UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number | 811-3940 | |||||
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| Strategic Funds, Inc |
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| (Exact name of Registrant as specified in charter) |
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c/o The Dreyfus Corporation 200 Park Avenue New York, New York 10166 |
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| (Address of principal executive offices) (Zip code) |
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| John Pak, Esq. 200 Park Avenue New York, New York 10166 |
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| (Name and address of agent for service) |
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Registrant's telephone number, including area code: | (212) 922-6000 | |||||
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Date of fiscal year end:
| 11/30 |
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Date of reporting period: | 5/31/15 |
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The following N-CSR relates only to the Registrant’s series listed below and does not affect the other series of the Registrant, which have different fiscal year ends and, therefore, different N-CSR reporting requirements. Separate N-CSR Forms will be filed for these series, as appropriate.
Dreyfus Select Managers Small Cap Value Fund
Dreyfus U.S. Equity Fund
Global Stock Fund
International Stock Fund
Dreyfus MLP Fund
Dreyfus |
U.S. Equity Fund |
SEMIANNUAL REPORT May 31, 2015
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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 President |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
10 | Statement of Assets and Liabilities |
11 | Statement of Operations |
12 | Statement of Changes in Net Assets |
14 | Financial Highlights |
18 | Notes to Financial Statements |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus
U.S. Equity Fund
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus U.S. Equity Fund, covering the six-month period from December 1, 2014, through May 31, 2015. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
The U.S. stock market proved volatile on its way to posting modest gains for the reporting period. Investors were confounded to a degree by divergent economic trends in domestic and international markets. Stock prices continued to climb over the final month of 2014 as a sustained economic recovery was fueled by strengthening labor markets, but investors worried over the first five months of 2015 that economic weakness in overseas markets, a strengthening U.S. dollar, and expected short-term interest rate hikes might derail growth in the United States.
We remain optimistic regarding the long-term outlook for the U.S. economy. We believe the domestic economic recovery has resumed after a winter soft patch, energy prices have begun to rebound, foreign currencies recently have strengthened, and aggressively accommodative monetary policies from the world’s major central banks seem likely to address global economic weakness.While stocks stand to benefit from these conditions, valuations appear to have risen toward fair levels. Moreover, we believe expectations of domestic rate hikes and recently mixed corporate financial reports may have created uncertainty as to the pace of future gains.As always, we urge you to discuss these observations with your financial advisor, who can help you assess their implications for your investment portfolio.
Thank you for your continued confidence and support.
![](https://capedge.com/proxy/N-CSRS/0000737520-15-000048/usencsrx4x1.jpg)
J. Charles Cardona
President
The Dreyfus Corporation
June 15, 2015
2
DISCUSSION OF FUND PERFORMANCE
For the reporting period of December 1, 2014, through May 31, 2015, as provided by Charlie Macquaker and Roy Leckie of Walter Scott & Partners Limited (Walter Scott), Sub-investment adviser
Fund and Market Performance Overview
For the six-month period ended May 31, 2015, Dreyfus U.S. Equity Fund’s Class A shares achieved a return of 1.26%, Class C shares returned 0.81%, Class I shares returned 1.44%, and Class Y shares returned 1.40%.1 In comparison, the fund’s benchmark, the Morgan Stanley Capital International USA Index (“MSCI USA Index”), achieved a 3.05% return over the same period.2
U.S. stocks advanced only modestly during the reporting period amid a brief economic downturn. The fund lagged its benchmark, mainly due to our focus on more attractively valued securities at a time when richly valued growth stocks fared better.
The Fund’s Investment Approach
The fund seeks long-term real returns by investing in stocks of companies that are located in the United States.When selecting stocks,Walter Scott seeks companies with fundamental strengths that indicate the potential for sustainable growth. The firm focuses on individual stock selection through extensive fundamental research. Candidates are initially selected for research if they meet certain broad absolute and trend criteria. Financial statements are analyzed in an effort to identify the nature of their cash generation and to understand the variables that add value to their businesses. Companies meeting the financial criteria are subjected to a detailed investigation of their products, costs and pricing, competition, industry position, and outlook.
Stocks Digested Gains in 2015 after Strong 2014 Rally
A previously robust U.S. economic expansion proved uneven in early 2015 in the face of severe winter weather, a labor slowdown in West Coast ports, and economic weakness in international markets. Massive quantitative easing programs and lower interest rates in overseas markets caused the U.S. dollar to appreciate sharply against most foreign currencies, hampering revenues for American exporters. Meanwhile, sharply lower oil prices generated challenges for energy producers.
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
In contrast to robust gains during 2014, the S&P 500 Index repeatedly vacillated between gains and losses in early 2015 before stronger economic data supported moderately higher stock prices in the spring. The information technology and health care sectors fared particularly well, while energy and telecommunications stocks trailed market averages.
Focus on Value Dampened Fund Results
Whilst investors favored companies exhibiting high levels of earnings momentum over the reporting period, the more reasonably valued companies on which the fund focuses were not rewarded in in the MSCI USA Index’s moderate gains. For example, the fund did not hold consumer electronics giant Apple due to its expensive valuation, but the stock continued to climb.
Meanwhile, some of the fund’s industrial holdings were hurt by weaker demand, including metal components fabricator Precision Castparts and industrial products distributor MSC Industrial Direct, which struggled with lower order volumes from customers in the hard-hit energy sector. In addition, industrial products producer Donaldson encountered a slowdown in engine-related sales when a strengthening U.S. dollar made its prices less competitive. Over the long term, the investment team continues to believe in the underlying fundamentals of those companies held but has been monitoring each one carefully.
The fund held no exposure to financial companies, helping to avoid the sector’s relative weakness.Among consumer discretionary companies, specialty coffee retailer Starbucks achieved impressive same-store sales on its way to reporting record quarterly revenues and earnings. Technology outsourcer Cognizant Technology Solutions reported sales, revenues, and earnings that consistently beat industry averages. In the health care sector, medical devices maker ResMed recovered from previous weakness with positive expectations of new sleep apnea products, and biotechnology firm Gilead Sciences announced positive results in clinical trials of a new liver disease medicine. The fund also benefited from lack of exposure to consumer staples company Procter & Gamble, which continued to struggle with weak consumer demand for its household goods. Lastly, apparel retailer Urban Outfitters was sold from the portfolio before its stock price fell sharply due to disappointing financial results.
4
Finding Opportunities despite Economic Headwinds
The world has long been entrenched in an environment of low growth, low inflation, and low interest rates, and we remain concerned about high debt levels in Europe and Japan and signs of slowing industrial activity in the United States. Yet, in our analysis, the aggregate financial characteristics of the fund’s holdings are remarkably strong. Individual companies in our portfolio have strong balance sheets and are generating excellent levels of internal profitability.We believe that this dynamic will drive stock prices higher over the long term as companies with these attributes continue to generate wealth.
We have continued to identify ample opportunities meeting our investment criteria in the United States. As of the reporting period’s end, the fund held overweighted exposure to the industrials, information technology, health care, and materials sectors. In contrast, the fund held no exposure to financial companies and relatively light positions in the consumer staples, utilities, and telecommunications services sectors.
June 15, 2015
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 for the fund reflect the |
absorption of certain fund expenses by The Dreyfus Corporation pursuant to an undertaking in effect through April |
1, 2016, at which time it may be extended, terminated, or modified. Had these expenses not been absorbed, Class |
A and Class C 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 USA (MSCI USA) Index is an unmanaged, market capitalization |
weighted index that is designed to measure the performance of publicly traded stocks issued by companies in the |
United States. Investors cannot invest directly in any index. |
The Fund 5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus U.S. Equity Fund from December 1, 2014 to May 31, 2015. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended May 31, 2015
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $ | 5.72 | $ | 9.51 | $ | 4.02 | $ | 3.97 |
Ending value (after expenses) | $ | 1,012.60 | $ | 1,008.10 | $ | 1,014.40 | $ | 1,014.00 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment
assuming a hypothetical 5% annualized return for the six months ended May 31, 2015
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $ | 5.74 | $ | 9.55 | $ | 4.03 | $ | 3.98 |
Ending value (after expenses) | $ | 1,019.25 | $ | 1,015.46 | $ | 1,020.94 | $ | 1,020.99 |
† Expenses are equal to the fund’s annualized expense ratio of 1.14% for Class A, 1.90% for Class C, .80% for |
Class I and .79% for ClassY, multiplied by the average account value over the period, multiplied by 182/365 (to |
reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS |
May 31, 2015 (Unaudited) |
Common Stocks—98.4% | Shares | Value ($) | |
Capital Goods—17.3% | |||
Boeing | 99,800 | 14,023,896 | |
Donaldson | 404,100 | 14,410,206 | |
Emerson Electric | 242,700 | 14,637,237 | |
Fastenal | 327,400 | a | 13,590,374 |
Flowserve | 263,300 | 14,481,500 | |
MSC Industrial Direct, Cl. A | 175,800 | 12,195,246 | |
Precision Castparts | 68,360 | 14,467,027 | |
Toro | 111,300 | 7,611,807 | |
W.W. Grainger | 64,100 | 15,405,153 | |
120,822,446 | |||
Consumer Durables & Apparel—4.0% | |||
DSW, Cl. A | 390,700 | 13,537,755 | |
NIKE, Cl. B | 138,600 | 14,091,462 | |
27,629,217 | |||
Consumer Services—5.3% | |||
McDonald’s | 143,500 | 13,765,955 | |
Panera Bread, Cl. A | 43,300 | b | 7,880,600 |
Starbucks | 299,800 | 15,577,608 | |
37,224,163 | |||
Energy—8.0% | |||
Apache | 157,100 | 9,400,864 | |
EOG Resources | 149,620 | 13,269,798 | |
Halliburton | 114,300 | 5,189,220 | |
Occidental Petroleum | 165,500 | 12,940,445 | |
Schlumberger | 162,050 | 14,709,278 | |
55,509,605 | |||
Food & Staples Retailing—1.8% | |||
Wal-Mart Stores | 170,600 | 12,670,462 | |
Health Care Equipment & Services—10.6% | |||
C.R. Bard | 83,950 | 14,298,364 | |
Intuitive Surgical | 20,200 | b | 9,852,550 |
Mettler-Toledo International | 29,400 | b | 9,545,592 |
ResMed | 202,600 | 11,916,932 | |
Stryker | 151,800 | 14,592,534 | |
Varian Medical Systems | 156,400 | b | 13,544,240 |
73,750,212 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Household & Personal Products—2.1% | |||
Colgate-Palmolive | 216,100 | 14,433,319 | |
Materials—6.9% | |||
Ecolab | 65,700 | 7,532,505 | |
FMC | 220,500 | 12,605,985 | |
Monsanto | 118,200 | 13,827,036 | |
Praxair | 117,300 | 14,411,478 | |
48,377,004 | |||
Pharmaceuticals, | |||
Biotech & Life Sciences—8.4% | |||
Biogen | 36,700 | b | 14,569,533 |
Celgene | 123,200 | b | 14,099,008 |
Gilead Sciences | 138,100 | 15,504,487 | |
Johnson & Johnson | 146,000 | 14,620,440 | |
58,793,468 | |||
Retailing—3.5% | |||
The TJX Companies | 212,400 | 13,674,312 | |
Tractor Supply | 120,200 | 10,474,228 | |
24,148,540 | |||
Software & Services—19.5% | |||
Adobe Systems | 205,400 | b | 16,245,086 |
Automatic Data Processing | 174,600 | 14,930,046 | |
Cognizant Technology Solutions, Cl. A | 239,600 | b | 15,506,912 |
Google, Cl. A | 13,660 | b | 7,449,071 |
Google, Cl. C | 17,006 | b | 9,049,063 |
Jack Henry & Associates | 212,700 | 13,842,516 | |
MasterCard, Cl. A | 166,700 | 15,379,742 | |
Microsoft | 294,000 | 13,776,840 | |
Oracle | 332,800 | 14,473,472 | |
Paychex | 302,100 | 14,926,761 | |
135,579,509 | |||
Technology Hardware & Equipment—7.2% | |||
Amphenol, Cl. A | 251,600 | 14,353,780 | |
Cisco Systems | 510,100 | 14,951,031 | |
QUALCOMM | 195,600 | 13,629,408 | |
TE Connectivity | 103,900 | 7,169,100 | |
50,103,319 |
8
Common Stocks (continued) | Shares | Value ($) | ||
Transportation—3.8% | ||||
C.H. Robinson Worldwide | 209,000 | 12,901,570 | ||
Expeditors International of Washington | 295,300 | 13,536,552 | ||
26,438,122 | ||||
Total Common Stocks | ||||
(cost $478,605,488) | 685,479,386 | |||
Other Investment—1.6% | ||||
Registered Investment Company; | ||||
Dreyfus Institutional Preferred | ||||
Plus Money Market Fund | ||||
(cost $11,020,917) | 11,020,917 | c | 11,020,917 | |
Investment of Cash Collateral | ||||
for Securities Loaned—2.0% | ||||
Registered Investment Company; | ||||
Dreyfus Institutional Cash Advantage Fund | ||||
(cost $14,099,481) | 14,099,481 | c | 14,099,481 | |
Total Investments (cost $503,725,886) | 102.0 | % | 710,599,784 | |
Liabilities, Less Cash and Receivables | (2.0 | %) | (13,853,577 | ) |
Net Assets | 100.0 | % | 696,746,207 |
a Security, or portion thereof, on loan.At May 31, 2015, the value of the fund’s securities on loan was $13,454,470 |
and the value of the collateral held by the fund was $14,099,481. |
b Non-income producing security. |
c Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Software & Services | 19.5 | Consumer Services | 5.3 |
Capital Goods | 17.3 | Consumer Durables & Apparel | 4.0 |
Health Care Equipment & Services | 10.6 | Transportation | 3.8 |
Pharmaceuticals, | Money Market Investments | 3.6 | |
Biotech & Life Sciences | 8.4 | Retailing | 3.5 |
Energy | 8.0 | Household & Personal Products | 2.1 |
Technology Hardware & Equipment | 7.2 | Food & Staples Retailing | 1.8 |
Materials | 6.9 | 102.0 |
† Based on net assets. |
See notes to financial statements. |
The Fund 9
STATEMENT OF ASSETS AND LIABILITIES |
May 31, 2015 (Unaudited) |
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments (including | ||||
securities on loan, valued at $13,454,470)—Note 1(b): | ||||
Unaffiliated issuers | 478,605,488 | 685,479,386 | ||
Affiliated issuers | 25,120,398 | 25,120,398 | ||
Cash | 172,658 | |||
Dividends and securities lending income receivable | 1,049,259 | |||
Receivable for shares of Common Stock subscribed | 565,572 | |||
Prepaid expenses | 38,181 | |||
712,425,454 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 473,760 | |||
Liability for securities on loan—Note 1(b) | 14,099,481 | |||
Payable for shares of Common Stock redeemed | 1,063,432 | |||
Accrued expenses | 42,574 | |||
15,679,247 | ||||
Net Assets ($) | 696,746,207 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 450,394,974 | |||
Accumulated undistributed investment income—net | 2,545,693 | |||
Accumulated net realized gain (loss) on investments | 36,931,642 | |||
Accumulated net unrealized appreciation | ||||
(depreciation) on investments | 206,873,898 | |||
Net Assets ($) | 696,746,207 | |||
Net Asset Value Per Share | ||||
Class A | Class C | Class I | Class Y | |
Net Assets ($) | 1,822,290 | 371,787 | 30,458,865 | 664,093,265 |
Shares Outstanding | 91,506 | 19,414 | 1,523,991 | 33,232,841 |
Net Asset Value Per Share ($) | 19.91 | 19.15 | 19.99 | 19.98 |
See notes to financial statements. |
10
STATEMENT OF OPERATIONS |
Six Months Ended May 31, 2015 (Unaudited) |
Investment Income ($): | ||
Income: | ||
Cash dividends: | ||
Unaffiliated issuers | 5,442,269 | |
Affiliated issuers | 4,594 | |
Income from securities lending—Note 1(b) | 39,535 | |
Total Income | 5,486,398 | |
Expenses: | ||
Management fee—Note 3(a) | 2,790,553 | |
Directors’ fees and expenses—Note 3(d) | 34,925 | |
Registration fees | 28,058 | |
Custodian fees—Note 3(c) | 28,027 | |
Professional fees | 25,851 | |
Shareholder servicing costs—Note 3(c) | 7,088 | |
Prospectus and shareholders’ reports | 4,967 | |
Loan commitment fees—Note 2 | 3,284 | |
Distribution fees—Note 3(b) | 1,580 | |
Interest expense—Note 2 | 55 | |
Miscellaneous | 15,694 | |
Total Expenses | 2,940,082 | |
Less—reduction in expenses due to undertaking—Note 3(a) | (511 | ) |
Less—reduction in fees due to earnings credits—Note 3(c) | (3 | ) |
Net Expenses | 2,939,568 | |
Investment Income—Net | 2,546,830 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments | 36,946,243 | |
Net unrealized appreciation (depreciation) on investments | (28,203,789 | ) |
Net Realized and Unrealized Gain (Loss) on Investments | 8,742,454 | |
Net Increase in Net Assets Resulting from Operations | 11,289,284 | |
See notes to financial statements. |
The Fund 11
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
May 31, 2015 | Year Ended | |||
(Unaudited) | November 30, 2014 | |||
Operations ($): | ||||
Investment income—net | 2,546,830 | 6,877,248 | ||
Net realized gain (loss) on investments | 36,946,243 | 35,143,437 | ||
Net unrealized appreciation | ||||
(depreciation) on investments | (28,203,789 | ) | 7,692,468 | |
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 11,289,284 | 49,713,153 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A | (8,272 | ) | (8,495 | ) |
Class C | — | (610 | ) | |
Class I | (275,670 | ) | (5,059,950 | ) |
Class Y | (6,136,955 | ) | (7 | ) |
Net realized gain on investments: | ||||
Class A | (92,066 | ) | (10,199 | ) |
Class C | (24,744 | ) | (4,325 | ) |
Class I | (1,531,336 | ) | (3,404,196 | ) |
Class Y | (33,499,765 | ) | (5 | ) |
Total Dividends | (41,568,808 | ) | (8,487,787 | ) |
Capital Stock Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A | 139,162 | 255,615 | ||
Class C | 30,505 | 6,026 | ||
Class I | 4,662,004 | 122,944,935 | ||
Class Y | 41,720,420 | 804,477,428 | ||
Dividends reinvested: | ||||
Class A | 91,099 | 17,062 | ||
Class C | 20,083 | 2,404 | ||
Class I | 1,638,458 | 3,833,304 | ||
Class Y | 21,529,033 | — | ||
Cost of shares redeemed: | ||||
Class A | (404,677 | ) | (757,712 | ) |
Class C | (178,648 | ) | (543,401 | ) |
Class I | (8,833,869 | ) | (930,072,086 | ) |
Class Y | (119,606,989 | ) | (76,500,502 | ) |
Increase (Decrease) in Net Assets | ||||
from Capital Stock Transactions | (59,193,419 | ) | (76,336,927 | ) |
Total Increase (Decrease) in Net Assets | (89,472,943 | ) | (35,111,561 | ) |
Net Assets ($): | ||||
Beginning of Period | 786,219,150 | 821,330,711 | ||
End of Period | 696,746,207 | 786,219,150 | ||
Undistributed investment income—net | 2,545,693 | 6,419,760 |
12
Six Months Ended | ||||
May 31, 2015 | Year Ended | |||
(Unaudited) | November 30, 2014 | |||
Capital Share Transactions: | ||||
Class A | ||||
Shares sold | 6,978 | 13,025 | ||
Shares issued for dividends reinvested | 4,624 | 859 | ||
Shares redeemed | (20,183 | ) | (38,125 | ) |
Net Increase (Decrease) in Shares Outstanding | (8,581 | ) | (24,241 | ) |
Class C | ||||
Shares sold | 1,570 | 316 | ||
Shares issued for dividends reinvested | 1,057 | 125 | ||
Shares redeemed | (9,396 | ) | (27,659 | ) |
Net Increase (Decrease) in Shares Outstanding | (6,769 | ) | (27,218 | ) |
Class Ia | ||||
Shares sold | 232,145 | 6,242,271 | ||
Shares issued for dividends reinvested | 83,002 | 192,435 | ||
Shares redeemed | (437,621 | ) | (46,165,337 | ) |
Net Increase (Decrease) in Shares Outstanding | (122,474 | ) | (39,730,631 | ) |
Class Ya | ||||
Shares sold | 2,085,680 | 39,794,904 | ||
Shares issued for dividends reinvested | 1,090,630 | — | ||
Shares redeemed | (5,939,616 | ) | (3,798,814 | ) |
Net Increase (Decrease) in Shares Outstanding | (2,763,306 | ) | 35,996,090 |
a During the period ended November 30, 2014, 37,528,119 Class I shares representing $758,955,395 were |
exchanged for 37,528,119 ClassY shares. |
See notes to financial statements.
The Fund 13
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | |||||||||||
May 31, 2015 | Year Ended November 30, | ||||||||||
Class A Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||
Per Share Data ($): | |||||||||||
Net asset value, | |||||||||||
beginning of period | 20.70 | 19.67 | 15.45 | 14.20 | 12.83 | 11.68 | |||||
Investment Operations: | |||||||||||
Investment income—neta | .03 | .10 | .08 | .08 | .04 | .01 | |||||
Net realized and unrealized | |||||||||||
gain (loss) on investments | .20 | 1.08 | 4.25 | 1.17 | 1.39 | 1.16 | |||||
Total from Investment Operations | .23 | 1.18 | 4.33 | 1.25 | 1.43 | 1.17 | |||||
Distributions: | |||||||||||
Dividends from | |||||||||||
investment income—net | (.08 | ) | (.07 | ) | (.11 | ) | — | — | (.02 | ) | |
Dividends from net realized | |||||||||||
gain on investments | (.94 | ) | (.08 | ) | — | — | (.06 | ) | — | ||
Total Distributions | (1.02 | ) | (.15 | ) | (.11 | ) | — | (.06 | ) | (.02 | ) |
Net asset value, end of period | 19.91 | 20.70 | 19.67 | 15.45 | 14.20 | 12.83 | |||||
Total Return (%)b | 1.26 | c | 6.02 | 28.20 | 8.80 | 11.17 | 10.01 | ||||
Ratios/Supplemental Data (%): | |||||||||||
Ratio of total expenses | |||||||||||
to average net assets | 1.16 | d | 1.16 | 1.15 | 1.22 | 1.15 | 1.76 | ||||
Ratio of net expenses | |||||||||||
to average net assets | 1.14 | d | 1.14 | 1.14 | 1.22 | 1.15 | 1.40 | ||||
Ratio of net investment income | |||||||||||
to average net assets | .34 | d | .48 | .48 | .57 | .29 | .04 | ||||
Portfolio Turnover Rate | 6.76 | c | 12.14 | 7.13 | 5.73 | 10.61 | 13.62 | ||||
Net Assets, end of period | |||||||||||
($ x 1,000) | 1,822 | 2,071 | 2,446 | 1,810 | 988 | 2,424 |
a | Based on average shares outstanding. |
b | Exclusive of sales charge. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
14
Six Months Ended | ||||||||||||
May 31, 2015 | Year Ended November 30, | |||||||||||
Class C Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 19.93 | 19.04 | 14.97 | 13.88 | 12.65 | 11.58 | ||||||
Investment Operations: | ||||||||||||
Investment (loss)—neta | (.04 | ) | (.05 | ) | (.06 | ) | (.05 | ) | (.06 | ) | (.09 | ) |
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .20 | 1.03 | 4.13 | 1.14 | 1.35 | 1.16 | ||||||
Total from Investment Operations | .16 | .98 | 4.07 | 1.09 | 1.29 | 1.07 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | — | (.01 | ) | — | — | — | — | |||||
Dividends from net realized | ||||||||||||
gain on investments | (.94 | ) | (.08 | ) | — | — | (.06 | ) | — | |||
Total Distributions | (.94 | ) | (.09 | ) | — | — | (.06 | ) | — | |||
Net asset value, end of period | 19.15 | 19.93 | 19.04 | 14.97 | 13.88 | 12.65 | ||||||
Total Return (%)b | .81 | c | 5.23 | 27.19 | 7.85 | 10.22 | 9.24 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 2.03 | d | 1.94 | 2.02 | 2.08 | 1.94 | 2.52 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.90 | d | 1.88 | 1.93 | 2.08 | 1.94 | 2.15 | |||||
Ratio of net investment (loss) | ||||||||||||
to average net assets | (.43 | )d | (.26 | ) | (.34 | ) | (.33 | ) | (.47 | ) | (.71 | ) |
Portfolio Turnover Rate | 6.76 | c | 12.14 | 7.13 | 5.73 | 10.61 | 13.62 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 372 | 522 | 1,016 | 278 | 214 | 312 |
a | Based on average shares outstanding. |
b | Exclusive of sales charge. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
The Fund 15
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||||
May 31, 2015 | Year Ended November 30, | |||||||||||
Class I Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 20.82 | 19.77 | 15.51 | 14.27 | 12.88 | 11.70 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .07 | .16 | .14 | .14 | .09 | .07 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .21 | 1.09 | 4.27 | 1.17 | 1.38 | 1.15 | ||||||
Total from Investment Operations | .28 | 1.25 | 4.41 | 1.31 | 1.47 | 1.22 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.17 | ) | (.12 | ) | (.15 | ) | (.07 | ) | (.02 | ) | (.04 | ) |
Dividends from net realized | ||||||||||||
gain on investments | (.94 | ) | (.08 | ) | — | — | (.06 | ) | — | |||
Total Distributions | (1.11 | ) | (.20 | ) | (.15 | ) | (.07 | ) | (.08 | ) | (.04 | ) |
Net asset value, end of period | 19.99 | 20.82 | 19.77 | 15.51 | 14.27 | 12.88 | ||||||
Total Return (%) | 1.44 | b | 6.37 | 28.75 | 9.23 | 11.46 | 10.47 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .80 | c | .78 | .79 | .80 | .82 | .94 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .80 | c | .78 | .79 | .80 | .82 | .94 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | .67 | c | .77 | .81 | .95 | .67 | .56 | |||||
Portfolio Turnover Rate | 6.76 | b | 12.14 | 7.13 | 5.73 | 10.61 | 13.62 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 30,459 | 34,278 | 817,867 | 535,019 | 376,490 | 144,771 |
a | Based on average shares outstanding. |
b | Not annualized. |
c | Annualized. |
See notes to financial statements.
16
Six Months Ended | ||||||
May 31, 2015 | Year Ended November 30, | |||||
Class Y Shares | (Unaudited) | 2014 | 2013 | a | ||
Per Share Data ($): | ||||||
Net asset value, beginning of period | 20.82 | 19.76 | 17.41 | |||
Investment Operations: | ||||||
Investment income—netb | .07 | .20 | .06 | |||
Net realized and unrealized | ||||||
gain (loss) on investments | .20 | 1.06 | 2.29 | |||
Total from Investment Operations | .27 | 1.26 | 2.35 | |||
Distributions: | ||||||
Dividends from investment income—net | (.17 | ) | (.12 | ) | — | |
Dividends from net realized gain on investments | (.94 | ) | (.08 | ) | — | |
Total Distributions | (1.11 | ) | (.20 | ) | — | |
Net asset value, end of period | 19.98 | 20.82 | 19.76 | |||
Total Return (%) | 1.40 | c | 6.43 | 13.50 | c | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses to average net assets | .79 | d | .79 | .76 | d | |
Ratio of net expenses to average net assets | .79 | d | .79 | .76 | d | |
Ratio of net investment income | ||||||
to average net assets | .69 | d | 1.03 | .78 | d | |
Portfolio Turnover Rate | 6.76 | c | 12.14 | 7.13 | ||
Net Assets, end of period ($ x 1,000) | 664,093 | 749,348 | 1 |
a | From July 1, 2013 (commencement of initial offering) to November 30, 2013. |
b | Based on average shares outstanding. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
The Fund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus U.S. Equity Fund (the “fund”) is a separate diversified series of Strategic Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering ten series, including the fund. The fund’s investment objective is to seek long-term total return. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Walter Scott & Partners Limited (“Walter Scott”), a wholly-owned subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser.The fund is closed to new investors.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 100 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class C, Class I and Class Y. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I and Class Y shares are sold at net asset value per share generally to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are
18
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: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value.All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
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. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant
20
American Depository Receipts and financial futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Directors (the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of May 31, 2015 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 | ||||
Common Stocks† | 685,479,386 | — | — | 685,479,386 |
Mutual Funds | 25,120,398 | — | — | 25,120,398 |
† | See Statement of Investments for additional detailed categorizations. |
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
At May 31, 2015, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by Dreyfus or U.S. Government and Agency securities.The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. During the period ended May 31, 2015, The Bank of New York Mellon earned $10,655 from lending portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments
22
in affiliated investment companies during the period ended May 31, 2015 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 11/30/2014 ($) | Purchases ($) | Sales ($) | 5/31/2015 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Preferred | |||||
Plus Money | |||||
Market | |||||
Fund | 18,282,000 | 87,035,006 | 94,296,089 | 11,020,917 | 1.6 |
Dreyfus | |||||
Institutional | |||||
Cash | |||||
Advantage | |||||
Fund | 29,867,949 | 120,814,084 | 136,582,552 | 14,099,481 | 2.0 |
Total | 48,149,949 | 207,849,090 | 230,878,641 | 25,120,398 | 3.6 |
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
As of and during the period ended May 31, 2015, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended May 31, 2015, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended November 30, 2014 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The tax character of distributions paid to shareholders during the fiscal year ended November 30, 2014 was as follows: ordinary income $5,069,062 and long-term capital gains $3,418,725.The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $430 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon, (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing.
The average amount of borrowings outstanding under the Facilities during the period ended May 31, 2015 was approximately $9,900 with a related weighted average annualized interest rate of 1.12%.
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 con-
24
tractually agreed, from December 1, 2014 through April 1, 2016, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .90% of the value of the fund’s average daily net assets. The reduction in expenses, pursuant to the undertaking, amounted to $511 during the period ended May 31, 2015.
Pursuant to a sub-investment advisory agreement between Dreyfus and Walter Scott, Dreyfus pays Walter Scott a monthly fee at an annual percentage of the fund’s average daily net assets.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended May 31, 2015, Class C shares were charged $1,580 pursuant to the Distribution Plan.
(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended May 31, 2015, Class A and Class C shares were charged $2,409 and $527, respectively, pursuant to the Shareholder Services Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and
The Fund 25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended May 31, 2015, the fund was charged $2,093 for transfer agency services and $59 for cash management services.These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $3.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended May 31, 2015, the fund was charged $28,027 pursuant to the custody agreement.
During the period ended May 31, 2015, the fund was charged $6,140 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $451,639, Distribution Plan fees $239, Shareholder Services Plan fees $472, custodian fees $18,400, Chief Compliance Officer fees $2,113 and transfer agency fees $956, which are offset against an expense reimbursement currently in effect in the amount of $59.
26
(d) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended May 31, 2015, amounted to $49,350,210 and $138,376,270, respectively.
At May 31, 2015, accumulated net unrealized appreciation on investments was $206,873,898, consisting of $217,717,539 gross unrealized appreciation and $10,843,641 gross unrealized depreciation.
At May 31, 2015, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
The Fund 27
NOTES
For More Information
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Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-DREYFUS.
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Dreyfus |
Select Managers |
Small Cap Value Fund |
SEMIANNUAL REPORT May 31, 2015
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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 LoseValue |
Contents | |
THE FUND | |
2 | A Letter from the President |
3 | Discussion of Fund Performance |
6 | UnderstandingYour Fund’s Expenses |
6 | ComparingYour Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
25 | Statement of Assets and Liabilities |
26 | Statement of Operations |
27 | Statement of Changes in Net Assets |
29 | Financial Highlights |
33 | Notes to Financial Statements |
44 | Approval of an Additional Sub-Investment Adviser |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus
Select Managers
Small Cap Value Fund
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Select Managers Small Cap Value Fund, covering the six-month period from December 1, 2014, through May 31, 2015. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
The U.S. stock market proved volatile on its way to posting modest gains for the reporting period. Investors were confounded to a degree by divergent economic trends in domestic and international markets. Stock prices continued to climb over the final month of 2014 as a sustained economic recovery was fueled by strengthening labor markets, but investors worried over the first five months of 2015 that economic weakness in overseas markets, a strengthening U.S. dollar, and expected short-term interest rate hikes might derail growth in the United States.
We remain optimistic regarding the long-term outlook for the U.S. economy. We believe the domestic economic recovery has resumed after a winter soft patch, energy prices have begun to rebound, foreign currencies recently have strengthened, and aggressively accommodative monetary policies from the world’s major central banks seem likely to address global economic weakness.While stocks stand to benefit from these conditions, valuations appear to have risen toward fair levels. Moreover, we believe expectations of domestic rate hikes and recently mixed corporate financial reports may have created uncertainty as to the pace of future gains.As always, we urge you to discuss these observations with your financial advisor, who can help you assess their implications for your investment portfolio.
Thank you for your continued confidence and support.
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J. Charles Cardona
President
The Dreyfus Corporation
June 15, 2015
2
DISCUSSION OF FUND PERFORMANCE
For the reporting period of December 1, 2014, through May 31, 2015, as provided by Keith L. Stransky and Robert B. Mayerick, Portfolio Allocation Managers, EACM Advisors LLC
Fund and Market Performance Overview
For the six-month period ended May 31, 2015, Dreyfus Select Managers Small Cap Value Fund’s Class A, Class C, Class I, and Class Y shares produced total returns of 4.19%, 3.84%, 4.34%, and 4.35%, respectively.1 In comparison, the Russell 2000Value Index (the “Index”), the fund’s benchmark, returned 3.38% for the same period.2
Stocks posted modest gains during the reporting period as the market digested previous gains.The fund outperformed its benchmark, in part due to overweighted exposure to technology stocks.
The Fund’s Investment Approach
The fund seeks capital appreciation. To pursue its goal, the fund normally invests at least 80% of its net assets in the stocks of small-cap companies. The fund uses a “multi-manager” approach by selecting one or more sub-advisers to manage its assets. As the fund’s portfolio allocation managers, we seek sub-advisers that complement one another’s style of investing, consistent with the fund’s investment goal.We monitor and evaluate the performance of the sub-advisers and will make corresponding recommendations to Dreyfus and the fund’s Board based on our evaluations.
The fund’s assets are currently under the day-to-day portfolio management of seven sub-advisers, each acting independently of one another and using their own methodology to select portfolio investments. As of the end of the reporting period, 15% of the fund’s assets are under the management of Thompson, Siegel, and Walmsley, LLC, which employs a combination of quantitative and qualitative security selection methods based on a four-factor valuation model. Approximately 22% of the fund’s assets are under the management of Walthausen & Co., LLC, which uses a proprietary valuation model to identify companies that are trading at a discount to their intrinsic values. Approximately 14% of the fund’s assets are under the management of Neuberger Berman Management LLC, which uses fundamental analysis and a bottom-up stock selection process to identify publicly traded small-cap companies selling at a material discount to their intrinsic value. Approximately 12%
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
of the fund’s assets are under the management of Lombardia Capital Partners, which uses fundamental analysis and a bottom-up value-oriented approach in seeking stocks trading below their intrinsic values. Approximately 7% of the fund’s assets are under the management of Iridian Asset Management LLC, which employs bottom-up stock selection and a disciplined valuation process to identify and invest in corporate change. Approximately 5% of the fund’s assets are under the management of Kayne Anderson Rudnick Investment Management, LLC, which employs a fundamental, bottom-up, research-driven investment process in seeking to identify high-quality companies whose securities are trading at attractive valuations. Approximately 22% of the fund’s assets are under the management of Channing Capital Management, LLC, which employs intensive, fundamental, bottom-up research to identify high-quality companies with strong balance sheets and management teams. Finally, approximately 3% of the fund’s assets are allocated to Eastern Shore Capital Management, which focuses on companies with quality fundamentals. These percentages can change over time, within ranges described in the prospectus.
Stocks Digested Gains in 2015 after Strong 2014 Rally
A previously robust U.S. economic expansion proved uneven during the reporting period in light of severe winter weather and global economic weakness. Massive quantitative easing programs in overseas markets caused the U.S. dollar to appreciate sharply against most foreign currencies, hampering revenues for American exporters. Meanwhile, plummeting oil prices challenged energy producers. In contrast to vigorous gains during 2014, broad measures of U.S. market performance repeatedly vacillated between gains and losses in early 2015 before stronger economic data supported moderately higher stock prices in the spring.
The Fund Beat Market Averages
The fund’s relative performance was buoyed during the reporting period by overweighted exposure to and successful security selection in the information technology sector.The fund held securities such as semiconductor developers Microsemi, which was rewarded for making an immediately accretive acquisition, and Freescale Semiconductor, which produced a breakthrough battery charging solution. The materials sector also added value, paced by industrial commodities producer Cytec Industries. The fund further benefited from underweighted exposure to real estate investment trusts (REITs), which struggled in anticipation of rising interest rates.
4
Although no single market sector significantly undermined relative results, marketer Iconix Brands Group declined amid a regulatory investigation and management departures, and waste oil recycler Darling Ingredients suffered an earnings shortfall due to pricing pressures.
The fund added a new sub-adviser late in the reporting period. Eastern Shore Capital Management focuses on higher quality companies with strong or improving financial positions, sustainable competitive advantages, skilled management teams, and compelling valuations.
A Constructive Investment Posture
The U.S. economic recovery has resumed, the projected growth rate for small-cap stocks appears attractive compared to current valuations, mergers-and-acquisitions activity has intensified, and U.S.-centric small-cap companies should continue to be insulated from global economic weakness.Therefore, as of the reporting period’s end, the fund’s sub-advisers generally have maintained constructive investment postures, including an emphasis on more economically sensitive industry groups and underweighted exposure to interest rate-sensitive companies such as utilities and REITs.
June 15, 2015
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 April 1, 2016, at which time it may |
be extended, terminated, or modified. Had these expenses not been absorbed, the fund’s returns would have been lower. |
2 SOURCE: LIPPER INC. — Reflects the reinvestment of dividends and, where applicable, capital gain |
distributions.The Russell 2000 Value Index is an unmanaged index, which measures the performance of those |
Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Investors cannot invest |
directly in any index. |
The Fund 5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Select Managers Small Cap Value Fund from December 1, 2014 to May 31, 2015. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended May 31, 2015
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $ | 6.57 | $ | 10.16 | $ | 4.94 | $ | 4.79 |
Ending value (after expenses) | $ | 1,041.90 | $ | 1,038.40 | $ | 1,043.40 | $ | 1,043.50 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment
assuming a hypothetical 5% annualized return for the six months ended May 31, 2015
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $ | 6.49 | $ | 10.05 | $ | 4.89 | $ | 4.73 |
Ending value (after expenses) | $ | 1,018.50 | $ | 1,014.96 | $ | 1,020.09 | $ | 1,020.24 |
† Expenses are equal to the fund’s annualized expense ratio of 1.29% for Class A, 2.00% for Class C, .97% for |
Class I and .94% for ClassY, multiplied by the average account value over the period, multiplied by 182/365 (to |
reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS |
May 31, 2015 (Unaudited) |
Common Stocks—97.2% | Shares | Value ($) | |
Automobiles & Components—1.7% | |||
American Axle & Manufacturing | |||
Holdings | 17,510 | a | 439,676 |
Dana Holding | 57,430 | 1,250,251 | |
Gentherm | 30,300 | a | 1,553,178 |
Modine Manufacturing | 144,400 | a | 1,615,836 |
Motorcar Parts of America | 59,300 | a | 1,706,061 |
Remy International | 108,570 | 2,399,397 | |
Superior Industries International | 98,320 | 1,896,593 | |
Thor Industries | 7,042 | 430,196 | |
Winnebago Industries | 131,515 | b | 2,857,821 |
14,149,009 | |||
Banks—13.6% | |||
Atlantic Coast Financial | 182,280 | a,b | 794,741 |
Banc of California | 37,195 | 482,419 | |
Bancorp | 113,300 | a | 1,095,611 |
Bank of Hawaii | 46,480 | b | 2,917,550 |
BankUnited | 118,590 | 3,983,438 | |
BBCN Bancorp | 93,769 | 1,350,274 | |
BofI Holding | 19,500 | a,b | 1,836,120 |
Boston Private Financial Holdings | 114,880 | 1,440,595 | |
Brookline Bancorp | 20,170 | 220,660 | |
Bryn Mawr Bank | 50,990 | 1,472,591 | |
Cathay General Bancorp | 11,300 | 341,486 | |
CenterState Banks | 84,075 | 1,041,689 | |
City Holding | 35,350 | 1,596,406 | |
Columbia Banking System | 226,040 | 6,828,668 | |
Commerce Bancshares | 28,565 | b | 1,274,285 |
Community Bank System | 44,345 | 1,565,822 | |
Customers Bancorp | 76,890 | a | 1,929,939 |
CVB Financial | 115,180 | 1,888,952 | |
Dime Community Bancshares | 105,100 | 1,722,589 | |
Eagle Bancorp | 88,720 | a | 3,530,169 |
East West Bancorp | 37,674 | 1,616,215 | |
F.N.B | 76,391 | 1,030,515 | |
First Financial Bancorp | 107,540 | 1,867,970 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Banks (continued) | |||
First Merchants | 33,167 | 772,459 | |
First Niagara Financial Group | 484,120 | 4,313,510 | |
FirstMerit | 98,462 | 1,933,794 | |
Great Southern Bancorp | 28,790 | 1,136,053 | |
Hancock Holding | 31,270 | 910,895 | |
Heritage Financial | 52,013 | 889,942 | |
Heritage Financial Group | 40,060 | 1,084,424 | |
Huntington Bancshares | 203,580 | 2,265,845 | |
IBERIABANK | 106,692 | 6,857,095 | |
Independent Bank | 125,652 | b | 5,668,162 |
Investors bancorp | 98,348 | 1,181,160 | |
Lakeland Financial | 46,360 | 1,835,392 | |
MB Financial | 162,819 | 5,246,028 | |
Nationstar Mortgage Holdings | 48,600 | a,b | 958,392 |
PacWest Bancorp | 119,501 | 5,364,400 | |
Popular | 48,200 | a | 1,566,018 |
Radian Group | 92,300 | b | 1,654,016 |
Signature Bank | 10,120 | a | 1,413,258 |
South State | 52,524 | 3,772,799 | |
Southside Bancshares | 64,197 | b | 1,723,689 |
Square 1 Financial, Cl. A | 12,000 | a | 313,440 |
Sterling Bancorp | 65,865 | b | 889,836 |
Stock Yards Bancorp | 21,110 | 737,161 | |
TCF Financial | 88,850 | 1,398,499 | |
Texas Capital Bancshares | 47,770 | a | 2,598,688 |
TriCo Bancshares | 56,440 | 1,331,137 | |
TrustCo Bank | 267,153 | 1,805,954 | |
Trustmark | 51,233 | 1,221,907 | |
Umpqua Holdings | 74,150 | 1,304,299 | |
Union Bankshares | 40,316 | 871,229 | |
United Financial Bancorp | 62,765 | 790,839 | |
Westamerica Bancorporation | 21,800 | b | 997,568 |
Wilshire Bancorp | 182,840 | 2,018,554 | |
Wintrust Financial | 27,600 | 1,382,760 | |
WSFS Financial | 75,030 | 1,850,990 | |
111,888,896 |
8
Common Stocks (continued) | Shares | Value ($) | |
Capital Goods—11.8% | |||
A.O. Smith | 26,625 | 1,900,493 | |
AAON | 80,720 | 1,910,642 | |
Actuant, Cl. A | 25,777 | 605,760 | |
Aerojet Rocketdyne Holdings | 59,800 | a | 1,240,850 |
Aerovironment | 21,450 | a | 554,482 |
Albany International, Cl. A | 33,030 | 1,307,327 | |
Allied Motion Technologies | 18,348 | 573,925 | |
American Woodmark | 4,810 | a | 246,945 |
AZZ | 40,960 | 1,963,213 | |
Beacon Roofing Supply | 26,345 | a | 826,179 |
Briggs & Stratton | 91,220 | 1,741,390 | |
Carlisle | 13,650 | 1,353,397 | |
Chart Industries | 15,720 | a | 510,271 |
Chicago Bridge & Iron Co | 30,140 | b | 1,635,396 |
Columbus McKinnon | 30,390 | 693,196 | |
DigitalGlobe | 103,900 | a | 3,117,000 |
EMCOR Group | 25,710 | 1,166,463 | |
EnerSys | 14,708 | 980,141 | |
Franklin Electric | 20,799 | 731,917 | |
FreightCar America | 84,995 | 1,905,588 | |
Generac Holdings | 21,100 | a,b | 881,558 |
Gibraltar Industries | 42,411 | a | 760,005 |
Global Brass & Copper Holdings | 42,620 | 734,343 | |
Graco | 23,950 | 1,738,531 | |
GrafTech International | 137,178 | a | 695,492 |
Granite Construction | 20,920 | 749,982 | |
H&E Equipment Services | 58,860 | 1,284,914 | |
Harsco | 297,935 | 4,799,733 | |
Hexcel | 133,115 | 6,554,583 | |
Hillenbrand | 166,193 | 5,105,449 | |
Hyster-Yale Materials Handling | 8,235 | 584,356 | |
ITT | 24,630 | 1,051,208 | |
KBR | 101,340 | 1,940,661 | |
KEYW Holding | 155,530 | a,b | 1,088,710 |
Lawson Products | 34,950 | a | 808,743 |
Levy Acquisition | 59,425 | a | 959,714 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Capital Goods (continued) | |||
LSI Industries | 28,965 | 274,298 | |
Lydall | 22,691 | a | 621,960 |
Manitowoc | 66,250 | b | 1,249,475 |
Meritor | 71,210 | a | 1,019,015 |
Mueller Water Products, Cl. A | 337,010 | 3,107,232 | |
National Presto Industries | 8,910 | b | 619,245 |
Orion Marine Group | 77,983 | a | 585,652 |
Owens Corning | 38,200 | 1,618,152 | |
Ply Gem Holdings | 167,880 | a | 2,073,318 |
Quanex Building Products | 38,745 | 689,274 | |
RBC Bearings | 16,500 | a | 1,156,320 |
Regal Beloit | 76,541 | 5,984,741 | |
Spirit Aerosystems Holdings, Cl. A | 48,510 | a | 2,648,161 |
Standex International | 22,960 | 1,837,029 | |
Sun Hydraulics | 22,500 | 841,050 | |
Teledyne Technologies | 13,370 | a | 1,354,782 |
The Greenbrier Companies | 26,310 | b | 1,584,651 |
Toro | 3,710 | 253,727 | |
TriMas | 120,463 | a | 3,481,381 |
Trinity Industries | 43,000 | 1,289,570 | |
Triumph Group | 29,852 | b | 1,990,830 |
Tutor Perini | 149,770 | a | 3,139,179 |
Twin Disc | 30,580 | 545,241 | |
Valmont Industries | 6,800 | b | 846,260 |
Wabash National | 82,300 | a | 1,114,342 |
Woodward | 41,283 | 2,102,956 | |
96,730,398 | |||
Commercial & Professional Services—6.7% | |||
ABM Industries | 167,381 | 5,429,840 | |
Acacia Research | 67,550 | 689,685 | |
ACCO Brands | 85,809 | a | 630,696 |
Brady, Cl. A | 20,920 | 529,276 | |
CBIZ | 121,033 | a | 1,097,769 |
CDI | 46,491 | 575,094 | |
CEB | 24,900 | 2,106,291 | |
Civeo | 151,640 | 606,560 |
10
Common Stocks (continued) | Shares | Value ($) | |
Commercial & Professional Services (continued) | |||
Clean Harbors | 29,800 | a,b | 1,678,932 |
Covanta Holding | 172,540 | 3,813,134 | |
Deluxe | 33,570 | 2,142,773 | |
Ennis | 30,345 | 510,403 | |
FTI Consulting | 12,465 | a | 489,875 |
G&K Services, Cl. A | 10,600 | 738,608 | |
Huron Consulting Group | 56,099 | a | 3,607,166 |
Kelly Services, Cl. A | 44,945 | 697,546 | |
Korn/Ferry International | 49,805 | 1,598,242 | |
Matthews International, Cl. A | 106,935 | 5,309,323 | |
McGrath RentCorp | 98,230 | 2,990,121 | |
MSA Safety | 98,252 | 4,391,864 | |
Multi-Color | 28,990 | 1,856,809 | |
Pitney Bowes | 15,066 | 329,192 | |
R.R. Donnelley & Sons | 46,792 | b | 897,471 |
Steelcase, Cl. A | 540,600 | 9,298,320 | |
Tetra Tech | 51,140 | 1,337,822 | |
UniFirst | 14,790 | 1,690,645 | |
US Ecology | 6,090 | 280,810 | |
55,324,267 | |||
Consumer Durables & Apparel—2.6% | |||
Columbia Sportswear | 2,610 | 146,291 | |
Crocs | 50,770 | a,b | 763,581 |
CSS Industries | 33,540 | 925,369 | |
G-III Apparel Group | 3,710 | a | 210,951 |
Helen of Troy | 3,880 | a | 339,461 |
Iconix Brand Group | 181,570 | a | 4,688,137 |
iRobot | 12,100 | a,b | 386,595 |
M/I Homes | 130,860 | a | 3,045,112 |
Nautilus | 9,450 | a | 199,584 |
Skullcandy | 178,100 | a | 1,335,750 |
Smith & Wesson Holding | 80,900 | a,b | 1,190,039 |
Standard Pacific | 28,120 | a | 231,709 |
Steven Madden | 33,900 | a | 1,280,742 |
TRI Pointe Homes | 76,305 | a | 1,100,318 |
UCP, Cl. A | 58,583 | a | 478,623 |
The Fund 11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Consumer Durables & Apparel (continued) | |||
Unifi | 70,260 | a | 2,284,855 |
Vera Bradley | 82,300 | a,b | 1,114,342 |
Wolverine World Wide | 48,800 | 1,433,744 | |
21,155,203 | |||
Consumer Services—2.4% | |||
American Public Education | 35,920 | a | 868,186 |
Bloomin’ Brands | 48,680 | 1,093,353 | |
Bob Evans Farms | 21,360 | 981,065 | |
Capella Education | 31,690 | 1,688,126 | |
Cheesecake Factory | 38,660 | 1,993,696 | |
Darden Restaurants | 4,615 | 302,467 | |
DeVry Education Group | 31,790 | 1,011,240 | |
Graham Holdings, Cl. B | 1,200 | 1,285,200 | |
Houghton Mifflin Harcourt | 50,200 | a | 1,324,276 |
Interval Leisure Group | 84,850 | 2,207,797 | |
Jamba | 54,200 | a,b | 829,802 |
LifeLock | 86,200 | a | 1,311,964 |
Marriott Vacations Worldwide | 3,770 | 332,816 | |
Ruth’s Hospitality Group | 60,873 | 896,659 | |
SeaWorld Entertainment | 155,370 | 3,355,992 | |
19,482,639 | |||
Diversified Financials—5.2% | |||
Ares Capital | 124,130 | 2,079,178 | |
Artisan Partners Asset Management, Cl. A | 32,100 | 1,415,931 | |
Cowen Group, Cl. A | 246,600 | a | 1,454,940 |
Encore Capital Group | 222,320 | a,b | 8,828,327 |
Evercore Partners, Cl. A | 101,835 | 5,190,530 | |
Fifth Street Finance | 79,319 | 550,474 | |
First Cash Financial Services | 47,900 | a | 2,231,661 |
FNFV Group | 76,090 | a | 1,168,742 |
Gain Capital Holdings | 91,959 | 855,219 | |
Green Dot, Cl. A | 80,800 | a | 1,183,720 |
Janus Capital Group | 33,614 | 610,094 | |
New Mountain Finance | 56,797 | b | 858,771 |
12
Common Stocks (continued) | Shares | Value ($) | |
Diversified Financials (continued) | |||
PHH | 151,566 | a | 4,181,706 |
Piper Jaffray | 4,750 | a | 225,245 |
Stifel Financial | 140,123 | a | 7,462,951 |
Voya Financial | 19,370 | 877,655 | |
Waddell & Reed Financial, Cl. A | 24,302 | 1,161,150 | |
Westwood Holdings | 6,720 | 381,360 | |
World Acceptance | 21,868 | a,b | 1,783,773 |
42,501,427 | |||
Energy—2.2% | |||
Aegean Marine Petroleum | |||
Network | 71,600 | 1,018,152 | |
Atwood Oceanics | 38,122 | b | 1,173,014 |
C&J Energy Services | 7,300 | a | 109,719 |
Clayton Williams Energy | 7,720 | a | 398,661 |
Core Laboratories | 8,600 | b | 1,010,328 |
Delek US Holdings | 23,900 | 904,854 | |
Era Group | 75,540 | a | 1,586,340 |
GulfMark Offshore, Cl. A | 20,468 | b | 274,885 |
Helix Energy Solutions Group | 64,200 | a,b | 1,006,014 |
ION Geophysical | 187,870 | a | 266,775 |
McDermott International | 78,220 | a | 427,081 |
Newpark Resources | 131,900 | a | 1,118,512 |
Oasis Petroleum | 5,910 | a | 100,352 |
PBF Energy | 26,300 | 705,366 | |
PDC Energy | 23,510 | a | 1,402,136 |
Sanchez Energy | 144,429 | a,b | 1,455,844 |
Stone Energy | 46,288 | a | 628,591 |
TETRA Technologies | 144,690 | a | 910,100 |
Tidewater | 39,470 | b | 968,594 |
Triangle Petroleum | 89,920 | a,b | 461,290 |
Ultra Petroleum | 70,710 | a,b | 983,576 |
Whiting Petroleum | 17,435 | a | 575,181 |
World Fuel Services | 10,600 | 530,318 | |
18,015,683 |
The Fund 13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Exchange-Traded Funds—.7% | |||
iShares Russell 2000 ETF | 49,145 | b | 6,088,574 |
Food & Staples Retailing—.3% | |||
Andersons | 26,050 | 1,155,057 | |
SpartanNash | 27,440 | 857,774 | |
Village Super Market, Cl. A | 16,900 | 541,138 | |
2,553,969 | |||
Food, Beverage & Tobacco—1.4% | |||
Calavo Growers | 4,000 | 201,800 | |
Dean Foods | 115,890 | 2,134,694 | |
Lancaster Colony | 53,753 | 4,796,918 | |
National Beverage | 53,300 | a | 1,103,310 |
Pinnacle Foods | 23,660 | 997,269 | |
Sanderson Farms | 6,408 | b | 522,444 |
TreeHouse Foods | 20,000 | a | 1,426,600 |
11,183,035 | |||
Health Care Equipment & Services—3.7% | |||
Accuray | 130,690 | a,b | 803,090 |
Addus HomeCare | 28,150 | a | 788,481 |
Air Methods | 60,440 | a | 2,548,150 |
Allscripts Healthcare Solutions | 193,610 | a | 2,724,093 |
AmSurg | 2,670 | a | 179,798 |
AngioDynamics | 35,260 | a | 565,923 |
Anika Therapeutics | 75,699 | a | 2,553,327 |
CorVel | 14,960 | a | 537,064 |
Cynosure, Cl. A | 48,000 | a | 1,713,600 |
Derma Sciences | 92,985 | a | 609,982 |
Globus Medical, Cl. A | 8,990 | a | 233,201 |
Halyard Health | 5,450 | 225,739 | |
HealthSouth | 35,360 | 1,526,137 | |
Hill-Rom Holdings | 18,702 | 964,275 | |
IPC Healthcare | 13,863 | a | 684,416 |
Kindred Healthcare | 227,103 | 5,202,930 | |
MedAssets | 51,291 | a | 1,070,443 |
Merit Medical Systems | 30,636 | a | 629,876 |
Molina Healthcare | 25,500 | a | 1,854,870 |
Natus Medical | 8,120 | a | 317,167 |
14
Common Stocks (continued) | Shares | Value ($) | |
Health Care Equipment & Services (continued) | |||
NuVasive | 3,090 | a | 156,200 |
Patterson | 29,300 | 1,401,712 | |
PharMerica | 29,664 | a | 986,625 |
Providence Service | 34,800 | a | 1,672,488 |
STERIS | 1,680 | 112,274 | |
Team Health Holdings | 2,380 | a | 139,182 |
30,201,043 | |||
Household & Personal Products—.4% | |||
Elizabeth Arden | 41,660 | a,b | 586,156 |
HRG Group | 58,975 | a | 773,752 |
Nu Skin Enterprises, Cl. A | 14,969 | b | 757,431 |
WD-40 | 14,900 | 1,257,113 | |
3,374,452 | |||
Insurance—4.7% | |||
American Equity Investment Life Holding | 102,645 | 2,608,209 | |
American Financial Group | 20,230 | 1,284,605 | |
Endurance Specialty Holdings | 30,300 | 1,841,634 | |
FBL Financial Group, Cl. A | 4,854 | 278,814 | |
Federated National Holding | |||
Company, Cl. C | 47,400 | 1,217,232 | |
First American Financial | 149,655 | 5,344,180 | |
FNF Group | 23,305 | 884,658 | |
Greenlight Capital Re, Cl. A | 44,300 | a | 1,357,352 |
HCC Insurance Holdings | 16,977 | 970,745 | |
Horace Mann Educators | 128,240 | 4,414,021 | |
Infinity Property & Casualty | 15,200 | 1,099,720 | |
Kemper | 8,270 | 295,983 | |
Maiden Holdings | 128,800 | 1,800,624 | |
Navigators Group | 23,790 | a | 1,846,580 |
Primerica | 96,540 | 4,269,965 | |
RLI | 38,900 | 1,893,263 | |
Stewart Information Services | 80,963 | 3,041,780 | |
Symetra Financial | 54,510 | 1,333,315 | |
The Hanover Insurance Group | 18,074 | 1,286,507 | |
Validus Holdings | 35,531 | 1,524,635 | |
38,593,822 |
The Fund 15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Materials—6.6% | |||
American Vanguard | 151,290 | 2,084,776 | |
AptarGroup | 20,090 | 1,281,139 | |
Avery Dennison | 56,620 | 3,505,344 | |
Chemtura | 57,740 | a | 1,602,862 |
Cliffs Natural Resources | 695,580 | b | 3,693,530 |
Crown Holdings | 51,210 | a | 2,831,401 |
Cytec Industries | 132,507 | 8,015,348 | |
Ferro | 229,780 | a | 3,485,763 |
FutureFuel | 72,200 | 866,400 | |
Glatfelter | 70,600 | 1,658,394 | |
Greif, Cl. A | 23,198 | 885,932 | |
Haynes International | 14,725 | 694,284 | |
Intrepid Potash | 131,230 | a | 1,524,893 |
Kaiser Aluminum | 50,889 | 4,128,625 | |
Koppers Holdings | 65,698 | 1,696,322 | |
Kraton Performance Polymers | 36,420 | a | 864,975 |
LSB Industries | 56,779 | a | 2,414,811 |
Materion | 41,150 | 1,530,368 | |
Mercer International | 66,975 | a | 949,705 |
Nevsun Resources | 235,350 | 981,409 | |
Olympic Steel | 27,045 | 474,369 | |
PolyOne | 176,813 | 6,876,258 | |
Resolute Forest Products | 49,300 | a,b | 589,135 |
Sealed Air | 23,400 | 1,139,580 | |
Sonoco Products | 19,573 | 881,176 | |
54,656,799 | |||
Media—1.6% | |||
Cinemark Holdings | 38,800 | 1,572,564 | |
Crown Media Holdings, Cl. A | 47,000 | a | 191,760 |
E.W. Scripps, Cl. A | 72,800 | 1,705,704 | |
Manchester United, Cl. A | 63,095 | a,b | 1,077,032 |
Media General | 71,173 | a | 1,178,625 |
Meredith | 90,287 | 4,767,154 | |
New Media Investment Group | 59,841 | 1,317,699 | |
World Wrestling Entertainment, Cl. A | 84,800 | b | 1,212,640 |
13,023,178 |
16
Common Stocks (continued) | Shares | Value ($) | |
Pharmaceuticals, Biotech | |||
& Life Sciences—2.3% | |||
ACADIA Pharmaceuticals | 4,520 | a | 186,224 |
Affymetrix | 100,770 | a,b | 1,182,032 |
Akorn | 3,880 | a | 178,092 |
Amarin, ADR | 268,655 | a | 620,593 |
BioDelivery Sciences International | 90,675 | a,b | 772,551 |
Cambrex | 46,160 | a | 1,847,323 |
Cempra | 6,090 | a | 223,564 |
Charles River Laboratories | |||
International | 96,792 | a | 7,001,934 |
Clovis Oncology | 1,740 | a | 160,846 |
Conatus Pharmaceuticals | 40,415 | a,b | 220,262 |
Concert Pharmaceuticals | 94,588 | a,b | 1,512,462 |
Flamel Technologies, ADR | 183,589 | a | 3,368,858 |
Genocea Biosciences | 7,940 | a | 84,243 |
MacroGenics | 4,350 | a | 140,723 |
PAREXEL International | 5,390 | a | 358,273 |
PDL BioPharma | 63,899 | b | 426,845 |
PTC Therapeutics | 1,570 | a | 91,201 |
Relypsa | 6,150 | a | 226,259 |
Tetraphase Pharmaceuticals, Cl. I | 6,260 | a | 268,429 |
ZIOPHARM Oncology | 9,220 | a | 87,406 |
ZS Pharma | 1,570 | a | 91,845 |
19,049,965 | |||
Real Estate—3.2% | |||
Alexander & Baldwin | 4,930 | 202,475 | |
AV Homes | 51,140 | a | 783,465 |
Chatham Lodging Trust | 52,100 | c | 1,455,674 |
Corporate Office Properties Trust | 170,933 | c | 4,387,850 |
DiamondRock Hospitality | 22,960 | c | 302,383 |
Equity Commonwealth | 34,800 | a,c | 896,100 |
First Potomac Realty Trust | 68,001 | c | 686,810 |
Hersha Hospitality Trust | 325,272 | c | 2,068,730 |
Highwoods Properties | 4,410 | c | 185,000 |
iStar Financial | 131,407 | a,c | 1,867,293 |
LaSalle Hotel Properties | 66,408 | c | 2,421,236 |
The Fund 17
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Real Estate (continued) | |||
Lexington Realty Trust | 142,100 | c | 1,304,478 |
Medical Properties Trust | 113,887 | c | 1,544,308 |
New Senior Investment Group | 204,074 | 3,254,981 | |
Newcastle Investment | 225,550 | c | 1,157,071 |
Outfront Media | 38,625 | 1,070,299 | |
Parkway Properties | 82,306 | c | 1,414,840 |
Ramco-Gershenson Properties Trust | 39,942 | c | 687,801 |
Sovran Self Storage | 3,300 | c | 300,993 |
STAG Industrial | 6,150 | c | 130,995 |
Sun Communities | 3,770 | c | 237,925 |
Sunstone Hotel Investors | 20,820 | c | 317,713 |
26,678,420 | |||
Retailing—4.0% | |||
ANN | 103,663 | a | 4,846,245 |
Asbury Automotive Group | 4,410 | a | 375,379 |
Big Lots | 75,850 | 3,329,815 | |
CST Brands | 18,595 | 739,523 | |
DSW, Cl. A | 45,873 | 1,589,500 | |
Express | 94,407 | a | 1,665,340 |
Finish Line, Cl. A | 24,725 | b | 647,053 |
Genesco | 24,400 | a | 1,615,036 |
GNC Holdings, Cl. A | 27,970 | 1,245,784 | |
Haverty Furniture | 53,470 | 1,123,405 | |
Lithia Motors, Cl. A | 45,195 | 4,811,008 | |
Lumber Liquidators Holdings | 17,174 | a | 350,350 |
New York & Co | 61,280 | a | 155,651 |
Office Depot | 108,888 | a | 1,009,392 |
Outerwall | 31,993 | b | 2,452,583 |
Pier 1 Imports | 99,150 | b | 1,260,197 |
Rent-A-Center | 31,195 | 943,649 | |
Select Comfort | 34,561 | a | 1,076,575 |
Shutterfly | 31,500 | a | 1,464,750 |
Sonic Automotive, Cl. A | 60,020 | 1,395,465 | |
The Children’s Place | 17,600 | 1,151,040 | |
33,247,740 |
18
Common Stocks (continued) | Shares | Value ($) | |
Semiconductors & Semiconductor | |||
Equipment—3.4% | |||
ANADIGICS | 659,947 | a | 572,768 |
Applied Micro Circuits | 123,060 | a | 786,353 |
Axcelis Technologies | 673,635 | a | 2,155,632 |
Brooks Automation | 44,170 | 496,471 | |
Cabot Microelectronics | 42,520 | a | 1,963,574 |
CEVA | 31,530 | a | 647,626 |
ChipMOS Technologies | 41,700 | 968,274 | |
Cypress Semiconductor | 90,565 | a | 1,243,457 |
Entegris | 19,310 | a | 268,988 |
FormFactor | 113,150 | a | 1,053,426 |
Intersil, Cl. A | 10,670 | 144,045 | |
MA-COM Technology | |||
Solutions Holdings | 33,200 | a,b | 1,266,912 |
Mellanox Technologies | 25,090 | a | 1,262,529 |
Microsemi | 170,389 | a | 6,200,456 |
MKS Instruments | 8,640 | 325,814 | |
Qorvo | 2,050 | a | 168,408 |
Rambus | 153,280 | a | 2,343,651 |
Rudolph Technologies | 33,000 | a | 420,420 |
Silicon Laboratories | 4,640 | a | 257,242 |
Teradyne | 84,100 | 1,778,715 | |
Ultratech | 97,890 | a | 1,951,927 |
Veeco Instruments | 37,300 | a | 1,129,444 |
Xcerra | 98,962 | a | 763,987 |
28,170,119 | |||
Software & Services—5.7% | |||
ACI Worldwide | 4,870 | a | 115,955 |
Acxiom | 84,100 | a | 1,393,537 |
American Software, Cl. A | 81,806 | 719,075 | |
AVG Technologies | 67,000 | a | 1,642,840 |
Bankrate | 72,930 | a | 889,746 |
Blackbaud | 2,490 | 127,637 | |
Booz Allen Hamilton Holdings | 181,229 | 4,594,155 | |
Cadence Design Systems | 68,610 | a | 1,357,792 |
The Fund 19
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Software & Services (continued) | |||
Cass Information Systems | 30,168 | 1,504,176 | |
Computer Services | 14,993 | 637,203 | |
Comverse | 86,108 | a | 2,072,620 |
Convergys | 130,200 | 3,232,866 | |
CoreLogic | 65,030 | a | 2,534,869 |
Covisint | 168,600 | a | 453,534 |
DST Systems | 22,110 | 2,617,824 | |
Epiq Systems | 61,600 | 1,033,032 | |
FalconStor Software | 570,929 | a | 822,138 |
Gigamon | 37,300 | a | 1,147,348 |
Heartland Payment Systems | 19,100 | 1,020,895 | |
Jack Henry & Associates | 27,950 | 1,818,986 | |
Lionbridge Technologies | 113,970 | a | 629,114 |
MAXIMUS | 3,300 | 215,721 | |
Mentor Graphics | 17,620 | 460,058 | |
MoneyGram International | 87,060 | a | 846,223 |
Monotype Imaging Holdings | 30,550 | 792,467 | |
NeuStar, Cl. A | 69,900 | a,b | 1,909,668 |
Nuance Communications | 117,650 | a | 1,984,756 |
Rovi | 112,590 | a,b | 1,887,008 |
SeaChange International | 110,520 | a | 747,115 |
Silver Spring Networks | 86,200 | a,b | 1,178,354 |
SS&C Technologies Holdings | 2,840 | 167,361 | |
Syntel | 34,720 | a | 1,649,547 |
Unwired Planet | 647,344 | a | 435,145 |
VeriFone Systems | 29,960 | a | 1,143,573 |
Verint Systems | 49,208 | a | 3,182,291 |
46,964,629 |
20
Common Stocks (continued) | Shares | Value ($) | |
Technology Hardware & Equipment���8.6% | |||
ADTRAN | 60,073 | 1,034,457 | |
Anixter International | 81,222 | a | 5,523,096 |
ARRIS Group | 77,880 | a | 2,570,819 |
Aviat Networks | 541,823 | a | 617,678 |
Avid Technology | 93,000 | a | 1,656,330 |
Avnet | 29,620 | 1,303,576 | |
Badger Meter | 24,025 | 1,550,093 | |
Bel Fuse, Cl. B | 29,440 | 659,456 | |
Belden | 69,953 | 5,905,432 | |
Black Box | 36,895 | 740,114 | |
Brocade Communications Systems | 104,780 | 1,295,605 | |
Ceragon Networks | 87,630 | a,b | 114,795 |
Ciena | 78,530 | a,b | 1,894,144 |
Cognex | 22,150 | 1,117,911 | |
Comtech Telecommunications | 62,000 | 1,862,480 | |
CTS | 35,736 | 673,624 | |
Dolby Laboratories, Cl. A | 37,310 | 1,460,686 | |
Harmonic | 122,500 | a | 834,225 |
II-VI | 67,930 | a | 1,268,253 |
Infinera | 78,220 | a | 1,614,461 |
Ingram Micro, Cl. A | 60,539 | a,b | 1,623,051 |
InvenSense | 52,600 | a,b | 744,816 |
Itron | 30,030 | a | 1,077,777 |
JDS Uniphase | 92,700 | a | 1,188,414 |
Kimball Electronics | 33,970 | 529,253 | |
Knowles | 66,059 | a,b | 1,278,242 |
Lexmark International, Cl. A | 59,020 | 2,713,740 | |
Littelfuse | 51,192 | 4,950,266 |
The Fund 21
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Technology Hardware & | |||
Equipment (continued) | |||
LRAD | 97,250 | a,b | 229,510 |
Maxwell Technologies | 99,900 | a,b | 509,490 |
Mercury Systems | 95,290 | a | 1,300,708 |
Methode Electronics | 37,550 | 1,762,222 | |
Neonode | 74,480 | a,b | 304,623 |
OSI Systems | 12,110 | a | 874,826 |
Park Electrochemical | 56,375 | 1,210,935 | |
Plantronics | 7,618 | 420,285 | |
Plexus | 18,932 | a | 861,027 |
QLogic | 37,239 | a | 577,949 |
Quantum | 599,019 | a | 1,221,999 |
Rogers | 14,420 | a | 1,041,845 |
ScanSource | 33,277 | a | 1,294,475 |
ShoreTel | 179,100 | a | 1,232,208 |
Sonus Networks | 277,106 | a | 2,169,740 |
SYNNEX | 25,080 | 2,073,364 | |
Vishay Intertechnology | 393,195 | 5,119,399 | |
Vishay Precision Group | 27,120 | a | 357,984 |
70,365,383 | |||
Telecommunication Services—.4% | |||
FairPoint Communications | 64,800 | a,b | 1,307,664 |
Telephone & Data Systems | 20,440 | 606,864 | |
US Cellular | 13,940 | a | 545,054 |
Vonage Holdings | 254,500 | a | 1,185,970 |
3,645,552 | |||
Transportation—1.4% | |||
Air Transport Services Group | 83,831 | a | 881,902 |
22
Common Stocks (continued) | Shares | Value ($) | |
Transportation (continued) | |||
Allegiant Travel | 930 | 146,447 | |
Celadon Group | 63,500 | 1,480,820 | |
Danaos | 105,701 | a | 689,170 |
Forward Air | 6,260 | 324,706 | |
JetBlue Airways | 8,290 | a | 167,126 |
Landstar System | 26,850 | b | 1,755,990 |
Quality Distribution | 69,400 | a | 1,097,908 |
Ryder System | 22,270 | 2,041,045 | |
SkyWest | 14,074 | 208,295 | |
Spirit Airlines | 3,650 | a | 232,031 |
Swift Transportation | 50,160 | a | 1,167,223 |
Werner Enterprises | 57,755 | 1,589,417 | |
11,782,080 | |||
Utilities—2.6% | |||
ALLETE | 112,501 | 5,664,425 | |
Atlantic Power | 239,800 | b | 707,410 |
Dynegy | 53,020 | a | 1,714,667 |
MGE Energy | 2,260 | 87,530 | |
New Jersey Resources | 84,717 | 2,547,440 | |
NorthWestern | 34,600 | 1,799,892 | |
Ormat Technologies | 40,350 | b | 1,496,985 |
Piedmont Natural Gas | 7,130 | 265,878 | |
PNM Resources | 32,300 | 858,857 | |
Portland General Electric | 131,045 | 4,581,333 | |
Questar | 57,100 | 1,296,170 | |
21,020,587 | |||
Total Common Stocks | |||
(cost $690,063,257) | 799,846,869 |
The Fund 23
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Investment of Cash Collateral | ||||
for Securities Loaned—8.2% | Shares | Value ($) | ||
Registered Investment Company; | ||||
Dreyfus Institutional Cash | ||||
Advantage Fund | ||||
(cost $67,579,785) | 67,579,785 | d | 67,579,785 | |
Total Investments (cost $757,643,042) | 105.4 | % | 867,426,654 | |
Liabilities, Less Cash and Receivables | (5.4 | %) | (44,104,780 | ) |
Net Assets | 100.0 | % | 823,321,874 |
ADR—American Depository Receipts
ETF—Exchange-Traded Fund
a Non-income producing security. |
b Security, or portion thereof, on loan.At May 31, 2015, the value of the fund’s securities on loan was $76,102,324 |
and the value of the collateral held by the fund was $78,720,687, consisting of cash collateral of $67,579,785 and |
U.S. Government & Agency securities valued at $11,140,902. |
c Investment in real estate investment trust. |
d Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Banks | 13.6 | Utilities | 2.6 |
Capital Goods | 11.8 | Consumer Services | 2.4 |
Technology Hardware & Equipment | 8.6 | Pharmaceuticals, | |
Money Market Investment | 8.2 | Biotech & Life Sciences | 2.3 |
Commercial & Professional Services | 6.7 | Energy | 2.2 |
Materials | 6.6 | Automobiles & Components | 1.7 |
Software & Services | 5.7 | Media | 1.6 |
Diversified Financials | 5.2 | Food, Beverage & Tobacco | 1.4 |
Insurance | 4.7 | Transportation | 1.4 |
Retailing | 4.0 | Exchange-Traded Funds | .7 |
Health Care Equipment & Services | 3.7 | Household & Personal Products | .4 |
Semiconductors & | Telecommunication Services | .4 | |
Semiconductor Equipment | 3.4 | Food & Staples Retailing | .3 |
Real Estate | 3.2 | ||
Consumer Durables & Apparel | 2.6 | 105.4 |
† Based on net assets. |
See notes to financial statements. |
24
STATEMENT OF ASSETS AND LIABILITIES |
May 31, 2015 (Unaudited) |
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments (including | ||||
securities on loan, valued at $76,102,324)—Note 1(b): | ||||
Unaffiliated issuers | 690,063,257 | 799,846,869 | ||
Affiliated issuers | 67,579,785 | 67,579,785 | ||
Cash | 26,834,939 | |||
Receivable for investment securities sold | 2,690,451 | |||
Dividends and securities lending income receivable | 705,621 | |||
Receivable for shares of Common Stock subscribed | 509,427 | |||
Prepaid expenses | 31,536 | |||
898,198,628 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 677,613 | |||
Liability for securities on loan—Note 1(b) | 67,579,785 | |||
Payable for investment securities purchased | 6,043,944 | |||
Payable for shares of Common Stock redeemed | 499,018 | |||
Accrued expenses | 76,394 | |||
74,876,754 | ||||
Net Assets ($) | 823,321,874 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 690,275,365 | |||
Accumulated undistributed investment income—net | 2,796,771 | |||
Accumulated net realized gain (loss) on investments | 20,466,126 | |||
Accumulated net unrealized appreciation | ||||
(depreciation) on investments | 109,783,612 | |||
Net Assets ($) | 823,321,874 | |||
Net Asset Value Per Share | ||||
Class A | Class C | Class I | Class Y | |
Net Assets ($) | 2,355,218 | 73,153 | 20,927,570 | 799,965,933 |
Shares Outstanding | 102,655 | 3,383 | 899,465 | 34,408,072 |
Net Asset Value Per Share ($) | 22.94 | 21.62 | 23.27 | 23.25 |
See notes to financial statements. |
The Fund 25
STATEMENT OF OPERATIONS |
Six Months Ended May 31, 2015 (Unaudited) |
Investment Income ($): | ||
Income: | ||
Cash dividends (net of $5,196 foreign taxes withheld at source) | 6,084,574 | |
Income from securities lending—Note 1(b) | 451,508 | |
Total Income | 6,536,082 | |
Expenses: | ||
Management fee—Note 3(a) | 3,537,641 | |
Custodian fees—Note 3(c) | 42,889 | |
Professional fees | 15,243 | |
Registration fees | 39,884 | |
Directors’ fees and expenses—Note 3(d) | 38,037 | |
Prospectus and shareholders’ reports | 11,745 | |
Shareholder servicing costs—Note 3(c) | 7,672 | |
Loan commitment fees—Note 2 | 3,572 | |
Distribution fees—Note 3(b) | 210 | |
Miscellaneous | 24,460 | |
Total Expenses | 3,721,353 | |
Less—reduction in expenses due to undertaking—Note 3(a) | (428 | ) |
Less—reduction in fees due to earnings credits—Note 3(c) | (4 | ) |
Net Expenses | 3,720,921 | |
Investment Income—Net | 2,815,161 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments | 24,879,573 | |
Net unrealized appreciation (depreciation) on investments | 6,762,054 | |
Net Realized and Unrealized Gain (Loss) on Investments | 31,641,627 | |
Net Increase in Net Assets Resulting from Operations | 34,456,788 | |
See notes to financial statements. |
26
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
May 31, 2015 | Year Ended | |||
(Unaudited) | November 30, 2014 | |||
Operations ($): | ||||
Investment income—net | 2,815,161 | 2,622,735 | ||
Net realized gain (loss) on investments | 24,879,573 | 88,770,738 | ||
Net unrealized appreciation | ||||
(depreciation) on investments | 6,762,054 | (63,501,216 | ) | |
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 34,456,788 | 27,892,257 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A | (472 | ) | (5,087 | ) |
Class I | (48,079 | ) | (3,895,063 | ) |
Class Y | (2,152,331 | ) | (6 | ) |
Net realized gain on investments: | ||||
Class A | (245,496 | ) | (138,419 | ) |
Class C | (6,784 | ) | (19,582 | ) |
Class I | (2,368,821 | ) | (56,713,713 | ) |
Class Y | (86,586,187 | ) | (93 | ) |
Total Dividends | (91,408,170 | ) | (60,771,963 | ) |
Capital Stock Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A | 545,079 | 909,969 | ||
Class C | 25,000 | 18,504 | ||
Class I | 5,958,871 | 76,211,933 | ||
Class Y | 112,851,744 | 799,022,425 | ||
Dividends reinvested: | ||||
Class A | 244,238 | 141,900 | ||
Class C | 6,784 | 19,582 | ||
Class I | 2,099,337 | 30,393,174 | ||
Class Y | 44,506,044 | — | ||
Cost of shares redeemed: | ||||
Class A | (309,145 | ) | (466,697 | ) |
Class C | (8,622 | ) | (201,387 | ) |
Class I | (6,005,828 | ) | (779,866,478 | ) |
Class Y | (49,233,077 | ) | (32,065,072 | ) |
Increase (Decrease) in Net Assets | ||||
from Capital Stock Transactions | 110,680,425 | 94,117,853 | ||
Total Increase (Decrease) in Net Assets | 53,729,043 | 61,238,147 | ||
Net Assets ($): | ||||
Beginning of Period | 769,592,831 | 708,354,684 | ||
End of Period | 823,321,874 | 769,592,831 | ||
Undistributed investment income—net | 2,796,771 | 2,182,492 |
The Fund 27
STATEMENT OF CHANGES IN NET ASSETS (continued)
Six Months Ended | ||||
May 31, 2015 | Year Ended | |||
(Unaudited) | November 30, 2014 | |||
Capital Share Transactions: | ||||
Class A | ||||
Shares sold | 24,345 | 36,677 | ||
Shares issued for dividends reinvested | 10,898 | 5,770 | ||
Shares redeemed | (13,527 | ) | (19,251 | ) |
Net Increase (Decrease) in Shares Outstanding | 21,716 | 23,196 | ||
Class C | ||||
Shares sold | 1,141 | 795 | ||
Shares issued for dividends reinvested | 321 | 831 | ||
Shares redeemed | (404 | ) | (8,480 | ) |
Net Increase (Decrease) in Shares Outstanding | 1,058 | (6,854 | ) | |
Class Ia | ||||
Shares sold | 255,930 | 3,068,808 | ||
Shares issued for dividends reinvested | 92,251 | 1,223,987 | ||
Shares redeemed | (257,842 | ) | (30,100,703 | ) |
Net Increase (Decrease) in Shares Outstanding | 90,339 | (25,807,908 | ) | |
Class Ya | ||||
Shares sold | 4,898,372 | 30,943,433 | ||
Shares issued for dividends reinvested | 1,956,768 | — | ||
Shares redeemed | (2,088,441 | ) | (1,302,104 | ) |
Net Increase (Decrease) in Shares Outstanding | 4,766,699 | 29,641,329 |
a During the period ended November 30, 2014, 27,149,740 Class I shares representing $705,893,243 were |
exchanged for 27,160,186 ClassY shares. |
See notes to financial statements.
28
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||||
May 31, 2015 | Year Ended November 30, | |||||||||||
Class A Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 24.89 | 26.25 | 19.62 | 18.66 | 19.63 | 15.24 | ||||||
Investment Operations: | ||||||||||||
Investment income (loss)—neta | .04 | .01 | .06 | .02 | (.04 | ) | (.05 | ) | ||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .93 | .84 | 7.57 | 2.56 | .23 | 4.47 | ||||||
Total from Investment Operations | .97 | .85 | 7.63 | 2.58 | .19 | 4.42 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.00 | )b | (.08 | ) | (.00 | )b | — | — | — | |||
Dividends from net realized | ||||||||||||
gain on investments | (2.92 | ) | (2.13 | ) | (1.00 | ) | (1.62 | ) | (1.16 | ) | (.03 | ) |
Total Distributions | (2.92 | ) | (2.21 | ) | (1.00 | ) | (1.62 | ) | (1.16 | ) | (.03 | ) |
Net asset value, end of period | 22.94 | 24.89 | 26.25 | 19.62 | 18.66 | 19.63 | ||||||
Total Return (%)c | 4.19 | d | 3.35 | 40.73 | 15.04 | .62 | 29.05 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.29 | e | 1.31 | 1.33 | 1.40 | 1.29 | 1.34 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.29 | e | 1.30 | 1.30 | 1.36 | 1.27 | 1.32 | |||||
Ratio of net investment income | ||||||||||||
(loss) to average net assets | .38 | e | .02 | .25 | .12 | (.18 | ) | (.27 | ) | |||
Portfolio Turnover Rate | 37.27 | d | 104.22 | 68.30 | 74.74 | 67.49 | 56.03 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 2,355 | 2,015 | 1,516 | 889 | 1,071 | 7,308 |
a | Based on average shares outstanding. |
b | Amount represents less than $.01 per share. |
c | Exclusive of sales charge. |
d | Not annualized. |
e | Annualized. |
See notes to financial statements.
The Fund 29
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||||
May 31, 2015 | Year Ended November 30, | |||||||||||
Class C Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 23.70 | 25.19 | 19.00 | 18.25 | 19.34 | 15.13 | ||||||
Investment Operations: | ||||||||||||
Investment (loss)—neta | (.04 | ) | (.20 | ) | (.10 | ) | (.12 | ) | (.18 | ) | (.18 | ) |
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .88 | .84 | 7.29 | 2.49 | .25 | 4.42 | ||||||
Total from Investment Operations | .84 | .64 | 7.19 | 2.37 | .07 | 4.24 | ||||||
Distributions: | ||||||||||||
Dividends from net realized | ||||||||||||
gain on investments | (2.92 | ) | (2.13 | ) | (1.00 | ) | (1.62 | ) | (1.16 | ) | (.03 | ) |
Net asset value, end of period | 21.62 | 23.70 | 25.19 | 19.00 | 18.25 | 19.34 | ||||||
Total Return (%)b | 3.84 | c | 2.60 | 39.69 | 14.16 | (.03 | ) | 28.07 | ||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 2.68 | d | 2.22 | 2.16 | 2.15 | 2.03 | 2.10 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 2.00 | d | 2.05 | 2.06 | 2.12 | 2.02 | 2.08 | |||||
Ratio of net investment (loss) | ||||||||||||
to average net assets | (.33 | )d | (.83 | ) | (.48 | ) | (.64 | ) | (.92 | ) | (1.02 | ) |
Portfolio Turnover Rate | 37.27 | c | 104.22 | 68.30 | 74.74 | 67.49 | 56.03 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 73 | 55 | 231 | 165 | 164 | 916 |
a | Based on average shares outstanding. |
b | Exclusive of sales charge. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
30
Six Months Ended | ||||||||||||
May 31, 2015 | Year Ended November 30, | |||||||||||
Class I Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 25.22 | 26.55 | 19.84 | 18.83 | 19.72 | 15.28 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .08 | .08 | .14 | .10 | .04 | .00 | b | |||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .94 | .87 | 7.65 | 2.57 | .23 | 4.47 | ||||||
Total from Investment Operations | 1.02 | .95 | 7.79 | 2.67 | .27 | 4.47 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.05 | ) | (.15 | ) | (.08 | ) | (.04 | ) | — | (.00 | )b | |
Dividends from net realized | ||||||||||||
gain on investments | (2.92 | ) | (2.13 | ) | (1.00 | ) | (1.62 | ) | (1.16 | ) | (.03 | ) |
Total Distributions | (2.97 | ) | (2.28 | ) | (1.08 | ) | (1.66 | ) | (1.16 | ) | (.03 | ) |
Net asset value, end of period | 23.27 | 25.22 | 26.55 | 19.84 | 18.83 | 19.72 | ||||||
Total Return (%) | 4.34 | c | 3.72 | 41.27 | 15.45 | 1.04 | 29.32 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .97 | d | .95 | .95 | .99 | .99 | 1.07 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .97 | d | .95 | .95 | .99 | .99 | 1.06 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | .69 | d | .31 | .60 | .52 | .20 | .02 | |||||
Portfolio Turnover Rate | 37.27 | c | 104.22 | 68.30 | 74.74 | 67.49 | 56.03 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 20,928 | 20,403 | 706,606 | 429,732 | 297,086 | 243,304 |
a | Based on average shares outstanding. |
b | Amount represents less than $.01 per share. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
The Fund 31
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||
May 31, 2015 | Year Ended November 30, | |||||
Class Y Shares | (Unaudited) | 2014 | 2013 | a | ||
Per Share Data ($): | ||||||
Net asset value, beginning of period | 25.21 | 26.54 | 22.76 | |||
Investment Operations: | ||||||
Investment income—netb | .08 | .12 | .02 | |||
Net realized and unrealized | ||||||
gain (loss) on investments | .94 | .83 | 3.76 | |||
Total from Investment Operations | 1.02 | .95 | 3.78 | |||
Distributions: | ||||||
Dividends from investment income—net | (.06 | ) | (.15 | ) | — | |
Dividends from net realized gain on investments | (2.92 | ) | (2.13 | ) | — | |
Total Distributions | (2.98 | ) | (2.28 | ) | — | |
Net asset value, end of period | 23.25 | 25.21 | 26.54 | |||
Total Return (%) | 4.35 | c | 3.71 | 16.61 | c | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses to average net assets | .94 | d | .95 | 1.01 | d | |
Ratio of net expenses to average net assets | .94 | d | .95 | .99 | d | |
Ratio of net investment income | ||||||
to average net assets | .72 | d | .45 | .07 | d | |
Portfolio Turnover Rate | 37.27 | c | 104.22 | 68.30 | ||
Net Assets, end of period ($ x 1,000) | 799,966 | 747,120 | 1 |
a | From July 1, 2013 (commencement of initial offering) to November 30, 2013. |
b | Based on average shares outstanding. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
32
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus Select Managers Small Cap Value 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 seek capital appreciation.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. EACM Advisors LLC (“EACM”), a subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s portfolio allocation manager. Thompson, Siegel and Walmsley, LLC (“TS&W”),Walthausen & Co., LLC (“Walthausen”), Neuberger Berman Management LLC (“Neuberger Berman”), Lombardia Capital Partners, LLC (“Lombardia”), Iridian Asset Management LLC (“Iridian”), Kayne Anderson Rudnick Investment Management, LLC (“Kayne”), Channing Capital Management, LLC (“Channing”) and Eastern Shore Capital Management (“Eastern Shore”) serve as the fund’s sub-investment advisers, each managing an allocated portion of the fund’s portfolio. At a May 4, 2015 meeting, the Company’s Board of Directors (the “Board”) approved a new sub-investment advisory agreement with Eastern Shore, which became effective May 18, 2015.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 100 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class C, Class I and Class Y. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I and Class Y shares are
The Fund 33
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
sold at net asset value per share generally to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
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: 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 unad-
34
justed quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last
The Fund 35
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value.All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
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. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and financial futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Directors (the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers.These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
36
The following is a summary of the inputs used as of May 31, 2015 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 | ||||
Common Stocks† | 780,213,695 | — | — | 780,213,695 |
Equity Securities— | ||||
Foreign | ||||
Common Stocks† | 13,544,600 | — | — | 13,544,600 |
Exchange-Traded | ||||
Funds | 6,088,574 | — | — | 6,088,574 |
Mutual Funds | 67,579,785 | — | — | 67,579,785 |
† See Statement of Investments for additional detailed categorizations. |
At May 31, 2015, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral
The Fund 37
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
is either in the form of cash, which can be invested in certain money market mutual funds managed by Dreyfus or U.S. Government and Agency securities.The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. During the period ended May 31, 2015, The Bank of New York Mellon earned $135,400 from lending portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended May 31, 2015 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 11/30/2014 ($) | Purchases ($) | Sales ($) | 5/31/2015 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Cash | |||||
Advantage | |||||
Fund | 45,342,224 | 116,215,995 | 93,978,434 | 67,579,785 | 8.2 |
(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.
38
(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended May 31, 2015, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended May 31, 2015, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended November 30, 2014 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The tax character of distributions paid to shareholders during the fiscal year ended November 30, 2014 was as follows: ordinary income $30,997,047 and long-term capital gains $29,774,916.The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $430 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended May 31, 2015, the fund did not borrow under the Facilities.
The Fund 39
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .90% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus had contractually agreed, from December 1, 2014 through April 1, 2016, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the expenses of Class A, C, I and Y shares (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed 1.05%, 1.05%, 1.05% and .95%, of the value of the respective class’ average daily net assets The reduction in expenses, pursuant to the undertaking, amounted to $428 during the period ended May 31, 2015.
Pursuant to a Portfolio Allocation Agreement between Dreyfus and EACM, Dreyfus pays EACM a monthly fee at an annual percentage of the value of the fund’s average daily net assets.
Pursuant to separate sub-investment advisory agreements between Dreyfus and TS&W, Walthausen, Neuberger Berman, Lombardia, Iridian, Kayne, Channing and Eastern Shore, each serves as the fund’s sub-investment adviser responsible for the day-to-day management of a portion of the fund’s portfolio. Dreyfus pays each sub-investment adviser a monthly fee at an annual percentage of the value of the fund’s average daily net assets. Dreyfus has obtained an exemptive order from the SEC (the “Order”), upon which the fund may rely, to use a manager of managers approach that permits Dreyfus, subject to certain conditions and approval by the Board, to enter into and materially amend sub-investment advisory agreements with one or more sub-investment advisers who are either unaffiliated with Dreyfus or are wholly-owned subsidiaries (as defined under the Act) of Dreyfus’ ultimate parent company, BNY Mellon, without obtaining shareholder approval. The Order also allows the fund to disclose the sub-investment advisory fee paid by Dreyfus to an unaffiliated sub-investment
40
adviser in documents filed with the SEC and provided to shareholders. In addition, pursuant to the Order, it is not necessary to disclose the sub-investment advisory fee payable by Dreyfus separately to a sub-investment adviser that is a wholly-owned subsidiary of BNY Mellon in documents filed with the SEC and provided to shareholders; such fees are to be aggregated with fees payable to Dreyfus. Dreyfus has ultimate responsibility (subject to oversight by the Board) to supervise any sub-investment adviser and recommend the hiring, termination, and replacement of any sub-adviser to the Board.
During the period ended May 31, 2015, the Distributor retained $345 from commissions earned on sales of the fund’s Class A shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended May 31, 2015, Class C shares were charged $210 pursuant to the Distribution Plan.
(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services.The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts.The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services.The Distributor determines the amounts to be paid to Service Agents. During the period ended May 31, 2015, Class A and Class C shares were charged $2,884 and $70, respectively, pursuant to the Shareholder Services Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and
The Fund 41
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended May 31, 2015, the fund was charged $1,778 for transfer agency services and $71 for cash management services.These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $4.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended May 31, 2015, the fund was charged $42,889 pursuant to the custody agreement.
During the period ended May 31, 2015, the fund was charged $13,507 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $628,304, Distribution Plan fees $37, Shareholder Services Plan fees $513, custodian fees $43,194, Chief Compliance Officer fees $4,648 and transfer agency fees $938, which are offset against an expense reimbursement currently in effect in the amount of $21.
(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.
42
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended May 31, 2015, amounted to $309,445,026 and $285,062,860, respectively.
At May 31, 2015, accumulated net unrealized appreciation on investments was $109,783,612, consisting of $139,110,120 gross unrealized appreciation and $29,326,508 gross unrealized depreciation.
At May 31, 2015, 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 43
APPROVAL OF AN ADDITONAL |
SUB-INVESTMENT ADVISER |
At a meeting of the fund’s Board of Directors held on May 4, 2015, Dreyfus and EACM recommended the appointment of Eastern Shore Capital Management, a division of Moody Aldrich Partners, LLC (“Eastern Shore”), to serve as a new sub-adviser for the fund.The recommendation of Eastern Shore was based on, among other information, EACM’s review and due diligence report relating to Eastern Shore and its investment advisory services. In the opinion of Dreyfus and EACM, the proposed allocation to Eastern Shore of a portion of the fund’s assets would allow Eastern Shore to effectively complement the fund’s seven other sub-advisers, Thomson, Siegel and Walmsley, LLC, Walthausen & Co., LLC, Neuberger Berman Management, LLC, Lombardia Capital Partners, LLC, Iridian Asset Management, LLC, Kayne Rudnick Anderson Investment Management, LLC and Channing Capital Management, LLC, and increase portfolio diversification, as well as help avoid any potential capacity constraints that may arise if the fund further grows its assets and would be in the best interests of the fund’s shareholders. It was noted that the target percentage of the fund’s assets to be allocated to Eastern Shore will occur over time.
At the Meeting, the Board, including a majority of the Directors who are not “interested persons” (as that term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of the fund or Dreyfus (the “Independent Directors”), considered and approved a new Sub-Investment Advisory Agreement, on behalf of the fund, between Dreyfus and Eastern Shore (the “Sub-Advisory Agreement”). In determining whether to approve the Sub-Advisory Agreement, the Board considered the due diligence materials prepared by EACM and other information, which included: (i) a copy of the Sub-Advisory Agreement between Dreyfus and Eastern Shore; (ii) information regarding the process by which EACM recommended and Dreyfus selected and recommended Eastern Shore for Board approval; (iii) information regarding the nature, extent and quality of the services Eastern Shore would provide to the fund; (iv) information regarding Eastern Shore’s reputation, investment management business, personnel, and operations; (v) information regarding Eastern Shore’s brokerage
44
and trading policies and practices; (vi) information regarding the level of the sub-investment advisory fee to be charged by Eastern Shore; (vii) information regarding Eastern Shore’s compliance program; and (viii) information regarding Eastern Shore’s historical performance returns managing investment mandates similar to the fund’s investment mandate, with such performance compared to relevant indices. The Board also considered the substance of discussions with representatives of Dreyfus and EACM at the Meeting. Additionally, the Board reviewed materials supplied by counsel that were prepared for use by the Board in fulfilling its duties under the 1940 Act.
Nature, Extent and Quality of Services to be Provided by Eastern Shore. In examining the nature, extent, and quality of the services to be provided by Eastern Shore to the fund, the Board considered Eastern Shore’s: (i) organization, history, reputation, qualification and background, as well as the qualifications of its personnel; (ii) expertise in providing portfolio management services to other similar investment portfolios and the performance history of those portfolios; (iii) proposed investment strategy for the fund; (iv) long- and short-term performance relative to unmanaged indices; and (v) compliance pro-gram.The Board specifically took into account Eastern Shore’s investment process and research resources and capabilities, evaluating how Eastern Shore would complement the fund’s existing Sub-Advisers. The Board also discussed the acceptability of the terms of the Sub-Advisory Agreement, noting the substantial similarity to the terms of the fund’s other sub-investment advisory agreements. The Board also considered the review process undertaken by EACM, subject to Dreyfus’ supervision, and EACM’s favorable assessment of the nature and quality of the sub-investment advisory services expected to be provided to the fund by Eastern Shore.The Board concluded that the fund will benefit from the quality and experience of Eastern Shore’s investment professionals. Based on their consideration and review of the foregoing information, the Board concluded that the nature, extent, and quality of the sub-investment advisory services to be pro-
The Fund 45
APPROVAL OF AN ADDITONAL SUB-INVESTMENT ADVISER (continued)
vided by Eastern Shore were adequate and appropriate in light of Eastern Shore’s experience in managing small cap value equity assets, Eastern Shore’s portfolio management and research resources to be applied in managing a portion of the fund’s portfolio, and Dreyfus’ and EACM’s recommendation to engage Eastern Shore, and supported a decision to approve the Sub-Advisory Agreement.
Investment Performance of Eastern Shore. Because Eastern Shore was a newly-appointed sub-adviser for the fund, the Board could not consider its investment performance in managing a portion of the fund’s portfolio as a factor in evaluating the Sub-Advisory Agreement during the Meeting. However, the Board did review Eastern Shore’s historical performance record in managing other portfolios that were comparable to the fund with respect to its investment mandate.The Board also discussed with representatives of Dreyfus and EACM the investment strategies to be employed by Eastern Shore in the management of its portion of the fund’s assets. The Board noted Eastern Shore’s reputation and experience with respect to small cap value equity investing, the portfolio manager’s experience in selecting small cap value stocks, and EACM’s experience and reputation in selecting, evaluating, and overseeing investment managers. Based on their consideration and review of the foregoing information, the Board concluded that these factors supported a decision to approve the Sub-Advisory Agreement.
Costs of Services to be Provided.The Board considered the proposed fee payable under the Sub-Advisory Agreement, noting that the proposed fee would be paid by Dreyfus, and not the fund, and, thus, would not impact the fees paid by the fund. The Board concluded that the proposed fee payable to Eastern Shore by Dreyfus with respect to the assets to be allocated to Eastern Shore in its capacity as a sub-adviser was reasonable and appropriate, and further noted that the rate of the proposed fee was the same as the rate charged by the fund’s other sub-advisers.
46
Profitability and Economies of Scale to be Realized.The Board recognized that, because Eastern Shore’s fee would be paid by Dreyfus, and not the fund, an analysis of economies of scale and profitability was more appropriate in the context of the Board’s consideration of the Management Agreement. Accordingly, considerations of profitability and economies of scale with respect to Eastern Shore were not relevant to the Board’s determination to approve the Sub-Advisory Agreement. The Board also considered whether there were any ancillary benefits that may accrue to Eastern Shore as a result of its relationship with the fund. The Board concluded that any benefits that were expected to accrue to Eastern Shore by virtue of its relationship with the fund were reasonable. In considering the materials and information described above, the Independent Directors received assistance from, and met separately with, their independent legal counsel, and were provided with a written description of their statutory responsibilities and the legal standards that are applicable to the approval of investment advisory and sub-investment advisory agreements.
After full consideration of the factors discussed above, with no single factor identified as being of paramount importance, the Board, including a majority of the Independent Directors, with the assistance of independent legal counsel, concluded that the initial approval of the Sub-Advisory Agreement was in the best interests of the fund, and approved the Sub-Advisory Agreement for the fund.
The Fund 47
NOTES
For More Information
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Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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International |
Stock Fund |
SEMIANNUAL REPORT May 31, 2015
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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 LoseValue |
Contents | |
THE FUND | |
2 | A Letter from the President |
3 | Discussion of Fund Performance |
6 | UnderstandingYour Fund’s Expenses |
6 | ComparingYour Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
10 | Statement of Assets and Liabilities |
11 | Statement of Operations |
12 | Statement of Changes in Net Assets |
14 | Financial Highlights |
18 | Notes to Financial Statements |
FOR MORE INFORMATION | |
Back Cover |
International
Stock Fund
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for International Stock Fund, covering the six-month period from December 1, 2014, through May 31, 2015. 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.
International stock markets continued to encounter bouts of heightened volatility on their way to posting moderate gains, on average. Despite ongoing concerns that persistent economic weakness and deflationary pressures in Europe, Japan, and China might undermine corporate profits for non-U.S. and multinational companies, investor sentiment recently has been buoyed by increasingly accommodative monetary policies from major central banks. Indeed, aggressive monetary stimulus measures caused most local currencies to depreciate against the U.S. dollar, making foreign exports more attractive to U.S. consumers in a recovering domestic economy.
We remain optimistic regarding the long-term outlook for the global economy generally and for international equities in particular.We believe currency depreciation has enhanced Europe’s competitiveness in global markets, recent wage negotiations in Japan suggest that long-awaited inflationary pressure may be taking root, and more stimulative economic policies in China may provide a catalyst for growth in the rest of Asia. As always, we urge you to discuss these observations with your financial advisor, who can help you assess their implications for your investment portfolio.
Thank you for your continued confidence and support.
![](https://capedge.com/proxy/N-CSRS/0000737520-15-000048/isncsrx4x1.jpg)
J. Charles Cardona
President
The Dreyfus Corporation
June 15, 2015
2
DISCUSSION OF FUND PERFORMANCE
For the reporting period of December 1, 2014, through May 31, 2015, as provided by Charlie Macquaker and Roy Leckie of Walter Scott & Partners Limited (Walter Scott), Sub-investment adviser
Fund and Market Performance Overview
For the six-month period ended May 31, 2015, International Stock Fund’s Class A shares produced a total return of 5.14%, Class C shares returned 4.73%, Class I shares returned 5.33%, and Class Y shares returned 5.35%.1 In comparison, the fund’s benchmark index, the Morgan Stanley Capital International Europe, Australasia, Far East Index (the “MSCI EAFE Index”), achieved a 4.84% return over the same period.2
International stocks advanced moderately during the reporting period amid sluggish economic growth and more aggressively accommodative monetary policies from major central banks.The fund’s Class A, Class I, and Class Y shares produced higher returns than the benchmark, mainly due to strong security selections across several countries and market sectors.
The Fund’s Investment Approach
The fund seeks long-term real return by investing in high-quality companies believed to be capable of sustainable growth and wealth creation over a long time horizon.The fund invests in stocks of foreign companies that are predominantly located in the world’s developed markets outside of the United States.When selecting stocks,Walter Scott seeks companies with fundamental strengths that indicate the potential for sustainable growth.The firm focuses on individual stock selection through extensive fundamental research. Candidates are initially selected for research if they meet certain broad absolute and trend criteria. Financial statements are analyzed in an effort to identify the nature of their cash generation and to understand the variables that could add value to their businesses. Companies meeting the financial criteria are subjected to a detailed investigation of products, costs and pricing, competition, industry position, and outlook.
Economic Sentiment Drove Market Performance
Economic growth generally proved sluggish in international markets during the reporting period, and a steep decline in oil prices in late 2014 stoked deflation
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
fears while generating challenges for energy producers. In Europe, disagreements between Greece and the European Union over debt relief measures produced additional uncertainty.
Nonetheless, the MSCI EAFE Index registered a moderately positive return in this environment. European equities were buoyed by a larger-than-expected quantitative easing program from the European Central Bank. One consequence of the ECB’s liquidity injection has been to weaken the euro particularly against the dollar, which has had major implications for many of the euro-based but global companies in which we invest. Elsewhere, Japanese stocks fared relatively well in the midst of new monetary stimulus measures. In contrast, U.K.-based equities generally lagged market averages.
Investment returns were further affected by a strengthening U.S. dollar against most other currencies, which dampened results from unhedged foreign investments for U.S. residents.
Highly Selective Approach
The fund performed well during the reporting period across a variety of countries and industry groups, reflecting Walter Scott’s highly selective approach of investing in high quality companies irrespective of region or sector. Swiss agricultural supplier Syngenta ranked as the reporting period’s top individual performer after being targeted for acquisition by global industry giant Monsanto. The advance has been rejected unanimously by the Swiss company’s board on the basis that the proposal significantly undervalues the business. Consequently, members of the investment team have met with senior management at both Syngenta and Monsanto to discuss the proposal and will continue to monitor the situation closely. Japanese machinery producer FANUC performed well in response to a positive outlook for factory automation and after announcing new measures to improve shareholder value.There was a notable spike in the share price of British natural gas producer BG Group after a takeover offer from Royal Dutch Shell, prompting us to lock in profits by selling the fund’s position. Japanese insurer Tokio Marine Holdings encountered stronger overseas business trends when a weaker yen made pricing more competitive. Irish information services company Experian was a beneficiary of expectations around the benefits of a change in the business model for its direct-to-consumer business in the United States.
In contrast, other holdings weighed on the fund’s relative performance over the reporting period. Australian retail conglomerate Woolworths issued a weaker-than-expected
4
earnings forecast stemming from competitive pressures and management changes in its supermarket unit. In Japan, Shin-Etsu Chemical, with whom the investment team recently met, disappointed by refraining from raising its dividend, and construction equipment producer Komatsu was hurt by the economic slowdown in China. British beverages producer Diageo lost market share to craft distillers in the United States. Swiss accessories maker The Swatch Group struggled with intensifying competitive pressures during a slump in sales of luxury goods in the emerging markets.
Finding Opportunities despite Economic Headwinds
The world has long been entrenched in an environment of low growth, low inflation, and low interest rates, and we remain concerned about high debt levels in Europe and Japan as well as signs of slowing industrial activity in the United States.Yet, in our analysis, the aggregate financial characteristics of the fund’s holdings continue to be remarkably strong. Individual companies in our portfolio have strong balance sheets and are generating excellent levels of internal profitability.We believe that this dynamic will drive stock prices higher over the long term as companies with these characteristics continue to generate wealth.
Therefore, we have continued to identify ample opportunities meeting our investment criteria.As of the reporting period’s end, the fund held overweighted exposure to the consumer discretionary, energy, and consumer staples sectors. In contrast, the fund held relatively light positions in the financials and telecommunications services sectors.
June 15, 2015
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.
Investing internationally involves special risks, including changes in currency exchange rates, political, economic, and social instability, a lack of comprehensive company information, differing auditing and legal standards, and less market liquidity.
1 Total return includes reinvestment of dividends and any capital gains paid, and does not take into consideration the |
maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed |
on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Past |
performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, |
fund shares may be worth more or less than their original cost. |
2 SOURCE: LIPPER INC. – Reflects reinvestment of net dividends and, where applicable, capital gain distributions. |
The Morgan Stanley Capital International Europe,Australasia, Far East (MSCI EAFE) Index is an unmanaged |
index composed of a sample of companies representative of the market structure of European and Pacific Basin |
countries. Returns are calculated on a month-end basis. Investors cannot invest directly in any index. |
The Fund 5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in International Stock Fund from December 1, 2014 to May 31, 2015. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended May 31, 2015
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $ | 6.44 | $ | 10.31 | $ | 4.76 | $ | 4.71 |
Ending value (after expenses) | $ | 1,051.40 | $ | 1,047.30 | $ | 1,053.30 | $ | 1,053.50 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
assuming a hypothetical 5% annualized return for the six months ended May 31, 2015 |
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $ | 6.34 | $ | 10.15 | $ | 4.68 | $ | 4.63 |
Ending value (after expenses) | $ | 1,018.65 | $ | 1,014.86 | $ | 1,020.29 | $ | 1,020.34 |
† Expenses are equal to the fund’s annualized expense ratio of 1.26% for Class A, 2.02% for Class C, .93% for |
Class I and .92% for ClassY, multiplied by the average account value over the period, multiplied by 182/365 (to |
reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS |
May 31, 2015 (Unaudited) |
Common Stocks—97.9% | Shares | Value ($) |
Australia—3.9% | ||
Cochlear | 356,600 | 24,051,396 |
CSL | 926,500 | 65,942,556 |
Woolworths | 2,180,100 | 46,501,055 |
136,495,007 | ||
Canada—1.7% | ||
Suncor Energy | 1,982,200 | 57,939,024 |
China—2.9% | ||
China Shenhua Energy, Cl. H | 8,128,500 | 19,962,393 |
CNOOC | 53,621,000 | 83,475,129 |
103,437,522 | ||
Denmark—2.6% | ||
Novo Nordisk, Cl. B | 1,626,000 | 92,138,424 |
Finland—1.9% | ||
Kone, Cl. B | 1,552,000 | 65,091,148 |
France—11.2% | ||
Air Liquide | 575,000 | 74,119,950 |
Danone | 963,980 | 66,229,435 |
Essilor International | 507,576 | 62,001,340 |
L’Oreal | 391,900 | 74,060,795 |
LVMH Moet Hennessy Louis Vuitton | 368,300 | 65,902,964 |
Total | 1,024,300 | 51,839,892 |
394,154,376 | ||
Germany—4.3% | ||
adidas | 929,000 | 72,989,440 |
SAP | 1,032,000 | 76,418,634 |
149,408,074 | ||
Hong Kong—10.1% | ||
AIA Group | 12,082,000 | 79,349,446 |
China Mobile | 5,173,500 | 67,903,337 |
CLP Holdings | 6,249,000 | 54,603,921 |
Hang Lung Properties | 25,615,000 | 80,921,740 |
Hong Kong & China Gas | 29,272,128 | 70,566,641 |
353,345,085 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Japan—19.0% | |||
Daito Trust Construction | 554,500 | 61,611,385 | |
Denso | 1,474,600 | 76,889,493 | |
FANUC | 409,400 | 89,969,722 | |
Honda Motor | 2,043,600 | 69,963,499 | |
INPEX | 5,109,600 | 62,914,579 | |
Keyence | 140,020 | 75,186,051 | |
Komatsu | 2,985,900 | 62,719,571 | |
Rakuten | 2,118,900 | 34,573,090 | |
Shin-Etsu Chemical | 981,900 | 59,712,602 | |
Tokio Marine Holdings | 1,759,700 | 72,424,437 | |
665,964,429 | |||
Singapore—2.1% | |||
DBS Group Holdings | 2,401,226 | 36,002,191 | |
Oversea-Chinese Banking | 5,189,502 | 39,203,501 | |
75,205,692 | |||
Spain—2.3% | |||
Inditex | 2,385,000 | 79,043,782 | |
Sweden—1.9% | |||
Hennes & Mauritz, Cl. B | 1,718,000 | 67,770,364 | |
Switzerland—13.4% | |||
Givaudan | 35,344 | a | 64,797,165 |
Kuehne + Nagel International | 352,000 | 49,496,606 | |
Nestle | 879,000 | 68,288,132 | |
Novartis | 730,000 | 75,128,166 | |
Roche Holding | 268,000 | 78,906,939 | |
SGS | 16,100 | 30,984,391 | |
Swatch Group-BR | 72,000 | 28,634,237 | |
Syngenta | 159,700 | 73,140,328 | |
469,375,964 | |||
Taiwan—2.1% | |||
Taiwan Semiconductor Manufacturing, ADR | 2,982,300 | 72,410,244 | |
United Kingdom—18.5% | |||
Burberry Group | 2,805,000 | 72,781,879 | |
Compass Group | 4,360,000 | 76,340,679 | |
Diageo | 2,429,000 | 67,514,345 | |
Experian | 4,363,000 | 83,182,721 |
8
Common Stocks (continued) | Shares | Value ($) | ||
United Kingdom (continued) | ||||
Intertek Group | 678,100 | 25,935,247 | ||
Reckitt Benckiser Group | 895,900 | 80,973,497 | ||
Rolls-Royce Holdings | 5,002,000 | a | 76,409,171 | |
SABMiller | 1,273,000 | 68,008,889 | ||
Smith & Nephew | 1,926,000 | 34,194,825 | ||
Standard Chartered | 3,975,132 | 63,613,379 | ||
648,954,632 | ||||
Total Common Stocks | ||||
(cost $2,874,599,179) | 3,430,733,767 | |||
Other Investment—2.3% | ||||
Registered Investment Company; | ||||
Dreyfus Institutional Preferred | ||||
Plus Money Market Fund | ||||
(cost $80,786,072) | 80,786,072 | b | 80,786,072 | |
Total Investments (cost $2,955,385,251) | 100.2 | % | 3,511,519,839 | |
Liabilities, Less Cash and Receivables | (.2 | %) | (7,082,413 | ) |
Net Assets | 100.0 | % | 3,504,437,426 |
ADR—American Depository Receipts
a | Non-income producing security. |
b | Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Consumer Discretionary | 18.4 | Materials | 7.7 |
Industrial | 13.8 | Information Technology | 6.4 |
Consumer Staples | 13.5 | Utilities | 3.6 |
Financial | 12.4 | Money Market Investment | 2.3 |
Health Care | 12.3 | Telecommunication Services | 1.9 |
Energy | 7.9 | 100.2 | |
† Based on net assets. | |||
See notes to financial statements. |
The Fund 9
STATEMENT OF ASSETS AND LIABILITIES |
May 31, 2015 (Unaudited) |
Cost | Value | ||||
Assets ($): | |||||
Investments in securities—See Statement of Investments: | |||||
Unaffiliated issuers | 2,874,599,179 | 3,430,733,767 | |||
Affiliated issuers | 80,786,072 | 80,786,072 | |||
Cash | 1,399,160 | ||||
Cash denominated in foeign currencies | 1,714,362 | 1,711,461 | |||
Dividends receivable | 14,952,705 | ||||
Receivable for shares of Common Stock subscribed | 2,725,524 | ||||
Prepaid expenses | 248,274 | ||||
3,532,556,963 | |||||
Liabilities ($): | |||||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 2,939,455 | ||||
Payable for shares of Common Stock redeemed | 13,845,778 | ||||
Payable for investment securities purchased | 11,069,136 | ||||
Accrued expenses | 265,168 | ||||
28,119,537 | |||||
Net Assets ($) | 3,504,437,426 | ||||
Composition of Net Assets ($): | |||||
Paid-in capital | 2,979,955,549 | ||||
Accumulated undistributed investment income—net | 27,305,963 | ||||
Accumulated net realized gain (loss) on investments | (58,265,356 | ) | |||
Accumulated net unrealized appreciation (depreciation) | |||||
on investments and foreign currency transactions | 555,441,270 | ||||
Net Assets ($) | 3,504,437,426 | ||||
Net Asset Value Per Share | |||||
Class A | Class C | Class I | Class Y | ||
Net Assets ($) | 117,036,111 | 22,272,398 | 1,687,105,477 | 1,678,023,440 | |
Shares Outstanding | 7,421,381 | 1,435,770 | 106,241,267 | 106,835,523 | |
Net Asset Value Per Share ($) | 15.77 | 15.51 | 15.88 | 15.71 | |
See notes to financial statements. |
10
STATEMENT OF OPERATIONS |
Six Months Ended May 31, 2015 (Unaudited) |
Investment Income ($): | ||
Income: | ||
Cash dividends (net of $4,766,681 foreign taxes withheld at source): | ||
Unaffiliated issuers | 46,644,717 | |
Affiliated issuers | 35,475 | |
Total Income | 46,680,192 | |
Expenses: | ||
Management fee—Note 3(a) | 14,327,332 | |
Shareholder servicing costs—Note 3(c) | 572,685 | |
Custodian fees—Note 3(c) | 510,473 | |
Registration fees | 147,401 | |
Directors’ fees and expenses—Note 3(d) | 117,027 | |
Distribution fees—Note 3(b) | 85,864 | |
Prospectus and shareholders’ reports | 60,716 | |
Professional fees | 57,998 | |
Loan commitment fees—Note 2 | 13,619 | |
Miscellaneous | 77,530 | |
Total Expenses | 15,970,645 | |
Less—reduction in fees due to earnings credits—Note 3(c) | (25 | ) |
Net Expenses | 15,970,620 | |
Investment Income—Net | 30,709,572 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments and foreign currency transactions | 29,330,141 | |
Net realized gain (loss) on forward foreign currency exchange contracts | (47,931 | ) |
Net Realized Gain (Loss) | 29,282,210 | |
Net unrealized appreciation (depreciation) on | ||
investments and foreign currency transactions | 112,277,590 | |
Net unrealized appreciation (depreciation) on | ||
forward foreign currency exchange contracts | (15,808 | ) |
Net Unrealized Appreciation (Depreciation) | 112,261,782 | |
Net Realized and Unrealized Gain (Loss) on Investments | 141,543,992 | |
Net Increase in Net Assets Resulting from Operations | 172,253,564 | |
See notes to financial statements. |
The Fund 11
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
May 31, 2015 | Year Ended | |||
(Unaudited) | November 30, 2014 | |||
Operations ($): | ||||
Investment income—net | 30,709,572 | 52,127,129 | ||
Net realized gain (loss) on investments | 29,282,210 | (17,721,379 | ) | |
Net unrealized appreciation | ||||
(depreciation) on investments | 112,261,782 | (73,865,820 | ) | |
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 172,253,564 | (39,460,070 | ) | |
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A | (1,342,362 | ) | (3,239,116 | ) |
Class C | (48,786 | ) | (172,199 | ) |
Class I | (31,334,683 | ) | (43,347,768 | ) |
Class Y | (16,487,075 | ) | (16 | ) |
Total Dividends | (49,212,906 | ) | (46,759,099 | ) |
Capital Stock Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A | 8,355,581 | 34,402,099 | ||
Class C | 356,420 | 1,059,488 | ||
Class I | 217,361,915 | 900,580,278 | ||
Class Y | 657,318,412 | 1,202,028,796 | ||
Dividends reinvested: | ||||
Class A | 1,292,513 | 3,140,068 | ||
Class C | 34,177 | 120,295 | ||
Class I | 29,033,887 | 32,088,480 | ||
Class Y | 5,616,660 | — | ||
Cost of shares redeemed: | ||||
Class A | (39,738,374 | ) | (174,314,811 | ) |
Class C | (3,876,585 | ) | (11,382,495 | ) |
Class I | (736,925,658 | ) | (1,690,923,943 | ) |
Class Y | (162,429,275 | ) | (56,231,386 | ) |
Increase (Decrease) in Net Assets | ||||
from Capital Stock Transactions | (23,600,327 | ) | 240,566,869 | |
Total Increase (Decrease) in Net Assets | 99,440,331 | 154,347,700 | ||
Net Assets ($): | ||||
Beginning of Period | 3,404,997,095 | 3,250,649,395 | ||
End of Period | 3,504,437,426 | 3,404,997,095 | ||
Undistributed investment income—net | 27,305,963 | 45,809,297 |
12
Six Months Ended | ||||
May 31, 2015 | Year Ended | |||
(Unaudited) | November 30, 2014 | |||
Capital Share Transactions: | ||||
Class A | ||||
Shares sold | 556,798 | 2,260,389 | ||
Shares issued for dividends reinvested | 88,589 | 202,978 | ||
Shares redeemed | (2,614,647 | ) | (11,352,564 | ) |
Net Increase (Decrease) in Shares Outstanding | (1,969,260 | ) | (8,889,197 | ) |
Class C | ||||
Shares sold | 23,841 | 70,654 | ||
Shares issued for dividends reinvested | 2,375 | 7,883 | ||
Shares redeemed | (261,836 | ) | (759,857 | ) |
Net Increase (Decrease) in Shares Outstanding | (235,620 | ) | (681,320 | ) |
Class Ia | ||||
Shares sold | 14,221,800 | 58,750,229 | ||
Shares issued for dividends reinvested | 1,979,134 | 2,059,594 | ||
Shares redeemed | (49,225,641 | ) | (107,876,292 | ) |
Net Increase (Decrease) in Shares Outstanding | (33,024,707 | ) | (47,066,469 | ) |
Class Ya | ||||
Shares sold | 44,236,791 | 76,683,096 | ||
Shares issued for dividends reinvested | 387,089 | — | ||
Shares redeemed | (10,761,401 | ) | (3,710,121 | ) |
Net Increase (Decrease) in Shares Outstanding | 33,862,479 | 72,972,975 |
a During the period ended November 30, 2014, 70,163,061 Class I shares representing $1,113,085,047 were |
exchanged for 70,923,105 ClassY shares. |
See notes to financial statements.
The Fund 13
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||||
May 31, 2015 | Year Ended November 30, | |||||||||||
Class A Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 15.15 | 15.57 | 14.13 | 12.58 | 12.83 | 11.97 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .11 | .19 | .17 | .21 | .15 | .09 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .66 | (.43 | ) | 1.46 | 1.46 | (.31 | ) | .86 | ||||
Total from Investment Operations | .77 | (.24 | ) | 1.63 | 1.67 | (.16 | ) | .95 | ||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.15 | ) | (.18 | ) | (.19 | ) | (.12 | ) | (.09 | ) | (.09 | ) |
Net asset value, end of period | 15.77 | 15.15 | 15.57 | 14.13 | 12.58 | 12.83 | ||||||
Total Return (%)b | 5.14 | c | (1.57 | ) | 11.65 | 13.40 | (1.32 | ) | 7.99 | |||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.26 | d | 1.29 | 1.30 | 1.31 | 1.27 | 1.34 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.26 | d | 1.29 | 1.30 | 1.31 | 1.27 | 1.34 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 1.42 | d | 1.26 | 1.14 | 1.62 | 1.08 | .69 | |||||
Portfolio Turnover Rate | 10.06 | c | 12.49 | 2.58 | 5.47 | 5.07 | 5.91 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 117,036 | 142,259 | 284,575 | 174,825 | 192,351 | 124,347 |
a | Based on average shares outstanding. |
b | Exclusive of sales charge. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
14
Six Months Ended | ||||||||||||
May 31, 2015 | Year Ended November 30, | |||||||||||
Class C Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 14.84 | 15.26 | 13.86 | 12.33 | 12.64 | 11.83 | ||||||
Investment Operations: | ||||||||||||
Investment income (loss)—neta | .05 | .07 | .06 | .12 | .04 | (.02 | ) | |||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .65 | (.42 | ) | 1.43 | 1.43 | (.30 | ) | .87 | ||||
Total from Investment Operations | .70 | (.35 | ) | 1.49 | 1.55 | (.26 | ) | .85 | ||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.03 | ) | (.07 | ) | (.09 | ) | (.02 | ) | (.05 | ) | (.04 | ) |
Net asset value, end of period | 15.51 | 14.84 | 15.26 | 13.86 | 12.33 | 12.64 | ||||||
Total Return (%)b | 4.73 | c | (2.28 | ) | 10.78 | 12.58 | (2.08 | ) | 7.18 | |||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 2.02 | d | 2.03 | 2.04 | 2.06 | 2.05 | 2.13 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 2.02 | d | 2.03 | 2.04 | 2.06 | 2.05 | 2.13 | |||||
Ratio of net investment income | ||||||||||||
(loss) to average net assets | .67 | d | .50 | .42 | .90 | .33 | (.12 | ) | ||||
Portfolio Turnover Rate | 10.06 | c | 12.49 | 2.58 | 5.47 | 5.07 | 5.91 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 22,272 | 24,805 | 35,905 | 23,962 | 23,319 | 13,959 |
a | Based on average shares outstanding. |
b | Exclusive of sales charge. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
The Fund 15
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||||||||
May 31, 2015 | Year Ended November 30, | ||||||||||||
Class I Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||
Per Share Data ($): | |||||||||||||
Net asset value, | |||||||||||||
beginning of period | 15.31 | 15.73 | 14.26 | 12.70 | 12.93 | 12.04 | |||||||
Investment Operations: | |||||||||||||
Investment income—neta | .13 | .26 | .23 | .26 | .19 | .14 | |||||||
Net realized and unrealized | |||||||||||||
gain (loss) on investments | .67 | (.45 | ) | 1.48 | 1.46 | (.31 | ) | .86 | |||||
Total from | |||||||||||||
Investment Operations | .80 | (.19 | ) | 1.71 | 1.72 | (.12 | ) | 1.00 | |||||
Distributions: | |||||||||||||
Dividends from | |||||||||||||
investment income—net | (.23 | ) | (.23 | ) | (.24 | ) | (.16 | ) | (.11 | ) | (.11 | ) | |
Net asset value, end of period | 15.88 | 15.31 | 15.73 | 14.26 | 12.70 | 12.93 | |||||||
Total Return (%) | 5.33 | b | (1.24 | ) | 12.13 | 13.74 | (1.01 | ) | 8.38 | ||||
Ratios/Supplemental | |||||||||||||
Data (%): | |||||||||||||
Ratio of total expenses | |||||||||||||
to average net assets | .93 | c | .93 | .92 | .93 | .93 | .97 | ||||||
Ratio of net expenses | |||||||||||||
to average net assets | .93 | c | .93 | .92 | .93 | .93 | .97 | ||||||
Ratio of net investment income | |||||||||||||
to average net assets | 1.68 | c | 1.70 | 1.54 | 1.96 | 1.41 | 1.11 | ||||||
Portfolio Turnover Rate | 10.06 | b | 12.49 | 2.58 | 5.47 | 5.07 | 5.91 | ||||||
Net Assets, end of period | |||||||||||||
($ x 1,000) | 1,687,105 | 2,132,444 | 2,930,169 | 1,935,074 | 1,116,202 | 688,992 |
a | Based on average shares outstanding. |
b | Not annualized. |
c | Annualized. |
See notes to financial statements.
16
Six Months Ended | ||||||
May 31, 2015 | Year Ended November 30, | |||||
Class Y Shares | (Unaudited) | 2014 | 2013 | a | ||
Per Share Data ($): | ||||||
Net asset value, beginning of period | 15.15 | 15.72 | 14.49 | |||
Investment Operations: | ||||||
Investment income—netb | .16 | .14 | .06 | |||
Net realized and unrealized | ||||||
gain (loss) on investments | .63 | (.48 | ) | 1.17 | ||
Total from Investment Operations | .79 | (.34 | ) | 1.23 | ||
Distributions: | ||||||
Dividends from investment income—net | (.23 | ) | (.23 | ) | — | |
Net asset value, end of period | 15.71 | 15.15 | 15.72 | |||
Total Return (%) | 5.35 | c | (2.20 | ) | 8.49 | c |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses to average net assets | .92 | d | .91 | .91 | d | |
Ratio of net expenses to average net assets | .92 | d | .91 | .91 | d | |
Ratio of net investment income | ||||||
to average net assets | 2.08 | d | .90 | .93 | d | |
Portfolio Turnover Rate | 10.06 | c | 12.49 | 2.58 | ||
Net Assets, end of period ($ x 1,000) | 1,678,023 | 1,105,489 | 1 |
a | From July 1, 2013 (commencement of initial offering) to November 30, 2013. |
b | Based on average shares outstanding. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
The Fund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
International Stock Fund (the “fund”) is a separate diversified series of Strategic Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering ten series, including the fund. The fund’s investment objective is to seek long-term total return.The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Walter Scott & Partners Limited (“Walter Scott”), a wholly-owned subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 600 million shares of $.001 par value Common Stock. The fund currently offers four classes of shares: Class A (100 million shares authorized), Class C (100 million shares authorized), Class I (300 million shares authorized) and Class Y (100 million shares authorized). Class A shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) on Class C shares redeemed within one year of purchase. Class I and Class Y shares are sold at net asset value per share generally to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are
18
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: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value.All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
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. These securities are generally categorized within Level 2 of the fair value hierarchy.
20
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 financial futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Directors (the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward foreign currency exchange contracts (“forward contracts”) are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The following is a summary of the inputs used as of May 31, 2015 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 | |||||
Common | |||||
Stocks† | 72,410,244 | 3,358,323,523 | †† | — 3,430,733,767 | |
Mutual Funds | 80,786,072 | — | — | 80,786,072 |
† | See Statement of Investments for additional detailed categorizations. |
†† | Securities classified within Level 2 at period end as the values were determined pursuant to the |
fund’s fair valuation procedures. See note above for additional information. |
At November 30, 2014, no exchange traded foreign equity securities were classified within Level 2 of the fair value hierarchy.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses
22
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.
(d) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended May 31, 2015 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 11/30/2014($) | Purchases ($) | Sales ($) | 5/31/2015 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Preferred | |||||
Plus Money | |||||
Market | |||||
Fund | 45,350,000 | 375,527,703 | 340,091,631 | 80,786,072 | 2.3 |
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S.These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S.
(f) 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 dis-
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
tributions are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended May 31, 2015, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended May 31, 2015, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended November 30, 2014 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010 (the “2010 Act”), the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 (“post-enactment losses”) for an unlimited period. Furthermore, post-enactment capital loss carryovers retain their character as either short-term or long-term capital losses rather than short-term as they were under previous statute.The 2010 Act requires post-enactment losses to be utilized before the utilization of losses incurred in taxable years prior to the effective date of the 2010 Act (“pre-enactment losses”).As a result of this ordering rule, pre-enactment losses may be more likely to expire unused.
The fund has an unused capital loss carryover of $85,323,936 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to November 30, 2014. If not applied, $598,805 of the carryover expires in fiscal year 2016, $15,114,500 expires in fiscal year 2017 and $16,297,830 expires in fis-
24
cal year 2019.The fund has $15,119,744 of post-enactment short-term capital losses and $38,193,057 of post-enactment long-term capital losses which can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended November 30, 2014 was as follows: ordinary income $46,759,099. The tax character of current year distribution 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 $430 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended May 31, 2015, the fund did not borrow under the Facilities.
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .85% of the value of the fund’s average daily net assets and is payable monthly.
Pursuant to a sub-investment advisory agreement between Dreyfus and Walter Scott, Dreyfus pays Walter Scott a monthly fee at an annual percentage of the value of the fund’s average daily net assets.
During the period ended May 31, 2015, the Distributor retained $340 from commissions earned on sales of the fund’s Class A shares.
The Fund 25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended May 31, 2015, Class C shares were charged $85,864 pursuant to the Distribution Plan.
(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended May 31, 2015, Class A and Class C shares were charged $162,822 and $28,621, respectively, pursuant to the Shareholder Services Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended May 31, 2015, the fund was charged $10,263 for transfer agency services and $477 for cash management services.These fees are included in Shareholder ser-
26
vicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $25.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended May 31, 2015, the fund was charged $510,473 pursuant to the custody agreement.
During the period ended May 31, 2015, the fund was charged $6,140 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $2,566,679, Distribution Plan fees $14,510, Shareholder Services Plan fees $30,376, custodian fees $320,000, Chief Compliance Officer fees $2,113 and transfer agency fees $5,777.
(d) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward contracts, during the period ended May 31, 2015, amounted to $332,557,942 and $396,680,061, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset.The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its over-the-counter (“OTC”) derivative contract counterparties in order to, among other things, reduce its credit risk to counterpar-
The Fund 27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
ties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.
Each type of derivative instrument that was held by the fund during the period ended May 31, 2015 is discussed below.
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 forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments.The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract.This risk is mitigated by Master Agreements between the fund and the counter-party and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty.At May 31, 2015, there were no forward contracts outstanding.
28
The following summarizes the average market value of derivatives outstanding during the period ended May 31, 2015:
Average Market Value ($) | |
Forward contracts | 14,412,332 |
At May 31, 2015, accumulated net unrealized appreciation on investments was $556,134,588, consisting of $679,047,850 gross unrealized appreciation and $122,913,262 gross unrealized depreciation.
At May 31, 2015, 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 29
For More Information
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Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-DREYFUS.
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Global Stock Fund
SEMIANNUAL REPORT May 31, 2015
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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 LoseValue |
Contents | |
THE FUND | |
2 | A Letter from the President |
3 | Discussion of Fund Performance |
6 | UnderstandingYour Fund’s Expenses |
6 | ComparingYour Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
10 | Statement of Assets and Liabilities |
11 | Statement of Operations |
12 | Statement of Changes in Net Assets |
14 | Financial Highlights |
18 | Notes to Financial Statements |
FOR MORE INFORMATION | |
Back Cover |
Global Stock Fund
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Global Stock Fund, covering the six-month period from December 1, 2014, through May 31, 2015. 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.
International stock markets continued to encounter bouts of heightened volatility on their way to posting moderate gains, on average. Despite ongoing concerns that persistent economic weakness and deflationary pressures in Europe, Japan, and China might undermine corporate profits for non-U.S. and multinational companies, investor sentiment recently has been buoyed by increasingly accommodative monetary policies from major central banks. Indeed, aggressive monetary stimulus measures caused most local currencies to depreciate against the U.S. dollar, making foreign exports more attractive to U.S. consumers in a recovering domestic economy.
We remain optimistic regarding the long-term outlook for the global economy generally and for international equities in particular.We believe currency depreciation has enhanced Europe’s competitiveness in global markets, recent wage negotiations in Japan suggest that long-awaited inflationary pressure may be taking root, and more stimulative economic policies in China may provide a catalyst for growth in the rest of Asia. As always, we urge you to discuss these observations with your financial advisor, who can help you assess their implications for your investment portfolio.
Thank you for your continued confidence and support.
![](https://capedge.com/proxy/N-CSRS/0000737520-15-000048/gsncsrx4x1.jpg)
J. Charles Cardona
President
The Dreyfus Corporation
June 15, 2015
2
DISCUSSION OF FUND PERFORMANCE
For the reporting period of December 1, 2014, through May 31, 2015, as provided by Charlie Macquaker and Roy Leckie of Walter Scott & Partners Limited (Walter Scott), Sub-investment adviser
Fund and Market Performance Overview
For the six-month period ended May 31, 2015, Global Stock Fund’s Class A shares produced a total return of 3.40%, Class C shares returned 3.10%, Class I shares returned 3.59%, and Class Y shares returned 3.60%.1 In comparison, the fund’s benchmark, the Morgan Stanley Capital International World Index (the “MSCI World Index”), achieved a 3.38% return over the same period.2
Global stocks advanced mildly during the reporting period amid more aggressively accommodative monetary policies from major central banks. The fund’s Class A, Class I and Class Y shares produced higher returns than the benchmark, mainly due to strong security selections across several countries and market sectors.
The Fund’s Investment Approach
The fund seeks long-term real returns by investing in high-quality companies that we believe are capable of sustainable growth and wealth creation over a long time horizon. The firm focuses on individual stock selection through extensive fundamental research. Candidates are initially selected for research if they meet certain broad absolute and trend criteria. Financial statements are analyzed in an effort to identify the nature of the cash generation that is looked for in any investment and to understand the variables that demonstrate robust financial health and define long-term competitive advantage. Companies meeting the financial criteria are then subjected to a detailed investigation of products, costs and pricing, competition, industry position, and outlook.
Monetary Easing Drove Market Performance
Economic growth proved sluggish throughout much of the world during the reporting period, and a steep decline in oil prices in late 2014 stoked deflation fears while generating challenges for energy producers. In Europe, disagreements between Greece and the European Union over debt relief measures produced additional uncertainty.The U.S. economy hit a soft patch during the first quarter of 2015 due to harsh winter weather and slower export activity.
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
Nonetheless, the MSCI World Index registered a modestly positive return in this environment. European equities were buoyed by a larger-than-expected quantitative easing program from the European Central Bank, and Japanese stocks fared relatively well in the midst of new monetary stimulus measures. One consequence of the ECB’s liquidity injection was to weaken the euro particularly against the dollar, which has had major implications for many of the euro-based but global companies in which we invest. In contrast, the recent slowdown in domestic economic activity, a strengthening U.S. dollar, and nervousness about upcoming short-term interest-rate hikes restrained the performance of the U.S. stock market. U.K.-based equities also generally lagged market averages.
Investment returns were further affected by a strengthening U.S. dollar against most other currencies, which dampened results from unhedged foreign investments for U.S. residents.
Highly Selective Approach
The fund performed well during the reporting period, across a variety of countries and industry groups, reflecting Walter Scott’s highly selective approach of investing in high quality companies irrespective of region or sector. Swiss agricultural supplier Syngenta ranked as the reporting period’s top individual performer after the company was targeted for acquisition by global industry giant Monsanto.The advance has been rejected unanimously by the Swiss company’s board on the basis that the proposal significantly undervalues the business. Consequently, members of the investment team have met with senior management at both Syngenta and Monsanto to discuss the proposal and will continue to monitor the situation closely. Japanese machinery producer FANUC performed well in response to a positive outlook for factory automation and after announcing new measures to improve shareholder value.There was a notable spike in the share price of British natural gas producer BG Group after a takeover offer from Royal Dutch Shell, prompting us to lock in profits by selling the fund’s position. Denmark-based Novo Nordisk, the world’s largest producer of insulin and related products, raised its earnings forecast in anticipation of better cost controls and new-product breakthroughs. Meanwhile, Spanish textiles manufacturer Inditex benefited from robust business trends and a depreciating euro.
In contrast, U.S.-based metal components maker Precision Castparts was hurt by transitory operational issues and weaker order volumes from a struggling energy sector. American retail giant Walmart Stores gave back some previous gains when consumer spending did not climb as much as had been anticipated. Swiss accessories
4
maker The Swatch Group struggled with intensifying competitive pressures and a slowdown in the sales of luxury goods in the emerging markets. In Japan, Shin-Etsu Chemical, who the investment team met with during the period, disappointed by refraining from raising its dividend, and construction equipment producer Komatsu was hurt by the economic slowdown in China.
Finding Opportunities despite Economic Headwinds
The world has long been entrenched in an environment of low growth, low inflation, and low interest rates, and we remain concerned about high debt levels in Europe and Japan as well as signs of slowing industrial activity in the United States.Yet, in our analysis, the aggregate financial characteristics of the fund’s holdings continue to be remarkably strong. Individual companies in our portfolio have strong balance sheets and are generating excellent levels of internal profitability.We believe that this dynamic will drive stock prices higher over the long term as companies with these characteristics continue to generate wealth.
Therefore, we have continued to identify ample opportunities meeting our investment criteria.As of the reporting period’s end, the fund held overweighted exposure to the information technology, health care, and consumer discretionary sectors. In contrast, the fund held relatively light positions in the financials, industrials, and telecommunications services sectors.
June 15, 2015
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.
Investing internationally involves special risks, including changes in currency exchange rates, political, economic, and social instability, a lack of comprehensive company information, differing auditing and legal standards, and less market liquidity.These risks generally are greater with emerging market countries than with more economically and politically established foreign countries.
1 Total return includes reinvestment of dividends and any capital gains paid and does not take into consideration the |
maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed |
on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Past |
performance is no guarantee of future results. Share price, yield, and investment return fluctuate such that upon |
redemption, fund shares may be worth more or less than their original cost. |
2 SOURCE: LIPPER INC. — Reflects reinvestment of net dividends and, where applicable, capital gain |
distributions.The Morgan Stanley Capital International (MSCI) World Index is an unmanaged index of global |
stock market performance, including the United States, Canada, Europe,Australia, New Zealand, and the Far East. |
Investors cannot invest directly in any index. |
The Fund 5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Global Stock Fund from December 1, 2014 to May 31, 2015. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended May 31, 2015
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $ | 6.24 | $ | 10.08 | $ | 4.62 | $ | 4.57 |
Ending value (after expenses) | $ | 1,034.00 | $ | 1,031.00 | $ | 1,035.90 | $ | 1,036.00 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment
assuming a hypothetical 5% annualized return for the six months ended May 31, 2015
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $ | 6.19 | $ | 10.00 | $ | 4.58 | $ | 4.53 |
Ending value (after expenses) | $ | 1,018.80 | $ | 1,015.01 | $ | 1,020.39 | $ | 1,020.44 |
† Expenses are equal to the fund’s annualized expense ratio of 1.23% for Class A, 1.99% for Class C, .91% for |
Class I and .90% for ClassY, multiplied by the average account value over the period, multiplied by 182/365 (to |
reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS |
May 31, 2015 (Unaudited) |
Common Stocks—97.2% | Shares | Value ($) |
Australia—1.8% | ||
CSL | 505,500 | 35,978,372 |
Canada—1.2% | ||
Suncor Energy | 789,500 | 23,076,813 |
China—2.3% | ||
China Shenhua Energy, Cl. H | 3,899,000 | 9,575,367 |
CNOOC | 23,855,000 | 37,136,555 |
46,711,922 | ||
Denmark—2.3% | ||
Novo Nordisk, Cl. B | 803,200 | 45,513,888 |
France—4.7% | ||
Essilor International | 247,500 | 30,232,579 |
L’Oreal | 211,700 | 40,006,814 |
LVMH Moet Hennessy Louis Vuitton | 125,400 | 22,438,859 |
92,678,252 | ||
Hong Kong—6.4% | ||
AIA Group | 6,186,600 | 40,630,962 |
China Mobile | 2,842,500 | 37,308,444 |
CLP Holdings | 1,301,000 | 11,368,171 |
Hong Kong & China Gas | 16,095,177 | 38,800,820 |
128,108,397 | ||
Japan—9.5% | ||
Denso | 512,700 | 26,733,516 |
FANUC | 215,100 | 47,270,365 |
Honda Motor | 825,400 | 28,257,914 |
Keyence | 46,457 | 24,945,853 |
Komatsu | 1,357,500 | 28,514,625 |
Shin-Etsu Chemical | 544,300 | 33,100,692 |
188,822,965 | ||
Singapore—1.8% | ||
DBS Group Holdings | 2,394,369 | 35,899,382 |
Spain—2.1% | ||
Inditex | 1,271,500 | 42,140,113 |
Sweden—2.0% | ||
Hennes & Mauritz, Cl. B | 1,018,000 | 39,035,503 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Switzerland—9.8% | |||
Nestle | 503,500 | 39,116,126 | |
Novartis | 431,700 | 44,428,534 | |
Roche Holding | 128,700 | 37,892,996 | |
SGS | 7,800 | 15,011,072 | |
Swatch Group-BR | 42,200 | 16,782,845 | |
Syngenta | 89,300 | 40,898,129 | |
194,129,702 | |||
Taiwan—2.2% | |||
Taiwan Semiconductor Manufacturing, ADR | 1,778,600 | 43,184,408 | |
United Kingdom—3.6% | |||
Reckitt Benckiser Group | 435,700 | 39,379,565 | |
Standard Chartered | 2,033,317 | 32,538,835 | |
71,918,400 | |||
United States—47.5% | |||
Adobe Systems | 526,100 | a | 41,609,249 |
Amphenol, Cl. A | 405,600 | 23,139,480 | |
Automatic Data Processing | 459,800 | 39,317,498 | |
C.R. Bard | 125,200 | 21,324,064 | |
Cisco Systems | 1,318,900 | 38,656,959 | |
Cognizant Technology Solutions, Cl. A | 611,400 | a | 39,569,808 |
Colgate-Palmolive | 565,100 | 37,743,029 | |
EOG Resources | 460,200 | 40,815,138 | |
Fastenal | 381,900 | 15,852,669 | |
Gilead Sciences | 358,500 | 40,248,795 | |
Google, Cl. A | 35,400 | a | 19,304,328 |
Google, Cl. C | 35,497 | a | 18,888,309 |
Intuitive Surgical | 65,400 | a | 31,898,850 |
Johnson & Johnson | 405,600 | 40,616,784 | |
MasterCard, Cl. A | 485,300 | 44,773,778 | |
Microsoft | 801,300 | 37,548,918 | |
NIKE, Cl. B | 412,600 | 41,949,042 | |
Oracle | 855,200 | 37,192,648 | |
Praxair | 303,400 | 37,275,724 | |
Precision Castparts | 187,300 | 39,638,299 | |
QUALCOMM | 581,200 | 40,498,016 | |
Schlumberger | 452,600 | 41,082,502 |
8
Common Stocks (continued) | Shares | Value ($) | ||
United States (continued) | ||||
Starbucks | 593,081 | 30,816,489 | ||
Stryker | 394,900 | 37,961,737 | ||
The TJX Companies | 583,800 | 37,585,044 | ||
W.W. Grainger | 160,300 | 38,524,899 | ||
Wal-Mart Stores | 417,800 | 31,030,006 | ||
944,862,062 | ||||
Total Common Stocks | ||||
(cost $1,444,283,064) | 1,932,060,179 | |||
Other Investment—4.6% | ||||
Registered Investment Company; | ||||
Dreyfus Institutional Preferred | ||||
Plus Money Market Fund | ||||
(cost $90,951,412) | 90,951,412 | b | 90,951,412 | |
Total Investments (cost $1,535,234,476) | 101.8 | % | 2,023,011,591 | |
Liabilities, Less Cash and Receivables | (1.8 | %) | (35,274,324 | ) |
Net Assets | 100.0 | % | 1,987,737,267 |
ADR—American Depository Receipts
BR—Bearer Certificate
a | Non-income producing security. |
b | Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Information Technology | 22.6 | Materials | 5.6 |
Health Care | 18.4 | Financial | 5.5 |
Consumer Discretionary | 14.4 | Money Market Investment | 4.6 |
Consumer Staples | 9.4 | Utilities | 2.5 |
Industrial | 9.3 | Telecommunication Services | 1.9 |
Energy | 7.6 | 101.8 | |
† Based on net assets. | |||
See notes to financial statements. |
The Fund 9
STATEMENT OF ASSETS AND LIABILITIES |
May 31, 2015 (Unaudited) |
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments: | ||||
Unaffiliated issuers | 1,444,283,064 | 1,932,060,179 | ||
Affiliated issuers | 90,951,412 | 90,951,412 | ||
Cash denominated in foeign currencies | 856,296 | 854,775 | ||
Dividends receivable | 4,870,429 | |||
Receivable for shares of Common Stock subscribed | 45,592 | |||
Prepaid expenses | 66,908 | |||
2,028,849,295 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 1,607,199 | |||
Cash overdraft due to Custodian | 169,642 | |||
Payable for investment securities purchased | 38,665,576 | |||
Payable for shares of Common Stock redeemed | 551,884 | |||
Accrued expenses | 117,727 | |||
41,112,028 | ||||
Net Assets ($) | 1,987,737,267 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 1,490,092,927 | |||
Accumulated undistributed investment income—net | 9,228,349 | |||
Accumulated net realized gain (loss) on investments | 763,460 | |||
Accumulated net unrealized appreciation (depreciation) | ||||
on investments and foreign currency transactions | 487,652,531 | |||
Net Assets ($) | 1,987,737,267 | |||
Net Asset Value Per Share | ||||
Class A | Class C | Class I | Class Y | |
Net Assets ($) | 51,955,665 | 18,031,620 | 1,537,538,073 | 380,211,909 |
Shares Outstanding | 2,690,501 | 954,923 | 78,643,858 | 19,468,301 |
Net Asset Value Per Share ($) | 19.31 | 18.88 | 19.55 | 19.53 |
See notes to financial statements. |
10
STATEMENT OF OPERATIONS |
Six Months Ended May 31, 2015 (Unaudited) |
Investment Income ($): | ||
Income: | ||
Cash dividends (net of $1,498,544 foreign taxes withheld at source): | ||
Unaffiliated issuers | 20,263,944 | |
Affiliated issuers | 21,721 | |
Total Income | 20,285,665 | |
Expenses: | ||
Management fee—Note 3(a) | 8,191,799 | |
Custodian fees—Note 3(c) | 225,163 | |
Shareholder servicing costs—Note 3(c) | 185,467 | |
Directors’ fees and expenses—Note 3(d) | 83,879 | |
Distribution fees—Note 3(b) | 72,272 | |
Registration fees | 43,831 | |
Professional fees | 38,326 | |
Interest expense—Note 2 | 10,678 | |
Prospectus and shareholders’ reports | 10,201 | |
Loan commitment fees—Note 2 | 9,034 | |
Miscellaneous | 36,496 | |
Total Expenses | 8,907,146 | |
Less—reduction in fees due to earnings credits—Note 3(c) | (13 | ) |
Net Expenses | 8,907,133 | |
Investment Income—Net | 11,378,532 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments and foreign currency transactions | 1,022,885 | |
Net realized gain (loss) on forward foreign currency exchange contracts | 17,979 | |
Net Realized Gain (Loss) | 1,040,864 | |
Net unrealized appreciation (depreciation) on | ||
investments and foreign currency transactions | 51,818,367 | |
Net Realized and Unrealized Gain (Loss) on Investments | 52,859,231 | |
Net Increase in Net Assets Resulting from Operations | 64,237,763 | |
See notes to financial statements. |
The Fund 11
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
May 31, 2015 | Year Ended | |||
(Unaudited) | November 30, 2014 | |||
Operations ($): | ||||
Investment income—net | 11,378,532 | 18,645,079 | ||
Net realized gain (loss) on investments | 1,040,864 | 11,021,250 | ||
Net unrealized appreciation | ||||
(depreciation) on investments | 51,818,367 | 77,170,067 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 64,237,763 | 106,836,396 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A | (363,489 | ) | (512,902 | ) |
Class I | (15,456,826 | ) | (13,098,083 | ) |
Class Y | (5,037,940 | ) | (142,507 | ) |
Net realized gain (loss) on investments: | ||||
Class A | (252,406 | ) | — | |
Class C | (99,330 | ) | — | |
Class I | (6,528,723 | ) | — | |
Class Y | (2,107,437 | ) | — | |
Total Dividends | (29,846,151 | ) | (13,753,492 | ) |
Capital Stock Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A | 1,917,919 | 10,604,219 | ||
Class C | 193,147 | 1,187,078 | ||
Class I | 96,761,050 | 442,939,658 | ||
Class Y | 20,813,008 | 461,633,983 | ||
Dividends reinvested: | ||||
Class A | 593,048 | 486,350 | ||
Class C | 73,742 | — | ||
Class I | 21,539,427 | 10,562,290 | ||
Class Y | 3,565,667 | 142,498 | ||
Cost of shares redeemed: | ||||
Class A | (7,294,267 | ) | (48,160,329 | ) |
Class C | (3,853,912 | ) | (4,523,033 | ) |
Class I | (80,365,555 | ) | (633,636,703 | ) |
Class Y | (117,469,936 | ) | (20,771,111 | ) |
Increase (Decrease) in Net Assets | ||||
from Capital Stock Transactions | (63,526,662 | ) | 220,464,900 | |
Total Increase (Decrease) in Net Assets | (29,135,050 | ) | 313,547,804 | |
Net Assets ($): | ||||
Beginning of Period | 2,016,872,317 | 1,703,324,513 | ||
End of Period | 1,987,737,267 | 2,016,872,317 | ||
Undistributed investment income—net | 9,228,349 | 18,708,072 |
12
Six Months Ended | ||||
May 31, 2015 | Year Ended | |||
(Unaudited) | November 30, 2014 | |||
Capital Share Transactions: | ||||
Class A | ||||
Shares sold | 103,391 | 588,683 | ||
Shares issued for dividends reinvested | 32,283 | 26,870 | ||
Shares redeemed | (392,199 | ) | (2,608,164 | ) |
Net Increase (Decrease) in Shares Outstanding | (256,525 | ) | (1,992,611 | ) |
Class C | ||||
Shares sold | 10,631 | 68,010 | ||
Shares issued for dividends reinvested | 4,092 | — | ||
Shares redeemed | (211,675 | ) | (253,264 | ) |
Net Increase (Decrease) in Shares Outstanding | (196,952 | ) | (185,254 | ) |
Class I a | ||||
Shares sold | 5,049,622 | 24,005,242 | ||
Shares issued for dividends reinvested | 1,159,280 | 576,544 | ||
Shares redeemed | (4,225,020 | ) | (33,673,734 | ) |
Net Increase (Decrease) in Shares Outstanding | 1,983,882 | (9,091,948 | ) | |
Class Y a | ||||
Shares sold | 1,112,017 | 24,357,908 | ||
Shares issued for dividends reinvested | 192,219 | 7,783 | ||
Shares redeemed | (6,358,122 | ) | (1,110,597 | ) |
Net Increase (Decrease) in Shares Outstanding | (5,053,886 | ) | 23,255,094 |
a During the period ended November 30, 2014, 22,262,630 Class I shares representing $423,212,595 were |
exchanged for 22,286,077 ClassY shares. |
See notes to financial statements.
The Fund 13
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||||
May 31, 2015 | Year Ended November 30, | |||||||||||
Class A Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 18.89 | 18.02 | 15.02 | 13.51 | 12.99 | 12.23 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .08 | .14 | .13 | .11 | .11 | .07 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .56 | .83 | 2.95 | 1.62 | .52 | .75 | ||||||
Total from Investment Operations | .64 | .97 | 3.08 | 1.73 | .63 | .82 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.13 | ) | (.10 | ) | (.08 | ) | (.10 | ) | (.07 | ) | (.06 | ) |
Dividends from net realized | ||||||||||||
gain on investments | (.09 | ) | — | — | (.12 | ) | (.04 | ) | — | |||
Total Distributions | (.22 | ) | (.10 | ) | (.08 | ) | (.22 | ) | (.11 | ) | (.06 | ) |
Net asset value, end of period | 19.31 | 18.89 | 18.02 | 15.02 | 13.51 | 12.99 | ||||||
Total Return (%)b | 3.40 | c | 5.49 | 20.60 | 13.08 | 4.86 | 6.70 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.23 | d | 1.23 | 1.24 | 1.28 | 1.27 | 1.32 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.23 | d | 1.23 | 1.24 | 1.28 | 1.27 | 1.32 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | .87 | d | .76 | .76 | .80 | .80 | .56 | |||||
Portfolio Turnover Rate | 7.37 | c | 7.05 | 6.39 | 6.05 | 8.54 | 7.50 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 51,956 | 55,682 | 89,024 | 61,806 | 48,872 | 37,152 |
a | Based on average shares outstanding. |
b | Exclusive of sales charge. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
14
Six Months Ended | ||||||||||||
May 31, 2015 | Year Ended November 30, | |||||||||||
Class C Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 18.42 | 17.61 | 14.71 | 13.24 | 12.78 | 12.07 | ||||||
Investment Operations: | ||||||||||||
Investment income (loss)—neta | .01 | (.01 | ) | .00 | b | .01 | .01 | (.02 | ) | |||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .54 | .82 | 2.90 | 1.59 | .50 | .73 | ||||||
Total from Investment Operations | .55 | .81 | 2.90 | 1.60 | .51 | .71 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | — | — | — | (.01 | ) | (.01 | ) | (.00 | )b | |||
Dividends from net realized | ||||||||||||
gain on investments | (.09 | ) | — | — | (.12 | ) | (.04 | ) | — | |||
Total Distributions | (.09 | ) | — | — | (.13 | ) | (.05 | ) | (.00 | )b | ||
Net asset value, end of period | 18.88 | 18.42 | 17.61 | 14.71 | 13.24 | 12.78 | ||||||
Total Return (%)c | 3.10 | d | 4.60 | 19.72 | 12.21 | 4.01 | 5.90 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.99 | e | 2.00 | 2.01 | 2.05 | 2.03 | 2.09 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.99 | e | 2.00 | 2.01 | 2.05 | 2.03 | 2.09 | |||||
Ratio of net investment income | ||||||||||||
(loss) to average net assets | .09 | e | (.05 | ) | .00 | f | .05 | .05 | (.17 | ) | ||
Portfolio Turnover Rate | 7.37 | d | 7.05 | 6.39 | 6.05 | 8.54 | 7.50 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 18,032 | 21,221 | 23,543 | 15,883 | 13,872 | 10,243 |
a | Based on average shares outstanding. |
b | Amount represents less than $.01 per share. |
c | Exclusive of sales charge. |
d | Not annualized. |
e | Annualized. |
f | Amount represents less than .01%. |
See notes to financial statements.
The Fund 15
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||||||||
May 31, 2015 | Year Ended November 30, | ||||||||||||
Class I Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||
Per Share Data ($): | |||||||||||||
Net asset value, | |||||||||||||
beginning of period | 19.18 | 18.28 | 15.24 | 13.70 | 13.15 | 12.36 | |||||||
Investment Operations: | |||||||||||||
Investment income—neta | .11 | .20 | .19 | .16 | .16 | .12 | |||||||
Net realized and unrealized | |||||||||||||
gain (loss) on investments | .56 | .85 | 2.98 | 1.64 | .53 | .76 | |||||||
Total from Investment Operations | .67 | 1.05 | 3.17 | 1.80 | .69 | .88 | |||||||
Distributions: | |||||||||||||
Dividends from | |||||||||||||
investment income—net | (.21 | ) | (.15 | ) | (.13 | ) | (.14 | ) | (.10 | ) | (.09 | ) | |
Dividends from net realized | |||||||||||||
gain on investments | (.09 | ) | — | — | (.12 | ) | (.04 | ) | — | ||||
Total Distributions | (.30 | ) | (.15 | ) | (.13 | ) | (.26 | ) | (.14 | ) | (.09 | ) | |
Net asset value, end of period | 19.55 | 19.18 | 18.28 | 15.24 | 13.70 | 13.15 | |||||||
Total Return (%) | 3.59 | b | 5.80 | 20.93 | 13.49 | 5.23 | 7.12 | ||||||
Ratios/Supplemental Data (%): | |||||||||||||
Ratio of total expenses | |||||||||||||
to average net assets | .91 | c | .91 | .91 | .93 | .93 | .96 | ||||||
Ratio of net expenses | |||||||||||||
to average net assets | .91 | c | .91 | .91 | .93 | .93 | .96 | ||||||
Ratio of net investment income | |||||||||||||
to average net assets | 1.20 | c | 1.06 | 1.12 | 1.14 | 1.13 | .94 | ||||||
Portfolio Turnover Rate | 7.37 | b | 7.05 | 6.39 | 6.05 | 8.54 | 7.50 | ||||||
Net Assets, end of period | |||||||||||||
($ x 1,000) | 1,537,538 | 1,470,169 | 1,567,608 | 668,063 | 472,646 | 364,688 |
a | Based on average shares outstanding. |
b | Not annualized. |
c | Annualized. |
See notes to financial statements.
16
Six Months Ended | ||||||
May 31, 2015 | Year Ended November 30, | |||||
Class Y Shares | (Unaudited) | 2014 | 2013 | a | ||
Per Share Data ($): | ||||||
Net asset value, beginning of period | 19.16 | 18.27 | 16.40 | |||
Investment Operations: | ||||||
Investment income—netb | .11 | .14 | .01 | |||
Net realized and unrealized gain (loss) on investments | .56 | .90 | 1.86 | |||
Total from Investment Operations | .67 | 1.04 | 1.87 | |||
Distributions: | ||||||
Dividends from investment income—net | (.21 | ) | (.15 | ) | — | |
Dividends from net realized gain on investments | (.09 | ) | — | — | ||
Total Distributions | (.30 | ) | (.15 | ) | — | |
Net asset value, end of period | 19.53 | 19.16 | 18.27 | |||
Total Return (%) | 3.60 | c | 5.75 | 11.40 | c | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses to average net assets | .90 | d | .90 | .90 | d | |
Ratio of net expenses to average net assets | .90 | d | .90 | .90 | d | |
Ratio of net investment income to average net assets | 1.20 | d | .74 | .83 | d | |
Portfolio Turnover Rate | 7.37 | c | 7.05 | 6.39 | ||
Net Assets, end of period ($ x 1,000) | 380,212 | 469,801 | 23,149 |
a | From July 1, 2013 (commencement of initial offering) to November 30, 2013. |
b | Based on average shares outstanding. |
c | Not annualized. |
d | Annualized. |
See notes to financial statements.
The Fund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Global Stock Fund (the “fund”) is a separate diversified series of Strategic Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering ten series, including the fund. The fund’s investment objective is to seek long-term total return. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Walter Scott & Partners Limited (“Walter Scott”), a wholly-owned subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser.The fund is closed to new investors.
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 500 million shares of $.001 par value Common Stock. The fund currently offers four classes of shares: Class A (100 million shares authorized), Class C (100 million shares authorized), Class I (200 million shares authorized) and Class Y (100 million shares authorized). Class A shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) on Class C shares redeemed within one year of purchase. Class I and Class Y shares are sold at net asset value per share generally to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are
18
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: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value.All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
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. These securities are generally categorized within Level 2 of the fair value hierarchy.
20
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 financial futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Directors (the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward foreign currency exchange contracts (“forward contracts”) are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The following is a summary of the inputs used as of May 31, 2015 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 | |||||
Common | |||||
Stocks† | 944,862,062 | — | — | 944,862,062 | |
Equity Securities— | |||||
Foreign | |||||
Common | |||||
Stocks† | 43,184,408 | 944,013,709 | †† | — | 987,198,117 |
Mutual Funds | 90,951,412 | — | — | 90,951,412 |
† | See Statement of Investments for additional detailed categorizations. |
†† | Securities classified within Level 2 at period end as the values were determined pursuant to the |
fund’s fair valuation procedures. See note above for additional information. |
At November 30, 2014, no exchange traded foreign equity securities were classified within Level 2 of the fair value hierarchy.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
22
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
(d) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended May 31, 2015 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 11/30/2014 ($) | Purchases ($) | Sales ($) | 5/31/2015 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Preferred | |||||
Plus Money | |||||
Market | |||||
Fund | 31,510,000 | 214,392,921 | 154,951,509 | 90,951,412 | 4.6 |
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S.These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S.
(f) 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
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended May 31, 2015, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended May 31, 2015, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended November 30, 2014 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The tax character of distributions paid to shareholders during the fiscal year ended November 30, 2014 was as follows: ordinary income $13,753,492. The tax character of current year distribution 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 $430 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.
24
The average amount of borrowings outstanding under the Facilities during the period ended May 31, 2015, was approximately $1,941,200, with a related weighted average annualized interest rate of 1.10%.
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .85% of the value of the fund’s average daily net assets and is payable monthly.
Pursuant to a sub-investment advisory agreement between Dreyfus and Walter Scott, Dreyfus pays Walter Scott a monthly fee at an annual percentage of the value of the fund’s average daily net assets.
During the period ended May 31, 2015, the Distributor retained $237 from commissions earned on sales of the fund’s Class A shares and $378 from CDSCs on redemptions of the fund’s Class C shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended May 31, 2015, Class C shares were charged $72,272 pursuant to the Distribution Plan.
(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents.
The Fund 25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
During the period ended May 31, 2015, Class A and Class C shares were charged $65,835 and $24,091, respectively, pursuant to the Shareholder Services Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended May 31, 2015, the fund was charged $5,176 for transfer agency services and $249 for cash management services.These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $13.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended May 31, 2015, the fund was charged $225,163 pursuant to the custody agreement.
During the period ended May 31, 2015, the fund was charged $6,140 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $1,431,262, Distribution Plan fees $11,623, Shareholder Services Plan fees $15,083, custodian fees $144,000, Chief Compliance Officer fees $2,113 and transfer agency fees $3,118.
(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.
26
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward contracts, during the period ended May 31, 2015, amounted to $139,674,713 and $243,364,439, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset.The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its over-the-counter (“OTC”) derivative contract counterparties in order to, among other things, reduce its credit risk to counterpar-ties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.
Each type of derivative instrument that was held by the fund during the period ended May 31, 2015 is discussed below.
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 forward contract is opened and the date the forward contract is closed.The fund realizes
The Fund 27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments.The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract.This risk is mitigated by Master Agreements between the fund and the counter-party and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty.At May 31, 2015, there were no forward contracts outstanding.
The following summarizes the average market value of derivatives outstanding during the period ended May 31, 2015:
Average Market Value ($) | |
Forward contracts | 1,236,784 |
At May 31, 2015, accumulated net unrealized appreciation on investments was $487,777,115, consisting of $520,972,048 gross unrealized appreciation and $33,194,933 gross unrealized depreciation.
At May 31, 2015, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
28
For More Information
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Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-DREYFUS.
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Dreyfus |
MLP Fund |
SEMIANNUAL REPORT May 31, 2015
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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 | Understanding Your Fund’s Expenses |
2 | Comparing Your Fund’s Expenses With Those of Other Funds |
3 | Statement of Investments |
5 | Statement of Securities Sold Short |
6 | Statement of Assets and Liabilities |
7 | Statement of Operations |
8 | Statement of Changes in Net Assets |
9 | Financial Highlights |
10 | Notes to Financial Statements |
23 | Information About the Approval of the Fund’s Management and Sub-Investment Advisory Agreements |
FOR MORE INFORMATION | |
Back Cover |
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 MLP Fund from April 30, 2015 (commencement of operations) to May 31, 2015. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended May 31, 2015
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $ | 1.82 | $ | 2.47 | $ | 1.60 | $ | 1.60 |
Ending value (after expenses) | $ | 986.40 | $ | 985.60 | $ | 986.40 | $ | 986.40 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment
assuming a hypothetical 5% annualized return for the six months ended May 31, 2015
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000††† | $ | 10.50 | $ | 14.24 | $ | 9.25 | $ | 9.25 |
Ending value (after expenses) | $ | 1,014.51 | $ | 1,010.77 | $ | 1,015.76 | $ | 1,015.76 |
† | Expenses are equal to the fund's annualized expense ratio of 2.09% for Class A, 2.84% for Class C, 1.84% for |
Class I and 1.84% for ClassY, multiplied by the average account value over the period, multiplied by 32/365 (to | |
reflect the actual days in the period). | |
†† | Please note that while Class A, Class C, Class I and ClassY shares commenced operations on April 30, 2015, |
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 expense ratios were in effect during the period December | |
1, 2014 to May 31, 2015. | |
††† | Expenses are equal to the fund's annualized expense ratio of 2.09% for Class A, 2.84% for Class C, 1.84% for |
Class I and 1.84% for ClassY, multiplied by the average account value over the period, multiplied by 182/365 | |
(to reflect the one-half year period). |
2
STATEMENT OF INVESTMENTS |
May 31, 2015 (Unaudited) |
Common Stocks—20.1% | Shares | Value ($) | |
Energy—13.9% | |||
Kinder Morgan | 37,825 | 1,569,359 | |
ONEOK | 6,164 | 258,395 | |
SemGroup, Cl. A | 20,398 | 1,605,323 | |
3,433,077 | |||
Materials—.7% | |||
Rentech | 145,798 | a | 172,042 |
Real Estate—3.2% | |||
InfraREIT | 26,562 | 804,829 | |
Utilities—2.3% | |||
NiSource | 11,923 | 562,527 | |
Total Common Stocks | |||
(cost $5,181,001) | 4,972,475 | ||
Master Limited Partnerships—68.5% | |||
Energy—66.9% | |||
Cheniere Energy Partners LP | 39,204 | b | 1,301,181 |
Columbia Pipeline Partners LP | 43,638 | b | 1,180,408 |
Cone Midstream Partners LP | 70,746 | b | 1,380,254 |
Energy Transfer Equity LP | 21,110 | b | 1,449,624 |
Energy Transfer Partners LP | 12,435 | 699,220 | |
MPLX LP | 12,758 | 931,334 | |
NuStar Energy LP | 11,245 | 701,800 | |
Nustar GP Holdings LLC | 25,080 | 962,570 | |
Plains GP Holdings LP, Cl. A | 25,773 | 720,613 | |
Rose Rock Midstream LP | 9,496 | 481,162 | |
Southcross Energy Partners LP | 75,981 | 1,022,704 | |
Tallgrass Energy GP LP | 60,323 | 1,933,352 | |
Tallgrass Energy Partners LP | 25,220 | 1,248,138 | |
Valero Energy Partners LP | 34,087 | 1,745,595 | |
Western Gas Equity Partners LP | 11,172 | 715,567 | |
Western Gas Partners LP | 1,202 | 82,337 | |
16,555,859 | |||
Materials—1.6% | |||
Westlake Chemical Partners LP | 18,050 | 394,212 | |
Total Master Limited Partnerships | |||
(cost $16,917,810) | 16,950,071 |
The Fund 3
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Number of | |||
Warrants—4.2% | Warrants | Value ($) | |
Materials | |||
Kinder Morgan (5/25/17) | |||
(cost $1,241,983) | 260,123 | a | 1,030,087 |
Other Investment—7.2% | Shares | Value ($) | |
Registered Investment Company; | |||
Dreyfus Institutional Preferred | |||
Plus Money Market Fund | |||
(cost $1,791,252) | 1,791,252 | c | 1,791,252 |
Total Investments (cost $25,132,046) | 100.0 | % | 24,743,885 |
Cash and Receivables (Net) | .0 | % | 2,913 |
Net Assets | 100.0 | % | 24,746,798 |
ETF—Exchange-Traded Fund
LLC—Limited Liability Company
LP—Limited Partnership
a | Non-income producing security. |
b | Held by a broker as collateral for open short positions. |
c | Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Energy | 80.8 | Real Estate | 3.2 |
Money Market Investment | 7.2 | Utilities | 2.3 |
Materials | 6.5 | 100.0 |
† Based on net assets. |
See notes to financial statements. |
4
STATEMENT OF SECURITIES SOLD SHORT |
May 31, 2015 (Unaudited) |
Common Stocks—8.8% | Shares | Value ($) |
Exchange-Traded Funds—8.8% | ||
iShares 20+ Year Treasury Bond ETF | 12,867 | 1,579,296 |
iShares U.S. Real Estate ETF | 2,949 | 221,853 |
SPDR Barclays High Yield Bond ETF | 9,358 | 368,892 |
Total Securities Sold Short | ||
(proceeds $2,201,141) | 2,170,041 |
ETF—Exchange-Traded Fund
Portfolio Summary (Unaudited)† | |
Value (%) | |
Exchange-Traded Funds | 8.8 |
† Based on net assets. |
See notes to financial statements. |
The Fund 5
STATEMENT OF ASSETS AND LIABILITIES |
May 31, 2015 (Unaudited) |
Cost | Value | ||||
Assets ($): | |||||
Investments in securities—See Statement of Investments: | |||||
Unaffiliated issuers | 23,340,794 | 22,952,633 | |||
Affiliated issuers | 1,791,252 | 1,791,252 | |||
Receivable from brokers for proceeds on securities sold short | 2,201,141 | ||||
Dividends receivable | 383 | ||||
Prepaid expenses | 88,664 | ||||
Due from The Dreyfus Corporation and affiliates—Note 2(c) | 22,254 | ||||
27,056,327 | |||||
Liabilities ($): | |||||
Securities sold short, at value (proceeds $2,201,141)—see | |||||
Statement of Securities Sold Short—Note 3 | 2,170,041 | ||||
Deferred tax liability—Note 1(g) | 7,221 | ||||
Due to broker | 1,082 | ||||
Accrued expenses | 131,185 | ||||
2,309,529 | |||||
Net Assets ($) | 24,746,798 | ||||
Composition of Net Assets ($): | |||||
Paid-in capital | 25,092,793 | ||||
Accumulated investment (loss)—net | (26,701 | ) | |||
Accumulated net realized gain (loss) on investments | 37,767 | ||||
Accumulated net unrealized appreciation | |||||
(depreciation) on investments | (357,061 | ) | |||
Net Assets ($) | 24,746,798 | ||||
Net Asset Value Per Share | |||||
Class A | Class C | Class I | Class Y | ||
Net Assets ($) | 4,024,896 | 985,402 | 9,873,830 | 9,862,670 | |
Shares Outstanding | 326,546 | 80,000 | 800,905 | 800,000 | |
Net Asset Value Per Share ($) | 12.33 | 12.32 | 12.33 | 12.33 | |
See notes to financial statements. |
6
STATEMENT OF OPERATIONS |
From April 30, 2015 (commencement of operations) to May 31, 2015 (Unaudited) |
Investment Income ($): | ||
Distributions from Master Limited Partnerships | 114,141 | |
Less return of capital on distributions from Master Limited Partnerships | (114,141 | ) |
Cash dividends: | ||
Unaffiliated issuers | 7,751 | |
Affiliated issuers | 447 | |
Total Investment Income | 8,198 | |
Expenses: | ||
Management fee—Note 2(a) | 21,906 | |
Professional fees | 36,414 | |
Registration fees | 8,030 | |
Prospectus and shareholders’ reports | 4,746 | |
Dividends on securities sold short | 4,678 | |
Shareholder servicing costs—Note 2(c) | 1,115 | |
Interest on securities sold short | 1,082 | |
Directors’ fees and expenses—Note 2(d) | 939 | |
Custodian fees—Note 2(c) | 800 | |
Distribution fees—Note 2(b) | 655 | |
Miscellaneous | 2,635 | |
Total Expenses, before income taxes | 83,000 | |
Less—reduction in expenses due to undertaking—Note 2(a) | (48,101 | ) |
Net Expenses, before income taxes | 34,899 | |
Income Taxes | 0 | |
Investment (Loss)—Net | (26,701 | ) |
Realized and Unrealized Gain (Loss) on Investments—Note 3 ($): | ||
Net realized gain (loss) on investments | 44,988 | |
Deferred tax expense—Note 1(g) | (7,221 | ) |
Net Realized Gain (Loss) on Investments | 37,767 | |
Net unrealized appreciation (depreciation) on investments | (388,161 | ) |
Net unrealized appreciation (depreciation) on securities sold short | 31,100 | |
Net Unrealized Appreciation (Depreciation) | (357,061 | ) |
Net Realized and Unrealized Gain (Loss) on Investments | (319,294 | ) |
Net (Decrease) in Net Assets Resulting from Operations | (345,995 | ) |
See notes to financial statements. |
The Fund 7
STATEMENT OF CHANGES IN NET ASSETS |
From April 30, 2015 (commencement of operations) to May 31, 2015 (Unaudited) |
Operations ($): | ||
Investment (loss)—net | (26,701 | ) |
Net realized gain (loss) on investments | 37,767 | |
Net unrealized appreciation (depreciation) on investments | (357,061 | ) |
Net Increase (Decrease) in Net Assets | ||
Resulting from Operations | (345,995 | ) |
Capital Stock Transactions ($): | ||
Net proceeds from shares sold: | ||
Class A | 4,081,690 | |
Class C | 1,000,000 | |
Class I | 10,011,103 | |
Class Y | 10,000,000 | |
Increase (Decrease) in Net Assets | ||
from Capital Stock Transactions | 25,092,793 | |
Total Increase (Decrease) in Net Assets | 24,746,798 | |
Net Assets ($): | ||
Beginning of Period | — | |
End of Period | 24,746,798 | |
Accumulated investment (loss)—net | (26,701 | ) |
Capital Share Transactions (Shares): | ||
Class A | ||
Shares sold | 326,546 | |
Class C | ||
Shares sold | 80,000 | |
Class I | ||
Shares sold | 800,905 | |
Class Y | ||
Shares sold | 800,000 | |
See notes to financial statements. |
8
FINANCIAL HIGHLIGHTS
The following table describes the performance for each share class for the period from April 30, 2015 (commencement of operations) to May 31, 2015. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distrib-utions.These figures have been derived from the fund’s financial statements.
Class A | Class C | Class I | Class Y | |||||
Shares | Shares | Shares | Shares | |||||
Per Share Data ($): | ||||||||
Net asset value, beginning of period | 12.50 | 12.50 | 12.50 | 12.50 | ||||
Investment Operations: | ||||||||
Investment (loss)—neta | (.02 | ) | (.03 | ) | (.02 | ) | (.02 | ) |
Net realized and unrealized | ||||||||
gain (loss) on investments | (.15 | ) | (.15 | ) | (.15 | ) | (.15 | ) |
Total from Investment Operations | (.17 | ) | (.18 | ) | (.17 | ) | (.17 | ) |
Net asset value, end of period | 12.33 | 12.32 | 12.33 | 12.33 | ||||
Total Return (%)b | (1.36 | )c | (1.44 | )c | (1.36 | ) | (1.36 | ) |
Ratios/Supplemental Data (%): | ||||||||
Ratio of total expenses | ||||||||
to average net assetsd | 4.29 | 5.04 | 4.04 | 4.04 | ||||
Ratio of net expenses | ||||||||
to average net assetsd | 2.09 | 2.84 | 1.84 | 1.84 | ||||
Ratio of income tax expense | ||||||||
to average net assetse | .33 | .33 | .33 | .33 | ||||
Ratio of net investment (loss) | ||||||||
to average net assetsd | (1.72 | ) | (2.47 | ) | (1.47 | ) | (1.47 | ) |
Portfolio Turnover Rateb | 8.40 | 8.40 | 8.40 | 8.40 | ||||
Net Assets, end of period ($ x 1,000) | 4,025 | 985 | 9,874 | 9,863 |
a Based on average shares outstanding. |
b Not annualized. |
c Exclusive of sales charge. |
d Annualized. |
e Income tax expense for ratio calculation is derived from the total current and deferred taxes on net investment income |
(loss) and realized and unrealized gain (loss), if any. |
See notes to financial statements.
The Fund 9
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus MLP 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 seek total return, consisting of capital appreciation and income. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary ofThe Bank of NewYork Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. The Boston Company Asset Management, LLC (“TBCAM”), a wholly-owned subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser.The fund’s fiscal year end is November 30.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 100 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class C, Class I and Class Y. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I and Class Y shares are sold at net asset value per share generally to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
As of May 31, 2015, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held 320,000 Class A, 800,000 Class I and all of the outstanding Class C and Class Y shares of the fund.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are
10
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: 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 11
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value.All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy. MLP’s are generally categorized within Level 1 of the fair value hiearchy.
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. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant American
12
Depository Receipts and financial futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Directors (the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of May 31, 2015 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 | ||||
Common Stocks† | 4,972,475 | — | — | 4,972,475 |
Master Limited | ||||
Partnership Shares† | 16,950,071 | — | — | 16,950,071 |
Mutual Funds | 1,791,252 | — | — | 1,791,252 |
Warrants† | 1,030,087 | — | — | 1,030,087 |
The Fund 13
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Level 2—Other | Level 3— | |||||
Level 1— | Significant | Significant | ||||
Unadjusted | Observable | Unobservable | ||||
Quoted Prices | Inputs | Inputs | Total | |||
Liabilities ($) | ||||||
Securities Sold Short: | ||||||
Equity Securities— | ||||||
Domestic | ||||||
Common Stocks†† | (2,170,041 | ) | — | — | (2,170,041 | ) |
† | See Statement of Investments for additional detailed categorizations. |
†† | See Statement of Securities Sold Short for additional detailed categorizations. |
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
(c) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended May 31, 2015 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 4/30/2015 ($) | Purchases ($) | Sales ($) | 5/31/2015 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Preferred | |||||
Plus Money | |||||
Market Fund | — | 27,979,651 | 26,188,399 | 1,791,252 | 7.2 |
(d) Risk: The fund invests primarily in Master Limited Partnerships (“MLPs”). MLPs and MLP-related investments comprise a minimum of 80% of investable assets of the fund.The majority of MLPs operate in the energy and/or natural resources sector. MLPs are generally organized under state law as limited partnerships or limited liability companies.An MLP consists of at least one general partner and one or more limited partners.The general partner controls the operations and
14
management of the MLP and has an ownership stake in the MLP.The limited partners, through their ownership of limited partner interests, contribute capital to the entity, have a limited role in the operation and management of the entity and receive cash distributions.
MLPs are subject to certain risks, such as supply and demand risk, depletion and exploration risk, commodity pricing risk, acquisition risk, and the risk associated with the hazards inherent in midstream energy industry activities. A substantial portion of the cash flow received by the fund is derived from investments in equity securities of MLPs. The amount of cash that MLPs have available for distributions, and the tax character of such distributions, are dependent upon the amount of cash generated by the MLP’s operations.
(e) Dividends to shareholders: The fund currently anticipates making quarterly distributions to its shareholders of substantially all of the fund’s distributable cash flow received as cash distributions from MLPs, interest payments received on debt securities owned by the fund, and other payments on or derived from securities owned by the fund.
The fund intends to pay out a consistent dividend that over time approximates the distributions received from the fund’s portfolio investments based on, among other considerations, distributions the fund actually receives from portfolio investments and estimated future cash flows. Because the fund’s policy will be to pay consistent dividends based on estimated income from investments and future cash flows, the fund’s dividends may exceed the amount the fund actually receives from its portfolio investments.
The fund’s distributions will be treated for U.S. federal income tax purposes as (i) first, taxable dividends to the extent of a shareholder’s allocable share of the fund’s earnings and profits, (ii) second, on-taxable returns of capital to the extent of a shareholder’s tax basis in shares of the fund (for the portion of those distributions that exceed the fund’s earnings and profits) and (iii) third, taxable gains (for the balance of those distri-
The Fund 15
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
butions). Dividend income will be treated as “qualified dividends” for federal income tax purposes, subject to favorable capital gain tax rates, provided that certain requirements are met. Unlike a regulated investment company under Subchapter M of the Internal Revenue Code, the fund will not be able to pass-through the character of its recognized net capital gain by paying “capital gain dividends.” Cash distributions from an MLP to the fund that exceed the fund’s allocable share of such MLP’s net taxable income will reduce the fund’s adjusted tax basis in the equity securities of the MLP. Although the fund expects that a significant portion of its distributions will be treated as nontaxable return of capital, no assurance can be given in this regard.
The actual characterizations of distributions made during the period will not be determined until after the fund’s fiscal year.
(f) Return of Capital Estimates: Distributions received from the fund’s investments in MLPs generally are comprised of income and return of capital.The fund records investment income and return of capital based on estimates made at the time such distributions are received. Such estimates are based on historical information available from each MLP and other industry sources. These estimates may subsequently be revised based on information received from MLPs after the tax reporting periods are concluded. At May 31, 2015, the distributions received by the fund are expected to be comprised of 100% return of capital.
(g) Federal income taxes: The fund is treated as a regular corporation for U.S. federal and state income tax purposes, and will pay federal and state income tax on its taxable income. Currently, the maximum marginal regular federal income tax rate for a corporation is 35%. The fund may be subject to a 20% alternative minimum tax on its federal alternative minimum taxable income to the extent that its alternative minimum tax exceeds its regular federal income tax.The fund is currently using an estimated rate of 34% for federal income tax and 2% for state and local tax, net of federal tax benefit.
16
The fund invests primarily in MLPs, which generally are intended to be treated as partnerships for federal income tax purposes.As a partner in the MLPs, the fund must report its allocable share of the MLPs’ taxable income or loss in computing the fund’s taxable income or loss, regardless of the extent (if any) to which the MLPs make distributions.
The fund’s income tax expense or benefit is included in the Statement of Operations based on the components of income or gains (losses) to which such expense or benefit relates. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Such temporary differences are principally: (i) taxes on unrealized gains (losses), which are attributable to the temporary difference between fair market value and tax basis, (ii) the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes and (iii) the net deferred tax benefit of accumulated net operating losses and capital loss carryforwards. During the period ended May 31, 2015, income tax expense amounted to $7,221 consisting of deferred tax expense of $7,221 and current tax expense of $0.
Deferred tax assets and liabilities are measured using effective tax rates expected to apply to taxable income in the years such temporary differences are realized or otherwise settled. To the extent the fund has a deferred tax asset; consideration is given to whether or not a valuation allowance is required. A valuation allowance is required if, based on the evaluation criterion provided by ASC 740, it is more-likely-than-not that some portion or the entire deferred tax asset will not be realized. The factors considered in assessing the fund’s valuation allowance are the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of the statutory carryfor-ward periods and the associated risks that operating and capital loss car-ryforwards may expire unused.
The Fund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
At May 31, 2015, the components of the fund’s deferred tax assets and liabilities were as follows:
Deferred tax assets: | |||
Net unrealized depreciation on investments | $ 128,542 | ||
Less:Valuation allowance | (128,542 | ) | |
Deferred tax liabilities: | |||
Basis reduction of investment in MLPs | (7,221 | ) | |
Total net deferred tax liability | $ (7,221 | ) |
Unexpected significant decreases in cash distributions from the fund’s MLP investments or significant declines in the fair value of its investments may change the fund’s assessment regarding the recoverability of its deferred tax assets and may result in a valuation allowance. If a valuation allowance is required to reduce any deferred tax asset in the future, it could have a material impact on the fund’s net asset value and results of operations.
The fund may rely, to some extent, on information provided by the MLPs, which may not be available on a timely basis, to estimate taxable income allocable to MLP units held in its portfolio, and to estimate its associated deferred tax liability or assets. Such estimates are made in good faith. From time to time, as new information becomes available, the fund may modify its estimates or assumptions regarding its tax liability or asset.
As of and during the period ended May 31, 2015, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended May 31, 2015, the fund did not incur any interest or penalties.
The fund files income tax returns in the U.S. federal jurisdiction and various states. The fund has reviewed all major jurisdictions and concluded that there is no significant impact on the fund’s net assets and no tax liability resulting from unrecognized tax benefits or expenses relating to uncertain tax positions expected to be taken on its tax returns.
18
NOTE 2—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 1.00% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus has contractually agreed, from April 30, 2015 through May 1, 2016, to waive receipt of its fees and/or assume the expenses of the fund, so that the expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, dividend and interest expense on securities sold short, taxes, such as deferred tax expenses, brokerage commissions and extraordinary expenses) exceed 1.25% of the value of the fund’s average daily net assets. The reduction in expenses, pursuant to the undertaking, amounted to $48,101 during the period ended May 31, 2015.
Pursuant to a sub-investment advisory agreement between Dreyfus and TBCAM, TBCAM serves as the fund’s sub-investment adviser responsible for the day-to-day management of the fund’s portfolio.
Dreyfus pays the sub-investment adviser a monthly fee at an annual percentage of the value of the fund’s average daily net assets. Dreyfus has obtained an exemptive order from the SEC (the “Order”), upon which the fund may rely, to use a manager of managers approach that permits Dreyfus, subject to certain conditions and approval by the Board, to enter into and materially amend sub-investment advisory agreements with one or more sub-investment advisers who are either unaffiliated with Dreyfus or are wholly-owned subsidiaries (as defined under the Act) of Dreyfus’ ultimate parent company, BNY Mellon, without obtaining shareholder approval. The Order also allows the fund to disclose the sub-investment advisory fee paid by Dreyfus to any unaffiliated sub-investment adviser in the aggregate with other unaffiliated sub-investment advisers in documents filed with the SEC and provided to shareholders. In addition, pursuant to the Order, it is not necessary to disclose the sub-investment advisory fee payable by Dreyfus separately to a sub-investment adviser that is a wholly-owned subsidiary of BNY
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Mellon in documents filed with the SEC and provided to shareholders; such fees are to be aggregated with fees payable to Dreyfus. Dreyfus has ultimate responsibility (subject to oversight by the Board) to supervise any sub-investment adviser and recommend the hiring, termination, and replacement of any sub-investment adviser to the Board.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended May 31, 2015, Class C shares were charged $655 pursuant to the Distribution Plan.
(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services.The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts.The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services.The Distributor determines the amounts to be paid to Service Agents. During the period ended May 31, 2015, Class A and Class C shares were charged $886 and $219, respectively, pursuant to the Shareholder Services Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended May 31, 2015,
20
the fund was charged $8 for transfer agency services and $2 for cash management services.These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, under a custody agreement for providing custodial services for the fund.These fees are determined based on net assets, geographic region and transaction activity. During the period ended May 31, 2015, the fund was charged $800 pursuant to the custody agreement.
During the period ended May 31, 2015, the fund was charged $2,113 for services performed by the Chief Compliance Officer and his staff.
The components of “Due from The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $21,221, Distribution Plan fees $635, Shareholder Services Plan fees $1,070, custodian fees $800, Chief Compliance Officer fees $2,113 and transfer agency fees $8, which are offset against an expense reimbursement currently in effect in the amount of $48,101.
(d) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 3—Securities Transactions:
The aggregate amount of purchases and sales of investment securities and securities sold short, excluding short-term securities, during the period ended May 31, 2015 were as follows:
Purchases ($) | Sales ($) | |
Long transactions | 25,226,381 | 1,816,434 |
Short sale transactions | — | 2,201,141 |
Total | 25,226,381 | 4,017,575 |
Short Sales: The fund is engaged in short-selling which obligates the fund to replace the security borrowed by purchasing the security at current market value.The fund incurs a loss if the price of the security
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
increases between the date of the short sale and the date on which the fund replaces the borrowed security. The fund realizes a gain if the price of the security declines between those dates. Until the fund replaces the borrowed security, the fund will maintain daily a segregated account with a broker or custodian of permissible liquid assets sufficient to cover its short positions. Securities Sold Short at May 31, 2015 and their related market values and proceeds, are set forth in the Statement of Securities Sold Short.
At May 31, 2015, accumulated net unrealized depreciation on investments was $388,161, consisting of $409,888 gross unrealized appreciation and $798,049 gross unrealized depreciation.
At May 31, 2015, 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).
22
INFORMATION ABOUT THE APPROVAL OF THE |
FUND’S MANAGEMENT AND SUB-INVESTMENT |
ADVISORY AGREEMENTS (Unaudited) |
At a meeting of the fund’s Board of Directors held on April 22, 2015, the Board considered the approval of the fund’s Management Agreement, pursuant to which Dreyfus will provide the fund with investment advisory and administrative services (the “Agreement”), and the Sub-Investment Advisory Agreement (together, the “Agreements”), pursuant to which The Boston Company Asset Management, LLC (the “Subadviser”) will provide day-to-day management of the fund’s investments. The Board members, a majority of whom are not “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of Dreyfus and the Subadviser. In considering the approval of the Agreements, the Board considered all factors that it believed to be relevant, including those discussed below.The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered Dreyfus’ extensive administrative, accounting, and compliance infrastructures, as
The Fund 23
INFORMATION ABOUT THE APPROVAL OF THE FUND’S MANAGEMENT AND | ||
SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued) |
well as Dreyfus’ supervisory activities over the Subadviser. 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.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. As the fund had not yet commenced operations, the Board was not able to review the fund’s performance. The Board was provided with composite performance information for the Subadviser’s energy infrastructure MLP strategy. The Board discussed with representatives of Dreyfus and the Subadviser the portfolio management team and the investment strategies to be employed in the management of the fund’s assets.The Board noted the reputation and experience of Dreyfus and the Subadviser.
The Board reviewed comparisons of the fund’s proposed management fee and anticipated expense ratio to the management fees and expense ratios of a group of funds independently prepared by Lipper, Inc. (“Lipper”) (the “Comparison Group”) and to the management fees of funds in the fund’s anticipated Lipper category. They noted that the fund’s contractual management fee was below the average and median contractual management fees for the funds in the Comparison Group. The fund’s estimated total expenses (as limited through at least April 30, 2016 by agreement with Dreyfus to waive receipt of its fees and/or assume the expenses of the fund so that annual direct fund operating expenses (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings, acquired fund fees and extraordinary expenses) do not exceed 1.25% of the fund’s average daily net assets) were below the average and median expense ratios of the funds in the Comparison Group.
Dreyfus representatives reviewed with the Board the management or investment advisory fees paid to Dreyfus or the Subadviser or its affiliates for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of
24
the fees paid in light of any differences in the services provided and other relevant factors.The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness and reasonableness of the fund’s management fee.
The Board considered the fee to be paid to the Subadviser in relation to the fee to be paid to Dreyfus by the fund and the respective services to be provided by the Subadviser and Dreyfus. The Board also noted the Subadviser’s fee will be paid by Dreyfus (out of its fee from the fund) and not the fund.
Analysis of Profitability and Economies of Scale.As the fund had not yet commenced operations, Dreyfus representatives were not able to review the dollar amount of expenses allocated and profit received by Dreyfus, or any economies of scale. The Board considered potential benefits to Dreyfus and the Subadviser from acting as investment adviser and sub-investment adviser, respectively, and noted the possibility of soft dollar arrangements with respect to trading the fund’s investments.The Board also considered the uncertainty of the estimated asset levels and the renewal requirements for advisory agreements and their ability to review the management fee annually after the initial term of the Agreements.
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 approval of the Agreements. 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 to be provided by Dreyfus and the Subadviser are adequate and appropriate.
The Board concluded that since the fund had not yet com- menced operations, its performance could not be measured and was not a factor.
The Board concluded that the fees to be paid to Dreyfus and the Subadviser were reasonable in light of the considerations described above.
The Fund 25
INFORMATION ABOUT THE APPROVAL OF THE FUND’S MANAGEMENT AND | ||
SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued) |
The Board determined that because the fund had not yet com- menced operations, economies of scale were not a factor, but, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund in connection with future renewals.
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its knowledge, gained through meetings and other interactions with Dreyfus and its affiliates and the Subadviser, of other funds advised by Dreyfus and the Subadviser. In addition, the Board’s consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. Certain aspects of the Board’s conclusions may be based, in part, on their consideration of similar arrangements in prior years.The Board determined to approve the Agreements.
26
NOTES
For More Information
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Telephone 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 E-mail Send your request to info@dreyfus.com Internet Information can be viewed online or downloaded at: http://www.dreyfus.com
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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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.
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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Strategic Funds, Inc.
By: /s/ Bradley J. Skapyak
Bradley J. Skapyak,
President
Date: July 20, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ Bradley J. Skapyak
Bradley J. Skapyak,
President
Date: July 20, 2015
By: /s/ James Windels
James Windels,
Treasurer
Date: July 20, 2015
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)