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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| Dreyfus Investment Funds |
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| (Exact name of Registrant as specified in charter) |
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c/o The Dreyfus Corporation 200 Park Avenue New York, New York 10166 |
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| (Address of principal executive offices) (Zip code) |
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| Bennett A. MacDougall, Esq. 200 Park Avenue New York, New York 10166 |
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| (Name and address of agent for service) |
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Registrant's telephone number, including area code: | (212) 922-6400 | |||||
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Date of fiscal year end:
| 09/30 |
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Date of reporting period: | 03/31/17 |
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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.
Dreyfus Diversified Emerging Markets Fund
Dreyfus/Newton International Equity Fund
Dreyfus Tax Sensitive Total Return Bond Fund
Dreyfus/The Boston Company Small/Mid Cap Growth Fund
Dreyfus/The Boston Company Small Cap Growth Fund
Dreyfus/The Boston Company Small Cap Value Fund
FORM N-CSR
Item 1. Reports to Stockholders.
Dreyfus Diversified Emerging Markets Fund
SEMIANNUAL REPORT |
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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 Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
With Those of Other Funds | |
Currency Exchange Contracts | |
the Fund’s Investment Advisory, | |
Administration and Sub-Investment | |
Advisory Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE CEO OF DREYFUS
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Diversified Emerging Markets Fund, covering the six-month period from October 1, 2016 through March 31, 2017. 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.
Stocks advanced solidly but bonds lost a degree of value over the reporting period amid heightened market volatility stemming from various economic and political developments. After previously rallying in response to stabilizing commodity prices, improving global economic data, and better-than-expected corporate earnings, stocks and corporate-backed bonds generally gave back a portion of their gains in October due to uncertainty in advance of U.S. elections. Meanwhile, prices of U.S. government securities began to decline in anticipation of higher inflation and short-term interest-rate hikes from U.S. monetary policymakers. After the election in early November, equity markets rallied to a series of new highs as investors revised their expectations for U.S. fiscal, regulatory, and tax policies. In the bond market, yields surged higher and prices fell after the election, while lower rated corporate-backed bonds continued to advance in anticipation of a more business-friendly political climate.
Some asset classes and industry groups seem likely to continue to benefit from a changing economic and geopolitical landscape, while others probably will face challenges as conditions evolve. Consequently, selectivity seems likely to be an important determinant of investment success in the months ahead. As always, we encourage you to discuss the implications of our observations with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Mark D. Santero
Chief Executive Officer
The Dreyfus Corporation
April 17, 2017
2
DISCUSSION OF FUND PERFORMANCE
For the period from October 1, 2016 through March 31, 2017, as provided by Portfolio Managers Elizabeth Slover, Michelle Y. Chan, CFA, and Julianne McHugh of The Boston Company, Sub-Investment Adviser; C. Wesley Boggs, William S. Cazalet, CAIA, Ronald P. Gala, CFA, Peter D. Goslin, CFA, and Syed A. Zamil, CFA, of Mellon Capital Management Corporation, Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended March 31, 2017, Dreyfus Diversified Emerging Markets Fund’s Class A shares produced a total return of 5.05%, Class C shares returned 4.58%, Class I shares returned 5.25%, and Class Y shares returned 5.28%.1 In comparison, the fund’s benchmark, the MSCI Emerging Markets Index (the “Index”), produced a total return of 6.80% for the same period.2
Emerging market equities gained ground during the reporting period in response to rising commodity prices, favorable currency movements, and improving local economies. The fund underperformed the Index, mainly due to lagging results from the defensively positioned Dreyfus Global Emerging Markets Fund (the “Newton Fund”).
As of March 9, 2017, C. Wesley Boggs and Syed A. Zamil of Mellon Capital Management Corporation became portfolio managers for the fund.
The Fund’s Investment Approach
The fund seeks long-term capital growth. To pursue its goal, the fund invests at least 80% of its assets 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 subadvisers 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 emerging market equity strategies employed by The Boston Company Asset Management, LLC (the “TBCAM Strategy”) and Mellon Capital Management Corporation (the “Mellon Capital Strategy”), each an affiliate of Dreyfus, and two affiliated underlying funds, the Newton Fund, which is sub-advised by Newton Investment Management (North America) Limited, an affiliate of Dreyfus, and Dreyfus Strategic Beta Emerging Markets Equity Fund (the “Mellon Capital Fund”), which is sub-advised by Mellon Capital Management Corporation.
Improved Economic Outlook Bolstered Emerging Markets
Early in the reporting period, uncertainties regarding the impact of the upcoming U.S. presidential election on global trade and prospects of tightening U.S. dollar liquidity led to a broad pullback in emerging market stocks. After the unexpected outcome of the election in November, concerns over changes to U.S. trade policy by a new presidential administration continued to take a toll on stock markets in Mexico and China. However, many other emerging markets responded positively to rebounding energy and commodity prices, and a
3
DISCUSSION OF FUND PERFORMANCE (continued)
general market rally persisted through the reporting period’s end. Weakness in the U.S. dollar during the opening months of 2017 further bolstered gains for emerging markets equities.
The energy and materials sectors led the Index’s advance due to rising demand and the recovery in commodity prices. In contrast, traditionally defensive consumer staples stocks fell out of favor when investors focused on more growth-oriented investments, and health care stocks struggled with highly publicized concerns regarding high drug prices.
Fund Participated in Market’s Gains
While the fund participated in most of the Index’s gains over the reporting period, relative results were dampened by the Newton Fund, where a relatively defensive investment posture limited participation in the benefits of a constructive market environment. Disappointing security selections in the financials and industrials sectors proved particularly counterproductive, as did overweighted exposure to health care stocks. Weakness in these areas was partly offset by relatively strong security selections in the consumer discretionary and consumer staples sectors.
The TBCAM Strategy produced results that were roughly in line with the Index, as favorable security selections among materials producers in India and Brazil were balanced by weaker returns from South Korean technology companies, a property finance company in Turkey, and a telecommunication services provider in Indonesia.
The fund’s quantitative strategies achieved attractive results compared to the Index. The Mellon Capital Strategy, which employs a composite alpha ranking process, produced especially strong returns in the information technology and materials sectors. From a country perspective, the strategy fared particularly well in India and Hong Kong. The Mellon Capital Fund’s strategic beta process added considerable value through strong stock selections across most market sectors, overweighted exposure to the energy and information technology sectors, a relatively heavy position in Brazil, and modestly underweighted exposure to China.
Positioned for Global Growth
We have seen evidence of economic improvement in most emerging markets, including more robust global demand for natural resources. Moreover, weaker currency values compared to the U.S. dollar appear likely to benefit exporters, and we continue to expect pro-growth fiscal policies in the United States to lend further support to global economic
4
conditions. While each of the fund’s four underlying strategies employs its own distinctive approach to investing in emerging-market equities, all report that they have continued to find opportunities that meet their investment criteria.
April 17, 2017
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 Dreyfus to allocate effectively the fund’s assets among investment strategies, subadvisers, 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, subadviser or underlying fund will achieve its particular investment objective.
Each subadviser makes investment decisions independently, and it is possible that the investment styles of the subadvisers 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 adviser or 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.
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 returns reflect the absorption of certain fund expenses by The Dreyfus Corporation pursuant to an agreement in effect through February 1, 2018, at which time it may be extended, terminated, or modified. Had these expenses not been absorbed, the fund’s returns would have been lower.
2 Source: Lipper Inc .— The MSCI Emerging Markets Index is a free float-adjusted market capitalization-weighted index that is designed to measure equity market performance of emerging markets. Investors cannot invest directly in any index.
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UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Diversified Emerging Markets Fund from October 1, 2016 to March 31, 2017. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment | ||||||||||||
assuming actual returns for the six months ended March 31, 2017 | ||||||||||||
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| Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† |
| $6.34 | $11.32 | $4.76 | $4.25 | |||||||
Ending value (after expenses) |
| $1,050.50 | $1,045.80 | $1,052.50 | $1,052.80 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment | |||||||||||
assuming a hypothetical 5% annualized return for the six months ended March 31, 2017 | |||||||||||
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| Class A | Class C | Class I | Class Y | ||||
Expenses paid per $1,000† | $6.24 | $11.15 | $4.68 | $4.18 | |||||||
Ending value (after expenses) | $1,018.75 | $1,013.86 | $1,020.29 | $1,020.79 |
† Expenses are equal to the fund’s annualized expense ratio of 1.24% for Class A, 2.22% for Class C, .93% for Class I and .83% for Class Y, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
6
STATEMENT OF INVESTMENTS
March 31, 2017 (Unaudited)
Common Stocks - 52.6% | Shares | Value ($) | |||
Brazil - 2.1% | |||||
Banco Bradesco | 31,500 | 322,486 | |||
BR Malls Participacoes | 3,770 | a | 17,449 | ||
CCR | 24,200 | 139,529 | |||
Cia de Saneamento Basico do Estado de Sao Paulo | 50,700 | 527,794 | |||
Cosan Industria e Comercio | 16,800 | 208,538 | |||
EcoRodovias Infraestrutura e Logistrica | 193,300 | 558,178 | |||
EDP - Energias do Brasil | 71,400 | 318,159 | |||
Fibria Celulose | 3,500 | 32,277 | |||
Petroleo Brasileiro, ADR | 86,487 | a | 797,410 | ||
Petroleo Brasileiro, ADR | 19,009 | a | 184,197 | ||
Qualicorp | 41,500 | 273,741 | |||
3,379,758 | |||||
Canada - .2% | |||||
Gran Tierra Energy | 116,127 | a,b | 306,575 | ||
Chile - .8% | |||||
Empresa Nacional de Telecomunicaciones | 33,486 | a | 405,953 | ||
Enel Generacion Chile | 445,800 | 334,805 | |||
Itau CorpBanca | 58,330,239 | 534,795 | |||
1,275,553 | |||||
China - 13.1% | |||||
Alibaba Group Holding, ADR | 25,209 | a | 2,718,286 | ||
Anhui Conch Cement, Cl. H | 152,500 | 518,047 | |||
ANTA Sports Products | 109,000 | 301,551 | |||
Baidu, ADR | 950 | a | 163,894 | ||
Bank of China, Cl. H | 3,067,000 | 1,523,338 | |||
Beijing Capital International Airport, Cl. H | 192,000 | 229,763 | |||
China Communications Services, Cl. H | 326,000 | 213,516 | |||
China Construction Bank, Cl. H | 1,678,000 | 1,349,482 | |||
China Evergrande Group | 44,000 | 40,764 | |||
China Huarong Asset Management, Cl. H | 877,000 | a,c | 358,857 | ||
China Life Insurance, Cl. H | 165,000 | 506,369 | |||
China Lodging Group, ADR | 11,678 | a | 724,620 | ||
China Medical System Holdings | 101,000 | 179,088 | |||
China Petroleum & Chemical, Cl. H | 198,000 | 160,510 | |||
China Southern Airlines, Cl. H | 352,000 | 243,680 | |||
China Vanke, Cl. H | 11,700 | 31,616 | |||
Chongqing Rural Commercial Bank, Cl. H | 535,000 | 361,417 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks - 52.6% (continued) | Shares | Value ($) | |||
China - 13.1% (continued) | |||||
Country Garden Holdings | 30,000 | 26,983 | |||
Geely Automobile Holdings | 275,000 | 421,090 | |||
Great Wall Motor, Cl. H | 347,500 | 395,725 | |||
Huaneng Renewables, Cl. H | 832,000 | 287,986 | |||
Industrial & Commercial Bank of China, Cl. H | 599,000 | 391,549 | |||
Jiangsu Expressway, Cl. H | 216,000 | 310,180 | |||
Longfor Properties | 7,500 | 12,334 | |||
People's Insurance Company Group of China, Cl. H | 812,000 | 336,440 | |||
PetroChina, Cl. H | 906,000 | 663,339 | |||
PICC Property & Casualty, Cl. H | 206,000 | 317,555 | |||
Ping An Insurance Group Company of China, Cl. H | 203,000 | 1,136,267 | |||
Shanghai Pharmaceuticals Holding, Cl. H | 267,500 | 700,460 | |||
Sino-Ocean Group Holding | 23,500 | 11,037 | |||
Sinopec Shanghai Petrochemical, Cl. H | 586,000 | 324,990 | |||
Sinopharm Group, Cl. H | 73,600 | 341,412 | |||
Sinotrans, Cl. H | 616,000 | 287,728 | |||
Sunny Optical Technology Group | 65,000 | 475,069 | |||
Tencent Holdings | 143,000 | 4,099,646 | |||
Weichai Power, Cl. H | 233,000 | 411,344 | |||
20,575,932 | |||||
Hong Kong - 1.2% | |||||
China Everbright International | 280,000 | 376,864 | |||
China Mobile | 111,000 | 1,214,765 | |||
China Overseas Land & Investment | 30,000 | 85,698 | |||
China Resources Land | 20,000 | 54,044 | |||
Haier Electronics Group | 48,000 | 109,940 | |||
Shanghai Industrial Holdings | 20,000 | 58,805 | |||
Shimao Property Holdings | 10,500 | 16,672 | |||
1,916,788 | |||||
Hungary - .5% | |||||
OTP Bank | 3,300 | 92,319 | |||
Richter Gedeon | 31,434 | 713,890 | |||
806,209 | |||||
India - 4.2% | |||||
Axis Bank | 52,850 | 397,783 | |||
Bajaj Finance | 21,000 | 375,042 | |||
Bharat Petroleum | 19,872 | 198,873 | |||
Bharti Infratel | 39,500 | 197,631 | |||
Hero MotoCorp | 4,300 | 213,358 |
8
Common Stocks - 52.6% (continued) | Shares | Value ($) | |||
India - 4.2% (continued) | |||||
Hindustan Petroleum | 31,000 | 249,267 | |||
ICICI Bank | 72,797 | 310,370 | |||
Infosys | 8,020 | 126,256 | |||
ITC | 116,439 | 502,623 | |||
Mahindra & Mahindra | 17,368 | 344,204 | |||
Power Finance | 136,686 | 307,115 | |||
Reliance Industries | 30,622 | 607,800 | |||
Tata Consultancy Services | 7,975 | 298,628 | |||
Tata Motors | 65,057 | 464,674 | |||
Tata Power | 198,400 | 268,851 | |||
UPL | 65,687 | 735,318 | |||
Vedanta | 254,927 | 1,001,834 | |||
6,599,627 | |||||
Indonesia - 1.2% | |||||
Bank Negara Indonesia | 597,600 | 290,380 | |||
Bank Rakyat Indonesia | 1,027,800 | 1,000,766 | |||
Bumi Serpong Damai | 2,183,400 | 308,860 | |||
Telekomunikasi Indonesia | 396,600 | 122,919 | |||
United Tractors | 80,000 | 159,093 | |||
1,882,018 | |||||
Malaysia - .3% | |||||
AirAsia | 89,200 | 63,290 | |||
Astro Malaysia Holdings | 75,100 | 46,497 | |||
DiGi.Com | 52,300 | 60,626 | |||
Public Bank | 37,200 | 167,276 | |||
Tenaga Nasional | 53,800 | 166,792 | |||
504,481 | |||||
Mexico - 1.8% | |||||
Alfa, Cl. A | 27,900 | 40,757 | |||
Arca Continental | 96,000 | 666,587 | |||
Fibra Uno Administracion | 13,100 | 22,397 | |||
Gruma, Cl. B | 28,570 | 403,716 | |||
Grupo Financiero Inbursa, Cl. O | 184,400 | 305,327 | |||
Grupo Financiero Interacciones, Cl. O | 106,900 | 496,751 | |||
OHL Mexico | 113,100 | 159,843 | |||
Promotora y Operadora de Infraestructura | 27,695 | a | 299,017 | ||
Wal-Mart de Mexico | 156,600 | 361,341 | |||
2,755,736 |
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STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks - 52.6% (continued) | Shares | Value ($) | |||
Panama - .3% | |||||
Copa Holdings, Cl. A | 4,413 | 495,359 | |||
Philippines - .5% | |||||
Ayala Land | 43,100 | 28,390 | |||
Globe Telecom | 2,295 | 92,944 | |||
Metropolitan Bank & Trust | 336,060 | 535,821 | |||
SM Investments | 2,500 | 34,728 | |||
SM Prime Holdings | 46,300 | 26,114 | |||
717,997 | |||||
Poland - 1.0% | |||||
KGHM Polska Miedz | 9,184 | 268,176 | |||
Polski Koncern Naftowy ORLEN | 6,409 | 161,611 | |||
Polskie Gornictwo Naftowe i Gazownictwo | 237,986 | 355,266 | |||
Powszechna Kasa Oszczednosci Bank Polski | 41,639 | a | 336,623 | ||
Powszechny Zaklad Ubezpieczen | 55,624 | 488,114 | |||
1,609,790 | |||||
Qatar - .2% | |||||
Ooredoo | 12,843 | 340,730 | |||
Qatar National Bank | 814 | 32,662 | |||
373,392 | |||||
Russia - 2.0% | |||||
Gazprom, ADR | 46,113 | 206,125 | |||
Lenta, GDR | 39,773 | a,c | 270,456 | ||
Lukoil, ADR | 4,647 | 246,105 | |||
MMC Norilsk Nickel, ADR | 4,700 | 73,884 | |||
Rosneft Oil Co., GDR | 88,349 | 502,706 | |||
Sberbank of Russia, ADR | 116,389 | 1,343,129 | |||
Sistema, GDR | 6,159 | 55,123 | |||
Surgutneftegas, ADR | 12,760 | 65,331 | |||
Tatneft, ADR | 7,450 | 274,533 | |||
Yandex, Cl. A | 5,530 | a | 121,273 | ||
3,158,665 | |||||
South Africa - 2.5% | |||||
AngloGold Ashanti, ADR | 24,917 | 268,356 | |||
Barclays Africa Group | 67,457 | 701,457 | |||
Barloworld | 42,816 | 380,729 | |||
Clicks Group | 38,897 | 371,393 | |||
Growthpoint Properties | 17,287 | 33,372 | |||
Investec | 12,200 | 83,169 | |||
Mondi | 5,400 | 129,008 |
10
Common Stocks - 52.6% (continued) | Shares | Value ($) | |||
South Africa - 2.5% (continued) | |||||
Naspers, Cl. N | 1,700 | 293,338 | |||
Redefine Properties | 20,861 | 17,120 | |||
Resilient REIT | 2,384 | 20,709 | |||
Sappi | 48,500 | 329,437 | |||
SPAR Group | 7,004 | 90,973 | |||
Standard Bank Group | 14,200 | 152,148 | |||
Steinhoff International Holdings | 27,620 | 132,107 | |||
Telkom | 53,573 | 299,605 | |||
Tsogo Sun Holdings | 127,200 | 262,056 | |||
Woolworths Holdings | 73,579 | 383,409 | |||
3,948,386 | |||||
South Korea - 8.8% | |||||
BGF retail | 1,828 | 171,636 | |||
CJ | 850 | 132,254 | |||
Coway | 4,898 | 421,343 | |||
DGB Financial Group | 17,200 | 166,878 | |||
Dongbu Insurance | 1,700 | 97,291 | |||
E-MART | 1,684 | 309,454 | |||
GS Holdings | 5,100 | 269,525 | |||
Hana Financial Group | 12,869 | 425,207 | |||
Hankook Tire | 14,735 | 718,106 | |||
Hanwha | 7,400 | 237,557 | |||
Hyosung | 1,883 | 228,156 | |||
Hyundai Development Co-Engineering & Construction | 2,025 | 73,608 | |||
Hyundai Mobis | 2,748 | 590,981 | |||
KB Financial Group | 6,120 | 268,157 | |||
KT | 3,396 | 96,872 | |||
KT&G | 8,133 | 709,083 | |||
KT, ADR | 20,908 | 351,882 | |||
LG Electronics | 2,200 | 133,578 | |||
LG Household & Health Care | 434 | 314,740 | |||
LG Uplus | 6,800 | 86,953 | |||
Lotte Chemical | 1,006 | 333,294 | |||
POSCO | 2,164 | 563,108 | |||
Samsung Card | 8,215 | 287,962 | |||
Samsung Electronics | 2,452 | 4,516,784 | |||
Samsung Fire & Marine Insurance | 1,405 | 336,708 | |||
Shinhan Financial Group | 15,639 | 651,683 | |||
SK Holdings | 890 | 193,790 |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks - 52.6% (continued) | Shares | Value ($) | |||
South Korea - 8.8% (continued) | |||||
SK Hynix | 12,373 | 558,738 | |||
SK Telecom | 890 | 200,554 | |||
Woori Bank | 28,600 | 332,469 | |||
13,778,351 | |||||
Taiwan - 6.5% | |||||
Advanced Semiconductor Engineering | 410,430 | 524,155 | |||
Airtac International Group | 47,000 | 462,371 | |||
Catcher Technology | 72,000 | 711,873 | |||
Cathay Financial Holding | 231,000 | 370,757 | |||
Chailease Holding | 44,000 | 102,813 | |||
CTBC Financial Holding | 706,000 | 436,269 | |||
First Financial Holding | 490,905 | 299,308 | |||
Formosa Chemicals & Fibre | 72,000 | 224,003 | |||
Hon Hai Precision Industry | 253,250 | 759,520 | |||
Hua Nan Financial Holdings | 636,000 | 355,284 | |||
Lite-On Technology | 141,000 | 243,035 | |||
Micro-Star International | 136,000 | 316,441 | |||
Phison Electronics | 18,000 | 161,654 | |||
Powertech Technology | 328,000 | 954,516 | |||
Realtek Semiconductor | 144,000 | 514,921 | |||
Taiwan Mobile | 23,000 | 84,518 | |||
Taiwan Semiconductor Manufacturing | 583,600 | 3,635,178 | |||
Uni-President Enterprises | 70,000 | 131,268 | |||
10,287,884 | |||||
Thailand - 1.0% | |||||
Glow Energy | 75,900 | 182,226 | |||
Indorama Ventures | 219,100 | 224,759 | |||
PTT, NVDR | 7,800 | 87,846 | |||
Siam Cement | 13,050 | 205,078 | |||
Siam Commercial Bank | 91,900 | 435,932 | |||
Thai Beverage | 579,900 | 389,682 | |||
1,525,523 | |||||
Turkey - 1.3% | |||||
Arcelik | 22,830 | 142,340 | |||
Emlak Konut Gayrimenkul Yatirim Ortakligi | 285,375 | 227,706 | |||
Enka Insaat ve Sanayi | 230,481 | 386,835 | |||
Ford Otomotiv Sanayi | 30,300 | 296,793 | |||
TAV Havalimananlari Holding | 49,300 | 196,552 | |||
Tupras Turkiye Petrol Rafinerileri | 14,658 | 363,783 |
12
Common Stocks - 52.6% (continued) | Shares | Value ($) | |||
Turkey - 1.3% (continued) | |||||
Turkiye Garanti Bankasi | 146,735 | 357,708 | |||
1,971,717 | |||||
United Arab Emirates - .6% | |||||
Abu Dhabi Commercial Bank | 74,771 | 138,431 | |||
Dubai Islamic Bank | 99,747 | 152,082 | |||
Emaar Properties | 291,583 | 579,530 | |||
870,043 | |||||
United States - 2.5% | |||||
iShares MSCI Chile Capped ETF | 24,768 | 1,078,894 | |||
iShares MSCI Emerging Markets ETF | 12,345 | 486,270 | |||
iShares MSCI Malaysia ETF | 49,923 | 1,521,653 | |||
iShares MSCI Philippines ETF | 26,959 | 920,919 | |||
4,007,736 | |||||
Total Common Stocks (cost $70,186,786) | 82,747,520 | ||||
Preferred Stocks - 2.3% | |||||
Brazil - 2.1% | |||||
Banco Bradesco | 53,712 | 555,547 | |||
Banco do Estado do Rio Grande do Sul, Cl. B | 70,600 | 340,980 | |||
Cia Energetica de Minas Gerais | 175,400 | 578,205 | |||
Cia Paranaense de Energia | 38,200 | 399,498 | |||
Itau Unibanco Holding | 55,429 | 671,040 | |||
Vale | 89,300 | 804,687 | |||
3,349,957 | |||||
Colombia - .1% | |||||
Grupo Aval Acciones y Valores | 130,123 | 52,955 | |||
South Korea - .1% | |||||
Samsung Electronics | 69 | 98,906 | |||
Taiwan - .0% | |||||
Cathay Financial Holding | 22,923 | a | 46,764 | ||
Total Preferred Stocks (cost $2,497,781) | 3,548,582 | ||||
Registered Investment Companies - 43.4% | |||||
United States - 43.4% | |||||
Dreyfus Global Emerging Markets Fund, Cl. Y | 3,679,584 | d,e | 54,972,978 | ||
Dreyfus Strategic Beta Emerging Markets Equity Fund, Cl. Y | 1,096,933 | e | 13,261,923 | ||
Total Registered Investment Companies (cost $58,312,408) | 68,234,901 |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Investment of Cash Collateral for Securities Loaned - .0% | Shares | Value ($) | |||
Registered Investment Company; | |||||
Dreyfus Institutional Preferred Money Market Fund, Hamilton Shares | 83,875 | f | 83,875 | ||
Total Investments (cost $131,080,850) | 98.3% | 154,614,878 | |||
Cash and Receivables (Net) | 1.7% | 2,749,502 | |||
Net Assets | 100.0% | 157,364,380 |
ADR—American Depository Receipt
ETF—Exchange-Traded Fund
GDR—Global Depository Receipt
NVDR—Non-Voting Depository Receipt
REIT—Real Estate Investment Trust
aNon-income producing security.
bSecurity, or portion thereof, on loan. At March 31, 2017, the value of the fund’s securities on loan was $80,520 and the value of the collateral held by the fund was $83,875.
cSecurity 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, 2017, these securities were valued at $629,313 or .4% of net assets.
dThe fund’s investment in the Dreyfus Global Emerging Markets Fund, Cl. Y represents 35.0% of the fund’s net assets. The Dreyfus Global Emerging Markets Fund, Cl. Y seeks to provide long-term capital appreciation.
eInvestment in affiliated mutual fund.
fInvestment in affiliated money market mutual fund.
Portfolio Summary (Unaudited) † | Value (%) |
Mutual Fund: Foreign | 43.4 |
Financials | 16.2 |
Information Technology | 13.3 |
Consumer Discretionary | 4.1 |
Materials | 4.0 |
Energy | 3.9 |
Industrials | 3.7 |
Consumer Staples | 3.0 |
Telecommunications | 2.4 |
Utilities | 1.9 |
Health Care | 1.4 |
Real Estate | 1.0 |
Money Market Investment | .0 |
98.3 |
† Based on net assets.
See notes to financial statements.
14
STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS March 31, 2017 (Unaudited)
Forward Foreign Currency Exchange Contracts | Foreign Currency | Cost ($) | Value ($) | Unrealized Appreciation ($) |
Purchases: | ||||
Credit Suisse International | ||||
Turkish Lira, | ||||
Expiring | ||||
4/3/2017 | 549,497 | 150,753 | 151,191 | 438 |
Gross Unrealized Appreciation | 438 |
See notes to financial statements.
15
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2017 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
|
| ||
Unaffiliated issuers |
| 72,684,567 |
| 86,296,102 |
| |
Affiliated issuers |
| 58,396,283 |
| 68,318,776 |
| |
Cash |
|
|
|
| 1,948,652 |
|
Cash denominated in foreign currency |
|
| 953,952 |
| 952,786 |
|
Receivable for investment securities sold |
|
|
|
| 1,214,101 |
|
Dividends and securities lending income receivable |
|
|
|
| 280,360 |
|
Receivable for shares of Beneficial Interest subscribed |
|
|
|
| 206,660 |
|
Unrealized appreciation on forward foreign |
|
|
|
| 438 |
|
Prepaid expenses |
|
|
|
| 46,258 |
|
|
|
|
|
| 159,264,133 |
|
Liabilities ($): |
|
|
|
| ||
Due to The Dreyfus Corporation and affiliates—Note 3(c) |
|
|
|
| 168,699 |
|
Payable for investment securities purchased |
|
|
|
| 1,410,060 |
|
Payable for shares of Beneficial Interest redeemed |
|
|
|
| 204,322 |
|
Liability for securities on loan—Note 1(c) |
|
|
|
| 83,875 |
|
Accrued expenses |
|
|
|
| 32,797 |
|
|
|
|
|
| 1,899,753 |
|
Net Assets ($) |
|
| 157,364,380 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 162,388,311 |
|
Accumulated distributions in excess of investment income—net |
|
|
|
| (69,688) |
|
Accumulated net realized gain (loss) on investments |
|
|
|
| (28,496,075) |
|
Accumulated net unrealized appreciation (depreciation) |
|
|
| 23,541,832 |
| |
Net Assets ($) |
|
| 157,364,380 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 1,001,155 | 39,184 | 1,905,784 | 154,418,257 |
|
Shares Outstanding | 47,885 | 1,974 | 91,575 | 7,410,430 |
|
Net Asset Value Per Share ($) | 20.91 | 19.85 | 20.81 | 20.84 |
|
See notes to financial statements. |
16
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2017 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends (net of $67,564 foreign taxes withheld at source): |
|
|
|
| ||
Unaffiliated issuers |
|
| 516,526 |
| ||
Affiliated issuers |
|
| 266,335 |
| ||
Income from securities lending—Note 1(c) |
|
| 7 |
| ||
Total Income |
|
| 782,868 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 441,070 |
| ||
Administration fee—Note 3(a) |
|
| 40,104 |
| ||
Registration fees |
|
| 34,068 |
| ||
Professional fees |
|
| 28,231 |
| ||
Custodian fees—Note 3(c) |
|
| 15,071 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 5,902 |
| ||
Prospectus and shareholders’ reports |
|
| 4,050 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 3,324 |
| ||
Loan commitment fees—Note 2 |
|
| 2,292 |
| ||
Distribution fees—Note 3(b) |
|
| 210 |
| ||
Miscellaneous |
|
| 34,586 |
| ||
Total Expenses |
|
| 608,908 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (24) |
| ||
Less—reduction in fees due to earnings credits—Note 3(c) |
|
| (515) |
| ||
Net Expenses |
|
| 608,369 |
| ||
Investment Income—Net |
|
| 174,499 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions: |
|
| ||||
Unaffiliated issuers |
|
|
| 1,949,126 |
| |
Affiliated issuers |
|
|
| (46,673) |
| |
Net realized gain (loss) on forward foreign currency exchange contracts | (18,320) |
| ||||
Net Realized Gain (Loss) |
|
| 1,884,133 |
| ||
Net unrealized appreciation (depreciation) on investments |
|
|
|
| ||
Unaffiliated issuers |
|
|
| 3,478,807 |
| |
Affiliated issuers |
|
|
| 1,912,169 |
| |
Net unrealized appreciation (depreciation) on |
|
| 438 |
| ||
Net Unrealized Appreciation (Depreciation) |
|
| 5,391,414 |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 7,275,547 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 7,450,046 |
| |||
See notes to financial statements. |
17
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Six Months Ended |
|
|
| Year Ended |
|
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 174,499 |
|
|
| 612,182 |
| |
Net realized gain (loss) on investments |
| 1,884,133 |
|
|
| (18,430,537) |
| ||
Net unrealized appreciation (depreciation) |
| 5,391,414 |
|
|
| 39,348,620 |
| ||
Net Increase (Decrease) in Net Assets | 7,450,046 |
|
|
| 21,530,265 |
| |||
Distributions to Shareholders from ($): |
|
|
|
|
|
|
|
| |
Investment income—net: |
|
|
|
|
|
|
|
| |
Class A |
|
| (706) |
|
|
| (5,152) |
| |
Class I |
|
| (6,480) |
|
|
| (5,449) |
| |
Class Y |
|
| (714,061) |
|
|
| (1,057,347) |
| |
Total Distributions |
|
| (721,247) |
|
|
| (1,067,948) |
| |
Beneficial Interest Transactions ($): |
|
|
|
|
|
|
|
| |
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 174,798 |
|
|
| 319,297 |
| |
Class C |
|
| - |
|
|
| 23,636 |
| |
Class I |
|
| 2,111,185 |
|
|
| 1,075,725 |
| |
Class Y |
|
| 19,536,690 |
|
|
| 65,099,939 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 706 |
|
|
| 5,152 |
| |
Class I |
|
| 5,849 |
|
|
| 4,990 |
| |
Class Y |
|
| 112,992 |
|
|
| 170,335 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (176,625) |
|
|
| (676,922) |
| |
Class C |
|
| (27,319) |
|
|
| (274,249) |
| |
Class I |
|
| (1,472,006) |
|
|
| (2,949,941) |
| |
Class Y |
|
| (19,776,375) |
|
|
| (121,057,786) |
| |
Increase (Decrease) in Net Assets | 489,895 |
|
|
| (58,259,824) |
| |||
Total Increase (Decrease) in Net Assets | 7,218,694 |
|
|
| (37,797,507) |
| |||
Net Assets ($): |
|
|
|
|
|
|
|
| |
Beginning of Period |
|
| 150,145,686 |
|
|
| 187,943,193 |
| |
End of Period |
|
| 157,364,380 |
|
|
| 150,145,686 |
| |
Undistributed (distributions in excess of) | (69,688) |
|
|
| 477,060 |
|
18
|
|
|
| Six Months Ended |
|
|
| Year Ended |
|
Capital Share Transactions (Shares): |
|
|
|
|
|
|
|
| |
Class A |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 9,087 |
|
|
| 18,059 |
| |
Shares issued for distributions reinvested |
|
| 38 |
|
|
| 296 |
| |
Shares redeemed |
|
| (8,873) |
|
|
| (37,669) |
| |
Net Increase (Decrease) in Shares Outstanding | 252 |
|
|
| (19,314) |
| |||
Class C |
|
|
|
|
|
|
|
| |
Shares sold |
|
| - |
|
|
| 1,450 |
| |
Shares redeemed |
|
| (1,423) |
|
|
| (15,716) |
| |
Net Increase (Decrease) in Shares Outstanding | (1,423) |
|
|
| (14,266) |
| |||
Class Ia |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 107,118 |
|
|
| 59,285 |
| |
Shares issued for distributions reinvested |
|
| 317 |
|
|
| 289 |
| |
Shares redeemed |
|
| (76,612) |
|
|
| (164,331) |
| |
Net Increase (Decrease) in Shares Outstanding | 30,823 |
|
|
| (104,757) |
| |||
Class Ya |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 999,359 |
|
|
| 3,702,351 |
| |
Shares issued for distributions reinvested |
|
| 6,111 |
|
|
| 9,840 |
| |
Shares redeemed |
|
| (1,029,186) |
|
|
| (6,966,813) |
| |
Net Increase (Decrease) in Shares Outstanding | (23,716) |
|
|
| (3,254,622) |
| |||
aDuring the period ended March 31, 2017, 104,048 Class Y shares representing $2,053,287 were exchanged for 104,188 Class I shares and during the period ended September 30, 2016, 51,105 Class Y shares representing $928,807 were exchanged for 51,169 Class I shares. | |||||||||
See notes to financial statements. |
19
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
Six Months Ended | |||||||||
March 31, 2017 | Year Ended September 30, | ||||||||
Class A Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 | |||
Per Share Data ($): | |||||||||
Net asset value, beginning of period | 19.92 | 17.23 | 21.34 | 20.58 | 19.78 | 21.86 | |||
Investment Operations: | |||||||||
Investment income (loss)—neta | (.02) | .02 | .09 | .05 | .23 | .07 | |||
Net realized and unrealized | 1.03 | 2.72 | (3.88) | .98 | .57 | 2.15 | |||
Total from Investment Operations | 1.01 | 2.74 | (3.79) | 1.03 | .80 | 2.22 | |||
Distributions: | |||||||||
Dividends from investment | (.02) | (.08) | (.13) | (.28) | – | (.08) | |||
Dividends from net realized gain | — | — | (.20) | — | — | (4.22) | |||
Total Distributions | (.02) | (.08) | (.33) | (.28) | — | (4.30) | |||
Proceeds from redemption | .00b | .03 | .01 | .01 | — | — | |||
Net asset value, end of period | 20.91 | 19.92 | 17.23 | 21.34 | 20.58 | 19.78 | |||
Total Return (%)c | 5.05d | 16.20 | (18.00) | 5.14 | 3.99 | 12.48 | |||
Ratios/Supplemental Data (%): | |||||||||
Ratio of total expenses | 1.24e,f | 1.39f | 1.42f | 4.80f | 6.20 | 5.55 | |||
Ratio of net expenses | 1.24e,f | 1.39f | 1.42f | 1.60f | 1.60 | 2.25 | |||
Ratio of net investment income (loss) | (.17)e,f | .10f | .47f | .22f | 1.10 | .36 | |||
Portfolio Turnover Rate | 28.50d | 62.91 | 78.32 | 128.76 | 67.74 | 70.79 | |||
Net Assets, end of period ($ x 1,000) | 1,001 | 949 | 1,153 | 209 | 130 | 107 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
f Amount does not include the expenses of the underlying funds.
See notes to financial statements.
20
Six Months Ended | |||||||
March 31, 2017 | Year Ended September 30, | ||||||
Class C Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 18.98 | 16.50 | 20.44 | 19.60 | 18.98 | 21.23 | |
Investment Operations: | |||||||
Investment income (loss)—neta | (.11) | (.13) | .04 | (.16) | .04 | (.14) | |
Net realized and unrealized | .98 | 2.58 | (3.79) | .99 | .58 | 2.14 | |
Total from Investment Operations | .87 | 2.45 | (3.75) | .83 | .62 | 2.00 | |
Distributions: | |||||||
Dividends from investment | — | — | — | — | — | (.03) | |
Dividends from net realized gain | — | — | (.20) | — | — | (4.22) | |
Total Distributions | — | — | (.20) | — | — | (4.25) | |
Proceeds from redemption | .00b | .03 | .01 | .01 | — | — | |
Net asset value, end of period | 19.85 | 18.98 | 16.50 | 20.44 | 19.60 | 18.98 | |
Total Return (%)c | 4.58d | 15.03 | (18.44) | 4.34 | 3.21 | 11.63 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | 2.31e,f | 2.23f | 2.08f | 6.10f | 6.62 | 5.79 | |
Ratio of net expenses | 2.22e,f | 2.23f | 2.08f | 2.35f | 2.35 | 3.00 | |
Ratio of net investment income (loss) | (1.13)e,f | (.74)f | .22f | (.77)f | .22 | (.69) | |
Portfolio Turnover Rate | 28.50d | 62.91 | 78.32 | 128.76 | 67.74 | 70.79 | |
Net Assets, end of period ($ x 1,000) | 39 | 64 | 291 | 69 | 76 | 91 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
f Amount does not include the expenses of the underlying funds.
See notes to financial statements.
21
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||
March 31, 2017 | Year Ended September 30, | ||||||
Class I Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 19.86 | 17.16 | 21.16 | 20.45 | 19.60 | 21.82 | |
Investment Operations: | |||||||
Investment income (loss)—neta | .02 | .02 | .16 | (.30) | .26 | .24 | |
Net realized and unrealized | 1.01 | 2.75 | (3.79) | 1.34 | .59 | 2.10 | |
Total from Investment Operations | 1.03 | 2.77 | (3.63) | 1.04 | .85 | 2.34 | |
Distributions: | |||||||
Dividends from investment | (.08) | (.10) | (.18) | (.34) | — | (.34) | |
Dividends from net realized gain | — | — | (.20) | — | — | (4.22) | |
Total Distributions | (.08) | (.10) | (.38) | (.34) | — | (4.56) | |
Proceeds from redemption | .00b | .03 | .01 | .01 | — | — | |
Net asset value, end of period | 20.81 | 19.86 | 17.16 | 21.16 | 20.45 | 19.60 | |
Total Return (%) | 5.25c | 16.45 | (17.44) | 5.32 | 4.23 | 13.36 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | .93d,e | 1.11e | .99e | 3.57e | 5.39 | 4.66 | |
Ratio of net expenses | .93d,e | 1.11e | .99e | 1.35e | 1.35 | 1.50 | |
Ratio of net investment income (loss) | .16d,e | .12e | .83e | (.63)e | 1.27 | 1.19 | |
Portfolio Turnover Rate | 28.50c | 62.91 | 78.32 | 128.76 | 67.74 | 70.79 | |
Net Assets, end of period ($ x 1,000) | 1,906 | 1,207 | 2,840 | 748 | 3,359 | 4,291 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Not annualized.
d Annualized.
e Amount does not include the expenses of the underlying funds.
See notes to financial statements.
22
Six Months Ended | ||||||||
March 31, 2017 | Year Ended September 30, | |||||||
Class Y Shares | (Unaudited) | 2016 | 2015 | 2014a | ||||
Per Share Data ($): | ||||||||
Net asset value, beginning of period | 19.90 | 17.18 | 21.20 | 19.03 | ||||
Investment Operations: | ||||||||
Investment income—netb | .02 | .07 | .17 | .14 | ||||
Net realized and unrealized gain (loss) | 1.02 | 2.74 | (3.82) | 2.02 | ||||
Total from Investment Operations | 1.04 | 2.81 | (3.65) | 2.16 | ||||
Distributions: | ||||||||
Dividends from investment income—net | (.10) | (.12) | (.18) | — | ||||
Dividends from net realized gain | — | — | (.20) | — | ||||
Total Distributions | (.10) | (.12) | (.38) | — | ||||
Proceeds from redemption fees—Note 3(e) | .00c | .03 | .01 | .01 | ||||
Net asset value, end of period | 20.84 | 19.90 | 17.18 | 21.20 | ||||
Total Return (%) | 5.28d | 16.64 | (17.44) | 11.40d | ||||
Ratios/Supplemental Data (%): | ||||||||
Ratio of total expenses to average net assetse | .83f | 1.01 | .93 | 1.29f | ||||
Ratio of net expenses to average net assetse | .83f | 1.01 | .93 | 1.29f | ||||
Ratio of net investment income | .24f | .42 | .84 | 1.03f | ||||
Portfolio Turnover Rate | 28.50d | 62.91 | 78.32 | 128.76 | ||||
Net Assets, end of period ($ x 1,000) | 154,418 | 147,926 | 183,659 | 187,879 |
a From the close of business on January 31, 2014 (commencement of initial offering) to September 30, 2014.
b Based on average shares outstanding.
c Amount represents less than $.01 per share.
d Not annualized.
e Amount does not include the expenses of the underlying funds.
f Annualized.
See notes to financial statements.
23
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus Diversified Emerging Markets Fund (the “fund”) is a separate diversified series of Dreyfus Investment Funds (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. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Mellon Capital Management Corporation (“Mellon Capital”) and The Boston Company Asset Management, LLC (“TBCAM”), each a wholly-owned subsidiary of BNY Mellon and an affiliate of Dreyfus, serve as the fund’s sub-investment advisers.
Effective March 31, 2017, the fund authorized the issuance of Class T shares, but, as of the date of this report, the fund did not offer Class T shares for purchase.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 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 T. Class A, Class C and Class T shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A and Class T shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I 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 Dreyfus, 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
24
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 is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
(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).
25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant 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 reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the 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.
26
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward foreign currency exchange contracts (“forward contracts”) are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of March 31, 2017 in 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 – Foreign | 78,739,784 | — | — | 78,739,784 | |
Equity Securities - Foreign | 3,548,582 | — | — | 3,548,582 | |
Exchange-Traded Funds | 4,007,736 | — | — | 4,007,736 | |
Registered Investment Companies | 68,318,776 | — | — | 68,318,776 | |
Other Financial Instruments: | |||||
Forward Foreign Currency Exchange Contracts†† | — | 438 | — | 438 |
† See Statement of Investments for additional detailed categorizations.
†† Amount shown represents unrealized appreciation at period end.
At September 30, 2016, $74,667,823 of exchange traded foreign equity securities were classified within Level 2 of the fair value hierarchy 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 received or paid. Net unrealized foreign exchange gains and losses arise
27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by Dreyfus, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended March 31, 2017, The Bank of New York Mellon earned $2 from lending portfolio securities, pursuant to the securities lending agreement.
(d) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended March 31, 2017 were as follows:
28
Affiliated Investment Company | Value 9/30/2016 ($) | Purchases ($) | † | Sales ($) | Net Realized Gain (Loss) ($) |
Dreyfus Global Emerging Markets Fund, Cl. Y | 54,484,482 | 3,047,470 | 3,542,942 | (83,805) | |
Dreyfus Institutional Preferred Money Market Fund, Hamilton Shares | — | 323,779 | 239,904 | — | |
Dreyfus Strategic Beta Emerging Markets Equity Fund, Cl. Y | 12,259,823 | 1,006,307 | 885,735 | 37,132 | |
Total | 66,744,305 | 4,377,556 | 4,668,581 | (46,673) |
Affiliated Investment Company | Change in Net Unrealized Appreciation (Depreciation) ($) | Value 3/31/2017 ($) | Net Assets (%) | Dividends/ Distributions ($) |
Dreyfus Global Emerging Markets Fund, Cl. Y | 1,067,773 | 54,972,978 | 35.0 | 17,516 |
Dreyfus Institutional Preferred Money Market Fund, Hamilton Shares | — | 83,875 | .0 | — |
Dreyfus Strategic Beta Emerging Markets Equity Fund, Cl. Y | 844,396 | 13,261,923 | 8.4 | 248,819 |
Total | 1,912,169 | 68,318,776 | 43.4 | 266,335 |
† Includes reinvested dividends/distributions.
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S.
(f) Dividends 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
29
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended March 31, 2017, 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, 2017, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2016 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010, 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 $27,601,431 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to September 30, 2016. The fund has $14,531,369 of short-term capital losses and $13,070,062 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, 2016 was as follows: ordinary income $1,067,948. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in an $810 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. Prior to October 5, 2016, the unsecured credit facility with Citibank, N.A. was $555 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time
30
of borrowing. During the period ended March 31, 2017, 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 Dreyfus, 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. Dreyfus had contractually agreed, from October 1, 2016 through February 1, 2017, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the expenses of Class A, C, I and Y shares (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings, acquired fund fees and expenses of the underlying fund and extraordinary expenses) did not exceed 1.35%, 1.35%, 1.35% and 1.30% of the value of the respective class’ average daily net assets. Dreyfus has also contractually agreed, from February 2, 2017 through February 1, 2018, to waive receipt of its fees and/or assume the expenses of the fund, so that the expenses of the fund (excluding certain expenses as described above) do not exceed 1.30% of the value of the fund’s average daily net assets. The reduction in expenses, pursuant to the undertaking, amounted to $24 during the period ended March 31, 2017.
Pursuant to separate sub-investment advisory agreements between Dreyfus, TBCAM and Mellon Capital, each serves as the fund’s sub-investment adviser responsible for the day-to-day management of a portion of the fund’s portfolio. Dreyfus pays each sub-investment adviser a monthly fee at an annual percentage of the value of the fund’s average daily net assets. Dreyfus has obtained an exemptive order from the SEC (the “Order”), upon which the fund may rely, to use a manager of managers approach that permits Dreyfus, subject to certain conditions and approval by the Board, to enter into and materially amend sub-investment advisory agreements with one or more sub-investment advisers who are either unaffiliated with Dreyfus or are wholly-owned subsidiaries (as defined under the Act) of Dreyfus’ ultimate parent company, BNY Mellon, without obtaining shareholder approval. The Order also allows the fund to disclose the sub-investment advisory fee paid by Dreyfus to 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
31
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
disclose the sub-investment advisory fee payable by Dreyfus separately to a sub-investment adviser that is a wholly-owned subsidiary of BNY Mellon in documents filed with the SEC and provided to shareholders; such fees are to be aggregated with fees payable to Dreyfus. Dreyfus has ultimate responsibility (subject to oversight by the Board) to supervise any sub-investment adviser and recommend the hiring, termination, and replacement of any sub-investment adviser to the Board.
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with Dreyfus, whereby Dreyfus performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate Dreyfus 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 Dreyfus for this service, Dreyfus has contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both Dreyfus’ costs in providing these services and a reasonable allocation of the costs incurred by Dreyfus and its affiliates related to the support and oversight of these services. The fund also reimburses Dreyfus for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration Agreement, the fund was charged $40,104 during the period ended March 31, 2017.
During the period ended March 31, 2017, the Distributor retained $395 from commissions earned on sales of the fund’s Class A shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended March 31, 2017, Class C shares were charged $210 pursuant to the Distribution Plan.
(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service
32
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, 2017, Class A and Class C shares were charged $1,181 and $70, 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 as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended March 31, 2017, the fund was charged $1,076 for transfer agency services and $48 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $43.
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, 2017, the fund was charged $15,071 pursuant to the custody agreement. These fees were partially offset by earnings credits of $472.
During the period ended March 31, 2017, the fund was charged $5,777 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $77,876, administration fees $7,080, Distribution Plan fees $25, Shareholder Services Plan fees $224, custodian fees $77,236, Chief Compliance Officer fees $5,777 and transfer agency fees $492, which are
33
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
offset again an expense reimbursement currently in effect in the amount of $11.
(d) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
(e) A 2% redemption fee is charged and retained by the fund on certain shares redeemed within sixty days following the date of issuance subject to certain exceptions, including redemptions made through use of the fund’s exchange privilege. During the period ended March 31, 2017, redemption fees charged and retained by the fund amounted to $23,246.
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, 2017, amounted to $41,346,400 and $42,859,264, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. Each type of derivative instrument that was held by the fund during the period ended March 31, 2017 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,
34
if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. Forward contracts open at March 31, 2017 are set forth in the Statement of Forward Foreign Currency Exchange Contracts.
The following summarizes the average market value of derivatives outstanding during the period ended March 31, 2017:
|
| Average Market Value ($) |
Forward contracts | 87,881 | |
At March 31, 2017, accumulated net unrealized appreciation on investments was $23,534,028, consisting of $25,123,779 gross unrealized appreciation and $1,589,751 gross unrealized depreciation.
At March 31, 2017, 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).
35
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 22-23, 2017, the Board considered the renewal of the fund’s Investment Advisory Agreement and Administration Agreement, pursuant to which Dreyfus provides the fund with investment advisory and administrative services (together, the “Management Agreement”), and the Sub-Investment Advisory Agreements (the “Sub-Investment Advisory Agreements” and, collectively with the Management Agreement, the “Agreements”), with each of The Boston Company Asset Management LLC (“TBCAM”) and Mellon Capital Management Corporation (“Mellon Capital,” and, together with TBCAM, the “Subadvisers”) pursuant to which each Subadviser serves as a sub-investment adviser and provides day-to-day management of a portion 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 Dreyfus and the Subadvisers. In considering the renewal of the Agreements, the Board considered all factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
A representative of Dreyfus reminded the Board that the fund uses a “manager of managers” approach by selecting one or more experienced investment managers to serve as subadvisers 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 emerging market equity strategies employed by TBCAM and Mellon Capital, each an affiliate of Dreyfus, and two affiliated underlying funds, Dreyfus Global Emerging Markets Fund (the “Newton Fund”), which is sub-advised by Newton Investment Management (North America) Limited, an affiliate of Dreyfus, and Dreyfus Strategic Beta Emerging Markets Fund, which is sub-advised by Mellon Capital.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board
36
also considered Dreyfus’ extensive administrative, accounting and compliance infrastructures, as well as Dreyfus’ supervisory activities over the Subadvisers. 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 comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended December 31, 2016, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. Dreyfus 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 was reminded that, prior to January 31, 2014, the fund did not use a “manager of managers” or “fund of funds” approach and the fund’s investment strategies were different than the strategies currently in place. The Board noted that different investment strategies may lead to different performance results and that the fund’s performance for periods prior to the Effective Date reflects the investment strategy in effect prior to that date.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds. The Board discussed with representatives of Dreyfus, its affiliates and/or the Sub-Adviser the results of the comparisons and considered that the fund’s total return performance (Class Y and/or Class I shares) was above the Performance Group and Performance Universe medians for the various periods, except for the 1- and 2-year periods when the fund’s performance was below and slightly below, respectively, the Performance Universe median. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was above the Expense Group median while the fund’s actual management fee and expense ratio were below the Expense Group and the Expense Universe medians. The Board was reminded that no investment advisory fee or administration fee are applied to the portion of the fund’s average daily net assets allocated to affiliated and unaffiliated open-end and closed-end funds, including the Newton Fund and the Mellon Capital Fund.
37
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
Dreyfus representatives stated that Dreyfus has contractually agreed, until February 1, 2018, to waive receipt of its fees and/or assume the expenses of the fund so that the expenses of the fund (excluding Rule 12b-1 fees, shareholder services fees, acquired fund fees and expenses incurred by underlying funds, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed 1.30% of the fund’s daily net assets. Dreyfus representatives also noted that, in connection with the Administration Agreement and its related fees, Dreyfus has contractually agreed to waive its fees to the extent that such fees exceed Dreyfus’ costs in providing the services contemplated under the Administration Agreement.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Broadridge category as the fund and (2) paid to Dreyfus or the Subadvisers 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.
The Board considered the fee to the Subadvisers in relation to the fee paid to Dreyfus by the fund and the respective services provided by the Subadvisers and Dreyfus. The Board also took into consideration that the Subadvisers’ fee is paid by Dreyfus (out of its fee from the fund) and not the fund.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex. The consulting firm also had analyzed where any economies of scale might emerge in 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 Dreyfus and the Subadvisers, 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 Dreyfus, and not the fund, pays the Subadvisers pursuant to the Sub-Investment Advisory Agreements, the Board did not consider the Subadvisers’ profitability to be relevant to its deliberations. Dreyfus
38
representatives 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 Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also stated that, as a result of shared and allocated costs among funds in the Dreyfus 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 Dreyfus 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 Dreyfus and the Subadvisers are adequate and appropriate.
· The Board generally was satisfied with the fund’s performance.
· The Board concluded that the fees paid to Dreyfus and the Subadvisers supported the renewal of the Agreements in light of the considerations described above.
· The Board determined that the fee charged by Dreyfus under the Agreement was for services in addition to, and not duplicative of, services provided under the advisory contracts of the underlying funds in which the fund invested.
· The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus in connection with the fee rate charged to the fund pursuant to the Agreements 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 Dreyfus and its affiliates and the Subadvisers, of Dreyfus and the Subadvisers and the services provided to the fund by Dreyfus and the Subadvisers. 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 this fund had the benefit of a number of years of reviews of the Agreements for the
39
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, during which lengthy discussions took place between the Board and Dreyfus representatives. 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 Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
40
NOTES
41
Dreyfus Diversified Emerging Markets Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Sub-Investment Adviser
Mellon Capital Management Corporation
50 Fremont Street, Suite 3900
San Francisco, CA 94105
The Boston Company Asset Management, LLC
BNY Mellon Center One Boston Place
Boston, MA 02108
Custodian
The Bank of New York Mellon
225 Liberty Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
Ticker Symbols: | Class A: DBEAX Class C: DBECX Class I: SBCEX Class Y: SBYEX |
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. (phone 1-800-SEC-0330 for information).
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.dreyfus.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
© 2017 MBSC Securities Corporation |
Dreyfus/Newton International Equity Fund
SEMIANNUAL REPORT |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
With Those of Other Funds | |
Currency Exchange Contracts | |
the Fund’s Investment Advisory, | |
Administration and Sub-Investment | |
Advisory Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE CEO OF DREYFUS
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus/Newton International Equity Fund, covering the six-month period from October 1, 2016 through March 31, 2017. 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.
Stocks advanced solidly but bonds lost a degree of value over the reporting period amid heightened market volatility stemming from various economic and political developments. After previously rallying in response to stabilizing commodity prices, improving global economic data, and better-than-expected corporate earnings, stocks and corporate-backed bonds generally gave back a portion of their gains in October due to uncertainty in advance of U.S. elections. Meanwhile, prices of U.S. government securities began to decline in anticipation of higher inflation and short-term interest-rate hikes from U.S. monetary policymakers. After the election in early November, equity markets rallied to a series of new highs as investors revised their expectations for U.S. fiscal, regulatory, and tax policies. In the bond market, yields surged higher and prices fell after the election, while lower rated corporate-backed bonds continued to advance in anticipation of a more business-friendly political climate.
Some asset classes and industry groups seem likely to continue to benefit from a changing economic and geopolitical landscape, while others probably will face challenges as conditions evolve. Consequently, selectivity seems likely to be an important determinant of investment success in the months ahead. As always, we encourage you to discuss the implications of our observations with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Mark D. Santero
Chief Executive Officer
The Dreyfus Corporation
April 17, 2017
2
DISCUSSION OF FUND PERFORMANCE
For the period from October 1, 2016 through March 31, 2017, as provided by Portfolio Managers Paul Markham and Jeff Munroe, of Newton Investment Management (North America) Limited, Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended March 31, 2017, Dreyfus/Newton International Equity Fund’s Class A shares produced a total return of 2.35%, Class C shares returned 1.93%, Class I shares returned 2.49%, and Class Y shares returned 2.51%.1,2 In comparison, the fund’s benchmark, the MSCI EAFE Index (the “Index”), produced a total return of 6.48% for the same period.3
International equities produced moderate gains over the reporting period due to improving global economic data and expectations of more business-friendly policies from a new presidential administration in the United States. The fund lagged the Index, mainly due to underweighted exposure to the financials sector and overweighted positions in consumer staples stocks.
The Fund’s Investment Approach
The fund seeks long-term growth of capital. The fund normally invests at least 80% of its assets in common stocks, securities convertible into common stocks of foreign companies, and in depositary receipts evidencing ownership in such securities. The core of the investment philosophy of Newton Investment Management (North America) 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 have created an extreme valuation, and the valuation of a company has become expensive against its peers.
Improved Investor Sentiment Bolstered International Stocks
International equities generally fared well over the reporting period in anticipation of higher levels of global economic growth stemming in part from more business-friendly fiscal, regulatory, and tax policies under a newly elected U.S. government. Although the election’s widely unexpected outcome caused the Index to decline in the weeks following the vote in November, improved investor sentiment later sparked a market rally that persisted through the end of the reporting period.
The Index’s gains over the reporting period were driven by especially strong results from the financials sector, as banks in Japan benefited from rising interest rates and higher lending margins, and a depreciating local currency helped support revenues and earnings of capital markets companies, including investment banks and brokerage firms. The materials sector gained value as commodity prices stabilized and demand increased for construction materials in China. The industrials sector climbed in anticipation of greater government spending on infrastructure projects. On the other hand, traditionally defensive, income-oriented stocks in the consumer staples, telecommunication services, real estate, and utilities sectors fell out of favor as interest rates climbed and investors shifted their focus to more growth-oriented investments. In the second half of the reporting period, higher bond yields were a negative to high-yielding sectors, such as consumer staples, and positive to the financial’s sector’s commercial banks’ spread-based businesses.
3
DISCUSSION OF FUND PERFORMANCE (continued)
Defensive Positioning Dampened Relative Results
The fund’s performance compared to the Index was undermined during the reporting period by its relatively conservative investment posture in a rallying market. Most notably, a substantially underweighted allocation to financial stocks and overweighted exposure to traditionally defensive consumer staples companies weighed on relative results. Our security selection strategy also produced some disappointments, particularly among consumer-related companies such as Japan Tobacco, which faced falling sales volumes and intensifying competitive pressures in its domestic market. German real estate company LEG Immobilien, Israeli drugmaker Teva Pharmaceutical Industries, and Japanese pharmacy distributor Sugi Holdings also trailed market averages.
The fund achieved better relative results through a lack of exposure to the utilities sector, which fell out of favor when investors turned away from low-growth, dividend-paying stocks. Despite the fund’s relatively low allocation to financial stocks, successful security selections included The Royal Bank of Scotland and Barclays in the United Kingdom. Other top performers for the reporting period were Hong Kong-based sofa manufacturer Man Wah Holdings and Swiss biopharmaceutical developer Actelion.
At times during the reporting period, we employed forward contracts to hedge the fund’s positions in certain currencies.
Maintaining a Cautious Perspective
Recent market moves suggest greater market optimism regarding the prospects for global economic growth, but it appears to us that the data remain mixed. We also are aware that recent stock market trends have not moved according to many analysts’ earlier expectations, and we are skeptical that inflation and interest rates can move substantially higher in light of today’s profound advances in technology, changing demographics, and generationally cheap money.
Therefore, while we significantly reduced the fund’s exposure to the consumer staples sector and increased its allocation to the financials and energy sectors over the reporting period, we have retained overweighted exposure to the consumer staples, information technology, health care, and consumer discretionary sectors. In contrast, the fund held relatively light positions in the materials, financials, utilities, and real estate sectors.
April 17, 2017
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 use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets. Derivatives can be highly volatile, illiquid, difficult to value, and there is the risk that changes in the value of a derivative held by the fund will not correlate with the underlying instruments or the fund’s other investments.
1 The Dreyfus Corporation (Dreyfus) serves as the investment adviser for the fund. Newton Investment Management North America 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.
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. Investors cannot invest directly in any index.
4
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus/Newton International Equity Fund from October 1, 2016 to March 31, 2017. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment | ||||||||||
assuming actual returns for the six months ended March 31, 2017 | ||||||||||
Class A | Class C | Class I | Class Y | |||||||
Expenses paid per $1,000† |
| $6.36 | $10.37 | $4.90 | $4.54 | |||||
Ending value (after expenses) |
| $1,023.50 | $1,019.30 | $1,024.90 | $1,025.10 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment | ||||||||
assuming a hypothetical 5% annualized return for the six months ended March 31, 2017 | ||||||||
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $6.34 | $10.35 | $4.89 | $4.53 | ||||
Ending value (after expenses) | $1,018.65 | $1,014.66 | $1,020.09 | $1,020.44 |
† Expenses are equal to the fund's annualized expense ratio of 1.26% for Class A, 2.06% for Class C, .97% for Class I and .90% for Class Y, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
March 31, 2017 (Unaudited)
Common Stocks - 95.9% | Shares | Value ($) | |||
Australia - .8% | |||||
Dexus Property Group | 1,096,154 | 8,182,004 | |||
China - 3.1% | |||||
Baidu, ADR | 92,862 | a | 16,020,552 | ||
China Biologic Products | 144,496 | a | 14,468,384 | ||
30,488,936 | |||||
France - 6.0% | |||||
BNP Paribas | 231,133 | 15,393,579 | |||
L'Oreal | 61,377 | 11,795,714 | |||
Total | 364,896 | 18,457,343 | |||
Vivendi | 753,528 | 14,650,460 | |||
60,297,096 | |||||
Georgia - 1.0% | |||||
TBC Bank Group | 532,284 | a | 9,983,451 | ||
Germany - 10.2% | |||||
Bayer | 104,766 | 12,076,176 | |||
Hella KGaA Hueck & Co. | 302,489 | 13,399,961 | |||
Infineon Technologies | 1,353,869 | 27,651,349 | |||
LEG Immobilien | 122,635 | a | 10,052,778 | ||
MTU Aero Engines | 56,897 | 7,402,109 | |||
SAP | 165,347 | 16,224,602 | |||
Telefonica Deutschland Holding | 3,086,333 | 15,310,171 | |||
102,117,146 | |||||
Hong Kong - 4.2% | |||||
AIA Group | 3,274,112 | 20,643,568 | |||
Man Wah Holdings | 26,605,600 | 21,122,892 | |||
41,766,460 | |||||
India - 2.1% | |||||
HDFC Bank, ADR | 137,756 | 10,362,006 | |||
Indiabulls Housing Finance | 690,313 | 10,355,473 | |||
20,717,479 | |||||
Ireland - 2.2% | |||||
CRH | 623,727 | 21,959,191 | |||
Israel - 1.3% | |||||
Teva Pharmaceutical Industries, ADR | 408,945 | 13,123,045 | |||
Japan - 24.8% | |||||
Bridgestone | 470,600 | 19,034,508 | |||
Don Quijote Holdings | 663,200 | 22,994,269 |
6
Common Stocks - 95.9% (continued) | Shares | Value ($) | |||
Japan - 24.8% (continued) | |||||
FANUC | 71,300 | 14,614,803 | |||
Japan Airlines | 474,286 | 15,021,400 | |||
Japan Tobacco | 717,000 | 23,301,051 | |||
M3 | 370,500 | 9,195,109 | |||
Recruit Holdings | 322,271 | 16,442,103 | |||
Skylark | 792,100 | 11,604,375 | |||
SoftBank Group | 191,200 | 13,502,330 | |||
Sony | 393,300 | 13,304,301 | |||
Sugi Holdings | 383,700 | 17,611,668 | |||
Suntory Beverage & Food | 404,200 | 17,027,737 | |||
TechnoPro Holdings | 637,600 | 24,597,970 | |||
Topcon | 854,200 | 15,283,988 | |||
Toyota Motor | 271,100 | 14,712,891 | |||
248,248,503 | |||||
Mexico - 1.9% | |||||
Fomento Economico Mexicano, ADR | 132,878 | 11,762,361 | |||
Grupo Financiero Santander Mexico, Cl. B, ADR | 847,274 | 7,650,884 | |||
19,413,245 | |||||
Netherlands - 7.4% | |||||
Intertrust | 453,938 | b | 8,707,040 | ||
RELX | 953,353 | 17,655,815 | |||
Unilever | 298,625 | 14,835,996 | |||
Wolters Kluwer | 794,601 | 33,029,964 | |||
74,228,815 | |||||
Norway - 1.8% | |||||
DNB | 1,132,592 | 17,952,735 | |||
Portugal - 1.1% | |||||
Galp Energia | 697,170 | 10,579,747 | |||
Switzerland - 7.3% | |||||
Actelion | 45,254 | a | 12,749,642 | ||
Credit Suisse Group | 1,030,738 | a | 15,332,697 | ||
Novartis | 295,249 | 21,915,602 | |||
Roche Holding | 91,664 | 23,409,026 | |||
73,406,967 | |||||
United Kingdom - 20.7% | |||||
Associated British Foods | 501,074 | 16,360,319 | |||
Barclays | 9,724,979 | 27,427,085 | |||
British American Tobacco | 272,617 | 18,102,739 | |||
Centrica | 2,836,321 | 7,711,353 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks - 95.9% (continued) | Shares | Value ($) | |||
United Kingdom - 20.7% (continued) | |||||
Diageo | 544,467 | 15,577,152 | |||
GlaxoSmithKline | 716,016 | 14,887,284 | |||
Just Eat | 436,388 | a | 3,094,601 | ||
Prudential | 531,276 | 11,222,594 | |||
Royal Bank of Scotland Group | 10,581,844 | a | 32,097,531 | ||
Royal Dutch Shell, Cl. B | 749,788 | 20,521,354 | |||
Vodafone Group | 8,079,914 | 21,066,593 | |||
Wolseley | 308,407 | 19,397,396 | |||
207,466,001 | |||||
Total Common Stocks (cost $799,440,755) | 959,930,821 | ||||
Preferred Stocks - 1.3% | |||||
Germany - 1.3% | |||||
Volkswagen | 90,830 | 13,236,231 | |||
Other Investment - 1.5% | |||||
Registered Investment Company; | |||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 15,126,946 | c | 15,126,946 | ||
Total Investments (cost $827,878,484) | 98.7% | 988,293,998 | |||
Cash and Receivables (Net) | 1.3% | 13,192,114 | |||
Net Assets | 100.0% | 1,001,486,112 |
ADR—American Depository Receipt
aNon-income producing security.
bSecurity exempt from registration pursuant to Rule 144A under the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At March 31, 2017, this security was valued at $8,707,040 or .87% of net assets.
cInvestment in affiliated money market mutual fund.
8
Portfolio Summary (Unaudited) † | Value (%) |
Financials | 17.8 |
Consumer Staples | 14.6 |
Consumer Discretionary | 14.4 |
Industrials | 13.2 |
Health Care | 12.2 |
Information Technology | 10.3 |
Telecommunication Services | 5.0 |
Energy | 4.9 |
Materials | 2.2 |
Real Estate | 1.8 |
Money Market Investment | 1.5 |
Utilities | .8 |
98.7 |
† Based on net assets.
See notes to financial statements.
9
STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS March 31, 2017 (Unaudited)
Forward Foreign Currency Exchange Contracts | Foreign Currency |
| Value ($) | Unrealized Appreciation ($) |
Sales: | ||||
State Street Bank and Trust Co. | ||||
Euro, | ||||
Expiring | ||||
4/4/2017 | 5,736,162 | 6,125,074 | 6,119,356 | 5,718 |
Japanese Yen, | ||||
Expiring | ||||
4/3/2017 | 3,236,661 | 29,174 | 29,073 | 101 |
4/4/2017 | 74,439,978 | 669,310 | 668,642 | 668 |
Gross Unrealized Appreciation | 6,487 |
See notes to financial statements.
10
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2017 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments: |
|
|
|
| ||
Unaffiliated issuers |
| 812,751,538 |
| 973,167,052 |
| |
Affiliated issuers |
| 15,126,946 |
| 15,126,946 |
| |
Cash |
|
|
|
| 2,082,570 |
|
Cash denominated in foreign currency |
|
| 15,063,707 |
| 15,042,472 |
|
Receivable for investment securities sold |
|
|
|
| 6,119,356 |
|
Dividends receivable |
|
|
|
| 4,977,208 |
|
Receivable for shares of Beneficial Interest subscribed |
|
|
|
| 778,818 |
|
Unrealized appreciation on forward foreign |
|
|
|
| 6,487 |
|
Prepaid expenses |
|
|
|
| 44,722 |
|
|
|
|
|
| 1,017,345,631 |
|
Liabilities ($): |
|
|
|
| ||
Due to The Dreyfus Corporation and affiliates—Note 3(c) |
|
|
|
| 894,672 |
|
Payable for investment securities purchased |
|
|
|
| 14,209,231 |
|
Payable for shares of Beneficial Interest redeemed |
|
|
|
| 695,550 |
|
Accrued expenses |
|
|
|
| 60,066 |
|
|
|
|
|
| 15,859,519 |
|
Net Assets ($) |
|
| 1,001,486,112 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 941,272,462 |
|
Accumulated undistributed investment income—net |
|
|
|
| 1,854,981 |
|
Accumulated net realized gain (loss) on investments |
|
|
|
| (102,137,613) |
|
Accumulated net unrealized appreciation (depreciation) |
|
|
| 160,496,282 |
| |
Net Assets ($) |
|
| 1,001,486,112 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 2,952,431 | 1,260,078 | 84,119,035 | 913,154,568 |
|
Shares Outstanding | 153,580 | 66,866 | 4,415,586 | 48,144,682 |
|
Net Asset Value Per Share ($) | 19.22 | 18.84 | 19.05 | 18.97 |
|
See notes to financial statements. |
11
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2017 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends (net of $748,629 foreign taxes withheld at source): |
|
|
|
| ||
Unaffiliated issuers |
|
| 10,164,322 |
| ||
Affiliated issuers |
|
| 24,961 |
| ||
Total Income |
|
| 10,189,283 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 4,049,341 |
| ||
Custodian fees—Note 3(c) |
|
| 201,703 |
| ||
Administration fee—Note 3(a) |
|
| 99,387 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 40,199 |
| ||
Professional fees |
|
| 39,483 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 39,064 |
| ||
Registration fees |
|
| 37,750 |
| ||
Loan commitment fees—Note 2 |
|
| 14,830 |
| ||
Interest expense—Note 2 |
|
| 13,022 |
| ||
Prospectus and shareholders’ reports |
|
| 9,486 |
| ||
Distribution fees—Note 3(b) |
|
| 4,726 |
| ||
Miscellaneous |
|
| 29,241 |
| ||
Total Expenses |
|
| 4,578,232 |
| ||
Less—reduction in fees due to earnings credits—Note 3(c) |
|
| (365) |
| ||
Net Expenses |
|
| 4,577,867 |
| ||
Investment Income—Net |
|
| 5,611,416 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions | (14,590,870) |
| ||||
Net realized gain (loss) on forward foreign currency exchange contracts | (181,357) |
| ||||
Net Realized Gain (Loss) |
|
| (14,772,227) |
| ||
Net unrealized appreciation (depreciation) on investments |
|
| 26,414,927 |
| ||
Net unrealized appreciation (depreciation) on |
|
| 90,212 |
| ||
Net Unrealized Appreciation (Depreciation) |
|
| 26,505,139 |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 11,732,912 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 17,344,328 |
| |||
See notes to financial statements. |
12
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Six Months Ended |
|
|
| Year Ended |
|
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 5,611,416 |
|
|
| 15,982,929 |
| |
Net realized gain (loss) on investments |
| (14,772,227) |
|
|
| (57,486,854) |
| ||
Net unrealized appreciation (depreciation) |
| 26,505,139 |
|
|
| 81,361,795 |
| ||
Net Increase (Decrease) in Net Assets | 17,344,328 |
|
|
| 39,857,870 |
| |||
Distributions to Shareholders from ($): |
|
|
|
|
|
|
|
| |
Investment income—net: |
|
|
|
|
|
|
|
| |
Class A |
|
| (52,660) |
|
|
| (66,686) |
| |
Class C |
|
| (1,025) |
|
|
| (4,742) |
| |
Class I |
|
| (1,085,404) |
|
|
| (610,971) |
| |
Class Y |
|
| (13,469,323) |
|
|
| (11,120,282) |
| |
Total Distributions |
|
| (14,608,412) |
|
|
| (11,802,681) |
| |
Beneficial Interest Transactions ($): |
|
|
|
|
|
|
|
| |
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 768,818 |
|
|
| 2,976,546 |
| |
Class C |
|
| 76,606 |
|
|
| 530,889 |
| |
Class I |
|
| 28,697,074 |
|
|
| 61,333,937 |
| |
Class Y |
|
| 77,144,464 |
|
|
| 328,405,779 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 51,532 |
|
|
| 65,675 |
| |
Class C |
|
| 1,025 |
|
|
| 4,742 |
| |
Class I |
|
| 1,013,638 |
|
|
| 569,133 |
| |
Class Y |
|
| 5,361,493 |
|
|
| 4,475,809 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (3,632,807) |
|
|
| (4,321,694) |
| |
Class C |
|
| (296,804) |
|
|
| (508,161) |
| |
Class I |
|
| (26,818,160) |
|
|
| (26,725,447) |
| |
Class Y |
|
| (214,579,313) |
|
|
| (210,851,108) |
| |
Increase (Decrease) in Net Assets | (132,212,434) |
|
|
| 155,956,100 |
| |||
Total Increase (Decrease) in Net Assets | (129,476,518) |
|
|
| 184,011,289 |
| |||
Net Assets ($): |
|
|
|
|
|
|
|
| |
Beginning of Period |
|
| 1,130,962,630 |
|
|
| 946,951,341 |
| |
End of Period |
|
| 1,001,486,112 |
|
|
| 1,130,962,630 |
| |
Undistributed investment income—net | 1,854,981 |
|
|
| 10,851,977 |
|
13
STATEMENT OF CHANGES IN NET ASSETS (continued)
|
|
|
| Six Months Ended |
|
|
| Year Ended |
|
Capital Share Transactions (Shares): |
|
|
|
|
|
|
|
| |
Class A |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 42,283 |
|
|
| 162,010 |
| |
Shares issued for distributions reinvested |
|
| 2,905 |
|
|
| 3,418 |
| |
Shares redeemed |
|
| (199,343) |
|
|
| (233,471) |
| |
Net Increase (Decrease) in Shares Outstanding | (154,155) |
|
|
| (68,043) |
| |||
Class C |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 4,261 |
|
|
| 28,824 |
| |
Shares issued for distributions reinvested |
|
| 59 |
|
|
| 252 |
| |
Shares redeemed |
|
| (16,913) |
|
|
| (27,912) |
| |
Net Increase (Decrease) in Shares Outstanding | (12,593) |
|
|
| 1,164 |
| |||
Class Ia |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 1,577,448 |
|
|
| 3,324,543 |
| |
Shares issued for distributions reinvested |
|
| 57,724 |
|
|
| 29,892 |
| |
Shares redeemed |
|
| (1,488,446) |
|
|
| (1,452,541) |
| |
Net Increase (Decrease) in Shares Outstanding | 146,726 |
|
|
| 1,901,894 |
| |||
Class Ya |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 4,266,060 |
|
|
| 17,940,974 |
| |
Shares issued for distributions reinvested |
|
| 306,722 |
|
|
| 236,191 |
| |
Shares redeemed |
|
| (12,002,509) |
|
|
| (11,482,175) |
| |
Net Increase (Decrease) in Shares Outstanding | (7,429,727) |
|
|
| 6,694,990 |
| |||
aDuring the period ended March 31, 2017, 229,757 Class Y shares representing $4,126,180 were exchanged for 228,775 Class I shares and during the period ended September 30, 2016, 442,280 Class Y shares representing $8,075,787 were exchanged for 440,353 Class I shares. | |||||||||
See notes to financial statements. |
14
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||
March 31, 2017 | Year Ended September 30, | |||||
Class A Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 18.97 | 18.54 | 20.41 | 20.15 | 16.96 | 14.74 |
Investment Operations: | ||||||
Investment income—neta | .06 | .22 | .19 | .47 | .21 | .18 |
Net realized and unrealized | .37 | .39 | (1.33) | .10 | 3.19 | 2.52 |
Total from Investment Operations | .43 | .61 | (1.14) | .57 | 3.40 | 2.70 |
Distributions: | ||||||
Dividends from | (.18) | (.18) | (.38) | (.31) | (.21) | (.23) |
Dividends from net realized | – | – | (.35) | – | – | (.25) |
Total Distributions | (.18) | (.18) | (.73) | (.31) | (.21) | (.48) |
Net asset value, end of period | 19.22 | 18.97 | 18.54 | 20.41 | 20.15 | 16.96 |
Total Return (%)b | 2.35c | 3.27 | (5.58) | 2.88 | 20.24 | 18.92 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.26d | 1.23 | 1.19 | 1.30 | 1.34 | 1.32 |
Ratio of net expenses | 1.26d | 1.23 | 1.19 | 1.30 | 1.34 | 1.32 |
Ratio of net investment income | .61d | 1.16 | .97 | 2.22 | 1.11 | 1.14 |
Portfolio Turnover Rate | 17.24c | 34.87 | 36.37 | 39.45 | 55.27 | 57.88 |
Net Assets, | 2,952 | 5,839 | 6,965 | 2,324 | 9,404 | 7,300 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
15
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||
March 31, 2017 | Year Ended September 30, | |||||
Class C Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 18.50 | 18.10 | 20.10 | 19.90 | 16.70 | 14.54 |
Investment Operations: | ||||||
Investment income (loss)—neta | (.01) | .07 | .02 | .29 | .05 | .07 |
Net realized and unrealized | .37 | .38 | (1.30) | .14 | 3.17 | 2.47 |
Total from Investment Operations | .36 | .45 | (1.28) | .43 | 3.22 | 2.54 |
Distributions: | ||||||
Dividends from | (.02) | (.05) | (.37) | (.23) | (.02) | (.13) |
Dividends from net realized | – | – | (.35) | – | – | (.25) |
Total Distributions | (.02) | (.05) | (.72) | (.23) | (.02) | (.38) |
Net asset value, end of period | 18.84 | 18.50 | 18.10 | 20.10 | 19.90 | 16.70 |
Total Return (%)b | 1.93c | 2.50 | (6.39) | 2.18 | 19.31 | 17.92 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 2.06d | 2.02 | 2.01 | 2.04 | 2.13 | 2.16 |
Ratio of net expenses | 2.06d | 2.02 | 2.01 | 2.04 | 2.13 | 2.16 |
Ratio of net investment income | (.07)d | .37 | .10 | 1.43 | .28 | .42 |
Portfolio Turnover Rate | 17.24c | 34.87 | 36.37 | 39.45 | 55.27 | 57.88 |
Net Assets, | 1,260 | 1,470 | 1,417 | 1,256 | 979 | 722 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
16
Six Months Ended | ||||||
March 31, 2017 | Year Ended September 30, | |||||
Class I Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 18.85 | 18.39 | 20.37 | 20.10 | 16.92 | 14.77 |
Investment Operations: | ||||||
Investment income—neta | .10 | .27 | .26 | .61 | .26 | .24 |
Net realized and unrealized | .35 | .41 | (1.35) | .03 | 3.18 | 2.49 |
Total from Investment Operations | .45 | .68 | (1.09) | .64 | 3.44 | 2.73 |
Distributions: | ||||||
Dividends from | (.25) | (.22) | (.54) | (.37) | (.26) | (.33) |
Dividends from net realized | – | – | (.35) | – | – | (.25) |
Total Distributions | (.25) | (.22) | (.89) | (.37) | (.26) | (.58) |
Net asset value, end of period | 19.05 | 18.85 | 18.39 | 20.37 | 20.10 | 16.92 |
Total Return (%) | 2.49b | 3.66 | (5.37) | 3.25 | 20.62 | 19.27 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .97c | .94 | .90 | .96 | 1.01 | 1.04 |
Ratio of net expenses | .97c | .94 | .90 | .96 | 1.01 | 1.04 |
Ratio of net investment income | 1.10c | 1.44 | 1.32 | 2.95 | 1.42 | 1.54 |
Portfolio Turnover Rate | 17.24b | 34.87 | 36.37 | 39.45 | 55.27 | 57.88 |
Net Assets, | 84,119 | 80,458 | 43,538 | 29,479 | 535,265 | 430,297 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
17
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||
March 31, 2017 | Year Ended September 30, | ||||
Class Y Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013a |
Per Share Data ($): | |||||
Net asset value, beginning of period | 18.77 | 18.31 | 20.38 | 20.11 | 18.74 |
Investment Operations: | |||||
Investment income—netb | .10 | .28 | .26 | .22 | .06 |
Net realized and unrealized | .36 | .40 | (1.34) | .43 | 1.31 |
Total from Investment Operations | .46 | .68 | (1.08) | .65 | 1.37 |
Distributions: | |||||
Dividends from | (.26) | (.22) | (.64) | (.38) | – |
Dividends from net realized | – | – | (.35) | – | – |
Total Distributions | (.26) | (.22) | (.99) | (.38) | – |
Net asset value, end of period | 18.97 | 18.77 | 18.31 | 20.38 | 20.11 |
Total Return (%) | 2.51c | 3.68 | (5.32) | 3.33 | 6.29c |
Ratios/Supplemental Data (%): | |||||
Ratio of total expenses | .90d | .88 | .89 | .91 | .94d |
Ratio of net expenses | .90d | .88 | .89 | .91 | .94d |
Ratio of net investment income | 1.11d | 1.49 | 1.32 | 1.10 | 1.19d |
Portfolio Turnover Rate | 17.24c | 34.87 | 36.37 | 39.45 | 55.27 |
Net Assets, | 913,155 | 1,043,195 | 895,031 | 763,426 | 1 |
a From July 1, 2013, (commencement of initial offering) to September 30, 2013.
b Based on average shares outstanding.
c Not annualized.
d Annualized.
See notes to financial statements.
18
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus/Newton International Equity Fund (the “fund”) is a separate diversified series of Dreyfus Investment Funds (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. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Newton Investment Management (North America) Limited (“Newton”), a wholly-owned subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser.
Effective March 31, 2017, the fund authorized the issuance of Class T shares, but, as of the date of this report, the fund did not offer Class T shares for purchase.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 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 T. Class A, Class C and Class T shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A and Class T shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I 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 Dreyfus, 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
19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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’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.
(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).
20
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant 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 reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the 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.
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward foreign currency exchange contracts (“forward contracts”) are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of March 31, 2017 in valuing the fund’s investments:
Level 1 – Quoted | Level 2 –Other | Level 3 – | Total | ||
Assets ($) | |||||
Investments in Securities: | |||||
Equity Securities - Foreign Common Stocks† | 959,930,821 | – | – | 959,930,821 | |
Equity Securities - Foreign Preferred Stocks† | 13,236,231 | – | – | 13,236,231 | |
Registered Investment Company | 15,126,946 | – | – | 15,126,946 | |
Other Financial Instruments: | |||||
Forward Foreign Currency Exchange Contracts†† | – | 6,487 | – | 6,487 |
† See Statement of Investments for additional detailed categorizations.
†† Amount shown represents unrealized appreciation at period end.
At September 30, 2016, $1,049,046,518 of exchange traded foreign equity securities were classified within Level 2 of the fair value hierarchy pursuant to the fund’s fair valuation procedures.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments
22
resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
(d) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended March 31, 2017 were as follows:
Affiliated Investment Company | Value | Purchases($) | Sales($) | Value | Net |
Dreyfus Institutional | 2,777,060 | 158,019,337 | 145,669,451 | 15,126,946 | 1.5 |
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S.
(f) Dividends 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.
23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended March 31, 2017, 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, 2017, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2016 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010, 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 $79,675,737 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to September 30, 2016. The fund has $32,370,062 of short-term capital losses and $47,305,675 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, 2016 was as follows: ordinary income $11,802,681. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in an $810 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. Prior to October 5, 2016, the unsecured credit facility with Citibank, N.A. was $555 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing.
24
The average amount of borrowings outstanding under the Facilities during the period ended March 31, 2017, was approximately $1,622,000 with a related weighted average annualized interest rate of 1.61%.
NOTE 3—Investment Advisory Fee, Sub-Investment Advisory Fee, Administration Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with Dreyfus, 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. Effective as of May 1, 2017, the Board approved a reduction in the investment advisory fee to an annual rate of .75% of the value of the fund’s average daily net assets. Dreyfus has contractually agreed, from May 1, 2017 through February 1, 2018, to waive receipt of its fees and/or assume the expenses of the fund so that the expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, 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. During the period ended March 31, 2017, there were no expense reimbursement, pursuant to the undertaking.
Pursuant to a sub-investment advisory agreement between Dreyfus and Newton, Dreyfus pays Newton a monthly fee at an annual percentage rate of the value of the fund’s average daily net assets.
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with Dreyfus, whereby Dreyfus performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate Dreyfus 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 Dreyfus for this service, Dreyfus has contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both Dreyfus’ costs in providing these services and a reasonable allocation of the costs incurred by Dreyfus and its affiliates related to the support and oversight of these services. The fund also reimburses Dreyfus for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration Agreement, the fund was charged $99,387 during the period ended March 31, 2017.
25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended March 31, 2017, Class C shares were charged $4,726 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, 2017, Class A and Class C shares were charged $5,699 and $1,575, 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 as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended March 31, 2017, the fund was charged $2,260 for transfer agency services and $90 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $79.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are
26
determined based on net assets, geographic region and transaction activity. During the period ended March 31, 2017, the fund was charged $201,703 pursuant to the custody agreement. These fees were partially offset by earnings credits of $286.
During the period ended March 31, 2017, the fund was charged $5,777 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $668,952, administration fees $16,564, Distribution Plan fees $786, Shareholder Services Plan fees $951, custodian fees $197,745, Chief Compliance Officer fees $5,777 and transfer agency fees $3,897.
(d) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward contracts, during the period ended March 31, 2017, amounted to $173,049,667 and $337,989,813, 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 events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.
Each type of derivative instrument that was held by the fund during the period ended March 31, 2017 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
27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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, 2017 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.
At March 31, 2017, derivative assets and liabilities (by type) on a gross basis are as follows:
Derivative Financial Instruments: |
| Assets ($) |
| Liabilities ($) |
|
Forward contracts | 6,487 | - | |||
Total gross amount of derivative | |||||
assets and liabilities in the | |||||
Statement of Assets and Liabilities | 6,487 | - | |||
Derivatives not subject to | |||||
Master Agreements | - | - | |||
Total gross amount of assets | |||||
and liabilities subject to | |||||
Master Agreements | 6,487 | - |
28
The following table presents derivative assets net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of March 31, 2017:
Financial | ||||||
Instruments | ||||||
and Derivatives | ||||||
Gross Amount of | Available | Collateral | Net Amount of | |||
Counterparty | Assets ($) | 1 | for Offset ($) | Received ($) |
| Assets ($) |
State Street | 6,487 | - | - | 6,487 | ||
Total | 6,487 | - | - | 6,487 | ||
1 Absent a default event or early termination, OTC derivative assets and liabilities are presented at gross amounts and are not offset in the Statement of Assets and Liabilities. |
The following summarizes the average market value of derivatives outstanding during the period ended March 31, 2017:
|
| Average Market Value ($) |
Forward contracts | 11,641,775 | |
At March 31, 2017, accumulated net unrealized appreciation on investments was $160,415,514, consisting of $187,957,869 gross unrealized appreciation and $27,542,355 gross unrealized depreciation.
At March 31, 2017, 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).
29
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 22-23, 2017, the Board considered the renewal of the fund’s Investment Advisory Agreement and Administration Agreement, pursuant to which Dreyfus provides the fund with investment advisory and administrative services (together, the “Management Agreement”), and the Sub-Investment Advisory Agreement (together with the Management Agreement, the “Agreements”), pursuant to which Newton Investment Management (North America) 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 Dreyfus and the Subadviser. In considering the renewal of the Agreements, the Board considered all factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered Dreyfus’ extensive administrative, accounting and compliance infrastructures, as well as Dreyfus’ supervisory activities over the Subadviser. The Board also considered portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. 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 comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended December 31, 2016, and (2) the
30
fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. Dreyfus 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.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds. The Board discussed with representatives of Dreyfus, its affiliates and/or the Subadviser the results of the comparisons and considered that the fund’s total return performance for Class A and Class I shares was below the Performance Group and Performance Universe medians for the various periods, except for the five-year period for Class I when the performance was above the Performance Universe median. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index and noted that the fund’s performance was above the return of the index in six of the ten calendar years shown.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual and actual management fees were below the Expense Group Medians, the fund’s actual management fee was above the Expense Universe median and the fund’s total expenses were below the Expense Group and Expense Universe medians.
Dreyfus representatives stated that, in connection with the Administration Agreement and its related fees, Dreyfus has contractually agreed to waive its fees to the extent that such fees exceed Dreyfus’ costs in providing the services contemplated under the Administration Agreement.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Broadridge category as the fund and (2) paid to Dreyfus or the Subadviser or its affiliates for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of 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.
The Board considered the fee to the Subadviser in relation to the fee paid to Dreyfus by the fund and the respective services provided by the Subadviser and Dreyfus. The Board also took into consideration that the Subadviser’s fee is paid by Dreyfus (out of its fee from the fund) and not the fund.
31
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex. The consulting firm also had analyzed where any economies of scale might emerge in 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 Dreyfus 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 Dreyfus, 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. Dreyfus representatives 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 Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also stated that, as a result of shared and allocated costs among funds in the Dreyfus 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 Dreyfus 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 Dreyfus and the Subadviser are adequate and appropriate.
· The Board was concerned about the fund’s performance and agreed to closely monitor performance.
32
· The Board concluded that the fees paid to Dreyfus and the Subadviser supported the renewal of the Agreements in light of the considerations described above.
· The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
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 Dreyfus and its affiliates and the Subadviser, of Dreyfus and the Subadviser and the services provided to the fund by Dreyfus 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 this fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, during which lengthy discussions took place between the Board and Dreyfus representatives. 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 Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
33
Dreyfus/Newton International Equity Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Sub-Investment Adviser
Newton Investment Management
(North America) Limited
160 Queen Victoria Street
London, EC4V, 4LA, UK
Custodian
The Bank of New York Mellon
225 Liberty Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
Ticker Symbols: | Class A: NIEAX Class C: NIECX Class I: SNIEX Class Y: NIEYX |
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. (phone 1-800-SEC-0330 for information).
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.dreyfus.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
© 2017 MBSC Securities Corporation |
Dreyfus Tax Sensitive Total Return Bond Fund
SEMIANNUAL REPORT |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
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 CEO OF DREYFUS
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Tax Sensitive Total Return Bond Fund, covering the six-month period from October 1, 2016 through March 31, 2017. 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.
Stocks advanced solidly but bonds lost a degree of value over the reporting period amid heightened market volatility stemming from various economic and political developments. After previously rallying in response to stabilizing commodity prices, improving global economic data, and better-than-expected corporate earnings, stocks and corporate-backed bonds generally gave back a portion of their gains in October due to uncertainty in advance of U.S. elections. Meanwhile, prices of U.S. government securities began to decline in anticipation of higher inflation and short-term interest-rate hikes from U.S. monetary policymakers. After the election in early November, equity markets rallied to a series of new highs as investors revised their expectations for U.S. fiscal, regulatory, and tax policies. In the bond market, yields surged higher and prices fell after the election, while lower rated corporate-backed bonds continued to advance in anticipation of a more business-friendly political climate.
Some asset classes and industry groups seem likely to continue to benefit from a changing economic and geopolitical landscape, while others probably will face challenges as conditions evolve. Consequently, selectivity seems likely to be an important determinant of investment success in the months ahead. As always, we encourage you to discuss the implications of our observations with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Mark D. Santero
Chief Executive Officer
The Dreyfus Corporation
April 17, 2017
2
DISCUSSION OF FUND PERFORMANCE
For the period from October 1, 2016 through March 31, 2017, as provided by Portfolio Managers Christine L. Todd, Thomas Casey, Daniel Rabasco, and Jeffrey Burger, of Standish Mellon Asset Management Company, LLC, Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended March 31, 2017, Dreyfus Tax Sensitive Total Return Bond Fund’s Class A shares produced a total return of -2.27%, Class C shares returned -2.59%, Class I shares returned -2.15%, and Class Y shares returned -2.11%.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 -1.25% for the same period.2
The Index generally produced flat returns during the reporting period amid rising interest rates, changing supply-and-demand dynamics, and political uncertainty. The fund lagged the Index, mainly due to a relatively long average duration.
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.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.
Political and Technical Factors Fueled Market Volatility
After municipal bonds produced relatively strong returns earlier in 2016, volatility began to increase near the start of the reporting period when issuers came to market with a flood of new securities in anticipation of short-term interest-rate hikes from the Federal Reserve Board. Market declines accelerated in November after the unexpected election of a new presidential administration, which sparked uncertainty regarding potential changes in tax policy. Short- and intermediate-term municipal bonds subsequently recouped their previous losses when supply-and-demand imbalances moderated and investors recognized that tax reform will take time and political capital to enact. In contrast, longer-term municipal bonds lost a degree of value.
Credit conditions remained sound for most municipal bond issuers. Several states and municipalities are facing pressure from underfunded pension systems, but most have benefited from rising tax revenues and balanced operating budgets.
Duration Posture Dampened Relative Results
The fund’s relative performance during the reporting period was constrained by its modestly long average duration. Although this positioning helped the fund capture higher yields and participate more fully in the market rally later in the reporting period, it made the fund more sensitive to rising interest rates during the sharp sell-off in November. In addition, our bias toward higher-quality bonds limited the fund’s participation in some of the stronger areas of the market.
3
DISCUSSION OF FUND PERFORMANCE (continued)
The fund achieved better relative results through other strategies, including an emphasis on securities with 15- to 20-year maturities and a correspondingly underweighted position in the 5-year maturity range. When municipal bonds became more attractively valued after the election in November, we reduced the fund’s holdings of taxable securities and redeployed those assets to municipal bonds. The fund also produced favorable results through tactical, short-term trades of general obligation bonds from Chicago.
Our emphasis on revenue-backed bonds also supported relative performance. The fund achieved particularly robust returns from higher-yielding bonds issued on behalf of airports, special tax districts, educational facilities, hospitals, and the states’ settlement of litigation with U.S. tobacco companies.
Near-Term Challenges May Create Long-Term Opportunities
The national municipal bond market recently has shown signs of renewed strength. Investors who may have overreacted to the tax implications of the presidential election appear to have adopted a more balanced perspective. However, we are aware that seasonal factors tend to weigh on market averages in the spring, when selling pressure increases to raise cash for income tax payments. Therefore, we are watchful for opportunities to take advantage of bouts of market volatility by purchasing municipal bonds from fundamentally sound issuers at attractive prices. We also may increase the fund’s exposure to taxable bonds when relative values improve.
As of the end of the reporting period, we have maintained the fund’s emphasis on higher-yielding revenue-backed municipal bonds. We also have retained relatively light exposure to general obligation bonds, particularly from states and municipalities that are struggling with public pension funding shortfalls. We have continued to set the fund’s average duration in a modestly long position.
April 17, 2017
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.
The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets. Derivatives can be highly volatile, illiquid, difficult to value, and there is the risk that changes in the value of a derivative held by the fund will not correlate with the underlying instruments or the fund’s other investments.
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 The Dreyfus Corporation, pursuant to an agreement in effect through February 1, 2018, 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. Reflects investments of dividends and, where applicable, capital gain distributions. 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.
4
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Tax Sensitive Total Return Bond Fund from October 1, 2016 to March 31, 2017. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment | |||||||||||
assuming actual returns for the six months ended March 31, 2017 | |||||||||||
|
|
|
| Class A | Class C | Class I | Class Y | ||||
Expenses paid per $1,000† |
| $3.45 | $7.14 | $2.22 | $2.22 | ||||||
Ending value (after expenses) |
| $977.30 | $974.10 | $978.50 | $978.90 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment | |||||||||||
assuming a hypothetical 5% annualized return for the six months ended March 31, 2017 | |||||||||||
|
|
|
| Class A | Class C | Class I | Class Y | ||||
Expenses paid per $1,000† | $3.53 | $7.29 | $2.27 | $2.27 | |||||||
Ending value (after expenses) | $1,021.44 | $1,017.70 | $1,022.69 | $1,022.69 |
† Expenses are equal to the fund’s annualized expense ratio of .70% for Class A, 1.45% for Class C, .45% for Class I and .45% for Class Y, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
March 31, 2017 (Unaudited)
Bonds and Notes - 2.7% | Coupon | Maturity Date | Principal | Value ($) | |||||
Asset-Backed Certificates - .7% | |||||||||
Carrington Mortgage Loan Trust, | 0.89 | 1/25/37 | 438,455 | a | 359,974 | ||||
OneMain Financial Issuance Trust, | 3.24 | 6/18/24 | 1,180,000 | b | 1,182,407 | ||||
1,542,381 | |||||||||
Asset-Backed Ctfs./Auto Receivables - 1.7% | |||||||||
Capital Auto Receivables Asset Trust, | 2.81 | 8/20/19 | 240,000 | 242,195 | |||||
DT Auto Owner Trust, | 3.68 | 4/15/21 | 1,500,000 | b | 1,515,437 | ||||
DT Auto Owner Trust, | 4.47 | 11/15/21 | 2,345,000 | b | 2,393,735 | ||||
4,151,367 | |||||||||
Health Care - .3% | |||||||||
Dignity Health, | 2.64 | 11/1/19 | 760,000 | 762,734 | |||||
Total Bonds and Notes | 6,456,482 | ||||||||
Long-Term Municipal Investments - 94.7% | |||||||||
Alabama - .6% | |||||||||
Alabama Public School and College Authority, | 5.00 | 1/1/26 | 1,250,000 | 1,485,162 | |||||
Arizona - .8% | |||||||||
Phoenix Civic Improvement Corporation, | 5.00 | 7/1/26 | 1,180,000 | 1,441,889 | |||||
Phoenix Industrial Development Authority, | 3.00 | 7/1/20 | 455,000 | b | 452,152 | ||||
1,894,041 | |||||||||
Arkansas - .9% | |||||||||
Arkansas Development Finance Authority, | 5.00 | 2/1/25 | 1,835,000 | 2,127,114 | |||||
California - 7.9% | |||||||||
California, | 5.00 | 7/1/18 | 340,000 | 357,326 | |||||
California, | 5.00 | 9/1/22 | 1,000,000 | 1,168,360 | |||||
California, | 5.00 | 8/1/28 | 1,500,000 | 1,789,035 | |||||
California, | 5.00 | 8/1/29 | 1,500,000 | 1,776,000 | |||||
California, | 5.00 | 8/1/36 | 1,400,000 | 1,600,662 | |||||
California State Public Works Board, | 5.00 | 10/1/26 | 1,000,000 | 1,175,240 |
6
Long-Term Municipal Investments - 94.7% (continued) | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
California - 7.9% (continued) | |||||||||
California State University Trustees, | 5.00 | 11/1/22 | 1,000,000 | 1,148,840 | |||||
California Statewide Communities Development Authority, | 5.00 | 12/1/31 | 525,000 | b | 564,097 | ||||
Golden State Tobacco Securitization Corporation, | 4.60 | 6/1/23 | 750,000 | 777,998 | |||||
Jurupa Public Financing Authority, | 5.00 | 9/1/29 | 1,060,000 | 1,202,517 | |||||
Los Angeles Community Facilities District Number 4, | 5.00 | 9/1/28 | 1,000,000 | 1,120,540 | |||||
Los Angeles Department of Airports, | 5.00 | 5/15/27 | 1,000,000 | 1,180,460 | |||||
Los Angeles Department of Water and Power, | 5.00 | 7/1/23 | 1,000,000 | 1,197,180 | |||||
Los Angeles Harbor Department, | 5.00 | 8/1/21 | 1,355,000 | 1,551,976 | |||||
Sacramento County, | 5.00 | 7/1/22 | 1,275,000 | 1,336,379 | |||||
Southern California Public Power Authority, | 5.00 | 7/1/23 | 1,000,000 | 1,118,710 | |||||
19,065,320 | |||||||||
Colorado - 1.5% | |||||||||
City and County of Denver, | 5.00 | 11/15/22 | 720,000 | 825,804 | |||||
Colorado Health Facilities Authority, | 5.00 | 11/15/26 | 1,000,000 | 1,194,430 | |||||
Denver Convention Center Hotel Authority, | 5.00 | 12/1/31 | 1,490,000 | 1,669,292 | |||||
3,689,526 | |||||||||
Connecticut - 1.4% | |||||||||
Connecticut, | 5.00 | 8/1/26 | 1,840,000 | 2,161,871 | |||||
Connecticut, | 5.00 | 9/1/33 | 1,000,000 | 1,137,070 | |||||
3,298,941 | |||||||||
District of Columbia - 1.9% | |||||||||
District of Columbia, | 5.00 | 4/1/24 | 2,015,000 | 2,379,191 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal Investments - 94.7% (continued) | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
District of Columbia - 1.9% (continued) | |||||||||
District of Columbia, | 5.00 | 4/1/32 | 1,000,000 | 1,157,640 | |||||
Metropolitan Washington Airports Authority, | 5.00 | 10/1/24 | 1,000,000 | 1,164,770 | |||||
4,701,601 | |||||||||
Florida - 8.9% | |||||||||
Citizens Property Insurance Corporation, | 5.00 | 6/1/20 | 1,500,000 | 1,661,325 | |||||
Citizens Property Insurance Corporation, | 5.00 | 6/1/21 | 3,000,000 | 3,398,250 | |||||
Florida Department of Transportation, | 5.00 | 7/1/25 | 1,000,000 | 1,179,270 | |||||
Florida Higher Educational Facilities Financing Authority, | 5.00 | 4/1/26 | 1,500,000 | 1,730,640 | |||||
Jacksonville, | 5.00 | 10/1/27 | 1,000,000 | 1,168,150 | |||||
Lakeland, | 5.00 | 10/1/17 | 1,000,000 | 1,020,860 | |||||
Lee County, | 5.00 | 10/1/25 | 1,000,000 | 1,171,130 | |||||
Miami Beach Redevelopment Agency, | 5.00 | 2/1/33 | 1,500,000 | 1,680,120 | |||||
Miami-Dade County, | 5.25 | 10/1/23 | 1,000,000 | 1,126,660 | |||||
Miami-Dade County, | 5.00 | 10/1/22 | 2,000,000 | 2,273,340 | |||||
Miami-Dade County School Board, | 5.00 | 5/1/26 | 1,500,000 | 1,742,325 | |||||
Orange County, | 5.00 | 10/1/30 | 750,000 | 876,233 | |||||
South Miami Health Facilities Authority, | 5.00 | 8/15/18 | 750,000 | 761,153 | |||||
Tampa, | 5.00 | 9/1/23 | 500,000 | 565,560 | |||||
Village Community Development District Number 7, | 3.00 | 5/1/19 | 630,000 | 640,729 | |||||
Village Community Development District Number 7, | 3.00 | 5/1/20 | 595,000 | 606,430 | |||||
21,602,175 |
8
Long-Term Municipal Investments - 94.7% (continued) | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
Georgia - 2.4% | |||||||||
Atlanta, | 5.00 | 1/1/22 | 1,000,000 | 1,114,350 | |||||
Atlanta Development Authority, | 5.00 | 7/1/29 | 1,000,000 | 1,155,060 | |||||
Fulton County Development Authority, | 5.00 | 7/1/25 | 1,000,000 | 1,187,770 | |||||
Main Street Natural Gas, Inc., | 5.50 | 9/15/28 | 1,100,000 | 1,314,181 | |||||
Municipal Electric Authority of Georgia, | 5.00 | 1/1/21 | 1,000,000 | 1,104,400 | |||||
5,875,761 | |||||||||
Illinois - 8.4% | |||||||||
Chicago, | 5.25 | 1/1/24 | 1,500,000 | 1,714,410 | |||||
Chicago, | 5.00 | 1/1/35 | 750,000 | 836,520 | |||||
Chicago, | 5.00 | 1/1/18 | 1,000,000 | c | 1,031,020 | ||||
Chicago, | 5.00 | 11/1/26 | 1,000,000 | 1,115,330 | |||||
Chicago, | 5.00 | 11/1/32 | 2,000,000 | 2,005,820 | |||||
Chicago Park District, | 5.00 | 1/1/28 | 2,500,000 | 2,755,175 | |||||
Greater Chicago Metropolitan Water Reclamation District, | 5.00 | 12/1/31 | 1,000,000 | 1,143,240 | |||||
Illinois Finance Authority, | 5.00 | 1/1/36 | 1,500,000 | 1,620,030 | |||||
Illinois Finance Authority, | 5.00 | 11/15/26 | 1,000,000 | 1,157,240 | |||||
Illinois Toll Highway Authority, | 5.00 | 1/1/27 | 1,000,000 | 1,173,880 | |||||
Illinois Toll Highway Authority, | 5.00 | 1/1/31 | 1,000,000 | 1,141,300 | |||||
Metropolitan Pier and Exposition Authority, | 5.00 | 12/15/28 | 2,035,000 | 2,129,037 | |||||
Northern Illinois University Board of Trustees, | 5.00 | 4/1/17 | 1,500,000 | 1,500,000 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal Investments - 94.7% (continued) | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
Illinois - 8.4% (continued) | |||||||||
Railsplitter Tobacco Settlement Authority, | 5.00 | 6/1/17 | 1,000,000 | 1,006,600 | |||||
20,329,602 | |||||||||
Kansas - .5% | |||||||||
Kansas Development Finance Authority, | 5.00 | 3/1/21 | 1,150,000 | 1,272,682 | |||||
Kentucky - .9% | |||||||||
Louisville and Jefferson County Metropolitan Sewer District, | 5.00 | 5/15/23 | 1,000,000 | 1,147,280 | |||||
Louisville/Jefferson County Metro Government, | 5.75 | 2/1/18 | 1,000,000 | c | 1,040,630 | ||||
2,187,910 | |||||||||
Louisiana - .9% | |||||||||
Louisiana, | 5.00 | 6/15/25 | 1,000,000 | 1,185,950 | |||||
Tobacco Settlement Financing Corporation of Louisiana, | 5.00 | 5/15/20 | 1,000,000 | 1,083,350 | |||||
2,269,300 | |||||||||
Maryland - 1.1% | |||||||||
Maryland Economic Development Corporation, | 5.13 | 6/1/20 | 1,000,000 | 1,058,730 | |||||
Maryland Health and Higher Educational Facilities Authority, | 5.00 | 7/1/32 | 1,500,000 | 1,704,780 | |||||
2,763,510 | |||||||||
Massachusetts - .6% | |||||||||
Massachusetts Development Finance Agency, | 5.00 | 7/1/28 | 1,335,000 | 1,519,350 | |||||
Michigan - 2.5% | |||||||||
Detroit, | 5.25 | 7/1/19 | 1,000,000 | 1,082,170 | |||||
Great Lakes Water Authority, | 5.00 | 7/1/25 | 1,105,000 | 1,275,910 | |||||
Michigan Finance Authority, | 5.00 | 8/1/25 | 1,000,000 | 1,155,780 |
10
Long-Term Municipal Investments - 94.7% (continued) | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
Michigan - 2.5% (continued) | |||||||||
Michigan Finance Authority, | 5.00 | 7/1/30 | 1,000,000 | 1,132,890 | |||||
Michigan Finance Authority, | 5.00 | 5/1/20 | 1,125,000 | 1,235,453 | |||||
Michigan Finance Authority, | 5.00 | 7/1/21 | 145,000 | 152,315 | |||||
6,034,518 | |||||||||
Minnesota - 1.0% | |||||||||
Saint Paul Housing and Redevelopment Authority, | 5.00 | 11/15/21 | 1,000,000 | 1,127,330 | |||||
Western Minnesota Municipal Power Agency, | 5.00 | 1/1/29 | 1,120,000 | 1,282,400 | |||||
2,409,730 | |||||||||
Missouri - 2.9% | |||||||||
Missouri Development Finance Board, | 5.00 | 6/1/23 | 1,000,000 | 1,141,420 | |||||
Missouri Development Finance Board, | 5.00 | 6/1/28 | 1,000,000 | 1,105,570 | |||||
Missouri Health and Educational Facilities Authority, | 5.00 | 11/15/27 | 1,000,000 | 1,167,130 | |||||
Missouri Joint Municipal Electric Utility Commission, | 5.00 | 12/1/29 | 3,120,000 | 3,609,434 | |||||
7,023,554 | |||||||||
Nebraska - .5% | |||||||||
Nebraska Public Power District, | 5.00 | 1/1/30 | 1,000,000 | 1,144,780 | |||||
New Jersey - 5.0% | |||||||||
New Jersey Economic Development Authority, | 5.00 | 6/15/18 | 1,250,000 | 1,293,275 | |||||
New Jersey Economic Development Authority, | 5.00 | 6/15/21 | 2,000,000 | 2,131,040 | |||||
New Jersey Economic Development Authority, | 5.00 | 6/15/26 | 1,845,000 | 1,924,667 |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal Investments - 94.7% (continued) | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
New Jersey - 5.0% (continued) | |||||||||
New Jersey Economic Development Authority, | 5.10 | 6/1/23 | 1,000,000 | 1,087,310 | |||||
New Jersey Educational Facilities Authority, | 5.00 | 7/1/18 | 1,225,000 | 1,281,779 | |||||
New Jersey Health Care Facilities Financing Authority, | 5.00 | 7/1/25 | 1,000,000 | 1,158,410 | |||||
New Jersey Higher Education Student Assistance Authority, | 5.00 | 12/1/18 | 1,000,000 | 1,049,270 | |||||
New Jersey Higher Education Student Assistance Authority, | 5.00 | 12/1/24 | 1,000,000 | 1,112,180 | |||||
Tobacco Settlement Financing Corporation of New Jersey, | 4.50 | 6/1/23 | 940,000 | 951,656 | |||||
11,989,587 | |||||||||
New Mexico - 1.8% | |||||||||
Albuquerque, | 5.00 | 7/1/20 | 2,000,000 | 2,238,100 | |||||
New Mexico Municipal Energy Acquisition Authority, | 1.28 | 8/1/19 | 1,000,000 | a | 996,100 | ||||
New Mexico Municipal Energy Acquisition Authority, | 1.18 | 2/1/19 | 1,000,000 | a | 995,830 | ||||
4,230,030 | |||||||||
New York - 13.1% | |||||||||
Metropolitan Transportation Authority, | 5.00 | 11/15/24 | 2,000,000 | 2,361,540 | |||||
Metropolitan Transportation Authority, | 5.00 | 11/15/26 | 1,205,000 | 1,413,272 | |||||
Metropolitan Transportation Authority, | 5.00 | 11/15/27 | 2,380,000 | 2,843,029 | |||||
Nassau County, | 5.00 | 10/1/21 | 2,000,000 | 2,290,340 | |||||
New York City, | 5.00 | 8/1/21 | 2,000,000 | 2,183,280 | |||||
New York City, | 5.00 | 8/1/23 | 1,000,000 | 1,178,800 | |||||
New York City, | 5.00 | 3/1/25 | 1,000,000 | 1,183,920 | |||||
New York City Health and Hospitals Corporation, | 5.00 | 2/15/19 | 1,000,000 | 1,070,810 | |||||
New York City Transitional Finance Authority, | 5.00 | 11/1/18 | 1,000,000 | 1,063,430 | |||||
New York State Dormitory Authority, | 5.00 | 12/1/27 | 800,000 | b | 897,928 |
12
Long-Term Municipal Investments - 94.7% (continued) | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
New York - 13.1% (continued) | |||||||||
New York Transportation Development Corporation, | 5.00 | 8/1/21 | 1,350,000 | 1,482,151 | |||||
New York Transportation Development Corporation, | 5.00 | 1/1/19 | 2,500,000 | 2,654,100 | |||||
Onondaga Civic Development Corporation, | 5.00 | 7/1/19 | 1,000,000 | c | 1,086,190 | ||||
Port Authority of New York and New Jersey, | 5.00 | 9/1/30 | 1,000,000 | 1,132,550 | |||||
Triborough Bridge and Tunnel Authority, | 0.88 | 12/3/19 | 3,500,000 | a | 3,474,555 | ||||
Triborough Bridge and Tunnel Authority, | 5.00 | 11/15/24 | 2,150,000 | 2,503,481 | |||||
Triborough Bridge and Tunnel Authority, | 5.00 | 11/15/28 | 1,000,000 | 1,237,960 | |||||
TSASC, Inc. of New York, | 5.00 | 6/1/22 | 1,500,000 | 1,640,280 | |||||
31,697,616 | |||||||||
North Carolina - .8% | |||||||||
North Carolina Medical Care Commission, | 5.00 | 10/1/19 | 1,875,000 | 1,977,281 | |||||
Ohio - 1.1% | |||||||||
Ohio Higher Educational Facility Commission, | 5.00 | 12/1/23 | 1,500,000 | 1,763,295 | |||||
Southeastern Ohio Port Authority, | 5.50 | 12/1/29 | 820,000 | 871,619 | |||||
2,634,914 | |||||||||
Pennsylvania - 1.6% | |||||||||
Pennsylvania Turnpike Commission, | 5.00 | 12/1/29 | 1,000,000 | 1,149,600 | |||||
Philadelphia, | 5.00 | 8/1/21 | 1,000,000 | 1,123,160 | |||||
Philadelphia School District, | 5.00 | 9/1/21 | 1,500,000 | 1,614,960 | |||||
3,887,720 | |||||||||
Rhode Island - 1.2% | |||||||||
Rhode Island Health and Educational Building Corporation, | 5.00 | 9/1/21 | 700,000 | 806,022 |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal Investments - 94.7% (continued) | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
Rhode Island - 1.2% (continued) | |||||||||
Tobacco Settlement Financing Corporation of Rhode Island, | 5.00 | 6/1/26 | 1,000,000 | 1,110,590 | |||||
Tobacco Settlement Financing Corporation of Rhode Island, | 5.00 | 6/1/35 | 1,000,000 | 1,051,940 | |||||
2,968,552 | |||||||||
South Carolina - .5% | |||||||||
South Carolina Public Service Authority, | 5.00 | 12/1/21 | 1,000,000 | 1,110,670 | |||||
Tennessee - 1.5% | |||||||||
Memphis, | 5.00 | 4/1/26 | 1,840,000 | 2,193,758 | |||||
Tennessee Energy Acquisition Corporation, | 5.25 | 9/1/26 | 1,120,000 | 1,315,328 | |||||
3,509,086 | |||||||||
Texas - 16.1% | |||||||||
Arlington Independent School District, | 5.00 | 2/15/27 | 1,400,000 | 1,623,272 | |||||
Central Texas Regional Mobility Authority, | 5.00 | 1/1/27 | 1,250,000 | 1,443,162 | |||||
Central Texas Regional Mobility Authority, | 5.00 | 1/1/31 | 1,175,000 | 1,310,090 | |||||
Corpus Christi, | 5.00 | 7/15/23 | 1,725,000 | 1,976,453 | |||||
Denton, | 5.00 | 12/1/27 | 2,000,000 | 2,376,980 | |||||
Harris County, | 5.00 | 10/1/27 | 1,500,000 | 1,795,395 | |||||
Harris County-Houston Sports Authority, | 5.00 | 11/15/29 | 750,000 | 856,380 | |||||
Houston, | 4.75 | 7/1/24 | 1,000,000 | 1,066,120 | |||||
Houston, | 1.96 | 7/1/32 | 2,700,000 | a | 2,511,000 | ||||
Houston, | 1.81 | 5/1/20 | 2,500,000 | a | 2,496,475 | ||||
Houston, | 5.00 | 3/1/24 | 2,000,000 | 2,347,440 | |||||
Love Field Airport Modernization Corporation, | 5.00 | 11/1/26 | 1,000,000 | 1,177,160 | |||||
Love Field Airport Modernization Corporation, | 5.00 | 11/1/27 | 1,850,000 | 2,135,677 | |||||
North Texas Tollway Authority, | 5.00 | 1/1/22 | 1,000,000 | 1,144,050 |
14
Long-Term Municipal Investments - 94.7% (continued) | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
Texas - 16.1% (continued) | |||||||||
North Texas Tollway Authority, | 5.00 | 1/1/21 | 2,000,000 | 2,228,700 | |||||
Plano Independent School District, | 5.00 | 2/15/26 | 1,500,000 | 1,827,540 | |||||
Sam Rayburn Municipal Power Agency, | 5.00 | 10/1/20 | 1,210,000 | 1,338,369 | |||||
Texas, | 5.00 | 8/1/17 | 1,000,000 | 1,014,460 | |||||
Texas, | 5.00 | 8/1/22 | 1,500,000 | 1,741,575 | |||||
Texas, | 5.50 | 8/1/25 | 2,400,000 | 2,959,176 | |||||
Trinity River Authority of Texas, | 5.00 | 2/1/23 | 1,940,000 | 2,260,992 | |||||
West Travis County Public Utility Agency, | 5.00 | 8/15/23 | 1,140,000 | 1,284,780 | |||||
38,915,246 | |||||||||
Utah - .7% | |||||||||
Utah Transit Authority, | 5.00 | 6/15/35 | 1,500,000 | 1,684,215 | |||||
Virginia - 1.2% | |||||||||
Virginia College Building Authority, | 5.00 | 7/1/19 | 425,000 | b | 445,426 | ||||
Virginia Public School Authority, | 5.00 | 8/1/24 | 2,000,000 | 2,331,040 | |||||
2,776,466 | |||||||||
Washington - 3.6% | |||||||||
King County Public Hospital District Number 1, | 5.00 | 12/1/25 | 2,500,000 | 2,882,750 | |||||
Port of Seattle, | 5.00 | 4/1/25 | 3,340,000 | 3,899,183 | |||||
Washington, | 5.00 | 7/1/27 | 1,500,000 | 1,795,005 | |||||
8,576,938 | |||||||||
Wisconsin - .9% | |||||||||
Wisconsin Health and Educational Facilities Authority, | 5.00 | 12/1/23 | 1,000,000 | 1,174,740 |
15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Long-Term Municipal Investments - 94.7% (continued) | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
Wisconsin - .9% (continued) | |||||||||
Wisconsin Health and Educational Facilities Authority, | 5.00 | 8/15/33 | 1,000,000 | 1,108,340 | |||||
2,283,080 | |||||||||
Total Long-Term Municipal Investments | 228,935,978 | ||||||||
Total Investments (cost $231,473,188) | 97.4% | 235,392,460 | |||||||
Cash and Receivables (Net) | 2.6% | 6,229,186 | |||||||
Net Assets | 100.0% | 241,621,646 |
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, 2017, these securities were valued at $7,451,182 or 3.08% of net assets.
c These securities are prerefunded; the date shown represents the prerefunded date. Bonds which are prerefunded are collateralized by U.S. Government securities which are held in escrow and are used to pay principal and interest on the municipal issue and to retire the bonds in full at the earliest refunding date.
Portfolio Summary (Unaudited) † | Value (%) |
Transportation Services | 23.7 |
Health Care | 9.7 |
Education | 8.7 |
Utility-Electric | 8.7 |
Utility-Water and Sewer | 7.5 |
Special Tax | 7.5 |
City | 6.3 |
State/Territory | 5.7 |
County | 2.9 |
Asset-Backed Ctfs./Auto Receivables | 1.7 |
Prerefunded | 1.4 |
Asset-Backed/Municipal | 1.3 |
Asset-Backed Certificates/Corporate | .6 |
Housing | .5 |
Lease | .5 |
Other | 10.7 |
97.4 |
† Based on net assets.
See notes to financial statements.
16
Summary of Abbreviations (Unaudited) | |||
ABAG | Association of Bay Area | ACA | American Capital Access |
AGC | ACE Guaranty Corporation | AGIC | Asset Guaranty Insurance Company |
AMBAC | American Municipal Bond | ARRN | Adjustable Rate |
BAN | Bond Anticipation Notes | BPA | Bond Purchase Agreement |
CIFG | CDC Ixis Financial Guaranty | COP | Certificate of Participation |
CP | Commercial Paper | DRIVERS | Derivative Inverse |
EDR | Economic Development | EIR | Environmental Improvement |
FGIC | Financial Guaranty | FHA | Federal Housing Administration |
FHLB | Federal Home | FHLMC | Federal Home Loan Mortgage |
FNMA | Federal National | GAN | Grant Anticipation Notes |
GIC | Guaranteed Investment | GNMA | Government National Mortgage |
GO | General Obligation | HR | Hospital Revenue |
IDB | Industrial Development Board | IDC | Industrial Development Corporation |
IDR | Industrial Development | LIFERS | Long Inverse Floating |
LOC | Letter of Credit | LOR | Limited Obligation Revenue |
LR | Lease Revenue | MERLOTS | Municipal Exempt Receipts |
MFHR | Multi-Family Housing Revenue | MFMR | Multi-Family Mortgage Revenue |
PCR | Pollution Control Revenue | PILOT | Payment in Lieu of Taxes |
P-FLOATS | Puttable Floating Option | PUTTERS | Puttable Tax-Exempt Receipts |
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 |
SONYMA | State of New York | SPEARS | Short Puttable Exempt |
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.
17
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2017 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
| 231,473,188 |
| 235,392,460 |
| |
Cash |
|
|
|
| 4,076,915 |
|
Interest receivable |
|
|
|
| 2,696,511 |
|
Receivable for shares of Beneficial Interest subscribed |
|
|
|
| 1,544,905 |
|
Prepaid expenses |
|
|
|
| 39,313 |
|
|
|
|
|
| 243,750,104 |
|
Liabilities ($): |
|
|
|
| ||
Due to The Dreyfus Corporation and affiliates—Note 3(c) |
|
|
|
| 94,085 |
|
Payable for investment securities purchased |
|
|
|
| 1,507,669 |
|
Payable for shares of Beneficial Interest redeemed |
|
|
|
| 485,124 |
|
Accrued expenses |
|
|
|
| 41,580 |
|
|
|
|
|
| 2,128,458 |
|
Net Assets ($) |
|
| 241,621,646 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 237,696,883 |
|
Accumulated undistributed investment income—net |
|
|
|
| 18,259 |
|
Accumulated net realized gain (loss) on investments |
|
|
|
| (12,768) |
|
Accumulated net unrealized appreciation (depreciation) |
|
|
| 3,919,272 |
| |
Net Assets ($) |
|
| 241,621,646 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 15,559,238 | 623,779 | 218,597,897 | 6,840,732 |
|
Shares Outstanding | 687,499 | 27,552 | 9,653,657 | 302,134 |
|
Net Asset Value Per Share ($) | 22.63 | 22.64 | 22.64 | 22.64 |
|
See notes to financial statements. |
18
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2017 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Interest Income |
|
| 3,196,945 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 464,424 |
| ||
Administration fee—Note 3(a) |
|
| 69,664 |
| ||
Registration fees |
|
| 33,277 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 24,245 |
| ||
Professional fees |
|
| 12,709 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 11,841 |
| ||
Custodian fees—Note 3(c) |
|
| 9,026 |
| ||
Loan commitment fees—Note 2 |
|
| 3,792 |
| ||
Prospectus and shareholders’ reports |
|
| 2,629 |
| ||
Distribution fees—Note 3(b) |
|
| 2,552 |
| ||
Miscellaneous |
|
| 26,038 |
| ||
Total Expenses |
|
| 660,197 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (117,723) |
| ||
Less—reduction in fees due to earnings credits—Note 3(c) |
|
| (1,962) |
| ||
Net Expenses |
|
| 540,512 |
| ||
Investment Income—Net |
|
| 2,656,433 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 132,113 |
| ||||
Net unrealized appreciation (depreciation) on investments |
|
| (6,863,675) |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (6,731,562) |
| ||
Net (Decrease) in Net Assets Resulting from Operations |
| (4,075,129) |
| |||
See notes to financial statements. |
19
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Six Months Ended |
|
|
| Year Ended |
|
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 2,656,433 |
|
|
| 5,126,750 |
| |
Net realized gain (loss) on investments |
| 132,113 |
|
|
| 192,403 |
| ||
Net unrealized appreciation (depreciation) |
| (6,863,675) |
|
|
| 4,875,739 |
| ||
Net Increase (Decrease) in Net Assets | (4,075,129) |
|
|
| 10,194,892 |
| |||
Distributions to Shareholders from ($): |
|
|
|
|
|
|
|
| |
Investment income—net: |
|
|
|
|
|
|
|
| |
Class A |
|
| (111,277) |
|
|
| (125,997) |
| |
Class C |
|
| (4,425) |
|
|
| (10,129) |
| |
Class I |
|
| (2,475,687) |
|
|
| (4,914,574) |
| |
Class Y |
|
| (46,804) |
|
|
| (22,793) |
| |
Net realized gain on investments: |
|
|
|
|
|
|
|
| |
Class A |
|
| (22,649) |
|
|
| (26,351) |
| |
Class C |
|
| (1,024) |
|
|
| (2,978) |
| |
Class I |
|
| (330,275) |
|
|
| (866,904) |
| |
Class Y |
|
| (10,438) |
|
|
| (3,954) |
| |
Total Distributions |
|
| (3,002,579) |
|
|
| (5,973,680) |
| |
Beneficial Interest Transactions ($): |
|
|
|
|
|
|
|
| |
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 11,721,174 |
|
|
| 1,300,371 |
| |
Class C |
|
| - |
|
|
| 191,447 |
| |
Class I |
|
| 57,328,479 |
|
|
| 59,884,638 |
| |
Class Y |
|
| 6,260,000 |
|
|
| - |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 130,684 |
|
|
| 144,389 |
| |
Class C |
|
| 5,449 |
|
|
| 13,077 |
| |
Class I |
|
| 2,480,737 |
|
|
| 4,829,541 |
| |
Class Y |
|
| 57,230 |
|
|
| 26,719 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (1,754,679) |
|
|
| (2,326,072) |
| |
Class C |
|
| (109,205) |
|
|
| (209,142) |
| |
Class I |
|
| (51,843,022) |
|
|
| (42,730,113) |
| |
Class Y |
|
| (494,439) |
|
|
| (20,000) |
| |
Increase (Decrease) in Net Assets | 23,782,408 |
|
|
| 21,104,855 |
| |||
Total Increase (Decrease) in Net Assets | 16,704,700 |
|
|
| 25,326,067 |
| |||
Net Assets ($): |
|
|
|
|
|
|
|
| |
Beginning of Period |
|
| 224,916,946 |
|
|
| 199,590,879 |
| |
End of Period |
|
| 241,621,646 |
|
|
| 224,916,946 |
| |
Undistributed investment income—net | 18,259 |
|
|
| 19 |
|
20
|
|
|
| Six Months Ended |
|
|
| Year Ended |
|
Capital Share Transactions (Shares): |
|
|
|
|
|
|
|
| |
Class A |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 522,416 |
|
|
| 55,987 |
| |
Shares issued for distributions reinvested |
|
| 5,791 |
|
|
| 6,219 |
| |
Shares redeemed |
|
| (77,634) |
|
|
| (100,057) |
| |
Net Increase (Decrease) in Shares Outstanding | 450,573 |
|
|
| (37,851) |
| |||
Class C |
|
|
|
|
|
|
|
| |
Shares sold |
|
| - |
|
|
| 8,238 |
| |
Shares issued for distributions reinvested |
|
| 241 |
|
|
| 563 |
| |
Shares redeemed |
|
| (4,859) |
|
|
| (8,978) |
| |
Net Increase (Decrease) in Shares Outstanding | (4,618) |
|
|
| (177) |
| |||
Class I |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 2,548,585 |
|
|
| 2,584,140 |
| |
Shares issued for distributions reinvested |
|
| 109,744 |
|
|
| 207,707 |
| |
Shares redeemed |
|
| (2,289,641) |
|
|
| (1,833,669) |
| |
Net Increase (Decrease) in Shares Outstanding | 368,688 |
|
|
| 958,178 |
| |||
Class Y |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 279,162 |
|
|
| - |
| |
Shares issued for distributions reinvested |
|
| 2,536 |
|
|
| 1,150 |
| |
Shares redeemed |
|
| (22,025) |
|
|
| (849) |
| |
Net Increase (Decrease) in Shares Outstanding | 259,673 |
|
|
| 301 |
| |||
See notes to financial statements. |
21
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, 2017 | Year Ended September 30, | ||||||||
Class A Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 | |||
Per Share Data ($): | |||||||||
Net asset value, beginning of period | 23.43 | 23.00 | 23.15 | 22.56 | 23.44 | 23.05 | |||
Investment Operations: | |||||||||
Investment income—neta | .23 | .49 | .52 | .49 | .51 | .53 | |||
Net realized and unrealized | (.76) | .51 | .02 | .59 | (.76) | .64 | |||
Total from Investment Operations | (.53) | 1.00 | .54 | 1.08 | (.25) | 1.17 | |||
Distributions: | |||||||||
Dividends from Investment | (.23) | (.48) | (.51) | (.49) | (.51) | (.52) | |||
Dividends from net realized gain | (.04) | (.09) | (.18) | — | (.12) | (.26) | |||
Total Distributions | (.27) | (.57) | (.69) | (.49) | (.63) | (.78) | |||
Net asset value, end of period | 22.63 | 23.43 | 23.00 | 23.15 | 22.56 | 23.44 | |||
Total Return (%)b | (2.27)c | 4.40 | 2.38 | 4.84 | (1.10) | 5.19 | |||
Ratios/Supplemental Data (%): | |||||||||
Ratio of total expenses | .84d | .88 | .89 | .95 | .89 | .90 | |||
Ratio of net expenses | .70d | .70 | .70 | .70 | .70 | .80 | |||
Ratio of net investment income | 2.04d | 2.07 | 2.24 | 2.15 | 2.20 | 2.25 | |||
Portfolio Turnover Rate | 13.32c | 29.16 | 29.93 | 26.01 | 35.03 | 21.97 | |||
Net Assets, end of period ($ x 1,000) | 15,559 | 5,551 | 6,319 | 6,173 | 6,908 | 6,639 |
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, 2017 | Year Ended September 30, | |||||||
Class C Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 | ||
Per Share Data ($): | ||||||||
Net asset value, beginning of period | 23.43 | 23.00 | 23.16 | 22.57 | 23.45 | 23.05 | ||
Investment Operations: | ||||||||
Investment income—neta | .15 | .31 | .35 | .32 | .33 | .35 | ||
Net realized and unrealized | (.75) | .51 | .01 | .59 | (.75) | .66 | ||
Total from Investment Operations | (.60) | .82 | .36 | .91 | (.42) | 1.01 | ||
Distributions: | ||||||||
Dividends from investment | (.15) | (.30) | (.34) | (.32) | (.34) | (.35) | ||
Dividends from net realized gain | (.04) | (.09) | (.18) | — | (.12) | (.26) | ||
Total Distributions | (.19) | (.39) | (.52) | (.32) | (.46) | (.61) | ||
Net asset value, end of period | 22.64 | 23.43 | 23.00 | 23.16 | 22.57 | 23.45 | ||
Total Return (%)b | (2.59)c | 3.62 | 1.58 | 4.07 | (1.80) | 4.39 | ||
Ratios/Supplemental Data (%): | ||||||||
Ratio of total expenses | 1.61d | 1.70 | 1.69 | 1.75 | 1.65 | 1.67 | ||
Ratio of net expenses | 1.45d | 1.45 | 1.45 | 1.45 | 1.45 | 1.55 | ||
Ratio of net investment income | 1.32d | 1.32 | 1.49 | 1.40 | 1.45 | 1.48 | ||
Portfolio Turnover Rate | 13.32c | 29.16 | 29.93 | 26.01 | 35.03 | 21.97 | ||
Net Assets, end of period ($ x 1,000) | 624 | 754 | 744 | 1,001 | 1,831 | 2,045 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
23
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||
March 31, 2017 | Year Ended September 30, | |||||
Class I Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 23.44 | 23.01 | 23.16 | 22.57 | 23.45 | 23.06 |
Investment Operations: | ||||||
Investment income—neta | .26 | .54 | .57 | .55 | .57 | .60 |
Net realized and unrealized | (.76) | .51 | .03 | .59 | (.76) | .65 |
Total from Investment Operations | (.50) | 1.05 | .60 | 1.14 | (.19) | 1.25 |
Distributions: | ||||||
Dividends from Investment | (.26) | (.53) | (.57) | (.55) | (.57) | (.60) |
Dividends from net realized gain | (.04) | (.09) | (.18) | — | (.12) | (.26) |
Total Distributions | (.30) | (.62) | (.75) | (.55) | (.69) | (.86) |
Net asset value, end of period | 22.64 | 23.44 | 23.01 | 23.16 | 22.57 | 23.45 |
Total Return (%) | (2.15)b | 4.65 | 2.63 | 5.11 | (.85) | 5.54 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .55c | .57 | .58 | .68 | .61 | .61 |
Ratio of net expenses | .45c | .45 | .45 | .45 | .45 | .45 |
Ratio of net investment income | 2.30c | 2.32 | 2.48 | 2.40 | 2.45 | 2.61 |
Portfolio Turnover Rate | 13.32b | 29.16 | 29.93 | 26.01 | 35.03 | 21.97 |
Net Assets, end of period ($ x 1,000) | 218,598 | 217,617 | 191,558 | 145,493 | 123,524 | 128,217 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
24
Six Months Ended | |||||||
March 31, 2017 | Year Ended September 30, | ||||||
Class Y Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013a | ||
Per Share Data ($): | |||||||
Net asset value, beginning of period | 23.43 | 23.00 | 23.16 | 22.57 | 22.60 | ||
Investment Operations: | |||||||
Investment income—netb | .25 | .54 | .57 | .47 | .14 | ||
Net realized and unrealized | (.74) | .51 | .02 | .68 | (.03) | ||
Total from Investment Operations | (.49) | 1.05 | .59 | 1.15 | .11 | ||
Distributions: | |||||||
Dividends from Investment | (.26) | (.53) | (.57) | (.56) | (.14) | ||
Dividends from net realized gain | (.04) | (.09) | (.18) | — | — | ||
Total Distributions | (.30) | (.62) | (.75) | (.56) | (.14) | ||
Net asset value, end of period | 22.64 | 23.43 | 23.00 | 23.16 | 22.57 | ||
Total Return (%) | (2.11)c | 4.66 | 2.59 | 5.13 | .50c | ||
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses to average net assets | .54d | .57 | .59 | .66 | .58d | ||
Ratio of net expenses to average net assets | .45d | .45 | .45 | .45 | .45d | ||
Ratio of net investment income to | 2.29d | 2.32 | 2.48 | 2.40 | 2.57d | ||
Portfolio Turnover Rate | 13.32c | 29.16 | 29.93 | 26.01 | 35.03 | ||
Net Assets, end of period ($ x 1,000) | 6,841 | 995 | 970 | 1,026 | 1 |
a From July 1, 2013 (commencement of initial offering) to September 30, 2013.
b Based on average shares outstanding.
c Not annualized.
d Annualized.
See notes to financial statements.
25
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus Tax Sensitive Total Return Bond Fund (the “fund”) is a separate non-diversified series of Dreyfus Investment Funds (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. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Standish Mellon Asset Management Company LLC (“Standish”), a wholly-owned subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser.
Effective March 31, 2017, the fund authorized the issuance of Class T shares, but, as of the date of this report, the fund did not offer Class T shares for purchase.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 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 T. Class A, Class C and Class T shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A and Class T shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I 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 Dreyfus, 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
26
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 is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
(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).
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NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
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 securities, excluding short-term investments (other than U.S. Treasury Bills), are valued each business day by an independent pricing service (the “Service”) approved by the Trust’s Board of Trustees (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 the 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 the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are valued as determined by the 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.
The Service is engaged under the general supervision of the Board.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
28
The following is a summary of the inputs used as of March 31, 2017 in valuing the fund’s investments:
Level 1 - | Level 2 – Other | Level 3 - | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Asset-Backed | — | 5,693,748 | — | 5,693,748 |
Corporate Bonds† | — | 762,734 | — | 762,734 |
Municipal Bonds† | — | 228,935,978 | — | 228,935,978 |
† See Statement of Investments for additional detailed categorizations.
At March 31, 2017, there were no transfers between levels of the fair value hierarchy.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. 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) 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.
(d) 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, 2017, 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, 2017, the fund did not incur any interest or penalties.
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NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Each tax year in the three-year period ended September 30, 2016 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, 2016 was as follows: tax-exempt income $4,559,794, ordinary income $1,042,824 and long-term capital gains $371,062. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in an $810 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. Prior to October 5, 2016, the unsecured credit facility with Citibank, N.A. was $555 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended March 31, 2017, 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 Dreyfus, 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. Dreyfus has contractually agreed, from October 1, 2016 through February 1, 2018, to waive receipt of its fees and assume the direct expenses of the fund so that the expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .45% of the value of the fund’s average daily net assets. The reduction in expenses, pursuant to the undertaking, amounted to $117,723 during the year ended March 31, 2017.
Pursuant to a sub-investment advisory agreement between Dreyfus and Standish, Standish serves as the fund’s sub-investment adviser responsible for the day-to-day management of the fund’s portfolio. Dreyfus pays the sub-investment adviser a monthly fee at an annual percentage of the value of the fund’s average daily net asset. Dreyfus has obtained an exemptive order from the SEC (the “Order”), upon which the fund may rely, to use a manager of managers approach that permits Dreyfus, subject to certain
30
conditions and approval by the Board, to enter into and materially amend sub-investment advisory agreements with one or more sub-investment advisers who are either unaffiliated with Dreyfus or are wholly-owned subsidiaries (as defined under the Act) of Dreyfus’ ultimate parent company, BNY Mellon, without obtaining shareholder approval. The Order also allows the fund to disclose the sub-investment advisory fee paid by Dreyfus to any unaffiliated sub-investment adviser in the aggregate with other unaffiliated sub-investment advisers in documents filed with the SEC and provided to shareholders. In addition, pursuant to the Order, it is not necessary to disclose the sub-investment advisory fee payable by Dreyfus separately to a sub-investment adviser that is a wholly-owned subsidiary of BNY Mellon in documents filed with the SEC and provided to shareholders; such fees are to be aggregated with fees payable to Dreyfus. Dreyfus has ultimate responsibility (subject to oversight by the Board) to supervise any sub-investment adviser and recommend the hiring, termination, and replacement of any sub-investment adviser to the Board.
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with Dreyfus, whereby Dreyfus performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate Dreyfus 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 Dreyfus for this service, Dreyfus has contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both Dreyfus’ costs in providing these services and a reasonable allocation of the costs incurred by Dreyfus and its affiliates related to the support and oversight of these services. The fund also reimburses Dreyfus for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration Agreement, the fund was charged $69,664 during the period ended March 31, 2017.
(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, 2017, Class C shares were charged $2,552 pursuant to the Distribution Plan.
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NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(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, 2017, Class A and Class C shares were charged $13,734 and $851, 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 as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended March 31, 2017, the fund was charged $4,418 for transfer agency services and $231 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $192.
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, 2017, the fund was charged $9,026 pursuant to the custody agreement. These fees were partially offset by earnings credits of $1,770.
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During the period ended March 31, 2017, the fund was charged $5,777 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $84,178, administration fees $12,627, Distribution Plan fees $409, Shareholder Services Plan fees $3,402, custodian fees $9,921, Chief Compliance Officer fees $5,777 and transfer agency fees $1,565, which are offset against an expense reimbursement currently in effect in the amount of $23,794.
(d) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of investment securities, excluding short-term securities, during the period ended March 31, 2017, amounted to $52,233,255 and $30,244,744, respectively.
At March 31, 2017, accumulated net unrealized appreciation on investments was $3,919,272, consisting of $5,008,148 gross unrealized appreciation and $1,088,876 gross unrealized depreciation.
At March 31, 2017, 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).
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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 22-23, 2017, the Board considered the renewal of the fund’s Investment Advisory Agreement and Administration Agreement, pursuant to which Dreyfus provides the fund with investment advisory and administrative services (together, the “Management Agreement”), and the Sub-Investment Advisory Agreement (together with the Management Agreement, the “Agreements”), pursuant to which Standish Mellon Asset Management Company LLC (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 Dreyfus and the Subadviser. In considering the renewal of the Agreements, the Board considered all factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered Dreyfus’ extensive administrative, accounting and compliance infrastructures, as well as Dreyfus’ 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 of Class A and Class I shares with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended December 31, 2016, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of
34
its analysis. Dreyfus 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.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds. The Board discussed with representatives of Dreyfus, its affiliates and/or the Sub-Adviser the results of the comparisons and considered that the fund’s total return performance of Class A shares was below the Performance Group and Performance Universe medians, except for the four-year period when performance was above the Performance Universe median, while the performance of Class I was generally above the Performance Group and/or Performance Universe medians in the various periods. The Board also noted that the fund’s yield performance for Class I shares was at or above the Performance Group and Performance Universe medians for the ten one-year periods and for Class A shares generally was below the Performance Group and Performance Universe medians. Dreyfus noted the proximity to the median of the fund’s total return or yield performance (Class A shares) in certain periods when performance was below median. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s Broadridge category average, and the Board noted that the fund’s performance for Class I shares was at or above the category average in eight of the ten one-year periods.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was below the Expense Group median and the fund’s actual management fee and the fund’s total expense ratio were below the Expense Group and Expense Universe medians (lowest management fee in the Expense Group and Expense Universe).
Dreyfus representatives stated that Dreyfus has agreed, until February 1, 2018, to waive receipt of its fees and/or assume the expenses of the fund so that the direct expenses of the classes (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, acquired fund fees and extraordinary expenses) do not exceed .45% of the fund’s daily net assets. Dreyfus representatives also noted that, in connection with the Administration Agreement and its related fees, Dreyfus has contractually agreed to waive its fees to the extent that such fees exceed Dreyfus’ costs in providing the services contemplated under the Administration Agreement.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Broadridge category as the fund and (2) paid to Dreyfus or the Subadviser or its affiliates for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of
35
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
the fee information provided for the Similar Clients to evaluate the appropriateness of the fund’s management fee.
The Board considered the fee to the Subadviser in relation to the fee paid to Dreyfus by the fund and the respective services provided by the Subadviser and Dreyfus. The Board also took into consideration that the Subadviser’s fee is paid by Dreyfus (out of its fee from the fund) and not the fund.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus. The Board also considered the expense limitation arrangement and its effect on the profitability of Dreyfus and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex. The consulting firm also had analyzed where any economies of scale might emerge in 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 Dreyfus 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 Dreyfus, 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. Dreyfus representatives 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 Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also stated that, as a result of shared and allocated costs among funds in the Dreyfus 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 Dreyfus 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
36
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 Dreyfus 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 Dreyfus and the Subadviser supported the renewal of the Agreements in light of the considerations described above.
· The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
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 Dreyfus and its affiliates and the Subadviser, of Dreyfus and the Subadviser and the services provided to the fund by Dreyfus 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 this fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, during which lengthy discussions took place between the Board and Dreyfus representatives. 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 Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
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Dreyfus Tax Sensitive Total Return Bond Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Sub-Investment Adviser
Standish Mellon Asset Management
Company LLC
BNY Mellon Center
201 Washington Street
Suite 2900
Boston, MA 02108-4408
Custodian
The Bank of New York Mellon
225 Liberty Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
Ticker Symbols: | Class A: DSDAX Class C: DSDCX Class I: SDITX Class Y: SDYTX |
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. (phone 1-800-SEC-0330 for information).
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.dreyfus.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
© 2017 MBSC Securities Corporation |
Dreyfus/The Boston Company Small/Mid Cap Growth Fund
| SEMIANNUAL REPORT |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
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 CEO OF DREYFUS
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus/The Boston Company Small/Mid Cap Growth Fund, covering the six-month period from October 1, 2016 through March 31, 2017. 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.
Stocks advanced solidly but bonds lost a degree of value over the reporting period amid heightened market volatility stemming from various economic and political developments. After previously rallying in response to stabilizing commodity prices, improving global economic data, and better-than-expected corporate earnings, stocks and corporate-backed bonds generally gave back a portion of their gains in October due to uncertainty in advance of U.S. elections. Meanwhile, prices of U.S. government securities began to decline in anticipation of higher inflation and short-term interest-rate hikes from U.S. monetary policymakers. After the election in early November, equity markets rallied to a series of new highs as investors revised their expectations for U.S. fiscal, regulatory, and tax policies. In the bond market, yields surged higher and prices fell after the election, while lower rated corporate-backed bonds continued to advance in anticipation of a more business-friendly political climate.
Some asset classes and industry groups seem likely to continue to benefit from a changing economic and geopolitical landscape, while others probably will face challenges as conditions evolve. Consequently, selectivity seems likely to be an important determinant of investment success in the months ahead. As always, we encourage you to discuss the implications of our observations with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Mark D. Santero
Chief Executive Officer
The Dreyfus Corporation
April 17, 2017
2
DISCUSSION OF FUND PERFORMANCE
For the period from October 1, 2016 through March 31, 2017, as provided by John R. Porter, Todd W. Wakefield, CFA, and Robert C. Zeuthen, CFA, of The Boston Company Asset Management, LLC, Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended March 31, 2017, Dreyfus/The Boston Company Small/Mid Cap Growth Fund’s Class A shares achieved a total return of 9.37%, Class C shares returned 8.94%, Class I shares returned 9.54%, and Class Y shares returned 9.63%.1 In comparison, the fund’s benchmark, the Russell 2500™ Growth Index (the “Index”), produced a total return of 9.01% for the same period.2
Small- and mid-cap stocks achieved solid gains over the reporting period amid expectations of greater economic growth and changing U.S. fiscal, tax, and regulatory policies. The fund’s relative performance as compared to the Index was due to favorable stock selections in the health care, industrials, and consumer staples sectors.
As of March 1, 2017, John R. Porter became the lead portfolio manager for the fund.
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 in equity securities of small-cap and mid-cap U.S. companies with market capitalizations equal to or less than the total market capitalization of the largest company in the Index. When choosing stocks, we seek to identify high-quality small-cap and mid-cap companies with rapid current or expected earnings or revenue growth. We employ fundamental research to identify companies with attractive characteristics, such as strong business and competitive positions, solid cash flows and balance sheets, high-quality management and high sustainable growth. We also may invest in companies that our research indicates will experience accelerating revenues and expanding operating margins.
Economic and Political Developments Drove Stocks Higher
U.S. stocks across all capitalization ranges fared well over the reporting period as investors’ risk appetites expanded in anticipation of more business-friendly policies from a newly elected U.S. president. Although the Index declined moderately before the vote in November, the election’s widely unexpected outcome sparked a robust rally that persisted through February. The rally paused in March, however, when investors began to recognize that the new administration’s proposals would take time, political capital, and cooperation from Congress to enact.
In this environment, health care stocks advanced amid expectations of lower corporate tax rates and reduced regulatory burdens. In the technology sector, investors looked forward to higher levels of enterprise spending on productivity-enhancing technologies. Companies in the materials sector responded positively to expectations of greater demand stemming from higher government spending on infrastructure projects. In contrast, the energy stocks in the Index posted double-digit losses stemming from renewed concerns about oil prices over the opening months of 2017.
Small-cap stocks generally produced higher returns than mid- and large-cap stocks over the reporting period, but mid-cap stocks trailed large-cap stocks. Small- and mid-cap growth stocks underperformed their more value-oriented counterparts, on average, but this trend appeared to reverse later in the reporting period.
3
DISCUSSION OF FUND PERFORMANCE (continued)
Security Selections Produced Positive Results
Strong results from the health care sector helped the fund outperform the Index in that sector over the reporting period. Veterinary services provider VCA was acquired at a premium to its stock price at the time, and health care plan provider Centene posted better-than-expected quarterly earnings. Acadia Healthcare Company demonstrated positive organic growth and expanded into new markets; Jazz Pharmaceuticals saw encouraging results in clinical trials for a new sleep apnea treatment; Sage Therapeutics rose on a positive clinical update and product pipeline strength; and Flexion Therapeutics gained value when regulators accepted the company’s filing for an osteoarthritis treatment.
The fund also fared well in the industrials sector, where defense contractor Mercury Systems continued to grow its share of the market for secure processing subsystems, nuclear components producer BWX Technologies received a substantial order from the U.S. Navy, and automotive parts remarketer Copart benefited from consumers’ tendency to keep their existing vehicles on the road. Results in the consumer staples sector were lifted by TreeHouse Foods, which achieved rising sales and greater operational efficiencies. In other areas, e-commerce specialist Shopify and digital marketer HubSpot benefited from the ongoing growth of online retailing and advertising, respectively.
On the other hand, relative performance was hurt by overweighted exposure to the lagging energy sector. Results also fell short of market averages in the materials sector, where lawn-and-garden products maker Scotts Miracle-Gro lost a degree of value after previously posting strong gains.
Positioned for Economic Growth
We continue to believe that pro-growth U.S. government policies are likely to boost corporate earnings and revenue growth, particularly for small and midsized companies. Yet, we have remained selective in light of current political uncertainties that could dampen investor sentiment in certain industry groups.
As of the reporting period’s end, we believe our growth-oriented investment process has identified ample opportunities in the information technology, energy, and health care sectors, but relatively few among industrials, consumer staples, real estate, materials, and consumer discretionary stocks.
April 17, 2017
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 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.
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.
4
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus/The Boston Company Small/Mid Cap Growth Fund from October 1, 2016 to March 31, 2017. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment | ||||||||||
assuming actual returns for the six months ended March 31, 2017 | ||||||||||
Class A | Class C | Class I | Class Y | |||||||
Expenses paid per $1,000† |
| $5.38 | $9.38 | $3.97 | $3.50 | |||||
Ending value (after expenses) |
| $1,093.70 | $1,089.40 | $1,095.40 | $1,096.30 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment | ||||||||
assuming a hypothetical 5% annualized return for the six months ended March 31, 2017 | ||||||||
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $5.19 | $9.05 | $3.83 | $3.38 | ||||
Ending value (after expenses) | $1,019.80 | $1,015.96 | $1,021.14 | $1,021.59 |
† Expenses are equal to the fund’s annualized expense ratio of 1.03% for Class A, 1.80% for Class C, .76% for Class I and .67% for Class Y, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
March 31, 2017 (Unaudited)
Common Stocks - 98.2% | Shares | Value ($) | |||
Banks - 2.9% | |||||
First Republic Bank | 206,737 | 19,393,998 | |||
SVB Financial Group | 60,744 | a,b | 11,303,851 | ||
30,697,849 | |||||
Capital Goods - 13.4% | |||||
Allegion | 80,785 | 6,115,424 | |||
Beacon Roofing Supply | 400,549 | b | 19,690,989 | ||
BMC Stock Holdings | 644,447 | b | 14,564,502 | ||
BWX Technologies | 346,515 | 16,494,114 | |||
Curtiss-Wright | 93,629 | 8,544,583 | |||
Graco | 117,555 | a | 11,066,628 | ||
Mercury Systems | 358,156 | b | 13,985,992 | ||
Nordson | 103,388 | 12,700,182 | |||
Quanta Services | 367,109 | b | 13,623,415 | ||
Snap-on | 110,038 | 18,560,109 | |||
Watsco | 55,408 | 7,933,317 | |||
143,279,255 | |||||
Commercial & Professional Services - 1.3% | |||||
Copart | 229,299 | a,b | 14,200,487 | ||
Consumer Durables & Apparel - 2.0% | |||||
Kate Spade & Company | 440,230 | b | 10,226,543 | ||
Newell Brands | 240,128 | 11,326,838 | |||
21,553,381 | |||||
Consumer Services - 4.2% | |||||
Bright Horizons Family Solutions | 74,692 | b | 5,414,423 | ||
Buffalo Wild Wings | 59,026 | b | 9,016,221 | ||
Panera Bread, Cl. A | 52,979 | a,b | 13,873,611 | ||
Planet Fitness, Cl. A | 890,329 | 17,156,640 | |||
45,460,895 | |||||
Diversified Financials - .9% | |||||
CBOE Holdings | 116,130 | 9,414,659 | |||
Energy - 4.9% | |||||
Diamondback Energy | 163,762 | b | 16,984,576 | ||
Oil States International | 368,579 | b | 12,218,394 | ||
TechnipFMC | 450,663 | b | 14,646,547 | ||
US Silica Holdings | 182,130 | a | 8,740,419 | ||
52,589,936 |
6
Common Stocks - 98.2% (continued) | Shares | Value ($) | |||
Food, Beverage & Tobacco - 1.2% | |||||
TreeHouse Foods | 147,621 | a,b | 12,497,594 | ||
Health Care Equipment & Services - 9.5% | |||||
ABIOMED | 86,301 | b | 10,804,885 | ||
Acadia Healthcare | 318,528 | a,b | 13,887,821 | ||
Align Technology | 143,599 | a,b | 16,472,241 | ||
athenahealth | 97,186 | a,b | 10,951,890 | ||
Brookdale Senior Living | 724,181 | b | 9,725,751 | ||
Centene | 154,957 | b | 11,042,236 | ||
Dentsply Sirona | 207,710 | 12,969,412 | |||
DexCom | 189,209 | b | 16,031,679 | ||
101,885,915 | |||||
Materials - 3.0% | |||||
Eagle Materials | 191,114 | 18,564,814 | |||
Packaging Corporation of America | 143,823 | 13,177,063 | |||
31,741,877 | |||||
Media - 1.5% | |||||
IMAX | 456,519 | a,b | 15,521,646 | ||
Pharmaceuticals, Biotechnology & Life Sciences - 11.3% | |||||
Alkermes | 362,791 | b | 21,223,273 | ||
Cambrex | 201,493 | b | 11,092,190 | ||
Flexion Therapeutics | 278,073 | b | 7,482,944 | ||
Halozyme Therapeutics | 751,612 | a,b | 9,740,892 | ||
ICON | 152,968 | b | 12,194,609 | ||
Jazz Pharmaceuticals | 125,478 | b | 18,210,622 | ||
Ligand Pharmaceuticals | 154,527 | a,b | 16,355,138 | ||
Neurocrine Biosciences | 276,513 | b | 11,973,013 | ||
Radius Health | 142,825 | a,b | 5,520,186 | ||
Sage Therapeutics | 102,702 | a,b | 7,299,031 | ||
121,091,898 | |||||
Real Estate - 1.7% | |||||
DuPont Fabros Technology | 369,630 | a,c | 18,329,952 | ||
Retailing - 3.2% | |||||
LKQ | 357,671 | b | 10,469,030 | ||
Ollie's Bargain Outlet Holdings | 168,307 | a,b | 5,638,284 | ||
Ulta Beauty | 65,374 | b | 18,646,626 | ||
34,753,940 | |||||
Semiconductors & Semiconductor Equipment - 7.6% | |||||
Impinj | 592,237 | a | 17,927,014 | ||
Inphi | 423,992 | a,b | 20,699,289 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks - 98.2% (continued) | Shares | Value ($) | |||
Semiconductors & Semiconductor Equipment - 7.6% (continued) | |||||
Mellanox Technologies | 291,037 | a,b | 14,828,335 | ||
Power Integrations | 421,234 | 27,696,135 | |||
81,150,773 | |||||
Software & Services - 24.2% | |||||
2U | 99,476 | b | 3,945,218 | ||
ANSYS | 59,295 | b | 6,336,857 | ||
Black Knight Financial Services, Cl. A | 337,088 | a,b | 12,910,470 | ||
Booz Allen Hamilton Holdings | 606,525 | 21,464,920 | |||
CACI International, Cl. A | 97,130 | b | 11,393,349 | ||
CommVault Systems | 348,617 | b | 17,709,744 | ||
CoStar Group | 52,967 | a,b | 10,975,822 | ||
HubSpot | 310,440 | b | 18,797,142 | ||
LogMeIn | 138,466 | 13,500,435 | |||
Manhattan Associates | 119,962 | b | 6,244,022 | ||
New Relic | 463,323 | b | 17,175,384 | ||
Proofpoint | 214,311 | a,b | 15,936,166 | ||
Science Applications International | 185,839 | 13,826,422 | |||
Shopify, Cl. A | 329,847 | a,b | 22,459,282 | ||
Splunk | 159,444 | a,b | 9,931,767 | ||
Square, Cl. A | 1,281,847 | b | 22,150,316 | ||
SS&C Technologies Holdings | 425,819 | a | 15,073,993 | ||
Twilio, Cl. A | 667,168 | a | 19,261,140 | ||
259,092,449 | |||||
Technology Hardware & Equipment - 4.4% | |||||
FLIR Systems | 478,142 | 17,346,992 | |||
NETGEAR | 309,994 | b | 15,360,203 | ||
Trimble | 433,358 | b | 13,871,790 | ||
46,578,985 | |||||
Transportation - 1.0% | |||||
J.B. Hunt Transport Services | 117,283 | 10,759,542 | |||
Total Common Stocks (cost $875,584,158) | 1,050,601,033 | ||||
Other Investment - 1.4% | |||||
Registered Investment Company; | |||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 14,652,719 | d | 14,652,719 |
8
Investment of Cash Collateral for Securities Loaned - 14.3% | Shares | Value ($) | |||
Registered Investment Company; | |||||
Dreyfus Institutional Preferred Money Market Fund, Hamilton Shares | 153,064,690 | d | 153,064,690 | ||
Total Investments (cost $1,043,301,567) | 113.9% | 1,218,318,442 | |||
Liabilities, Less Cash and Receivables | (13.9%) | (148,964,659) | |||
Net Assets | 100.0% | 1,069,353,783 |
aSecurity, or portion thereof, on loan. At March 31, 2017, the value of the fund’s securities on loan was $230,474,080 and the value of the collateral held by the fund was $234,883,855, consisting of cash collateral of $153,064,690 and U.S. Government & Agency securities valued at $81,819,165.
bNon-income producing security.
cInvestment in real estate investment trust.
dInvestment in affiliated money market mutual fund.
Portfolio Summary (Unaudited) † | Value (%) |
Software & Services | 24.2 |
Money Market Investments | 15.7 |
Capital Goods | 13.4 |
Pharmaceuticals, Biotechnology & Life Sciences | 11.3 |
Health Care Equipment & Services | 9.5 |
Semiconductors & Semiconductor Equipment | 7.6 |
Energy | 4.9 |
Technology Hardware & Equipment | 4.4 |
Consumer Services | 4.2 |
Retailing | 3.2 |
Materials | 3.0 |
Banks | 2.9 |
Consumer Durables & Apparel | 2.0 |
Real Estate | 1.7 |
Media | 1.5 |
Commercial & Professional Services | 1.3 |
Food, Beverage & Tobacco | 1.2 |
Transportation | 1.0 |
Diversified Financials | .9 |
113.9 |
† Based on net assets.
See notes to financial statements.
9
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2017 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
|
| ||
Unaffiliated issuers |
| 875,584,158 |
| 1,050,601,033 |
| |
Affiliated issuers |
| 167,717,409 |
| 167,717,409 |
| |
Cash |
|
|
|
| 1,460,222 |
|
Receivable for investment securities sold |
|
|
|
| 8,922,075 |
|
Dividends and securities lending income receivable |
|
|
|
| 368,411 |
|
Receivable for shares of Beneficial Interest subscribed |
|
|
|
| 107,411 |
|
Prepaid expenses |
|
|
|
| 214,519 |
|
|
|
|
|
| 1,229,391,080 |
|
Liabilities ($): |
|
|
|
| ||
Due to The Dreyfus Corporation and affiliates—Note 3(c) |
|
|
|
| 702,001 |
|
Liability for securities on loan—Note 1(b) |
|
|
|
| 153,064,690 |
|
Payable for investment securities purchased |
|
|
|
| 5,017,089 |
|
Payable for shares of Beneficial Interest redeemed |
|
|
|
| 1,086,115 |
|
Accrued expenses |
|
|
|
| 167,402 |
|
|
|
|
|
| 160,037,297 |
|
Net Assets ($) |
|
| 1,069,353,783 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 847,911,840 |
|
Accumulated investment (loss)—net |
|
|
|
| (921,851) |
|
Accumulated net realized gain (loss) on investments |
|
|
|
| 47,346,919 |
|
Accumulated net unrealized appreciation (depreciation) |
|
|
| 175,016,875 |
| |
Net Assets ($) |
|
| 1,069,353,783 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 209,532,649 | 36,039,012 | 465,656,037 | 358,126,085 |
|
Shares Outstanding | 11,760,357 | 2,229,299 | 25,421,893 | 19,468,231 |
|
Net Asset Value Per Share ($) | 17.82 | 16.17 | 18.32 | 18.40 |
|
See notes to financial statements. |
10
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2017 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends: |
|
|
|
| ||
Unaffiliated issuers |
|
| 4,057,917 |
| ||
Affiliated issuers |
|
| 33,159 |
| ||
Income from securities lending—Note 1(b) |
|
| 394,215 |
| ||
Total Income |
|
| 4,485,291 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 2,843,640 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 724,936 |
| ||
Distribution fees—Note 3(b) |
|
| 129,886 |
| ||
Registration fees |
|
| 82,335 |
| ||
Administration fee—Note 3(a) |
|
| 80,457 |
| ||
Professional fees |
|
| 31,337 |
| ||
Custodian fees—Note 3(c) |
|
| 28,224 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 26,640 |
| ||
Loan commitment fees—Note 2 |
|
| 14,480 |
| ||
Prospectus and shareholders’ reports |
|
| 11,266 |
| ||
Interest expense—Note 2 |
|
| 286 |
| ||
Miscellaneous |
|
| 14,927 |
| ||
Total Expenses |
|
| 3,988,414 |
| ||
Less—reduction in fees due to earnings credits—Note 3(c) |
|
| (3,712) |
| ||
Net Expenses |
|
| 3,984,702 |
| ||
Investment Income—Net |
|
| 500,589 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 50,042,668 |
| ||||
Net unrealized appreciation (depreciation) on investments |
|
| 35,888,971 |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 85,931,639 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 86,432,228 |
| |||
See notes to financial statements. |
11
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Six Months Ended |
|
|
| Year Ended |
|
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income (loss)—net |
|
| 500,589 |
|
|
| (2,132,511) |
| |
Net realized gain (loss) on investments |
| 50,042,668 |
|
|
| 27,648,284 |
| ||
Net unrealized appreciation (depreciation) |
| 35,888,971 |
|
|
| 79,181,821 |
| ||
Net Increase (Decrease) in Net Assets | 86,432,228 |
|
|
| 104,697,594 |
| |||
Distributions to Shareholders from ($): |
|
|
|
|
|
|
|
| |
Net realized gain on investments: |
|
|
|
|
|
|
|
| |
Class A |
|
| (4,997,899) |
|
|
| (14,162,754) |
| |
Class C |
|
| (837,455) |
|
|
| (2,369,599) |
| |
Class I |
|
| (11,207,680) |
|
|
| (32,102,467) |
| |
Class Y |
|
| (2,582,326) |
|
|
| (6,629,336) |
| |
Total Distributions |
|
| (19,625,360) |
|
|
| (55,264,156) |
| |
Beneficial Interest Transactions ($): |
|
|
|
|
|
|
|
| |
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 19,426,506 |
|
|
| 27,869,952 |
| |
Class C |
|
| 4,658,032 |
|
|
| 5,717,983 |
| |
Class I |
|
| 74,040,900 |
|
|
| 90,844,531 |
| |
Class Y |
|
| 237,230,697 |
|
|
| 78,013,436 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 4,713,908 |
|
|
| 13,597,132 |
| |
Class C |
|
| 834,810 |
|
|
| 2,351,988 |
| |
Class I |
|
| 11,079,966 |
|
|
| 31,581,829 |
| |
Class Y |
|
| 2,582,326 | �� |
|
| 6,629,336 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (52,526,492) |
|
|
| (48,373,129) |
| |
Class C |
|
| (5,393,298) |
|
|
| (10,052,551) |
| |
Class I |
|
| (164,808,277) |
|
|
| (150,361,398) |
| |
Class Y |
|
| (15,770,623) |
|
|
| (82,304,295) |
| |
Increase (Decrease) in Net Assets | 116,068,455 |
|
|
| (34,485,186) |
| |||
Total Increase (Decrease) in Net Assets | 182,875,323 |
|
|
| 14,948,252 |
| |||
Net Assets ($): |
|
|
|
|
|
|
|
| |
Beginning of Period |
|
| 886,478,460 |
|
|
| 871,530,208 |
| |
End of Period |
|
| 1,069,353,783 |
|
|
| 886,478,460 |
| |
Accumulated investment (loss)—net | (921,851) |
|
|
| (1,422,440) |
|
12
|
|
|
| Six Months Ended |
|
|
| Year Ended |
|
Capital Share Transactions (Shares): |
|
|
|
|
|
|
|
| |
Class Aa |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 1,143,646 |
|
|
| 1,784,531 |
| |
Shares issued for distributions reinvested |
|
| 281,595 |
|
|
| 861,123 |
| |
Shares redeemed |
|
| (3,051,531) |
|
|
| (3,105,350) |
| |
Net Increase (Decrease) in Shares Outstanding | (1,626,290) |
|
|
| (459,696) |
| |||
Class Ca |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 302,058 |
|
|
| 399,641 |
| |
Shares issued for distributions reinvested |
|
| 54,849 |
|
|
| 162,206 |
| |
Shares redeemed |
|
| (349,156) |
|
|
| (700,043) |
| |
Net Increase (Decrease) in Shares Outstanding | 7,751 |
|
|
| (138,196) |
| |||
Class Ia |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 4,194,295 |
|
|
| 5,699,323 |
| |
Shares issued for distributions reinvested |
|
| 644,559 |
|
|
| 1,953,113 |
| |
Shares redeemed |
|
| (9,361,862) |
|
|
| (9,406,753) |
| |
Net Increase (Decrease) in Shares Outstanding | (4,523,008) |
|
|
| (1,754,317) |
| |||
Class Ya |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 13,339,908 |
|
|
| 5,017,728 |
| |
Shares issued for distributions reinvested |
|
| 149,614 |
|
|
| 408,966 |
| |
Shares redeemed |
|
| (897,414) |
|
|
| (5,024,552) |
| |
Net Increase (Decrease) in Shares Outstanding | 12,592,108 |
|
|
| 402,142 |
| |||
aDuring the period ended March 31, 2017, 217 Class A shares representing $3,514 were exchanged for 212 Class I shares, 1,105 Class C shares representing $17,825 were exchanged for 977 Class I shares and 5,834,952 Class I shares representing $103,337,008 were exchanged for 5,808,713 Class Y shares and during the period ended September 30, 2016, 343 Class A shares representing $5,687 were exchanged for 335 Class I shares and 537,037 Class I shares representing $8,775,190 were exchanged for 535,073 Class Y shares. | |||||||||
See notes to financial statements. |
13
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
Six Months Ended | |||||||
March 31, 2017 | Year Ended September 30, | ||||||
Class A Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 16.66 | 15.83 | 17.65 | 18.76 | 15.82 | 12.95 | |
Investment Operations: | |||||||
Investment (loss)—neta | (.00)b | (.06) | (.07) | (.09) | (.06) | (.06) | |
Net realized and unrealized | 1.54 | 1.92 | .06 | 1.08 | 4.20 | 4.08 | |
Total from Investment Operations | 1.54 | 1.86 | (.01) | .99 | 4.14 | 4.02 | |
Distributions: | |||||||
Dividends from net realized | (.38) | (1.03) | (1.81) | (2.10) | (1.20) | (1.15) | |
Net asset value, end of period | 17.82 | 16.66 | 15.83 | 17.65 | 18.76 | 15.82 | |
Total Return (%)c | 9.37d | 12.11 | (.42) | 5.59 | 28.73 | 32.36 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | 1.03e | 1.04 | 1.03 | 1.04 | 1.02 | 1.08 | |
Ratio of net expenses | 1.03e | 1.04 | 1.03 | 1.04 | 1.02 | 1.08 | |
Ratio of net investment (loss) | (.05)e | (.41) | (.42) | (.48) | (.34) | (.37) | |
Portfolio Turnover Rate | 43.73d | 120.54 | 144.39 | 139.37 | 124.25 | 153.75 | |
Net Assets, end of period ($ x 1,000) | 209,533 | 222,978 | 219,185 | 225,427 | 193,470 | 135,904 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
See notes to financial statements.
14
Six Months Ended | ||||||
March 31, 2017 | Year Ended September 30, | |||||
Class C Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 15.20 | 14.64 | 16.58 | 17.87 | 15.26 | 12.63 |
Investment Operations: | ||||||
Investment (loss)—neta | (.06) | (.17) | (.20) | (.22) | (.20) | (.18) |
Net realized and unrealized | 1.41 | 1.76 | .07 | 1.03 | 4.01 | 3.96 |
Total from Investment Operations | 1.35 | 1.59 | (.13) | .81 | 3.81 | 3.78 |
Distributions: | ||||||
Dividends from net realized | (.38) | (1.03) | (1.81) | (2.10) | (1.20) | (1.15) |
Net asset value, end of period | 16.17 | 15.20 | 14.64 | 16.58 | 17.87 | 15.26 |
Total Return (%)b | 8.94c | 11.28 | (1.18) | 4.72 | 27.54 | 31.21 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.80d | 1.83 | 1.81 | 1.83 | 1.92 | 1.97 |
Ratio of net expenses | 1.80d | 1.83 | 1.81 | 1.83 | 1.92 | 1.97 |
Ratio of net investment (loss) | (.84)d | (1.19) | (1.21) | (1.26) | (1.29) | (1.24) |
Portfolio Turnover Rate | 43.73c | 120.54 | 144.39 | 139.37 | 124.25 | 153.75 |
Net Assets, end of period ($ x 1,000) | 36,039 | 33,779 | 34,554 | 31,329 | 6,991 | 1,893 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
15
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||
March 31, 2017 | Year Ended September 30, | ||||||
Class I Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 17.09 | 16.18 | 17.96 | 19.01 | 15.98 | 13.03 | |
Investment Operations: | |||||||
Investment income (loss)—neta | .02 | (.03) | (.03) | (.04) | (.01) | (.01) | |
Net realized and unrealized | 1.59 | 1.97 | .06 | 1.09 | 4.24 | 4.11 | |
Total from Investment Operations | 1.61 | 1.94 | .03 | 1.05 | 4.23 | 4.10 | |
Distributions: | |||||||
Dividends from net realized | (.38) | (1.03) | (1.81) | (2.10) | (1.20) | (1.15) | |
Net asset value, end of period | 18.32 | 17.09 | 16.18 | 17.96 | 19.01 | 15.98 | |
Total Return (%) | 9.54b | 12.36 | (.17) | 5.85 | 29.03 | 32.81 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | .76c | .79 | .79 | .80 | .75 | .78 | |
Ratio of net expenses | .76c | .79 | .79 | .80 | .75 | .78 | |
Ratio of net investment income (loss) | .24c | (.16) | (.19) | (.24) | (.06) | (.07) | |
Portfolio Turnover Rate | 43.73b | 120.54 | 144.39 | 139.37 | 124.25 | 153.75 | |
Net Assets, end of period ($ x 1,000) | 465,656 | 511,768 | 512,830 | 605,932 | 605,704 | 513,947 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
16
Six Months Ended | ||||||
March 31, 2017 | Year Ended September 30, | |||||
Class Y Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013a | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 17.15 | 16.21 | 17.97 | 19.01 | 17.16 | |
Investment Operations: | ||||||
Investment income (loss)—netb | .01 | (.00)c | (.01) | (.03) | (.01) | |
Net realized and unrealized | 1.62 | 1.97 | .06 | 1.09 | 1.86 | |
Total from Investment Operations | 1.63 | 1.97 | .05 | 1.06 | 1.85 | |
Distributions: | ||||||
Dividends from net realized | (.38) | (1.03) | (1.81) | (2.10) | - | |
Net asset value, end of period | 18.40 | 17.15 | 16.21 | 17.97 | 19.01 | |
Total Return (%) | 9.63d | 12.53 | (.05) | 5.90 | 10.78d | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .67e | .68 | .68 | .72 | .72e | |
Ratio of net expenses | .67e | .68 | .68 | .72 | .72e | |
Ratio of net investment income (loss) | .12e | (.03) | (.07) | (.15) | (.26)e | |
Portfolio Turnover Rate | 43.73d | 120.54 | 144.39 | 139.37 | 124.25 | |
Net Assets, end of period ($ x 1,000) | 358,126 | 117,953 | 104,961 | 100,902 | 1 |
a From July 1, 2013, (commencement of initial offering) to September 30, 2013.
b Based on average shares outstanding.
c Amount represents less than $.01 per share.
d Not annualized.
e Annualized.
See notes to financial statements.
17
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus/The Boston Company Small/Mid Cap Growth Fund (the “fund”) is a separate non-diversified series of Dreyfus Investment Funds (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. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. The Boston Company Asset Management, LLC (“TBCAM”), a wholly-owned subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser.
Effective March 31, 2017, the fund authorized the issuance of Class T shares, but, as of the date of this report, the fund did not offer Class T shares for purchase.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 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 T. Class A, Class C and Class T shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A and Class T shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I 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 Dreyfus, 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 unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
18
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 is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
(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.
19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant 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 reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the 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 restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
20
The following is a summary of the inputs used as of March 31, 2017 in 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 - Domestic Common Stocks† | 985,778,949 | – | – | 985,778,949 |
Equity Securities - Foreign Common Stocks† | 64,822,084 | – | – | 64,822,084 |
Registered Investment Companies | 167,717,409 | – | – | 167,717,409 |
† See Statement of Investments for additional detailed categorizations.
At March 31, 2017, there were no transfers between levels of the fair value hierarchy.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by Dreyfus, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
continuous basis. During the period ended March 31, 2017, The Bank of New York Mellon earned $78,475 from lending portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended March 31, 2017 were as follows:
Affiliated Investment Company | Value | Purchases($) | Sales($) | Value | Net |
Dreyfus Institutional Cash Advantage | 61,352,680 | - | 61,352,680 | - | - |
Dreyfus Institutional | 21,320,462 | 317,997,220 | 324,664,963 | 14,652,719 | 1.4 |
Dreyfus Institutional | - | 411,861,883 | 258,797,193 | 153,064,690 | 14.3 |
Total | 82,673,142 | 729,859,103 | 644,814,836 | 167,717,409 | 15.7 |
† During the period ended March 31, 2017, Dreyfus Institutional Cash Advantage Fund was acquired by Dreyfus Institutional Preferred Money Market Fund.
(d) 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.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
22
As of and during the period ended March 31, 2017, 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, 2017, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2016 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, 2016 was as follows: long-term capital gains $55,264,156. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in an $810 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. Prior to October 5, 2016, the unsecured credit facility with Citibank, N.A. was $555 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing.
The average amount of borrowings outstanding under the Facilities during the period ended March 31, 2017 was approximately $35,200 with a related weighted average annualized interest rate of 1.63%.
NOTE 3—Investment Advisory Fee, Sub-Investment Advisory Fee, Administration Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with Dreyfus, 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 Dreyfus and TBCAM, TBCAM serves as the fund’s sub-investment adviser responsible for the day-to-day management of the fund’s portfolio. Dreyfus pays TBCAM a monthly fee at an annual percentage of the value of the fund’s average daily net assets. Dreyfus has obtained an exemptive order from the SEC (the “Order”), upon which the fund may rely, to use a manager of managers approach that permits Dreyfus, subject to certain conditions and approval by the Board, to enter into and materially amend sub-investment
23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
advisory agreements with one or more sub-investment advisers who are either unaffiliated with Dreyfus or are wholly-owned subsidiaries (as defined under the Act) of Dreyfus’ ultimate parent company, BNY Mellon, without obtaining shareholder approval. The Order also allows the fund to disclose the sub-investment advisory fee paid by Dreyfus to any unaffiliated sub-investment adviser in the aggregate with other unaffiliated sub-investment advisers in documents filed with the SEC and provided to shareholders. In addition, pursuant to the Order, it is not necessary to disclose the sub-investment advisory fee payable by Dreyfus separately to a sub-investment adviser that is a wholly-owned subsidiary of BNY Mellon in documents filed with the SEC and provided to shareholders; such fees are to be aggregated with fees payable to Dreyfus. Dreyfus has ultimate responsibility (subject to oversight by the Board) to supervise any sub-investment adviser and recommend the hiring, termination, and replacement of any sub-investment adviser to the Board.
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with Dreyfus, whereby Dreyfus performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate Dreyfus 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 Dreyfus for this service, Dreyfus has contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both Dreyfus’ costs in providing these services and a reasonable allocation of the costs incurred by Dreyfus and its affiliates related to the support and oversight of these services. The fund also reimburses Dreyfus for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration Agreement, the fund was charged $80,457 during the period ended March 31, 2017.
During the period ended March 31, 2017, the Distributor retained $5,984 from commissions earned on sales of the fund’s Class A shares and $1,960 from CDSCs on redemptions of the fund’s Class C shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the
24
period ended March 31, 2017, Class C shares were charged $129,886 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, 2017, Class A and Class C shares were charged $274,651 and $43,295, 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 as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended March 31, 2017, the fund was charged $43,921 for transfer agency services and $3,620 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $3,171.
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, 2017, the fund was charged $28,224
25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
pursuant to the custody agreement. These fees were partially offset by earnings credit of $541.
During the period ended March 31, 2017, the fund was charged $5,777 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $543,366, administration fees $24,560, Distribution Plan fees $22,913, Shareholder Services Plan fees $52,075, custodian fees $34,546, Chief Compliance Officer fees $5,777 and transfer agency fees $18,764.
(d) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended March 31, 2017, amounted to $510,403,557 and $410,401,000, respectively.
At March 31, 2017, accumulated net unrealized appreciation on investments was $175,016,875, consisting of $189,838,587 gross unrealized appreciation and $14,821,712 gross unrealized depreciation.
At March 31, 2017, 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).
26
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 22-23, 2017, the Board considered the renewal of the fund’s Investment Advisory Agreement and Administration Agreement, pursuant to which Dreyfus provides the fund with investment advisory and administrative services (together, the “Management Agreement”), and the Sub-Investment Advisory Agreement (together with the Management Agreement, the “Agreements”), pursuant to which The Boston Company Asset Management LLC (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 Dreyfus and the Subadviser. In considering the renewal of the Agreements, the Board considered all factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered Dreyfus’ extensive administrative, accounting and compliance infrastructures, as well as Dreyfus’ supervisory activities over the Subadviser. The Board also considered portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. 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 comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended December 31, 2016, and (2) the
27
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. Dreyfus 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.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds. They also considered that performance generally should be considered over longer periods of time, although it is possible that long-term performance can be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect disproportionately long-term performance. The Board discussed with representatives of Dreyfus, its affiliates and/or the Sub-Adviser the results of the comparisons and considered that the fund’s total return performance (Class A and Class I shares) was above the Performance Group and Performance Universe medians for the various periods, except for the three-year period when the fund’s performance was below the Performance Group median. Dreyfus also provided a comparison of the fund’s calendar year total returns of the fund’s benchmark index.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was below the Expense Group median and the fund’s actual management fee and total expense ratio were below the Expense Group and Expense Universe medians (lowest management fee in the Performance Group and Performance Universe).
Dreyfus representatives stated that, in connection with the Administration Agreement and its related fees, Dreyfus has contractually agreed to waive its fees to the extent that such fees exceed Dreyfus’ costs in providing the services contemplated under the Administration Agreement.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Broadridge category as the fund and (2) paid to Dreyfus or the Subadviser or its affiliates for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of 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.
The Board considered the fee to the Subadviser in relation to the fee paid to Dreyfus by the fund and the respective services provided by the Subadviser and Dreyfus. The Board
28
also took into consideration that the Subadviser’s fee is paid by Dreyfus (out of its fee from the fund) and not the fund.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex. The consulting firm also had analyzed where any economies of scale might emerge in 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 Dreyfus 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 Dreyfus, 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. Dreyfus representatives 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 Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also stated that, as a result of shared and allocated costs among funds in the Dreyfus 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 Dreyfus 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 Dreyfus and the Subadviser are adequate and appropriate.
· The Board was satisfied with the fund’s performance.
29
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
· The Board concluded that the fees paid to Dreyfus and the Subadviser supported the renewal of the Agreements in light of the considerations described above.
· The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
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 Dreyfus and its affiliates and the Subadviser, of Dreyfus and the Subadviser and the services provided to the fund by Dreyfus 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 this fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, during which lengthy discussions took place between the Board and Dreyfus representatives. 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 Dreyfus funds that the Board oversees, in prior years.
30
NOTES
31
NOTES
32
NOTES
33
Dreyfus/The Boston Company Small/Mid Cap Growth Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Sub-Investment Adviser
The Boston Company Asset
Management LLC
BNY Mellon Center
One Boston Place
Boston, MA 02108
Custodian
The Bank of New York Mellon
225 Liberty Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
Ticker Symbols: | Class A: DBMAX Class C: DBMCX Class I: SDSCX Class Y: DBMYX |
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. (phone 1-800-SEC-0330 for information).
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.dreyfus.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
© 2017 MBSC Securities Corporation |
|
Dreyfus/The Boston Company Small Cap Growth Fund
SEMIANNUAL REPORT |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
With Those of Other Funds | |
Fund’s Investment Advisory and | |
Administration Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE CEO OF DREYFUS
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus/The Boston Company Small Cap Growth Fund, covering the six-month period from October 1, 2016 through March 31, 2017. 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.
Stocks advanced solidly but bonds lost a degree of value over the reporting period amid heightened market volatility stemming from various economic and political developments. After previously rallying in response to stabilizing commodity prices, improving global economic data, and better-than-expected corporate earnings, stocks and corporate-backed bonds generally gave back a portion of their gains in October due to uncertainty in advance of U.S. elections. Meanwhile, prices of U.S. government securities began to decline in anticipation of higher inflation and short-term interest-rate hikes from U.S. monetary policymakers. After the election in early November, equity markets rallied to a series of new highs as investors revised their expectations for U.S. fiscal, regulatory, and tax policies. In the bond market, yields surged higher and prices fell after the election, while lower rated corporate-backed bonds continued to advance in anticipation of a more business-friendly political climate.
Some asset classes and industry groups seem likely to continue to benefit from a changing economic and geopolitical landscape, while others probably will face challenges as conditions evolve. Consequently, selectivity seems likely to be an important determinant of investment success in the months ahead. As always, we encourage you to discuss the implications of our observations with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Mark D. Santero
Chief Executive Officer
The Dreyfus Corporation
April 17, 2017
2
DISCUSSION OF FUND PERFORMANCE
For the period from October 1, 2016 through March 31, 2017, 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, 2017, Dreyfus/The Boston Company Small Cap Growth Fund’s Class I shares achieved a total return of 7.27%, and Class Y shares returned 7.26%.1 In comparison, the fund’s benchmark, the Russell 2000® Growth Index (the “Index”), produced a total return of 9.11% for the same period.2
Small-cap stocks achieved solid gains over the reporting period amid expectations of greater economic growth and changing U.S. fiscal, tax, and regulatory policies. The fund lagged the Index, mainly due to shortfalls in the health care, energy, materials, and consumer discretionary sectors.
As of March 1, 2017, John R. Porter became the lead portfolio manager for the fund.
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 in equity securities of small-cap U.S. companies with total market capitalizations equal to or less than that of the largest company in the Index. When choosing stocks, we seek to identify high-quality, small-cap companies that are experiencing or are expected to experience rapid current or expected earnings or revenue growth. We employ fundamental research to identify companies with attractive characteristics, such as strong business and competitive positions, solid cash flows and balance sheets, high-quality management, and high sustainable growth. We also may invest in companies that our research indicates will experience accelerating revenues and expanding operating margins.
Economic and Political Developments Drove Stocks Higher
U.S. stocks across all capitalization ranges fared well over the reporting period as investors’ risk appetites expanded in anticipation of more business-friendly policies from a newly elected U.S. president. Although the Index declined moderately before the vote in November, the election’s widely unexpected outcome sparked a robust rally that persisted through February. The rally paused in March, however, when investors began to recognize that the new administration’s proposals would take time, political capital, and cooperation from Congress to enact.
In this environment, health care stocks advanced amid expectations of lower corporate tax rates and reduced regulatory burdens. In the technology sector, investors looked forward to higher levels of enterprise spending on productivity-enhancing technologies. Companies in the materials sector responded positively to expectations of greater demand stemming from higher government spending on infrastructure projects. In contrast, the energy stocks in the Index posted double-digit losses stemming from renewed concerns about oil prices over the opening months of 2017.
Small-cap stocks generally produced higher returns than mid- and large-cap stocks over the reporting period. Small-cap growth stocks underperformed their more value-oriented counterparts, on average, but this trend appeared to reverse later in the reporting period.
Security Selections Weighed on Fund Results
Some disappointing security selections in the health care sector dampened the fund’s performance compared to the Index over the reporting period. Most notably, Foamix
3
DISCUSSION OF FUND PERFORMANCE (continued)
Pharmaceuticals lost considerable value after clinical trials of a new acne medication produced mixed results. Biotechnology firm Natera was hurt by weaker-than-expected quarterly earnings and reduced revenue projections. Ear specialist Otonomy struggled due to a soft start for its lead product. Meanwhile, overweighted exposure to the lagging energy sector more than offset the benefits of above-average security selections in the area.
In the materials sector, chemical company Flotek Industries encountered concerns regarding sluggish demand from its energy-related customers, and the timing of the fund’s purchase of construction materials provider Summit Materials proved to be a headwind. Among consumer discretionary companies, online marketplace Etsy lagged sector averages despite robust quarterly earnings when the company announced an increase in capital spending, and the sale of 1-800-Flowers.com from the portfolio caused the fund to miss a subsequent rebound.
The fund achieved better relative results in the information technology sector. E-commerce specialist Shopify and digital marketer HubSpot benefited from the ongoing growth of online retailing and advertising, respectively. Software developer Mimecast participated in positive secular trends surrounding cloud computing and cybersecurity solutions, and data protection specialist Varonis Systems reported strong revenues and earnings. The fund further benefited from underweighted exposure to the industrials sector, where results were also buoyed by successful security selections, such as lead recycler Aqua Metals and equipment rental company Herc Holdings. In the real estate sector, data centers operator DuPont Fabros Technology exhibited positive earnings growth and strong cash flows amid robust customer demand.
Positioned for Economic Growth
We continue to believe that pro-growth U.S. government policies are likely to boost corporate earnings and revenue growth, particularly for small companies. Yet, we have remained selective in light of current political uncertainties that could dampen investor sentiment in certain industry groups.
As of the reporting period’s end, we believe our growth-oriented investment process has identified ample opportunities in the information technology, consumer staples, and energy sectors, but relatively few among industrials, financials, materials, and health care stocks.
April 17, 2017
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.
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.
A significant portion of the fund’s recent performance is attributable to positive returns from its initial public offering (IPO) investments. There can be no guarantee that IPOs will have or continue to have a positive effect on the fund’s performance. Currently, the fund is relatively small in asset size. IPOs tend to have a reduced effect on performance as a fund’s asset base grows.
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 returns reflect the absorption of certain expenses by The Dreyfus Corporation pursuant to an agreement in effect through February 1, 2018. 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.
4
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus/The Boston Company Small Cap Growth Fund from October 1, 2016 to March 31, 2017. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment | ||||||||||||||
assuming actual returns for the six months ended March 31, 2017 | ||||||||||||||
|
|
| Class I | Class Y | ||||||||||
Expenses paid per $1,000† |
| $5.17 | $5.17 | |||||||||||
Ending value (after expenses) |
| $1,072.70 | $1,072.60 |
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 | |||||||||||||||
assuming a hypothetical 5% annualized return for the six months ended March 31, 2017 | |||||||||||||||
|
|
| Class I | Class Y | |||||||||||
Expenses paid per $1,000† | $5.04 | $5.04 | |||||||||||||
Ending value (after expenses) | $1,019.95 | $1,019.95 |
† Expenses are equal to the fund’s annualized expense ratio of 1.00% for Class I and 1.00% for Class Y, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
March 31, 2017 (Unaudited)
Common Stocks - 98.8% | Shares | Value ($) | |||
Banks - 3.3% | |||||
Columbia Banking System | 1,517 | 59,148 | |||
National Bank Holdings, Cl. A | 2,830 | 91,975 | |||
TriState Capital Holdings | 1,427 | a | 33,320 | ||
184,443 | |||||
Capital Goods - 10.3% | |||||
Beacon Roofing Supply | 2,028 | a | 99,696 | ||
Curtiss-Wright | 491 | 44,809 | |||
Granite Construction | 1,094 | 54,908 | |||
Herc Holdings | 914 | a | 44,685 | ||
KeyW Holding | 8,841 | a | 83,459 | ||
Mercury Systems | 3,789 | a | 147,960 | ||
Sun Hydraulics | 1,592 | 57,487 | |||
Watsco | 330 | 47,249 | |||
580,253 | |||||
Commercial & Professional Services - 1.7% | |||||
Aqua Metals | 1,584 | a | 30,951 | ||
WageWorks | 875 | a | 63,263 | ||
94,214 | |||||
Consumer Services - 4.2% | |||||
Bright Horizons Family Solutions | 405 | a | 29,358 | ||
Buffalo Wild Wings | 358 | a | 54,685 | ||
Planet Fitness, Cl. A | 5,208 | 100,358 | |||
Texas Roadhouse | 1,124 | 50,052 | |||
234,453 | |||||
Diversified Financials - .8% | |||||
WisdomTree Investments | 5,304 | 48,160 | |||
Energy - 4.4% | |||||
Laredo Petroleum | 2,862 | a | 41,785 | ||
Oil States International | 2,130 | a | 70,610 | ||
PDC Energy | 1,321 | a | 82,364 | ||
US Silica Holdings | 1,081 | 51,877 | |||
246,636 | |||||
Exchange-Traded Funds - 1.3% | |||||
iShares Russell 2000 Growth ETF | 442 | 71,454 | |||
Food & Staples Retailing - 1.0% | |||||
Performance Food Group | 2,264 | a | 53,883 |
6
Common Stocks - 98.8% (continued) | Shares | Value ($) | |||
Food, Beverage & Tobacco - 4.3% | |||||
Calavo Growers | 1,756 | 106,414 | |||
Freshpet | 4,827 | a | 53,097 | ||
Snyder's-Lance | 2,030 | 81,829 | |||
241,340 | |||||
Health Care Equipment & Services - 5.0% | |||||
Align Technology | 708 | a | 81,215 | ||
Endologix | 5,723 | a | 41,434 | ||
NxStage Medical | 2,896 | a | 77,700 | ||
Spectranetics | 1,409 | a | 41,037 | ||
WellCare Health Plans | 296 | a | 41,502 | ||
282,888 | |||||
Household & Personal Products - 1.6% | |||||
Inter Parfums | 2,402 | 87,793 | |||
Materials - 3.8% | |||||
Carpenter Technology | 1,905 | 71,057 | |||
Headwaters | 3,212 | a | 75,418 | ||
Summit Materials, Cl. A | 2,824 | a | 69,781 | ||
216,256 | |||||
Media - 1.6% | |||||
IMAX | 2,633 | a | 89,522 | ||
Pharmaceuticals, Biotechnology & Life Sciences - 12.7% | |||||
Aerie Pharmaceuticals | 646 | a | 29,296 | ||
Cambrex | 1,350 | a | 74,318 | ||
Flexion Therapeutics | 3,369 | a | 90,660 | ||
Foamix Pharmaceuticals | 4,729 | a | 23,409 | ||
Galapagos, ADR | 644 | a | 55,506 | ||
Halozyme Therapeutics | 4,738 | a | 61,404 | ||
Ligand Pharmaceuticals | 913 | a | 96,632 | ||
Natera | 6,033 | a | 53,513 | ||
NeoGenomics | 5,842 | a | 46,093 | ||
Otonomy | 2,621 | a | 32,107 | ||
Radius Health | 1,553 | a | 60,023 | ||
Retrophin | 2,369 | a | 43,732 | ||
Sage Therapeutics | 660 | a | 46,906 | ||
713,599 | |||||
Real Estate - 4.8% | |||||
DuPont Fabros Technology | 1,990 | b | 98,684 | ||
Monmouth Real Estate Investment | 2,004 | b | 28,597 | ||
Physicians Realty Trust | 2,730 | b | 54,245 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks - 98.8% (continued) | Shares | Value ($) | |||
Real Estate - 4.8% (continued) | |||||
Potlatch | 1,968 | b | 89,938 | ||
271,464 | |||||
Retailing - 5.9% | |||||
Burlington Stores | 668 | a | 64,990 | ||
Core-Mark Holding | 1,345 | 41,951 | |||
Duluth Holdings, Cl. B | 1,584 | a | 33,723 | ||
Etsy | 5,843 | a | 62,111 | ||
Monro Muffler Brake | 966 | 50,329 | |||
Ollie's Bargain Outlet Holdings | 2,321 | a | 77,754 | ||
330,858 | |||||
Semiconductors & Semiconductor Equipment - 10.3% | |||||
Impinj | 4,370 | 132,280 | |||
Inphi | 2,567 | a | 125,321 | ||
MaxLinear | 4,020 | a | 112,761 | ||
Mellanox Technologies | 1,582 | a | 80,603 | ||
Power Integrations | 2,002 | 131,631 | |||
582,596 | |||||
Software & Services - 17.8% | |||||
2U | 1,120 | a | 44,419 | ||
CACI International, Cl. A | 584 | a | 68,503 | ||
CommVault Systems | 1,898 | a | 96,418 | ||
HubSpot | 1,849 | a | 111,957 | ||
LogMeIn | 957 | 93,308 | |||
Mimecast | 5,210 | a | 116,652 | ||
New Relic | 2,750 | a | 101,943 | ||
Proofpoint | 1,287 | a | 95,701 | ||
Shopify, Cl. A | 1,731 | a | 117,864 | ||
Twilio, Cl. A | 3,043 | 87,851 | |||
Varonis Systems | 2,109 | a | 67,066 | ||
1,001,682 | |||||
Technology Hardware & Equipment - 4.0% | |||||
Airgain | 1,596 | 24,195 | |||
Calix | 3,951 | a | 28,645 | ||
NETGEAR | 2,034 | a | 100,785 | ||
Novanta | 2,803 | a | 74,420 | ||
228,045 | |||||
Total Common Stocks (cost $4,301,911) | 5,559,539 |
8
Other Investment - 1.7% | Shares | Value ($) | |||
Registered Investment Company; | |||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 97,078 | c | 97,078 | ||
Total Investments (cost $4,398,989) | 100.5% | 5,656,617 | |||
Liabilities, Less Cash and Receivables | (.5%) | (28,429) | |||
Net Assets | 100.0% | 5,628,188 |
ADR—American Depository Receipt
ETF—Exchange-Traded Fund
aNon-income producing security.
bInvestment in real estate investment trust.
cInvestment in affiliated money market mutual fund.
Portfolio Summary (Unaudited) † | Value (%) |
Software & Services | 17.8 |
Pharmaceuticals, Biotechnology & Life Sciences | 12.7 |
Semiconductors & Semiconductor Equipment | 10.3 |
Capital Goods | 10.3 |
Retailing | 5.9 |
Health Care Equipment & Services | 5.0 |
Real Estate | 4.8 |
Energy | 4.4 |
Food, Beverage & Tobacco | 4.3 |
Consumer Services | 4.2 |
Technology Hardware & Equipment | 4.0 |
Materials | 3.8 |
Banks | 3.3 |
Money Market Investment | 1.7 |
Commercial & Professional Services | 1.7 |
Media | 1.6 |
Household & Personal Products | 1.6 |
Exchange-Traded Funds | 1.3 |
Food & Staples Retailing | 1.0 |
Diversified Financials | .8 |
100.5 |
† Based on net assets.
See notes to financial statements.
9
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2017 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments: |
|
|
|
| ||
Unaffiliated issuers |
| 4,301,911 |
| 5,559,539 |
| |
Affiliated issuers |
| 97,078 |
| 97,078 |
| |
Receivable for investment securities sold |
|
|
|
| 50,271 |
|
Dividends and securities lending income receivable |
|
|
|
| 2,133 |
|
Prepaid expenses |
|
|
|
| 16,779 |
|
|
|
|
|
| 5,725,800 |
|
Liabilities ($): |
|
|
|
| ||
Due to The Dreyfus Corporation and affiliates—Note 3(b) |
|
|
|
| 4,586 |
|
Payable for investment securities purchased |
|
|
|
| 50,212 |
|
Payable for shares of Beneficial Interest redeemed |
|
|
|
| 2,603 |
|
Accrued expenses |
|
|
|
| 40,211 |
|
|
|
|
|
| 97,612 |
|
Net Assets ($) |
|
| 5,628,188 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 3,361,505 |
|
Accumulated investment (loss)—net |
|
|
|
| (21,676) |
|
Accumulated net realized gain (loss) on investments |
|
|
|
| 1,030,731 |
|
Accumulated net unrealized appreciation (depreciation) |
|
|
| 1,257,628 |
| |
Net Assets ($) |
|
| 5,628,188 |
|
Net Asset Value Per Share | Class I | Class Y |
|
Net Assets ($) | 5,562,868 | 65,320 |
|
Shares Outstanding | 196,237 | 2,302 |
|
Net Asset Value Per Share ($) | 28.35 | 28.38 |
|
See notes to financial statements. |
10
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2017 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends: |
|
|
|
| ||
Unaffiliated issuers |
|
| 33,333 |
| ||
Affiliated issuers |
|
| 228 |
| ||
Income from securities lending—Note 1(b) |
|
| 2,479 |
| ||
Total Income |
|
| 36,040 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 24,615 |
| ||
Professional fees |
|
| 24,855 |
| ||
Registration fees |
|
| 18,065 |
| ||
Prospectus and shareholders’ reports |
|
| 7,429 |
| ||
Custodian fees—Note 3(b) |
|
| 6,104 |
| ||
Shareholder servicing costs—Note 3(b) |
|
| 4,492 |
| ||
Administration fee—Note 3(a) |
|
| 1,846 |
| ||
Trustees’ fees and expenses—Note 3(c) |
|
| 174 |
| ||
Loan commitment fees—Note 2 |
|
| 99 |
| ||
Miscellaneous |
|
| 10,360 |
| ||
Total Expenses |
|
| 98,039 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (67,123) |
| ||
Less—reduction in fees due to earnings credits—Note 3(b) |
|
| (49) |
| ||
Net Expenses |
|
| 30,867 |
| ||
Investment Income—Net |
|
| 5,173 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 659,724 |
| ||||
Net unrealized appreciation (depreciation) on investments |
|
| (289,843) |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 369,881 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 375,054 |
| |||
See notes to financial statements. |
11
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Six Months Ended |
|
|
| Year Ended |
|
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income (loss)—net |
|
| 5,173 |
|
|
| (33,140) |
| |
Net realized gain (loss) on investments |
| 659,724 |
|
|
| 1,528,637 |
| ||
Net unrealized appreciation (depreciation) |
| (289,843) |
|
|
| (244,152) |
| ||
Net Increase (Decrease) in Net Assets | 375,054 |
|
|
| 1,251,345 |
| |||
Distributions to Shareholders from ($): |
|
|
|
|
|
|
|
| |
Net realized gain on investments: |
|
|
|
|
|
|
|
| |
Class I |
|
| (932,650) |
|
|
| (4,752,698) |
| |
Class Y |
|
| (9,494) |
|
|
| (20,348) |
| |
Total Distributions |
|
| (942,144) |
|
|
| (4,773,046) |
| |
Beneficial Interest Transactions ($): |
|
|
|
|
|
|
|
| |
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class I |
|
| 2,147,509 |
|
|
| 1,052,187 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class I |
|
| 867,499 |
|
|
| 2,738,666 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class I |
|
| (3,330,282) |
|
|
| (16,873,095) |
| |
Increase (Decrease) in Net Assets | (315,274) |
|
|
| (13,082,242) |
| |||
Total Increase (Decrease) in Net Assets | (882,364) |
|
|
| (16,603,943) |
| |||
Net Assets ($): |
|
|
|
|
|
|
|
| |
Beginning of Period |
|
| 6,510,552 |
|
|
| 23,114,495 |
| |
End of Period |
|
| 5,628,188 |
|
|
| 6,510,552 |
| |
Accumulated investment (loss)—net | (21,676) |
|
|
| (26,849) |
| |||
Capital Share Transactions (Shares): |
|
|
|
|
|
|
|
| |
Class I |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 69,819 |
|
|
| 36,897 |
| |
Shares issued for distributions reinvested |
|
| 30,960 |
|
|
| 99,155 |
| |
Shares redeemed |
|
| (116,974) |
|
|
| (578,694) |
| |
Net Increase (Decrease) in Shares Outstanding | (16,195) |
|
|
| (442,642) |
| |||
See notes to financial statements. |
12
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, 2017 | Year Ended September 30, | |||||||
(Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 | ||||
Per Share Data ($): | |||||||||
Net asset value, beginning of period | 30.32 | 35.16 | 52.76 | 70.83 | 60.57 | 47.21 | |||
Investment Operations: | |||||||||
Investment income (loss)—neta | .02 | (.08) | (.17) | (.30) | (.13) | (.16) | |||
Net realized and unrealized | 2.13 | 4.08 | 3.48 | 1.98 | 16.26 | 14.57 | |||
Total from Investment Operations | 2.15 | 4.00 | 3.31 | 1.68 | 16.13 | 14.41 | |||
Distributions: | |||||||||
Dividends from net realized | (4.12) | (8.84) | (20.91) | (19.75) | (5.87) | (1.05) | |||
Net asset value, end of period | 28.35 | 30.32 | 35.16 | 52.76 | 70.83 | 60.57 | |||
Total Return (%) | 7.27b | 13.83 | 6.50 | 1.46 | 30.20 | 30.86 | |||
Ratios/Supplemental Data (%): | |||||||||
Ratio of total expenses | 3.19c | 2.06 | 1.40 | 1.15 | 1.04 | 1.02 | |||
Ratio of net expenses | 1.00c | .98 | .95 | .95 | .98 | .96 | |||
Ratio of net investment income | .17c | (.26) | (.41) | (.52) | (.22) | (.29) | |||
Portfolio Turnover Rate | 68.58b | 197.34 | 169.20 | 138.15 | 121.73 | 154.49 | |||
Net Assets, end of period ($ x 1,000) | 5,563 | 6,441 | 23,034 | 46,290 | 101,043 | 133,692 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
13
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||
Class Y Shares | March 31, 2017 | Year Ended September 30, | |||||
(Unaudited) | 2016 | 2015 | 2014 | 2013a | |||
Per Share Data ($): | |||||||
Net asset value, beginning of period | 30.35 | 35.18 | 52.76 | 70.83 | 64.04 | ||
Investment Operations: | |||||||
Investment income (loss)—netb | .03 | (.07) | (.15) | (.19) | (.10) | ||
Net realized and unrealized | 2.12 | 4.08 | 3.48 | 1.87 | 6.89 | ||
Total from Investment Operations | 2.15 | 4.01 | 3.33 | 1.68 | 6.79 | ||
Distributions: | |||||||
Dividends from net realized | (4.12) | (8.84) | (20.91) | (19.75) | — | ||
Net asset value, end of period | 28.38 | 30.35 | 35.18 | 52.76 | 70.83 | ||
Total Return (%) | 7.26c | 13.85 | 6.56 | 1.48 | 10.59c | ||
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | 3.14d | 2.17 | 1.40 | 1.11 | 1.07d | ||
Ratio of net expenses | 1.00d | .97 | .90 | .95 | .95d | ||
Ratio of net investment income | .22d | (.23) | (.35) | (.38) | (.57)d | ||
Portfolio Turnover Rate | 68.58c | 197.34 | 169.20 | 138.15 | 121.73 | ||
Net Assets, end of period ($ x 1,000) | 65 | 70 | 81 | 156 | 1 |
a From July 1, 2013 (commencement of initial offering) to September 30, 2013.
b Based on average shares outstanding.
c Not annualized.
d Annualized.
See notes to financial statements.
14
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus/The Boston Company Small Cap Growth Fund (the “fund”) is a separate diversified series of Dreyfus Investment Funds (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. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, 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 Dreyfus, 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 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
15
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
(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:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies
16
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 reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the 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 restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of March 31, 2017 in valuing the fund’s investments:
17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities—Domestic Common Stocks† | 5,085,132 | - | - | 5,085,132 |
Equity Securities—Foreign Common Stocks† | 402,953 | - | - | 402,953 |
Exchange-Traded Funds | 71,454 | - | - | 71,454 |
Registered Investment Company | 97,078 | - | - | 97,078 |
† See Statement of Investments for additional detailed categorizations.
At March 31, 2017, there were no transfers between levels of the fair value hierarchy.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by Dreyfus, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended March 31, 2017, The Bank of
18
New York Mellon earned $516 from lending portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended March 31, 2017 were as follows:
Affiliated Investment Company | Value 9/30/2016 ($) | Purchases ($) | Sales ($) | Value 3/31/2017 ($) | Net |
Dreyfus Institutional Cash Advantage Fund, Institutional Shares† | 523,447 | 145,604 | 669,051 | - | - |
Dreyfus Institutional Preferred Government Plus Money Market Fund | 50,743 | 3,212,815 | 3,166,480 | 97,078 | 1.7 |
Dreyfus Institutional Preferred Money Market Fund, Hamilton Shares† | - | 5,624,271 | 5,624,271 | - | - |
Total | 574,190 | 8,982,690 | 9,459,802 | 97,078 | 1.7 |
† During the period ended March 31, 2017, Dreyfus Institutional Cash Advantage Fund was acquired by Dreyfus Institutional Preferred Money Market Fund.
(d) 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.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable
19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended March 31, 2017, 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, 2017, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2016 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, 2016 was as follows: ordinary income $750,272 and long-term capital gains $4,022,774. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in an $810 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. Prior to October 5, 2016, the unsecured credit facility with Citibank, N.A. was $555 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended March 31, 2017, 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 Dreyfus, 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. Dreyfus has contractually agreed, from October 1, 2016 through February 1, 2018, to waive receipt of its fees and/or assume the direct expenses of the fund, so that none of the classes (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. The reduction in expenses, pursuant to the undertaking, amounted to $67,123 during the period ended March 31, 2017.
20
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with Dreyfus, whereby Dreyfus performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate Dreyfus 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 Dreyfus for this service, Dreyfus has contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both Dreyfus’ costs in providing these services and a reasonable allocation of the costs incurred by Dreyfus and its affiliates related to the support and oversight of these services. The fund also reimburses Dreyfus for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration Agreement, the fund was charged $1,846 during the period ended March 31, 2017.
(b) The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended March 31, 2017, the fund was charged $1,965 for transfer agency services and $58 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $49.
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, 2017, the fund was charged $6,104 pursuant to the custody agreement.
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
During the period ended March 31, 2017, the fund was charged $5,777 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $3,821, administration fees $287, custodian fees $7,818, Chief Compliance Officer fees $5,777 and transfer agency fees $734, which are offset against an expense reimbursement currently in effect in the amount of $13,851.
(c) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended March 31, 2017, amounted to $4,174,931 and $5,509,412, respectively.
At March 31, 2017, accumulated net unrealized appreciation on investments was $1,257,628, consisting of $1,379,233 gross unrealized appreciation and $121,605 gross unrealized depreciation.
At March 31, 2017, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
22
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 22-23, 2017, the Board considered the renewal of the fund’s Investment Advisory Agreement and Administration Agreement, pursuant to which Dreyfus provides the fund with investment advisory 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 Dreyfus representatives. In considering the renewal of the Agreement, the Board considered all factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered Dreyfus’ extensive administrative, accounting and compliance infrastructures. 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 comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended December 31, 2016, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Broadridge used to select
23
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS (Unaudited) (continued)
the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds. The Board discussed with representatives of Dreyfus and/or its affiliates the results of the comparisons and considered that the fund’s total return performance was above the Performance Group and Performance Universe medians for the various periods, except for the ten-year period when the fund’s performance was below the Performance Universe median.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was below the Expense Group median, the fund’s actual management fee (which was zero) was below the Expense Group and Expense Universe medians and the fund’s total expense ratio was below the Expense Group and Expense Universe medians.
Dreyfus representatives stated that Dreyfus has contractually agreed to waive receipt of its fees and/or assume the expenses of the fund, until February 1, 2018, so that the direct annual fund operating expenses for Class I and Y shares (excluding taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed 1.00% of the fund’s average daily net assets.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Broadridge category as the fund and (2) paid to Dreyfus or the Dreyfus-affiliated primary employer of the fund’s primary portfolio manager(s) 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.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus. The Board also considered the expense limitation arrangement and its effect on the profitability of Dreyfus and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex. The consulting firm also had analyzed
24
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 Dreyfus, 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. Dreyfus representatives 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 Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also stated that, as a result of shared and allocated costs among funds in the Dreyfus 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 Dreyfus 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 Dreyfus are adequate and appropriate.
· The Board was satisfied with the fund’s performance.
· The Board concluded that the fee paid to Dreyfus supported the renewal of the Agreement in light of the considerations described above.
· The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
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 Dreyfus and its affiliates, of Dreyfus and the services provided to the fund by Dreyfus. 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
25
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS (Unaudited) (continued)
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 this fund had the benefit of a number of years of reviews of the Agreement for the fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, during which lengthy discussions took place between the Board and Dreyfus representatives. 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 similar arrangements for other Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreement.
26
NOTES
27
NOTES
28
NOTES
29
Dreyfus/The Boston Company Small Cap Growth Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York Mellon
225 Liberty Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
Ticker Symbols: | Class I: SSETX Class Y: SSYGX |
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. (phone 1-800-SEC-0330 for information).
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.dreyfus.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
© 2017 MBSC Securities Corporation |
Dreyfus/The Boston Company Small Cap Value Fund
SEMIANNUAL REPORT |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
With Those of Other Funds | |
Fund’s Investment Advisory and | |
Administration Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE CEO OF DREYFUS
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus/The Boston Company Small Cap Value Fund, covering the six-month period from October 1, 2016 through March 31, 2017. 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.
Stocks advanced solidly but bonds lost a degree of value over the reporting period amid heightened market volatility stemming from various economic and political developments. After previously rallying in response to stabilizing commodity prices, improving global economic data, and better-than-expected corporate earnings, stocks and corporate-backed bonds generally gave back a portion of their gains in October due to uncertainty in advance of U.S. elections. Meanwhile, prices of U.S. government securities began to decline in anticipation of higher inflation and short-term interest-rate hikes from U.S. monetary policymakers. After the election in early November, equity markets rallied to a series of new highs as investors revised their expectations for U.S. fiscal, regulatory, and tax policies. In the bond market, yields surged higher and prices fell after the election, while lower rated corporate-backed bonds continued to advance in anticipation of a more business-friendly political climate.
Some asset classes and industry groups seem likely to continue to benefit from a changing economic and geopolitical landscape, while others probably will face challenges as conditions evolve. Consequently, selectivity seems likely to be an important determinant of investment success in the months ahead. As always, we encourage you to discuss the implications of our observations with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Mark D. Santero
Chief Executive Officer
The Dreyfus Corporation
April 17, 2017
2
DISCUSSION OF FUND PERFORMANCE
For the period from October 1, 2016 through March 31, 2017, as provided by Joseph M. Corrado, CFA, Stephanie K. Brandaleone, CFA, and Jonathan Piskorowski, CFA, Portfolio Managers
Market and Fund Performance Overview
For the six-month period ended March 31, 2017, Dreyfus/The Boston Company Small Cap Value Fund’s Class A shares achieved a total return of 14.07%, Class C shares returned 13.59%, Class I shares returned 14.24%, and Class Y shares returned 14.19%.1 In comparison, the fund’s benchmark, the Russell 2000® Value Index (the “Index”), produced a total return of 13.93% for the same period.2
Small-cap stocks achieved solid gains over the reporting period amid expectations of greater economic growth and changing U.S. fiscal, tax, and regulatory policies. The fund’s relative performance as compared to the Index was mainly due to favorable results in the real estate, utilities, health care, and consumer discretionary 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 in equity securities of small-cap U.S. companies 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 and look for companies with strong competitive positions, high-quality management, and financial strength. We use a consistent three-step fundamental research process to evaluate the stocks, consisting of valuation, which is to identify small-cap companies that are considered to be attractively priced relative to their earnings potential; fundamentals, which is to verify the strength of the underlying business position; and catalyst, which is to identify a specific event that has the potential to cause the stocks to appreciate in value.
Economic and Political Developments Drove Stocks Higher
U.S. stocks across all capitalization ranges fared well over the reporting period as investors’ risk appetites expanded in anticipation of more business-friendly policies from a newly elected U.S. president. Although the Index declined moderately before the vote in November, the election’s widely unexpected outcome sparked a robust rally that persisted through February. The rally paused in March, however, when investors began to recognize that the new administration’s proposals would take time, political capital, and cooperation from Congress to enact.
Investors also generally responded positively to good economic news, including continued robust job growth and higher levels of consumer and business confidence.
In this environment, small-cap stocks generally produced higher returns than mid- and large-cap stocks. Small-cap value stocks outperformed their more growth-oriented counterparts, on average, but this trend appeared to moderate later in the reporting period.
Security Selections Bolstered Fund Results
The fund’s relative results were buoyed by underweighted exposure to some of the Index’s weaker market segments, including the utilities and real estate sectors, which were hurt by rising interest rates and investors’ preference for riskier stocks over their traditionally defensive counterparts. Our security selection strategy proved particularly effective in the health care sector, where medical emergency transport services company Air Methods received an acquisition offer at a substantial premium to its stock price at the time. In addition, home and hospice care provider Amedisys and life sciences company Cambrex reported better-than-expected quarterly results and provided solid future earnings guidance to securities analysts.
Among consumer discretionary companies, media company E.W. Scripps advanced amid expectations of reduced regulatory pressures, apparel retailer The Children’s Place achieved improved inventory
3
DISCUSSION OF FUND PERFORMANCE (continued)
management and higher profit margins, and consumer robots producer iRobot and automotive components maker Gentherm announced strong financial results. In other areas, banking institution Webster Financial climbed in expectation of greater adoption of health savings accounts under the new presidential administration, and employment services company Korn/Ferry International benefited from strong results across its various business units.
Disappointments during the reporting period included the information technology sector, where photovoltaic semiconductor producer First Solar was hurt by weak bookings and concerns regarding a major restructuring plan. Meanwhile, a short report was released questioning digital printer Electronics for Imaging’s accounting practices, and supercomputer manufacturer Cray announced weaker-than-expected financial results. In the energy sector, oil-and-gas producer Callon Petroleum fell short of earnings and production targets, energy transport provider SemGroup issued EBITDA guidance that was below consensus estimates, seismic equipment specialist Geospace Technologies encountered a decline in exploration spending, and energy services company Oil States International reduced its forecast for offshore production activity.
Positioned for Economic Growth
Looking forward, investors continue to focus on the potential impacts of policy changes in Washington, increasing geopolitical pressures and the future actions of the Federal Reserve. While volatility measures have been tepid to start the year, markets could be thrown off balance until visibility improves on a number of these issues. Within this environment, the investment team remains focused on the strategy’s disciplined, research-driven investment approach and driving returns with strong stock selection.
The team is finding the most compelling combinations of fundamentals, valuation and catalysts for change within information technology, consumer discretionary and health care; the strategy has overweight positions versus the Index within these sectors. Conversely, we remain underweight within the banks and insurance segments, where we are finding fewer opportunities meeting our investment criteria.
April 17, 2017
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.
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 The Dreyfus Corporation pursuant to an agreement in effect through February 1, 2018, 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.
4
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus/The Boston Company Small Cap Value Fund from October 1, 2016 to March 31, 2017. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment | |||||||||||
assuming actual returns for the six months ended March 31, 2017 | |||||||||||
|
|
|
| Class A | Class C | Class I | Class Y | ||||
Expenses paid per $1,000† |
| $7.04 | $11.88 | $5.50 | $5.34 | ||||||
Ending value (after expenses) |
| $1,140.70 | $1,135.90 | $1,142.40 | $1,141.90 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment | ||||||||
assuming a hypothetical 5% annualized return for the six months ended March 31, 2017 | ||||||||
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $6.64 | $11.20 | $5.19 | $5.04 | ||||
Ending value (after expenses) | $1,018.35 | $1,013.81 | $1,019.80 | $1,019.95 |
† Expenses are equal to the fund’s annualized expense ratio of 1.32% for Class A, 2.23% for Class C, 1.03% for Class I and 1.00% for Class Y, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
March 31, 2017 (Unaudited)
Common Stocks - 98.6% | Shares | Value ($) | |||
Automobiles & Components - 1.0% | |||||
Gentherm | 55,830 | a | 2,191,327 | ||
Banks - 17.0% | |||||
Associated Banc-Corp | 101,489 | 2,476,332 | |||
Banner | 30,990 | 1,724,284 | |||
Brookline Bancorp | 86,810 | 1,358,576 | |||
Bryn Mawr Bank | 25,519 | 1,008,000 | |||
Capital Bank Financial, Cl. A | 26,158 | 1,135,257 | |||
Central Pacific Financial | 48,973 | 1,495,635 | |||
CoBiz Financial | 45,955 | 772,044 | |||
CVB Financial | 59,538 | 1,315,194 | |||
FCB Financial Holdings, Cl. A | 29,282 | a | 1,450,923 | ||
First Horizon National | 118,539 | b | 2,192,971 | ||
First Midwest Bancorp | 75,797 | 1,794,873 | |||
Fulton Financial | 114,481 | 2,043,486 | |||
Hancock Holding | 66,749 | 3,040,417 | |||
IBERIABANK | 5,690 | 450,079 | |||
Old National Bancorp | 74,739 | 1,296,722 | |||
Seacoast Banking Corporation of Florida | 49,971 | a | 1,198,305 | ||
South State | 12,032 | 1,075,059 | |||
Synovus Financial | 49,556 | 2,032,787 | |||
UMB Financial | 30,538 | 2,299,817 | |||
Umpqua Holdings | 144,225 | 2,558,551 | |||
United Community Banks | 76,035 | 2,105,409 | |||
Webster Financial | 87,927 | b | 4,399,867 | ||
39,224,588 | |||||
Capital Goods - 9.4% | |||||
Aerojet Rocketdyne Holdings | 15,732 | a | 341,384 | ||
Aerovironment | 53,269 | a | 1,493,130 | ||
Apogee Enterprises | 14,097 | b | 840,322 | ||
Astec Industries | 20,261 | 1,245,950 | |||
Atkore International Group | 32,242 | 847,320 | |||
Chart Industries | 40,796 | a | 1,425,412 | ||
Comfort Systems USA | 32,086 | 1,175,952 | |||
EMCOR Group | 30,643 | 1,928,977 | |||
EnerSys | 26,649 | 2,103,672 | |||
Granite Construction | 38,572 | b | 1,935,929 | ||
Kennametal | 53,939 | b | 2,116,027 |
6
Common Stocks - 98.6% (continued) | Shares | Value ($) | |||
Capital Goods - 9.4% (continued) | |||||
Lindsay | 24,990 | b | 2,202,119 | ||
Teledyne Technologies | 8,928 | a | 1,129,035 | ||
Trinity Industries | 54,380 | 1,443,789 | |||
Valmont Industries | 9,727 | 1,512,548 | |||
21,741,566 | |||||
Commercial & Professional Services - 2.5% | |||||
Interface | 72,387 | 1,378,972 | |||
Knoll | 34,310 | 816,921 | |||
Korn/Ferry International | 59,672 | 1,879,071 | |||
LSC Communications | 53,360 | 1,342,538 | |||
McGrath RentCorp | 12,609 | 423,284 | |||
5,840,786 | |||||
Consumer Durables & Apparel - 4.0% | |||||
Cavco Industries | 9,596 | a | 1,116,974 | ||
Deckers Outdoor | 31,828 | a,b | 1,901,086 | ||
Ethan Allen Interiors | 35,302 | 1,082,006 | |||
Kate Spade & Company | 88,772 | a | 2,062,174 | ||
Oxford Industries | 20,925 | b | 1,198,165 | ||
Vera Bradley | 63,607 | a | 592,181 | ||
William Lyon Homes, Cl. A | 66,931 | a,b | 1,380,117 | ||
9,332,703 | |||||
Consumer Services - 1.8% | |||||
Belmond, Cl. A | 134,779 | a | 1,630,826 | ||
Cheesecake Factory | 41,411 | 2,623,801 | |||
4,254,627 | |||||
Diversified Financials - 1.3% | |||||
Cohen & Steers | 40,005 | 1,599,000 | |||
Morningstar | 18,742 | 1,473,121 | |||
3,072,121 | |||||
Energy - 6.8% | |||||
Callon Petroleum | 117,726 | a | 1,549,274 | ||
Dril-Quip | 19,123 | a,b | 1,043,160 | ||
Geospace Technologies | 41,232 | a | 669,195 | ||
Natural Gas Services Group | 33,081 | a | 861,760 | ||
Newpark Resources | 71,615 | a | 580,082 | ||
Oasis Petroleum | 130,466 | a | 1,860,445 | ||
Oceaneering International | 42,220 | 1,143,318 | |||
Oil States International | 28,050 | a | 929,858 | ||
PDC Energy | 26,413 | a | 1,646,851 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks - 98.6% (continued) | Shares | Value ($) | |||
Energy - 6.8% (continued) | |||||
RPC | 108,628 | b | 1,988,979 | ||
SemGroup, Cl. A | 51,587 | b | 1,857,132 | ||
SRC Energy | 174,307 | a,b | 1,471,151 | ||
15,601,205 | |||||
Exchange-Traded Funds - .3% | |||||
iShares Russell 2000 Value ETF | 4,831 | b | 570,831 | ||
Food & Staples Retailing - 2.9% | |||||
Sprouts Farmers Market | 94,431 | a,b | 2,183,245 | ||
United Natural Foods | 105,797 | a | 4,573,604 | ||
6,756,849 | |||||
Food, Beverage & Tobacco - 2.0% | |||||
Boston Beer, Cl. A | 18,544 | a,b | 2,682,390 | ||
Hain Celestial Group | 50,003 | a | 1,860,112 | ||
4,542,502 | |||||
Health Care Equipment & Services - 5.6% | |||||
Allscripts Healthcare Solutions | 145,174 | a | 1,840,806 | ||
Amedisys | 29,810 | a | 1,522,993 | ||
AMN Healthcare Services | 42,088 | a | 1,708,773 | ||
Analogic | 14,149 | 1,073,909 | |||
Globus Medical, Cl. A | 85,409 | a,b | 2,529,815 | ||
Natus Medical | 24,632 | a,b | 966,806 | ||
Omnicell | 52,578 | a | 2,137,296 | ||
Tivity Health | 42,679 | a,b | 1,241,959 | ||
13,022,357 | |||||
Insurance - 1.0% | |||||
Safety Insurance Group | 12,325 | 863,983 | |||
Selective Insurance Group | 30,662 | b | 1,445,713 | ||
2,309,696 | |||||
Materials - 3.3% | |||||
Calgon Carbon | 59,179 | 864,013 | |||
Carpenter Technology | 41,821 | 1,559,923 | |||
Commercial Metals | 78,936 | 1,510,046 | |||
Haynes International | 18,405 | 701,599 | |||
Louisiana-Pacific | 96,696 | a | 2,399,995 | ||
Stillwater Mining | 38,876 | a | 671,389 | ||
7,706,965 | |||||
Media - 2.6% | |||||
E.W. Scripps, Cl. A | 120,586 | a | 2,826,536 | ||
New York Times, Cl. A | 134,144 | b | 1,931,674 |
8
Common Stocks - 98.6% (continued) | Shares | Value ($) | |||
Media - 2.6% (continued) | |||||
Scholastic | 31,745 | 1,351,385 | |||
6,109,595 | |||||
Pharmaceuticals, Biotechnology & Life Sciences - 2.2% | |||||
Cambrex | 53,893 | a | 2,966,810 | ||
Supernus Pharmaceuticals | 63,632 | a | 1,991,682 | ||
4,958,492 | |||||
Real Estate - 8.1% | |||||
Agree Realty | 24,735 | b,c | 1,186,291 | ||
American Assets Trust | 11,804 | c | 493,879 | ||
CareTrust | 86,008 | c | 1,446,655 | ||
CBL & Associates Properties | 47,944 | c | 457,386 | ||
CyrusOne | 37,912 | b,c | 1,951,331 | ||
Healthcare Trust of America, Cl. A | 31,822 | b,c | 1,001,120 | ||
LaSalle Hotel Properties | 49,597 | b,c | 1,435,833 | ||
Outfront Media | 36,344 | c | 964,933 | ||
Parkway | 65,514 | c | 1,303,073 | ||
Pebblebrook Hotel Trust | 80,511 | b,c | 2,351,726 | ||
Potlatch | 24,981 | c | 1,141,632 | ||
Retail Opportunity Investments | 31,031 | b,c | 652,582 | ||
STAG Industrial | 68,927 | c | 1,724,554 | ||
STORE Capital | 33,221 | c | 793,317 | ||
Tanger Factory Outlet Centers | 32,062 | c | 1,050,672 | ||
Washington Prime Group | 80,362 | c | 698,346 | ||
18,653,330 | |||||
Retailing - 4.2% | |||||
Dillard's, Cl. A | 31,275 | b | 1,633,806 | ||
Express | 113,013 | a | 1,029,548 | ||
RH | 56,034 | a,b | 2,592,133 | ||
Shutterfly | 23,902 | a | 1,154,228 | ||
The Children's Place | 15,167 | b | 1,820,798 | ||
Urban Outfitters | 61,931 | a | 1,471,481 | ||
9,701,994 | |||||
Semiconductors & Semiconductor Equipment - 3.6% | |||||
Brooks Automation | 69,034 | 1,546,362 | |||
Cirrus Logic | 31,000 | a,b | 1,881,390 | ||
First Solar | 15,131 | a,b | 410,050 | ||
Integrated Device Technology | 53,799 | a | 1,273,422 | ||
Nanometrics | 26,768 | a | 815,353 | ||
Photronics | 109,377 | a | 1,170,334 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks - 98.6% (continued) | Shares | Value ($) | |||
Semiconductors & Semiconductor Equipment - 3.6% (continued) | |||||
Semtech | 33,255 | a | 1,124,019 | ||
8,220,930 | |||||
Software & Services - 6.4% | |||||
Acxiom | 64,947 | a | 1,849,041 | ||
CSG Systems International | 35,347 | 1,336,470 | |||
DST Systems | 20,958 | 2,567,355 | |||
MicroStrategy, Cl. A | 8,844 | a | 1,660,903 | ||
Qualys | 34,705 | a | 1,315,319 | ||
Teradata | 60,070 | a | 1,869,378 | ||
Verint Systems | 53,692 | a | 2,328,890 | ||
WebMD Health | 33,057 | a | 1,741,443 | ||
14,668,799 | |||||
Technology Hardware & Equipment - 6.0% | |||||
CalAmp | 60,735 | a,b | 1,019,741 | ||
Ciena | 57,642 | a | 1,360,928 | ||
Cray | 64,747 | a | 1,417,959 | ||
Electronics For Imaging | 31,901 | a | 1,557,726 | ||
FARO Technologies | 23,200 | a | 829,400 | ||
Methode Electronics | 15,428 | 703,517 | |||
NETGEAR | 21,210 | a | 1,050,955 | ||
NetScout Systems | 59,994 | a | 2,276,772 | ||
Plantronics | 23,836 | 1,289,766 | |||
Tech Data | 18,453 | a | 1,732,737 | ||
Vishay Intertechnology | 35,998 | b | 592,167 | ||
13,831,668 | |||||
Transportation - 2.0% | |||||
Kirby | 27,051 | a,b | 1,908,448 | ||
Knight Transportation | 47,047 | 1,474,923 | |||
Marten Transport | 55,767 | 1,307,736 | |||
4,691,107 | |||||
Utilities - 4.6% | |||||
American States Water | 25,317 | 1,121,543 | |||
Chesapeake Utilities | 26,109 | 1,806,743 | |||
Hawaiian Electric Industries | 55,362 | b | 1,844,108 | ||
Portland General Electric | 35,642 | 1,583,218 | |||
Vectren | 27,327 | 1,601,635 | |||
WGL Holdings | 31,301 | 2,583,272 | |||
10,540,519 | |||||
Total Common Stocks (cost $181,803,563) | 227,544,557 |
10
Other Investment - 1.1% | Shares | Value ($) | |||
Registered Investment Company; | |||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 2,516,044 | d | 2,516,044 | ||
Investment of Cash Collateral for Securities Loaned - 9.0% | |||||
Registered Investment Company; | |||||
Dreyfus Institutional Preferred Money Market Fund, Hamilton Shares | 20,914,956 | d | 20,914,956 | ||
Total Investments (cost $205,234,563) | 108.7% | 250,975,557 | |||
Liabilities, Less Cash and Receivables | (8.7%) | (20,119,154) | |||
Net Assets | 100.0% | 230,856,403 |
ETF—Exchange-Traded Fund
aNon-income producing security.
bSecurity, or portion thereof, on loan. At March 31, 2017, the value of the fund’s securities on loan was $44,945,291 and the value of the collateral held by the fund was $46,586,264, consisting of cash collateral of $20,914,956 and U.S. Government & Agency securities valued at $25,671,308.
cInvestment in real estate investment trust.
dInvestment in affiliated money market mutual fund.
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Portfolio Summary (Unaudited) † | Value (%) |
Banks | 17.0 |
Money Market Investments | 10.1 |
Capital Goods | 9.4 |
Real Estate | 8.1 |
Energy | 6.8 |
Software & Services | 6.4 |
Technology Hardware & Equipment | 6.0 |
Health Care Equipment & Services | 5.6 |
Utilities | 4.6 |
Retailing | 4.2 |
Consumer Durables & Apparel | 4.0 |
Semiconductors & Semiconductor Equipment | 3.6 |
Materials | 3.3 |
Food & Staples Retailing | 2.9 |
Media | 2.6 |
Commercial & Professional Services | 2.5 |
Pharmaceuticals, Biotechnology & Life Sciences | 2.2 |
Transportation | 2.0 |
Food, Beverage & Tobacco | 2.0 |
Consumer Services | 1.8 |
Diversified Financials | 1.3 |
Insurance | 1.0 |
Automobiles & Components | 1.0 |
Exchange-Traded Funds | .3 |
108.7 |
† Based on net assets.
See notes to financial statements.
12
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2017 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
|
| ||
Unaffiliated issuers |
| 181,803,563 |
| 227,544,557 |
| |
Affiliated issuers |
| 23,431,000 |
| 23,431,000 |
| |
Cash |
|
|
|
| 96,487 |
|
Receivable for investment securities sold |
|
|
|
| 3,671,076 |
|
Dividends and securities lending income receivable |
|
|
|
| 273,993 |
|
Prepaid expenses |
|
|
|
| 38,784 |
|
|
|
|
|
| 255,055,897 |
|
Liabilities ($): |
|
|
|
| ||
Due to The Dreyfus Corporation and affiliates—Note 3(c) |
|
|
|
| 191,169 |
|
Liability for securities on loan—Note 1(b) |
|
|
|
| 20,914,956 |
|
Payable for investment securities purchased |
|
|
|
| 3,037,761 |
|
Payable for shares of Beneficial Interest redeemed |
|
|
|
| 6,894 |
|
Accrued expenses |
|
|
|
| 48,714 |
|
|
|
|
|
| 24,199,494 |
|
Net Assets ($) |
|
| 230,856,403 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 171,779,792 |
|
Accumulated undistributed investment income—net |
|
|
|
| 736,334 |
|
Accumulated net realized gain (loss) on investments |
|
|
|
| 12,599,283 |
|
Accumulated net unrealized appreciation (depreciation) |
|
|
| 45,740,994 |
| |
Net Assets ($) |
|
| 230,856,403 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 117,779 | 50,288 | 223,496,658 | 7,191,678 |
|
Shares Outstanding | 4,821 | 2,068 | 9,132,706 | 294,140 |
|
Net Asset Value Per Share ($) | 24.43 | 24.32 | 24.47 | 24.45 |
|
See notes to financial statements. |
13
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2017 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends: |
|
|
|
| ||
Unaffiliated issuers |
|
| 1,933,275 |
| ||
Affiliated issuers |
|
| 7,868 |
| ||
Income from securities lending—Note 1(b) |
|
| 69,283 |
| ||
Total Income |
|
| 2,010,426 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 881,077 |
| ||
Administration fee—Note 3(a) |
|
| 66,081 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 49,894 |
| ||
Professional fees |
|
| 42,964 |
| ||
Registration fees |
|
| 42,881 |
| ||
Custodian fees—Note 3(c) |
|
| 18,288 |
| ||
Prospectus and shareholders’ reports |
|
| 9,334 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 7,639 |
| ||
Loan commitment fees—Note 2 |
|
| 3,503 |
| ||
Interest expense—Note 2 |
|
| 530 |
| ||
Distribution fees—Note 3(b) |
|
| 120 |
| ||
Miscellaneous |
|
| 12,409 |
| ||
Total Expenses |
|
| 1,134,720 |
| ||
Less—reduction in fees due to earnings credits—Note 3(c) |
|
| (87) |
| ||
Net Expenses |
|
| 1,134,633 |
| ||
Investment Income—Net |
|
| 875,793 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 18,293,394 |
| ||||
Net unrealized appreciation (depreciation) on investments |
|
| 9,351,457 |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 27,644,851 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 28,520,644 |
| |||
See notes to financial statements. |
14
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Six Months Ended |
|
|
| Year Ended |
|
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 875,793 |
|
|
| 1,368,152 |
| |
Net realized gain (loss) on investments |
| 18,293,394 |
|
|
| 16,248,204 |
| ||
Net unrealized appreciation (depreciation) |
| 9,351,457 |
|
|
| 13,645,153 |
| ||
Net Increase (Decrease) in Net Assets | 28,520,644 |
|
|
| 31,261,509 |
| |||
Distributions to Shareholders from ($): |
|
|
|
|
|
|
|
| |
Investment income—net: |
|
|
|
|
|
|
|
| |
Class A |
|
| (68) |
|
|
| - |
| |
Class C |
|
| (86) |
|
|
| - |
| |
Class I |
|
| (910,192) |
|
|
| (1,900,456) |
| |
Class Y |
|
| (49) |
|
|
| - |
| |
Net realized gain on investments: |
|
|
|
|
|
|
|
| |
Class A |
|
| (1,374) |
|
|
| - |
| |
Class C |
|
| (2,600) |
|
|
| - |
| |
Class I |
|
| (16,890,205) |
|
|
| (20,323,088) |
| |
Class Y |
|
| (840) |
|
|
| - |
| |
Total Distributions |
|
| (17,805,414) |
|
|
| (22,223,544) |
| |
Beneficial Interest Transactions ($): |
|
|
|
|
|
|
|
| |
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 105,479 |
|
|
| 10,000 |
| |
Class C |
|
| 38,301 |
|
|
| 10,000 |
| |
Class I |
|
| 22,148,320 |
|
|
| 21,354,015 |
| |
Class Y |
|
| 7,060,569 |
|
|
| 10,000 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 561 |
|
|
| - |
| |
Class C |
|
| 1,818 |
|
|
| - |
| |
Class I |
|
| 17,276,112 |
|
|
| 21,820,149 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class I |
|
| (31,859,432) |
|
|
| (101,891,572) |
| |
Increase (Decrease) in Net Assets | 14,771,728 |
|
|
| (58,687,408) |
| |||
Total Increase (Decrease) in Net Assets | 25,486,958 |
|
|
| (49,649,443) |
| |||
Net Assets ($): |
|
|
|
|
|
|
|
| |
Beginning of Period |
|
| 205,369,445 |
|
|
| 255,018,888 |
| |
End of Period |
|
| 230,856,403 |
|
|
| 205,369,445 |
| |
Undistributed investment income—net | 736,334 |
|
|
| 770,936 |
|
15
STATEMENT OF CHANGES IN NET ASSETS (continued)
|
|
|
| Six Months Ended |
|
|
| Year Ended |
|
Capital Share Transactions (Shares): |
|
|
|
|
|
|
|
| |
Class A |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 4,359 |
|
|
| 439.17 |
| |
Shares issued for distributions reinvested |
|
| 23 |
|
|
| - |
| |
Net Increase (Decrease) in Shares Outstanding | 4,382 |
|
|
| 439.17 |
| |||
Class C |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 1,554 |
|
|
| 439.17 |
| |
Shares issued for distributions reinvested |
|
| 75 |
|
|
| - |
| |
Net Increase (Decrease) in Shares Outstanding | 1,629 |
|
|
| 439.17 |
| |||
Class I |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 906,108 |
|
|
| 998,157 |
| |
Shares issued for distributions reinvested |
|
| 712,417 |
|
|
| 1,055,644 |
| |
Shares redeemed |
|
| (1,334,767) |
|
|
| (4,821,491) |
| |
Net Increase (Decrease) in Shares Outstanding | 283,758 |
|
|
| (2,767,690) |
| |||
Class Y |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 293,701 |
|
|
| 439.17 |
| |
aEffective August 1, 2016, the fund commenced offering Class A, Class C and Class Y 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.
Class A Shares | Six Months Ended | Year Ended | ||||
Per Share Data ($): | ||||||
Net asset value, beginning of period | 23.19 | 22.77 | ||||
Investment Operations: | ||||||
Investment income—netb | .03 | .02 | ||||
Net realized and unrealized | 3.21 | .40 | ||||
Total from Investment Operations | 3.24 | .42 | ||||
Distributions: | ||||||
Dividends from investment | (.09) | - | ||||
Dividends from net realized gain on investments | (1.91) | - | ||||
Total Distributions | (2.00) | - | ||||
Net asset value, end of period | 24.43 | 23.19 | ||||
Total Return (%)c,d | 14.07 | 1.84 | ||||
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.32 | 1.37 | ||||
Ratio of net expenses | 1.32 | 1.37 | ||||
Ratio of net investment income | .26 | .46 | ||||
Portfolio Turnover Ratec | 41.39 | 78.56 | ||||
Net Assets, end of period ($ x 1,000) | 118 | 10 |
a From August 1, 2016 (commencement of initial offering) to September 30, 2016.
b Based on average shares outstanding.
c Not annualized.
d Exclusive of sales charge.
e Annualized.
See notes to financial statements.
17
FINANCIAL HIGHLIGHTS (continued)
Class C Shares | Six Months Ended | Year Ended | ||||
Per Share Data ($): | ||||||
Net asset value, beginning of period | 23.16 | 22.77 | ||||
Investment Operations: | ||||||
Investment (loss)—netb | (.07) | (.01) | ||||
Net realized and unrealized | 3.20 | .40 | ||||
Total from Investment Operations | 3.13 | .39 | ||||
Distributions: | ||||||
Dividends from investment | (.06) | - | ||||
Dividends from net realized gain on investments | (1.91) | - | ||||
Total Distributions | (1.97) | - | ||||
Net asset value, end of period | 24.32 | 23.16 | ||||
Total Return (%)c,d | 13.59 | 1.71 | ||||
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 2.23 | 2.13 | ||||
Ratio of net expenses | 2.23 | 2.13 | ||||
Ratio of net investment (loss) | (.59) | (.30) | ||||
Portfolio Turnover Ratec | 41.39 | 78.56 | ||||
Net Assets, end of period ($ x 1,000) | 50 | 10 |
a From August 1, 2016 (commencement of initial offering) to September 30, 2016.
b Based on average shares outstanding.
c Not annualized.
d Exclusive of sales charge.
e Annualized.
See notes to financial statements.
18
Six Months Ended | Year Ended September 30, | ||||||
Class I Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 23.20 | 21.95 | 28.21 | 32.76 | 25.65 | 18.81 | |
Investment Operations: | |||||||
Investment income—neta | .10 | .14 | .15 | .11 | .26 | .14 | |
Net realized and unrealized | 3.18 | 3.11 | (.51) | 1.15 | 7.29 | 6.79 | |
Total from Investment Operations | 3.28 | 3.25 | (.36) | 1.26 | 7.55 | 6.93 | |
Distributions: | |||||||
Dividends from investment | (.10) | (.17) | (.13) | (.09) | (.22) | (.09) | |
Dividends from net realized gain on investments | (1.91) | (1.83) | (5.77) | (5.72) | (.22) | - | |
Total Distributions | (2.01) | (2.00) | (5.90) | (5.81) | (.44) | (.09) | |
Net asset value, end of period | 24.47 | 23.20 | 21.95 | 28.21 | 32.76 | 25.65 | |
Total Return (%) | 14.24b | 15.91 | (2.05) | 3.62 | 29.92 | 36.95 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | 1.03c | 1.00 | .97 | .96 | .99 | .98 | |
Ratio of net expenses | 1.03c | 1.00 | .97 | .96 | .99 | .98 | |
Ratio of net investment income | .80c | .63 | .62 | .37 | .90 | .59 | |
Portfolio Turnover Rate | 41.39b | 78.56 | 76.23 | 68.43 | 76.63 | 88.54 | |
Net Assets, end of period ($ x 1,000) | 223,497 | 205,339 | 255,019 | 318,376 | 385,746 | 457,180 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
19
FINANCIAL HIGHLIGHTS (continued)
Class Y Shares | Six Months Ended | Year Ended | ||||
Per Share Data ($): | ||||||
Net asset value, beginning of period | 23.20 | 22.77 | ||||
Investment Operations: | ||||||
Investment income—netb | .03 | .03 | ||||
Net realized and unrealized | 3.24 | .40 | ||||
Total from Investment Operations | 3.27 | .43 | ||||
Distributions: | ||||||
Dividends from investment | (.11) | - | ||||
Dividends from net realized gain on investments | (1.91) | - | ||||
Total Distributions | (2.02) | - | ||||
Net asset value, end of period | 24.45 | 23.20 | ||||
Total Return (%)c | 14.19 | 1.89 | ||||
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.00 | 1.12 | ||||
Ratio of net expenses | 1.00 | 1.12 | ||||
Ratio of net investment income | .29 | .72 | ||||
Portfolio Turnover Ratec | 41.39 | 78.56 | ||||
Net Assets, end of period ($ x 1,000) | 7,192 | 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.
20
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus/The Boston Company Small Cap Value Fund (the “fund”) is a separate diversified series of Dreyfus Investment Funds (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. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
Effective March 31, 2017, the fund authorized the issuance of Class T shares, but, as of the date of this report, the fund did not offer Class T shares for purchase.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 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 T. Class A, Class C and Class T shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A and Class T shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I 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 Dreyfus, 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 unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
As of March 31, 2017, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held 439 Class A and Class C shares of the fund.
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
(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.
22
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant 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 reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the 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 restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The following is a summary of the inputs used as of March 31, 2017 in 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-Domestic Common Stocks† | 225,342,900 | - | - | 225,342,900 |
Equity Securities-Foreign Common Stocks† | 1,630,826 | - | - | 1,630,826 |
Exchange-Traded Funds | 570,831 | - | - | 570,831 |
Registered Investment Companies | 23,431,000 | - | - | 23,431,000 |
† See Statement of Investments for additional detailed categorizations.
At March 31, 2017, there were no transfers between levels of the fair value hierarchy.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by Dreyfus, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights
24
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, 2017, The Bank of New York Mellon earned $14,282 from lending portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended March 31, 2017 were as follows:
Affiliated Investment Company | Value | Purchases($) | Sales($) | Value | Net |
Dreyfus Institutional Cash Advantage | 14,807,111 | - | 14,807,111 | - | - |
Dreyfus Institutional | 2,846,520 | 43,561,348 | 43,891,824 | 2,516,044 | 1.1 |
Dreyfus Institutional | - | 91,559,934 | 70,644,978 | 20,914,956 | 9.0 |
Total | 17,653,631 | 135,121,282 | 129,343,913 | 23,431,000 | 10.1 |
† During the period ended March 31, 2017, Dreyfus Institutional Cash Advantage Fund was acquired by Dreyfus Institutional Preferred Money Market Fund.
(d) 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.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable
25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended March 31, 2017, 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, 2017, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2016 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, 2016 was as follows: ordinary income $1,900,456 and long-term capital gains $20,323,088. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in an $810 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. Prior to October 5, 2016, the unsecured credit facility with Citibank, N.A. was $555 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing.
The average amount of borrowings outstanding under the Facilities during the period ended March 31, 2017 was approximately $70,900 with a related weighted average annualized interest rate of 1.50%.
NOTE 3—Investment Advisory Fee, Administration Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with Dreyfus, 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. Dreyfus has contractually agreed, from March 23, 2017 through February 1, 2018, to waive receipt of its fees and/or assume the direct expenses of the fund so that the annual fund operating expenses for 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 February 1, 2018, Dreyfus may
26
terminate this expense limitation at any time. During the period ended March 31, 2017, there was no expense reimbursement, pursuant to the undertaking.
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with Dreyfus, whereby Dreyfus performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate Dreyfus 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 Dreyfus for this service, Dreyfus has contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both Dreyfus’ costs in providing these services and a reasonable allocation of the costs incurred by Dreyfus and its affiliates related to the support and oversight of these services. The fund also reimburses Dreyfus for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration Agreement, the fund was charged $66,081 during the period ended March 31, 2017.
(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, 2017, Class C shares were charged $120 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, 2017, Class A and Class C shares were charged $86 and $40, respectively, pursuant to the Shareholder Services Plan.
27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended March 31, 2017, the fund was charged $1,329 for transfer agency services and $61 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $56.
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, 2017, the fund was charged $18,288 pursuant to the custody agreement. These fees were partially offset by earnings credit of $31.
During the period ended March 31, 2017, the fund was charged $5,777 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $154,883, administration fees $11,616, Distribution Plan fees $32, Shareholder Services Plan fees $35, custodian fees $17,999, Chief Compliance Officer fees $5,777 and transfer agency fees $827.
(d) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
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NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended March 31, 2017, amounted to $89,950,011 and $94,500,354, respectively.
At March 31, 2017, accumulated net unrealized appreciation on investments was $45,740,994, consisting of $50,258,492 gross unrealized appreciation and $4,517,498 gross unrealized depreciation.
At March 31, 2017, 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).
29
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 22-23, 2017, the Board considered the renewal of the fund’s Investment Advisory Agreement and Administration Agreement, pursuant to which Dreyfus provides the fund with investment advisory 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 Dreyfus representatives. In considering the renewal of the Agreement, the Board considered all factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered Dreyfus’ extensive administrative, accounting and compliance infrastructures. 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 comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended December 31, 2016, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Broadridge used to select
30
the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds. They also considered that performance generally should be considered over longer periods of time, although it is possible that long-term performance can be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect disproportionately long-term performance. The Board discussed with representatives of Dreyfus and/or its affiliates the results of the comparisons and considered that the fund’s total return performance was variously above the Performance Group and Performance Universe medians for the one year and two year periods and below the medians for the three, four, five and ten year periods. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index and noted that the fund’s performance was above the return of the index in six of the ten calendar years shown.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was below the Expense Group median, the fund’s actual management fee was below the Expense Group median and above the Expense Universe median and the fund’s total expenses were below the Expense Group median and the Expense Universe median.
Dreyfus representatives stated that Dreyfus has contractually agreed, until February 1, 2018, to waive receipt of its fees and/or assume the direct expenses of the fund so that the annual fund operating expenses for Class Y shares (excluding taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed 1.00%.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Broadridge category as the fund[and (2) paid to Dreyfus or the Dreyfus-affiliated primary employer of the fund’s primary portfolio manager(s) 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.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit. The Board concluded that the
31
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS (Unaudited) (continued)
profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex. The consulting firm also had analyzed where any economies of scale might emerge in 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 Dreyfus, 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. Dreyfus representatives 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 Dreyfus may have realized any economies of scale would be less. In addition, Dreyfus representatives noted that the fund had been generally closed to new investors since August 31, 2006. Dreyfus representatives also stated that, as a result of shared and allocated costs among funds in the Dreyfus 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 Dreyfus 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 Dreyfus are adequate and appropriate.
· The Board generally was satisfied with the fund’s improved performance.
· The Board concluded that the fee paid to Dreyfus supported the renewal of the Agreement in light of the considerations described above.
· The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
32
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 Dreyfus and its affiliates, of Dreyfus and the services provided to the fund by Dreyfus. 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 this fund had the benefit of a number of years of reviews of the Agreement for the fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, during which lengthy discussions took place between the Board and Dreyfus representatives. 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 similar arrangements for other Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreement.
33
Dreyfus/The Boston Company Small Cap Value Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York Mellon
225 Liberty Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
Ticker Symbols: | Class A: RUDAX Class C: BOSCX Class I: STSVX Class Y: BOSYX |
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. (phone 1-800-SEC-0330 for information).
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.dreyfus.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
© 2017 MBSC 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. Exhibits.
(a)(1) Not applicable.
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.
(a)(3) Not applicable.
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dreyfus Investment Funds
By: /s/ Bradley J. Skapyak
Bradley J. Skapyak
President
Date: May 23, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ Bradley J. Skapyak
Bradley J. Skapyak
President
Date: May 23, 2017
By: /s/ James Windels
James Windels
Treasurer
Date: May 23, 2017
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)