted to $88,017 during the period ended November 30, 2010.
Pursuant to separate Sub-Investment Advisory Agreements (each, a “Sub-Investment Advisory Agreement”) between Dreyfus and each of CCM, GSAM and Mar Vista, each Sub-Investment Advisory
20
Agreement will continue until November 30, 2011. Dreyfus pays CCM, GSAM and Mar Vista separate monthly fees at an annual percentage rate based on the average daily net assets of the fund under the Sub-Adviser’s management.
(b) Under the Distribution Plan (the “Plan”) adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of the average daily net assets of Class C shares. During the period ended November 30, 2010, Class C shares were charged $3,527 pursuant to the Plan.
(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding Class A and Class C shares and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (a securities dealer, financial institution or other industry professional) in respect of these services.The Distributor determines the amounts to be paid to Service Agents. During the period ended November 30, 2010, Class A and Class C shares were charged $1,177 and $1,176, respectively, pursuant to the Share holder Services Plan.
The fund compensates DreyfusTransfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended November 30, 2010, the fund was charged $15 pursuant to the transfer agency agreement, which is included in Shareholder servicing costs in the Statement of Operations.
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.
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The fund compensates The Bank of New York Mellon under a cash management agreement for performing cash management services related to fund subscriptions and redemptions. During the period ended November 30, 2010, the fund was charged $3 pursuant to the cash management agreement, which is included in Shareholder servicing costs in the Statement of Operations.
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 November 30, 2010, the fund was charged $5,920 pursuant to the custody agreement.
During the period ended November 30, 2010, the fund was charged $1,152 for services performed by the Chief Compliance Officer.
The components of “Due fromThe Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $4,491, Rule 12b-1 distribution plan fees $746, shareholder services plan fees $498, custodian fees $2,339, chief compliance officer fees $1,152 and transfer agency per account fees $15, which are offset against an expense reimbursement currently in effect in the amount of $17,047.
(d) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended November 30, 2010, amounted to $9,805,947 and $4,011,824, respectively.
22
The provisions of ASC Topic 815 “Derivatives and Hedging” require 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 agreements.The fund held no derivatives during the period ended November 30, 2010.
At November 30, 2010, accumulated net unrealized appreciation on investments was $1,004,398, consisting of $1,051,279 gross unrealized appreciation and $46,881 gross unrealized depreciation.
At November 30, 2010, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
The Fund 23
INFORMATION ABOUT THE REVIEW AND APPROVAL |
OF THE FUND’S MANAGEMENT AGREEMENT, PORTFOLIO |
ALLOCATION MANAGEMENT AGREEMENT AND |
SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) |
At a meeting of the fund’s Board of Directors held on April 26, 2010, the Board considered, through the initial renewal date of November 30, 2011, the initial approval of (a) the fund’s Management Agreement, pursuant to which Dreyfus provides the fund with investment advisory and administrative services; (b) Dreyfus’ Portfolio Allocation Management Agreement (the “Allocation Agreement”) with EACM, pursuant to which EACM is responsible for evaluating and recommending sub-advisers to provide the fund with day-to-day portfolio management services, recommending the percentage of fund assets to be allocated to each sub-adviser, monitoring and evaluating the performance of the sub-advisers, and recommending whether a sub-adviser should be terminated; and (c) Dreyfus’ separate Sub-Investment Advisory Agreements (the “Sub-Advisory Agreements” and, collectively with the Management Ag reement and Allocation Agreement, the “Agreements”) with each of Cupps Capital Management, LLC, Goldman Sachs Asset Management, L.P., and MarVista Investment Partners, LLC (collectively, the “Sub-Advisers”), pursuant to which each Sub-Adviser would serve as initial sub-investment adviser and provide day-to-day management of a percentage 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 Dreyfus. In considering the initial approval of the Agreements, the Board considered did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services to be Provided to the Fund. The Board members previously had been provided with information and presentations from representatives of Dreyfus regarding the nature, extent and quality of the services provided to funds in the Dreyfus fund complex, and there had been no material changes in this information.The Board member discussed the nature, extent, and quality of the services to be provided to the fund pursuant to the
24
Agreements.The Board had previously considered these matters with respect to Cupps. Representatives of Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex and Dreyfus’ corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each distribution channel, including the distribution channel(s) for the fund.
The Board members also considered Dreyfus’, EACM’s, and each Sub-Adviser’s research and portfolio management capabilities, EACM’s experience and reputation in multi-manager equity investment programs, and each Sub-Advisers experience in managing U.S. equity portfolios.The Board also noted that Dreyfus also provide 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 Dreyfus’ extensive administrative, accounting, and compliance infrastructure.
Comparative Analysis of the Fund’s Proposed Management Fee and Expense Ratio. As the fund had not yet commenced operations, the Board members were not able to review fund performance or an actual expense ratio. Representatives of Dreyfus and EACM discussed each Sub-Adviser’s resources, experience, investment style, and portfolio management personnel in respect of the portion of the fund’s assets to be managed.
The Board members discussed the fund’s management fee, portfolio allocation fee, and sub-advisory fees, and compared the management fee to the management and administrative fees for the funds in the Lipper Large Cap Growth Funds category. Dreyfus representatives noted that the proposed contractual management fee for the fund was lower than the average and median management fee for all funds reported in the Lipper Large Cap Growth Funds category. They also noted that the portfolio allocation and sub-advisory fees were payable by Dreyfus. Dreyfus had also advised the Board that Dreyfus would
The Fund 25
INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND’S |
MANAGEMENT AGREEMENT, PORTFOLIO ALLOCATION |
MANAGEMENT AGREEMENT AND SUB-INVESTMENT |
ADVISORY AGREEMENTS (Unaudited) (continued) |
contractually agree, until October 1, 2011, to waive receipt of its fees and/or assume the expenses of the fund so that the direct expenses of none of the fund’s share classes (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings, and extraordinary expenses) exceed 1.00%.
Dreyfus provided the Board members with the management or investment advisory fees paid to Dreyfus or its affiliates or to the respective Sub-Advisers by funds in the same Lipper category, or by separate accounts and/or other types of client portfolios managed by Dreyfus, EACM, or one of the Sub-Advisers s considered to have similar investment strategies and policies as the fund (the “Similar Accounts”), and explained the nature of the Similar Accounts. Representatives of Dreyfus noted that neither Dreyfus nor EACM manage any institutional separate accounts considered to have similar investment strategies and policies as the fund.
Analysis of Profitability and Economies of Scale.As the fund had not yet commenced operations, Dreyfus’ representatives did not have information on expenses allocated to and profit to be received by Dreyfus to provide.The Board previously had been provided with information prepared by an independent consulting firm regarding Dreyfus’s approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex.The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund. The Board members previously had considered potential benefits to Dreyfus and sub-investment advisers from acting in their respective capacities for a fund, including the possibility of soft dollar arrangements in the future with respect to trading the fund’s portfolio.The Board also considered the potential benefit to BNY Mellon with EACM acting as portfolio allocation manager to the fund. The costs of the services to be provided and profits to be realized by Dreyfus and BNY Mellon and its affiliates from the relationship with the fund in light of the relevant circumstances for the fund, and the extent
26
to which economies of scale would be realized as the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investor were not considered as the fund had not commenced operations. Since Dreyfus, and not the fund, will pay EACM and each Sub-Adviser pursuant to the Allocation Agreement and each Sub-Investment Advisory Agreement, respectively, the Board did not consider EACM’s and each Sub-Adviser’s profitability to be relevant.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the Agreements. 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 to be provided by Dreyfus, EACM, and the Sub-Advisers are adequate and appropriate. The Board considered Dreyfus’ overall equity management experience, EACM experience and reputation with respect to multi-manager strategies, EACM’s recommendation to engage the Sub-Advisers, and each Sub-Adviser’s experience and record in managing domestic equity assets.
The Board concluded that the fee to be paid to Dreyfus by the fund was reasonable in light of the services to be provided, comparative expense and advisory fee information, and benefits anticipated to be derived by Dreyfus, BNY Mellon, or EACM from its relationship with the fund, and that the separate fees to be paid by Dreyfus to EACM and to the Sub-Advisers are reasonable and appropriate.
The Board members considered these conclusions and determinations, and without any one factor being dispositive, determined that approval of the Agreements was in the best interests of the fund and its prospective shareholders.
The Fund 27
NOTES
Dreyfus |
Select Managers |
Small Cap Growth Fund |
SEMIANNUAL REPORT November 30, 2010
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.
Contents | |
THE FUND | |
2 | A Letter from the Chairman and CEO |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
13 | Statement of Assets and Liabilities |
14 | Statement of Operations |
15 | Statement of Changes in Net Assets |
16 | Financial Highlights |
17 | Notes to Financial Statements |
26 | Information About the Review and Approval of the Fund’s Management Agreement, Portfolio Allocation Management Agreement, and Sub-Invesment Advisory Agreements |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus |
Select Managers |
Small Cap Growth Fund |
The Fund |
A LETTER FROM THE CHAIRMAN AND CEO
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Select Managers Small Cap Growth Fund, covering the period since the fund’s inception on July 1, 2010, through November 30, 2010.
Stocks throughout the global markets delivered respectable returns during the reporting period, despite periodic bouts of market volatility stemming from economic uncertainty and events. Although GDP growth in most countries was positive throughout the reporting period, the global economic recovery has been milder than historical averages, in particular in the U.S. Most notably, heavy sovereign debt burdens recently renewed credit concerns in Europe, effectively barring some governments from adopting more stimulative fiscal policies. However, robust demand from the world’s emerging markets has taken up some of the slack, supporting corporate earnings and stock prices.
We are cautiously optimistic regarding global economic and market prospects in 2011. Global expansion should gain a degree of momentum, led by financially strong emerging markets countries, while “debt hangover” countries in the developed world may face continued economic challenges. Monetary policy remains stimulative in most markets, and inflation-adjusted interest rates and inflation remain low. So is your portfolio positioned accordingly given these recent global economic events?Talk with your financial advisor, who can help you evaluate your portfolio investments within the new global economic framework to help meet your individual investment needs and future capital goals.
For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
Thank you for your continued confidence and support.
Jonathan R. Baum
Chairman and Chief Executive Officer
The Dreyfus Corporation
December 15, 2010
2
DISCUSSION OF FUND PERFORMANCE
For the period of July 1, 2010, through November 30, 2010, as provided by Keith L. Stransky and Robert B. Mayerick, Portfolio Allocation Managers, EACM Advisors LLC
Market and Fund Performance Overview
For the period from the fund’s inception on July 1, 2010 and the end of its semiannual reporting period on November 30, 2010, Dreyfus Select Managers Small Cap Growth Fund’s Class A shares produced a total return of 23.12%, Class C shares returned 22.72% and Class I shares returned 23.28/%.1 In comparison, the total return of the Russell 2000 Growth Index (the “Index”), the fund’s benchmark, was 23.75% for the same period.2
Small-cap stocks generally encountered heightened volatility due to economic concerns, but rising corporate earnings and the prospect of further easing of U.S. monetary policy helped the Index end the reporting period with substantial gains. The fund produced slightly lower returns than its benchmark, mainly resulting from shortfalls in the energy, materials and consumer discretionary sectors.
The Fund’s Investment Approach
The fund seeks long-term capital appreciation.To pursue its goal, the fund normally invests at least 80% of its assets in the stocks of small-cap companies.
The fund uses a “multi-manager” approach by selecting one or more subadvisers to manage its assets.We seek subadvisers that complement one another’s styles of investing.We monitor and evaluate the performance of the subadvisers and recommend any changes to Dreyfus and the fund’s board.
As of November 30, 2010, the fund’s assets were allocated among three subadvisers, each of which acts independently and uses its own methodology to select investments. Currently 39% of the fund’s assets are allocated to Riverbridge Partners, LLC, which employs a bottom-up approach to stock selection and focuses on companies that are building their earnings power and intrinsic value over long periods of time. Approximately 31% of the fund’s assets are allocated to Geneva
TheFund 3
DISCUSSION OF FUND PERFORMANCE (continued)
Capital Management Ltd., which employs bottom-up fundamental analysis supplemented by top-down considerations to identify companies that perform well over long periods of time. Approximately 30% of the fund’s assets are allocated to Cupps Capital Management, LLC, which employs a proprietary investment framework to evaluate the attractiveness of stocks.
Economic Concerns Sparked Heightened Market Volatility
In the weeks before the fund’s inception on July 1, 2010, investors faced greater economic uncertainty as Europe was roiled by a sovereign debt crisis. In the United States, mixed data regarding unemployment and housing markets suggested that stubborn economic headwinds might constrain already mild growth. As a result, the U.S. stock market had recently posted sharp declines.
Fortunately, the fund’s launch coincided with the bottom of the market for the current cycle. Indeed, losses posted just prior to the fund’s launch proved temporary as rising corporate earnings and greater consumer spending—as well as anticipation of reduced political uncertainty and new monetary stimulus from the Federal Reserve Board—sparked a broad-based market rally, enabling the fund and the Index to advance strongly by the reporting period’s end.
Fund Added Value in Technology and Health Care Areas
The fund participated to a significant degree in the market rally.The fund achieved positive relative performance through overweighted exposure to the information technology sector.Winners included networking equipment provider Riverbed Technology, which more than doubled in value after announcing record quarterly profits. Server solutions developer Netezza nearly doubled in value when it received an acquisition offer from industry giant International Business Machines. In the health care sector, food and animal safety testing company Neogen advanced when it increased the earnings guidance it provides to analysts. Dialysis devices maker NxStage Medical also raised its earnings guidance, and the stock responded accordingly.
However, the fund’s relative performance was hurt by underweighted exposure to the energy sector, which was the benchmark’s strongest-performing sector during the reporting period as oil prices climbed. Similarly, an underweighted position in the materials sector prevented
4
the fund from benefiting more fully from the effects of rising industrial and agricultural commodity prices.The fund’s results in the consumer discretionary sector were undermined by a handful of for-profit education companies. American Public Education, Capella Education Co. and Grand Canyon Education encountered increased regulatory scrutiny that investors worried might endanger future tuition funding.
Positioned for a Slow Recovery
Although we expect the U.S. economy to remain sluggish, we are optimistic about the prospects of U.S. stocks. In our judgment, rising corporate earnings could lead to greater mergers-and-acquisitions activity, potentially benefiting small-cap stocks as larger companies begin to deploy some of their massive cash reserves. In addition, we expect earnings growth to become increasingly scarce in a slow-growth environment, potentially placing a premium on stocks of companies able to deliver consistent earnings improvement.We believe that these factors—as well as the fund’s exposure to some of the industry’s top portfolio managers—make the fund an attractive investment vehicle in today’s marketplace.
December 15, 2010
Please note, the position in any security highlighted with italicized typeface was sold during the | |
reporting period. | |
Equity funds are subject generally to market, market sector, market liquidity, issuer and investment | |
style risks, among other factors, to varying degrees, all of which are more fully described in the | |
fund’s prospectus. | |
The prices of small company stocks tend to be more volatile than the prices of large company | |
stocks, mainly because these companies have less established and more volatile earnings histories. | |
They also tend to be less liquid than larger company stocks. | |
1 | Total return includes reinvestment of dividends and any capital gains paid, and does not take into |
consideration the maximum initial sales charge in the case of Class A shares, or the applicable | |
contingent deferred sales charge imposed on redemptions in the case of Class C shares. Had these | |
charges been reflected, returns would have been lower. Past performance is no guarantee of future | |
results. Share price and investment return fluctuate such that upon redemption, fund shares may be | |
worth more or less than their original cost. Return figures provided reflect the absorption of certain | |
fund expenses by The Dreyfus Corporation pursuant to an undertaking in effect through October | |
1, 2011, 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. — The Russell 2000 Growth Index is an unmanaged index, |
which measures the performance of those Russell 2000 companies with higher price-to-book ratios | |
and higher forecasted growth values.The total return figure cited for this index assumes change in | |
security prices and reinvestment of dividends, but does not reflect the costs of managing a mutual | |
fund. Investors cannot invest directly in any index. |
TheFund 5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Select Managers Small Cap Growth Fund from July 1, 2010 (commencement of operations) to November 30, 2010. 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, 2010
Class A | Class C | Class I | |
Expenses paid per $1,000† | $ 6.55 | $ 10.04 | $ 5.38 |
Ending value (after expenses) | $1,231.20 | $1,227.20 | $1,232.80 |
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, 2010
Class A | Class C | Class I | |
Expenses paid per $1,000††† | $ 7.08 | $ 10.86 | $ 5.82 |
Ending value (after expenses) | $1,018.05 | $1,014.29 | $1,019.30 |
† | Expenses are equal to the fund’s annualized expense ratio of 1.40% for Class A, 2.15% for Class C and 1.15% |
for Class I, multiplied by the average account value over the period, multiplied by 153/365 (to reflect the actual days | |
in the period). | |
†† | Please note that while Class A, Class C and Class I shares commenced operations on July 1, 2010, the hypothetical |
expenses paid during the period reflect projected activity for the full six month period for purposes of comparability.This | |
projection assumes that annualized expenses ratios were in effect during the period June 1, 2010 to November 30, 2010. | |
††† Expenses are equal to the fund’s annualized expense ratio of 1.40% for Class A, 2.15% for Class C and 1.15% | |
for Class I, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half | |
year period). |
6
STATEMENT OF INVESTMENTS
November 30, 2010 (Unaudited)
Common Stocks—97.5% | Shares | Value ($) |
Consumer Discretionary—15.4% | ||
Allegiant Travel | 2,715 | 135,560 |
BJ’s Restaurants | 2,258 a | 82,756 |
Capella Education | 3,430 a | 187,930 |
Cheesecake Factory | 9,175 a | 292,407 |
China Lodging Group, ADS | 2,996 | 71,275 |
China Yuchai International | 2,800 | 70,588 |
Country Style Cooking | ||
Restaurant Chain Co., ADR | 1,117 | 24,540 |
CROCS | 8,720 a | 152,992 |
Dick’s Sporting Goods | 3,930 a | 134,445 |
DTS | 3,970 a | 186,352 |
FactSet Research Systems | 1,500 | 133,005 |
G-III Apparel Group | 1,210 a | 33,118 |
Grand Canyon Education | 11,651 a | 221,835 |
hhgregg | 5,955 a | 149,292 |
Hibbett Sports | 5,560 a | 190,430 |
Home Inns & Hotels Management, ADR | 2,250 a | 107,123 |
LKQ | 18,260 a | 393,960 |
Lululemon Athletica | 2,147 a | 115,122 |
Mobile Mini | 5,480 a | 99,024 |
MWI Veterinary Supply | 1,910 a | 116,701 |
Tempur-Pedic International | 1,623 a | 56,984 |
Tenneco | 1,689 a | 61,581 |
Tesla Motors | 8,167 | 288,540 |
Ulta Salon, Cosmetics & Fragrance | 14,816 a | 517,819 |
Vera Bradley | 3,542 | 115,965 |
Warnaco Group | 1,204 a | 64,835 |
Westport Innovations | 3,791 a | 68,807 |
WMS Industries | 3,990 a | 176,957 |
4,249,943 | ||
Consumer Staples—2.9% | ||
Fresh Market | 3,004 | 108,895 |
Green Mountain Coffee Roasters | 3,123 a | 115,801 |
Panera Bread, Cl. A | 1,245 a | 124,799 |
TreeHouse Foods | 2,900 a | 144,072 |
United Natural Foods | 8,000 a | 299,520 |
793,087 |
TheFund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) |
Energy—2.5% | ||
Brigham Exploration | 7,670 a | 192,901 |
Dril-Quip | 2,030 a | 157,203 |
Northern Oil and Gas | 2,855 a | 65,237 |
SM Energy | 3,170 | 157,517 |
Whiting Petroleum | 1,110 a | 122,156 |
695,014 | ||
Financial—2.9% | ||
Affiliated Managers Group | 1,480 a | 129,367 |
Cass Information Systems | 4,205 | 148,689 |
Eaton Vance | 3,440 | 102,237 |
Financial Engines | 7,305 | 123,601 |
Mesabi Trust | 875 | 41,361 |
Portfolio Recovery Associates | 4,025 a | 255,064 |
800,319 | ||
Health Care—14.0% | ||
Abaxis | 5,185 a | 139,995 |
AngioDynamics | 13,710 a | 191,529 |
Bio-Reference Laboratories | 6,950 a | 145,741 |
Cepheid | 27,087 a | 533,343 |
Dexcom | 4,861 a | 54,808 |
Exact Sciences | 3,785 a | 22,483 |
Haemonetics | 1,590 a | 93,476 |
HeartWare International | 1,358 a | 124,882 |
IDEXX Laboratories | 1,610 a | 103,378 |
Incyte | 5,323 a | 77,237 |
Insulet | 122 a | 1,656 |
IPC The Hospitalist | 4,575 a | 148,322 |
Masimo | 3,171 | 97,857 |
Mednax | 4,800 a | 293,760 |
MEDTOX Scientific | 3,765 | 43,674 |
Meridian Bioscience | 6,920 | 153,762 |
Nektar Therapeutics | 3,214 a | 40,721 |
Neogen | 13,825 a | 513,599 |
NuVasive | 2,825 a | 65,992 |
NxStage Medical | 10,617 a | 229,752 |
Onyx Pharmaceuticals | 2,400 a | 70,680 |
8
Common Stocks (continued) | Shares | Value ($) |
Health Care (continued) | ||
Salix Pharmaceuticals | 1,960 a | 87,514 |
SXC Health Solutions | 4,160 a | 159,536 |
Techne | 4,875 | 292,841 |
Thoratec | 1,616 a | 41,135 |
USANA Health Sciences | 1,665 a | 70,130 |
Volcano | 1,959 a | 52,011 |
3,849,814 | ||
Industrial—17.4% | ||
Acuity Brands | 3,685 | 198,474 |
Aerovironment | 3,950 a | 97,565 |
Beacon Roofing Supply | 11,885 a | 204,303 |
Chemed | 6,500 | 396,110 |
Cognex | 865 a | 41,295 |
CoStar Group | 2,715 a | 143,189 |
Donaldson | 2,695 | 146,312 |
Dynamex | 1,125 a | 27,169 |
Echo Global Logistics | 3,965 a | 45,399 |
Esterline Technologies | 570 a | 33,562 |
Forrester Research | 5,590 a | 193,693 |
Forward Air | 4,425 | 121,776 |
Genesee & Wyoming, Cl. A | 4,345 a | 206,344 |
Hexcel | 2,453 a | 42,069 |
HMS Holdings | 2,845 a | 179,263 |
iRobot | 3,214 a | 65,244 |
Knight Transportation | 3,855 | 74,324 |
Marten Transport | 6,365 | 136,848 |
MAXIMUS | 3,730 | 226,411 |
Middleby | 3,618 a | 291,141 |
Monro Muffler Brake | 4,540 | 224,458 |
Polypore International | 4,726 a | 150,192 |
Resources Connection | 11,680 | 195,406 |
Ritchie Brothers Auctioneers | 8,340 | 166,967 |
Rollins | 15,275 | 412,731 |
SuccessFactors | 10,989 a | 331,538 |
Triumph Group | 2,536 | 213,354 |
Universal Technical Institute | 3,765 | 77,973 |
TheFund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) |
Industrial (continued) | ||
US Airways Group | 14,174 a | 158,182 |
4,801,292 | ||
Information Technology—32.8% | ||
AboveNet | 495 a | 29,057 |
Allscripts Healthcare Solutions | 12,290 a | 215,689 |
American Superconductor | 2,265 a | 75,379 |
ANSYS | 4,960 a | 240,560 |
athenahealth | 1,314 a | 53,887 |
Badger Meter | 3,200 | 135,744 |
Blackboard | 3,665 a | 152,281 |
Bottomline Technologies | 7,710 a | 145,950 |
Cabot Microelectronics | 3,875 a | 152,946 |
Cognex | 5,349 | 149,558 |
comScore | 2,105 a | 46,310 |
Concur Technologies | 5,945 a | 304,443 |
Constant Contact | 9,475 a | 242,465 |
DealerTrack Holdings | 8,230 a | 157,193 |
Digi International | 19,210 a | 184,416 |
Digital River | 3,480 a | 128,134 |
Dionex | 1,830 a | 166,841 |
Echelon | 9,465 a | 90,201 |
FARO Technologies | 4,280 a | 111,152 |
Fortinet | 4,932 | 157,183 |
Gentex | 16,300 | 342,137 |
Guidance Software | 9,060 a | 55,538 |
Imax | 3,031 a | 82,474 |
Innerworkings | 17,690 a | 109,147 |
Interactive Intelligence | 6,475 a | 175,084 |
MakeMyTrip | 872 | 24,782 |
Mellanox Technologies | 4,789 a | 114,122 |
MercadoLibre | 1,045 a | 66,483 |
MIPS Technologies | 10,611 a | 144,203 |
Nanometrics | 5,308 a | 62,900 |
Napco Security Technologies | 6,895 a | 11,377 |
National Instruments | 10,325 | 352,289 |
10
Common Stocks (continued) | Shares | Value ($) |
Information Technology (continued) | ||
NetLogic Microsystems | 2,632 a | 82,118 |
NetScout Systems | 1,160 a | 25,624 |
NetSuite | 11,455 a | 284,313 |
OPNET Technologies | 4,213 | 102,460 |
PAREXEL International | 6,220 a | 109,223 |
Pegasystems | 3,610 | 111,730 |
Power Integrations | 6,400 | 257,856 |
QLIK Technologies | 5,495 | 129,517 |
Quality Systems | 4,125 | 266,021 |
Quantum | 26,995 a | 97,992 |
Rackspace Hosting | 8,419 a | 245,582 |
RightNow Technologies | 3,525 a | 89,288 |
Riverbed Technology | 8,180 a | 277,384 |
Semtech | 14,175 a | 331,553 |
STEC | 5,040 a | 85,655 |
Stratasys | 9,104 a | 307,898 |
Telvent GIT | 4,390 a | 104,745 |
Teradyne | 14,762 a | 175,077 |
Terremark Worldwide | 7,878 a | 94,260 |
Tyler Technologies | 7,675 a | 156,647 |
Ultimate Software Group | 16,433 a | 720,915 |
Veeco Instruments | 5,244 a | 230,631 |
Verint Systems | 6,775 a | 222,897 |
Vocus | 960 a | 23,501 |
9,012,812 | ||
Materials—3.6% | ||
Balchem | 6,945 | 215,017 |
CIRCOR International | 3,025 | 119,488 |
Ferro | 5,851 a | 83,494 |
Kaydon | 4,185 | 146,391 |
Landec | 12,325 a | 77,154 |
RBC Bearings | 4,100 a | 151,249 |
Rockwood Holdings | 3,332 a | 127,182 |
Zoltek | 8,560 a | 77,810 |
997,785 |
TheFund 11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) |
Telecommunications—3.8% | ||
Acme Packet | 3,705 a | 181,471 |
Aruba Networks | 6,948 a | 147,298 |
Finisar | 9,470 a | 181,066 |
IPG Photonics | 10,643 a | 305,028 |
Ixia | 3,826 a | 60,680 |
Logmein | 2,113 a | 92,528 |
RF Micro Devices | 9,953 a | 69,771 |
1,037,842 | ||
Utilities—.4% | ||
EnerNOC | 4,535 a | 111,244 |
Total Investments (cost $24,436,103) | 95.7% | 26,349,152 |
Cash and Receivables (Net) | 4.3% | 1,177,871 |
Net Assets | 100.0% | 27,527,023 |
ADR—American Depository Receipts |
ADS—American Depository Shares |
a Non-income producing security. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Information Technology | 32.8 | Financial | 2.9 |
Industrial | 17.4 | Consumer Staples | 2.9 |
Consumer Discretionary | 15.4 | Energy | 2.5 |
Health Care | 14.0 | Utilities | .4 |
Telecommunications | 3.8 | ||
Materials | 3.6 | 95.7 |
† Based on net assets. |
See notes to financial statements. |
12
STATEMENT OF ASSETS AND LIABILITIES
November 30, 2010 (Unaudited)
Cost | Value | |
Assets ($): | ||
Investments in securities—See Statement of Investments | 24,436,103 | 26,349,152 |
Cash | 1,597,998 | |
Receivable for investment securities sold | 143,179 | |
Receivable for shares of Common Stock subscribed | 41,200 | |
Dividends receivable | 10,285 | |
Deferred assets | 75,005 | |
Due from The Dreyfus Corporation and affiliates—Note 3(c) | 245 | |
28,217,064 | ||
Liabilities ($): | ||
Payable for investment securities purchased | 599,087 | |
Accrued expenses | 90,954 | |
690,041 | ||
Net Assets ($) | 27,527,023 | |
Composition of Net Assets ($): | ||
Paid-in capital | 25,612,073 | |
Accumulated Investment (loss)—net | (35,160) | |
Accumulated net realized gain (loss) on investments | 37,061 | |
Accumulated net unrealized appreciation | ||
(depreciation) on investments | 1,913,049 | |
Net Assets ($) | 27,527,023 |
Net Asset Value Per Share | |||
Class A | Class C | Class I | |
Net Assets ($) | 1,273,942 | 1,227,252 | 25,025,829 |
Shares Outstanding | 82,782 | 80,000 | 1,624,358 |
Net Asset Value Per Share ($) | 15.39 | 15.34 | 15.41 |
See notes to financial statements. |
TheFund 13
STATEMENT OF OPERATIONS
From July 1, 2010 (commencement of operations)
to November 30, 2010 (Unaudited)
Investment Income ($): | |
Income: | |
Cash dividends (net of $158 foreign taxes withheld at source) | 19,400 |
Expenses: | |
Management fee—Note 3(a) | 38,169 |
Legal fees | 40,937 |
Auditing fees | 25,405 |
Registration fees | 24,571 |
Directors’ fees and expenses—Note 3(d) | 18,030 |
Custodian fees—Note 3(c) | 13,004 |
Distribution fees—Note 3(b) | 3,464 |
Shareholder servicing costs—Note 3(c) | 2,645 |
Prospectus and shareholders’ reports | 2,423 |
Loan commitment fees—Note 2 | 35 |
Miscellaneous | 3,606 |
Total Expenses | 172,289 |
Less—expense reimbursement from The Dreyfus | |
Corporation due to undertaking—Note 3(a) | (117,729) |
Net Expenses | 54,560 |
Investment (Loss)—Net | (35,160) |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | |
Net realized gain (loss) on investments | 37,061 |
Net unrealized appreciation (depreciation) on investments | 1,913,049 |
Net Realized and Unrealized Gain (Loss) on Investments | 1,950,110 |
Net Increase in Net Assets Resulting from Operations | 1,914,950 |
See notes to financial statements. |
14
STATEMENT OF CHANGES IN NET ASSETS
From July 1, 2010 (commencement of operations)
to November 30, 2010 (Unaudited)
Operations ($): | |
Investment (loss)—net | (35,160) |
Net realized gain (loss) on investments | 37,061 |
Net unrealized appreciation (depreciation) on investments | 1,913,049 |
Net Increase (Decrease) in Net Assets | |
Resulting from Operations | 1,914,950 |
Capital Stock Transactions ($): | |
Net proceeds from shares sold: | |
Class A Shares | 1,040,694 |
Class C Shares | 1,000,000 |
Class I Shares | 23,611,553 |
Cost of shares redeemed: | |
Class I Shares | (40,174) |
Increase (Decrease) in Net Assets | |
from Capital Stock Transactions | 25,612,073 |
Total Increase (Decrease) in Net Assets | 27,527,023 |
Net Assets ($): | |
Beginning of Period | — |
End of Period | 27,527,023 |
Accumulated investment (loss)—net | (35,160) |
Capital Share Transactions (Shares): | |
Class A | |
Shares sold | 82,782 |
Class C | |
Shares sold | 80,000 |
Class I | |
Shares sold | 1,627,042 |
Shares redeemed | (2,684) |
Net Increase (Decrease) in Shares Outstanding | 1,624,358 |
See notes to financial statements. |
TheFund 15
FINANCIAL HIGHLIGHTS (Unaudited)
The following table describes the performance for each share class for the period from July 1, 2010 (commencement of operations) to November 30, 2010.All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Class A | Class C | Class I | |
Shares | Shares | Shares | |
Per Share Data ($): | |||
Net asset value, beginning of period | 12.50 | 12.50 | 12.50 |
Investment Operations: | |||
Investment (loss)—neta | (.06) | (.10) | (.04) |
Net realized and unrealized | |||
gain (loss) on investments | 2.95 | 2.94 | 2.95 |
Total from Investment Operations | 2.89 | 2.84 | 2.91 |
Net asset value, end of period | 15.39 | 15.34 | 15.41 |
Total Return (%)b | 23.12c | 22.72c | 23.28 |
Ratios/Supplemental Data (%): | |||
Ratio of total expenses to average net assetsd | 4.72 | 5.47 | 3.77 |
Ratio of net expenses to average net assetsd | 1.40 | 2.15 | 1.15 |
Ratio of net investment (loss) | |||
to average net assetsd | (1.05) | (1.81) | (.66) |
Portfolio Turnover Rateb | 28.61 | 28.61 | 28.61 |
Net Assets, end of period ($ x 1,000) | 1,274 | 1,227 | 25,026 |
a | Based on average shares outstanding at each month end. |
b | Not annualized. |
c | Exclusive of sales charge. |
d | Annualized. |
See notes to financial statements.
16
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus Select Managers Small Cap Growth Fund (the “fund”) is a separate diversified series of Strategic Funds, Inc. (the “Company”) which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering ten series, including the fund, which commenced operations on July 1, 2010.The fund’s investment objective is to seek capital appreciation.The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of NewYork Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. EACM Advisors LLC (“EACM”), a subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s portfolio allocation manager. Riverbridge Partners, LLC (“Riverbridge”), Geneva Capital Manag ement Ltd. (“Geneva”) and Cupps Capital Management, LLC (“CCM”), serve as the fund’s sub-investment advisers, each managing an allocated portion of the fund’s portfolio.The fiscal year end of the fund is May 31.
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 75 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class C and Class I. Class A shares are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (���CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I shares are sold at net asset value per share only to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments ar e allocated to each class of shares based on its relative net assets.
TheFund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
As of November 30, 2010, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held 80,000 Class A, 80,000 Class C and 320,000 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates.
The Company 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 investment companies that are not traded on an exchange
18
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 anal ytical 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.
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value.This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
TheFund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used as of November 30, 2010, in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities— | ||||
Domestic† | 25,446,246 | — | — | 25,446,246 |
Equity Securities— | ||||
Foreign† | 902,906 | — | — | 902,906 |
† See Statement of Investments for industry classification. |
In January 2010, FASB issued Accounting Standards Update (“ASU”) No. 2010-06 “Improving Disclosures about FairValue Measurements”. The portions of ASU No. 2010-06 which require reporting entities to prepare new disclosures surrounding amounts and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements as well as inputs and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3 have been adopted by the fund. No significant transfers between Level 1 or Level 2 fair value measurements occurred
20
at November 30, 2010. The remaining portion of ASU No. 2010-06 requires reporting entities to make new disclosures about information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of activity in Level 3 fair value measurements. These new and revised disclosures are required to be implemented for fiscal years beginning after December 15, 2010. Management is currently evaluating the impact that the adoption of this remaining portion of ASU No. 2010-06 may have on the fund’s financial statement disclosures.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
(c) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” in the Act.
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”).To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(e) Federal income taxes: It is the policy of the fund to 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.
TheFund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
As of and during the period ended November 30, 2010, 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.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $225 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended November 30, 2010, 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 .90% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus has contractually agreed, until October 1, 2011, to waive receipt of its fees and/or assume the expenses of the fund 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 $117,729 during the period ended November 30, 2010.
22
Pursuant to separate Sub-Investment Advisory Agreements (each, a “Sub-Investment Advisory Agreement”) between Dreyfus and each of Riverbridge, Geneva and CCM, each Sub-Investment Advisory Agreement will continue until November 30, 2011. Dreyfus pays Riverbridge, Geneva and CCM separate monthly fees at an annual percentage rate based on the average daily net assets of the fund under the Sub-Adviser’s management.
(b) Under the Distribution Plan (the “Plan”) adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of the average daily net assets of Class C shares. During the period ended November 30, 2010, Class C shares were charged $3,464 pursuant to the Plan.
(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services.The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding Class A and Class C shares and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (a securities dealer, financial institution or other industry professional) in respect of these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended November 30, 2010, Class A and Class C shares were charged $1,169 and $1,155, respectively, pursuant to the Share holder 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, 2010, the fund was charged
TheFund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
$135 pursuant to the transfer agency agreement, which is included in Shareholder servicing costs in the Statement of Operations.
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.
The fund compensates The Bank of New York Mellon under a cash management agreement for performing cash management services related to fund subscriptions and redemptions. During the period ended November 30, 2010, the fund was charged $6 pursuant to the cash management agreement, which is included in Shareholder servicing costs in the Statement of Operations.
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 November 30, 2010, the fund was charged $13,004 pursuant to the custody agreement.
During the period ended November 30, 2010, the fund was charged $1,152 for services performed by the Chief Compliance Officer.
The components of “Due from The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $17,223, Rule 12b-1 distribution plan fees $746, shareholder services plan fees $506, custodian fees $5,600, chief compliance officer fees $1,152 and transfer agency per account fees $135, which are offset against an expense reimbursement currently in effect in the amount of $25,607.
(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.
24
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended November 30, 2010, amounted to $27,601,824 and $3,202,782, respectively.
The provisions of ASC Topic 815 “Derivatives and Hedging” require 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 agreements.The fund held no derivatives during the period ended November 30, 2010.
At November 30, 2010, accumulated net unrealized appreciation on investments was $1,913,049, consisting of $2,091,241 gross unrealized appreciation and $178,192 gross unrealized depreciation.
At November 30, 2010, 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).
TheFund 25
INFORMATION ABOUT THE REVIEW AND APPROVAL OF
THE FUND’S MANAGEMENT AGREEMENT, PORTFOLIO
ALLOCATION MANAGEMENT AGREEMENT, AND
SUB-INVESMENT ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Directors held on April 26, 2010, the Board considered, through the initial renewal date of November 30, 2011, the initial approval of (a) the fund’s Management Agreement, pursuant to which Dreyfus provides the fund with investment advisory and administrative services; (b) Dreyfus’ Portfolio Allocation Management Agreement (the “Allocation Agreement”) with EACM, pursuant to which EACM is responsible for evaluating and recommending sub-advisers to provide the fund with day-to-day portfolio management services, recommending the percentage of fund assets to be allocated to each sub-adviser, monitoring and evaluating the performance of the sub-advisers, and recommending whether a sub-adviser should be terminated; and (c) Dreyfus’ separate Sub-Investment Advisory Agreements (the “Sub-Advisory Agreements” and, collectively with the Management Ag reement and Allocation Agreement, the “Agreements”) with each of Riverbridge Partners, LLC (“Riverbridge”) and Geneva Capital Management Ltd (“Geneva”).At a meeting of the fund’s Board of Directors held on June 24, 2010, the Board also considered, through the initial renewal date of November 30, 2011, the initial approval of a Sub-Investment Advisory Agreement with Cupps Capital Management, LLC (“Cupps” and, collectively with Riverbridge and Geneva, the “Sub-Advisers”). Pursuant to each Sub-Advisory Agreement, each Sub-Adviser would serve as initial sub-investment adviser and provide day-to-day management of a percentage 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 Dreyfus. In considering the initi al approval of the Agreements, the Board considered did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered. Consideration of Cupps as Sub-Adviser was done in part by reference to the Board’s previous consideration of Cupps in connection with approval as a sub-investment adviser for another fund overseen by the Board.
26
Analysis of Nature, Extent, and Quality of Services to be Provided to the Fund.The Board members previously had been provided with information and presentations from representatives of Dreyfus regarding the nature, extent and quality of the services provided to funds in the Dreyfus fund complex, and there had been no material changes in this information. For Riverbridge and Geneva, the Board member discussed the nature, extent, and quality of the services to be provided to the fund pursuant to the Agreements.The Board had previously considered these matters with respect to Cupps.As a new fund, the fund did not have any open accounts or assets. Representatives of Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex and Dreyfus 146; corresponding need for broad, deep and diverse resources to be able to provide ongoing shareholder services to each distribution channel, including the distribution channel(s) for the fund.
The Board members also considered Dreyfus’, EACM’s, and each Sub-Adviser’s research and portfolio management capabilities, EACM’s experience and reputation in multi-manager equity investment programs, and each Sub-Advisers experience in managing U.S. equity portfolios.The Board also noted that Dreyfus also provide 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 Dreyfus’ extensive administrative, accounting, and compliance infrastructure.
Comparative Analysis of the Fund’s Proposed Management Fee and Expense Ratio. As the fund had not yet commenced operations, the Board members were not able to review fund performance or an actual expense ratio. Representatives of Dreyfus and EACM discussed each Sub-Adviser’s resources, experience, investment style, and portfolio management personnel in respect of the portion of the fund’s assets to be managed.
TheFund 27
INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND’S
MANAGEMENT AGREEMENT, PORTFOLIO ALLOCATION
MANAGEMENT AGREEMENT, AND SUB-INVESTMENT
ADVISORY AGREEMENTS (Unaudited) (continued)
The Board members discussed the fund’s management fee, portfolio allocation fee, and sub-advisory fees, and compared the management fee to the management and administrative fees for the funds in the Lipper Small Cap Growth Funds category. Dreyfus representatives noted that the proposed contractual management fee for the fund was lower than the average and median management fee for all funds reported in the Lipper Small Cap Growth Funds category. They also noted that the portfolio allocation and sub-advisory fees were payable by Dreyfus. Dreyfus had also advised the Board that Dreyfus would contractually agree, until October 1, 2011, to waive receipt of its fees and/or assume the expenses of the fund so that the direct expenses of none of the fund’s share classes (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings, and extraordinary expenses) exceed 1.15%.
Dreyfus provided the Board members with the management or investment advisory fees paid to Dreyfus or its affiliates or to the respective Sub-Advisers by funds in the same Lipper category, or by separate accounts and/or other types of client portfolios managed by Dreyfus, EACM, or one of the Sub-Advisers s considered to have similar investment strategies and policies as the fund (the “Similar Accounts”), and explained the nature of the Similar Accounts. Representatives of Dreyfus noted that neither Dreyfus nor EACM manage any institutional separate accounts considered to have similar investment strategies and policies as the fund.
Analysis of Profitability and Economies of Scale.As the fund had not yet commenced operations, Dreyfus’ representatives did not have information on expenses allocated to and profit to be received by Dreyfus to provide.The Board previously had been provided with information prepared by an independent consulting firm regarding Dreyfus’s approach to allocating costs to, and determining the profitability of, individual
28
funds and the entire Dreyfus fund complex.The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund. The Board members previously had considered potential benefits to Dreyfus and sub-investment advisers from acting in their respective capacities for a fund, including the possibility of soft dollar arrangements in the future with respect to trading the fund’s portfolio.The Board also considered the potential benefit to BNY Mellon with EACM acting as portfolio allocation manager to the fund. The costs of the services to be provided and profits to be realized by Dreyfus and BNY Mellon and its affiliates from the relationship with the fund in light of the relevant circumstances for the fund, and the extent to which economies of scale would be realized as the fund grows and whether fee levels reflect these economies of scale for the benefit of fund investor were not considered as the fund had not commenced operations. Since Dreyfus, and not the fund, will pay EACM and each Sub-Adviser pursuant to the Allocation Agreement and each Sub-Investment Advisory Agreement, respectively, the Board did not consider EACM’s and each Sub-Adviser’s profitability to be relevant.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the Agreements. 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 to be provided by Dreyfus, EACM, and the Sub-Advisers are adequate and appropriate. The Board considered Dreyfus’ overall equity management experience, EACM experience and reputation with respect to multi-manager strategies, EACM’s recommendation to engage the Sub-Advisers, and each Sub-Adviser’s experience and record in managing domestic equity assets.
TheFund 29
INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE FUND’S
MANAGEMENT AGREEMENT, PORTFOLIO ALLOCATION
MANAGEMENT AGREEMENT, AND SUB-INVESTMENT
ADVISORY AGREEMENTS (Unaudited) (continued)
The Board concluded that the fee to be paid to Dreyfus by the fund was reasonable in light of the services to be provided, comparative expense and advisory fee information, and benefits anticipated to be derived by Dreyfus, BNY Mellon, or EACM from its relationship with the fund, and that the separate fees to be paid by Dreyfus to EACM and to the Sub-Advisers are reasonable and appropriate.
The Board members considered these conclusions and determinations, and without any one factor being dispositive, determined that approval of the Agreements was in the best interests of the fund and its prospective shareholders.
30
NOTES
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes.
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value
Contents | |
THE FUND | |
2 | A Letter from the Chairman and CEO |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
12 | Statement of Assets and Liabilities |
13 | Statement of Operations |
14 | Statement of Changes in Net Assets |
16 | Financial Highlights |
19 | Notes to Financial Statements |
30 | Information About the Review and Approval of the Fund’s Management Agreement |
FOR MORE INFORMATION | |
Back Cover |
Emerging Markets
Opportunity Fund
The Fund
A LETTER FROM THE CHAIRMAN AND CEO
Dear Shareholder:
We are pleased to present this semiannual report for Emerging Markets Opportunity Fund, covering the six-month period from June 1, 2010, through November 30, 2010.
Stocks throughout the global markets delivered respectable returns during the reporting period, despite periodic bouts of market volatility stemming from economic uncertainty and events. Although GDP growth in most countries was positive throughout the reporting period, the global economic recovery has been milder than historical averages, in particular in the U.S. Most notably, heavy sovereign debt burdens recently renewed credit concerns in Europe, effectively barring some governments from adopting more stimulative fiscal policies. However, robust demand from the world’s emerging markets has taken up some of the slack, supporting corporate earnings and stock prices.
We are cautiously optimistic regarding global economic and market prospects in 2011. Global expansion should gain a degree of momentum, led by financially strong emerging markets countries, while “debt hangover” countries in the developed world may face continued economic challenges. Monetary policy remains stimulative in most markets, and inflation-adjusted interest rates and inflation remain low. So is your portfolio positioned accordingly given these recent global economic events? Talk with your financial advisor, who can help you evaluate your portfolio investments within the new global economic framework to help meet your individual investment needs and future capital goals.
For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
Thank you for your continued confidence and support.
Jonathan R. Baum
Chairman and Chief Executive Officer
The Dreyfus Corporation
December 15, 2010
2
DISCUSSION OF FUND PERFORMANCE
For the period of June 1, 2010, through November 30, 2010, as provided by Richard Fairgrieve,Tony Hann and Bill Rudman, Portfolio Managers
Fund and Market Performance Overview
For the six-month period ended November 30, 2010, Emerging Markets Opportunity Fund’s Class A shares achieved a total return of 13.35%, Class C shares achieved a return of 12.93% and Class I shares achieved a return of 13.53%.1 In comparison, the fund’s benchmark, the Morgan Stanley Capital International Emerging Markets Index (“MSCI EM Index”), achieved an 18.78% total return for the same period.2
Emerging markets equities continued to advance strongly over the reporting period, as global investors increasingly allocated capital away from sluggish developed-market economies and into the faster-growing economies of Asia and Latin America. The fund produced lower returns than its benchmark, primarily due to shortfalls in Hungary, Egypt and Mexico.
On October 5, 2010, the Board of Directors approved the liquidation of the fund, effective on or about December 15, 2010 (the “Liquidation Date”). Following close of business October 15, 2010, the fund was closed to new and subsequent investments, except that participants in group retirement plans (and their successor plans) were able to invest in the fund, if the fund was established as an investment option under the plans before October 15, 2010. Following close of business December 15, 2010, the fund was liquidated.
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
The contingent deferred sales charge applicable to redemptions of Class C shares and certain Class A shares of the fund was waived on any redemption of fund shares.The fund’s redemption fee was not waived.
Fund shares held on the Liquidation Date in Dreyfus-sponsored Individual Retirement Accounts (“IRAs”) were exchanged for shares of Dreyfus Worldwide Dollar Money Market Fund, Inc. (the “Money Market Fund”) to avoid penalties that may be imposed on holders of IRAs under the Internal Revenue Code if their fund shares are redeemed in cash. Investors may obtain a copy of the Prospectus of the Money Market Fund by calling 1-800-645-6561.
December 15, 2010
Equity funds are subject generally to market, market sector, market liquidity, issuer and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
Investing internationally involves special risks, including changes in currency exchange rates, political, economic and social instability, a lack of comprehensive company information, differing auditing and legal standards and less market liquidity.These risks generally are greater with emerging market countries than with more economically and politically established foreign countries.
4
1 | Total return includes reinvestment of dividends and any capital gains paid, and does not take |
into consideration the maximum initial sales charge in the case of Class A shares, or the | |
applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. | |
Had these charges been reflected, returns would have been lower. Past performance is no guarantee | |
of future results. Share price and investment return fluctuate such that upon redemption, fund | |
shares may be worth more or less than their original cost. Return figures provided reflect the | |
absorption of certain fund expenses by The Dreyfus Corporation pursuant to an undertaking in | |
effect through December 15, 2010. 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 select designated emerging market countries in Europe, Latin America and the | |
Pacific Basin. Investors cannot invest directly in any index. |
The Fund 5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Emerging Markets Opportunity Fund from June 1, 2010 to November 30, 2010. 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, 2010 | |||
Class A | Class C | Class I | |
Expenses paid per $1,000† | $ 10.70 | $ 14.68 | $ 9.37 |
Ending value (after expenses) | $1,133.50 | $1,129.30 | $1,135.30 |
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, 2010 | |||
Class A | Class C | Class I | |
Expenses paid per $1,000† | $ 10.10 | $ 13.87 | $ 8.85 |
Ending value (after expenses) | $1,015.04 | $1,011.28 | $1,016.29 |
† Expenses are equal to the fund’s annualized expense ratio of 2.00% for Class A, 2.75% for Class C and 1.75% for Class I, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period).
6
STATEMENT OF INVESTMENTS |
November 30, 2010 (Unaudited) |
Common Stocks—100.0% | Shares | Value ($) | |
Australia—.8% | |||
Centamin Egypt | 25,857 | a | 72,153 |
Brazil—18.9% | |||
Banco Bradesco, ADR | 5,979 | 119,939 | |
Banco Santander Brasil, ADR | 4,000 | 52,200 | |
Brookfield Incorporacoes | 17,800 | 84,505 | |
Cia de Bebidas das Americas, ADR | 700 | 94,948 | |
Cia Hering | 2,200 | 38,737 | |
Estacio Participacoes | 2,400 | 38,003 | |
Gerdau | 7,500 | 65,132 | |
Itau Unibanco Holding, ADR | 8,625 | 201,221 | |
Localiza Rent a Car | 5,200 | 85,403 | |
OGX Petroleo e Gas Participacoes | 7,400 | a | 85,886 |
PDG Realty | 14,800 | 89,684 | |
Petroleo Brasileiro, ADR | 9,400 | 291,032 | |
Vale | 3,800 | 118,703 | |
Vale, ADR | 7,800 | 221,442 | |
Vivo Participacoes, ADR | 3,000 | 86,610 | |
1,673,445 | |||
China—10.1% | |||
Agricultural Bank of China, Cl. H | 137,000 | 71,454 | |
AviChina Industry & Technology, Cl. H | 124,000 | a | 60,043 |
China Construction Bank, Cl. H | 80,000 | 72,221 | |
China Life Insurance, Cl. H | 22,000 | 94,487 | |
China Merchants Bank, Cl. H | 27,000 | 69,890 | |
China Minsheng Bank, Cl. H | 68,000 | 60,512 | |
China National Building Material, Cl. H | 28,000 | 64,545 | |
Dongfang Electric, Cl. H | 10,400 | 51,631 | |
Kunlun Energy | 68,000 | 98,956 | |
PCD Stores | 164,000 | 52,167 | |
PetroChina, Cl. H | 40,000 | 49,710 | |
Tencent Holdings | 3,400 | 75,618 | |
Yanzhou Coal Mining, Cl. H | 26,000 | 72,156 | |
893,390 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Czech Republic—2.4% | |||
CEZ | 2,493 | 97,401 | |
Komercni Banka | 528 | 111,248 | |
208,649 | |||
Egypt—3.0% | |||
Commercial International Bank Egypt | 15,768 | 112,636 | |
Orascom Construction Industries | 1,726 | 77,655 | |
Talaat Moustafa Group | 51,903 | a | 71,714 |
262,005 | |||
Hong Kong—3.7% | |||
Belle International Holdings | 38,000 | 69,099 | |
China Mobile | 16,000 | 159,586 | |
CNOOC | 44,000 | 95,422 | |
324,107 | |||
Hungary—3.5% | |||
MOL Hungarian Oil and Gas | 1,430 | a | 122,823 |
OTP Bank | 8,208 a | 186,720 | |
309,543 | |||
India—2.8% | |||
GAIL India | 5,206 | 55,631 | |
Housing Development & Infrastructure | 11,323 | a | 46,689 |
ICICI Bank | 2,577 | 62,592 | |
Infosys Technologies, ADR | 500 | 33,075 | |
Reliance Industries | 2,476 | 53,249 | |
251,236 | |||
Mexico—1.7% | |||
Southern Copper | 3,500 | 146,755 | |
Peru—2.4% | |||
Cia de Minas Buenaventura, ADR | 2,800 | 141,792 | |
Credicorp | 600 | 71,922 | |
213,714 | |||
Poland—4.7% | |||
Bank Pekao | 956 | 56,105 | |
KGHM Polska Miedz | 1,105 | 47,746 | |
Powszechna Kasa Oszczednosci Bank Polski | 11,422 | 158,373 | |
Powszechny Zaklad Ubezpieczen | 1,096 | 125,426 | |
Telekomunikacja Polska | 6,043 | 31,509 | |
419,159 |
8
Common Stocks (continued) | Shares | Value ($) | |
Russia—9.6% | |||
Gazprom, ADR | 12,301 | 273,574 | |
Globaltrans Investment, GDR | 2,815 | 48,559 | |
LUKOIL, ADR | 1,850 | 102,305 | |
Magnit, GDR | 2,068 | 54,595 | |
MMC Norilsk Nickel, ADR | 2,967 | 58,678 | |
Mobile Telesystems, ADR | 2,100 | 44,037 | |
Rosneft Oil, GDR | 6,524 | 42,928 | |
Sberbank of Russian, GDR | 411 | 145,639 | |
Severstal, GDR | 2,526 | 35,675 | |
Sistema, GDR | 1,534 | 39,163 | |
845,153 | |||
South Africa—2.6% | |||
AngloGold Ashanti, ADR | 500 | 23,415 | |
Aspen Pharmacare Holdings | 3,601 | a | 47,216 |
Clicks Group | 6,218 | a | 38,091 |
Exxaro Resources | 2,473 | 43,932 | |
Naspers, Cl. N | 876 | 43,721 | |
Sasol, ADR | 500 | 22,335 | |
Standard Bank Group | 816 | 11,738 | |
230,448 | |||
South Korea—16.9% | |||
Hyundai Hysco | 2,460 | 49,119 | |
Hyundai Mobis | 296 | 70,209 | |
Hyundai Motor | 515 | 76,624 | |
KB Financial Group, ADR | 2,571 | 118,369 | |
KCC | 248 | 71,658 | |
Kia Motors | 1,750 | 73,885 | |
Korea Electric Power, ADR | 2,200 a | 26,202 | |
KT | 1,440 | 57,754 | |
LG Chem | 301 | 100,731 | |
LG Display | 2,150 | 73,342 | |
LG Electronics | 241 | 21,410 | |
LG Household & Health Care | 227 | 74,890 | |
POSCO | 249 | 97,611 | |
Samsung Electronics | 407 | 289,962 | |
Samsung Electronics, GDR | 317 | 77,982 | |
Samsung Fire & Marine Insurance | 181 | 29,818 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
South Korea (continued) | |||
Shinhan Financial Group | 2,910 | 112,193 | |
Shinsegae | 157 | 76,780 | |
1,498,539 | |||
Taiwan—6.1% | |||
Chunghwa Telecom, ADR | 2,637 | 63,578 | |
First Financial Holding | 135,675 | 90,799 | |
HON HAI Precision Industry | 15,480 | 55,100 | |
HTC | 1,000 | 27,721 | |
Taiwan Cement | 79,000 | 81,248 | |
Taiwan Semiconductor Manufacturing | 48,000 | 99,834 | |
Wistron | 32,000 | 64,877 | |
Young Fast Optoelectronics | 5,334 | 57,920 | |
541,077 | |||
Thailand—5.3% | |||
Bank of Ayudhya, NVDR | 123,700 | 92,069 | |
Banpu, NVDR | 3,750 | 94,277 | |
Pruksa Real Estate, NVDR | 60,300 | 41,889 | |
PTT Chemical, NVDR | 8,700 | 44,176 | |
PTT, NVDR | 9,900 | 101,194 | |
Siam Commercial Bank, NVDR | 27,800 | 95,180 | |
468,785 | |||
Turkey—5.0% | |||
Akerneji Elektrik Uretim | 1 | a | 1 |
Enka Insaat ve Sanayi | 1 | 2 | |
Ford Otomotiv Sanayi | 5,480 | 47,370 | |
Haci Omer Sabanci Holding | 8,960 | 44,207 | |
Koza Altin Isletmeleri | 3,835 | 47,431 | |
Tofas Turk Otomobil Fabrikasi | 8,984 | 47,074 | |
Turk Hava Yollari | 12,039 | a | 43,709 |
Turkiye Garanti Bankasi | 16,142 | 89,517 | |
Turkiye Halk Bankasi | 4,569 | 42,989 | |
Turkiye Is Bankasi, Cl. C | 11,174 | 43,242 | |
Yapi ve Kredi Bankasi | 11,943 | a | 41,295 |
446,837 |
10
Common Stocks (continued) | Shares | Value ($) | |
United Kingdom—.5% | |||
Petropavlovsk | 2,659 | 44,048 | |
Total Common Stocks | |||
(cost $7,180,904) | 8,849,043 | ||
Preferred Stocks—.4% | |||
Brazil | |||
Usinas Siderurgicas de Minas Gerais, Cl. A | |||
(cost $45,358) | 2,900 | 31,628 | |
Number of | |||
Rights—.0% | Rights | Value ($) | |
China—.0% | |||
China Construction Bank, Cl. H | 6,020 | a | 2,039 |
Taiwan—.0% | |||
Taiwan Cement | 7,678 | a | 1,096 |
Total Rights | |||
(cost $0) | 3,135 | ||
Total Investments (cost $7,226,262) | 100.4% | 8,883,806 | |
Liabilities, Less Cash and Receivables | (.4%) | (32,587) | |
Net Assets | 100.0% | 8,851,219 |
ADR—American Depository Receipts |
GDR—Global Depository Receipts |
NVDR—Non Voting Depository Receipts |
a Non-income producing security. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Financial | 30.6 | Industrial | 3.9 |
Materials | 19.5 | Consumer Staples | 3.4 |
Energy | 15.7 | Utilities | 2.0 |
Consumer Discretionary | 9.7 | Health Care | .5 |
Information Technology | 9.7 | ||
Telecommunication Services | 5.4 | 100.4 |
† Based on net assets. |
See notes to financial statements. |
The Fund 11
STATEMENT OF ASSETS AND LIABILITIES |
November 30, 2010 (Unaudited) |
Cost | Value | ||
Assets ($): | |||
Investments in securities—See Statement of Investments | 7,226,262 | 8,883,806 | |
Cash denominated in foreign currencies | 117,808 | 116,940 | |
Receivable for investment securities sold | 99,919 | ||
Dividends receivable | 14,986 | ||
Receivable for shares of Common Stock subscribed | 225 | ||
Prepaid expenses | 12,976 | ||
9,128,852 | |||
Liabilities ($): | |||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 57,531 | ||
Cash overdraft due to Custodian | 212,390 | ||
Unrealized depreciation on forward foreign | |||
currency exchange contracts—Note 4 | 49 | ||
Accrued expenses | 7,663 | ||
277,633 | |||
Net Assets ($) | 8,851,219 | ||
Composition of Net Assets ($): | |||
Paid-in capital | 13,368,543 | ||
Accumulated Investment (loss)—net | (28,271) | ||
Accumulated net realized gain (loss) on investments | (6,145,296) | ||
Accumulated net unrealized appreciation (depreciation) | |||
on investments and foreign currency transactions | 1,656,243 | ||
Net Assets ($) | 8,851,219 | ||
Net Asset Value Per Share | |||
Class A | Class C | Class I | |
Net Assets ($) | 6,536,367 | 1,464,848 | 850,004 |
Shares Outstanding | 591,816 | 134,164 | 77,916 |
Net Asset Value Per Share ($) | 11.04 | 10.92 | 10.91 |
See notes to financial statements. |
12
STATEMENT OF OPERATIONS |
Six Months Ended November 30, 2010 (Unaudited) |
Investment Income ($): | |
Income: | |
Cash dividends (net of $14,888 foreign taxes withheld at source): | |
Unaffiliated issuers | 91,181 |
Affiliated issuers | 57 |
Total Income | 91,238 |
Expenses: | |
Management fee—Note 3(a) | 70,370 |
Custodian fees—Note 3(c) | 69,462 |
Shareholder servicing costs—Note 3(c) | 22,746 |
Registration fees | 21,412 |
Auditing fees | 20,490 |
Distribution fees—Note 3(b) | 7,554 |
Directors’ fees and expenses—Note 3(d) | 1,105 |
Legal fees | 957 |
Prospectus and shareholders’ reports | 290 |
Interest expense—Note 2 | 158 |
Loan commitment fees—Note 2 | 28 |
Miscellaneous | 6,135 |
Total Expenses | 220,707 |
Less—expense reimbursement from The Dreyfus | |
Corporation due to undertaking—Note 3(a) | (101,623) |
Less—reduction in fees due to earnings credits—Note 3(c) | (24) |
Net Expenses | 119,060 |
Investment (Loss)—Net | (27,822) |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | |
Net realized gain (loss) on investments and foreign currency transactions | 886,402 |
Net realized gain (loss) on forward foreign currency exchange contracts | 21,821 |
Net Realized Gain (Loss) | 908,223 |
Net unrealized appreciation (depreciation) on | |
investments and foreign currency transactions | 722,436 |
Net unrealized appreciation (depreciation) on | |
forward foreign currency exchange contracts | 7 |
Net Unrealized Appreciation (Depreciation) | 722,443 |
Net Realized and Unrealized Gain (Loss) on Investments | 1,630,666 |
Net Increase in Net Assets Resulting from Operations | 1,602,844 |
See notes to financial statements. |
The Fund 13
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||
November 30, 2010 | Year Ended | |
(Unaudited) | May 31, 2010 | |
Operations ($): | ||
Investment (loss)—net | (27,822) | (13,299) |
Net realized gain (loss) on investments | 908,223 | 3,303,300 |
Net unrealized appreciation | ||
(depreciation) on investments | 722,443 | (673,377) |
Net Increase (Decrease) in Net Assets | ||
Resulting from Operations | 1,602,844 | 2,616,624 |
Dividends to Shareholders from ($): | ||
Investment income—net: | ||
Class A Shares | — | (41,461) |
Class C Shares | — | (2,439) |
Class I Shares | — | (137,805) |
Total Dividends | — | (181,705) |
Capital Stock Transactions ($): | ||
Net proceeds from shares sold: | ||
Class A Shares | 522,803 | 3,851,455 |
Class C Shares | 57,275 | 1,019,523 |
Class I Shares | 47,068 | 23,749,512 |
Dividends reinvested: | ||
Class A Shares | — | 38,820 |
Class C Shares | — | 1,726 |
Class I Shares | — | 112,332 |
Cost of shares redeemed: | ||
Class A Shares | (3,141,188) | (5,883,939) |
Class C Shares | (937,046) | (1,173,389) |
Class I Shares | (551,740) | (23,624,456) |
Increase (Decrease) in Net Assets | ||
from Capital Stock Transactions | (4,002,828) | (1,908,416) |
Total Increase (Decrease) in Net Assets | (2,399,984) | 526,503 |
Net Assets ($): | ||
Beginning of Period | 11,251,203 | 10,724,700 |
End of Period | 8,851,219 | 11,251,203 |
Accumulated investment (loss)—net | (28,271) | (449) |
14
Six Months Ended | ||
November 30, 2010 | Year Ended | |
(Unaudited) | May 31, 2010 | |
Capital Share Transactions: | ||
Class A | ||
Shares sold | 50,595 | 383,229 |
Shares issued for dividends reinvested | — | 3,802 |
Shares redeemed | (278,688) | (585,452) |
Net Increase (Decrease) in Shares Outstanding | (228,093) | (198,421) |
Class C | ||
Shares sold | 5,615 | 107,442 |
Shares issued for dividends reinvested | — | 170 |
Shares redeemed | (84,279) | (115,539) |
Net Increase (Decrease) in Shares Outstanding | (78,664) | (7,927) |
Class I | ||
Shares sold | 4,378 | 2,430,671 |
Shares issued for dividends reinvested | — | 11,166 |
Shares redeemed | (52,255) | (2,334,383) |
Net Increase (Decrease) in Shares Outstanding | (47,877) | 107,454 |
See notes to financial statements. |
The Fund 15
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 | |||||
November 30, 2010 | Year Ended May 31, | ||||
Class A Shares | (Unaudited) | 2010 | 2009 | 2008 | 2007a |
Per Share Data ($): | |||||
Net asset value, beginning of period | 9.74 | 8.54 | 19.64 | 16.81 | 12.50 |
Investment Operations: | |||||
Investment income (loss)—netb | (.02) | .01 | .08 | .05 | .02 |
Net realized and unrealized | |||||
gain (loss) on investments | 1.32 | 1.24 | (8.88) | 4.84 | 4.36 |
Total from Investment Operations | 1.30 | 1.25 | (8.80) | 4.89 | 4.38 |
Distributions: | |||||
Dividends from investment income—net | — | (.05) | (.11) | (.10) | — |
Dividends from net realized | |||||
gain on investments | — | — | (2.19) | (1.96) | (.07) |
Total Distributions | — | (.05) | (2.30) | (2.06) | (.07) |
Net asset value, end of period | 11.04 | 9.74 | 8.54 | 19.64 | 16.81 |
Total Return (%)c | 13.35d | 14.61 | (41.48) | 29.25 | 35.12d |
Ratios/Supplemental Data (%): | |||||
Ratio of total expenses | |||||
to average net assets | 3.80e | 3.07 | 3.66 | 2.69 | 3.46d |
Ratio of net expenses | |||||
to average net assets | 2.00e | 2.02 | 2.00 | 1.98 | 1.73d |
Ratio of net investment income | |||||
(loss) to average net assets | (.38)e | .15 | .78 | .26 | .17d |
Portfolio Turnover Rate | 87.99d | 347.86 | 188.35 | 259.49 | 140.52d |
Net Assets, end of period ($ x 1,000) | 6,536 | 7,985 | 8,694 | 24,062 | 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. |
16
Six Months Ended | |||||
November 30, 2010 | Year Ended May 31, | ||||
Class C Shares | (Unaudited) | 2010 | 2009 | 2008 | 2007a |
Per Share Data ($): | |||||
Net asset value, beginning of period | 9.67 | 8.50 | 19.44 | 16.70 | 12.50 |
Investment Operations: | |||||
Investment income (loss)—netb | (.06) | (.06) | .01 | (.07) | (.07) |
Net realized and unrealized | |||||
gain (loss) on investments | 1.31 | 1.24 | (8.78) | 4.77 | 4.34 |
Total from Investment Operations | 1.25 | 1.18 | (8.77) | 4.70 | 4.27 |
Distributions: | |||||
Dividends from investment income—net | — | (.01) | — | — | — |
Dividends from net realized | |||||
gain on investments | — | — | (2.19) | (1.96) | (.07) |
Total Distributions | — | (.01) | (2.19) | (1.96) | (.07) |
Proceeds from redemption fees | — | — | .02 | — | — |
Net asset value, end of period | 10.92 | 9.67 | 8.50 | 19.44 | 16.70 |
Total Return (%)c | 12.93d | 13.87 | (41.83) | 28.17 | 34.32d |
Ratios/Supplemental Data (%): | |||||
Ratio of total expenses | |||||
to average net assets | 4.66e | 3.94 | 4.60 | 3.54 | 4.17d |
Ratio of net expenses | |||||
to average net assets | 2.75e | 2.77 | 2.75 | 2.73 | 2.38d |
Ratio of net investment income | |||||
(loss) to average net assets | (1.14)e | (.61) | .06 | (.40) | (.46)d |
Portfolio Turnover Rate | 87.99d | 347.86 | 188.35 | 259.49 | 140.52d |
Net Assets, end of period ($ x 1,000) | 1,465 | 2,057 | 1,876 | 3,414 | 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
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||
November 30, 2010 | Year Ended May 31, | ||||
Class I Shares | (Unaudited) | 2010 | 2009 | 2008a | 2007b |
Per Share Data ($): | |||||
Net asset value, beginning of period | 9.61 | 8.44 | 19.55 | 16.85 | 12.50 |
Investment Operations: | |||||
Investment income (loss)—netc | (.01) | (.01) | .12 | .07 | .05 |
Net realized and unrealized | |||||
gain (loss) on investments | 1.31 | 1.28 | (8.89) | 4.88 | 4.37 |
Total from Investment Operations | 1.30 | 1.27 | (8.77) | 4.95 | 4.42 |
Distributions: | |||||
Dividends from investment income—net | — | (.10) | (.20) | (.29) | — |
Dividends from net realized | |||||
gain on investments | — | — | (2.19) | (1.96) | (.07) |
Total Distributions | — | (.10) | (2.39) | (2.25) | (.07) |
Proceeds from redemption fees | — | — | .05 | — | — |
Net asset value, end of period | 10.91 | 9.61 | 8.44 | 19.55 | 16.85 |
Total Return (%) | 13.53d | 14.87 | (40.93) | 29.52 | 35.44d |
Ratios/Supplemental Data (%): | |||||
Ratio of total expenses | |||||
to average net assets | 3.44e | 2.62 | 3.37 | 2.47 | 3.43d |
Ratio of net expenses | |||||
to average net assets | 1.75e | 1.77 | 1.75 | 1.74 | 1.51d |
Ratio of net investment income | |||||
(loss) to average net assets | (.15)e | (.12) | 1.04 | .40 | .36d |
Portfolio Turnover Rate | 87.99d | 347.86 | 188.35 | 259.49 | 140.52d |
Net Assets, end of period ($ x 1,000) | 850 | 1,209 | 155 | 523 | 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 | Not annualized. |
e | Annualized. |
See notes to financial statements. |
18
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Emerging Markets Opportunity 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 ten series, including the fund.The fund’s investment objective is to pursue long-term capital appreciation by investing in stocks of companies located in emerging market coun-tries.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.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Manager, is the distributor of the fund’s shares.The fund is authorized to issue 100 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class C and Class I. Class A shares are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I shares are sold at net asset value per share only to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investmen ts are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates.
The Company 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 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
20
and other appropriate indicators, such as prices of relevant ADRs, GDRs 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. Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange. Forward foreign currency exchange contracts (“forward contracts”) are valued at the forward rate.
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value.This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 November 30, 2010 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities— | ||||
Foreign† | 8,880,671 | — | — | 8,880,671 |
Rights† | 3,135 | — | — | 3,135 |
Liabilities ($) | ||||
Other Financial | ||||
Instruments: | ||||
Forward Foreign | ||||
Currency Exchange | ||||
Contracts†† | — | (49) | — | (49) |
† | See Statement of Investments for additional detailed categorizations. |
†† | Amount shown represents unrealized appreciation (depreciation) at period end. |
In January 2010, FASB issued Accounting Standards Update (“ASU”) No. 2010-06 “Improving Disclosures about FairValue Measurements”. The portions of ASU No. 2010-06 which require reporting entities to prepare new disclosures surrounding amounts and reasons for significant transfers in and out of Level 1 and Level 2 fair value measurements as well as inputs and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements that fall in either Level 2 or Level 3 have been adopted by the fund. No significant transfers between Level 1 or Level 2 fair value measurements occurred at November 30, 2010. The remaining portion of ASU No. 2010-06 requires reporting entities to make new disclosures about information on purchases, sales, issuances and settlements on a gross basis in the reconciliation of activity in Level 3 fair value measurements. These new and re vised disclosures are required to be implemented for fiscal years
22
beginning after December 15, 2010. Management is currently evaluating the impact that the adoption of this remaining portion of ASU No. 2010-06 may 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.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on investments are included with net realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S.
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(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, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(f) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended November 30, 2010, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period, the fund did not incur any interest or penalties.
Each of the tax years in the three-year period ended May 31, 2010 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The fund has an unused capital loss carryover of $6,616,054 available for federal income tax purposes to be applied against future net securities profits, if any, realized subsequent to May 31, 2010. If not applied, $4,440,867 of the carryover expires in fiscal 2017 and $2,175,187 expires in fiscal 2018.
The tax character of distributions paid to shareholders during the fiscal year ended May 31, 2010 was as follows: ordinary income $181,705.
24
The tax character of current year distributions, if any, will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $225 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing.
The average amount of borrowings outstanding under the Facilities during the period ended November 30, 2010 was approximately $20,800 with a related weighted average annualized interest rate of 1.52%.
NOTE 3—Management Fee and Other Transactions With Affiliates:
(a) Pursuant to a management 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.The Manager has contractually agreed, until October 1, 2011, to waive receipt of its fees and/or assume the expenses of the fund so that annual fund operating expenses (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest on borrowings, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed 1.75% of the value of the fund’s average daily net assets.The expense reimbursement pursuant to the undertaking, amounted to $101,623 during the period ended November 30, 2010.
During the period ended November 30, 2010, the Distributor retained $994 from commissions earned on sales of the fund’s Class A shares and $215 from CDSCs on redemptions of the fund’s Class C shares.
The Fund 25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(b) Under the Distribution Plan (the “Plan”) adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of the average daily net assets of Class C shares. During the period ended November 30, 2010, Class C shares were charged $7,554 pursuant to the Plan.
(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding Class A and Class C shares and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (a securities dealer, financial institution or other industry professional) in respect of these services.The Distributor determines the amounts to be paid to Service Agents. During the period ended November 30, 2010, Class A and Class C shares were charged $10,181 and $2,518, respectively, pursuant to the Shar eholder Services Plan.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, under a transfer agency agreement for providing personnel and facilities to perform transfer agency services for the fund. During the period ended November 30, 2010, the fund was charged $3,238 pursuant to the transfer agency agreement, which is included in Shareholder servicing costs in the Statement of Operations.
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.
The fund compensates The Bank of New York Mellon under a cash management agreement for performing cash management services
26
related to fund subscriptions and redemptions. During the period ended November 30, 2010, the fund was charged $419 pursuant to the cash management agreement, which is included in Shareholder servicing costs in the Statement of Operations.These fees were partially offset by earnings credits of $24.
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 November 30, 2010, the fund was charged $69,462 pursuant to the custody agreement.
During the period ended November 30, 2010, the fund was charged $3,345 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 $13,156, Rule 12b-1 distribution plan fees $1,034, shareholder services plan fees $1,844, custodian fees $37,840, chief compliance officer fees $1,152 and transfer agency per account fees $2,505.
(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 is charged and retained by the fund on certain shares redeemed within sixty days, following the date of issuance subjected to exceptions, including redemptions made through the use of the fund’s exchange privilege. During the period ended November 30, 2010, redemption fees charged and retained by the fund amounted to $1,691.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward contracts, during the period ended November 30, 2010 amounted to $9,564,471 and $13,317,155, respectively.
The Fund 27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The provisions of ASC Topic 815 “Derivatives and Hedging” require 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 agreements. The disclosure requirements distinguish between derivatives, which are accounted for as “hedges” and those that do not qualify for hedge accounting. Because investment companies value their derivatives at fair value and recognize changes in fair value through the Statement of Operations, they do not qualify for such accounting. Accordingly, even though a fund’s investments in derivatives may represent economic hedges, they are considered to be non-hedge transactions for purposes of this disclosure.
Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract decreases between those dates.With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the for ward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract increases between those dates. Any realized gain or loss which occurred during the period is reflected in the Statement of Operations.The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty
28
nonperformance on these forward contracts, which is typically limited to the unrealized gain on each open contract.The following summarizes open forward contracts at November 30, 2010:
Foreign | ||||
Forward Foreign Currency | Currency | Unrealized | ||
Exchange Contracts | Amounts | Proceeds ($) | Value ($) (Depreciation) ($) | |
Sales; | ||||
South African Rand, | ||||
Expiring 12/3/2010 | 65,701 | 9,214 | 9,263 | (49) |
The following summarizes the average market value of derivatives | ||||
outstanding during the period ended November 30, 2010: | ||||
Value ($) | ||||
Forward Contracts | 103,051 |
At November 30, 2010, accumulated net unrealized appreciation on investments was $1,657,544, consisting of $1,823,279 gross unrealized appreciation and $165,735 gross unrealized depreciation.
At November 30, 2010, 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).
NOTE 5—Liquidation:
On October 4, 2010, the Board of Directors of Strategic Funds, Inc. approved the liquidation of the fund, effective December 15, 2010. Accordingly, effective on October 15, 2010, no new or subsequent investments in the fund will be permitted, except that investments may continue to be made by participants in group employer retirement plans, if the fund was established as an investment option under the plans before October 15, 2010.
The Fund 29
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 8-9, 2010, the Board considered the renewal of the fund’s Management Agreement with Dreyfus pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the “Agreement”). The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of Dreyfus. In considering the renewal of the Agreement, the Board considered all factors that it believed to be relevant, including those discussed below.The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent and Quality of Services Provided to the Fund.The Board members considered information previously provided to them in a presentation from representatives of Dreyfus regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex, and representatives of Dreyfus confirmed that there had been no material changes in this information. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex and Dreyfus’ corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each dis tribution channel, including the distribution channel(s) for the fund.
The Board members also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements.The Board members also considered Dreyfus’ extensive administrative, accounting, and compliance infrastructures.The Board also considered portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.
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Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio.The Board members reviewed reports prepared by Lipper, Inc. (“Lipper”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended September 30, 2010, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Lipper as of September 30 , 2010. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds.The Board members discussed the results of the comparisons and noted that the fund’s total return performance was below the Performance Group and Performance Universe medians for the various periods. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index.
The Board noted that the fund’s Management Agreement would expire on November 30, 2010, and that the fund was slated for liquidation on or about December 15, 2010.
The Board members also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. They noted that the fund’s contractual management fee was above the Expense Group median, the fund’s actual management fee was below the Expense Group and Expense Universe medians, and the fund’s total
The Fund 31
INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE |
FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued) |
expenses were above the Expense Group and Expense Universe medians. The Board also considered the current fee waiver and expense reimbursement arrangement undertaken by Dreyfus.
Representatives of Dreyfus reviewed with the Board members the management or investment advisory fees paid to Dreyfus or its affiliates by funds in the same Lipper category as the fund, or separate accounts and/or other types of client portfolios managed by Dreyfus or Blackfriars Asset Management, a Dreyfus affiliate and the primary employer of the fund’s primary portfolio managers, considered to have similar investment strategies and policies as the fund (the “Similar Accounts”), and explained the nature of the Similar Accounts. Representatives of Dreyfus noted that there were no institutional separate accounts managed by Dreyfus with similar investment strategies and policies as the fund. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors.The Board members considered the relevance of the fee information provided for the Similar Accounts to evaluate the appropriateness and reasonableness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. Dreyfus’ representatives reviewed the expenses allocated and profit received by Dreyfus and the resulting profitability percentage for managing the fund, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable given the services rendered and service levels provided by Dreyfus. The Board also noted the expense limitation arrangement and its effect on Dreyfus’ profitability. The Board previously had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex.The consulting firm also had analyzed where any economies of scale might emerge in conn ection with the management of a fund.
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The Board’s counsel stated that the Board members should consider the profitability analysis (1) as part of their evaluation of whether the fees under the Agreement bear a reasonable relationship to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Dreyfus representatives noted that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that Dreyfus may have realized any economies of scale would be less. They also noted that, as a result of shared and allocated costs among funds in the Dreyf us funds complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board members also considered potential benefits to Dreyfus from acting as investment adviser and noted the soft dollar arrangements in effect with respect to trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
The Board concluded that the nature, extent, and quality of the services provided by Dreyfus are adequate and appropriate.
The Board noted Dreyfus’ past efforts to improve the fund’s perfor- mance and the advisability to renewing the Agreement to facilitate the fund’s orderly liquidation.
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INFORMATION ABOUT THE REVIEW AND APPROVAL OF THE |
FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued) |
The Board concluded that the fee paid to Dreyfus was reasonable in light of the considerations described above.
The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
The Board members considered these conclusions and determinations, along with information received on a routine and regular basis throughout the year. In addition, it should be noted that the Board’s consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of prior or similar agreements during which lengthy discussions took place between the Board members and Dreyfus representatives. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board members’ conclusions may be based, in part, on their consideration of the same or similar arrangements in prior years. The Board members determined that renewal of the Agreement was in the best interests of the fund and its shareholders.
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NOTES
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.
Not applicable. [CLOSED END FUNDS ONLY]
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures applicable to Item 10.
Item 11. Controls and Procedures.
(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(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.
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Item 12. Exhibits.
(a)(1) Not applicable.
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.
(a)(3) Not applicable.
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Strategic Funds, Inc.
By: /s/ Bradley J. Skapyak |
Bradley J. Skapyak, President
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Date: January 24, 2011 |
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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. |
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By: /s/ Bradley J. Skapyak |
Bradley J. Skapyak, President
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Date: January 24, 2011 |
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By: /s/ James Windels |
James Windels, Treasurer
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Date: January 24, 2011 |
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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)
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