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 | 811-04813 | |||||
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| BNY Mellon Investment Funds I |
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| (Exact name of Registrant as specified in charter) |
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c/o BNY Mellon Investment Adviser, Inc. 240 Greenwich Street New York, New York 10286 |
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| (Address of principal executive offices) (Zip code) |
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| Bennett A. MacDougall, Esq. 240 Greenwich Street New York, New York 10286 |
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| (Name and address of agent for service) |
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Registrant's telephone number, including area code: | (212) 922-6400 | |||||
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Date of fiscal year end:
| 09/30 |
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Date of reporting period: | 03/31/20
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The following N-CSR relates only to the Registrant's series listed below and does not relate to any series of the Registrant with a different fiscal year end and, therefore, different N-CSR reporting requirements. A separate N-CSR will be filed for any series with a different fiscal year end, as appropriate.
BNMY Mellon Diversified Emerging Markets Fund
BNY Mellon International Equity Fund
BNY Mellon Small Cap Growth Fund
BNY Mellon Small Cap Value Fund
BNY Mellon Small/Mid Cap Growth Fund
BNY Mellon Tax Sensitive Total Return Bond Fund
FORM N-CSR
Item 1. Reports to Stockholders.
BNY Mellon Diversified Emerging Markets Fund
SEMIANNUAL REPORT March 31, 2020 |
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The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
BNY Mellon Investment Adviser, Inc. | |
With Those of Other Funds | |
in Affiliated Issuers | |
the Fund’s Investment Advisory, | |
Administration and Sub-Investment | |
Advisory Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.
Dear Shareholder:
We are pleased to present this semiannual report for BNY Mellon Diversified Emerging Markets Fund, covering the six-month period from October 1, 2019 through March 31, 2020. 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.
Stock markets performed well over the last several months of 2019. Accommodative policies from the U.S. Federal Reserve (the “Fed”), paired with healthy U.S. consumer spending, helped support valuations. Despite periodic investor concern regarding trade relations with China and global growth rates, the rally continued through the end of the calendar year, supported in part by a December announcement from President Trump that the first phase of a trade deal with China was in process. However, the positive outlook was short-lived, as concerns over the spread of the coronavirus roiled markets the first several months of 2020. As the virus spread across the globe, concerns about the economic effects of a widespread quarantine worked to depress equity valuations. Many indices, particularly in the U.S., reported historically low returns for the first quarter of 2020.
In fixed-income markets, interest rates were heavily influenced by changes in Fed policy and investor concern over COVID-19. The Fed cut the target overnight lending rate by 25 basis points in October 2019 in an effort to support the U.S. economy. Rates across much of the Treasury curve increased during the month of November, and the long end of the curve rose in December as investors anticipated improvements in global economic growth during the coming year. However, concerns regarding COVID-19 and the resulting economic impact caused yields throughout the intermediate- and long-dated portions of the curve to fall during January and February of 2020. In March, the Fed cut rates twice, resulting in an overnight lending target-rate of nearly zero at the end of the period.
We believe the near-term outlook for the U.S. will be challenging, as the country curbs the spread of COVID-19. However, we are confident that once the economic effects have been mitigated, the economy will rebound. As always, we will monitor relevant data for signs of change. We encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
April 15, 2020
2
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from October 1, 2019 through March 31, 2020, as provided by portfolio managers Julianne McHugh, Peter D. Goslin, CFA, Syed A. Zamil, CFA, and Chris Yao, CFA of Mellon Investments Corporation, Sub-Investment Adviser
Chris Yao was added to the portfolio management team in December 2019.
Market and Fund Performance Overview
For the six-month period ended March 31, 2020, BNY Mellon Diversified Emerging Markets Fund’s Class A shares produced a total return of -15.26%, Class C shares returned -15.58%, Class I shares returned -15.01% and Class Y shares returned -15.00%.1 In comparison, the fund’s benchmark, the MSCI Emerging Markets Index (the “Index”), produced a return of -14.55% for the same period.2
Emerging-markets stocks generally posted losses during the reporting period, due in part to volatility created by the spread of the COVID-19. The fund underperformed the Index, due to three of the four underlying strategies trailing their respective benchmarks.
The Fund’s Investment Approach
The fund seeks long-term capital growth. To pursue its goal, the fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities (or other instruments with similar economic characteristics) of companies located, organized, or with a majority of assets or business in countries considered to be emerging markets, including other investment companies that invest in such securities.
The fund uses a “manager-of-managers” approach by selecting one or more experienced investment managers to serve as sub-advisers to the fund. The fund also uses a “fund-of-funds” approach by investing in one or more underlying funds. The fund currently allocates its assets among the emerging market equity strategies that are separately employed by: (i) Mellon Investments Corporation (Mellon), the fund’s sub-adviser, through its Active Equity portfolio management team (the Active Equity Strategy); (ii) Mellon through its Multi-Factor Equity portfolio management team (the Multi-Factor Equity Strategy); (iii) BNY Mellon Global Emerging Markets Fund, an affiliated underlying fund, which is sub-advised by Newton Investment Management Limited (the Newton Fund); and (iv) BNY Mellon Strategic Beta Emerging Markets Equity Fund, an affiliated underlying fund, which is sub-advised by Mellon (the Strategic Beta Fund). BNY Mellon Investment Adviser, Inc. determines the investment strategies and sets the target allocations.
Geopolitical Events and Disease Drive Market Activity
Emerging markets rose very strongly in the final quarter of 2019. The global economic environment remained sluggish, but sentiment improved, as China and the U.S. reached a
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
‘phase one’ trade agreement. The People’s Bank of China cut its bank-funding rate but did not aggressively stimulate, in stark contrast to the U.S., where the slowdown led to rapid loosening of policy and a consequent spike in money-supply growth. The positive sentiment carried over into the new year; however, the strong emerging market equity index gains that had accumulated by mid-January started to reverse, as optimism about the ‘phase one’ U.S.-China trade agreement was replaced by escalating tensions between the U.S. and Iran, following a drone attack by the U.S. that killed a senior Iranian general, and as fears grew over the potential impact of the outbreak of the COVID-19 in China. By the end of the quarter, emerging markets, along with all global markets, had suffered substantial falls, as COVID-19 spread across the world and many countries went into lockdown, essentially mothballing large parts of the global economy. The situation was exacerbated by a breakdown in the OPEC (Organization of the Petroleum Exporting Countries) alliance, led by Russia, seeing an opportunity to disrupt higher cost competition in the U.S. In recognition of the worsening economic conditions brought by the global pandemic, many global authorities—including the central People’s Bank of China—intervened, with an unprecedented level of stimulus being directed at markets, ultimately followed by very significant measures from the U.S. Federal Reserve (the “Fed”) and the European Central Bank to underpin markets and economies.
Most Underlying Strategies Produce Negative Relative Results
The Active Equity Strategy underperformed the Index, in part due to security selection within the industrials, health care and financials sectors. From a country perspective, selection among companies based in India, South Korea and Brazil provided the biggest headwind. India-based civil engineering and infrastructure company Larsen & Toubro was among the largest individual detractors from performance, as was Brazil’s energy company Petroleo Brasileiro. Better results were achieved elsewhere within the portfolio. Allocation and stock selection decisions within the information technology, real estate and communication services sectors were positive. From a country standpoint, South Africa, Thailand and Indonesia benefited results. South Africa-based pharmacy chain Clicks Group was among the top contributors to results, as were several Thailand- and Indonesia-based banks.
The Multi-Factor Equity Strategy lagged the Index in a period when investors rewarded growth stocks and generally penalized value and dividend yielding stocks. Stock selection within the communication services and financials sectors detracted, as did positions in companies based in South Korea and South Africa. South Africa-based financials company Nedbank Group was among the leading detractors from overall performance for the period,
4
as was Brazil-based meat processing company JBS. Conversely, the strategy benefited from stock selection within the materials sector and security choices among companies based in Brazil and Thailand. Two Hong Kong-based materials companies were among the leading individual contributors to performance. The companies were Anhui Conch Cement and China National Building Materials. The Strategic Beta Fund trailed the Index as a result of stock selection within the communication services and consumer discretionary sectors. From a country standpoint, companies based in China and South Korea provided the largest headwind. Relatively low exposure to Tencent Holdings was the largest individual detractor from performance for the period. However, the strategy’s performance benefited from several other positions. Stock selection within the financials and materials sectors was accretive to performance, and companies based in India and Taiwan provided the biggest tailwind to results. Taiwanese technology company Hon Hai Precision Industry was the largest individual contributor to positive returns.
Conversely, the Newton Fund outpaced its benchmark by a comfortable margin on a gross basis. At the sector level, the fund benefited most from stock selection within the consumer discretionary and financials sectors and from a lack of exposure to energy companies. At a country level, some of the biggest losers in the market decline were ‘commodity countries’ such as Brazil and Russia, where the fund has little exposure, aiding relative performance as asset prices and currencies fell. The top individual contributor to performance over the period was online food-delivery business Delivery Hero. A position in Samsung SDI also bolstered results. On the other hand, the fund’s low weighting in health care, in particular, the void in pharmaceutical stocks, was detrimental as they performed relatively well in the sell-off, owing to their defensive nature. At a country level, the overweight in India was the largest detractor. Brazilian travel companyCVC was the largest individual stock detractor.
Finding Opportunities in the Emerging Markets
We are cautiously optimistic on emerging market equity growth opportunities as we move through the next several months, and the virus effect peaks and wanes. U.S. and other developed market policy will likely be biased to loosening, which can be supportive of a yield pickup in emerging markets. This may benefit currencies and may even reduce the discount rate for equities, particularly those with good structural growth opportunities.
Each of the fund’s underlying strategies and underlying funds employs its own distinctive approach to investing in emerging-market equities, and all report that they have continued to
5
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
find opportunities that meet their investment criteria across a wide variety of markets and industry groups.
April 15, 2020
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. The fund’s return reflects the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through January 31, 2021, at which time it may be extended, modified or terminated. Had these expenses not been absorbed, returns would have been lower.
2 Source: Lipper Inc. — The MSCI Emerging Markets Index is a free float-adjusted, market capitalization-weighted index that is designed to measure equity market performance of emerging markets. It reflects reinvestment of net dividends and, where applicable, capital gain distributions. Investors cannot invest directly in any index.
Please note: the position in any security highlighted with italicized typeface was sold during the reporting period
The fund’s performance will be influenced by political, social and economic factors affecting investments in foreign companies. These special risks include exposure to currency fluctuations, less liquidity, less developed or less efficient trading markets, lack of comprehensive company information, political instability and differing auditing and legal standards. Investments in foreign currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedged positions, that the U.S. dollar will decline relative to the currency being hedged.
Emerging markets tend to be more volatile than the markets of more mature economies and generally have less diverse and less mature economic structures and less stable political systems than those of developed countries. The securities of companies located in emerging markets are often subject to rapid and large changes in price. An investment in this fund should be considered only as a supplement to a complete investment program for those investors willing to accept the greater risks associated with investing in emerging-market countries.
The ability of the fund to achieve its investment goal depends, in part, on the ability of BNY Mellon Investment Adviser, Inc. to allocate effectively the fund’s assets among investment strategies, sub-advisers and underlying funds. There can be no assurance that the actual allocations will be effective in achieving the fund’s investment goal or that an investment strategy, sub-adviser or underlying fund will achieve its particular investment objective.
Each strategy of the sub-adviser makes investment decisions independently, and it is possible that the investment styles of the individual strategies of the sub-adviser may not complement one another. As a result, the fund’s exposure to a given stock, industry, sector, market capitalization, geographic area or investment style could unintentionally be greater or smaller than it would have been if the fund had a single investment strategy.
The risks of investing in other investment companies, including ETFs, typically reflect the risks associated with the types of instruments in which the investment companies and ETFs invest. When the fund or an underlying fund invests in another investment company or ETF, shareholders of the fund will bear indirectly their proportionate share of the expenses of the other investment company or ETF (including management fees) in addition to the expenses of the fund. ETFs are exchange-traded investment companies that are, in many cases, designed to provide investment results corresponding to an index. The value of the underlying securities can fluctuate in response to activities of individual companies or in response to general market and/or economic conditions.
The fund may, but is not required to, use derivative instruments. A small investment in derivatives could have a potentially large impact on the fund’s performance. The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
6
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 BNY Mellon Diversified Emerging Markets Fund from October 1, 2019 to March 31, 2020. 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 |
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Assume actual returns for the six months ended March 31, 2020 |
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Expense paid per $1,000† | $7.16 | $10.60 | $4.44 | $4.02 |
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Ending value (after expenses) | $847.40 | $844.20 | $849.90 | $850.00 |
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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 |
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Assuming a hypothetical 5% annualized return for the six months ended March 31, 2020 |
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| Class A | Class C | Class I | Class Y |
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Expense paid per $1,000† | $7.82 | $11.58 | $4.85 | $4.39 |
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Ending value (after expenses) | $1,017.25 | $1,013.50 | $1,020.20 | $1,020.65 |
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†Expenses are equal to the fund’s annualized expense ratio of 1.55% for Class A, 2.30% for Class C, .96% for Class I and .87% for Class Y, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
7
STATEMENT OF INVESTMENTS
March 31, 2020 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 53.4% | |||||||
Argentina - .3% | |||||||
Globant | 3,578 | a,b | 314,435 | ||||
Grupo Financiero Galicia, ADR | 16,300 | b | 114,915 | ||||
429,350 | |||||||
Brazil - 2.3% | |||||||
B3 - Brasil Bolsa Balcao | 18,800 | 128,913 | |||||
Banco do Brasil | 77,900 | 416,029 | |||||
BB Seguridade Participacoes | 28,400 | 137,188 | |||||
BR Malls Participacoes | 4,235 | b | 8,053 | ||||
BRF | 4,800 | b | 13,949 | ||||
CCR | 169,600 | 388,414 | |||||
Cia de Saneamento Basico do Estado de Sao Paulo | 24,200 | 181,124 | |||||
Cia Siderurgica Nacional | 47,900 | b | 64,806 | ||||
EDP - Energias do Brasil | 193,600 | 605,454 | |||||
IRB Brasil Resseguros | 31,400 | 58,617 | |||||
JBS | 84,100 | b | 329,207 | ||||
Minerva | 315,800 | b | 483,172 | ||||
Petroleo Brasileiro, ADR | 59,913 | 322,931 | |||||
Tim Participacoes | 75,000 | 181,434 | |||||
Vale | 35,800 | 297,639 | |||||
YDUQS Part | 69,700 | b | 300,472 | ||||
3,917,402 | |||||||
Chile - .2% | |||||||
Enel Americas | 2,792,900 | 341,322 | |||||
Enel Generacion Chile | 72,000 | 25,657 | |||||
366,979 | |||||||
China - 20.0% | |||||||
Alibaba Group Holding, ADR | 38,830 | b | 7,551,658 | ||||
Anhui Conch Cement, Cl. H | 219,000 | b | 1,513,944 | ||||
ANTA Sports Products | 74,000 | 534,861 | |||||
BAIC Motor, Cl. H | 772,500 | b,c | 303,648 | ||||
Beijing Capital International Airport, Cl. H | 430,000 | b | 273,416 | ||||
CGN Power, Cl. H | 540,000 | c | 123,533 | ||||
China CITIC Bank, Cl. H | 1,191,000 | 586,509 | |||||
China Coal Energy, Cl. H | 1,015,000 | b | 280,483 | ||||
China Construction Bank, Cl. H | 3,054,000 | 2,489,234 | |||||
China Everbright Bank, Cl. A | 12,400 | b | 6,330 | ||||
China Evergrande Group | 40,000 | b | 65,845 | ||||
China Medical System Holdings | 282,000 | b | 304,001 | ||||
China National Building Material, Cl. H | 456,000 | 494,995 |
8
Description | Shares | Value ($) | |||||
Common Stocks - 53.4% (continued) | |||||||
China - 20.0% (continued) | |||||||
China Resources Sanjiu Medical & Pharmaceutical, Cl. A | 89,300 | b | 349,972 | ||||
China Shenhua Energy, Cl. H | 116,000 | 220,058 | |||||
China Vanke, Cl. H | 11,300 | b | 37,013 | ||||
China Yangtze Power, Cl. A | 120,800 | b | 293,798 | ||||
Chongqing Rural Commercial Bank, Cl. H | 183,000 | b | 74,880 | ||||
CNOOC | 930,000 | 969,595 | |||||
Country Garden Holdings | 29,000 | 34,815 | |||||
ENN Energy Holdings | 68,200 | 655,879 | |||||
Gree Electric Appliances of Zhuhai, Cl. A | 45,000 | b | 332,532 | ||||
Li Ning | 150,500 | 436,657 | |||||
Longfor Group Holdings | 7,000 | c | 33,875 | ||||
Meituan Dianping, Cl. B | 54,800 | b | 657,629 | ||||
Momo, ADR | 8,300 | b | 180,027 | ||||
New China Life Insurance, Cl. H | 122,100 | b | 378,546 | ||||
PICC Property & Casualty, Cl. H | 306,000 | b | 294,325 | ||||
Ping An Insurance Group Company of China, Cl. H | 245,000 | 2,396,629 | |||||
Shandong Weigao Group Medical Polymer, Cl. H | 268,000 | 337,679 | |||||
Shanghai Pharmaceuticals Holding, Cl. H | 316,600 | b | 536,092 | ||||
Sino-Ocean Group Holding | 22,500 | 5,692 | |||||
Sinotruk Hong Kong | 207,000 | b | 342,630 | ||||
Tencent Holdings | 159,000 | 7,753,090 | |||||
Times China Holdings | 293,000 | 487,233 | |||||
Tingyi Cayman Islands Holding | 176,000 | 286,734 | |||||
Weichai Power, Cl. H | 255,000 | b | 408,116 | ||||
Wuliangye Yibin, Cl. A | 34,700 | b | 566,245 | ||||
Yanzhou Coal Mining, Cl. H | 336,000 | 262,397 | |||||
Zhongsheng Group Holdings | 134,500 | 468,200 | |||||
Zoomlion Heavy Industry Science and Technology, Cl. H | 158,800 | b | 115,125 | ||||
33,443,920 | |||||||
Colombia - .3% | |||||||
Ecopetrol | 553,600 | 265,079 | |||||
Grupo Aval Acciones y Valores, ADR | 47,797 | 209,351 | |||||
Interconexion Electrica | 25,770 | 106,074 | |||||
580,504 | |||||||
Czech Republic - .2% | |||||||
Moneta Money Bank | 195,526 | c | 404,004 | ||||
Greece - .5% | |||||||
Hellenic Telecommunications Organization | 34,700 | b | 421,518 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 53.4% (continued) | |||||||
Greece - .5% (continued) | |||||||
OPAP | 54,676 | 420,324 | |||||
841,842 | �� | ||||||
Hong Kong - 1.9% | |||||||
Bosideng International Holdings | 500,000 | 116,743 | |||||
China Mobile | 37,500 | 283,308 | |||||
China Overseas Land & Investment | 26,000 | 80,234 | |||||
China Resources Cement Holdings | 302,000 | 358,750 | |||||
China Resources Land | 20,000 | 82,052 | |||||
China Unicom Hong Kong | 800,000 | 458,384 | |||||
Galaxy Entertainment Group | 89,000 | 471,423 | |||||
Kingboard Laminates Holdings | 85,500 | 78,689 | |||||
Shanghai Industrial Holdings | 80,000 | 120,533 | |||||
Shanghai Industrial Urban Development Group | 83,000 | 7,867 | |||||
Shenzhen International Holdings | 115,000 | 209,196 | |||||
Shimao Property Holdings | 214,500 | 750,763 | |||||
Sino Biopharmaceutical | 166,000 | 217,584 | |||||
3,235,526 | |||||||
Hungary - .4% | |||||||
MOL Hungarian Oil & Gas | 50,300 | b | 296,413 | ||||
OTP Bank | 10,995 | b | 318,946 | ||||
615,359 | |||||||
India - 3.9% | |||||||
ACC | 35,671 | 451,546 | |||||
Bajaj Finance | 5,000 | 144,124 | |||||
Bharti Infratel | 133,627 | 279,906 | |||||
Dr. Reddy's Laboratories | 10,540 | b | 431,122 | ||||
Hindalco Industries | 143,300 | b | 181,234 | ||||
Hindustan Petroleum | 198,461 | b | 494,868 | ||||
Hindustan Unilever | 25,505 | 767,708 | |||||
Housing Development Finance | 32,682 | b | 698,007 | ||||
ICICI Bank | 109,448 | b | 479,302 | ||||
Infosys | 48,040 | 403,678 | |||||
Larsen & Toubro | 42,123 | 445,846 | |||||
Maruti Suzuki India | 5,492 | b | 307,782 | ||||
Oil & Natural Gas | 272,700 | 246,146 | |||||
Shriram Transport Finance | 45,667 | 394,044 | |||||
Tata Consultancy Services | 11,300 | 270,792 | |||||
Tech Mahindra | 37,500 | 277,952 | |||||
The Tata Power Company | 79,700 | b | 34,604 | ||||
UPL | 66,918 | b | 286,015 | ||||
6,594,676 |
10
Description | Shares | Value ($) | |||||
Common Stocks - 53.4% (continued) | |||||||
Indonesia - .2% | |||||||
Gudang Garam | 114,700 | b | 288,764 | ||||
Indah Kiat Pulp & Paper | 201,900 | b | 49,426 | ||||
338,190 | |||||||
Malaysia - .3% | |||||||
Malaysia Airports Holdings | 107,900 | b | 107,102 | ||||
RHB Bank | 351,200 | b | 378,006 | ||||
485,108 | |||||||
Mexico - 1.7% | |||||||
America Movil, Ser. L | 1,027,200 | 610,539 | |||||
Arca Continental | 100,700 | b | 406,451 | ||||
Coca-Cola Femsa | 37,000 | 148,140 | |||||
Fibra Uno Administracion | 12,700 | 9,968 | |||||
Grupo Aeroportuario del Centro Norte | 95,900 | b | 324,538 | ||||
Grupo Aeroportuario del Pacifico, Cl. B | 10,000 | 54,067 | |||||
Grupo Financiero Banorte, Cl. O | 183,500 | b | 502,793 | ||||
Grupo Mexico, Ser. B | 197,300 | 365,865 | |||||
Wal-Mart de Mexico | 201,100 | 473,790 | |||||
2,896,151 | |||||||
Netherlands - .1% | |||||||
VEON, ADR | 154,232 | 232,890 | |||||
Philippines - .5% | |||||||
Aboitiz Equity Ventures | 51,300 | 37,762 | |||||
Ayala Land | 41,700 | 24,905 | |||||
Globe Telecom | 5,770 | 219,344 | |||||
International Container Terminal Services | 268,130 | 391,506 | |||||
Metro Pacific Investments | 1,765,000 | 83,389 | |||||
SM Prime Holdings | 44,800 | b | 25,118 | ||||
782,024 | |||||||
Poland - .3% | |||||||
Play Communications | 46,101 | b,c | 326,136 | ||||
Powszechna Kasa Oszczednosci Bank Polski | 41,400 | b | 225,903 | ||||
552,039 | |||||||
Qatar - .1% | |||||||
The Commercial Bank | 85,600 | 91,413 | |||||
Russia - 2.5% | |||||||
Gazprom, ADR | 162,725 | b | 749,675 | ||||
Lukoil, ADR | 27,576 | 1,643,502 | |||||
MMC Norilsk Nickel, ADR | 6,353 | 157,321 | |||||
Rosneft Oil, GDR | 11,893 | 47,984 | |||||
Sberbank of Russia, ADR | 106,434 | b | 1,008,473 | ||||
Sistema, GDR | 5,949 | b | 19,630 |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 53.4% (continued) | |||||||
Russia - 2.5% (continued) | |||||||
Surgutneftegas, ADR | 12,340 | b | 52,396 | ||||
Tatneft, ADR | 4,468 | 187,423 | |||||
X5 Retail Group, GDR | 12,502 | 335,773 | |||||
4,202,177 | |||||||
Saudi Arabia - .5% | |||||||
Al Rajhi Bank | 41,241 | 590,506 | |||||
Etihad Etisalat | 37,184 | b | 214,344 | ||||
804,850 | |||||||
South Africa - 1.8% | |||||||
Clicks Group | 33,520 | 482,062 | |||||
Growthpoint Properties | 16,697 | 11,983 | |||||
Impala Platinum Holdings | 44,541 | 188,129 | |||||
Investec | 79,200 | 150,137 | |||||
Kumba Iron Ore | 6,734 | 104,895 | |||||
Mediclinic International | 88,225 | 294,308 | |||||
Naspers, Cl. N | 3,790 | b | 538,449 | ||||
Nedbank Group | 28,300 | 130,557 | |||||
Ninety One | 39,600 | b | 76,054 | ||||
Redefine Properties | 20,141 | 2,665 | |||||
Resilient REIT | 2,303 | 4,090 | |||||
Sibanye Stillwater | 788,510 | a,b | 995,033 | ||||
The Foschini Group | 7,400 | 27,944 | |||||
3,006,306 | |||||||
South Korea - 5.8% | |||||||
Daelim Industrial | 6,985 | 418,559 | |||||
Doosan Bobcat | 4,220 | 61,115 | |||||
Hotel Shilla | 480 | 27,499 | |||||
Hyundai Glovis | 2,680 | 197,580 | |||||
Hyundai Mobis | 8,174 | 1,125,641 | |||||
Korea Investment Holdings | 13,699 | 553,511 | |||||
Korea Zinc | 440 | 127,518 | |||||
Kumho Petrochemical | 5,446 | 286,775 | |||||
LG Uplus | 18,480 | 162,915 | |||||
POSCO | 2,697 | 353,876 | |||||
Posco International | 30,400 | 280,423 | |||||
Samsung Electronics | 108,527 | 4,217,805 | |||||
Samsung Securities | 13,700 | 325,465 | |||||
Shinhan Financial Group | 25,206 | 586,604 | |||||
Shinsegae | 1,940 | 345,166 | |||||
SK Hynix | 5,633 | 381,062 | |||||
Woori Financial Group | 34,560 | 213,992 | |||||
9,665,506 |
12
Description | Shares | Value ($) | |||||
Common Stocks - 53.4% (continued) | |||||||
Taiwan - 8.2% | |||||||
Asia Cement | 317,000 | b | 413,076 | ||||
Chailease Holding | 420,707 | b | 1,273,312 | ||||
Chicony Electronics | 206,000 | 516,393 | |||||
Feng Tay Enterprise | 114,500 | b | 492,334 | ||||
Hon Hai Precision Industry | 80,000 | b | 184,951 | ||||
Lite-On Technology | 238,000 | 321,897 | |||||
MediaTek | 82,000 | b | 873,382 | ||||
Nanya Technology | 52,000 | b | 92,371 | ||||
Powertech Technology | 133,000 | b | 372,471 | ||||
Realtek Semiconductor | 25,000 | b | 180,682 | ||||
Standard Foods | 106,000 | b | 213,835 | ||||
Taiwan Semiconductor Manufacturing | 709,600 | 6,333,899 | |||||
Uni-President Enterprises | 232,000 | b | 503,318 | ||||
Win Semiconductors | 49,000 | b | 419,352 | ||||
Winbond Electronics | 254,000 | b | 95,361 | ||||
Wistron | 434,000 | b | 351,708 | ||||
Wiwynn | 19,000 | b | 434,116 | ||||
Yageo | 51,000 | b | 453,982 | ||||
Zhen Ding Technology Holding | 58,000 | b | 175,268 | ||||
13,701,708 | |||||||
Thailand - .1% | |||||||
PTT, NVDR | 72,300 | 67,727 | |||||
Thai Oil | 45,900 | 42,993 | |||||
110,720 | |||||||
Turkey - .8% | |||||||
Akbank | 5,980 | b | 4,973 | ||||
BIM Birlesik Magazalar | 63,187 | 475,411 | |||||
Emlak Konut Gayrimenkul Yatirim Ortakligi | 14,424 | 2,507 | |||||
Eregli Demir ve Celik Fabrikalari | 436,172 | 488,837 | |||||
KOC Holding | 37,600 | 76,237 | |||||
TAV Havalimanlari Holding | 47,500 | 116,786 | |||||
Turkiye Is Bankasi, Cl. C | 122,500 | b | 85,791 | ||||
Turkiye Sise ve Cam Fabrikalari | 27,110 | 16,714 | |||||
Turkiye Vakiflar Bankasi, Cl. D | 21,320 | b | 14,642 | ||||
1,281,898 | |||||||
United Arab Emirates - .5% | |||||||
Dubai Islamic Bank | 815,342 | 798,996 | |||||
Emaar Properties | 29,063 | b | 17,211 | ||||
816,207 | |||||||
Total Common Stocks(cost $93,359,781) | 89,396,749 |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Exchange-Traded Funds - 1.6% | |||||||
United States - 1.6% | |||||||
iShares MSCI Emerging Markets ETF | 80,297 | a | 2,740,537 | ||||
Preferred Dividend | |||||||
Preferred Stocks - .5% | |||||||
Brazil - .2% | |||||||
Banco do Estado do Rio Grande do Sul, Cl. B | 8.67 | 149,900 | 344,452 | ||||
South Korea - .3% | |||||||
Samsung Electronics | 2.52 | 17,070 | 557,207 | ||||
Total Preferred Stocks(cost $1,073,315) | 901,659 | ||||||
1-Day | |||||||
Investment Companies - 43.5% | |||||||
Registered Investment Companies - 43.5% | |||||||
BNY Mellon Global Emerging Markets Fund, Cl. Y | 4,290,560 | d | 59,853,318 | ||||
BNY Mellon Strategic Beta Emerging Markets Equity, Cl. Y | 1,336,520 | d | 12,977,610 | ||||
Total Investment Companies(cost $70,252,206) | 72,830,928 | ||||||
Investment of Cash Collateral for Securities Loaned - 1.2% | |||||||
Registered Investment Companies - 1.2% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 0.40 | 2,015,831 | d | 2,015,831 | |||
Total Investments(cost $169,963,770) | 100.2% | 167,885,704 | |||||
Liabilities, Less Cash and Receivables | (.2%) | (411,661) | |||||
Net Assets | 100.0% | 167,474,043 |
ADR—American Depository Receipt
ETF—Exchange-Traded Fund
GDR—Global Depository Receipt
NVDR—Non-Voting Depository Receipt
REIT—Real Estate Investment Trust
a Security, or portion thereof, on loan. At March 31, 2020, the value of the fund’s securities on loan was $3,030,182 and the value of the collateral was $3,183,574, consisting of cash collateral of $2,015,831 and U.S. Government & Agency securities valued at $1,167,743.
b Non-income producing security.
c Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2020, these securities were valued at $1,191,196 or .71% of net assets.
d Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
14
Portfolio Summary (Unaudited)† | Value (%) |
Investment Companies | 46.3 |
Banks | 6.4 |
Retailing | 5.7 |
Semiconductors & Semiconductor Equipment | 5.2 |
Media & Entertainment | 4.7 |
Technology Hardware & Equipment | 4.4 |
Materials | 4.3 |
Energy | 3.7 |
Telecommunication Services | 2.0 |
Insurance | 2.0 |
Food, Beverage & Tobacco | 1.9 |
Diversified Financials | 1.9 |
Utilities | 1.4 |
Capital Goods | 1.4 |
Transportation | 1.2 |
Consumer Durables & Apparel | 1.1 |
Food & Staples Retailing | 1.1 |
Automobiles & Components | 1.0 |
Real Estate | 1.0 |
Pharmaceuticals Biotechnology & Life Sciences | .8 |
Software & Services | .8 |
Consumer Services | .7 |
Health Care Equipment & Services | .7 |
Household & Personal Products | .5 |
100.2 |
† Based on net assets.
See notes to financial statements.
15
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS(Unaudited)
Investment Companies | Value | Purchases ($) | † | Sales ($) | Net Realized | |
Registered Investment Companies: | ||||||
BNY Mellon Global Emerging Markets Fund, Cl. Y | 69,050,412 | 3,442,476 | 5,307,687 | (359,210) | ||
BNY Mellon Strategic Beta Emerging Markets Equity Fund, Cl. Y | 17,074,910 | 991,131 | 1,332,500 | (172,487) | ||
Investment of Cash Collateral for | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 582,162 | 10,320,316 | 8,886,647 | - | ||
Total | 86,707,484 | 14,753,923 | 15,526,834 | (531,697) |
Investment Companies | Net Change in | Value | Net | Dividends/ | ||
Registered Investment Companies: | ||||||
BNY Mellon Global Emerging Markets Fund, Cl. Y | (6,972,673) | 59,853,318 | 35.7 | 1,707,109 | ||
BNY Mellon Strategic Beta Emerging Markets Equity Fund, Cl. Y | (3,583,444) | 12,977,610 | 7.8 | 557,293 | ||
Investment of Cash Collateral for | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | - | 2,015,831 | 1.2 | - | ||
Total | (10,556,117) | 74,846,759 | 44.7 | 2,264,402 |
See notes to financial statements.
16
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 97,695,733 |
| 93,038,945 |
| ||
Affiliated issuers |
| 72,268,037 |
| 74,846,759 |
| |
Cash |
|
|
|
| 463,848 |
|
Cash denominated in foreign currency |
|
| 753,362 |
| 698,079 |
|
Receivable for shares of Beneficial Interest subscribed |
| 714,429 |
| |||
Dividends and securities lending income receivable |
| 452,549 |
| |||
Receivable for investment securities sold |
| 109,211 |
| |||
Tax reclaim receivable |
| 17,454 |
| |||
Prepaid expenses |
|
|
|
| 46,409 |
|
|
|
|
|
| 170,387,683 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 156,571 |
| |||
Liability for securities on loan—Note 1(c) |
| 2,015,831 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 699,643 |
| |||
Trustees’ fees and expenses payable |
| 1,788 |
| |||
Other accrued expenses |
|
|
|
| 39,807 |
|
|
|
|
|
| 2,913,640 |
|
Net Assets ($) |
|
| 167,474,043 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 201,996,497 |
|
Total distributable earnings (loss) |
|
|
|
| (34,522,454) |
|
Net Assets ($) |
|
| 167,474,043 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 238,409 | 20,629 | 2,559,608 | 164,655,397 |
|
Shares Outstanding | 12,812 | 1,184 | 138,987 | 8,933,458 |
|
Net Asset Value Per Share ($) | 18.61 | 17.42 | 18.42 | 18.43 |
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
|
17
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends (net of $147,375 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 1,591,742 |
| ||
Affiliated issuers |
|
| 2,264,402 |
| ||
Interest |
|
| 7,785 |
| ||
Income from securities lending—Note 1(c) |
|
| 4,224 |
| ||
Total Income |
|
| 3,868,153 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 673,015 |
| ||
Custodian fees—Note 3(c) |
|
| 71,890 |
| ||
Professional fees |
|
| 59,974 |
| ||
Administration fee—Note 3(a) |
|
| 55,164 |
| ||
Registration fees |
|
| 32,425 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 11,195 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 6,683 |
| ||
Prospectus and shareholders’ reports |
|
| 6,397 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 3,281 |
| ||
Loan commitment fees—Note 2 |
|
| 2,821 |
| ||
Distribution fees—Note 3(b) |
|
| 96 |
| ||
Miscellaneous |
|
| 11,211 |
| ||
Total Expenses |
|
| 934,152 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (33) |
| ||
Net Expenses |
|
| 934,119 |
| ||
Investment Income—Net |
|
| 2,934,034 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions: |
|
| ||||
Unaffiliated issuers |
|
|
| (2,370,816) |
| |
Affiliated issuers |
|
|
| (531,697) |
| |
Net realized gain (loss) on forward foreign currency exchange contracts | (39,403) |
| ||||
Net Realized Gain (Loss) |
|
| (2,941,916) |
| ||
Net change in unrealized appreciation (depreciation) on investments |
|
| ||||
Unaffiliated issuers |
|
|
| (19,282,793) |
| |
Affiliated issuers |
|
|
| (10,556,117) |
| |
Net change in unrealized appreciation (depreciation) on | 102 |
| ||||
Net Change in Unrealized Appreciation (Depreciation) |
|
| (29,838,808) |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (32,780,724) |
| ||
Net (Decrease) in Net Assets Resulting from Operations |
| (29,846,690) |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
18
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 2,934,034 |
|
|
| 3,386,078 |
| |
Net realized gain (loss) on investments |
| (2,941,916) |
|
|
| (5,022,533) |
| ||
Net change in unrealized appreciation |
| (29,838,808) |
|
|
| (2,048,951) |
| ||
Net Increase (Decrease) in Net Assets | (29,846,690) |
|
|
| (3,685,406) |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (4,209) |
|
|
| (225) |
| |
Class C |
|
| (230) |
|
|
| - |
| |
Class I |
|
| (85,164) |
|
|
| (42,914) |
| |
Class Y |
|
| (4,635,350) |
|
|
| (2,456,868) |
| |
Total Distributions |
|
| (4,724,953) |
|
|
| (2,500,007) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 7,796 |
|
|
| 295,186 |
| |
Class I |
|
| 2,236,109 |
|
|
| 4,407,958 |
| |
Class Y |
|
| 19,563,209 |
|
|
| 49,904,492 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 4,103 |
|
|
| 219 |
| |
Class C |
|
| 140 |
|
|
| - |
| |
Class I |
|
| 74,366 |
|
|
| 41,912 |
| |
Class Y |
|
| 708,904 |
|
|
| 392,592 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (38,736) |
|
|
| (475,599) |
| |
Class C |
|
| - |
|
|
| (3,471) |
| |
Class I |
|
| (2,899,172) |
|
|
| (5,054,192) |
| |
Class Y |
|
| (26,916,149) |
|
|
| (65,125,772) |
| |
Increase (Decrease) in Net Assets | (7,259,430) |
|
|
| (15,616,675) |
| |||
Total Increase (Decrease) in Net Assets | (41,831,073) |
|
|
| (21,802,088) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 209,305,116 |
|
|
| 231,107,204 |
| |
End of Period |
|
| 167,474,043 |
|
|
| 209,305,116 |
|
19
STATEMENT OF CHANGES IN NET ASSETS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class A |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 322 |
|
|
| 14,044 |
| |
Shares issued for distributions reinvested |
|
| 166 |
|
|
| 10 |
| |
Shares redeemed |
|
| (1,699) |
|
|
| (21,120) |
| |
Net Increase (Decrease) in Shares Outstanding | (1,211) |
|
|
| (7,066) |
| |||
Class C |
|
|
|
|
|
|
|
| |
Shares issued for distributions reinvested |
|
| 6 |
|
|
| - |
| |
Shares redeemed |
|
| - |
|
|
| (177) |
| |
Net Increase (Decrease) in Shares Outstanding | 6 |
|
|
| (177) |
| |||
Class Ia |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 94,594 |
|
|
| 198,897 |
| |
Shares issued for distributions reinvested |
|
| 3,055 |
|
|
| 2,057 |
| |
Shares redeemed |
|
| (135,771) |
|
|
| (231,289) |
| |
Net Increase (Decrease) in Shares Outstanding | (38,122) |
|
|
| (30,335) |
| |||
Class Ya |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 949,890 |
|
|
| 2,314,163 |
| |
Shares issued for distributions reinvested |
|
| 29,113 |
|
|
| 19,254 |
| |
Shares redeemed |
|
| (1,308,946) |
|
|
| (3,025,870) |
| |
Net Increase (Decrease) in Shares Outstanding | (329,943) |
|
|
| (692,453) |
| |||
|
|
|
|
|
|
|
|
|
|
aDuring the period ended March 31, 2020, 89,963 Class Y shares representing $2,133,750 were exchanged for 90,043 Class I shares and during the period ended September 30, 2019, 184,848 Class Y shares representing $4,091,696 were exchanged for 185,016 Class I shares. | |||||||||
See notes to financial statements. |
20
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||
March 31, 2020 | Year Ended September 30, | |||||||
Class A Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||
Per Share Data ($): | ||||||||
Net asset value, beginning of period | 22.25 | 22.69 | 24.18 | 19.92 | 17.23 | 21.34 | ||
Investment Operations: | ||||||||
Investment income—neta | .24 | .13 | .19 | .02 | .02 | .09 | ||
Net realized and unrealized | (3.56) | (.55) | (1.50) | 4.26 | 2.72 | (3.88) | ||
Total from Investment Operations | (3.32) | (.42) | (1.31) | 4.28 | 2.74 | (3.79) | ||
Distributions: | ||||||||
Dividends from investment | (.32) | (.02) | (.18) | (.02) | (.08) | (.13) | ||
Dividends from net realized gain | - | - | - | - | - | (.20) | ||
Total Distributions | (.32) | (.02) | (.18) | (.02) | (.08) | (.33) | ||
Proceeds from redemption | .00b | .00b | .00b | .00b | .03 | .01 | ||
Net asset value, end of period | 18.61 | 22.25 | 22.69 | 24.18 | 19.92 | 17.23 | ||
Total Return (%)c | (15.26)d | (1.87) | (5.50) | 21.48 | 16.20 | (18.00) | ||
Ratios/Supplemental Data (%): | ||||||||
Ratio of total expenses | 1.55f | 1.51 | 1.26 | 1.28 | 1.39 | 1.42 | ||
Ratio of net expenses | 1.55f | 1.51 | 1.26 | 1.27 | 1.39 | 1.42 | ||
Ratio of net investment income | 2.04f | .60 | .77 | .08 | .10 | .47 | ||
Portfolio Turnover Rate | 16.38d | 44.24 | 41.37 | 50.35 | 62.91 | 78.32 | ||
Net Assets, end of period ($ x 1,000) | 238 | 312 | 479 | 901 | 949 | 1,153 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
e Amount does not include the expenses of the underlying funds.
f Annualized.
See notes to financial statements.
21
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||
March 31, 2020 | Year Ended September 30, | ||||||
Class C Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 20.81 | 21.37 | 22.85 | 18.98 | 16.50 | 20.44 | |
Investment Operations: | |||||||
Investment income (loss)—neta | .14 | .04 | (.11) | (.16) | (.13) | .04 | |
Net realized and unrealized | (3.33) | (.60) | (1.37) | 4.03 | 2.58 | (3.79) | |
Total from Investment Operations | (3.19) | (.56) | (1.48) | 3.87 | 2.45 | (3.75) | |
Distributions: | |||||||
Dividends from net realized gain | (.20) | - | - | - | - | (.20) | |
Proceeds from redemption | .00b | .00b | .00b | .00b | .03 | .01 | |
Net asset value, end of period | 17.42 | 20.81 | 21.37 | 22.85 | 18.98 | 16.50 | |
Total Return (%)c | (15.58)d | (2.62) | (6.48) | 20.39 | 15.03 | (18.44) | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | 2.52f | 2.27 | 2.59 | 2.32 | 2.23 | 2.08 | |
Ratio of net expenses | 2.30f | 2.27 | 2.26 | 2.25 | 2.23 | 2.08 | |
Ratio of net investment income (loss) | 1.31f | .21 | (.47) | (.83) | (.74) | .22 | |
Portfolio Turnover Rate | 16.38d | 44.24 | 41.37 | 50.35 | 62.91 | 78.32 | |
Net Assets, end of period ($ x 1,000) | 21 | 25 | 29 | 28 | 64 | 291 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
e Amount does not include the expenses of the underlying funds.
f Annualized.
See notes to financial statements.
22
Six Months Ended | |||||||
March 31, 2020 | Year Ended September 30, | ||||||
Class I Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 22.11 | 22.66 | 24.13 | 19.86 | 17.16 | 21.16 | |
Investment Operations: | |||||||
Investment income—neta | .30 | .33 | .32 | .13 | .02 | .16 | |
Net realized and unrealized | (3.50) | (.64) | (1.52) | 4.22 | 2.75 | (3.79) | |
Total from Investment Operations | (3.20) | (.31) | (1.20) | 4.35 | 2.77 | (3.63) | |
Distributions: | |||||||
Dividends from investment | (.49) | (.24) | (.27) | (.08) | (.10) | (.18) | |
Dividends from net realized gain | - | - | - | - | - | (.20) | |
Total Distributions | (.49) | (.24) | (.27) | (.08) | (.10) | (.38) | |
Proceeds from redemption | .00b | .00b | .00b | .00b | .03 | .01 | |
Net asset value, end of period | 18.42 | 22.11 | 22.66 | 24.13 | 19.86 | 17.16 | |
Total Return (%) | (15.01)c | (1.26) | (5.10) | 22.05 | 16.45 | (17.44) | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | .96e | .90 | .89 | .95 | 1.11 | .99 | |
Ratio of net expenses | .96e | .90 | .89 | .94 | 1.11 | .99 | |
Ratio of net investment income | 2.52e | 1.49 | 1.26 | .57 | .12 | .83 | |
Portfolio Turnover Rate | 16.38c | 44.24 | 41.37 | 50.35 | 62.91 | 78.32 | |
Net Assets, end of period ($ x 1,000) | 2,560 | 3,916 | 4,700 | 3,550 | 1,207 | 2,840 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Not annualized.
d Amount does not include the expenses of the underlying funds.
e Annualized.
See notes to financial statements.
23
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||
March 31, 2020 | Year Ended September 30, | |||||||||
Class Y Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||||
Per Share Data ($): | ||||||||||
Net asset value, | 22.14 | 22.69 | 24.16 | 19.90 | 17.18 | 21.20 | ||||
Investment Operations: | ||||||||||
Investment income—neta | .32 | .35 | .31 | .13 | .07 | .17 | ||||
Net realized and unrealized | (3.52) | (.63) | (1.50) | 4.23 | 2.74 | (3.82) | ||||
Total from Investment Operations | (3.20) | .28 | 1.19 | 4.36 | 2.81 | (3.65) | ||||
Distributions: | ||||||||||
Dividends from investment | (.51) | (.27) | (.28) | (.10) | (.12) | (.18) | ||||
Dividends from net realized gain | - | - | - | - | - | (.20) | ||||
Total Distributions | (.51) | (.27) | (.28) | (.10) | (.12) | (.38) | ||||
Proceeds from redemption | .00b | .00b | .00b | .00b | .03 | .01 | ||||
Net asset value, end of period | 18.43 | 22.14 | 22.69 | 24.16 | 19.90 | 17.18 | ||||
Total Return (%) | (15.00)c | (1.15) | (5.06) | 22.06 | 16.64 | (17.44) | ||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | .87e | .82 | .80 | .86 | 1.01 | .93 | ||||
Ratio of net expenses | .87e | .82 | .80 | .85 | 1.01 | .93 | ||||
Ratio of net investment income | 2.75e | 1.59 | 1.24 | .61 | .42 | .84 | ||||
Portfolio Turnover Rate | 16.38c | 44.24 | 41.37 | 50.35 | 62.91 | 78.32 | ||||
Net Assets, end of period ($ x 1,000) | 164,655 | 205,052 | 225,899 | 213,397 | 147,926 | 183,659 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Not annualized.
d Amount does not include the expenses of the underlying funds.
e Annualized.
See notes to financial statements.
24
NOTES TO FINANCIAL STATEMENTS(Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Diversified Emerging Markets Fund (the “fund”) is a separate diversified series of BNY Mellon Investment Funds I (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering seven series, including the fund. The fund’s investment objective is to seek long-term growth of capital. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Mellon Investments Corporation (the “Sub-Adviser”), a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser, serves as the fund’s sub-investment adviser.
The Trust’s Board of Trustees (the “Board”) approved, effective December 31, 2019 (the “Effective Date”), the termination of the fund’s authorized Class T shares. Prior to the Effective Date, the fund did not offer such Class T shares for purchase.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C, Class I and Class Y. Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. 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 C shares automatically convert to Class A shares ten years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of
25
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
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 Trust 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 is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. 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 Trustenters 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.
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:
26
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 equity 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 ADRs and 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 accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as:
27
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
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 securities where observable inputs are limited, assumptions about market activity and risk are used and such securities 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 following is a summary of the inputs used as of March 31, 2020in valuing the fund’s investments:
Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||
Assets ($) | |||||
Investments in Securities: † | |||||
Equity Securities – | 17,226,048 | 72,170,701 | †† | - | 89,396,749 |
Equity Securities - | 344,452 | 557,207 | †† | - | 901,659 |
Exchange-Traded Funds | 2,740,537 | - | - | 2,740,537 | |
Investment Companies | 74,846,759 | - | - | 74,846,759 |
† See Statement of Investments for additional detailed categorizations, if any.
†† Securities classified within Level 2 at period end as the values were determined pursuant to the fund’s fair valuation procedures.
(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
28
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.
Foreign Taxes:The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the fund understanding of the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invest. These foreign taxes, if any, are paid by the fund and are reflected in the Statements of Operations. Foreign taxes payable or deferred as of March 31, 2020, if any, are disclosed in the fund’s Statements of Assets and Liabilities.
(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.
Pursuant to a securities lending agreement with The Bank of New York Mellon, 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 the Adviser, 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. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended March 31, 2020, The Bank of New York Mellon earned $883 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
29
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(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, economic developments and public health conditions. 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. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
(f) Dividends and distributions to shareholders: Dividends and distributions 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.
(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 and
30
net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended March 31, 2020, 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 March 31, 2020, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
The fund has an unused capital loss carryover of $25,804,582 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to September 30, 2019. The fund has $17,005,516 of short-term capital losses and $8,799,066 of 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 September 30, 2019 was as follows: ordinary income $2,500,007. 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 long-term open-end funds managed by the Adviser in a $927 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $747 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $180 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. Prior to March 11, 2020, the Citibank Credit Facility was $1.030 billion with Tranche A available in an amount equal to $830 million and Tranche B available in an amount equal to $200 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund
31
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended March 31, 2020, the fund did not borrow under the Facilities.
NOTE 3—Investment Advisory Fee, Sub-Investment Advisory Fee, Administration Fee and Other Transactions with Affiliates:
(a)Pursuant to an investment advisory agreement with the Adviser, the fund has agreed to pay an investment advisory fee at the annual rate of 1.10% of the value of the fund’s average daily net assets other than assets allocated to investments in other investment companies (other underlying funds, which may consist of affiliated funds, mutual funds and exchange traded funds) and is payable monthly. Therefore the fund’s investment advisory fee will fluctuate based on the fund’s allocation between underlying and direct investments. The Adviser has also contractually agreed, from October 1, 2019 through January 31, 2021, 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, acquired fund fees and expenses of the underlying fund and extraordinary expenses) exceed 1.30% of the value of the fund’s average daily net assets. On or after January 31, 2021, the Adviser, Inc. may terminate this expense limitation at any time. The reduction in expenses, pursuant to the undertaking, amounted to $33 during the period ended March 31, 2020.
Pursuant to separate sub-investment advisory agreements between the Adviser and the Sub-Adviser, the Sub-Adviser serves as the fund’s sub-investment adviser responsible for the day-to-day management of a portion of the fund’s portfolio. The Adviser pays the sub-investment adviser a monthly fee at an annual percentage of the value of the fund’s average daily net assets. The Adviser 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 the Adviser, 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 the Adviser or are wholly-owned subsidiaries (as defined under the Act) of the Adviser’s ultimate parent company, BNY Mellon, without obtaining shareholder approval. The Order also allows the fund to disclose the sub-investment advisory fee paid by the Adviser 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 the
32
Adviser 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 the Adviser. The Adviser 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.
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with the Adviser, whereby the Adviser performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate the Adviser for providing accounting and recordkeeping services, administration, compliance monitoring, regulatory and shareholder reporting, as well as related facilities, equipment and clerical help. The fee is based on the fund’s average daily net assets and computed at the following annual rates: .10% of the first $500 million, .065% of the next $500 million and .02% in excess of $1 billion.
In addition, after applying any expense limitations or fee waivers that reduce the fees paid to the Adviser for this service, the Adviser has contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both the Adviser’ costs in providing these services and a reasonable allocation of the costs incurred by the Adviser and its affiliates related to the support and oversight of these services. The fund also reimburses the Adviser for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration Agreement, the fund was charged $55,164 during the period ended March 31, 2020.
(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 March 31, 2020, Class C shares were charged $96 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
33
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
the amounts to be paid to Service Agents. During the period ended March 31, 2020, Class A and Class C shares were charged $385and $32, respectively, pursuant to the Shareholder Services Plan.
Under its terms, the Distribution Plan and Shareholder Services Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of a majority of those Trustees who are not “interested persons” of the Trust and who have no direct or indirect financial interest in the operation of or in any agreement related to the Distribution Plan or Shareholder Services Plan.
The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees For financial reporting purposes, the fund includes net earnings credits, if any, as an expense offset in the Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statements of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, 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 March 31, 2020, the fund was charged $1,552 for transfer agency services. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended March 31, 2020, the fund was charged $71,890 pursuant to the custody agreement.
During the period ended March 31, 2020, the fund was charged $6,683 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees of $98,079, administration fees of 10,540, Distribution Plan
34
fees of $14, Shareholder Services Plan fees of $59, custodian fees of $44,000, Chief Compliance Officer fees of $3,329 and transfer agency fees of $560, which are offset against an expense reimbursement currently in effect in the amount of $10.
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
(e)A 2% redemption fee is charged and retained by the fund on certain shares redeemed within sixty days following the date of issuance subject to certain exceptions, including redemptions made through use of the fund’s exchange privilege. During the period ended March 31, 2020, redemption fees charged and retained by the fund amounted to $2,888. Effective on December 13, 2019, the fund will no longer assess a redemption fee on redemptions or exchanges of fund shares. The fund reserves the right to reimpose a redemption fee in the future, upon appropriate notice.
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 March 31, 2020, amounted to $33,602,027 and $40,498,395, respectively.
Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. This risk may be mitigated by Master Agreements,
35
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. At March 31, 2020, there were no forward contracts outstanding.
The following summarizes the average market value of derivatives outstanding duringthe period ended March 31, 2020:
|
| Average Market Value ($) |
Forward contracts |
| 151,696 |
|
|
|
At March 31, 2020, accumulated net unrealized depreciation on investments was $2,078,066, consisting of $20,136,259 gross unrealized appreciation and $22,214,325 gross unrealized depreciation.
At March 31, 2020, 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).
36
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 26-27, 2020, the Board considered the renewal of the fund’s Investment Advisory Agreement and Administration Agreement, pursuant to which the Adviser provides the fund with investment advisory services and administrative services, and the Sub-Investment Advisory Agreement (together with the Investment Advisory Agreement and Administration Agreement, the “Agreements”), pursuant to which Mellon Investments Corporation (the “Subadviser”) provides day-to-day management of the fund’s investments. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser and the Subadviser. In considering the renewal of the Agreements, the Board considered several 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 it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s 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 the Adviser 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 the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s 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. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of emerging markets funds (the “Performance Group”) and with a broader group of all retail and institutional emerging markets funds (the “Performance Universe”), all for
37
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
various periods ended December 31, 2019, and (2) the fund’s actual and contractual management fees and total expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of institutional emerging markets funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
The Board noted that, prior to January 31, 2014, the fund did not use a “manager of managers” or “fund of funds” approach and the fund’s investments strategies were different than the strategies currently in place. The Board noted that different investments strategies may lead to different performance results and that the fund’s performance for periods prior to January 31, 2014 reflects the investment strategies in effect during those periods.
Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds. The Board discussed with representatives of the Adviser and the Subadviser the results of the comparisons and considered that the fund’s total return performance was below the Performance Group median for all periods and below the Performance Universe median for all periods except the one- and three-year periods when it was above the Performance Universe median. The Board also considered that the fund’s yield performance was at or above the Performance Group median for six of the ten one-year periods ended December 31st and above the Performance Universe median for five of the ten one-year periods ended December 31st. The Board considered the relative proximity of the fund’s performance to the Performance Group and/or Performance Universe median in certain periods when performance was below median. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index.
The Board reviewed and considered the contractual management fee rate (which reflected the advisory and administration fees) payable by the fund to the Adviser in light of the nature, extent and quality of the management services provided by the Adviser. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was higher than the Expense Group median contractual management fee, the fund’s actual management fee was lower than the Expense Group and Expense Universe median actual management fees and the fund’s total expenses were lower than the Expense Group and Expense Universe median total expenses (lowest total expenses in the Expense Group).
38
Representatives of the Adviser stated that the Adviser has contractually agreed, until January 31, 2021, to waive receipt of its fees and/or assume the direct expenses of the fund so that the direct expenses of none of its classes (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 1.30% of the fund’s average daily net assets.
The Board considered the fee to the Subadviser in relation to the fee paid to the Adviser by the fund and the respective services provided by the Subadviser and the Adviser. The Board also took into consideration that the Subadviser’s fee is paid by the Adviser (out of its fee from the fund) and not the fund, and, accordingly, that the retention of the Subadviser does not increase the fees or expenses otherwise incurred by the fund and its shareholders.
Representatives of the Adviser reviewed with the Board the management or investment advisory fees paid by funds advised or administered by the Adviser that are in the same Lipper category as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness of the fund’s management fee. Representatives of the Adviser noted that there were no separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund advised by the Adviser.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered on the advice of its counsel the profitability analysis (1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the mix of services provided by the Adviser and the Subadviser, including the nature, extent and quality of such services, supported the renewal of the Agreements and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Since the Adviser, and not the fund, pays the Subadviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Subadviser’s profitability to be relevant to its deliberations. Representatives
39
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser and the Subadviser from acting as investment adviser and sub-investment adviser, respectively, and took into consideration the soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the 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 provided by the Adviser and the Subadviser are adequate and appropriate.
· The Board generally was satisfied with the fund’s performance.
· The Board concluded that the fees paid to the Adviser and the Subadviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates and the Subadviser, of the Adviser and the Subadviser and the services provided to the fund by the Adviser and the Subadviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreements, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the
40
Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
41
BNY Mellon Diversified Emerging Markets Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Mellon Investments Corporation
BNY Mellon Center
One Boston Place
Boston, MA 02108-4408
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class A: DBEAX Class C: DBECX Class I: SBCEX Class Y: SBYEX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mailSend your request toinfo@bnymellon.com
InternetInformation can be viewed online or downloaded atwww.bnymellonim.com/us
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-PORT. The fund’s Forms N-PORT are available on the SEC’s website atwww.sec.gov.
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 atwww.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2020 BNY Mellon Securities Corporation |
BNY Mellon International Equity Fund
SEMIANNUAL REPORT March 31, 2020 |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.bnymellonim.com/us and sign up for eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
BNY Mellon Investment Adviser, Inc. | |
With Those of Other Funds | |
in Affiliated Issuers | |
Currency Exchange Contracts | |
the Fund’s Investment Advisory and | |
Sub-Investment Advisory Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.
Dear Shareholder:
We are pleased to present this semiannual report for BNY Mellon International Equity Fund, covering the six-month period from October 1, 2019 through March 31, 2020. 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.
Stock markets performed well over the last several months of 2019. Accommodative policies from the U.S. Federal Reserve (the “Fed”), paired with healthy U.S. consumer spending, helped support valuations. Despite periodic investor concern regarding trade relations with China and global growth rates, the rally continued through the end of the calendar year, supported in part by a December announcement from President Trump that the first phase of a trade deal with China was in process. However, the positive outlook was short-lived, as concerns over the spread of the COVID-19 roiled markets the first several months of 2020. As the virus spread across the globe, concerns about the economic effects of a widespread quarantine worked to depress equity valuations. Many indices, particularly in the U.S., reported historically low returns for the first quarter of 2020.
In fixed-income markets, interest rates were heavily influenced by changes in Fed policy and investor concern over COVID-19. The Fed cut the target overnight lending rate by 25 basis points in October 2019 in an effort to support the U.S. economy. Rates across much of the Treasury curve increased during the month of November, and the long end of the curve rose in December as investors anticipated improvements in global economic growth during the coming year. However, concerns regarding COVID-19 and the resulting economic impact caused yields throughout the intermediate- and long-dated portions of the curve to fall during January and February of 2020. In March, the Fed cut rates twice, resulting in an overnight lending target-rate of nearly zero at the end of the period.
We believe the near-term outlook for the U.S. will be challenging, as the country curbs the spread of COVID-19. However, we are confident that once the economic effects have been mitigated, the economy will rebound. As always, we will monitor relevant data for signs of change. We encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
April 15, 2020
2
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from October 1, 2019 through March 31, 2020, as provided by portfolio managers Paul Markham and Jeff Munroe, of Newton Investment Management Limited, Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended March 31, 2020, BNY Mellon International Equity Fund’s Class A shares produced a total return of -15.64%, Class C shares returned -15.98%, Class I shares returned -15.54% and Class Y shares returned -15.55%.1, 2 In comparison, the fund’s benchmark, the MSCI EAFE Index (the “Index”), produced a net return of -16.52% for the same period.3
International equity markets provided negative returns over the reporting period, resulting from market volatility fueled by the COVID-19 pandemic and resulting economic effects. The fund outperformed the Index, primarily due to overweight positioning within the health care sector and stock selection within the consumer discretionary sector.
The Fund’s Investment Approach
The fund seeks long-term growth of capital. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in common stocks or securities convertible into common stocks of foreign companies and depositary receipts evidencing ownership in such securities. At least 75% of the fund’s net assets will be invested in countries represented in the Index.
The core of the investment philosophy of Newton Investment Management Limited (“Newton”), the fund’s sub-investment adviser, is the belief that no company, market or economy can be considered in isolation; each must be understood within a global context. Newton believes that a global comparison of companies is the most effective method of stock analysis, and Newton’s global analysts research investment opportunities by global sector rather than by region.
The process begins by identifying a core list of investment themes that Newton believes will positively or negatively affect certain sectors or industries and cause stocks within these sectors or industries to outperform or underperform others. Newton then identifies specific companies, using these investment themes, to help focus on areas where thematic and strategic research indicates superior returns are likely to be achieved. Sell decisions for individual stocks will typically be a result of one or more of the following: a change in investment theme or strategy, profit-taking, a significant change in the prospects of a company, price movement and market activity creating an extreme valuation, and the valuation of a company becoming expensive against its peers.
Geopolitical Events and Disease Drive Market Activity
International equities gained toward the end of 2019, as investor optimism regarding trade and future economic growth prospects bolstered sentiment. While the U.S. saw some encouraging economic data releases, greater certainty as to the timing of Brexit was also forthcoming. In addition, as the calendar year-end approached, both the U.S. and China intimated that a ‘phase-one’ trade deal would be signed in early 2020.
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
However, by the end of the review period, the conditions that had briefly prevailed at the start of the year seemed like a distant memory. Optimism rapidly gave way to extreme risk aversion, as the global scope of the COVID-19 pandemic, and its alarming humanitarian and economic implications, became apparent. Financial markets also contended with a second major exogenous shock in the form of an oil-price war between Saudi Arabia and Russia, which resulted in the oil price halving in less than a month. This exacerbated the intensity of the decline in risk assets that began in late February and persisted into the second half of March. While the response from central banks was initially muted, it ramped up dramatically, as the crisis intensified, and financial markets became progressively more distressed. Governments were also active in launching an unprecedented array of fiscal initiatives that sought to offset the economic impact of lockdown measures. Such action latterly provided some comfort, and indices rallied toward the end of March.
Health Care and Consumer Discretionary Sectors Drive Fund Performance
The defensive qualities of the health care sector appealed to investors, and overweight positioning in this area aided relative returns. Stock selection in the consumer discretionary sector was also a source of relative strength. With Roche Holding’s pharmaceutical business seeing very limited impact from the global pandemic, given the inelastic nature of drug demand, shares were well supported. The stock received a further boost as news emerged that the U.S. Food and Drug Administration had approved its new COVID-19 test. Within the consumer discretionary sector, Pan Pacific International, the leading, low-cost value retailer in Japan, performed well, with its relative earnings stability appealing, as COVID-19 concerns escalated over the latter part of the review period. Earnings growth for the second quarter beat expectations comprehensively, reflecting the ongoing strength of performance at converted Uny stores and management’s focus on cutting costs across the group.
Conversely, stock picking weighed on the portfolio’s relative performance in the consumer staples, communication services and health care sectors. Elsewhere in the markets, Suzuki Motor was among the top individual detractors. The company endured a difficult end to 2019, despite initial optimism around an Indian recovery over the second half, as investor concern that a slowdown in the Indian market may persist grew. Several sets of financial results highlighted the struggles of the country’s automobile market, while Suzuki Motor’s stock was hit particularly hard by the COVID-19 outbreak and associated lockdown measures. With a key factor for the company being a recovery in Indian profitability, considerable uncertainty around the economy and gloomy implications for demand weighed on its share price.
Forced into widespread event cancellation and postponement, Informa, the world’s largest exhibition company, fell sharply as COVID-19 continued to spread. The company was also among the top individual negative contributors for the period.
Finding Opportunity amid the Volatility
We believe we will continue to see market volatility driven by COVID-19 news developments for quite some time. Markets might continue to oscillate between the reassurance that governments and central banks will be standing by to support them, and the uncertainty of both the duration and depth of what will undoubtedly be a significant economic impact. Furthermore, the longer-term implications in terms of social behavior and consumption trends will be potentially material. Fiscal expansion may have its own
4
implications in terms of funding costs over the coming years. Volatility will likely continue to be a part of the investment landscape, and we believe that investment opportunities may be revealed by the market weakness.
In this environment, we do not intend to ramp up either the beta of the fund or its sensitivity to cyclicality. As the global economic situation unfolds, driven primarily by the effects of COVID-19 and the authorities’ responses to it, we will continue to evaluate business-model impact, balance-sheet strength and currency dynamics, among other factors, as key fundamental inputs, in addition to the thematic backdrop. Our perception is that volatility will continue as long as markets find it impossible to judge when a plateau has been reached and some visibility restored. While we are unable to predict when that may be, we will continue to keep a close eye on our favored names. Valuations may at some stage begin to reflect the worst of outcomes and allow us to increase exposure at highly favorable valuation levels.
April 15, 2020
1 BNY Mellon Investment Adviser, Inc. serves as the investment adviser for the fund. Newton Investment Management Limited (Newton) is the fund’s sub-investment adviser. Newton’s comments are provided as a general market overview and should not be considered investment advice or predictive of any future market performance. Newton’s views are current as of the date of this communication and are subject to change rapidly as economic and market conditions dictate.
2 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. The fund’s return reflects the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through January 31, 2021, at which time it may be extended, modified or terminated. Had these expenses not been absorbed, returns would have been lower.
3 Source: Lipper Inc. — The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted, market capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. It reflects reinvestment of net dividends and, where applicable, capital gain distributions. Investors cannot invest directly in any index.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund's exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
Equities 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.
The fund may, but is not required to, use derivative instruments. A small investment in derivatives could have a potentially large impact on the fund’s performance. The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets.
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 BNY Mellon International Equity Fund from October 1, 2019 to March 31, 2020. 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 |
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Assume actual returns for the six months ended March 31, 2020 |
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| Class A | Class C | Class I | Class Y |
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Expense paid per $1,000† | $4.93 | $8.37 | $3.78 | $3.74 |
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Ending value (after expenses) | $843.60 | $840.20 | $844.60 | $844.50 |
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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 |
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Assuming a hypothetical 5% annualized return for the six months ended March 31, 2020 |
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| Class A | Class C | Class I | Class Y |
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Expense paid per $1,000† | $5.40 | $9.17 | $4.14 | $4.09 |
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Ending value (after expenses) | $1,019.65 | $1,015.90 | $1,020.90 | $1,020.95 |
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†Expenses are equal to the fund’s annualized expense ratio of 1.07% for Class A, 1.82% for Class C, .82% for Class I and .81% for Class Y, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS
March 31, 2020 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 97.3% | |||||||
China - 5.6% | |||||||
Alibaba Group Holding, ADR | 74,283 | a | 14,446,558 | ||||
Ping An Insurance Group Company of China, Cl. H | 960,500 | 9,395,762 | |||||
Tencent Holdings | 343,853 | 16,766,813 | |||||
40,609,133 | |||||||
Denmark - 1.6% | |||||||
Chr. Hansen Holding | 156,800 | 11,764,754 | |||||
France - 9.9% | |||||||
AXA | 454,490 | 7,870,367 | |||||
Bureau Veritas | 553,033 | 10,511,840 | |||||
L'Oreal | 48,596 | a | 12,755,772 | ||||
Thales | 184,206 | 15,461,342 | |||||
Total | 178,091 | 6,906,278 | |||||
Valeo | 318,178 | a | 5,320,940 | ||||
Vivendi | 627,246 | 13,458,593 | |||||
72,285,132 | |||||||
Germany - 8.2% | |||||||
Bayer | 212,645 | 12,482,314 | |||||
Deutsche Post | 416,508 | 11,491,658 | |||||
HELLA GmbH & Co. | 122,048 | 3,564,841 | |||||
Infineon Technologies | 347,090 | 5,198,936 | |||||
SAP | 240,091 | 27,575,212 | |||||
60,312,961 | |||||||
Hong Kong - 3.1% | |||||||
AIA Group | 2,545,312 | 22,898,394 | |||||
India - .2% | |||||||
Vakrangee | 4,872,018 | a | 1,280,670 | ||||
Ireland - .9% | |||||||
CRH | 231,997 | 6,323,990 | |||||
Japan - 21.6% | |||||||
Ebara | 267,200 | 5,079,883 | |||||
FANUC | 51,600 | 6,997,383 | |||||
Japan Tobacco | 352,900 | 6,532,342 | |||||
M3 | 275,800 | 8,150,349 | |||||
Pan Pacific International Holdings | 845,700 | 16,059,653 | |||||
Recruit Holdings | 601,513 | 15,532,151 | |||||
Seven & i Holdings | 199,900 | 6,601,168 | |||||
Sony | 365,600 | 21,732,435 | |||||
Sugi Holdings | 245,400 | 13,144,686 | |||||
Suntory Beverage & Food | 259,500 | 9,819,884 | |||||
Suzuki Motor | 474,000 | 11,341,820 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 97.3% (continued) | |||||||
Japan - 21.6% (continued) | |||||||
TechnoPro Holdings | 408,400 | 18,966,374 | |||||
Topcon | 783,000 | 5,801,466 | |||||
Toyota Industries | 245,800 | 11,794,698 | |||||
157,554,292 | |||||||
Netherlands - 4.6% | |||||||
ASML Holding | 26,800 | 7,122,383 | |||||
Koninklijke Ahold Delhaize | 392,259 | 9,180,154 | |||||
Wolters Kluwer | 249,020 | 17,705,277 | |||||
34,007,814 | |||||||
Norway - 2.0% | |||||||
DNB | 355,874 | 3,991,205 | |||||
Mowi | 385,188 | 5,871,186 | |||||
TOMRA Systems | 176,586 | b | 4,941,812 | ||||
14,804,203 | |||||||
South Korea - 1.1% | |||||||
Samsung SDI | 43,138 | 8,428,294 | |||||
Sweden - 1.3% | |||||||
Swedbank, Cl. A | 837,134 | a | 9,348,051 | ||||
Switzerland - 14.7% | |||||||
Alcon | 143,983 | a | 7,347,744 | ||||
Credit Suisse Group | 1,348,678 | a | 11,136,558 | ||||
Lonza Group | 30,459 | 12,672,502 | |||||
Novartis | 354,177 | 29,270,973 | |||||
Roche Holding | 91,635 | 29,791,823 | |||||
Zurich Insurance Group | 48,091 | 17,070,330 | |||||
107,289,930 | |||||||
Taiwan - 2.1% | |||||||
Taiwan Semiconductor Manufacturing, ADR | 315,307 | 15,068,522 | |||||
Thailand - .6% | |||||||
Kasikornbank | 1,609,200 | 4,485,223 | |||||
United Kingdom - 19.8% | |||||||
Anglo American | 438,895 | 7,669,374 | |||||
Associated British Foods | 226,532 | 5,084,029 | |||||
Barclays | 9,834,483 | 11,426,810 | |||||
Diageo | 628,051 | 20,115,640 | |||||
GlaxoSmithKline | 1,413,789 | 26,518,933 | |||||
Informa | 1,337,316 | 7,416,770 | |||||
Linde | 37,888 | 6,836,681 | |||||
Persimmon | 357,859 | a | 8,474,958 | ||||
Prudential | 491,837 | 6,278,314 | |||||
RELX | 731,419 | 15,740,511 | |||||
Royal Bank of Scotland Group | 4,792,230 | 6,684,487 |
8
Description | Shares | Value ($) | |||||
Common Stocks - 97.3% (continued) | |||||||
United Kingdom - 19.8% (continued) | |||||||
St. James's Place | 657,649 | 6,266,590 | |||||
Unilever | 322,466 | 15,887,901 | |||||
144,400,998 | |||||||
Total Common Stocks(cost $710,286,656) | 710,862,361 | ||||||
1-Day | |||||||
Investment Companies - 1.5% | |||||||
Registered Investment Companies - 1.5% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 0.40 | 10,553,387 | c | 10,553,387 | |||
Investment of Cash Collateral for Securities Loaned - .0% | |||||||
Registered Investment Companies - .0% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 0.40 | 124,538 | c | 124,538 | |||
Total Investments(cost $720,964,581) | 98.8% | 721,540,286 | |||||
Cash and Receivables (Net) | 1.2% | 8,890,664 | |||||
Net Assets | 100.0% | 730,430,950 |
ADR—American Depository Receipt
a Non-income producing security.
b Security, or portion thereof, on loan. At March 31, 2020, the value of the fund’s securities on loan was $119,357 and the value of the collateral was $124,538.
c Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Portfolio Summary (Unaudited)† | Value (%) |
Pharmaceuticals Biotechnology & Life Sciences | 15.2 |
Commercial & Professional Services | 11.4 |
Insurance | 8.7 |
Food, Beverage & Tobacco | 6.5 |
Media & Entertainment | 5.2 |
Banks | 4.9 |
Materials | 4.5 |
Automobiles & Components | 4.4 |
Retailing | 4.2 |
Consumer Durables & Apparel | 4.1 |
Food & Staples Retailing | 4.0 |
Software & Services | 3.9 |
Household & Personal Products | 3.9 |
Capital Goods | 3.8 |
Semiconductors & Semiconductor Equipment | 3.7 |
Diversified Financials | 2.4 |
Health Care Equipment & Services | 2.1 |
Technology Hardware & Equipment | 1.9 |
Transportation | 1.6 |
Investment Companies | 1.5 |
Energy | .9 |
98.8 |
† Based on net assets.
See notes to financial statements.
10
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS(Unaudited)
Investment Companies | Value | Purchases ($) | Sales ($) | Value | Net | Dividends/ |
Registered Investment Companies; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 15,621,555 | 163,331,999 | 168,400,167 | 10,553,387 | 1.5 | 108,541 |
Investment of Cash Collateral for Securities Loaned; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | - | 29,462,152 | 29,337,614 | 124,538 | .0 | - |
Total | 15,621,555 | 192,794,151 | 197,737,781 | 10,677,925 | 1.5 | 108,541 |
See notes to financial statements.
11
STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTSMarch 31, 2020 (Unaudited)
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation)($) |
CIBC World Markets | |||||
United States Dollar | 44,027,474 | British Pound | 33,430,000 | 4/16/2020 | 2,490,456 |
J.P. Morgan Securities | |||||
United States Dollar | 812,951 | Hong Kong Dollar | 6,303,987 | 4/1/2020 | (172) |
State Street Bank and Trust Company | |||||
United States Dollar | 134,605 | Japanese Yen | 14,622,898 | 4/2/2020 | (1,398) |
British Pound | 33,430,000 | United States Dollar | 40,374,414 | 4/16/2020 | 1,162,604 |
United States Dollar | 4,836,612 | Japanese Yen | 522,092,843 | 4/1/2020 | (19,076) |
Gross Unrealized Appreciation | 3,653,060 | ||||
Gross Unrealized Depreciation | (20,646) |
See notes to financial statements.
12
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 710,286,656 |
| 710,862,361 |
| ||
Affiliated issuers |
| 10,677,925 |
| 10,677,925 |
| |
Cash denominated in foreign currency |
|
| 6,495,243 |
| 6,496,441 |
|
Receivable for investment securities sold |
| 5,858,591 |
| |||
Unrealized appreciation on forward foreign |
| 3,653,060 |
| |||
Tax reclaim receivable |
| 3,565,887 |
| |||
Dividends and securities lending income receivable |
| 2,049,091 |
| |||
Receivable for shares of Beneficial Interest subscribed |
| 598,374 |
| |||
Prepaid expenses |
|
|
|
| 45,155 |
|
|
|
|
|
| 743,806,885 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 569,859 |
| |||
Payable for investment securities purchased |
| 6,371,569 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 6,192,595 |
| |||
Liability for securities on loan—Note 1(c) |
| 124,538 |
| |||
Unrealized depreciation on forward foreign |
| 20,646 |
| |||
Trustees’ fees and expenses payable |
| 15,445 |
| |||
Interest payable—Note 2 |
| 543 |
| |||
Other accrued expenses |
|
|
|
| 80,740 |
|
|
|
|
|
| 13,375,935 |
|
Net Assets ($) |
|
| 730,430,950 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 818,427,478 |
|
Total distributable earnings (loss) |
|
|
|
| (87,996,528) |
|
Net Assets ($) |
|
| 730,430,950 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 4,652,888 | 1,329,667 | 175,291,664 | 549,156,731 |
|
Shares Outstanding | 278,776 | 81,317 | 10,599,063 | 33,359,317 |
|
Net Asset Value Per Share ($) | 16.69 | 16.35 | 16.54 | 16.46 |
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
|
13
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends (net of $790,536 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 7,690,413 |
| ||
Affiliated issuers |
|
| 108,541 |
| ||
Income from securities lending—Note 1(c) |
|
| 2,683 |
| ||
Interest |
|
| 137 |
| ||
Total Income |
|
| 7,801,774 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 3,892,611 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 85,134 |
| ||
Custodian fees—Note 3(c) |
|
| 81,885 |
| ||
Professional fees |
|
| 57,016 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 48,255 |
| ||
Registration fees |
|
| 35,794 |
| ||
Loan commitment fees—Note 2 |
|
| 16,470 |
| ||
Prospectus and shareholders’ reports |
|
| 15,283 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 6,683 |
| ||
Distribution fees—Note 3(b) |
|
| 6,167 |
| ||
Interest expense—Note 2 |
|
| 2,631 |
| ||
Miscellaneous |
|
| 24,939 |
| ||
Total Expenses |
|
| 4,272,868 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (57,545) |
| ||
Net Expenses |
|
| 4,215,323 |
| ||
Investment Income—Net |
|
| 3,586,451 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions | (10,392,597) |
| ||||
Net realized gain (loss) on forward foreign currency exchange contracts | (315,229) |
| ||||
Net Realized Gain (Loss) |
|
| (10,707,826) |
| ||
Net change in unrealized appreciation (depreciation) on investments | (149,493,957) |
| ||||
Net change in unrealized appreciation (depreciation) on | 3,265,842 |
| ||||
Net Change in Unrealized Appreciation (Depreciation) |
|
| (146,228,115) |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (156,935,941) |
| ||
Net (Decrease) in Net Assets Resulting from Operations |
| (153,349,490) |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
14
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 3,586,451 |
|
|
| 21,376,705 |
| |
Net realized gain (loss) on investments |
| (10,707,826) |
|
|
| (50,907,414) |
| ||
Net change in unrealized appreciation |
| (146,228,115) |
|
|
| (57,133,261) |
| ||
Net Increase (Decrease) in Net Assets | (153,349,490) |
|
|
| (86,663,970) |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (145,643) |
|
|
| (90,291) |
| |
Class C |
|
| (25,255) |
|
|
| (17,516) |
| |
Class I |
|
| (5,603,959) |
|
|
| (5,237,649) |
| |
Class Y |
|
| (22,376,787) |
|
|
| (19,359,721) |
| |
Total Distributions |
|
| (28,151,644) |
|
|
| (24,705,177) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 1,516,872 |
|
|
| 4,468,947 |
| |
Class C |
|
| 28,881 |
|
|
| 340,517 |
| |
Class I |
|
| 28,511,054 |
|
|
| 54,492,411 |
| |
Class Y |
|
| 22,976,286 |
|
|
| 92,655,345 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 142,532 |
|
|
| 87,660 |
| |
Class C |
|
| 25,107 |
|
|
| 17,428 |
| |
Class I |
|
| 5,456,699 |
|
|
| 5,113,623 |
| |
Class Y |
|
| 8,244,551 |
|
|
| 6,968,266 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (1,745,559) |
|
|
| (4,135,096) |
| |
Class C |
|
| (138,605) |
|
|
| (713,745) |
| |
Class I |
|
| (36,925,058) |
|
|
| (114,125,301) |
| |
Class Y |
|
| (187,325,091) |
|
|
| (231,092,498) |
| |
Increase (Decrease) in Net Assets | (159,232,331) |
|
|
| (185,922,443) |
| |||
Total Increase (Decrease) in Net Assets | (340,733,465) |
|
|
| (297,291,590) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 1,071,164,415 |
|
|
| 1,368,456,005 |
| |
End of Period |
|
| 730,430,950 |
|
|
| 1,071,164,415 |
|
15
STATEMENT OF CHANGES IN NET ASSETS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class A |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 74,094 |
|
|
| 222,565 |
| |
Shares issued for distributions reinvested |
|
| 6,608 |
|
|
| 4,691 |
| |
Shares redeemed |
|
| (85,062) |
|
|
| (203,457) |
| |
Net Increase (Decrease) in Shares Outstanding | (4,360) |
|
|
| 23,799 |
| |||
Class C |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 1,436 |
|
|
| 17,658 |
| |
Shares issued for distributions reinvested |
|
| 1,185 |
|
|
| 951 |
| |
Shares redeemed |
|
| (7,052) |
|
|
| (36,555) |
| |
Net Increase (Decrease) in Shares Outstanding | (4,431) |
|
|
| (17,946) |
| |||
Class Ia |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 1,607,089 |
|
|
| 2,791,761 |
| |
Shares issued for distributions reinvested |
|
| 255,463 |
|
|
| 276,416 |
| |
Shares redeemed |
|
| (1,927,232) |
|
|
| (5,807,188) |
| |
Net Increase (Decrease) in Shares Outstanding | (64,680) |
|
|
| (2,739,011) |
| |||
Class Ya |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 1,234,790 |
|
|
| 4,798,352 |
| |
Shares issued for distributions reinvested |
|
| 387,796 |
|
|
| 378,299 |
| |
Shares redeemed |
|
| (10,656,763) |
|
|
| (12,022,275) |
| |
Net Increase (Decrease) in Shares Outstanding | (9,034,177) |
|
|
| (6,845,624) |
| |||
|
|
|
|
|
|
|
|
|
|
aDuring the period ended March 31, 2020, 251,608 Class Y shares representing $5,130,020 were exchanged for 250,472 Class I shares. During the period ended September 30, 2019, 574,726 Class Y shares representing $11,306,078 were exchanged for 572,242 Class I shares. | |||||||||
See notes to financial statements. |
16
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||
March 31, 2020 | Year Ended September 30, | |||||
Class A Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 |
Per Share Data ($): | ||||||
Net asset value, | 20.28 | 21.97 | 21.55 | 18.97 | 18.54 | 20.41 |
Investment Operations: | ||||||
Investment income—neta | .04 | .33 | .32 | .19 | .22 | .19 |
Net realized and unrealized | (3.13) | (1.66) | .34 | 2.57 | .39 | (1.33) |
Total from Investment Operations | (3.09) | (1.33) | .66 | 2.76 | .61 | (1.14) |
Distributions: | ||||||
Dividends from | (.50) | (.36) | (.24) | (.18) | (.18) | (.38) |
Dividends from net realized | – | – | – | – | – | (.35) |
Total Distributions | (.50) | (.36) | (.24) | (.18) | (.18) | (.73) |
Net asset value, end of period | 16.69 | 20.28 | 21.97 | 21.55 | 18.97 | 18.54 |
Total Return (%)b | (15.64)c | (5.89) | 3.06 | 14.76 | 3.27 | (5.58) |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.19d | 1.18 | 1.14 | 1.23 | 1.23 | 1.19 |
Ratio of net expenses | 1.07d | 1.07 | 1.07 | 1.18 | 1.23 | 1.19 |
Ratio of net investment income | .42d | 1.66 | 1.45 | .99 | 1.16 | .97 |
Portfolio Turnover Rate | 19.98c | 36.45 | 31.58 | 37.78 | 34.87 | 36.37 |
Net Assets, | 4,653 | 5,743 | 5,697 | 3,845 | 5,839 | 6,965 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
17
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||
March 31, 2020 | Year Ended September 30, | |||||
Class C Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 |
Per Share Data ($): | ||||||
Net asset value, | 19.78 | 21.38 | 21.04 | 18.50 | 18.10 | 20.10 |
Investment Operations: | ||||||
Investment income (loss)—neta | (.03) | .17 | .15 | .06 | .07 | .02 |
Net realized and unrealized | (3.09) | (1.59) | .33 | 2.50 | .38 | (1.30) |
Total from Investment Operations | (3.12) | (1.42) | .48 | 2.56 | .45 | (1.28) |
Distributions: | ||||||
Dividends from | (.31) | (.18) | (.14) | (.02) | (.05) | (.37) |
Dividends from net realized | – | – | – | – | – | (.35) |
Total Distributions | (.31) | (.18) | (.14) | (.02) | (.05) | (.72) |
Net asset value, end of period | 16.35 | 19.78 | 21.38 | 21.04 | 18.50 | 18.10 |
Total Return (%)b | (15.98)c | (6.55) | 2.27 | 13.83 | 2.50 | (6.39) |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.94d | 1.93 | 1.90 | 1.99 | 2.02 | 2.01 |
Ratio of net expenses | 1.82d | 1.82 | 1.82 | 1.95 | 2.02 | 2.01 |
Ratio of net investment income | (.33)d | .89 | .68 | .32 | .37 | .10 |
Portfolio Turnover Rate | 19.98c | 36.45 | 31.58 | 37.78 | 34.87 | 36.37 |
Net Assets, | 1,330 | 1,696 | 2,217 | 1,784 | 1,470 | 1,417 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
18
Six Months Ended | ||||||
March 31, 2020 | Year Ended September 30, | |||||
Class I Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 |
Per Share Data ($): | ||||||
Net asset value, | 20.12 | 21.79 | 21.38 | 18.85 | 18.39 | 20.37 |
Investment Operations: | ||||||
Investment income—neta | .07 | .36 | .42 | .27 | .27 | .26 |
Net realized and unrealized | (3.11) | (1.62) | .29 | 2.51 | .41 | (1.35) |
Total from Investment Operations | (3.04) | (1.26) | .71 | 2.78 | .68 | (1.09) |
Distributions: | ||||||
Dividends from | (.54) | (.41) | (.30) | (.25) | (.22) | (.54) |
Dividends from net realized | – | – | – | – | – | (.35) |
Total Distributions | (.54) | (.41) | (.30) | (.25) | (.22) | (.89) |
Net asset value, end of period | 16.54 | 20.12 | 21.79 | 21.38 | 18.85 | 18.39 |
Total Return (%) | (15.54)b | (5.62) | 3.30 | 15.02 | 3.66 | (5.37) |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .87c | .86 | .87 | .93 | .94 | .90 |
Ratio of net expenses | .82c | .82 | .82 | .89 | .94 | .90 |
Ratio of net investment income | .66c | 1.84 | 1.97 | 1.42 | 1.44 | 1.32 |
Portfolio Turnover Rate | 19.98b | 36.45 | 31.58 | 37.78 | 34.87 | 36.37 |
Net Assets, | 175,292 | 214,538 | 292,092 | 112,714 | 80,458 | 43,538 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
19
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||
March 31, 2020 | Year Ended September 30, | |||||
Class Y Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 |
Per Share Data ($): | ||||||
Net asset value, | 20.03 | 21.70 | 21.29 | 18.77 | 18.31 | 20.38 |
Investment Operations: | ||||||
Investment income—neta | .07 | .37 | .36 | .27 | .28 | .26 |
Net realized and unrealized | (3.09) | (1.63) | .35 | 2.51 | .40 | (1.34) |
Total from | (3.02) | (1.26) | .71 | 2.78 | .68 | (1.08) |
Distributions: | ||||||
Dividends from | (.55) | (.41) | (.30) | (.26) | (.22) | (.64) |
Dividends from net realized | – | – | – | – | – | (.35) |
Total Distributions | (.55) | (.41) | (.30) | (.26) | (.22) | (.99) |
Net asset value, end of period | 16.46 | 20.03 | 21.70 | 21.29 | 18.77 | 18.31 |
Total Return (%) | (15.55)b | (5.63) | 3.33 | 15.11 | 3.68 | (5.32) |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .81c | .80 | .80 | .86 | .88 | .89 |
Ratio of net expenses | .81c | .80 | .80 | .86 | .88 | .89 |
Ratio of net investment income | .70c | 1.88 | 1.64 | 1.42 | 1.49 | 1.32 |
Portfolio Turnover Rate | 19.98b | 36.45 | 31.58 | 37.78 | 34.87 | 36.37 |
Net Assets, | 549,157 | 849,188 | 1,068,449 | 1,027,565 | 1,043,195 | 895,031 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
20
NOTES TO FINANCIAL STATEMENTS(Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon International Equity Fund (the “fund”) is a separate diversified series of BNY Mellon Investment Funds I (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering seven series, including the fund. The fund’s investment objective is to seek long-term growth of capital. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Effective December 31, 2019, Newton Investment Management (North America) Limited (“NIMNA”) reorganized into Newton Investment Management Limited (“NIM” or the “Sub-Adviser”), a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser. Consequently, the sub-investment advisory agreement between the Adviser and NIMNA was terminated and NIM now serves as the fund’s sub-adviser pursuant to a sub-investment advisory agreement between the Adviser and NIM. There was no change to the fund’s investment objective, polices or strategies as a result of the reorganization of NIMNA into Sub-Adviser.
The Trust's Board of Trustees (the “Board”) approved, effective December 31, 2019 (the “Effective Date”), the termination of the fund’s authorized Class T shares. Prior to the Effective Date, the fund did not offer such Class T shares for purchase.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C, Class I and Class Y. Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. 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 C shares automatically convert to Class A shares ten years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship
21
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. 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 Trust 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 is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. 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 Trustenters 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
22
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 equity 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 ADRs and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
23
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. 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 securities where observable inputs are limited, assumptions about market activity and risk are used and such securities 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 following is a summary of the inputs used as of March 31, 2020in valuing the fund’s investments:
Level 1 – | Level 2 – | Level 3 – | Total | |
Assets ($) | ||||
Investments in Securities: † | ||||
Equity Securities - | 29,515,080 | 681,347,281†† | – | 710,862,361 |
Investment Companies | 10,677,925 | – | – | 10,677,925 |
Other Financial Instruments; | ||||
Forward Foreign Currency Exchange Contracts††† | – | 3,653,060 | – | 3,653,060 |
24
Level 1 – | Level 2 – | Level 3 – | Total | |
Liabilities ($) | ||||
Other Financial Instruments; | ||||
Forward Foreign Currency Exchange Contracts††† | – | (20,646) | – | (20,646) |
† See Statement of Investments for additional detailed categorizations, if any.
†† Securities classified within Level 2 at period end as the values were determined pursuant to the fund’s fair valuation procedures.
††† Amount shown represents unrealized appreciation (depreciation) at period end, but only variation margin on exchanged traded and centrally cleared derivatives, if any, are reported in the Statement of Assets and Liabilities.
(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.
Foreign Taxes:The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the fund understanding of the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invest. These foreign taxes, if any, are paid by the fund and are reflected in the Statements of Operations. Foreign taxes payable or deferred as of March 31, 2020, if any, are disclosed in the fund’s Statements of Assets and Liabilities.
(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.
25
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
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 the Adviser, 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 the Adviser, 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. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended March 31, 2020, The Bank of New York Mellon earned $609 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(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, economic developments and public health conditions. 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. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in
26
these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
(f) Dividends and distributions to shareholders: Dividends and distributions 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.
(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 and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended March 31, 2020, 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 March 31, 2020, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
The fund has an unused capital loss carryover of $74,117,179 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to September 30, 2019. The fund has
27
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
short-term capital losses of $50,394,989 and long-term capital losses of $23,722,190 which can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended September 30, 2019 was as follows: ordinary income $24,705,177. 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 long-term open-end funds managed by the Adviser in a $927 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $747 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $180 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. Prior to March 11, 2020, the Citibank Credit Facility was $1.030 billion with Tranche A available in an amount equal to $830 million and Tranche B available in an amount equal to $200 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit 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 March 31, 2020 was approximately $227,870 with a related weighted average annualized interest rate of 2.31%.
NOTE 3—Investment Advisory Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates:
(a)Pursuant to an investment advisory agreement with the Adviser, the investment advisory fee was computed at the annual rate of .75% of the value of the fund’s average daily net assets and is payable monthly. The Adviser has contractually agreed, from October 1, 2019 through January 31, 2021, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the direct expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .82% of the value of the fund’s average daily net assets. On or after January 31, 2021, the Adviser may terminate
28
this expense limitation at any time. The reduction in expenses, pursuant to the undertaking, amounted to $57,545 during the period ended March 31, 2020.
Pursuant to a sub-investment advisory agreement between the Adviser and the Sub-Adviser, The Adviser pays the Sub-Adviser a monthly fee at an annual rate of .36% of the value 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 March 31, 2020, Class C shares were charged $6,167 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 March 31, 2020, Class A and Class C shares were charged $7,281and $2,056, respectively, pursuant to the Shareholder Services Plan.
Under its terms, the Distribution Plan and Shareholder Services Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of a majority of those Trustees who are not “interested persons” of the Trust and who have no direct or indirect financial interest in the operation of or in any agreement related to the Distribution Plan or Shareholder Services Plan.
The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees For financial reporting purposes, the fund includes net earnings credits, if any, as an expense offset in the Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statements of Operations.
29
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, 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 March 31, 2020, the fund was charged $2,862 for transfer agency services. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended March 31, 2020, the fund was charged $81,885 pursuant to the custody agreement.
During the period ended March 31, 2020, the fund was charged $6,683 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees of $519,245, Distribution Plan fees of $868, Shareholder Services Plan fees of $1,294, custodian fees of $56,000, Chief Compliance Officer fees of $3,329 and transfer agency fees of $1,020, which are offset against an expense reimbursement currently in effect in the amount of $11,897.
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds 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 March 31, 2020, amounted to $198,313,196 and $357,111,593, 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 counterparties. Master Agreements include provisions for general obligations, representations, collateral and
30
events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instruments’ 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 March 31, 2020 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 may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. Forward contracts open at March 31, 2020 are set forth in the Statement of Forward Foreign Currency Exchange Contracts.
The provisions of ASC Topic 210 “Disclosures about Offsetting Assets and Liabilities” require disclosure on the offsetting of financial assets and liabilities. These disclosures are required for certain investments, including derivative financial instruments subject to Master Agreements which are eligible for offsetting in the Statement of Assets and Liabilities and require the fund to disclose both gross and net information with respect to such investments. For financial reporting purposes, the fund does not offset derivative assets and derivative liabilities that are subject to Master Agreements in the Statement of Assets and Liabilities.
31
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
At March 31, 2020, derivative assets and liabilities (by type) on a gross basis are as follows:
Derivative Financial Instruments: |
| Assets ($) |
| Liabilities ($) |
|
Forward contracts |
| 3,653,060 |
| (20,646) |
|
Total gross amount of derivative |
|
|
|
|
|
assets and liabilities in the |
|
|
|
|
|
Statement of Assets and Liabilities |
| 3,653,060 |
| (20,646) |
|
Derivatives not subject to |
|
|
|
|
|
Master Agreements |
| - |
| - |
|
Total gross amount of assets |
|
|
|
|
|
and liabilities subject to |
|
|
|
|
|
Master Agreements |
| 3,653,060 |
| (20,646) |
|
The following tables present derivative assets and liabilities net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of March 31, 2020:
|
|
| Financial |
|
|
|
|
|
| Instruments |
|
|
|
|
|
| and Derivatives |
|
|
|
| Gross Amount of |
| Available | Collateral |
| Net Amount of |
Counterparty | Assets ($) | 1 | for Offset ($) | Received ($) | 2 | Assets ($) |
CIBC World Markets | 2,490,456 |
| - | (2,490,456) |
| - |
State Street Bank | 1,162,604 |
| (20,474) | (960,000) |
| 182,130 |
Total | 3,653,060 |
| (20,474) | (3,450,456) |
| 182,130 |
|
|
|
|
|
|
|
|
|
| Financial |
|
|
|
|
|
| Instruments |
|
|
|
|
|
| and Derivatives |
|
|
|
| Gross Amount of |
| Available | Collateral |
| Net Amount of |
Counterparty | Liabilities ($) | 1 | for Offset ($) | Pledged ($) | 2 | Liabilities ($) |
J.P. Morgan Securities | (172) |
| - | - |
| (172) |
State Street Bank | (20,474) |
| 20,474 | - |
| - |
Total | (20,646) |
| 20,474 | - |
| (172) |
|
|
|
|
|
|
|
1Absent a default event or early termination, OTC derivative assets and liabilities are presented at gross amounts | ||||||
2In some instances, the actual collateral received and/or pledged may be more than the amount shown due to |
The following summarizes the average market value of derivatives outstanding duringthe period ended March 31, 2020:
|
| Average Market Value ($) |
Forward contracts |
| 50,071,294 |
|
|
|
32
At March 31, 2020, accumulated net unrealized appreciation on investments inclusive of derivative contracts was $4,208,119, consisting of $124,211,713 gross unrealized appreciation and $120,003,594 gross unrealized depreciation.
At March 31, 2020, the cost of investments inclusive of derivative contracts for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
33
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 26-27, 2020, the Board considered the renewalof the fund’s Management Agreement, pursuant to which the Adviser provides the fund with investment advisory and administrative services, and the Sub-Investment Advisory Agreement (together with the Management Agreement, the “Agreements”), pursuant to which Newton Investment Management Limited (the “Subadviser”) provides day-to-day management of the fund’s investments. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser and the Subadviser. In considering the renewal of the Agreements, the Board considered several 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 it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s 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 the Adviser 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 the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s supervisory activities over the Subadviser. The Board also considered portfolio management’s brokerage policies and practices (including that there are no soft dollar arrangements in place for the fund) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of international multi-cap growth funds (the “Performance Group”) and with a broader group of all retail and institutional international multi-cap growth funds (the
34
“Performance Universe”), all for various periods ended December 31, 2019, and (2) the fund’s actual and contractual management fees and total expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of institutional international multi-cap growth funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds. The Board discussed with representatives of the Adviser and the Subadviser the results of the comparisons and considered that the fund’s total return performance was below the Performance Group and Performance Universe medians for all periods. The Board discussed with representatives of the Adviser the portfolio management strategy of the fund’s portfolio managers and the reasons for the fund’s underperformance versus the Performance Group and Performance Universe during the periods under review, and noted that the portfolio managers are very experienced and continued to apply a consistent investment strategy. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in five of the ten calendar years shown.
The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management services provided by the Adviser. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year which reflected reductions for a fee waiver arrangement in place that reduced the investment advisory fee paid to the Adviser. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was higher than the Expense Group median contractual management fee and that the fund’s actual management fee was lower than the Expense Group median but higher than the Expense Universe median actual management fee. This information also showed that the fund’s total expenses were lower than the Expense Group and Expense Universe median total expenses.
Representatives of the Adviser stated that the Adviser has contractually agreed, until January 31, 2021, to waive receipt of its fees and/or assume the direct expenses of the fund so that the direct expenses of none of its classes (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .82% of the fund’s average daily net assets.
35
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
The Board considered the fee to the Subadviser in relation to the fee paid to the Adviser by the fund and the respective services provided by the Subadviser and the Adviser. The Board also took into consideration that the Subadviser’s fee is paid by the Adviser (out of its fee from the fund) and not the fund, and, accordingly, that the retention of the Subadviser does not increase the fees or expenses otherwise incurred by the fund and its shareholders.
Representatives of the Adviser reviewed with the Board the management or investment advisory fees paid to the Adviser 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 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 of the fund’s management fee. Representatives of the Adviser noted that there were no other funds advised or administered by the Adviser that are in the same Lipper category as the fund.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also considered the expense limitation arrangement and its effect on the profitability of the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered on the advice of its counsel the profitability analysis (1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the mix of services provided by the Adviser and the Subadviser, including the nature, extent and quality of such services, supported the renewal of the Agreements and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Since the Adviser, and not the fund, pays the Subadviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Subadviser’s profitability to be relevant to its deliberations. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s
36
asset level. The Board also considered potential benefits to the Adviser and the Subadviser from acting as investment adviser and sub-investment adviser, respectively, and took into consideration that there were no soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the 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 provided by the Adviser and the Subadviser are adequate and appropriate.
· The Board determined to closely monitor performance.
· The Board concluded that the fees paid to the Adviser and the Subadviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates and the Subadviser, of the Adviser and the Subadviser and the services provided to the fund by the Adviser and the Subadviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreements, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
37
BNY Mellon International Equity Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Newton Investment Management Limited
160 Queen Victoria Street
London, EC4V, 4LA, UK
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class A: NIEAX Class C: NIECX Class I: SNIEX Class Y: NIEYX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mailSend your request toinfo@bnymellon.com
InternetInformation can be viewed online or downloaded atwww.bnymellonim.com/us
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-PORT. The fund’s Forms N-PORT are available on the SEC’s website atwww.sec.gov.
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 atwww.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2020 BNY Mellon Securities Corporation |
BNY Mellon Small Cap Growth Fund
SEMIANNUAL REPORT March 31, 2020 |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.bnymellonim.com/us and sign up for eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
BNY Mellon Investment Adviser, Inc. | |
With Those of Other Funds | |
in Affiliated Issuers | |
Fund’s Investment Advisory and | |
Administration Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.
Dear Shareholder:
We are pleased to present this semiannual report for BNY Mellon Small Cap Growth Fund, covering the six-month period from October 1, 2019 through March 31, 2020. 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.
Stock markets performed well over the last several months of 2019. Accommodative policies from the U.S. Federal Reserve (the “Fed”), paired with healthy U.S. consumer spending, helped support valuations. Despite periodic investor concern regarding trade relations with China and global growth rates, the rally continued through the end of the calendar year, supported in part by a December announcement from President Trump that the first phase of a trade deal with China was in process. However, the positive outlook was short-lived, as concerns over the spread of the coronavirus roiled markets the first several months of 2020. As the virus spread across the globe, concerns about the economic effects of a widespread quarantine worked to depress equity valuations. Many indices, particularly in the U.S., reported historically low returns for the first quarter of 2020.
In fixed-income markets, interest rates were heavily influenced by changes in Fed policy and investor concern over COVID-19. The Fed cut the target overnight lending rate by 25 basis points in October 2019 in an effort to support the U.S. economy. Rates across much of the Treasury curve increased during the month of November, and the long end of the curve rose in December as investors anticipated improvements in global economic growth during the coming year. However, concerns regarding COVID-19 and the resulting economic impact caused yields throughout the intermediate- and long-dated portions of the curve to fall during January and February of 2020. In March, the Fed cut rates twice, resulting in an overnight lending target-rate of nearly zero at the end of the period.
We believe the near-term outlook for the U.S. will be challenging, as the country curbs the spread of COVID-19. However, we are confident that once the economic effects have been mitigated, the economy will rebound. As always, we will monitor relevant data for signs of change. We encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
April 15, 2020
2
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from October 1, 2019 through March 31, 2020, as provided by John R. Porter, Todd Wakefield, CFA, and Robert C. Zeuthen, CFA, Primary Portfolio Managers
Market and Fund Performance Overview
For the six-month period ended March 31, 2020, BNY Mellon Small Cap Growth Fund’s Class I shares produced a total return of -2.11%, and Class Y shares returned -2.14%.1In comparison, the fund’s benchmark, the Russell 2000® Growth Index (the “Index”), posted a total return of -17.31% for the same period.2
Small-cap growth stocks produced negative returns during the period, due to extreme market volatility in late February and March, which was caused in part by the spreading COVID-19 and the resulting economic effects. The fund outperformed the Index, mainly due to successful security selection within the information technology and health care sectors.
The Fund’s Investment Approach
The fund seeks long-term growth of capital. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of small-cap U.S. companies—i.e., those with total market capitalizations equal to or less than that of the largest company in the Index.
We employ a growth-oriented investment style in managing the fund’s portfolio. This means the portfolio managers seek to identify those small-cap companies that are experiencing, or are expected to experience, rapid earnings or revenue growth. We focus on high-quality companies and individual stock selection, instead of trying to predict which industries or sectors will perform best, and select by:
· Using fundamental research to identify and follow companies considered to have attractive characteristics, such as strong business and competitive positions, solid cash flows and balance sheets, high-quality management and high sustainable growth;
· Investing in a company when the research indicates that the company will experience accelerating revenues and expanding operating margins, which may lead to rising estimate trends and favorable earnings surprises.
The fund’s investment strategy may lead it to emphasize certain industries, such as technology, health care, business services and communications.
Central Bank Policy, Trade and Disease Influence Markets
Equity markets were affected by an array of geopolitical developments in late 2019, ranging from civil protests in Hong Kong to an impeachment inquiry against the U.S. president and the Brexit saga in the U.K. Continuing trade tensions between the U.S. and China remained an influencer of investor sentiment and equity market valuations early in the period. Alternating signs of progress and deterioration in the trade dispute occurred, although the year concluded with President Trump indicating that he would sign the first phase of a deal. Investor optimism helped fuel a rally that pushed U.S. equity indices to new record highs in December 2019.
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
Central banks worked during the period to support economic growth. The U.S. Federal Reserve (the “Fed”) cut interest rates in October 2019 to support weak inflation and flagging growth. In December 2019, the Bank of Japan announced a stimulus package worth 26 trillion yen to help alleviate potential economic setbacks from a typhoon and consumption tax increase. The People’s Bank of China and European Central Bank also provided additional support to their respective jurisdictions during the six months. Despite these measures, volatility reentered equity markets in January 2020, due to concerns over the COVID-19 outbreak. Although some indices hit new record highs in early February 2020, investor sentiment shifted later in the month, due to increasing virus cases in the U.S. A sell-off began that accelerated through late March, eliminating gains for many areas of the capital markets, and sending some equity indices into bear market territory. Asset valuations came under additional pressure from the Russia/Saudi Arabia oil conflict, which caused the price of oil to fall precipitously. The Fed cut rates twice in March 2020 in an effort to support the economy. Large numbers of people were laid off after several states ordered non-essential businesses closed. A landmark $2 trillion-dollar stimulus deal was signed the final Friday in March, in an effort to provide much needed cash to households and loans to small businesses.
In this environment, large-cap stocks generally outperformed their mid- and small-cap counterparts.
Security Selections Drive Fund Performance
The fund’s strong outperformance was driven by security selections within the information technology and health care sectors. IT services and software companies were among the strongest performers. IT services company Shopify, a provider of website services and payment systems for e-commerce sites, performed well on strong trends in online shopping. Everbridge, a disaster communications software company, also outperformed the broader market and bolstered portfolio results. Demand for the company’s products, particularly among schools and public organizations, increased during the period. Communications equipment company Lumentum Holdings was also among the top contributors. Within health care, telemedicine company Teladoc Health, posted strong absolute and relative performance. Social distancing guidelines and a general increase in disease during the period led to an increase in demand for the company’s services. Life sciences tools and services company NeoGenomics also contributed to returns. Elsewhere in the markets, positioning within the industrials sector was helpful. A relative underweight and successful stock selection worked to bolster results.
Conversely, positioning within the materials and energy sectors weighed most heavily on returns. Within materials, mining company Constellium was among the top individual detractors from performance for the period. The company experienced higher-than-anticipated costs during the period due to production inefficiencies. An overweight to the construction materials industry also weighed on performance. An overweight to the energy sector, which performed particularly poorly during the six months, also provided a headwind to results.
Finding Opportunities Amid Volatility
It is our opinion that there are many uncertainties in the world right now. We think the downturn witnessed in March may have been driven more by uncertainty than anything else,
4
but it is difficult to project how the widespread job losses and economic slowdown associated with the COVID-19 will affect corporate fundamentals in the future. We believe the economy may take a while to recover fully. There may be permanent changes in the way businesses are run. Our team is paying very close attention to the nature of every business in which we are invested, and how they may be affected by potential paradigm shifts in the way the U.S. economy functions.
We are encouraged by the stimulus efforts of governments and the capitalization levels of banks. In a difficult time, we believe that active management is more important than ever and will continue to utilize market volatility as an opportunity to purchase the stocks of fundamentally strong companies, which we think are well positioned to function in the new economy, at more attractive prices.
April 15, 2020
1 Total return includes reinvestment of dividends and any capital gains paid. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. The fund’s return reflects the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through January 31, 2021, at which time it may be extended, modified or terminated. Had these expenses not been absorbed, returns would have been lower. Past performance is no guarantee of future results.
2 Source: Lipper Inc. — The Russell 2000® Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher growth earning potential as defined by Russell’s leading style methodology. The Russell 2000® Growth Index is constructed to provide a comprehensive and unbiased barometer for the small-cap growth segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set, and that the represented companies continue to reflect growth characteristics. Investors cannot invest directly in any index.
Equities 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.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
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 BNY Mellon Small Cap Growth Fund from October 1, 2019 to March 31, 2020. 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 |
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Assume actual returns for the six months ended March 31, 2020 |
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| Class I | Class Y |
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Expense paid per $1,000† | $4.95 | $4.95 |
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Ending value (after expenses) | $978.90 | $978.60 |
|
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS(Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended March 31, 2020 |
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| Class I | Class Y |
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Expense paid per $1,000† | $5.05 | $5.05 |
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Ending value (after expenses) | $1,020.00 | $1,020.00 |
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†Expenses are equal to the fund’s annualized expense ratio of 1.00% for Class I and 1.00% for Class Y, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS
March 31, 2020 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 96.5% | |||||||
Banks - .8% | |||||||
SVB Financial Group | 228 | a | 34,446 | ||||
TriState Capital Holdings | 3,781 | a | 36,562 | ||||
71,008 | |||||||
Capital Goods - 8.9% | |||||||
Allied Motion Technologies | 1,721 | 40,788 | |||||
Construction Partners, Cl. A | 7,707 | a,b | 130,171 | ||||
Curtiss-Wright | 881 | 81,413 | |||||
Energy Recovery | 8,724 | a,b | 64,907 | ||||
Kornit Digital | 4,297 | a,b | 106,952 | ||||
Mercury Systems | 3,043 | a,b | 217,088 | ||||
Proto Labs | 452 | a,b | 34,411 | ||||
SiteOne Landscape Supply | 1,223 | a,b | 90,037 | ||||
765,767 | |||||||
Consumer Durables & Apparel - .6% | |||||||
YETI Holdings | 2,707 | a | 52,841 | ||||
Consumer Services - 2.2% | |||||||
OneSpaWorld Holdings | 4,036 | b | 16,386 | ||||
Planet Fitness, Cl. A | 2,995 | a | 145,857 | ||||
Shake Shack, Cl. A | 808 | a,b | 30,494 | ||||
192,737 | |||||||
Diversified Financials - .9% | |||||||
Assetmark Financial Holdings | 3,763 | a,b | 76,727 | ||||
Energy - .4% | |||||||
Cactus, Cl. A | 2,612 | 30,299 | |||||
Food & Staples Retailing - 1.6% | |||||||
Grocery Outlet Holding | 3,895 | a,b | 133,754 | ||||
Food, Beverage & Tobacco - 4.2% | |||||||
Calavo Growers | 1,996 | b | 115,149 | ||||
Freshpet | 3,921 | a | 250,434 | ||||
365,583 | |||||||
Health Care Equipment & Services - 12.0% | |||||||
1Life Healthcare | 8,285 | a,b | 150,373 | ||||
Align Technology | 122 | a | 21,222 | ||||
AtriCure | 2,482 | a | 83,370 | ||||
Centene | 898 | a | 53,350 | ||||
Evolent Health, Cl. A | 6,552 | a,b | 35,577 | ||||
Health Catalyst | 1,573 | a,b | 41,134 | ||||
iRhythm Technologies | 1,616 | a,b | 131,462 | ||||
Nevro | 714 | a,b | 71,386 | ||||
Tabula Rasa HealthCare | 1,551 | a,b | 81,102 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 96.5% (continued) | |||||||
Health Care Equipment & Services - 12.0% (continued) | |||||||
Teladoc Health | 2,380 | a,b | 368,924 | ||||
1,037,900 | |||||||
Household & Personal Products - 1.0% | |||||||
Inter Parfums | 1,915 | 88,760 | |||||
Insurance - 3.0% | |||||||
Kinsale Captial Group | 414 | b | 43,275 | ||||
Palomar Holdings | 3,678 | a | 213,913 | ||||
257,188 | |||||||
Materials - 1.7% | |||||||
Constellium | 4,671 | a | 24,336 | ||||
Summit Materials, Cl. A | 7,888 | a,b | 118,320 | ||||
142,656 | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 19.2% | |||||||
10X Genomics, CI. A | 1,089 | a,b | 67,866 | ||||
Acceleron Pharma | 654 | a | 58,775 | ||||
Alector | 807 | a | 19,473 | ||||
Amicus Therapeutics | 4,905 | a,b | 45,322 | ||||
Arena Pharmaceuticals | 873 | a | 36,666 | ||||
Ascendis Pharma, ADR | 423 | a,b | 47,634 | ||||
Biohaven Pharmaceutical Holding | 1,899 | a,b | 64,623 | ||||
Blueprint Medicines | 514 | a | 30,059 | ||||
CareDx | 1,548 | a,b | 33,793 | ||||
CRISPR Therapeutics | 948 | a | 40,205 | ||||
Denali Therapeutics | 2,399 | a,b | 42,007 | ||||
Editas Medicine | 775 | a,b | 15,368 | ||||
FibroGen | 2,341 | a | 81,350 | ||||
GW Pharmaceuticals, ADR | 703 | a,b | 61,562 | ||||
Iovance Biotherapeutics | 1,200 | a,b | 35,922 | ||||
NanoString Technologies | 2,961 | a | 71,212 | ||||
Natera | 2,329 | a | 69,544 | ||||
NeoGenomics | 4,181 | a,b | 115,437 | ||||
Pacific Biosciences of California | 9,744 | a | 29,817 | ||||
Prevail Therapeutics | 4,105 | a | 50,040 | ||||
Prothena | 3,195 | a | 34,187 | ||||
PTC Therapeutics | 1,813 | a | 80,878 | ||||
Quanterix | 4,160 | a,b | 76,419 | ||||
Sarepta Therapeutics | 566 | a,b | 55,366 | ||||
Twist Bioscience | 3,073 | a | 93,972 | ||||
Ultragenyx Pharmaceutical | 1,088 | a,b | 48,340 | ||||
uniQure | 1,184 | a,b | 56,181 | ||||
Veracyte | 1,680 | a,b | 40,841 | ||||
Voyager Therapeutics | 3,569 | a | 32,656 | ||||
Xenon Pharmaceuticals | 6,280 | a | 71,215 |
8
Description | Shares | Value ($) | |||||
Common Stocks - 96.5% (continued) | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 19.2% (continued) | |||||||
Zogenix | 2,043 | a,b | 50,523 | ||||
1,657,253 | |||||||
Real Estate - 1.0% | |||||||
Physicians Realty Trust | 4,316 | c | 60,165 | ||||
Redfin | 1,952 | a | 30,100 | ||||
90,265 | |||||||
Retailing - 4.4% | |||||||
Etsy | 2,192 | a,b | 84,260 | ||||
National Vision Holdings | 7,596 | a | 147,514 | ||||
Ollie's Bargain Outlet Holdings | 3,269 | a,b | 151,485 | ||||
383,259 | |||||||
Semiconductors & Semiconductor Equipment - 2.3% | |||||||
Power Integrations | 1,138 | 100,520 | |||||
Semtech | 2,615 | a | 98,063 | ||||
198,583 | |||||||
Software & Services - 24.2% | |||||||
CACI International, Cl. A | 942 | a | 198,903 | ||||
Everbridge | 2,787 | a,b | 296,425 | ||||
HubSpot | 1,470 | a | 195,789 | ||||
I3 Verticals, Cl. A | 5,547 | a | 105,892 | ||||
Medallia | 4,891 | a,b | 98,016 | ||||
Mimecast | 2,016 | a | 71,165 | ||||
New Relic | 786 | a,b | 36,345 | ||||
Proofpoint | 1,475 | a | 151,320 | ||||
Q2 Holdings | 1,075 | a,b | 63,490 | ||||
Rapid7 | 5,057 | a | 219,120 | ||||
Shopify, Cl. A | 696 | a | 290,183 | ||||
Twilio, Cl. A | 2,570 | a,b | 229,989 | ||||
Zendesk | 1,980 | a | 126,740 | ||||
2,083,377 | |||||||
Technology Hardware & Equipment - 3.1% | |||||||
Littelfuse | 384 | 51,233 | |||||
Lumentum Holdings | 1,687 | a | 124,332 | ||||
NETGEAR | 1,903 | a,b | 43,465 | ||||
nLight | 4,302 | a,b | 45,128 | ||||
264,158 | |||||||
Telecommunication Services - 4.1% | |||||||
Bandwidth, Cl. A | 5,301 | a,b | 356,704 | ||||
Transportation - .9% | |||||||
Marten Transport | 3,599 | 73,851 | |||||
Total Common Stocks(cost $6,851,159) | 8,322,670 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Exchange-Traded Funds - 2.0% | |||||||
Registered Investment Companies - 2.0% | |||||||
iShares Russell 2000 Growth ETF | 1,099 | b | 173,829 | ||||
1-Day | |||||||
Investment Companies - 5.5% | |||||||
Registered Investment Companies - 5.5% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 0.40 | 471,692 | d | 471,692 | |||
Investment of Cash Collateral for Securities Loaned - 1.8% | |||||||
Registered Investment Companies - 1.8% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 0.40 | 153,954 | d | 153,954 | |||
Total Investments(cost $7,635,182) | 105.8% | 9,122,145 | |||||
Liabilities, Less Cash and Receivables | (5.8%) | (498,597) | |||||
Net Assets | 100.0% | 8,623,548 |
ADR—American Depository Receipt
ETF—Exchange-Traded Fund
a Non-income producing security.
b Security, or portion thereof, on loan. At March 31, 2020, the value of the fund’s securities on loan was $2,805,318 and the value of the collateral was $2,906,013, consisting of cash collateral of $153,954 and U.S. Government & Agency securities valued at $2,752,059.
c Investment in real estate investment trust within the United States.
d Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
Portfolio Summary (Unaudited)† | Value (%) |
Health Care | 31.3 |
Information Technology | 29.5 |
Industrials | 9.7 |
Investment Companies | 9.3 |
Consumer Discretionary | 7.3 |
Consumer Staples | 6.8 |
Financials | 4.7 |
Communication Services | 4.1 |
Materials | 1.7 |
Real Estate | 1.0 |
Energy | .4 |
105.8 |
† Based on net assets.
See notes to financial statements.
10
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS(Unaudited)
Investment Companies | Value | Purchases($) | Sales ($) | Value | Net | Dividends/ |
Registered Investment Companies; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 132,784 | 5,444,675 | 5,105,767 | 471,692 | 5.5 | 2,345 |
Investment of Cash Collateral for Securities Loaned: | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 398,183 | 2,524,376 | 2,768,605 | 153,954 | 1.8 | - |
Total | 530,967 | 7,969,051 | 7,874,372 | 625,646 | 7.3 | 2,345 |
See notes to financial statements.
11
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 7,009,536 |
| 8,496,499 |
| ||
Affiliated issuers |
| 625,646 |
| 625,646 |
| |
Receivable for investment securities sold |
| 19,534 |
| |||
Receivable for shares of Beneficial Interest subscribed |
| 7,635 |
| |||
Dividends and securities lending income receivable |
| 1,509 |
| |||
Prepaid expenses |
|
|
|
| 18,171 |
|
|
|
|
|
| 9,168,994 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(b) |
| 1,338 |
| |||
Payable for investment securities purchased |
| 334,856 |
| |||
Liability for securities on loan—Note 1(b) |
| 153,954 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 9,546 |
| |||
Trustees’ fees and expenses payable |
| 53 |
| |||
Other accrued expenses |
|
|
|
| 45,699 |
|
|
|
|
|
| 545,446 |
|
Net Assets ($) |
|
| 8,623,548 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 7,108,770 |
|
Total distributable earnings (loss) |
|
|
|
| 1,514,778 |
|
Net Assets ($) |
|
| 8,623,548 |
|
Net Asset Value Per Share | Class I | Class Y |
|
Net Assets ($) | 8,581,757 | 41,791 |
|
Shares Outstanding | 308,084 | 1,496.51 |
|
Net Asset Value Per Share ($) | 27.86 | 27.93 |
|
|
|
|
|
See notes to financial statements. |
|
|
|
12
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends: |
| |||||
Unaffiliated issuers |
|
| 9,034 |
| ||
Affiliated issuers |
|
| 2,345 |
| ||
Income from securities lending—Note 1(b) |
|
| 4,098 |
| ||
Interest |
|
| 134 |
| ||
Total Income |
|
| 15,611 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 36,061 |
| ||
Professional fees |
|
| 46,823 |
| ||
Registration fees |
|
| 17,306 |
| ||
Chief Compliance Officer fees—Note 3(b) |
|
| 6,683 |
| ||
Shareholder servicing costs—Note 3(b) |
|
| 5,490 |
| ||
Prospectus and shareholders’ reports |
|
| 4,547 |
| ||
Administration fee—Note 3(a) |
|
| 2,705 |
| ||
Custodian fees—Note 3(b) |
|
| 2,005 |
| ||
Trustees’ fees and expenses—Note 3(c) |
|
| 418 |
| ||
Loan commitment fees—Note 2 |
|
| 110 |
| ||
Miscellaneous |
|
| 7,200 |
| ||
Total Expenses |
|
| 129,348 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (84,197) |
| ||
Net Expenses |
|
| 45,151 |
| ||
Investment (Loss)—Net |
|
| (29,540) |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 408,561 |
| ||||
Net change in unrealized appreciation (depreciation) on investments | (560,426) |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (151,865) |
| ||
Net (Decrease) in Net Assets Resulting from Operations |
| (181,405) |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
13
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment (loss)—net |
|
| (29,540) |
|
|
| (45,652) |
| |
Net realized gain (loss) on investments |
| 408,561 |
|
|
| (182,822) |
| ||
Net change in unrealized appreciation |
| (560,426) |
|
|
| (463,791) |
| ||
Net Increase (Decrease) in Net Assets | (181,405) |
|
|
| (692,265) |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class I |
|
| - |
|
|
| (810,240) |
| |
Class Y |
|
| - |
|
|
| (84,787) |
| |
Total Distributions |
|
| - |
|
|
| (895,027) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class I |
|
| 4,675,590 |
|
|
| 3,427,480 |
| |
Class Y |
|
| 8,697 |
|
|
| 12,743 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class I |
|
| - |
|
|
| 767,125 |
| |
Class Y |
|
| - |
|
|
| 78,411 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class I |
|
| (2,926,439) |
|
|
| (2,883,720) |
| |
Class Y |
|
| (22,080) |
|
|
| (539,978) |
| |
Increase (Decrease) in Net Assets | 1,735,768 |
|
|
| 862,061 |
| |||
Total Increase (Decrease) in Net Assets | 1,554,363 |
|
|
| (725,231) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 7,069,185 |
|
|
| 7,794,416 |
| |
End of Period |
|
| 8,623,548 |
|
|
| 7,069,185 |
| |
Capital Share Transactions (Shares): |
| ||||||||
Class I |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 150,903 |
|
|
| 120,413 |
| |
Shares issued for distributions reinvested |
|
| - |
|
|
| 29,290 |
| |
Shares redeemed |
|
| (89,254) |
|
|
| (100,049) |
| |
Net Increase (Decrease) in Shares Outstanding | 61,649 |
|
|
| 49,654 |
| |||
Class Y |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 267 |
|
|
| 420 |
| |
Shares issued for distributions reinvested |
|
| - |
|
|
| 2,988 |
| |
Shares redeemed |
|
| (698) |
|
|
| (22,182) |
| |
Net Increase (Decrease) in Shares Outstanding | (431) |
|
|
| (18,774) |
| |||
|
|
|
|
|
|
|
|
|
|
See notes to financial statements. |
14
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||
Class I Shares | March 31, 2020 | Year Ended September 30, | ||||||||
(Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 28.46 | 35.83 | 31.65 | 30.32 | 35.16 | 52.76 | ||||
Investment Operations: | ||||||||||
Investment (loss)—neta | (.10) | (.20) | (.19) | (.07) | (.08) | (.17) | ||||
Net realized and unrealized | (.50) | (2.91) | 8.54 | 5.52 | 4.08 | 3.48 | ||||
Total from Investment Operations | (.60) | (3.11) | 8.35 | 5.45 | 4.00 | 3.31 | ||||
Distributions: | ||||||||||
Dividends from net realized | - | (4.26) | (4.17) | (4.12) | (8.84) | (20.91) | ||||
Net asset value, end of period | 27.86 | 28.46 | 35.83 | 31.65 | 30.32 | 35.16 | ||||
Total Return (%) | (2.11)b | (7.64) | 30.01 | 19.75 | 13.83 | 6.50 | ||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | 2.87c | 3.47 | 3.51 | 3.08 | 2.06 | 1.40 | ||||
Ratio of net expenses | 1.00c | 1.00 | 1.00 | 1.00 | .98 | .95 | ||||
Ratio of net investment (loss) | (.66)c | (.66) | (.58) | (.23) | (.26) | (.41) | ||||
Portfolio Turnover Rate | 43.18b | 90.11 | 87.65 | 125.73 | 197.34 | 169.20 | ||||
Net Assets, end of period ($ x 1,000) | 8,582 | 7,014 | 7,051 | 5,377 | 6,441 | 23,034 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
15
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||
Class Y Shares | March 31, 2020 | Year Ended September 30, | |||||
(Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||
Per Share Data ($): | |||||||
Net asset value, beginning of period | 28.54 | 35.89 | 31.70 | 30.35 | 35.18 | 52.76 | |
Investment Operations: | |||||||
Investment (loss)—neta | (.10) | (.19) | (.20) | (.21) | (.07) | (.15) | |
Net realized and unrealized | (.51) | (2.90) | 8.56 | 5.68 | 4.08 | 3.48 | |
Total from Investment Operations | (.61) | (3.09) | 8.36 | 5.47 | 4.01 | 3.33 | |
Distributions: | |||||||
Dividends from net realized | - | (4.26) | (4.17) | (4.12) | (8.84) | (20.91) | |
Net asset value, end of period | 27.93 | 28.54 | 35.89 | 31.70 | 30.35 | 35.18 | |
Total Return (%) | (2.14)b | (7.57) | 30.00 | 19.81 | 13.85 | 6.56 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | 2.89c | 3.45 | 3.27 | 3.18 | 2.17 | 1.40 | |
Ratio of net expenses | 1.00c | 1.00 | 1.00 | 1.00 | .97 | .90 | |
Ratio of net investment (loss) | (.65)c | (.59) | (.59) | (.69) | (.23) | (.35) | |
Portfolio Turnover Rate | 43.18b | 90.11 | 87.65 | 125.73 | 197.34 | 169.20 | |
Net Assets, end of period ($ x 1,000) | 42 | 55 | 743 | 1,541 | 70 | 81 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
16
NOTES TO FINANCIAL STATEMENTS(Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Small Cap Growth Fund (the “fund”) is a separate diversified series of BNY Mellon Investment Funds I (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering seven series, including the fund. The fund’s investment objective is to seek long-term growth of capital. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class I and Class Y. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or contingent deferred sales charge. 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 Trust 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
17
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. 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 Trustenters 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.
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:
18
Investments in equity 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 ADRs and 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 accurately reflect 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 Trust’s Board of Trustees (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 securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of March 31, 2020in valuing the fund’s investments:
19
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
Assets ($) | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total |
Investments in Securities:† | ||||
Equity Securities—Common Stocks | 8,322,670 | - | - | 8,322,670 |
Exchange—Traded Funds | 173,829 | - | - | 173,829 |
Investment Companies | 625,646 | - | - | 625,646 |
† See Statement of Investments for additional detailed categorizations, if any.
(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, 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 the Adviser, 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. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended March 31, 2020, The Bank of New York Mellon earned $840 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(d) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the
20
investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
(e) Dividends and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(f) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended March 31, 2020, 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 March 31, 2020, the fund did not incur any interest or penalties.
21
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
Each tax year in the three-year period ended September 30, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
The fund has an unused capital loss carryover of $129,608 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to September 30, 2019. The fund has $129,608 of short-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 September 30, 2019 was as follows: ordinary income $170,011 and long-term capital gains $725,016. 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 long-term open-end funds managed by the Adviser in a $927 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $747 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $180 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. Prior to March 11, 2020, the Citibank Credit Facility was $1.030 billion with Tranche A available in an amount equal to $830 million and Tranche B available in an amount equal to $200 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit 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 March 31, 2020, the fund did not borrow under the Facilities.
NOTE 3—Investment Advisory Fee, Administration Fee and Other Transactions with Affiliates:
(a)Pursuant to an investment advisory agreement with the Adviser, the investment advisory fee is computed at the annual rate of .80% of the
22
value of the fund’s average daily net assets and is payable monthly. The Adviser has contractually agreed, from October 1, 2019 through January 31, 2021, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the direct expenses of neither class shares (excluding taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 1.00% of the value of the fund’s average daily net assets. On or after January 31, 2021, the Adviser may terminate this expense limitation agreement at any time. The reduction in expenses, pursuant to the undertaking, amounted to $84,197 during the period ended March 31, 2020.
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with the Adviser, whereby the Adviser performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate the Adviser for providing accounting and recordkeeping services, administration, compliance monitoring, regulatory and shareholder reporting, as well as related facilities, equipment and clerical help. The fee is based on the fund’s average daily net assets and computed at the following annual rates: .06% of the first $500 million, .04% of the next $500 million and .02% in excess of $1 billion.
In addition, after applying any expense limitations or fee waivers that reduce the fees paid to the Adviser for this service, the Adviser has contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both the Adviser’ costs in providing these services and a reasonable allocation of the costs incurred by the Adviser and its affiliates related to the support and oversight of these services. The fund also reimburses the Adviser for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration Agreement, the fund was charged $2,705 during the period ended March 31, 2020.
(b)The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees For financial reporting purposes, the fund includes net earnings credits, if any, as an expense offset in the Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statements of Operations.
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NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, 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 March 31, 2020, the fund was charged $744 for transfer agency services. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended March 31, 2020, the fund was charged $2,005 pursuant to the custody agreement.
During the period ended March 31, 2020, the fund was charged $6,683 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees of $5,665, administration fees of $425, custodian fees of $3,200, Chief Compliance Officer fees of $3,329 and transfer agency fees of $317, which are offset against an expense reimbursement currently in effect in the amount of $11,598.
(c) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds 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 March 31, 2020, amounted to $5,420,871 and $3,718,399, respectively.
At March 31, 2020, accumulated net unrealized appreciation on investments was $1,486,963, consisting of $2,327,769 gross unrealized appreciation and $840,806 gross unrealized depreciation.
At March 31, 2020, 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).
24
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 26-27, 2020, the Board considered the renewalof the fund’s Investment Advisory Agreement and Administration Agreement pursuant to which BNY Mellon Investment Adviser provides the fund with investment advisory services and administrative services (together, the “Agreement”). The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser. In considering the renewal of the Agreement, the Board considered several 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 it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s 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 the Adviser 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 the Adviser’s extensive administrative, accounting and compliance infrastructures. The Board also considered portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of small-cap growth funds (the “Performance Group”) and with a broader group of all retail and institutional small-cap growth funds (the “Performance Universe”), all for various periods ended December 31, 2019, and (2) the fund’s actual and contractual management fees and total expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of institutional
25
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS (Unaudited) (continued)
small-cap growth funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds. The Board discussed with representatives of the Adviser the results of the comparisons and considered that the fund’s total return performance was above the Performance Group and Performance Universe medians for all periods, except the three-year period when it was below the Performance Group median. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index. The Board also noted that the fund had a four star five-year rating from Morningstar based on Morningstar’s risk-adjusted return measures.
The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management services provided by the Adviser. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year which reflected reductions for a fee waiver arrangement in place that reduced the investment advisory fee paid to the Adviser. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was lower than the Expense Group median contractual management fee and that the fund’s actual management fee was lower than the Expense Group median and Expense Universe median actual management fee. This information also showed that the fund’s total expenses were lower than the Expense Group median and slightly higher than the Expense Universe median total expenses.
Representatives of the Adviser stated that the Adviser has contractually agreed, until January 31, 2021, to waive receipt of its fees and/or assume the direct expenses of the fund so that the direct expenses of neither class (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 1.00% of the fund’s average daily net assets.
Representatives of the Adviser reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by the Adviser that are in the same Lipper category as the fund and (2) paid to the Adviser, or the primary employer of the fund’s primary portfolio manager(s) that is affiliated with the Adviser, 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 the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee
26
information provided for the Similar Clients to evaluate the appropriateness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also considered the expense limitation arrangement and its effect on the profitability of the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement, considered in relation to the mix of services provided by the Adviser, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser from acting as investment adviser and took into consideration the soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by the Adviser are adequate and appropriate.
· The Board generally was satisfied with the fund’s performance.
27
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS (Unaudited) (continued)
· The Board concluded that the fee paid to the Adviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates, of the Adviser and the services provided to the fund by the Adviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreement, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreement for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
28
NOTES
29
BNY Mellon Small Cap Growth Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class I: SSETX Class Y: SSYGX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mailSend your request toinfo@bnymellon.com
InternetInformation can be viewed online or downloaded atwww.bnymellonim.com/us
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-PORT. The fund’s Forms N-PORT are available on the SEC’s website atwww.sec.gov.
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 atwww.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2020 BNY Mellon Securities Corporation |
BNY Mellon Small Cap Value Fund
SEMIANNUAL REPORT March 31, 2020 |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.bnymellonim.com/us and sign up for eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
BNY Mellon Investment Adviser, Inc. | |
With Those of Other Funds | |
in Affiliated Issuers | |
Fund’s Investment Advisory and | |
Administration Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.
Dear Shareholder:
We are pleased to present this semiannual report for BNY Mellon Small Cap Value Fund, covering the six-month period from October 1, 2019 through March 31, 2020. 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.
Stock markets performed well over the last several months of 2019. Accommodative policies from the U.S. Federal Reserve (the “Fed”), paired with healthy U.S. consumer spending, helped support valuations. Despite periodic investor concern regarding trade relations with China and global growth rates, the rally continued through the end of the calendar year, supported in part by a December announcement from President Trump that the first phase of a trade deal with China was in process. However, the positive outlook was short-lived, as concerns over the spread of the coronavirus roiled markets the first several months of 2020. As the virus spread across the globe, concerns about the economic effects of a widespread quarantine worked to depress equity valuations. Many indices, particularly in the U.S., reported historically low returns for the first quarter of 2020.
In fixed-income markets, interest rates were heavily influenced by changes in Fed policy and investor concern over COVID-19. The Fed cut the target overnight lending rate by 25 basis points in October 2019 in an effort to support the U.S. economy. Rates across much of the Treasury curve increased during the month of November, and the long end of the curve rose in December as investors anticipated improvements in global economic growth during the coming year. However, concerns regarding COVID-19 and the resulting economic impact caused yields throughout the intermediate- and long-dated portions of the curve to fall during January and February of 2020. In March, the Fed cut rates twice, resulting in an overnight lending target-rate of nearly zero at the end of the period.
We believe the near-term outlook for the U.S. will be challenging, as the country curbs the spread of COVID-19. However, we are confident that once the economic effects have been mitigated, the economy will rebound. As always, we will monitor relevant data for signs of change. We encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
April 15, 2020
2
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from October 1, 2019 through March 31, 2020, as provided by Joseph M. Corrado, CFA, Stephanie K. Brandaleone, CFA, Jonathan Piskorowski, CFA and Nicholas Cohn, Portfolio Managers
Nicholas Cohn was added to the portfolio management team in December 2019.
Market and Fund Performance Overview
For the six-month period ended March 31, 2020, BNY Mellon Small Cap Value Fund’s Class A shares produced a total return of -29.11%, Class C shares returned -29.42%, Class I shares returned -28.98% and Class Y shares returned -28.92%.1 In comparison, the fund’s benchmark, the Russell 2000® Value Index (the “Index”), posted a total return of -30.20% for the same period.2
Small-cap value stocks posted negative returns during the period, due to extreme market volatility in late February and March, which was caused in part by the spreading COVID-19 and the resulting economic effects. The fund outperformed the Index, due primarily to positioning within the industrials and information technology sectors.
The Fund’s Investment Approach
The fund seeks long-term growth of capital. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of small-cap U.S. companies—i.e., those with market capitalizations that are equal to or less than the total market capitalization of the largest company in the Index.
We use fundamental research and qualitative analysis to select stocks from among portfolio candidates. We look for companies with strong competitive positions, high-quality management and financial strength.
We use a variety of screening methods to identify small-cap companies that might be attractive investments. Once attractive investments have been identified, we use a consistent, three-step, fundamental research process to evaluate the stocks. The first step is valuation—to identify small-cap companies that are considered to be attractively priced relative to their earnings potential. Second, fundamentals—to verify the strength of the underlying business position. Third, catalyst—to identify a specific event that has the potential to cause the stocks to appreciate in value.
We primarily focus on individual stock selection instead of trying to predict which industries or sectors will perform best. The stock selection process is designed to produce a diversified portfolio of companies that we believe are undervalued relative to expected business growth.
Central Bank Policy, Trade and Disease Influence Markets
Equity markets were affected by an array of geopolitical developments in late 2019, ranging from civil protests in Hong Kong, to an impeachment inquiry against the U.S. president and the Brexit saga in the U.K. Continuing trade tensions between the U.S. and China remained an influencer of investor sentiment and equity market valuations early in the period. Alternating signs of progress and deterioration in the trade dispute occurred, although the year concluded with President Trump indicating that he would sign the first phase of a deal. Investor optimism helped fuel a rally that pushed U.S. equity indices to new record highs in December 2019.
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
Central banks worked during the period to support economic growth. The U.S. Federal Reserve (the “Fed”) cut interest rates in October 2019 to support weak inflation and flagging growth. In December 2019, the Bank of Japan announced a stimulus package worth 26 trillion yen to help alleviate potential economic setbacks from a typhoon and consumption tax increase. The People’s Bank of China and European Central Bank also provided additional support to their respective jurisdictions during the six months. Despite these measures, volatility reentered equity markets in January 2020, due to concerns over the COVID-19 outbreak. Although some indices hit new record highs in early February 2020, investor sentiment shifted later in the month, due to increasing virus cases in the U.S. A sell-off began that accelerated through late March, eliminating gains for many areas of the capital markets, and sending some equity indices into bear market territory. Asset valuations came under additional pressure from the Russia/Saudi Arabia oil conflict, which caused the price of oil to fall precipitously. The Fed cut rates twice in March 2020 in an effort to support the economy. Large numbers of people were laid off after several states ordered non-essential businesses closed. A landmark $2 trillion-dollar stimulus deal was signed the final Friday in March, in an effort to provide much needed cash to households and loans to small businesses.
In this environment, large-cap stocks generally outperformed their mid- and small-cap counterparts.
Industrials and Information Technology Drive Fund Performance
The largest contributor to relative outperformance was stock selection within the machinery industry. Astec Industries and Lindsay were among the top contributors to performance. Lindsay produces equipment and materials that go into water management systems and infrastructure projects, both of which are essential businesses that continued throughout the quarantine period. Drone manufacturer AeroVironment also provided a tailwind to performance. The company continued to see steady demand from its aerospace and defense client base throughout the six months, as well as corporate clients such as Amazon.com which is investigating the possibility of drone delivery for products. An overweight to the information technology sector as a whole also bolstered results. From a stock selection standpoint, a position in IT services company NIC was beneficial. The company provides services for federal and state government agencies. A position in software company Verint Systems also helped returns.
Conversely, overweight exposure to, as well as security selection within, several areas of the consumer discretionary sector weighed on results. Hotels, restaurants and leisure, textiles, apparel and luxury goods and specialty retail all suffered during the period due to social distancing guidelines and the economic slowdown from the COVID-19 pandemic. The Cheesecake Factory announced it would suspend payments on its real estate leases, helping to depress the stock price.BJ’s Restaurants was also particularly hard hit. We have since exited our position inBJ’s Restaurants. The materials sector also weighed on results. Within metals and mining, specialty metals company Carpenter Technology saw a decrease in demand for its products from its auto and industrial clients. Home building products company Louisiana-Pacific also saw decreased demand for its construction materials.
4
Finding Opportunities Amid Volatility
Given that U.S. small cap value stocks were some of the hardest hit U.S. securities in the recent market downturn, we believe this will position them for a future resurgence. In times of volatility, there can be a rotation away from momentum stocks into higher quality, dividend paying positions. Balance sheet strength, cash flow and quality has begun to demonstrate its ability to hold up during this downturn. We are looking to volatility to provide opportunities to add companies to the portfolio at attractive valuations, which we think stand to benefit from a recovering economy.
Given this environment, we remain focused on companies we believe may be undervalued due to investor overreactions, and which maintain strong fundamentals and contain catalysts for positive change. We think that our disciplined, repeatable investment approach can provide strong upside potential, while mitigating downside risk during periods of market turbulence.
April 15, 2020
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. 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. The fund’s return reflects the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through January 31, 2021, at which time it may be extended, modified or terminated. Had these expenses not been absorbed, returns would have been lower.
2 Source: Lipper Inc. — The Russell 2000®Value Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies that are considered more value-oriented relative to the overall market as defined by Russell’s leading style methodology. The Russell 2000® Value Index is constructed to provide a comprehensive and unbiased barometer for the small-cap value segment. The index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set, and that the represented companies continue to reflect value characteristics. Investors cannot invest directly in any index.
Please note: the position in any security highlighted with italicized typeface was sold during the reporting period.
Equities 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.
Small companies carry additional risks because their earnings and revenues tend to be less predictable and their share prices more volatile than those of larger, more established companies. The shares of smaller companies tend to trade less frequently than those of larger, more established companies, which can adversely affect the pricing of these securities and the fund’s ability to sell these securities.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
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 BNY Mellon Small Cap Value Fund from October 1, 2019 to March 31, 2020. 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 |
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Assume actual returns for the six months ended March 31, 2020 |
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| Class A | Class C | Class I | Class Y |
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Expense paid per $1,000† | $6.02 | $9.85 | $4.49 | $4.19 |
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Ending value (after expenses) | $708.90 | $705.80 | $710.20 | $710.80 |
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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 |
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Assuming a hypothetical 5% annualized return for the six months ended March 31, 2020 |
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| Class A | Class C | Class I | Class Y |
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Expense paid per $1,000† | $7.11 | $11.63 | $5.30 | $4.95 |
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Ending value (after expenses) | $1,017.95 | $1,013.45 | $1,019.75 | $1,020.10 |
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†Expenses are equal to the fund’s annualized expense ratio of 1.41% for Class A, 2.31% for Class C, 1.05% for Class I and .98% for Class Y, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS
March 31, 2020 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% | |||||||
Automobiles & Components - 2.8% | |||||||
Dorman Products | 15,422 | a | 852,374 | ||||
Gentherm | 37,492 | a | 1,177,249 | ||||
Stoneridge | 40,861 | a | 684,422 | ||||
Visteon | 18,516 | a | 888,398 | ||||
3,602,443 | |||||||
Banks - 15.2% | |||||||
Atlantic Union Bankshares | 33,646 | 736,848 | |||||
Banner | 31,663 | 1,046,146 | |||||
Boston Private Financial Holdings | 121,265 | 867,045 | |||||
Bryn Mawr Bank | 19,439 | 551,679 | |||||
Central Pacific Financial | 39,050 | 620,895 | |||||
Columbia Banking System | 37,450 | 1,003,660 | |||||
Cullen/Frost Bankers | 19,705 | 1,099,342 | |||||
CVB Financial | 25,968 | 520,658 | |||||
Essent Group | 35,403 | 932,515 | |||||
First Bancorp | 18,097 | 417,679 | |||||
First Interstate BancSystem, Cl. A | 43,626 | 1,258,174 | |||||
HarborOne Bancorp | 59,057 | a | 444,699 | ||||
Heritage Commerce | 55,776 | 427,802 | |||||
Heritage Financial | 28,153 | 563,060 | |||||
National Bank Holdings, Cl. A | 22,485 | 537,391 | |||||
Old National Bancorp | 83,338 | 1,099,228 | |||||
Seacoast Banking Corp. of Florida | 48,738 | a | 892,393 | ||||
South State | 17,892 | 1,050,797 | |||||
TriState Capital Holdings | 3,660 | a | 35,392 | ||||
UMB Financial | 23,781 | 1,102,963 | |||||
Umpqua Holdings | 116,540 | 1,270,286 | |||||
United Community Banks | 69,929 | 1,280,400 | |||||
Webster Financial | 74,593 | 1,708,180 | |||||
19,467,232 | |||||||
Capital Goods - 13.2% | |||||||
Advanced Drainage Systems | 9,490 | 279,386 | |||||
Aerojet Rocketdyne Holdings | 57,054 | a | 2,386,569 | ||||
AeroVironment | 21,585 | a | 1,315,822 | ||||
Astec Industries | 30,893 | 1,080,328 | |||||
Blue Bird | 19,339 | a | 211,375 | ||||
Construction Partners, Cl. A | 63,556 | a | 1,073,461 | ||||
EMCOR Group | 17,825 | 1,093,029 | |||||
Energy Recovery | 65,571 | a | 487,848 | ||||
EnerSys | 20,615 | 1,020,855 | |||||
Granite Construction | 37,965 | 576,309 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Capital Goods - 13.2% (continued) | |||||||
Kaman | 14,126 | 543,427 | |||||
Kennametal | 20,510 | 381,896 | |||||
Lindsay | 14,589 | 1,336,061 | |||||
MSC Industrial Direct, Cl. A | 12,059 | 662,883 | |||||
Regal Beloit | 7,343 | 462,242 | |||||
Rexnord | 44,776 | 1,015,072 | |||||
The Gorman-Rupp Company | 9,275 | 289,473 | |||||
The Greenbrier Companies | 52,667 | 934,313 | |||||
TPI Composites | 33,385 | a | 493,430 | ||||
TriMas | 43,912 | a | 1,014,367 | ||||
Wabash National | 30,399 | 219,481 | |||||
16,877,627 | |||||||
Commercial & Professional Services - 1.3% | |||||||
Huron Consulting Group | 7,055 | a | 320,015 | ||||
Knoll | 50,956 | 525,866 | |||||
Korn Ferry | 33,942 | 825,469 | |||||
1,671,350 | |||||||
Consumer Durables & Apparel - 4.5% | |||||||
Cavco Industries | 5,587 | a | 809,780 | ||||
Helen of Troy | 3,021 | a | 435,115 | ||||
iRobot | 18,286 | a | 747,897 | ||||
M.D.C. Holdings | 34,058 | 790,146 | |||||
Oxford Industries | 19,106 | 692,784 | |||||
Skechers USA, Cl. A | 24,532 | a | 582,390 | ||||
Taylor Morrison Home | 42,895 | a | 471,845 | ||||
Toll Brothers | 32,643 | 628,378 | |||||
TRI Pointe Group | 71,486 | a | 626,932 | ||||
5,785,267 | |||||||
Consumer Services - .8% | |||||||
Ruth's Hospitality Group | 39,743 | 265,483 | |||||
The Cheesecake Factory | 43,610 | 744,859 | |||||
1,010,342 | |||||||
Diversified Financials - 1.7% | |||||||
Blucora | 20,828 | a | 250,977 | ||||
Cohen & Steers | 13,437 | 610,712 | |||||
Federated Hermes | 31,524 | 600,532 | |||||
LPL Financial Holdings | 10,851 | 590,620 | |||||
WisdomTree Investments | 50,258 | 117,101 | |||||
2,169,942 | |||||||
Energy - 1.1% | |||||||
Cactus, Cl. A | 34,823 | 403,947 | |||||
Dril-Quip | 27,471 | a | 837,865 |
8
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Energy - 1.1% (continued) | |||||||
Helix Energy Solutions Group | 122,372 | a | 200,690 | ||||
1,442,502 | |||||||
Food, Beverage & Tobacco - 3.5% | |||||||
Calavo Growers | 14,038 | 809,852 | |||||
Flowers Foods | 55,038 | 1,129,380 | |||||
Fresh Del Monte Produce | 25,026 | 690,968 | |||||
The Hain Celestial Group | 68,726 | a | 1,784,814 | ||||
4,415,014 | |||||||
Health Care Equipment & Services - 6.7% | |||||||
Acadia Healthcare | 33,679 | a | 618,010 | ||||
AMN Healthcare Services | 13,501 | a | 780,493 | ||||
Evolent Health, Cl. A | 105,824 | a | 574,624 | ||||
LHC Group | 19,985 | a | 2,801,897 | ||||
Natus Medical | 29,117 | a | 673,476 | ||||
NuVasive | 22,751 | a | 1,152,566 | ||||
Omnicell | 12,157 | a | 797,256 | ||||
R1 RCM | 133,962 | a | 1,217,715 | ||||
8,616,037 | |||||||
Household & Personal Products - .1% | |||||||
Inter Parfums | 2,944 | 136,454 | |||||
Insurance - 2.7% | |||||||
Argo Group International Holdings | 5,681 | 210,538 | |||||
Kemper | 13,701 | 1,018,943 | |||||
Safety Insurance Group | 10,177 | 859,244 | |||||
Selective Insurance Group | 27,665 | 1,374,950 | |||||
3,463,675 | |||||||
Materials - 3.6% | |||||||
Cabot | 32,271 | 842,919 | |||||
Carpenter Technology | 39,625 | 772,687 | |||||
Chase | 5,288 | 435,150 | |||||
Coeur Mining | 207,626 | a | 666,479 | ||||
Livent | 133,186 | a | 699,226 | ||||
Schnitzer Steel Industries, Cl. A | 57,454 | 749,200 | |||||
Stepan | 4,869 | 430,712 | |||||
4,596,373 | |||||||
Media & Entertainment - 3.4% | |||||||
Gray Television | 89,177 | a | 957,761 | ||||
IMAX | 47,313 | a | 428,183 | ||||
John Wiley & Sons, Cl. A | 11,981 | 449,168 | |||||
MSG Networks, Cl. A | 77,745 | a | 792,999 | ||||
Scholastic | 31,971 | 814,941 | |||||
TEGNA | 55,761 | 605,564 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Media & Entertainment - 3.4% (continued) | |||||||
World Wrestling Entertainment, Cl. A | 8,227 | 279,142 | |||||
4,327,758 | |||||||
Real Estate - 10.1% | |||||||
Agree Realty | 24,749 | b | 1,531,963 | ||||
Columbia Property Trust | 41,813 | b | 522,662 | ||||
Cousins Properties | 17,819 | b | 521,562 | ||||
Empire State Realty Trust, Cl. A | 137,099 | b | 1,228,407 | ||||
Equity Commonwealth | 44,775 | b | 1,419,815 | ||||
Newmark Group, Cl. A | 102,476 | 435,523 | |||||
Physicians Realty Trust | 119,596 | b | 1,667,168 | ||||
Potlatchdeltic | 59,827 | b | 1,877,970 | ||||
Sunstone Hotel Investors | 150,410 | b | 1,310,071 | ||||
Terreno Realty | 25,711 | b | 1,330,544 | ||||
Urban Edge Properties | 112,077 | b | 987,398 | ||||
Weingarten Realty Investors | 9,095 | b | 131,241 | ||||
12,964,324 | |||||||
Retailing - 3.0% | |||||||
Dick's Sporting Goods | 32,458 | 690,057 | |||||
Dillard's, Cl. A | 18,199 | 672,453 | |||||
Ollie's Bargain Outlet Holdings | 14,396 | a | 667,111 | ||||
Urban Outfitters | 52,911 | a | 753,453 | ||||
Williams-Sonoma | 24,354 | 1,035,532 | |||||
3,818,606 | |||||||
Semiconductors & Semiconductor Equipment - 5.1% | |||||||
Brooks Automation | 9,401 | 286,730 | |||||
Diodes | 46,004 | a | 1,869,373 | ||||
First Solar | 29,762 | a | 1,073,218 | ||||
MKS Instruments | 23,363 | 1,902,916 | |||||
Semtech | 37,364 | a | 1,401,150 | ||||
6,533,387 | |||||||
Software & Services - 5.9% | |||||||
Cloudera | 112,625 | a | 886,359 | ||||
CSG Systems International | 31,257 | 1,308,105 | |||||
KBR | 62,644 | 1,295,478 | |||||
Mimecast | 18,082 | a | 638,295 | ||||
NIC | 56,050 | 1,289,150 | |||||
Progress Software | 16,312 | 521,984 | |||||
Verint Systems | 38,395 | a | 1,650,985 | ||||
7,590,356 | |||||||
Technology Hardware & Equipment - 4.6% | |||||||
Coherent | 16,951 | a | 1,803,756 | ||||
Fabrinet | 26,279 | a | 1,433,782 | ||||
FLIR Systems | 23,327 | 743,898 |
10
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Technology Hardware & Equipment - 4.6% (continued) | |||||||
Lumentum Holdings | 11,290 | a | 832,073 | ||||
NETGEAR | 47,673 | a | 1,088,851 | ||||
5,902,360 | |||||||
Transportation - 2.6% | |||||||
Echo Global Logistics | 27,826 | a | 475,268 | ||||
JetBlue Airways | 37,442 | a | 335,106 | ||||
Landstar System | 7,654 | 733,712 | |||||
Marten Transport | 53,927 | 1,106,582 | |||||
SkyWest | 24,629 | 645,033 | |||||
3,295,701 | |||||||
Utilities - 6.3% | |||||||
Avista | 48,564 | 2,063,484 | |||||
Chesapeake Utilities | 15,154 | 1,298,849 | |||||
NorthWestern | 14,378 | 860,236 | |||||
PNM Resources | 27,351 | 1,039,338 | |||||
Portland General Electric | 28,437 | 1,363,270 | |||||
Southwest Gas Holdings | 21,246 | 1,477,872 | |||||
8,103,049 | |||||||
Total Common Stocks(cost $146,690,563) | 125,789,799 | ||||||
Exchange-Traded Funds - 1.5% | |||||||
Registered Investment Companies - 1.5% | |||||||
iShares Russell 2000 Value ETF | 23,199 | 1,903,014 | |||||
1-Day | |||||||
Investment Companies - .4% | |||||||
Registered Investment Companies - .4% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 0.40 | 522,645 | c | 522,645 | |||
Total Investments(cost $148,961,842) | 100.1% | 128,215,458 | |||||
Liabilities, Less Cash and Receivables | (.1%) | (97,403) | |||||
Net Assets | 100.0% | 128,118,055 |
ETF—Exchange-Traded Fund
a Non-income producing security.
b Investment in real estate investment trust within the United States.
c Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Portfolio Summary (Unaudited)† | Value (%) |
Financials | 19.6 |
Industrials | 17.1 |
Information Technology | 15.6 |
Consumer Discretionary | 11.1 |
Real Estate | 10.1 |
Health Care | 6.7 |
Utilities | 6.3 |
Materials | 3.6 |
Consumer Staples | 3.6 |
Communication Services | 3.4 |
Investment Companies | 1.9 |
Energy | 1.1 |
100.1 |
† Based on net assets.
See notes to financial statements.
12
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS(Unaudited)
Investment Companies | Value | Purchases($) | Sales ($) | Value | Net | Dividends/ |
Registered Investment Companies; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 2,606,737 | 28,430,653 | 30,514,745 | 522,645 | .4 | 19,430 |
Investment of Cash Collateral for Securities Loaned; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 3,675,174 | 19,821,359 | 23,496,533 | - | - | - |
Total | 6,281,911 | 48,252,012 | 54,011,278 | 522,645 | .4 | 19,430 |
See notes to financial statements.
13
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 148,439,197 |
| 127,692,813 |
| ||
Affiliated issuers |
| 522,645 |
| 522,645 |
| |
Receivable for investment securities sold |
| 1,571,476 |
| |||
Dividends and securities lending income receivable |
| 134,241 |
| |||
Receivable for shares of Beneficial Interest subscribed |
| 50,346 |
| |||
Prepaid expenses |
|
|
|
| 33,865 |
|
|
|
|
|
| 130,005,386 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 117,287 |
| |||
Payable for investment securities purchased |
| 1,664,312 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 47,873 |
| |||
Trustees’ fees and expenses payable |
| 967 |
| |||
Other accrued expenses |
|
|
|
| 56,892 |
|
|
|
|
|
| 1,887,331 |
|
Net Assets ($) |
|
| 128,118,055 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 162,518,216 |
|
Total distributable earnings (loss) |
|
|
|
| (34,400,161) |
|
Net Assets ($) |
|
| 128,118,055 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 17,189,640 | 943,364 | 80,845,581 | 29,139,470 |
|
Shares Outstanding | 1,302,733 | 73,530 | 6,093,090 | 2,181,510 |
|
Net Asset Value Per Share ($) | 13.20 | 12.83 | 13.27 | 13.36 |
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
|
14
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends: |
| |||||
Unaffiliated issuers |
|
| 1,674,251 |
| ||
Affiliated issuers |
|
| 19,430 |
| ||
Income from securities lending—Note 1(b) |
|
| 70,574 |
| ||
Interest |
|
| 5,874 |
| ||
Total Income |
|
| 1,770,129 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 741,031 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 82,545 |
| ||
Administration fee—Note 3(a) |
|
| 55,577 |
| ||
Professional fees |
|
| 50,262 |
| ||
Registration fees |
|
| 26,618 |
| ||
Prospectus and shareholders’ reports |
|
| 11,350 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 9,733 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 6,683 |
| ||
Custodian fees—Note 3(c) |
|
| 6,311 |
| ||
Distribution fees—Note 3(b) |
|
| 5,968 |
| ||
Loan commitment fees—Note 2 |
|
| 2,586 |
| ||
Interest expense—Note 2 |
|
| 161 |
| ||
Miscellaneous |
|
| 11,787 |
| ||
Total Expenses |
|
| 1,010,612 |
| ||
Investment Income—Net |
|
| 759,517 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | (8,620,491) |
| ||||
Net change in unrealized appreciation (depreciation) on investments | (44,217,164) |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (52,837,655) |
| ||
Net (Decrease) in Net Assets Resulting from Operations |
| (52,078,138) |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
15
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 759,517 |
|
|
| 1,491,600 |
| |
Net realized gain (loss) on investments |
| (8,620,491) |
|
|
| 13,691,071 |
| ||
Net change in unrealized appreciation |
| (44,217,164) |
|
|
| (29,845,902) |
| ||
Net Increase (Decrease) in Net Assets | (52,078,138) |
|
|
| (14,663,231) |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (2,022,089) |
|
|
| (3,661,314) |
| |
Class C |
|
| (129,047) |
|
|
| (271,667) |
| |
Class I |
|
| (9,644,441) |
|
|
| (23,751,385) |
| |
Class Y |
|
| (3,635,523) |
|
|
| (1,237) |
| |
Total Distributions |
|
| (15,431,100) |
|
|
| (27,685,603) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 641,951 |
|
|
| 830,555 |
| |
Class C |
|
| 43,129 |
|
|
| 84,950 |
| |
Class I |
|
| 8,324,006 |
|
|
| 14,340,621 |
| |
Class Y |
|
| 1,083,392 |
|
|
| 45,528,472 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 1,935,640 |
|
|
| 3,459,346 |
| |
Class C |
|
| 114,926 |
|
|
| 232,832 |
| |
Class I |
|
| 9,102,667 |
|
|
| 23,011,692 |
| |
Class Y |
|
| 3,634,782 |
|
|
| - |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (1,958,918) |
|
|
| (6,123,736) |
| |
Class C |
|
| (496,245) |
|
|
| (715,036) |
| |
Class I |
|
| (15,451,110) |
|
|
| (94,088,299) |
| |
Class Y |
|
| (5,394,570) |
|
|
| (1,176,704) |
| |
Increase (Decrease) in Net Assets | 1,579,650 |
|
|
| (14,615,307) |
| |||
Total Increase (Decrease) in Net Assets | (65,929,588) |
|
|
| (56,964,141) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 194,047,643 |
|
|
| 251,011,784 |
| |
End of Period |
|
| 128,118,055 |
|
|
| 194,047,643 |
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class Aa,b |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 34,205 |
|
|
| 39,781 |
| |
Shares issued for distributions reinvested |
|
| 95,967 |
|
|
| 196,889 |
| |
Shares redeemed |
|
| (103,919) |
|
|
| (309,095) |
| |
Net Increase (Decrease) in Shares Outstanding | 26,253 |
|
|
| (72,425) |
| |||
Class Ca,b |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 2,523 |
|
|
| 4,699 |
| |
Shares issued for distributions reinvested |
|
| 5,845 |
|
|
| 13,528 |
| |
Shares redeemed |
|
| (27,527) |
|
|
| (35,446) |
| |
Net Increase (Decrease) in Shares Outstanding | (19,159) |
|
|
| (17,219) |
| |||
Class Ia |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 486,380 |
|
|
| 680,938 |
| |
Shares issued for distributions reinvested |
|
| 449,292 |
|
|
| 1,304,518 |
| |
Shares redeemed |
|
| (821,513) |
|
|
| (4,746,055) |
| |
Net Increase (Decrease) in Shares Outstanding | 114,159 |
|
|
| (2,760,599) |
| |||
Class Ya |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 57,267 |
|
|
| 2,300,703 |
| |
Shares issued for distributions reinvested |
|
| 178,264 |
|
|
| - |
| |
Shares redeemed |
|
| (295,759) |
|
|
| (59,404) |
| |
Net Increase (Decrease) in Shares Outstanding | (60,228) |
|
|
| 2,241,299 |
| |||
|
|
|
|
|
|
|
|
|
|
aDuring the period ended March 31, 2020, 221 Class I shares representing $3,772 were exchanged for 215 Class C shares. During the period ended September 30, 2019, 2,242,448 Class I shares representing $44,089,411 were exchanged for 2,228,844 Class Y shares and 1,613 Class A shares representing $33,080 were exchanged for 1,605 Class I share | |||||||||
bDuring the period ended September 30, 2019, 1,502 Class C shares representing $33,597 were automaticaly converted to 1,474 Class A shares. | |||||||||
See notes to financial statements. |
17
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
Six Months Ended March 31, 2020 | Year Ended September 30, | ||||
Class A Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016a |
Per Share Data ($): | |||||
Net asset value, | 20.11 | 24.49 | 25.18 | 23.19 | 22.77 |
Investment Operations: | |||||
Investment income—netb | .05 | .10 | .04 | .05 | .02 |
Net realized and unrealized | (5.34) | (1.71) | 3.37 | 3.94 | .40 |
Total from Investment Operations | (5.29) | (1.61) | 3.41 | 3.99 | .42 |
Distributions: | |||||
Dividends from investment | (.10) | (0.03) | (.06) | (.09) | - |
Dividends from net realized | (1.52) | (2.74) | (4.04) | (1.91) | - |
Total Distributions | (1.62) | (2.77) | (4.10) | (2.00) | - |
Net asset value, end of period | 13.20 | 20.11 | 24.49 | 25.18 | 23.19 |
Total Return (%)c | (29.11)d | (5.05) | 15.08 | 17.58 | 1.84d |
Ratios/Supplemental Data (%): | |||||
Ratio of total expenses | 1.41e | 1.31 | 1.36 | 1.37 | 1.37e |
Ratio of net expenses | 1.41e | 1.31 | 1.36 | 1.37 | 1.37e |
Ratio of net investment income | .50e | .49 | .15 | .21 | .46e |
Portfolio Turnover Rate | 35.51d | 69.41 | 84.28 | 76.86 | 78.56 |
Net Assets, end of period | 17,190 | 25,664 | 33,037 | 231 | 10 |
a From August 1, 2016 (commencement of initial offering) to September 30, 2016.
b Based on average shares outstanding.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
See notes to financial statements.
18
Six Months Ended March 31, 2020 | Year Ended September 30, | ||||
Class C Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016a |
Per Share Data ($): | |||||
Net asset value, | 19.58 | 24.07 | 24.94 | 23.16 | 22.77 |
Investment Operations: | |||||
Investment (loss)—netb | (.04) | (.06) | (.15) | (.20) | (.01) |
Net realized and unrealized | (5.19) | (1.69) | 3.32 | 3.95 | .40 |
Total from Investment Operations | (5.23) | (1.75) | 3.17 | 3.75 | .39 |
Distributions: | |||||
Dividends from investment | - | - | - | (.06) | - |
Dividends from net realized | (1.52) | (2.74) | (4.04) | (1.91) | - |
Total Distributions | (1.52) | (2.74) | (4.04) | (1.97) | - |
Net asset value, end of period | 12.83 | 19.58 | 24.07 | 24.94 | 23.16 |
Total Return (%)c | (29.42)d | (5.76) | 14.11 | 16.49 | 1.71d |
Ratios/Supplemental Data (%): | |||||
Ratio of total expenses | 2.31e | 2.08 | 2.19 | 2.30 | 2.13e |
Ratio of net expenses | 2.31e | 2.08 | 2.19 | 2.30 | 2.13e |
Ratio of net investment (loss) | (.42)e | (.30) | (.67) | (.79) | (.30)e |
Portfolio Turnover Rate | 35.51d | 69.41 | 84.28 | 76.86 | 78.56 |
Net Assets, end of period | 943 | 1,815 | 2,646 | 27 | 10 |
a From August 1, 2016 (commencement of initial offering) to September 30, 2016.
b Based on average shares outstanding.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
See notes to financial statements.
19
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended March 31, 2020 | Year Ended September 30, | ||||||
Class I Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |
Per Share Data ($): | |||||||
Net asset value, | 20.23 | 24.64 | 25.27 | 23.20 | 21.95 | 28.21 | |
Investment Operations: | |||||||
Investment income—neta | .08 | .15 | .11 | .15 | .14 | .15 | |
Net realized and unrealized | (5.36) | (1.72) | 3.40 | 3.93 | 3.11 | (.51) | |
Total from Investment Operations | (5.28) | (1.57) | 3.51 | 4.08 | 3.25 | (.36) | |
Distributions: | |||||||
Dividends from investment | (.16) | (.10) | (.10) | (.10) | (.17) | (.13) | |
Dividends from net realized | (1.52) | (2.74) | (4.04) | (1.91) | (1.83) | (5.77) | |
Total Distributions | (1.68) | (2.84) | (4.14) | (2.01) | (2.00) | (5.90) | |
Net asset value, end of period | 13.27 | 20.23 | 24.64 | 25.27 | 23.20 | 21.95 | |
Total Return (%) | (28.98)b | (4.72) | 15.43 | 17.98 | 15.91 | (2.05) | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | 1.05c | 1.02 | 1.01 | 1.03 | 1.00 | .97 | |
Ratio of net expenses | 1.05c | 1.02 | 1.01 | 1.03 | 1.00 | .97 | |
Ratio of net investment income | .87c | .75 | .46 | .62 | .63 | .62 | |
Portfolio Turnover Rate | 35.51b | 69.41 | 84.28 | 76.86 | 78.56 | 76.23 | |
Net Assets, end of period ($ x 1,000) | 80,846 | 120,937 | 215,318 | 208,377 | 205,339 | 255,019 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
20
Six Months Ended March 31, 2020 | Year Ended September 30, | ||||
Class Y Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016a |
Per Share Data ($): | |||||
Net asset value, | 20.36 | 24.74 | 25.25 | 23.20 | 22.77 |
Investment Operations: | |||||
Investment income (loss)—netb | .09 | .23 | (.04) | .10 | .03 |
Net realized and unrealized | (5.40) | (1.79) | 3.57 | 3.97 | .40 |
Total from Investment Operations | (5.31) | (1.56) | 3.53 | 4.07 | .43 |
Distributions: | |||||
Dividends from investment | (.17) | (.08) | - | (.11) | - |
Dividends from net realized | (1.52) | (2.74) | (4.04) | (1.91) | - |
Total Distributions | (1.69) | (2.82) | (4.04) | (2.02) | - |
Net asset value, end of period | 13.36 | 20.36 | 24.74 | 25.25 | 23.20 |
Total Return (%) | (28.92)c | (4.67) | 15.49 | 17.93 | 1.89c |
Ratios/Supplemental Data (%): | |||||
Ratio of total expenses | .98d | 1.01 | .97 | 1.00 | 1.12d |
Ratio of net expenses | .98d | 1.00 | .95 | 1.00 | 1.12d |
Ratio of net investment income (loss) | .92d | 1.23 | (.14) | .42 | .72d |
Portfolio Turnover Rate | 35.51c | 69.41 | 84.28 | 76.86 | 78.56 |
Net Assets, end of period ($ x 1,000) | 29,139 | 45,631 | 11 | 7,427 | 10 |
a From August 1, 2016 (commencement of initial offering) to September 30, 2016.
b Based on average shares outstanding.
c Not annualized.
d Annualized.
See notes to financial statements.
21
NOTES TO FINANCIAL STATEMENTS(Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Small Cap Value Fund (the “fund”) is a separate diversified series of BNY Mellon Investment Funds I (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering seven series, including the fund. The fund’s investment objective is to seek long-term growth of capital. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
The Trust’s Board of Trustees (the “Board”) approved, effective December 31, 2019 (the “Effective Date”), the termination of the fund’s authorized Class T shares. Prior to the Effective Date, the fund did not offer such Class T shares for purchase.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C, Class I and Class Y. Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. 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 C shares automatically convert to Class A shares ten years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. 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
22
unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Trust 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 is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. 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 Trustenters 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.
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:
23
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
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 equity 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 American Depository Receipts and 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 accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as:
24
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 securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of March 31, 2020in valuing the fund’s investments:
Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total | |
Assets ($) | ||||
Investments in Securities:† | ||||
Equity Securities- Common Stocks | 125,789,799 | - | - | 125,789,799 |
Exchange-Traded Funds | 1,903,014 | - | - | 1,903,014 |
Investment Companies | 522,645 | - | - | 522,645 |
† See Statement of Investments for additional detailed categorizations, if any.
(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, 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 the Adviser, 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
25
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
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. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended March 31, 2020, The Bank of New York Mellon earned $13,535 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(d) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
(e) Dividends and distributions to shareholders: Dividends and distributions 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.
26
(f) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended March 31, 2020, 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 March 31, 2020, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2019 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 September 30, 2019 was as follows: ordinary income $3,236,138 and long-term capital gains $24,449,465. 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 long-term open-end funds managed by the Adviser in a $927 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $747 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $180 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. Prior to March 11, 2020, the Citibank Credit Facility was $1.030 billion with Tranche A available in an amount equal to $830 million and Tranche B available in an amount equal to $200 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit 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 March 31, 2020 was approximately $12,570 with a related weighted average annualized interest rate of 2.57%.
27
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
NOTE 3—Investment Advisory Fee, Administration Fee and Other Transactions with Affiliates:
(a)Pursuant to an investment advisory agreement with the Adviser, the investment advisory fee is computed at the annual rate of .80% of the value of the fund’s average daily net assets and is payable monthly. The Adviser has contractually agreed, from October 1, 2019 through January 31, 2021, to waive receipt of its fees and/or assume the direct expenses of Class Y shares, so that the annual fund operating expenses of Class Y shares (excluding taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed 1.00% of the value of Class Y shares average daily net assets. On or after January 31, 2021, the Adviser may terminate this expense limitation agreement at any time. There was no reduction in expenses, pursuant to the undertaking, during the period ended March 31, 2020.
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with the Adviser, whereby the Adviser performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate the Adviser for providing accounting and recordkeeping services, administration, compliance monitoring, regulatory and shareholder reporting, as well as related facilities, equipment and clerical help. The fee is based on the fund’s average daily net assets and computed at the following annual rates: .06% of the first $500 million, .04% of the next $500 million and .02% in excess of $1 billion.
In addition, after applying any expense limitations or fee waivers that reduce the fees paid to the Adviser for this service, the Adviser has contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both the Adviser’ costs in providing these services and a reasonable allocation of the costs incurred by the Adviser and its affiliates related to the support and oversight of these services. The fund also reimburses the Adviser for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration Agreement, the fund was charged $55,577 during the period ended March 31, 2020.
During the period ended March 31, 2020, the Distributor retained $223 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
28
period ended March 31, 2020, Class C shares were charged $5,968 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 March 31, 2020, Class A and Class C shares were charged $31,104and $1,989, respectively, pursuant to the Shareholder Services Plan.
Under its terms, the Distribution Plan and Shareholder Services Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of a majority of those Trustees who are not “interested persons” of the Trust and who have no direct or indirect financial interest in the operation of or in any agreement related to the Distribution Plan or Shareholder Services Plan.
The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees For financial reporting purposes, the fund includes net earnings credits, if any, as an expense offset in the Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statements of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, 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 March 31, 2020, the fund was charged $7,786 for transfer agency services. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are
29
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
determined based on net assets, geographic region and transaction activity. During the period ended March 31, 2020, the fund was charged $6,311 pursuant to the custody agreement.
During the period ended March 31, 2020, the fund was charged $6,683 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees of $93,243, administration fees of $6,993, Distribution Plan fees of $655, Shareholder Services Plan fees of $4,140, custodian fees of $6,000, Chief Compliance Officer fees of $3,329 and transfer agency fees of $2,927.
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds 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 March 31, 2020, amounted to $63,559,925 and $75,162,760, respectively.
At March 31, 2020, accumulated net unrealized depreciation on investments was $20,746,384, consisting of $10,915,128 gross unrealized appreciation and $31,661,512 gross unrealized depreciation.
At March 31, 2020, 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).
30
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 26-27, 2020, the Board considered the renewalof the fund’s Investment Advisory Agreement and Administration Agreement pursuant to which BNY Mellon Investment Adviser provides the fund with investment advisory services and administrative services (together, the “Agreement”). The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser. In considering the renewal of the Agreement, the Board considered several 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 it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s 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 the Adviser 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 the Adviser’s extensive administrative, accounting and compliance infrastructures. The Board also considered portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of small-cap core funds (the “Performance Group”) and with a broader group of all retail and institutional small-cap core funds (the “Performance Universe”), all for various periods ended December 31, 2019, and (2) the fund’s actual and contractual management fees and total expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of institutional small-cap core funds, excluding outliers (the “Expense Universe”), the information for
31
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS (Unaudited) (continued)
which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds. The Board discussed with representatives of the Adviser the results of the comparisons and considered that the fund’s total return performance was at or above the Performance Group and Performance Universe medians for all periods. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in seven of the ten calendar years shown.
The Board reviewed and considered the contractual management fee rate (which reflected the advisory and administration fees) payable by the fund to the Adviser in light of the nature, extent and quality of the management services provided by the Adviser. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was slightly higher than the Expense Group median contractual management fee, the fund’s actual management fee was higher than the Expense Group and Expense Universe median actual management fee and the fund’s total expenses were slightly higher than the Expense Group and Expense Universe median total expenses.
Representatives of the Adviser stated that the Adviser has contractually agreed, until January 31, 2021, to waive receipt of its fees and/or assume the direct expenses of the fund so that the direct expenses of Class Y shares (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed 1.00% of the fund’s average daily net assets.
Representatives of the Adviser reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by the Adviser that are in the same Lipper category as the fund and (2) paid to the Adviser, or the primary employer of the fund’s primary portfolio manager(s) that is affiliated with the Adviser, 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 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 of the fund’s management fee.
32
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement, considered in relation to the mix of services provided by the Adviser, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser from acting as investment adviser and took into consideration the soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by the Adviser are adequate and appropriate.
· The Board was satisfied with the fund’s performance.
· The Board concluded that the fee paid to the Adviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
33
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS (Unaudited) (continued)
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates, of the Adviser and the services provided to the fund by the Adviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreement, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreement for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreement.
34
NOTES
35
NOTES
36
NOTES
37
BNY Mellon Small Cap Value Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class A: RUDAX Class C: BOSCX Class I: STSVX Class Y: BOSYX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mailSend your request toinfo@bnymellon.com
InternetInformation can be viewed online or downloaded atwww.bnymellonim.com/us
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-PORT. The fund’s Forms N-PORT are available on the SEC’s website atwww.sec.gov.
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 atwww.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2020 BNY Mellon Securities Corporation |
BNY Mellon Small/Mid Cap Growth Fund
SEMIANNUAL REPORT March 31, 2020 |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.bnymellonim.com/us and sign up for eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
BNY Mellon Investment Adviser, Inc. | |
With Those of Other Funds | |
in Affiliated Issuers | |
the Fund’s Investment Advisory, | |
Administration and Sub-Investment | |
Advisory Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.
Dear Shareholder:
We are pleased to present this semiannual report for BNY Mellon Small/Mid Cap Growth Fund, covering the six-month period from October 1, 2019 through March 31, 2020. 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.
Stock markets performed well over the last several months of 2019. Accommodative policies from the U.S. Federal Reserve (the “Fed”), paired with healthy U.S. consumer spending, helped support valuations. Despite periodic investor concern regarding trade relations with China and global growth rates, the rally continued through the end of the calendar year, supported in part by a December announcement from President Trump that the first phase of a trade deal with China was in process. However, the positive outlook was short-lived, as concerns over the spread of COVID-19 roiled markets the first several months of 2020. As the virus spread across the globe, concerns about the economic effects of a widespread quarantine worked to depress equity valuations. Many indices, particularly in the U.S., reported historically low returns for the first quarter of 2020.
In fixed-income markets, interest rates were heavily influenced by changes in Fed policy and investor concern over COVID-19. The Fed cut the target overnight lending rate by 25 basis points in October 2019 in an effort to support the U.S. economy. Rates across much of the Treasury curve increased during the month of November, and the long end of the curve rose in December as investors anticipated improvements in global economic growth during the coming year. However, concerns regarding COVID-19 and the resulting economic impact caused yields throughout the intermediate- and long-dated portions of the curve to fall during January and February of 2020. In March, the Fed cut rates twice, resulting in an overnight lending target-rate of nearly zero at the end of the period.
We believe the near-term outlook for the U.S. will be challenging, as the country curbs the spread of COVID-19. However, we are confident that once the economic effects have been mitigated, the economy will rebound. As always, we will monitor relevant data for signs of change. We encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
April 15, 2020
2
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from October 1, 2019 through March 31, 2020, as provided by John R. Porter, Todd W. Wakefield, CFA, and Robert C. Zeuthen, CFA, of Mellon Investments Corporation, Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended March 31, 2020, BNY Mellon Small/Mid Cap Growth Fund’s Class A shares produced a total return of -2.37%, Class C shares returned -2.77%, Class I shares returned -2.32%, Class Y shares returned -2.22% and Class Z shares returned
-2.37.1 In comparison, the fund’s benchmark, the Russell 2500™ Growth Index (the “Index”), posted a total return of -15.10% for the same period.2
Small- and mid-cap growth stocks were affected by extreme market volatility during the second half of the period, which was caused in part by the spreading of COVID-19 and the resulting economic effects. Based on the Russell family of indices, mid-cap and small-cap stocks produced negative returns. The fund outperformed the Index, mainly due to successful security selections in the health care and information technology sectors.
The Fund’s Investment Approach
The fund seeks long-term growth of capital. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of small-cap and mid-cap U.S. companies (those with market capitalizations equal to or less than the total market capitalization of the largest company in the Index). We employ a growth-oriented investment style in managing the fund’s portfolio. This means we seek to identify those small-cap and mid-cap companies that are experiencing, or are expected to experience, rapid earnings or revenue growth. We focus on high-quality companies and individual stock selection, instead of trying to predict which industries or sectors will perform best, and select stocks by:
· Using fundamental research to identify and follow companies considered to have attractive characteristics, such as strong business and competitive positions, solid cash flows and balance sheets, high-quality management and high sustainable growth;
· Investing in a company when the portfolio managers’ research indicates that the company will experience accelerating revenues and expanding operating margins, which may lead to rising estimate trends and favorable earnings surprises.
The fund’s investment strategy may lead it to emphasize certain industries, such as technology, health care, business services and communications.
Central Bank Policy, Trade and Disease Influence Markets
Equity markets were affected by an array of geopolitical developments in late 2019, ranging from civil protests in Hong Kong to an impeachment inquiry against the U.S. president and the Brexit saga in the U.K. Continuing trade tensions between the U.S. and China remained an influencer of investor sentiment and equity market valuations early in the period. Alternating signs of progress and deterioration in the trade dispute occurred, although the year concluded with President Trump indicating that he would sign the first phase of a deal.
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
Investor optimism helped fuel a rally that pushed U.S. equity indices to new record highs in December 2019.
Central banks worked during the period to support economic growth. The U.S. Federal Reserve (the “Fed”) cut interest rates in October 2019 to support weak inflation and flagging growth. In December 2019, the Bank of Japan (the “BOJ”) announced a stimulus package worth 26 trillion yen to help alleviate potential economic setbacks from a typhoon and consumption tax increase. The People’s Bank of China and the European Central Bank also provided additional support to their respective jurisdictions during the six months. Despite these measures, volatility reentered equity markets in January, due to concerns over the COVID-19 outbreak. Although some indices hit new record highs in early February 2020, investor sentiment shifted later in the month, due to increasing virus cases in the U.S. A sell-off began that accelerated through late March, eliminating gains for many areas of the capital markets, and sending some equity indices into bear market territory. Asset valuations came under additional pressure from the Russia/Saudi Arabia oil conflict, which caused the price of oil to fall precipitously. The Fed cut rates twice in March 2020 in an effort to support the economy. Large numbers of people were laid off after several states ordered non-essential businesses closed. A landmark $2 trillion-dollar stimulus deal was signed the final Friday in March, in an effort to provide much needed cash to households and loans to small businesses.
In this environment, large-cap stocks generally outperformed their mid- and small-cap counterparts.
Security Selections Drive Fund Performance
The fund’s strong outperformance was driven by security selections within the health care and information technology sectors. Within health care, telemedicine company Teladoc Health posted strong absolute and relative performance. Social distancing guidelines and a general increase in disease during the period led to an increase in demand for the company’s services. Health care equipment and services company DexCom also contributed to returns, as did several biotechnology companies such as Acceleron Pharma and Sarepta Therapeutics. IT services and software companies were among the strongest performers within the information technology sector. IT services company Shopify, a provider of website services and payment systems for e-commerce sites, performed well on strong trends in online shopping. Software company DocuSign, which specializes in document digitalization, was among the leading contributors to portfolio performance. Everbridge, a disaster communications software company, also outperformed the broader market and bolstered portfolio results. Demand for the company’s products, particularly among schools and public organizations, increased during the period. Communications equipment company Lumentum Holdings was also among the top contributors. Elsewhere in the markets, positioning within the industrials sector was helpful. A relative underweight and successful stock selection worked to bolster results. Within the consumer discretionary sector, companies such as Lululemon Athletica and Peleton Interactive were standout performers.
Conversely, positioning within the energy and materials sectors weighed most heavily on returns. An overweight to the energy sector, which performed particularly poorly during the six months, provided a headwind to results. Within materials, mining company Constellium was among the top individual detractors from performance for the period. The company
4
experienced higher-than- anticipated costs during the period due to production inefficiencies. An overweight to the construction materials industry also weighed on performance.
Finding Opportunities Amid Volatility
It is our opinion that there are many uncertainties in the world right now. We think the downturn witnessed in March may have been driven more by uncertainty than anything else, but it is difficult to project how the widespread job losses and economic slowdown associated with the COVID-19 will affect corporate fundamentals in the future. We believe the economy may take a while to recover fully. There may be permanent changes in the way businesses are run. Our team is paying very close attention to the nature of every business in which we are invested, and how they may be affected by potential paradigm shifts in the way the U.S. economy functions.
We are encouraged by the stimulus efforts of governments and the capitalization levels of banks. In a difficult time, we believe that active management is more important than ever and will continue to utilize market volatility as an opportunity to purchase the stocks of fundamentally strong companies, which we think are well positioned to function in the new economy, at more attractive prices.
April 15, 2020
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. — The Russell 2500™ Growth Index measures the performance of the small- to mid-cap growth segment of the U.S. equity universe. It includes those Russell 2500 companies with higher growth earning potential as defined by Russell’s leading style methodology. The Russell 2500™ Growth Index is constructed to provide a comprehensive and unbiased barometer of the small- to mid-cap growth market. The index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small- to mid-cap opportunity set, and that the represented companies continue to reflect growth characteristics. Investors cannot invest directly in any index.
Equities 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.
Small and midsized companies carry additional risks because their earnings and revenues tend to be less predictable, and their share prices more volatile, than those of larger, more established companies.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund's exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
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 BNY Mellon Small/Mid Cap Growth Fund from October 1, 2019 to March 31, 2020. 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 |
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Assume actual returns for the six months ended March 31, 2020 |
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| Class A | Class C | Class I | Class Y | Class Z |
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Expense paid per $1,000† | $4.79 | $8.58 | $3.66 | $3.21 | $4.45 |
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Ending value (after expenses) | $976.30 | $972.30 | $976.80 | $977.80 | $976.30 |
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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 |
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Assuming a hypothetical 5% annualized return for the six months ended March 31, 2020 |
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| Class A | Class C | Class I | Class Y | Class Z |
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Expense paid per $1,000† | $4.90 | $8.77 | $3.74 | $3.29 | $4.55 |
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Ending value (after expenses) | $1,020.15 | $1,016.30 | $1,021.30 | $1,021.75 | $1,020.50 |
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†Expenses are equal to the fund’s annualized expense ratio of .97% for Class A, 1.74% for Class C, .74% for Class I, .65% for Class Y and .90% for Class Z, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS
March 31, 2020 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 97.1% | |||||||
Banks - .8% | |||||||
First Republic Bank | 78,521 | 6,460,708 | |||||
SVB Financial Group | 56,437 | a | 8,526,502 | ||||
14,987,210 | |||||||
Capital Goods - 6.8% | |||||||
Allegion | 84,203 | b | 7,748,360 | ||||
Colfax | 308,702 | a,b | 6,112,300 | ||||
Curtiss-Wright | 174,169 | 16,094,957 | |||||
Graco | 312,974 | 15,251,223 | |||||
Lincoln Electric Holdings | 146,509 | b | 10,109,121 | ||||
Masco | 294,016 | 10,164,133 | |||||
Mercury Systems | 551,950 | a | 39,376,113 | ||||
Rexnord | 423,774 | 9,606,957 | |||||
SiteOne Landscape Supply | 162,557 | a,b | 11,967,446 | ||||
126,430,610 | |||||||
Commercial & Professional Services - 3.0% | |||||||
Clarivate Analytics | 872,194 | a,b | 18,098,025 | ||||
CoStar Group | 48,014 | a | 28,194,301 | ||||
FTI Consulting | 70,444 | a | 8,437,078 | ||||
54,729,404 | |||||||
Consumer Durables & Apparel - 4.1% | |||||||
Lululemon Athletica | 195,101 | a | 36,981,395 | ||||
Peloton Interactive, Cl. A | 1,469,641 | a | 39,018,969 | ||||
76,000,364 | |||||||
Consumer Services - 2.2% | |||||||
OneSpaWorld Holdings | 525,703 | b | 2,134,354 | ||||
Planet Fitness, Cl. A | 689,615 | a,b | 33,584,250 | ||||
Wynn Resorts | 94,008 | b | 5,658,342 | ||||
41,376,946 | |||||||
Diversified Financials - 1.9% | |||||||
LPL Financial Holdings | 278,243 | 15,144,766 | |||||
Morningstar | 98,875 | 11,494,219 | |||||
Tradeweb Markets, Cl. A | 220,823 | 9,283,399 | |||||
35,922,384 | |||||||
Energy - .3% | |||||||
Cactus, Cl. A | 506,668 | 5,877,349 | |||||
Food & Staples Retailing - 1.1% | |||||||
Grocery Outlet Holding | 566,788 | a,b | 19,463,500 | ||||
Health Care Equipment & Services - 15.5% | |||||||
1Life Healthcare | 1,335,349 | a,b | 24,236,584 | ||||
ABIOMED | 170,342 | a | 24,726,845 | ||||
Align Technology | 187,166 | a | 32,557,526 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 97.1% (continued) | |||||||
Health Care Equipment & Services - 15.5% (continued) | |||||||
DexCom | 329,215 | a | 88,647,723 | ||||
Insulet | 166,384 | a | 27,566,501 | ||||
Nevro | 123,752 | a,b | 12,372,725 | ||||
Teladoc Health | 442,477 | a,b | 68,588,360 | ||||
Teleflex | 28,739 | 8,416,504 | |||||
287,112,768 | |||||||
Information Technology Services - 11.6% | |||||||
Black Knight | 415,875 | a,b | 24,145,702 | ||||
CACI International, Cl. A | 164,428 | a | 34,718,972 | ||||
Euronet Worldwide | 140,615 | a | 12,053,518 | ||||
Shopify, Cl. A | 140,551 | a | 58,599,928 | ||||
Square, Cl. A | 634,754 | a | 33,248,414 | ||||
Twilio, Cl. A | 582,300 | a,b | 52,110,027 | ||||
214,876,561 | |||||||
Insurance - .5% | |||||||
Kinsale Captial Group | 89,353 | b | 9,340,069 | ||||
Materials - 1.9% | |||||||
AptarGroup | 144,455 | 14,379,051 | |||||
Constellium | 714,377 | a | 3,721,904 | ||||
Summit Materials, Cl. A | 1,148,202 | a,b | 17,223,030 | ||||
35,323,985 | |||||||
Media & Entertainment - 1.5% | |||||||
Liberty Media Corp-Liberty Formula One, Cl. C | 481,411 | a | 13,108,822 | ||||
Live Nation Entertainment | 310,567 | a,b | 14,118,376 | ||||
27,227,198 | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 12.2% | |||||||
10X Genomics, CI. A | 293,037 | a,b | 18,262,066 | ||||
Acceleron Pharma | 108,328 | a,b | 9,735,437 | ||||
Alector | 144,917 | a | 3,496,847 | ||||
Amicus Therapeutics | 762,653 | a,b | 7,046,914 | ||||
Arena Pharmaceuticals | 144,107 | a | 6,052,494 | ||||
Ascendis Pharma, ADR | 90,115 | a,b | 10,147,850 | ||||
Biohaven Pharmaceutical Holding | 338,896 | a,b | 11,532,631 | ||||
Blueprint Medicines | 83,135 | a | 4,861,735 | ||||
CRISPR Therapeutics | 122,570 | a,b | 5,198,194 | ||||
FibroGen | 504,167 | a | 17,519,803 | ||||
GW Pharmaceuticals, ADR | 152,464 | a,b | 13,351,272 | ||||
Iovance Biotherapeutics | 194,081 | a,b | 5,809,815 | ||||
Natera | 246,345 | a | 7,355,862 | ||||
Neurocrine Biosciences | 182,200 | a,b | 15,769,410 | ||||
Sarepta Therapeutics | 311,667 | a,b | 30,487,266 | ||||
Twist Bioscience | 559,095 | a | 17,097,125 |
8
Description | Shares | Value ($) | |||||
Common Stocks - 97.1% (continued) | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 12.2% (continued) | |||||||
Ultragenyx Pharmaceutical | 191,376 | a,b | 8,502,836 | ||||
uniQure | 249,128 | a,b | 11,821,124 | ||||
Veracyte | 296,992 | a,b | 7,219,876 | ||||
Voyager Therapeutics | 532,374 | a | 4,871,222 | ||||
Zogenix | 387,172 | a,b | 9,574,764 | ||||
225,714,543 | |||||||
Real Estate - .9% | |||||||
Americold Realty Trust | 479,475 | c | 16,321,329 | ||||
Retailing - 4.1% | |||||||
Etsy | 304,362 | a,b | 11,699,675 | ||||
National Vision Holdings | 1,582,551 | a | 30,733,140 | ||||
Ollie's Bargain Outlet Holdings | 706,449 | a,b | 32,736,847 | ||||
75,169,662 | |||||||
Semiconductors & Semiconductor Equipment - 1.8% | |||||||
Power Integrations | 221,916 | 19,601,840 | |||||
Semtech | 378,113 | a | 14,179,237 | ||||
33,781,077 | |||||||
Software & Services - 18.4% | |||||||
DocuSign | 560,200 | a | 51,762,480 | ||||
Everbridge | 301,944 | a,b | 32,114,764 | ||||
HubSpot | 313,620 | a | 41,771,048 | ||||
Medallia | 1,038,660 | a,b | 20,814,746 | ||||
Proofpoint | 285,945 | a | 29,335,098 | ||||
Q2 Holdings | 203,130 | a,b | 11,996,858 | ||||
Rapid7 | 856,726 | a,b | 37,121,938 | ||||
Slack Technologies, Cl. A | 1,215,808 | a,b | 32,632,287 | ||||
Splunk | 326,141 | a,b | 41,168,778 | ||||
SS&C Technologies Holdings | 441,282 | 19,336,977 | |||||
Zendesk | 361,551 | a,b | 23,142,879 | ||||
341,197,853 | |||||||
Technology Hardware & Equipment - 5.0% | |||||||
Cognex | 187,151 | 7,901,515 | |||||
FLIR Systems | 963,176 | 30,715,683 | |||||
Littelfuse | 70,802 | 9,446,403 | |||||
Lumentum Holdings | 306,565 | a,b | 22,593,840 | ||||
nLight | 565,596 | a,b | 5,933,102 | ||||
Trimble | 236,590 | a | 7,530,660 | ||||
Zebra Technologies, Cl. A | 51,127 | a | 9,386,917 | ||||
93,508,120 | |||||||
Telecommunication Services - 2.5% | |||||||
Bandwidth, Cl. A | 697,283 | a,b | 46,920,173 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 97.1% (continued) | |||||||
Transportation - 1.0% | |||||||
Knight-Swift Transportation Holdings | 582,789 | b | 19,115,479 | ||||
Total Common Stocks(cost $1,420,878,457) | 1,800,396,584 | ||||||
Exchange-Traded Funds - 1.7% | |||||||
Registered Investment Companies - 1.7% | |||||||
iShares Russell 2000 Growth ETF | 198,419 | b | 31,383,933 | ||||
1-Day | |||||||
Investment Companies - 1.1% | |||||||
Registered Investment Companies - 1.1% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 0.40 | 20,987,068 | d | 20,987,068 | |||
Investment of Cash Collateral for Securities Loaned - 1.8% | |||||||
Registered Investment Companies - 1.8% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 0.40 | 32,996,496 | d | 32,996,496 | |||
Total Investments(cost $1,503,569,877) | 101.7% | 1,885,764,081 | |||||
Liabilities, Less Cash and Receivables | (1.7%) | (31,059,628) | |||||
Net Assets | 100.0% | 1,854,704,453 |
ADR—American Depository Receipt
ETF—Exchange-Traded Fund
a Non-income producing security.
b Security, or portion thereof, on loan. At March 31, 2020, the value of the fund’s securities on loan was $503,375,046 and the value of the collateral was $526,412,594, consisting of cash collateral of $32,996,496 and U.S. Government & Agency securities valued at $493,416,098.
c Investment in real estate investment trust within the United States.
d Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
10
Portfolio Summary (Unaudited)† | Value (%) |
Information Technology | 36.8 |
Health Care | 27.7 |
Industrials | 10.8 |
Consumer Discretionary | 10.4 |
Investment Companies | 4.6 |
Communication Services | 4.0 |
Financials | 3.2 |
Materials | 1.9 |
Consumer Staples | 1.1 |
Real Estate | .9 |
Energy | .3 |
101.7 |
† Based on net assets.
See notes to financial statements.
11
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS(Unaudited)
Investment Companies | Value | Purchases($) | Sales ($) | Value | Net | Dividends/ |
Registered Investment | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 6,268,871 | 289,921,602 | 275,203,405 | 20,987,068 | 1.1 | 107,823 |
Investment | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 122,367,304 | 472,916,489 | 562,287,297 | 32,996,496 | 1.8 | - |
Total | 128,636,175 | 762,838,091 | 837,490,702 | 53,983,564 | 2.9 | 107,823 |
See notes to financial statements.
12
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 1,449,586,313 |
| 1,831,780,517 |
| ||
Affiliated issuers |
| 53,983,564 |
| 53,983,564 |
| |
Receivable for investment securities sold |
| 15,372,361 |
| |||
Receivable for shares of Beneficial Interest subscribed |
| 4,757,385 |
| |||
Dividends and securities lending income receivable |
| 289,797 |
| |||
Prepaid expenses |
|
|
|
| 117,142 |
|
|
|
|
|
| 1,906,300,766 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 1,126,590 |
| |||
Liability for securities on loan—Note 1(b) |
| 32,996,496 |
| |||
Payable for investment securities purchased |
| 15,436,199 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 1,753,480 |
| |||
Trustees’ fees and expenses payable |
| 11,211 |
| |||
Interest payable—Note 2 |
| 414 |
| |||
Other accrued expenses |
|
|
|
| 271,923 |
|
|
|
|
|
| 51,596,313 |
|
Net Assets ($) |
|
| 1,854,704,453 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 1,413,019,785 |
|
Total distributable earnings (loss) |
|
|
|
| 441,684,668 |
|
Net Assets ($) |
|
| 1,854,704,453 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y | Class Z |
|
Net Assets ($) | 293,726,524 | 51,929,359 | 1,203,930,582 | 202,884,887 | 102,233,101 |
|
Shares Outstanding | 14,275,507 | 2,904,369 | 56,168,776 | 9,394,627 | 4,777,159 |
|
Net Asset Value Per Share ($) | 20.58 | 17.88 | 21.43 | 21.60 | 21.40 |
|
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
|
|
13
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends: |
| |||||
Unaffiliated issuers |
|
| 2,736,955 |
| ||
Affiliated issuers |
|
| 107,823 |
| ||
Income from securities lending—Note 1(b) |
|
| 1,947,672 |
| ||
Interest |
|
| 56,451 |
| ||
Total Income |
|
| 4,848,901 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 6,406,805 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 1,355,630 |
| ||
Distribution fees—Note 3(b) |
|
| 350,133 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 101,589 |
| ||
Administration fee—Note 3(a) |
|
| 101,050 |
| ||
Registration fees |
|
| 61,869 |
| ||
Prospectus and shareholders’ reports |
|
| 55,775 |
| ||
Professional fees |
|
| 51,721 |
| ||
Loan commitment fees—Note 2 |
|
| 28,447 |
| ||
Custodian fees—Note 3(c) |
|
| 18,514 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 6,683 |
| ||
Interest expense—Note 2 |
|
| 3,286 |
| ||
Miscellaneous |
|
| 60,125 |
| ||
Total Expenses |
|
| 8,601,627 |
| ||
Investment (Loss)—Net |
|
| (3,752,726) |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 122,777,622 |
| ||||
Net change in unrealized appreciation (depreciation) on investments | (158,447,253) |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (35,669,631) |
| ||
Net (Decrease) in Net Assets Resulting from Operations |
| (39,422,357) |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
14
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment (loss)—net |
|
| (3,752,726) |
|
|
| (7,947,800) |
| |
Net realized gain (loss) on investments |
| 122,777,622 |
|
|
| (50,863,861) |
| ||
Net change in unrealized appreciation |
| (158,447,253) |
|
|
| (33,652,356) |
| ||
Net Increase (Decrease) in Net Assets | (39,422,357) |
|
|
| (92,464,017) |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| - |
|
|
| (22,139,233) |
| |
Class C |
|
| - |
|
|
| (4,757,737) |
| |
Class I |
|
| - |
|
|
| (79,415,710) |
| |
Class Y |
|
| - |
|
|
| (14,023,109) |
| |
Class Z |
|
| - |
|
|
| (7,752,625) |
| |
Total Distributions |
|
| - |
|
|
| (128,088,414) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 28,915,320 |
|
|
| 73,739,038 |
| |
Class C |
|
| 5,466,765 |
|
|
| 16,516,962 |
| |
Class I |
|
| 193,602,367 |
|
|
| 483,485,726 |
| |
Class Y |
|
| 22,586,234 |
|
|
| 38,561,552 |
| |
Class Z |
|
| 507,425 |
|
|
| 1,475,412 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| - |
|
|
| 20,879,228 |
| |
Class C |
|
| - |
|
|
| 4,721,634 |
| |
Class I |
|
| - |
|
|
| 78,772,622 |
| |
Class Y |
|
| - |
|
|
| 14,023,109 |
| |
Class Z |
|
| - |
|
|
| 7,215,382 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (57,748,257) |
|
|
| (65,764,679) |
| |
Class C |
|
| (10,829,161) |
|
|
| (15,906,152) |
| |
Class I |
|
| (257,849,950) |
|
|
| (342,315,449) |
| |
Class Y |
|
| (29,198,603) |
|
|
| (35,933,057) |
| |
Class Z |
|
| (4,920,449) |
|
|
| (9,475,697) |
| |
Increase (Decrease) in Net Assets | (109,468,309) |
|
|
| 269,995,631 |
| |||
Total Increase (Decrease) in Net Assets | (148,890,666) |
|
|
| 49,443,200 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 2,003,595,119 |
|
|
| 1,954,151,919 |
| |
End of Period |
|
| 1,854,704,453 |
|
|
| 2,003,595,119 |
|
15
STATEMENT OF CHANGES IN NET ASSETS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class Aa,b |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 1,227,391 |
|
|
| 3,520,523 |
| |
Shares issued for distributions reinvested |
|
| - |
|
|
| 1,057,717 |
| |
Shares redeemed |
|
| (2,538,051) |
|
|
| (3,151,375) |
| |
Net Increase (Decrease) in Shares Outstanding | (1,310,660) |
|
|
| 1,426,865 |
| |||
Class Ca,b |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 270,487 |
|
|
| 887,296 |
| |
Shares issued for distributions reinvested |
|
| - |
|
|
| 272,461 |
| |
Shares redeemed |
|
| (551,000) |
|
|
| (888,663) |
| |
Net Increase (Decrease) in Shares Outstanding | (280,513) |
|
|
| 271,094 |
| |||
Class Ia |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 8,270,456 |
|
|
| 22,461,433 |
| |
Shares issued for distributions reinvested |
|
| - |
|
|
| 3,842,674 |
| |
Shares redeemed |
|
| (11,113,146) |
|
|
| (15,896,416) |
| |
Net Increase (Decrease) in Shares Outstanding | (2,842,690) |
|
|
| 10,407,691 |
| |||
Class Y |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 956,635 |
|
|
| 1,757,531 |
| |
Shares issued for distributions reinvested |
|
| - |
|
|
| 679,744 |
| |
Shares redeemed |
|
| (1,211,860) |
|
|
| (1,632,342) |
| |
Net Increase (Decrease) in Shares Outstanding | (255,225) |
|
|
| 804,933 |
| |||
Class Z |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 21,808 |
|
|
| 66,507 |
| |
Shares issued for distributions reinvested |
|
| - |
|
|
| 352,141 |
| |
Shares redeemed |
|
| (204,932) |
|
|
| (431,190) |
| |
Net Increase (Decrease) in Shares Outstanding | (183,124) |
|
|
| (12,542) |
| |||
|
|
|
|
|
|
|
|
|
|
aDuring the period ended March 31, 2019, 144 Class A shares representing $3,288 were exchanged for 139 Class I shares and 366 Class C shares representing $8,292 were exchanged for 306 Class I shares. During the period ended September 30, 2019, 645 Class A shares representing $14,199 were exchanged for 621 Class I shares. | |||||||||
bDuring the period ended March 31, 2020, 181 Class C shares representing $3,817 were automatically converted to 158 Class A shares and during the period ended September 30, 2019, 1,772 Class C shares representing $33,661 were automatically converted to 1,560 Class A shares. | |||||||||
See notes to financial statements. |
16
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||
March 31, 2020 | Year Ended September 30, | |||||||
Class A Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||
Per Share Data ($): | ||||||||
Net asset value, beginning of period | 21.08 | 24.00 | 19.87 | 16.66 | 15.83 | 17.65 | ||
Investment Operations: | ||||||||
Investment (loss)—neta | (.06) | (.12) | (.11) | (.04) | (.06) | (.07) | ||
Net realized and unrealized | (.44) | (1.23) | 6.05 | 3.63 | 1.92 | .06 | ||
Total from Investment Operations | (.50) | (1.35) | 5.94 | 3.59 | 1.86 | (.01) | ||
Distributions: | ||||||||
Dividends from net realized | - | (1.57) | (1.81) | (.38) | (1.03) | (1.81) | ||
Net asset value, end of period | 20.58 | 21.08 | 24.00 | 19.87 | 16.66 | 15.83 | ||
Total Return (%)b | (2.37)c | (5.17) | 32.33 | 21.95 | 12.11 | (.42) | ||
Ratios/Supplemental Data (%): | ||||||||
Ratio of total expenses | .97d | .98 | 1.00 | 1.04 | 1.04 | 1.03 | ||
Ratio of net expenses | .97d | .98 | 1.00 | 1.03 | 1.04 | 1.03 | ||
Ratio of net investment (loss) | (.52)d | (.58) | (.53) | (.20) | (.41) | (.42) | ||
Portfolio Turnover Rate | 31.11c | 49.35 | 56.70 | 67.52 | 120.54 | 144.39 | ||
Net Assets, | 293,727 | 328,595 | 339,848 | 225,374 | 222,978 | 219,185 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
17
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||
March 31, 2020 | Year Ended September 30, | ||||||
Class C Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 18.39 | 21.31 | 17.96 | 15.20 | 14.64 | 16.58 | |
Investment Operations: | |||||||
Investment (loss)—neta | (.13) | (.25) | (.24) | (.16) | (.17) | (.20) | |
Net realized and unrealized | (.38) | (1.10) | 5.40 | 3.30 | 1.76 | .07 | |
Total from Investment Operations | (.51) | (1.35) | 5.16 | 3.14 | 1.59 | (.13) | |
Distributions: | |||||||
Dividends from net realized | - | (1.57) | (1.81) | (.38) | (1.03) | (1.81) | |
Net asset value, end of period | 17.88 | 18.39 | 21.31 | 17.96 | 15.20 | 14.64 | |
Total Return (%)b | (2.77)c | (5.88) | 31.34 | 21.00 | 11.28 | (1.18) | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | 1.74d | 1.74 | 1.73 | 1.79 | 1.83 | 1.81 | |
Ratio of net expenses | 1.74d | 1.74 | 1.73 | 1.79 | 1.83 | 1.81 | |
Ratio of net investment (loss) | (1.29)d | (1.34) | (1.27) | (.97) | (1.19) | (1.21) | |
Portfolio Turnover Rate | 31.11c | 49.35 | 56.70 | 67.52 | 120.54 | 144.39 | |
Net Assets, end of period ($ x 1,000) | 51,929 | 58,574 | 62,107 | 37,725 | 33,779 | 34,554 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
18
Six Months Ended | |||||||
March 31, 2020 | Year Ended September 30, | ||||||
Class I Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |
Per Share Data ($): | |||||||
Net asset value, | 21.94 | 24.85 | 20.46 | 17.09 | 16.18 | 17.96 | |
Investment Operations: | |||||||
Investment income (loss)—neta | (.03) | (.08) | (.07) | .02 | (.03) | (.03) | |
Net realized and unrealized | (.48) | (1.26) | 6.27 | 3.73 | 1.97 | .06 | |
Total from Investment Operations | (.51) | (1.34) | 6.20 | 3.75 | 1.94 | .03 | |
Distributions: | |||||||
Dividends from net realized | - | (1.57) | (1.81) | (.38) | (1.03) | (1.81) | |
Net asset value, end of period | 21.43 | 21.94 | 24.85 | 20.46 | 17.09 | 16.18 | |
Total Return (%) | (2.32)b | (4.95) | 32.69 | 22.34 | 12.36 | (.17) | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | .74c | .74 | .74 | .75 | .79 | .79 | |
Ratio of net expenses | .74c | .74 | .74 | .75 | .79 | .79 | |
Ratio of net investment income | (.29)c | (.35) | (.29) | .10 | (.16) | (.19) | |
Portfolio Turnover Rate | 31.11b | 49.35 | 56.70 | 67.52 | 120.54 | 144.39 | |
Net Assets, | 1,203,931 | 1,294,518 | 1,207,703 | 497,604 | 511,768 | 512,830 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
19
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||
March 31, 2020 | Year Ended September 30, | ||||||
Class Y Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |
Per Share Data ($): | |||||||
Net asset value, | 22.09 | 24.99 | 20.55 | 17.15 | 16.21 | 17.97 | |
Investment Operations: | |||||||
Investment income (loss)—neta | (.02) | (.06) | (.03) | .01 | (.00)b | (.01) | |
Net realized and unrealized | (.47) | (1.27) | 6.28 | 3.77 | 1.97 | .06 | |
Total from Investment Operations | (.49) | (1.33) | 6.25 | 3.78 | 1.97 | .05 | |
Distributions: | |||||||
Dividends from net realized | - | (1.57) | (1.81) | (.38) | (1.03) | (1.81) | |
Net asset value, end of period | 21.60 | 22.09 | 24.99 | 20.55 | 17.15 | 16.21 | |
Total Return (%) | (2.22)c | (4.87) | 32.79 | 22.44 | 12.53 | (.05) | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | .65d | .64 | .65 | .68 | .68 | .68 | |
Ratio of net expenses | .65d | .64 | .65 | .68 | .68 | .68 | |
Ratio of net investment income | (.19)d | (.25) | (.16) | .05 | (.03) | (.07) | |
Portfolio Turnover Rate | 31.11c | 49.35 | 56.70 | 67.52 | 120.54 | 144.39 | |
Net Assets, | 202,885 | 213,183 | 221,008 | 420,380 | 117,953 | 104,961 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Not annualized.
d Annualized.
See notes to financial statements.
20
Six Months Ended | ||||||||
March 31, 2020 | Year Ended September 30, | |||||||
Class Z Shares | (Unaudited) | 2019 | 2018a | |||||
Per Share Data ($): | ||||||||
Net asset value, beginning of period | 21.92 | 24.83 | 20.86 | |||||
Investment Operations: | ||||||||
Investment (loss)—netb | (.05) | (.08) | (.07) | |||||
Net realized and unrealized | (.47) | (1.26) | 4.04 | |||||
Total from Investment Operations | (.52) | (1.34) | 3.97 | |||||
Distributions: | ||||||||
Dividends from net realized | - | (1.57) | - | |||||
Net asset value, end of period | 21.40 | 21.92 | 24.83 | |||||
Total Return (%) | (2.37)c | (4.95) | 19.03c | |||||
Ratios/Supplemental Data (%): | ||||||||
Ratio of total expenses | .90d | .76 | .84d | |||||
Ratio of net expenses | .90d | .76 | .84d | |||||
Ratio of net investment (loss) | (.44)d | (.36) | (.42)d | |||||
Portfolio Turnover Rate | 31.11c | 49.35 | 56.70 | |||||
Net Assets, end of period ($ x 1,000) | 102,233 | 108,725 | 123,486 |
a From January 19, 2018, (commencement of initial offering) to September 30, 2018.
b Based on average shares outstanding.
c Not annualized.
d Annualized.
See notes to financial statements.
21
NOTES TO FINANCIAL STATEMENTS(Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Small/Mid Cap Growth Fund (the “fund”) is a separate non-diversified series of BNY Mellon Investment Funds I (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering seven series, including the fund. The fund’s investment objective is to seek long-term growth of capital. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Mellon Investments Corporation (the “Sub-Adviser”), a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser, serves as the fund’s sub-investment adviser.
The Trust’s Board of Trustees (the “Board”) approved, effective December 31, 2019 (the “Effective Date”), the termination of the fund’s authorized Class T shares. Prior to the Effective Date, the fund did not offer such Class T shares for purchase.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C, Class I, Class Y and Class Z. Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. 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 C shares automatically convert to Class A shares ten years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. 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
22
unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Trust 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 is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. 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 Trustenters 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.
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:
23
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
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 equity 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 American Depository Receipts and 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 accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as:
24
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 securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of March 31, 2020in valuing the fund’s investments:
Level 1 – Unadjusted | Level 2 –Other Significant Observable | Level 3 –Significant Unobservable Inputs | Total | ||
Assets ($) | |||||
Investments in Securities: † | |||||
Equity Securities - Common Stocks | 1,800,396,584 | - | - | 1,800,396,584 | |
Exchange-Traded Funds | 31,383,933 | - | - | 31,383,933 | |
Investment Companies | 53,983,564 | - | - | 53,983,564 |
† See Statement of Investments for additional detailed categorizations, if any.
(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, 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 the Adviser, 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
25
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
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. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended March 31, 2020, The Bank of New York Mellon earned $444,120 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
(c) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(e) Dividends and distributions to shareholders: Dividends and distributions 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.
26
(f) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended March 31, 2020, 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 March 31, 2020, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
The fund has an unused capital loss carryover of $46,949,088 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to September 30, 2019. These short-term capital losses can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended September 30, 2019 was as follows: ordinary income $23,925,294 and long-term capital gains $104,163,120. 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 long-term open-end funds managed by the Adviser in a $927 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $747 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $180 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. Prior to March 11, 2020, the Citibank Credit Facility was $1.030 billion with Tranche A available in an
27
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
amount equal to $830 million and Tranche B available in an amount equal to $200 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit 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 March 31, 2020 was approximately $240,980 with a related weighted average annualized interest rate of 2.73%.
NOTE 3—Investment Advisory Fee, Sub-Investment Advisory Fee, Administration Fee and Other Transactions with Affiliates:
(a)Pursuant to an investment advisory agreement with the Adviser, the investment advisory fee is computed at the annual rate of .60% of the value of the fund’s average daily net assets and is payable monthly.
Pursuant to a sub-investment advisory agreement between the Adviser and the Sub-Adviser, the Sub-Adviser serves as the fund’s sub-investment adviser responsible for the day-to-day management of the fund’s portfolio. The Adviser pays the Sub-Adviser a monthly fee at an annual percentage of the value of the fund’s average daily net assets. The Adviser 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 the Adviser, 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 the Adviser or are wholly-owned subsidiaries (as defined under the Act) of the Adviser’s ultimate parent company, BNY Mellon, without obtaining shareholder approval. The Order also allows the fund to disclose the sub-investment advisory fee paid by the Adviser 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 the Adviser 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 the Adviser. The Adviser 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.
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with the Adviser, whereby the Adviser
28
performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate the Adviser for providing accounting and recordkeeping services, administration, compliance monitoring, regulatory and shareholder reporting, as well as related facilities, equipment and clerical help. The fee is based on the fund’s average daily net assets and computed at the following annual rates: .06% of the first $500 million, .04% of the next $500 million and .02% in excess of $1 billion.
In addition, after applying any expense limitations or fee waivers that reduce the fees paid to the Adviser for this service, the Adviser has contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both the Adviser’ costs in providing these services and a reasonable allocation of the costs incurred by the Adviser and its affiliates related to the support and oversight of these services. The fund also reimburses the Adviser for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration Agreement, the fund was charged $101,050 during the period ended March 31, 2020.
During the period ended March 31, 2020, the Distributor retained $19,431 from commissions earned on sales of the fund’s Class A shares and $10,349 from CDSC fees 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 March 31, 2020, Class C shares were charged $231,935 pursuant to the Distribution Plan.
Under the Service Plan adopted pursuant to Rule 12b-1 under the Act, Class Z shares reimburse the Distributor for distributing its shares and servicing shareholder accounts at an amount not to exceed an annual rate of up to .25% of the value of the average daily net assets of Class Z shares. During the period ended March 31, 2020, Class Z shares were charged $118,198 pursuant to the Service 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
29
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended March 31, 2020, Class A and Class C shares were charged $430,506and $77,312, respectively, pursuant to the Shareholder Services Plan.
Under its terms, the Distribution Plan and Shareholder Services Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of a majority of those Trustees who are not “interested persons” of the Trust and who have no direct or indirect financial interest in the operation of or in any agreement related to the Distribution Plan or Shareholder Services Plan.
The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees For financial reporting purposes, the fund includes net earnings credits, if any, as an expense offset in the Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statements of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, 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 March 31, 2020, the fund was charged $54,828 for transfer agency services. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended March 31, 2020, the fund was charged $18,514 pursuant to the custody agreement.
During the period ended March 31, 2020, the fund was charged $6,683 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment
30
advisory fees of $952,161, administration fees of $17,670, Distribution Plan fees of $44,360, Shareholder Services Plan fees of $74,720, custodian fees of $12,000, Chief Compliance Officer fees of $3,329 and transfer agency fees of $22,350.
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds 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 March 31, 2020, amounted to $650,692,340 and $788,151,766, respectively.
At March 31, 2020, accumulated net unrealized appreciation on investments was $382,194,204, consisting of $551,816,982 gross unrealized appreciation and $169,622,778 gross unrealized depreciation.
At March 31, 2020, 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).
31
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 26-27, 2020, the Board considered the renewal of the fund’s Investment Advisory Agreement and Administration Agreement, pursuant to which the Adviser provides the fund with investment advisory services and administrative services, and the Sub-Investment Advisory Agreement (together with the Investment Advisory Agreement and Administration Agreement, the “Agreements”), pursuant to which Mellon Investments Corporation (the “Subadviser”) provides day-to-day management of the fund’s investments. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser and the Subadviser. In considering the renewal of the Agreements, the Board considered several 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 it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s 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 the Adviser 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 the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s 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. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of mid-cap growth funds (the “Performance Group”) and with a broader group of all retail
32
and institutional mid-cap growth funds (the “Performance Universe”), all for various periods ended December 31, 2019, and (2) the fund’s actual and contractual management fees and total expenses with those of the same group of mid-cap growth funds in the Performance Group (the “Expense Group”) and with a broader group of institutional mid-cap growth funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds. The Board discussed with representatives of the Adviser and the Subadviser the results of the comparisons and considered that the fund’s total return performance was above the Performance Group and the Performance Universe medians for all periods. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index. The Board also noted that the fund had a four star overall rating from Morningstar based on Morningstar’s risk-adjusted return measures.
The Board reviewed and considered the contractual management fee rate (which reflected the advisory and administration fees) payable by the fund to the Adviser in light of the nature, extent and quality of the management services provided by the Adviser. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was lower than the Expense Group median contractual management fee, the fund’s actual management fee was lower than the Expense Group and Expense Universe median actual management fees (lowest actual management fee in the Expense Group) and the fund’s total expenses were lower than the Expense Group and Expense Universe median total expenses.
The Board considered the fee to the Subadviser in relation to the fee paid to the Adviser by the fund and the respective services provided by the Subadviser and the Adviser. The Board also took into consideration that the Subadviser’s fee is paid by the Adviser (out of its fee from the fund) and not the fund, and, accordingly, that the retention of the Subadviser does not increase the fees or expenses otherwise incurred by the fund and its shareholders.
Representatives of the Adviser reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by the Adviser that are in the same Lipper category as the fund and (2) paid to the Adviser 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
33
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered on the advice of its counsel the profitability analysis (1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the mix of services provided by the Adviser and the Subadviser, including the nature, extent and quality of such services, supported the renewal of the Agreements and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Since the Adviser, and not the fund, pays the Subadviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Subadviser’s profitability to be relevant to its deliberations. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser and the Subadviser from acting as investment adviser and sub-investment adviser, respectively, and took into consideration the soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the 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 provided by the Adviser and the Subadviser are adequate and appropriate.
· The Board was satisfied with the fund’s performance.
34
· The Board concluded that the fees paid to the Adviser and the Subadviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates and the Subadviser, of the Adviser and the Subadviser and the services provided to the fund by the Adviser and the Subadviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreements, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
35
NOTES
36
NOTES
37
BNY Mellon Small/Mid Cap Growth Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Mellon Investments Corporation
BNY Mellon Center
One Boston Place
Boston, MA 02108
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class A: DBMAX Class C: DBMCX Class I: SDSCX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mailSend your request toinfo@bnymellon.com
InternetInformation can be viewed online or downloaded atwww.bnymellonim.com/us
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-PORT. The fund’s Forms N-PORT are available on the SEC’s website atwww.sec.gov.
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 atwww.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2020 BNY Mellon Securities Corporation |
BNY Mellon Tax Sensitive Total Return Bond Fund
SEMIANNUAL REPORT March 31, 2020 |
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The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
BNY Mellon Investment Adviser, Inc. | |
With Those of Other Funds | |
the Fund’s Investment Advisory, | |
Administration And Sub-Investment | |
Advisory Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.
Dear Shareholder:
We are pleased to present this semiannual report for BNY Mellon Tax Sensitive Total Return Bond Fund, covering the six-month period from October 1, 2019 through March 31, 2020. 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.
Stock markets performed well over the last several months of 2019. Accommodative policies from the U.S. Federal Reserve (the “Fed”), paired with healthy U.S. consumer spending, helped support valuations. Despite periodic investor concern regarding trade relations with China and global growth rates, the rally continued through the end of the calendar year, supported in part by a December announcement from President Trump that the first phase of a trade deal with China was in process. However, the positive outlook was short-lived, as concerns over the spread of the coronavirus roiled markets the first several months of 2020. As the virus spread across the globe, concerns about the economic effects of a widespread quarantine worked to depress equity valuations. Many indices, particularly in the U.S., reported historically low returns for the first quarter of 2020.
In fixed-income markets, interest rates were heavily influenced by changes in Fed policy and investor concern over COVID-19. The Fed cut the target overnight lending rate by 25 basis points in October 2019 in an effort to support the U.S. economy. Rates across much of the Treasury curve increased during the month of November, and the long end of the curve rose in December as investors anticipated improvements in global economic growth during the coming year. However, concerns regarding COVID-19 and the resulting economic impact caused yields throughout the intermediate- and long-dated portions of the curve to fall during January and February of 2020. In March, the Fed cut rates twice, resulting in an overnight lending target-rate of nearly zero at the end of the period.
We believe the near-term outlook for the U.S. will be challenging, as the country curbs the spread of COVID-19. However, we are confident that once the economic effects have been mitigated, the economy will rebound. As always, we will monitor relevant data for signs of change. We encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
April 15, 2020
2
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from October 1, 2019 through March 31, 2020, as provided by Thomas Casey, Daniel Rabasco and Jeffrey Burger, of Mellon Investments Corporation, Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended March 31, 2020, BNY Mellon Tax Sensitive Total Return Bond Fund’s Class A shares produced a total return of -1.56%, Class C shares returned -1.93%, Class I shares returned -1.43% and Class Y shares returned -1.43%.1 In comparison, the fund’s benchmark, the Bloomberg Barclays 3-, 5-, 7-, 10-Year U.S. Municipal Bond Index (the “Index”), provided a total return of 0.21% for the same period.2
Municipal bonds declined during the reporting period as the Federal Reserve (the “Fed”) reduced interest rates amid a slowing economy and the COVID-19 pandemic. The fund underperformed the Index, primarily due to asset allocation and security selection.
The Fund’s Investment Approach
The fund seeks high, after-tax total return. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in bonds. The fund normally invests at least 65% of its net assets in municipal bonds that provide income exempt from federal personal income tax. The fund may invest up to 35% of its net assets in taxable bonds. The fund invests principally in bonds rated investment grade at the time of purchase or, if unrated, determined to be of comparable quality by the fund’s subadviser.3 The fund may invest up to 25% of its assets in bonds rated below investment grade.
We seek relative value opportunities among municipal bonds and invest selectively in taxable securities with the potential to enhance after-tax total return and/or reduce volatility. We use a combination of fundamental credit analysis and macroeconomic and quantitative inputs to identify undervalued sectors and securities, and we select municipal bonds using fundamental credit analysis to estimate the relative value and attractiveness of various sectors and securities and to exploit pricing inefficiencies.
COVID-19 Concerns and Supply-Demand Factors Drove Municipal Bonds
Through most of the reporting period, the municipal bond market benefited from strong demand resulting from concerns about economic momentum. Demand was driven especially by investors in states with high income-tax rates. These investors moved into municipal bonds as a way to reduce their federal income taxes, which rose as a result of the cap on the federal deductibility of state and local taxes in the Tax Cuts and Jobs Act of 2017.
Actions by the Fed early in the period, including two rate cuts, also helped performance in the municipal bond market. This contributed to a decline in yields across the municipal bond yield curve, though investors largely favored longer-term issues, causing the municipal bond yield curve to flatten.
Supply increased somewhat during the reporting period, as low interest rates led issuers to seek to capture favorable financing. New issuance may have been inhibited by the absence of advance refunding, which was eliminated by the Tax Cuts and Jobs Act of 2017.
The municipal bond market continued to perform well early in 2020 until the emergence of the COVID-19 crisis, which resulted in turmoil and hindered returns, particularly in March.
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
A conflict between Russia and Saudi Arabia over oil prices also contributed to economic deterioration and uncertainty, leading to a flight to quality.
Actions by the Fed, including two emergency rate cuts in March 2020, provided some support to the municipal bond market, but technical supply and demand factors became the predominant driver. Though the municipal bond market often benefits from economic uncertainty, in this environment that was not the case. Fears of widespread economic damage due to the COVID-19 caused investors to shift out of the municipal bond market, resulting in large outflows from municipal bond mutual funds. In a normal market, broker-dealers would step in to buy municipal bonds. But a decline in the municipal bond market, combined with a rally in the Treasury market, prevented them from hedging their municipal bond purchases by shorting Treasuries, as they normally do.
In addition, the municipal bond market was hurt by the inability of large investors to capitalize on the volatility. As municipal bond yields rose, insurance companies and other large investors were expected to step in, but since there was also a lack of liquidity in corporate bonds, which normally would have financed their municipal bond purchases, these investors were hindered in their ability to act. As a result, the municipal market yield spreads rose significantly, weakening performance.
Despite the market turmoil, fundamentals in the municipal bond market generally remained healthy during the reporting period. Steady but slower economic growth through most of the period supported tax revenues, fiscal balances and “rainy day” funds.
Asset Allocation and Security Selection Drove Performance
The fund’s performance versus the Index was hindered by asset allocation and security selection decisions. The fund’s overweight to revenue bonds detracted from returns, especially in the hospital, health care, prepaid gas, industrial development and transportation sectors. Security selections in these sectors also contributed negatively to fund performance. An underweight to general obligation bonds, which benefited somewhat from the market’s flight to quality, also detracted from returns.
On the other hand, yield curve positioning was advantageous to the fund. An overweight to shorter-term issues in the tax-exempt market was additive to performance, as were positions in the taxable market, which tends to be concentrated in shorter-term issues. The fund did not make use of derivatives during the reporting period.
Positioned for Economic Uncertainty
Despite the recent turmoil and the continuing economic uncertainty, we remain constructive on the market. The market will be supported by programs recently announced by the Fed, including direct lending to municipalities. In addition, we believe the portfolio is well-positioned for a period of economic uncertainty, given our diversified pool of revenue bond positions. These are concentrated in essential services and are therefore less sensitive to the performance of the economy. Historically, such a portfolio has performed relatively well in times of economic uncertainty. Moreover, we have also reduced exposure to lower quality
4
sectors and those that may be affected by effects of the COVID-19 crisis. In this environment, we are maintaining an average duration that is slightly longer than that of the Index.
April 15, 2020
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. Share price, yield and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. Dividends paid by the fund will be exempt from federal income tax to the extent such dividends are derived from interest paid on principal obligations. The fund also may invest a portion of its assets in securities that generate income that is not exempt from federal or state income tax. Income may be subject to state and local taxes, and some income may be subject to the federal alternative minimum tax (AMT) for certain investors. Capital gains, if any, are taxable. Return figures provided reflect the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc., pursuant to an agreement in effect through January 31, 2021, at which time it may be extended, modified or terminated. Had these expenses not been absorbed, the fund’s returns would have been lower. Past performance is no guarantee of future results.
2 Source: FactSet — The Bloomberg Barclays 3-, 5-, 7-, 10-Year U.S. Municipal Bond Index is composed of an equal-weighted composite of the 3-Year, 5-Year, 7-Year, and 10-Year Bloomberg Barclays U.S. Municipal Bond Indices. Investors cannot invest directly in any index.
3 The fund may continue to own investment-grade bonds (at the time of purchase), which are subsequently downgraded to below investment grade.
Bonds are subject generally to interest-rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
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 BNY Mellon Tax Sensitive Total Return Bond Fund from October 1, 2019 to March 31, 2020. 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 |
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Assume actual returns for the six months ended March 31, 2020 |
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| Class A | Class C | Class I | Class Y |
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Expense paid per $1,000† | $3.52 | $7.23 | $2.28 | $2.28 |
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Ending value (after expenses) | $984.40 | $980.70 | $985.70 | $985.70 |
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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 |
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Assuming a hypothetical 5% annualized return for the six months ended March 31, 2020 |
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| Class A | Class C | Class I | Class Y |
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Expense paid per $1,000† | $3.59 | $7.36 | $2.33 | $2.33 |
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Ending value (after expenses) | $1,021.45 | $1,017.70 | $1,022.70 | $1,022.70 |
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†Expenses are equal to the fund’s annualized expense ratio of .71% for Class A, 1.46% for Class C, .46% for Class I and .46% for Class Y, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS
March 31, 2020 (Unaudited)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 10.0% | |||||||||
Asset-Backed Certificates - .4% | |||||||||
Carrington Mortgage Loan Trust, Ser. 2006-NC5, Cl. A2, 1 Month LIBOR +.11% | 1.06 | 1/25/2037 | 119,785 | a | 115,594 | ||||
Daimler Trucks Retail Trust, Ser. 2018-1, Cl. A3 | 2.85 | 7/15/2021 | 416,457 | b | 415,886 | ||||
531,480 | |||||||||
Asset-Backed Ctfs./Auto Receivables - 3.6% | |||||||||
Capital Auto Receivables Asset Trust, Ser. 2018-1, Cl. A4 | 2.93 | 6/20/2022 | 1,000,000 | b | 996,359 | ||||
Enterprise Fleet Financing, Ser. 2018-1, Cl. A2 | 2.87 | 10/20/2023 | 628,121 | b | 625,551 | ||||
Ford Credit Floorplan Master Owner Trust, Ser. 2018-1, Cl. A1 | 2.95 | 5/15/2023 | 1,000,000 | 1,000,529 | |||||
OSCAR US Funding Trust VIII, Ser. 2018-1A, Cl. A3 | 3.23 | 5/10/2022 | 980,250 | b | 987,976 | ||||
Santander Retail Auto Lease Trust, Ser. 2018-A, Cl. A3 | 2.93 | 5/20/2021 | 625,297 | b | 625,817 | ||||
4,236,232 | |||||||||
Banks - 1.7% | |||||||||
Citigroup, Sr. Unscd. Notes | 2.88 | 7/24/2023 | 1,000,000 | 1,009,187 | |||||
JPMorgan Chase & Co., Sr. Unscd. Notes | 3.80 | 7/23/2024 | 1,000,000 | 1,048,070 | |||||
2,057,257 | |||||||||
Collateralized Municipal-Backed Securities - 1.2% | |||||||||
Federal Home Loan Mortgage Corp. Multifamily Variable Rate Certificate, Revenue Bonds, Ser. M048 | 3.15 | 1/15/2036 | 1,250,000 | b | 1,441,150 | ||||
Health Care - 3.1% | |||||||||
SSM Health Care Corp., Sr. Unscd. Notes, Ser. 2018 | 3.69 | 6/1/2023 | 3,645,000 | 3,706,512 | |||||
TotalBonds and Notes | 11,972,631 | ||||||||
Long-Term Municipal Investments - 89.3% | |||||||||
Arizona - 1.4% | |||||||||
Maricopa County Industrial Development Authority, Revenue Bonds (Benjamin Franklin Charter School Obligated Group) | 4.80 | 7/1/2028 | 1,600,000 | b | 1,613,824 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 89.3%(continued) | |||||||||
Arkansas - 1.8% | |||||||||
Arkansas Development Finance Authority, Revenue Bonds, Refunding (Washington Regional Medical Center) Ser. B | 5.00 | 2/1/2025 | 1,835,000 | 2,113,204 | |||||
California - 2.4% | |||||||||
California Municipal Finance Authority, Revenue Bonds, Refunding (William Jessup University) | 5.00 | 8/1/2027 | 1,100,000 | 1,174,998 | |||||
California Statewide Communities Development Authority, Revenue Bonds (Loma Linda University Medical Center Obligated Group) Ser. A | 5.00 | 12/1/2031 | 525,000 | b | 586,404 | ||||
Los Angeles Community Facilities District, Special Tax Bonds, Refunding | 5.00 | 9/1/2028 | 985,000 | 1,133,262 | |||||
2,894,664 | |||||||||
Colorado - 1.9% | |||||||||
Colorado Health Facilities Authority, Revenue Bonds, Refunding (CommonSpirit Health Obligated Group) Ser. A | 5.00 | 8/1/2029 | 1,000,000 | 1,205,460 | |||||
Denver Convention Center Hotel Authority, Revenue Bonds, Refunding | 5.00 | 12/1/2031 | 1,000,000 | 1,022,520 | |||||
2,227,980 | |||||||||
Connecticut - 2.3% | |||||||||
Connecticut, GO, Ser. A | 5.00 | 10/15/2025 | 1,000,000 | 1,113,940 | |||||
Connecticut, Revenue Bonds, Ser. A | 5.00 | 9/1/2033 | 1,000,000 | 1,118,230 | |||||
Connecticut, Revenue Bonds, Ser. A | 5.00 | 9/1/2026 | 500,000 | 570,885 | |||||
2,803,055 | |||||||||
District of Columbia - .8% | |||||||||
District of Columbia, Revenue Bonds (Ingleside Rock Creek Project) Ser. B | 3.88 | 7/1/2024 | 1,000,000 | 941,290 | |||||
Florida - 5.6% | |||||||||
Atlantic Beach, Revenue Bonds (Fleet Landing Project) Ser. B2 | 3.00 | 11/15/2023 | 1,250,000 | 1,225,150 | |||||
Florida Higher Educational Facilities Financial Authority, Revenue Bonds, Refunding (Nova Southeastern University Project) | 5.00 | 4/1/2026 | 1,000,000 | 1,154,450 | |||||
Jacksonville, Revenue Bonds, Refunding | 5.00 | 10/1/2027 | 1,000,000 | 1,152,240 |
8
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 89.3%(continued) | |||||||||
Florida - 5.6% (continued) | |||||||||
Miami Beach Redevelopment Agency, Tax Allocation Bonds, Refunding | 5.00 | 2/1/2033 | 1,000,000 | 1,120,550 | |||||
Reedy Creek Improvement District, GO, Refunding, Ser. A | 1.87 | 6/1/2026 | 1,435,000 | 1,411,538 | |||||
Village Community Development District No. 7, Special Assessment Bonds, Refunding | 3.00 | 5/1/2020 | 575,000 | 575,483 | |||||
6,639,411 | |||||||||
Georgia - 6.3% | |||||||||
Fulton County Development Authority, Revenue Bonds (WellStar Health System Obligated Group) Ser. A | 5.00 | 4/1/2036 | 1,000,000 | 1,191,150 | |||||
Georgia Municipal Electric Authority, Revenue Bonds (Plant Vogtle Unis 3 & 4 Project) | 5.00 | 1/1/2030 | 1,145,000 | 1,336,490 | |||||
Georgia Municipal Electric Authority, Revenue Bonds, Refunding (Project One) Ser. A | 5.00 | 1/1/2021 | 1,000,000 | 1,017,310 | |||||
Main Street Natural Gas, Revenue Bonds, Ser. B, 1 Month LIBOR x.67 +.75% | 1.81 | 9/1/2023 | 1,000,000 | a | 996,060 | ||||
Main Street Natural Gas, Revenue Bonds, Ser. C | 4.00 | 9/1/2026 | 1,750,000 | 1,824,305 | |||||
The Atlanta Development Authority, Revenue Bonds, Ser. A1 | 5.00 | 7/1/2029 | 1,000,000 | 1,132,070 | |||||
7,497,385 | |||||||||
Hawaii - 1.9% | |||||||||
Hawaii Airports System, Revenue Bonds, Ser. A | 5.00 | 7/1/2028 | 1,000,000 | 1,162,740 | |||||
Hawaii Department of Budget & Finance, Revenue Bonds, Refunding (Hawaiian Electric Co.) | 4.00 | 3/1/2037 | 1,090,000 | 1,135,006 | |||||
2,297,746 | |||||||||
Illinois - 13.7% | |||||||||
Chicago Il Wastewater Transmission, Revenue Bonds (Insured; Assured Guaranty Municipal Corp.) | 5.00 | 1/1/2032 | 1,000,000 | 1,113,820 | |||||
Chicago Il Wastewater Transmission, Revenue Bonds, Refunding, Ser. C | 5.00 | 1/1/2026 | 1,000,000 | 1,154,630 | |||||
Chicago Il Waterworks, Revenue Bonds (2nd LIEN Project) | 5.00 | 11/1/2026 | 1,000,000 | 1,136,790 | |||||
Chicago O'Hare International Airport, Revenue Bonds | 5.25 | 1/1/2024 | 1,000,000 | 1,083,610 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 89.3%(continued) | |||||||||
Illinois - 13.7% (continued) | |||||||||
Chicago O'Hare International Airport, Revenue Bonds, Refunding, Ser. B | 5.00 | 1/1/2035 | 750,000 | 842,775 | |||||
Chicago Park District, GO, Refunding, Ser. B | 5.00 | 1/1/2028 | 1,000,000 | 1,078,930 | |||||
Cook County II, Revenue Bonds, Refunding | 5.00 | 11/15/2035 | 1,000,000 | 1,211,370 | |||||
Illinois Finance Authority, Revenue Bonds, Refunding (Rosalind Franklin University) | 5.00 | 8/1/2035 | 1,100,000 | 1,179,937 | |||||
Illinois Finance Authority, Revenue Bonds, Refunding (Rush University Medical Center Obligated Group) Ser. A | 5.00 | 11/15/2026 | 1,000,000 | 1,149,120 | |||||
Illinois State Toll Highway Authority, Revenue Bonds, Ser. B | 5.00 | 1/1/2031 | 1,000,000 | 1,162,940 | |||||
Illinois State Toll Highway Authority, Revenue Bonds, Ser. B | 5.00 | 1/1/2027 | 1,000,000 | 1,170,650 | |||||
Metropolitan Pier & Exposition Authority, Revenue Bonds, Refunding (McCormick Place Project) Ser. B | 5.00 | 12/15/2028 | 1,000,000 | 1,008,220 | |||||
Northern Illinois University, Revenue Bonds, Refunding (Insured; Build America Mutual) Ser. B | 5.00 | 4/1/2027 | 550,000 | 648,967 | |||||
Sales Tax Securitization Corp., Revenue Bonds, Refunding, Ser. A | 5.00 | 1/1/2030 | 750,000 | 888,562 | |||||
University of Illinois, Revenue Bonds, Refunding, Ser. C | 5.00 | 4/1/2025 | 1,450,000 | 1,520,006 | |||||
16,350,327 | |||||||||
Iowa - .8% | |||||||||
Iowa Finance Authority, Revenue Bonds, Refunding (Iowa Fertilizer Co.) | 3.13 | 12/1/2022 | 1,000,000 | 938,780 | |||||
Kansas - .8% | |||||||||
Kansas Development Finance Authority, Revenue Bonds (Village Shalom Obligated Group Project) Ser. B | 4.00 | 11/15/2025 | 1,000,000 | 946,790 | |||||
Kentucky - 1.0% | |||||||||
Louisville County Metropolitan Government, Revenue Bonds (Norton Healthcare Obligated Group) | 5.00 | 10/1/2026 | 1,000,000 | 1,136,460 |
10
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 89.3%(continued) | |||||||||
Louisiana - .4% | |||||||||
Tobacco Settlement Financing Corp., Revenue Bonds, Refunding, Ser. A | 5.00 | 5/15/2020 | 500,000 | 501,400 | |||||
Maryland - 3.0% | |||||||||
Maryland Health & Higher Educational Facilities Authority, Revenue Bonds, Refunding (University of Maryland Medical System Obligated Group) Ser. B | 5.00 | 7/1/2032 | 1,000,000 | 1,207,260 | |||||
Maryland Transportation Authority, Revenue Bonds | 5.00 | 6/1/2028 | 2,000,000 | 2,399,120 | |||||
3,606,380 | |||||||||
Massachusetts - 2.7% | |||||||||
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Suffolk University) | 5.00 | 7/1/2028 | 1,000,000 | 1,158,430 | |||||
Massachusetts Educational Financing Authority, Revenue Bonds, Ser. B | 5.00 | 7/1/2026 | 1,200,000 | 1,416,336 | |||||
Massachusetts Port Authority, Revenue Bonds, Refunding (Bosfuel Project) Ser. A | 5.00 | 7/1/2032 | 500,000 | 602,515 | |||||
3,177,281 | |||||||||
Michigan - 1.0% | |||||||||
Michigan Finance Authority, Revenue Bonds, Refunding (Great Lakes Water Authority) (Insured; Assured Guaranty Municipal Corp.) Ser. C3 | 5.00 | 7/1/2030 | 1,000,000 | 1,142,510 | |||||
Minnesota - .8% | |||||||||
Duluth Independent School District No. 709, COP, Refunding, Ser. B | 5.00 | 2/1/2024 | 800,000 | 903,104 | |||||
Missouri - 2.9% | |||||||||
Missouri Development Finance Board, Revenue Bonds, Refunding (Branson Landing Project) Ser. A | 5.00 | 6/1/2028 | 1,000,000 | 1,108,590 | |||||
Missouri Development Finance Board, Revenue Bonds, Refunding (Branson Landing Project) Ser. A | 5.00 | 6/1/2023 | 1,000,000 | 1,107,960 | |||||
Missouri Health & Educational Facilities Authority, Revenue Bonds, Refunding (St. Luke's Health System Obligated Group) | 5.00 | 11/15/2027 | 1,000,000 | 1,207,610 | |||||
3,424,160 |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 89.3%(continued) | |||||||||
New Jersey - 7.2% | |||||||||
New Jersey Economic Development Authority, Revenue Bonds, Refunding (New Jersey - American Water Company Project) Ser. C | 5.10 | 6/1/2023 | 1,000,000 | 1,005,180 | |||||
New Jersey Economic Development Authority, Revenue Bonds, Refunding (Port Newark Container Terminal LLC Project) | 5.00 | 10/1/2023 | 1,000,000 | 1,062,850 | |||||
New Jersey Economic Development Authority, Revenue Bonds, Refunding, Ser. XX | 5.00 | 6/15/2021 | 1,000,000 | 1,027,720 | |||||
New Jersey Economic Development Authority, Revenue Bonds, Refunding, Ser. XX | 5.00 | 6/15/2026 | 1,000,000 | 1,076,080 | |||||
New Jersey Higher Education Student Assistance Authority, Revenue Bonds, Refunding, Ser. 2015-1A | 5.00 | 12/1/2024 | 1,000,000 | 1,144,360 | |||||
New Jersey Higher Education Student Assistance Authority, Revenue Bonds, Refunding, Ser. B | 5.00 | 12/1/2022 | 1,000,000 | 1,087,280 | |||||
New Jersey Transportation Trust Fund Authority, Revenue Bonds | 5.00 | 6/15/2029 | 1,120,000 | 1,235,293 | |||||
Tobacco Settlement Financing Corp., Revenue Bonds, Refunding, Ser. B | 3.20 | 6/1/2027 | 1,000,000 | 995,520 | |||||
8,634,283 | |||||||||
New York - 7.4% | |||||||||
New York City, GO, Ser. D2 | 3.86 | 12/1/2028 | 2,000,000 | 2,246,520 | |||||
New York City Housing Development Corp., Revenue Bonds, Ser. B2 | 5.00 | 7/1/2026 | 450,000 | 497,246 | |||||
New York City Transitional Finance Authority, Revenue Bonds, Ser. E2 | 2.63 | 2/1/2023 | 1,000,000 | 1,029,000 | |||||
New York State Dormitory Authority, Revenue Bonds, Refunding (Orange Regional Medical Center Obligated Group) | 5.00 | 12/1/2027 | 800,000 | b | 950,936 | ||||
New York State Urban Development Corp., Revenue Bonds, Refunding, Ser. B | 2.67 | 3/15/2023 | 1,000,000 | 1,012,580 | |||||
Niagara Area Development Corp., Revenue Bonds, Refunding (Covanta Holding Project) Ser. B | 3.50 | 11/1/2024 | 1,000,000 | b | 966,230 | ||||
TSASC, Revenue Bonds, Refunding, Ser. A | 5.00 | 6/1/2032 | 1,000,000 | 1,105,120 | |||||
TSASC, Revenue Bonds, Refunding, Ser. B | 5.00 | 6/1/2022 | 1,000,000 | 1,039,040 | |||||
8,846,672 |
12
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 89.3%(continued) | |||||||||
Oklahoma - .8% | |||||||||
Oklahoma Development Finance Authority, Revenue Bonds (Gilcrease Developers LLC) | 1.63 | 7/6/2023 | 1,000,000 | 967,400 | |||||
Pennsylvania - 8.1% | |||||||||
Commonwealth Financing Authority, Revenue Bonds | 5.00 | 6/1/2028 | 1,000,000 | 1,224,560 | |||||
Luzerne County Industrial Development Authority, Revenue Bonds, Refunding (Pennsylvania-American Water Co.) | 2.45 | 12/3/2029 | 1,500,000 | 1,584,300 | |||||
Montgomery County Industrial Development Authority, Revenue Bonds, Refunding (ACTS Retirement-Life Communities Obligated Group) | 5.00 | 11/15/2036 | 1,000,000 | 1,023,700 | |||||
Pennsylvania Housing Finance Agency, Revenue Bonds, Refunding, Ser. 114A | 3.35 | 10/1/2026 | 1,000,000 | 1,023,210 | |||||
Pennsylvania Turnpike Commission, Revenue Bonds, Refunding | 5.00 | 12/1/2033 | 1,000,000 | 1,217,440 | |||||
Pennsylvania Turnpike Commission, Revenue Bonds, Ser. B | 5.00 | 12/1/2029 | 1,000,000 | 1,167,300 | |||||
Philadelphia Airport, Revenue Bonds, Refunding, Ser. B | 5.00 | 7/1/2027 | 1,000,000 | 1,183,700 | |||||
The School District of Philadelphia, GO (Insured; State Aid Withholding) Ser. A | 5.00 | 9/1/2027 | 1,000,000 | 1,219,960 | |||||
9,644,170 | |||||||||
Rhode Island - 2.1% | |||||||||
Rhode Island Student Loan Authority, Revenue Bonds, Ser. A | 5.00 | 12/1/2025 | 1,250,000 | 1,455,475 | |||||
Rhode Island Tobacco Settlement Financing Corp., Revenue Bonds, Refunding, Ser. A | 5.00 | 6/1/2026 | 1,000,000 | 1,088,220 | |||||
2,543,695 | |||||||||
South Carolina - .9% | |||||||||
South Carolina Public Service Authority, Revenue Bonds, Refunding, Ser. C | 5.00 | 12/1/2021 | 1,000,000 | 1,057,450 | |||||
Tennessee - 2.1% | |||||||||
Tennessee Energy Acquisition Corp., Revenue Bonds, Ser. A | 5.25 | 9/1/2026 | 1,120,000 | 1,254,971 | |||||
Tennessee Energy Acquisition Corp., Revenue Bonds, Ser. A | 4.00 | 5/1/2023 | 1,250,000 | 1,281,162 | |||||
2,536,133 |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Long-Term Municipal Investments - 89.3%(continued) | |||||||||
Texas - 7.4% | |||||||||
Central Texas Regional Mobility Authority, Revenue Bonds, Refunding | 5.00 | 1/1/2027 | 1,250,000 | 1,389,050 | |||||
Central Texas Regional Mobility Authority, Revenue Bonds, Ser. A | 5.00 | 1/1/2031 | 1,175,000 | 1,281,467 | |||||
Clifton Higher Education Finance Corp., Revenue Bonds (International American Education Federation) Ser. D | 5.75 | 8/15/2033 | 1,000,000 | 1,075,750 | |||||
Dallas Love Field, Revenue Bonds | 5.00 | 11/1/2027 | 1,000,000 | 1,137,840 | |||||
Harris County-Houston Sports Authority, Revenue Bonds, Refunding, Ser. A | 5.00 | 11/15/2029 | 750,000 | 856,958 | |||||
Houston Combined Utility System, Revenue Bonds, Refunding, Ser. A, 1 Month MUNIPSA +.90% | 5.61 | 5/1/2020 | 2,000,000 | a | 2,000,460 | ||||
Mission Economic Development Corp., Revenue Bonds, Refunding (Natgasoline Project) | 4.63 | 10/1/2031 | 1,000,000 | b | 1,023,380 | ||||
8,764,905 | |||||||||
Virginia - .8% | |||||||||
Virginia Small Business Financing Authority, Revenue Bonds (95 Express Lanes) | 5.00 | 7/1/2034 | 1,000,000 | 1,008,080 | |||||
Washington - 1.0% | |||||||||
Port of Seattle, Revenue Bonds | 5.00 | 4/1/2027 | 1,000,000 | 1,189,930 | |||||
TotalLong-Term Municipal Investments | 106,348,469 | ||||||||
Total Investments(cost $116,243,918) | 99.3% | 118,321,100 | |||||||
Cash and Receivables (Net) | 0.7% | 818,758 | |||||||
Net Assets | 100.0% | 119,139,858 |
a Variable rate security—rate shown is the interest rate in effect at period end.
b Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2020, these securities were valued at $10,233,513 or 8.59% of net assets.
14
Portfolio Summary (Unaudited)† | Value (%) |
General | 15.3 |
Medical | 12.1 |
Education | 10.5 |
Transportation | 10.3 |
Airport | 7.1 |
Water | 5.1 |
Tobacco Settlement | 5.0 |
Development | 4.8 |
Student Loan | 4.3 |
General Obligation | 4.0 |
Asset-Backed | 4.0 |
Nursing Homes | 3.5 |
Power | 2.9 |
Utilities | 2.6 |
Banks | 1.7 |
Multifamily Housing | 1.6 |
School District | 1.0 |
Special Tax | .9 |
Facilities | .9 |
Single Family Housing | .9 |
Pollution | .8 |
99.3 |
† Based on net assets.
See notes to financial statements.
15
Summary of Abbreviations(Unaudited) | |||
ABAG | Association of Bay Area Governments | ACA | American Capital Access |
AGC | ACE Guaranty Corporation | AGIC | Asset Guaranty Insurance Company |
AMBAC | American Municipal Bond Assurance Corporation | ARRN | Adjustable Rate Receipt Notes |
BAN | Bond Anticipation Notes | BPA | Bond Purchase Agreement |
CIFG | CDC Ixis Financial Guaranty | COP | Certificate of Participation |
CP | Commercial Paper | DRIVERS | Derivative Inverse Tax-Exempt Receipts |
EDR | Economic Development Revenue | EIR | Environmental Improvement Revenue |
EFFE | Effective Federal Funds Rate | EURIBOR | Euro Interbank Offered Rate |
FCPR | Farm Credit Prime Rate | FGIC | Financial Guaranty Insurance Company |
FHA | Federal Housing Administration | FHLB | Federal Home Loan Bank |
FHLMC | Federal Home Loan Mortgage Corporation | FNMA | Federal National Mortgage Association |
GAN | Grant Anticipation Notes | GIC | Guaranteed Investment Contract |
GNMA | Government National Mortgage Association | GO | General Obligation |
HR | Hospital Revenue | IDB | Industrial Development Board |
IDC | Industrial Development Corporation | IDR | Industrial Development Revenue |
LIBOR | London Interbank Offered Rate | LIFERS | Long Inverse Floating Exempt Receipts |
LOC | Letter of Credit | LOR | Limited Obligation Revenue |
LR | Lease Revenue | NAN | Note Anticipation Notes |
MERLOTS | Municipal Exempt Receipts Liquidity Option Tender | MFHR | Multi-Family Housing Revenue |
MFMR | Multi-Family Mortgage Revenue | MUNIPSA | Securities Industry and Financial Markets Association Municipal Swap Index Yield |
PCR | Pollution Control Revenue | P-FLOATS | Puttable Floating Option Tax-Exempt Receipts |
PILOT | Payment in Lieu of Taxes | PRIME | Prime Lending Rate |
PUTTERS | Puttable Tax-Exempt Receipts | OBFR | Overnight Bank Funding Rate |
RAC | Revenue Anticipation Certificates | RAN | Revenue Anticipation Notes |
RAW | Revenue Anticipation Warrants | RIB | Residual Interest Bonds |
ROCS | Reset Options Certificates | RRR | Resources Recovery Revenue |
SAAN | State Aid Anticipation Notes | SBPA | Standby Bond Purchase Agreement |
SFHR | Single Family Housing Revenue | SFMR | Single Family Mortgage Revenue |
SOFR | Secured Overnight Financing Rate | SONYMA | State of New York Mortgage Agency |
SPEARS | Short Puttable Exempt Adjustable Receipts | SWDR | Solid Waste Disposal Revenue |
TAN | Tax Anticipation Notes | TAW | Tax Anticipation Warrants |
TRAN | Tax and Revenue Anticipation Notes | XLCA | XL Capital Assurance |
See notes to financial statements.
16
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments | 116,243,918 |
| 118,321,100 |
| ||
Cash |
|
|
|
| 450,529 |
|
Interest receivable |
| 1,330,242 |
| |||
Prepaid expenses |
|
|
|
| 32,765 |
|
|
|
|
|
| 120,134,636 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 34,378 |
| |||
Payable for investment securities purchased |
| 667,684 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 248,455 |
| |||
Trustees’ fees and expenses payable |
| 1,607 |
| |||
Other accrued expenses |
|
|
|
| 42,654 |
|
|
|
|
|
| 994,778 |
|
Net Assets ($) |
|
| 119,139,858 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 113,526,758 |
|
Total distributable earnings (loss) |
|
|
|
| 5,613,100 |
|
Net Assets ($) |
|
| 119,139,858 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 3,505,114 | 134,919 | 115,251,104 | 248,721 |
|
Shares Outstanding | 158,212 | 6,087.25 | 5,197,992 | 11,219 |
|
Net Asset Value Per Share ($) | 22.15 | 22.16 | 22.17 | 22.17 |
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
|
17
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Interest Income |
|
| 2,245,763 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 309,643 |
| ||
Professional fees |
|
| 46,964 |
| ||
Administration fee—Note 3(a) |
|
| 46,447 |
| ||
Registration fees |
|
| 37,726 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 9,820 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 8,126 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 6,683 |
| ||
Prospectus and shareholders’ reports |
|
| 6,656 |
| ||
Custodian fees—Note 3(c) |
|
| 5,138 |
| ||
Interest expense—Note 2 |
|
| 4,649 |
| ||
Loan commitment fees—Note 2 |
|
| 2,925 |
| ||
Distribution fees—Note 3(b) |
|
| 524 |
| ||
Miscellaneous |
|
| 20,310 |
| ||
Total Expenses |
|
| 505,611 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (143,605) |
| ||
Less—reduction in fees due to earnings credits—Note 3(c) |
|
| (4,392) |
| ||
Net Expenses |
|
| 357,614 |
| ||
Investment Income—Net |
|
| 1,888,149 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 6,023,896 |
| ||||
Net change in unrealized appreciation (depreciation) on investments | (10,069,022) |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (4,045,126) |
| ||
Net (Decrease) in Net Assets Resulting from Operations |
| (2,156,977) |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
18
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 1,888,149 |
|
|
| 6,837,311 |
| |
Net realized gain (loss) on investments |
| 6,023,896 |
|
|
| 1,784,326 |
| ||
Net change in unrealized appreciation |
| (10,069,022) |
|
|
| 11,286,618 |
| ||
Net Increase (Decrease) in Net Assets | (2,156,977) |
|
|
| 19,908,255 |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (146,873) |
|
|
| (156,615) |
| |
Class C |
|
| (5,688) |
|
|
| (2,801) |
| |
Class I |
|
| (5,978,281) |
|
|
| (6,752,586) |
| |
Class Y |
|
| (11,924) |
|
|
| (8,977) |
| |
Total Distributions |
|
| (6,142,766) |
|
|
| (6,920,979) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 525,844 |
|
|
| 2,026,265 |
| |
Class I |
|
| 10,216,205 |
|
|
| 58,223,138 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 142,107 |
|
|
| 153,803 |
| |
Class C |
|
| 5,270 |
|
|
| 2,647 |
| |
Class I |
|
| 5,433,937 |
|
|
| 6,385,459 |
| |
Class Y |
|
| 537 |
|
|
| 8,951 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (1,410,428) |
|
|
| (4,543,150) |
| |
Class C |
|
| (3,127) |
|
|
| (61,626) |
| |
Class I |
|
| (159,541,342) |
|
|
| (72,844,817) |
| |
Class Y |
|
| - |
|
|
| (268,004) |
| |
Increase (Decrease) in Net Assets | (144,630,997) |
|
|
| (10,917,334) |
| |||
Total Increase (Decrease) in Net Assets | (152,930,740) |
|
|
| 2,069,942 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 272,070,598 |
|
|
| 270,000,656 |
| |
End of Period |
|
| 119,139,858 |
|
|
| 272,070,598 |
|
19
STATEMENT OF CHANGES IN NET ASSETS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class A |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 22,935 |
|
|
| 89,249 |
| |
Shares issued for distributions reinvested |
|
| 6,230 |
|
|
| 6,690 |
| |
Shares redeemed |
|
| (60,217) |
|
|
| (194,716) |
| |
Net Increase (Decrease) in Shares Outstanding | (31,052) |
|
|
| (98,777) |
| |||
Class C |
|
|
|
|
|
|
|
| |
Shares issued for distributions reinvested |
|
| 231 |
|
|
| 115 |
| |
Shares redeemed |
|
| (137) |
|
|
| (2,637) |
| |
Net Increase (Decrease) in Shares Outstanding | 94 |
|
|
| (2,522) |
| |||
Class I |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 440,979 |
|
|
| 2,531,053 |
| |
Shares issued for distributions reinvested |
|
| 237,617 |
|
|
| 277,153 |
| |
Shares redeemed |
|
| (6,827,708) |
|
|
| (3,155,305) |
| |
Net Increase (Decrease) in Shares Outstanding | (6,149,112) |
|
|
| (347,099) |
| |||
Class Y |
|
|
|
|
|
|
|
| |
Shares issued for distributions reinvested |
|
| 23 |
|
|
| 390 |
| |
Shares redeemed |
|
| - |
|
|
| (11,747) |
| |
Net Increase (Decrease) in Shares Outstanding | 23 |
|
|
| (11,357) |
| |||
|
|
|
|
|
|
|
|
|
|
See notes to financial statements. |
20
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 | |||||||||
March 31, 2020 | Year Ended September 30, | ||||||||
Class A Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |||
Per Share Data ($): | |||||||||
Net asset value, beginning of period | 23.53 | 22.46 | 23.05 | 23.43 | 23.00 | 23.15 | |||
Investment Operations: | |||||||||
Investment income—neta | .25 | .51 | .49 | .48 | .49 | .52 | |||
Net realized and unrealized | (.60) | 1.08 | (.57) | (.35) | .51 | .02 | |||
Total from Investment Operations | (.35) | 1.59 | (.08) | .13 | 1.00 | .54 | |||
Distributions: | |||||||||
Dividends from Investment | (.25) | (.51) | (.48) | (.47) | (.48) | (.51) | |||
Dividends from net realized gain | (.78) | (.01) | (.03) | (.04) | (.09) | (.18) | |||
Total Distributions | (1.03) | (.52) | (.51) | (.51) | (.57) | (.69) | |||
Net asset value, end of period | 22.15 | 23.53 | 22.46 | 23.05 | 23.43 | 23.00 | |||
Total Return (%)b | (1.56)c | 7.17 | (.36) | .59 | 4.40 | 2.38 | |||
Ratios/Supplemental Data (%): | |||||||||
Ratio of total expenses | .93d | .88 | .85 | .85 | .88 | .89 | |||
Ratio of net expenses | .71d | .70 | .70 | .70 | .70 | .70 | |||
Ratio of net investment income | 2.19d | 2.24 | 2.10 | 2.08 | 2.07 | 2.24 | |||
Portfolio Turnover Rate | 10.00c | 29.19 | 31.75 | 20.30 | 29.16 | 29.93 | |||
Net Assets, end of period ($ x 1,000) | 3,505 | 4,454 | 6,469 | 16,714 | 5,551 | 6,319 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
21
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||||
March 31, 2020 | Year Ended September 30, | ||||||||
Class C Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |||
Per Share Data ($): | |||||||||
Net asset value, beginning of period | 23.54 | 22.47 | 23.06 | 23.43 | 23.00 | 23.16 | |||
Investment Operations: | |||||||||
Investment income—neta | .17 | .34 | .29 | .30 | .31 | .35 | |||
Net realized and unrealized | (.60) | 1.08 | (.54) | (.33) | .51 | .01 | |||
Total from Investment Operations | (.43) | 1.42 | (.25) | (.03) | .82 | .36 | |||
Distributions: | |||||||||
Dividends from investment | (.17) | (.34) | (.31) | (.30) | (.30) | (.34) | |||
Dividends from net realized gain | (.78) | (.01) | (.03) | (.04) | (.09) | (.18) | |||
Total Distributions | (.95) | (.35) | (.34) | (.34) | (.39) | (.52) | |||
Net asset value, end of period | 22.16 | 23.54 | 22.47 | 23.06 | 23.43 | 23.00 | |||
Total Return (%)b | (1.93)c | 6.36 | (1.12) | (.11) | 3.62 | 1.58 | |||
Ratios/Supplemental Data (%): | |||||||||
Ratio of total expenses | 2.24d | 2.02 | 1.84 | 1.64 | 1.70 | 1.69 | |||
Ratio of net expenses | 1.46d | 1.45 | 1.45 | 1.45 | 1.45 | 1.45 | |||
Ratio of net investment income | 1.46d | 1.49 | 1.33 | 1.34 | 1.32 | 1.49 | |||
Portfolio Turnover Rate | 10.00c | 29.19 | 31.75 | 20.30 | 29.16 | 29.93 | |||
Net Assets, end of period ($ x 1,000) | 135 | 141 | 191 | 585 | 754 | 744 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
22
Six Months Ended | |||||||
March 31, 2020 | Year Ended September 30, | ||||||
Class I Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 23.55 | 22.48 | 23.07 | 23.44 | 23.01 | 23.16 | |
Investment Operations: | |||||||
Investment income—neta | .28 | .57 | .54 | .53 | .54 | .57 | |
Net realized and unrealized | (.60) | 1.08 | (.56) | (.33) | .51 | .03 | |
Total from Investment Operations | (.32) | 1.65 | (.02) | .20 | 1.05 | .60 | |
Distributions: | |||||||
Dividends from Investment | (.28) | (.57) | (.54) | (.53) | (.53) | (.57) | |
Dividends from net realized gain | (.78) | (.01) | (.03) | (.04) | (.09) | (.18) | |
Total Distributions | (1.06) | (.58) | (.57) | (.57) | (.62) | (.75) | |
Net asset value, end of period | 22.17 | 23.55 | 22.48 | 23.07 | 23.44 | 23.01 | |
Total Return (%) | (1.43)b | 7.48 | (.10) | .84 | 4.65 | 2.63 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | .65c | .55 | .55 | .56 | .57 | .58 | |
Ratio of net expenses | .46c | .45 | .45 | .45 | .45 | .45 | |
Ratio of net investment income | 2.45c | 2.49 | 2.36 | 2.33 | 2.32 | 2.48 | |
Portfolio Turnover Rate | 10.00b | 29.19 | 31.75 | 20.30 | 29.16 | 29.93 | |
Net Assets, end of period ($ x 1,000) | 115,251 | 267,212 | 262,833 | 248,973 | 217,617 | 191,558 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
23
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||
March 3, 2020 | Year Ended September 30, | |||||||
Class Y Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | ||
Per Share Data ($): | ||||||||
Net asset value, beginning of period | 23.55 | 22.48 | 23.06 | 23.43 | 23.00 | 23.16 | ||
Investment Operations: | ||||||||
Investment income—neta | .28 | .57 | .54 | .54 | .54 | .57 | ||
Net realized and unrealized | (.60) | 1.08 | (.55) | (.34) | .51 | .02 | ||
Total from Investment Operations | (.32) | 1.65 | (.01) | .20 | 1.05 | .59 | ||
Distributions: | ||||||||
Dividends from Investment | (.28) | (.57) | (.54) | (.53) | (.53) | (.57) | ||
Dividends from net realized gain | (.78) | (.01) | (.03) | (.04) | (.09) | (.18) | ||
Total Distributions | (1.06) | (.58) | (.57) | (.57) | (.62) | (.75) | ||
Net asset value, end of period | 22.17 | 23.55 | 22.48 | 23.06 | 23.43 | 23.00 | ||
Total Return (%) | (1.43)b | 7.48 | (.11) | .88 | 4.66 | 2.59 | ||
Ratios/Supplemental Data (%): | ||||||||
Ratio of total expenses | .67c | .57 | .56 | .55 | .57 | .59 | ||
Ratio of net expenses | .46c | .45 | .45 | .45 | .45 | .45 | ||
Ratio of net investment income | 2.46c | 2.49 | 2.35 | 2.33 | 2.32 | 2.48 | ||
Portfolio Turnover Rate | 10.00b | 29.19 | 31.75 | 20.30 | 29.16 | 29.93 | ||
Net Assets, end of period ($ x 1,000) | 249 | 264 | 507 | 6,980 | 995 | 970 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
24
NOTES TO FINANCIAL STATEMENTS(Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Tax Sensitive Total Return Bond Fund (the “fund”) is a separate non-diversified series of BNY Mellon Investment Funds I (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering seven series, including the fund. The fund’s investment objective is to seek a high after-tax total return. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Mellon Investments Corporation (the “Sub-Adviser”), a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser, serves as the fund’s sub-investment adviser.
The Trust’s Board of Trustees (the “Board”) approved, effective December 31, 2019 (the “Effective Date”), the termination of the fund’s authorized Class T shares. Prior to the Effective Date, the fund did not offer such Class T shares for purchase.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C, Class I and Class Y. Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. 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 C shares automatically convert to Class A shares ten years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of
25
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
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 Trust 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 is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. 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 Trustenters 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.
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:
26
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:
Registered investment companies that are not traded on an exchange are valued at their net asset value and are generally categorized within Level 1 of the fair value hierarchy.
Investments in debt securities, excluding short-term investments (other than U.S. Treasury Bills), are valued each business day by one or more independent pricing services (each, a “Service”) approved by the the Board.Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of a Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by a Service based upon its evaluation of the market for such securities). Securities are valued as determined by a Service, based on methods which include consideration of the following: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. These securities are generally categorized within Level 2 of the fair value hierarchy.
Each Service and independent valuation firm is engaged under the general oversight of the Board.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on
27
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
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 securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of March 31, 2020in valuing the fund’s investments:
Level 1 - | Level 2 – Other | Level 3 - | Total | ||
Assets ($) | |||||
Investments in Securities:† | |||||
Asset-Backed | − | 4,767,712 | − | 4,767,712 | |
Collateralized | − | 1,441,150 | − | 1,441,150 | |
Corporate Bonds | − | 5,763,769 | − | 5,763,769 | |
Municipal Securities | − | 106,348,469 | − | 106,348,469 |
† See Statement of Investments for additional detailed categorizations, if any.
(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. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when issued or delayed delivery basis may be settled a month or more after the trade date.
(c) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies
28
worldwide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
The fund invests primarily in debt securities. Failure of an issuer of the debt securities to make timely interest or principal payments, or a decline or the perception of a decline in the credit quality of a debt security, can cause the debt security’s price to fall, potentially lowering the fund’s share price. In addition, the value of debt securities may decline due to general market conditions that are not specifically related to a particular issuer, such as real or perceived adverse economic conditions, changes in outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment. Such values may also decline because of factors that affect a particular industry.
(d) Dividends and distributions to shareholders:It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. 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, which can distribute tax-exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended March 31, 2020, 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 March 31, 2020, the fund did not incur any interest or penalties.
29
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
Each tax year in the three-year period ended September 30, 2019 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 September 30, 2019 was as follows: tax-exempt income $6,334,403, ordinary income $532,561 and long-term capital gains $54,015. 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 long-term open-end funds managed by the Adviser in a $927 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $747 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $180 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. Prior to March 11, 2020, the Citibank Credit Facility was $1.030 billion with Tranche A available in an amount equal to $830 million and Tranche B available in an amount equal to $200 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit 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 March 31, 2020 was approximately $349,180 with a related weighted average annualized rate of 2.66%.
NOTE 3—Investment Advisory Fee, Sub-Investment Advisory Fee, Administration Fee and Other Transactions with Affiliates:
(a)Pursuant to an investment advisory agreement with the Adviser, the fund has agreed to pay an investment advisory fee at the annual rate of .40% of the value of the fund’s average daily net assets and is payable monthly. The Adviser has contractually agreed, from October 1, 2019 through January 31, 2021, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the direct expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment
30
fees on borrowings and extraordinary expenses) exceed .45% of the value of the fund’s average daily net assets. On or after January 31, 2021, the Adviser may terminate this expense limitation agreement at any time. The reduction in expenses, pursuant to the undertaking, amounted to $143,605 during the year ended March 31, 2020.
Pursuant to a sub-investment advisory agreement between the Adviser and the Sub-Adviser, the Sub-Adviser serves as the fund’s sub-investment adviser responsible for the day-to-day management of the fund’s portfolio. The Adviser pays the sub-investment adviser a monthly fee at an annual percentage of the value of the fund’s average daily net asset. The Adviser 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 the Adviser, 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 the Adviser or are wholly-owned subsidiaries (as defined under the Act) of the Adviser’s ultimate parent company, BNY Mellon, without obtaining shareholder approval. The Order also allows the fund to disclose the sub-investment advisory fee paid by the Adviser 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 the Adviser 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 the Adviser. The Adviser 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.
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with the Adviser, whereby the Adviser performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate the Adviser for providing accounting and recordkeeping services, administration, compliance monitoring, regulatory and shareholder reporting, as well as related facilities, equipment and clerical help. The fee is based on the fund’s average daily net assets and computed at the following annual rates: .06% of the first $500 million, .04% of the next $500 million and .02% in excess of $1 billion.
In addition, after applying any expense limitations or fee waivers that reduce the fees paid to the Adviser for this service, the Adviser has
31
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both the Adviser’ costs in providing these services and a reasonable allocation of the costs incurred by the Adviser and its affiliates related to the support and oversight of these services. The fund also reimburses the Adviser for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration Agreement, the fund was charged $46,447 during the period ended March 31, 2020.
(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 March 31, 2020, Class C shares were charged $524 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 March 31, 2020, Class A and Class C shares were charged $4,434and $175, respectively, pursuant to the Shareholder Services Plan.
Under its terms, the Distribution Plan and Shareholder Services Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of a majority of those Trustees who are not “interested persons” of the Trust and who have no direct or indirect financial interest in the operation of or in any agreement related to the Distribution Plan or 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, if any, as an expense offset in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, 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
32
basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended March 31, 2020, the fund was charged $3,626 for transfer agency services. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended March 31, 2020, the fund was charged $5,138 pursuant to the custody agreement. These fees were partially offset by earnings credits of $4,392.
During the period ended March 31, 2020, the fund was charged $6,683 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees of $42,154, administration fees of $6,323, Distribution Plan fees of $86, Shareholder Services Plan fees of $779, custodian fees of $3,456, Chief Compliance Officer fees of $3,329 and transfer agency fees of $1,240, which are offset against an expense reimbursement currently in effect in the amount of $22,989.
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds 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 (including paydowns) of investment securities, excluding short-term securities, during the period ended March 31, 2020, amounted to $15,798,774 and $161,936,469, respectively.
At March 31, 2020, accumulated net unrealized appreciation on investments was $2,077,182, consisting of $3,231,272 gross unrealized appreciation and $1,154,090 gross unrealized depreciation.
At March 31, 2020, 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).
33
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 26-27, 2020, the Board considered the renewal of the fund’s Investment Advisory Agreement and Administration Agreement, pursuant to which the Adviser provides the fund with investment advisory services and administrative services, and the Sub-Investment Advisory Agreement (together with the Investment Advisory Agreement and Administration Agreement, the “Agreements”), pursuant to which Mellon Investments Corporation (the “Subadviser”) provides day-to-day management of the fund’s investments. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser and the Subadviser. In considering the renewal of the Agreements, the Board considered several 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 it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s 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 the Adviser 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 the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s supervisory activities over the Subadviser.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of intermediate municipal debt funds (the “Performance Group”) and with a broader group of all retail and institutional intermediate municipal debt funds (the “Performance Universe”), all for various periods ended December 31, 2019, and (2) the fund’s actual and contractual management fees and total expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of
34
institutional intermediate municipal debt funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds. The Board discussed with representatives of the Adviser and the Subadviser the results of the comparisons and considered that the fund’s total return performance was lower than the Performance Group median and higher than the Performance Universe median for all periods. The Board also considered that the fund’s yield performance was at or above the Performance Group median for three of the ten one-year periods ended December 31st and at or above the Performance Universe median for five of the ten one-year periods ended December 31st. The Board considered the relative proximity of the fund’s performance to the Performance Group and/or Performance Universe median in certain periods when performance was below median. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in six of the ten calendar years shown.
The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management services provided by the Adviser. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year which included reductions for a fee waiver arrangement in place that reduced the investment advisory fee paid to the Adviser. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was lower than the Expense Group median contractual management fee and that the fund’s actual management fee was equal to the Expense Group median but slightly higher than the Expense Universe median actual management fee. This information also showed that the fund’s total expenses were lower than the Expense Group and Expense Universe median total expenses.
Representatives of the Adviser stated that the Adviser has contractually agreed, until January 31, 2021, to waive receipt of its fees and/or assume the direct expenses of the fund so that the direct expenses of none of its classes (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .45% of the fund’s average daily net assets.
The Board considered the fee to the Subadviser in relation to the fee paid to the Adviser by the fund and the respective services provided by the Subadviser and the Adviser. The
35
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
Board also took into consideration that the Subadviser’s fee is paid by the Adviser (out of its fee from the fund) and not the fund, and, accordingly, that the retention of the Subadviser does not increase the fees or expenses otherwise incurred by the fund and its shareholders.
Representatives of the Adviser reviewed with the Board the management or investment advisory fees paid by funds advised or administered by the Adviser that are in the same Lipper category as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness of the fund’s management fee. Representatives of the Adviser noted that there were no separate accounts and/or other types of client portfolios advised by the Adviser that are considered to have similar investment strategies and policies as the fund.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also considered the expense limitation arrangement and its effect on the profitability of the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered on the advice of its counsel the profitability analysis (1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the mix of services provided by the Adviser and the Subadviser, including the nature, extent and quality of such services, supported the renewal of the Agreements and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Since the Adviser, and not the fund, pays the Subadviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Subadviser’s profitability to be relevant to its deliberations. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect
36
potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser and the Subadviser from acting as investment adviser and sub-investment adviser, respectively, and took into consideration that there were no soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the 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 provided by the Adviser and the Subadviser are adequate and appropriate.
· The Board generally was satisfied with the fund’s overall performance.
· The Board concluded that the fees paid to the Adviser and the Subadviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates and the Subadviser, of the Adviser and the Subadviser and the services provided to the fund by the Adviser and the Subadviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreements, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
37
BNY Mellon Tax Sensitive Total Return Bond Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Mellon Investments Corporation
BNY Mellon Center
One Boston Place
Boston, MA 02108-4408
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class A: DSDAX Class C: DSDCX Class I: SDITX Class Y: SDYTX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mailSend your request toinfo@bnymellon.com
InternetInformation can be viewed online or downloaded atwww.bnymellonim.com/us
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-PORT. The fund’s Forms N-PORT are available on the SEC’s website atwww.sec.gov.
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 atwww.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2020 BNY Mellon Securities Corporation |
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures applicable to Item 10.
Item 11. Controls and Procedures.
(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes to the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
(a)(1) Not applicable.
(a)(3) Not applicable.
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.
BNY Mellon Investment Funds I
By: /s/ Renee LaRoche-Morris
Renee LaRoche-Morris
President (Principal Executive Officer)
Date: May 26, 2020
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/ Renee LaRoche-Morris
Renee LaRoche-Morris
President (Principal Executive Officer)
Date: May 26, 2020
By: /s/ James Windels
James Windels
Treasurer (Principal Financial Officer)
Date: May 26, 2020
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)