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 | |||||
BNY Mellon Investment Funds I | ||||||
(Exact name of Registrant as specified in charter) | ||||||
c/o BNY Mellon Investment Adviser, Inc. 240 Greenwich Street New York, New York 10286 | ||||||
(Address of principal executive offices) (Zip code) | ||||||
Bennett A. MacDougall, Esq. 240 Greenwich Street New York, New York 10286 | ||||||
(Name and address of agent for service) | ||||||
Registrant's telephone number, including area code: | (212) 922-6400 | |||||
Date of fiscal year end:
| 09/30 | |||||
Date of reporting period: | 03/31/2021
| |||||
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.
BNY Mellon Diversified Emerging Markets Fund
BNY Mellon International Equity Fund
BNY Mellon Small Cap Growth Fund
BNY Mellon Small Cap Value Fund
BNY Mellon Small/Mid Cap Growth Fund
BNY Mellon Tax Sensitive Total Return Bond Fund
FORM N-CSR
Item 1. | Reports to Stockholders. |
BNY Mellon Diversified Emerging Markets Fund
SEMIANNUAL REPORT March 31, 2021 |
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The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
FOR MORE INFORMATION
Back Cover
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from October 1, 2020 through March 31, 2021, as provided by portfolio managers Julianne McHugh, Peter D. Goslin, CFA, Syed A. Zamil, CFA, and Chris Yao, CFA of Mellon Investments Corporation, Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended March 31, 2021, BNY Mellon Diversified Emerging Markets Fund’s Class A shares produced a total return of 22.42%, Class C shares returned 22.02%, Class I shares returned 22.68% and Class Y shares returned 22.67%.1 In comparison, the fund’s benchmark, the MSCI Emerging Markets Index (the “Index”), produced a return of 22.43% for the same period.2
Emerging-markets stocks posted positive returns during the reporting period, amid supportive central bank policies and improving investor sentiment due to anticipated economic reopening, vaccine approval and rollouts. The fund performed in-line with the Index.
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, plus any borrowings for investment purposes, in equity securities (or other instruments with similar economic characteristics) of companies located, organized or with a majority of assets or business in countries considered to be emerging markets, including other investment companies that invest in such securities.
The fund uses a “manager-of-managers” approach by selecting one or more experienced investment managers to serve as sub-advisers to the fund. The fund also uses a “fund-of-funds” approach by investing in one or more underlying funds. The fund currently allocates its assets among the emerging-market equity strategies that are separately employed by: (i) Mellon Investments Corporation (Mellon), the fund’s sub-adviser, through its Active Equity portfolio management team (the Active Equity Strategy); (ii) Mellon through its Multi-Factor Equity portfolio management team (the Multi-Factor Equity Strategy); and (iii) BNY Mellon Global Emerging Markets Fund, an affiliated underlying fund, which is sub-advised by Newton Investment Limited (the Newton Fund). BNY Mellon Investment Adviser, Inc. determines the investment strategies and sets the target allocations.
2
A Tale of Two Markets
After a strong summer rally, volatility crept back into equity markets in the fall of 2020 as increasing COVID-19 infection rates began to concern investors. By October, several countries had begun to reinstitute some degree of behavioral restriction among residents in order to stem the spread of the virus. In addition, mounting political rhetoric in the U.S. due to the election, renewed trade difficulties between the U.S. and China, and other geopolitical events stoked investor anxiety. However, resolution in the U.S. presidential election and promising progress towards a COVID-19 vaccine during the month of November 2020 helped stocks resurrect their upward momentum.
December 2020 brought vaccine approvals and passage of another U.S. fiscal stimulus package, both of which helped to support the rally. Ten-year U.S. Treasury rates began to rise as market participants anticipated the beginning of a strong global economic recovery. A strong rotation began out of companies that were able to benefit in the COVID-19-economy, such as technology and growth stocks. Investors began to support COVID-19-sensitive sectors of the market, which had previously lagged, as well as cyclical areas of the market on the theory that these sectors were offering more attractive valuations and would benefit most from economic reopening. As the stock rally continued, and sentiment strengthened, the yield curve continued to steepen on increasing concerns over inflation rates, which could lead to tightening by the U.S. Federal Reserve (the “Fed”). Despite small pockets of volatility, stocks generally rose through the end of the period, and stocks produced strong results for the six months.
Manager Performance Drives Positive Relative Results
The Multi-Factor Equity Strategy posted positive absolute performance in a period when investors rewarded value and dividend-yielding stocks and generally penalized growth and momentum stocks. Stock selection within the consumer discretionary, energy and information technology sectors contributed, as did positions in companies based in China and India. India-based Tata Motors was among the leading individual contributors to fund performance, as was Mexico-based mining company Grupo Mexico China-based health care company China Medical System Holdings was also a primary contributor to fund results. Conversely, stock selection within the industrials, consumer staples and health care sectors detracted from performance, as did selection among companies located in Malaysia and Thailand. From an individual company perspective, a position in China-based online commerce platform Alibaba Group Holding was a headwind to results, as was a position in Hong Kong-based materials company Conch Cement. Dr. Reddy’s Laboratories, an India-based health care company, also weighed on returns.
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
The Newton Fund also produced positive absolute performance. At the sector level, the Fund benefited most from stock selection within the communication services, information technology and materials sectors. At a country level, the largest positive contribution came from Chinese holdings. Performance was driven in large part by the Fund’s holdings in the electric-vehicle (EV) supply chain, as strong EV sales numbers, coupled with U.S. president-elect Joe Biden’s promise of $2 trillion for renewable energy and other climate measures over his tenure, helped Korean battery maker Samsung SDI, copper-foils producer Iljin Materials and lithium producers Livent and Orocobre to outperform. Other top stock performers included Chinese online entertainment brand Bilibili, which made gains based on its strong earnings announcements and growth outlook, and chipmaker ASML Holding, whose results for the fourth quarter were solid, while guidance came in ahead of expectations. At a sector level, positioning within the consumer discretionary and financial sectors detracted. At a country level, positioning in Taiwan detracted as did the underweight in South Africa, as the hard-hit country started to recover from the pandemic. New Oriental Education & Technology Group (“New Oriental”) was the biggest detractor with the impact of COVID-19 resulting in the announcement of mixed results and a negative market reaction. The stock weakened further toward the end of the six months on fears about increased regulation despite nothing being communicated through official channels to date. We note that New Oriental strictly adheres to the regulations published in 2018. While stricter enforcement and additional regulatory curbs can negatively affect growth and profitability, New Oriental should be better positioned for this than smaller and more informal competitors. Maruti Suzuki India detracted, despite the latest results revealing that the company is running at near capacity and has a large backlog of orders. A recent report also highlighted that the company now accounts for 50% of all passenger-vehicle sales in India. The absence of large Index constituent Samsung Electronics also had a material negative impact after the shares rallied strongly in the first three months of the period on expectations of strong memory price recovery.
The Active Equity Strategy also posted positive absolute performance, in part due to security selection and allocation decisions within the materials, financials and information technology sectors. From a country perspective, selections among companies based in Taiwan, South Korea and South Africa provided the biggest tailwind. Taiwan Semiconductor Manufacturing was among the leading individual contributors to performance. Demand for semiconductors has surged since the beginning of the pandemic, helping to raise the stock prices of semiconductor manufacturers. Samsung Electronics, which produces semiconductors and electronic equipment, has also benefited from this trend and was among the leading contributors to total portfolio results. Tencent Holdings was also beneficial to performance. The stock rose for much of the period on the back of strong demand for its online games. Conversely, stock selection decisions in the consumer staples, consumer discretionary and real estate sectors weighed on results, as did companies based in Brazil, China and Mexico. China-based Alibaba Group Holding, an online commerce platform, was one of the largest detractors from total performance during the period. Chinese property company Shimao Property Holdings also provided a headwind, as did Malaysian-based health care equipment company Top Glove.
4
A Constructive Investment Posture
Each of the fund’s underlying strategies and the underlying fund employ its own distinctive approach to investing in emerging-market equities, and all have continued to find opportunities that meet their investment criteria across a wide variety of markets and industry groups.
April 15, 2021
1 DUE TO RECENT MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE DIFFERENT THAN THE FIGURES SHOWN. Investors should note that the fund’s short-term performance is highly unusual, in part to unusually favorable market conditions, and is unlikely to be repeated or consistently achieved in the future. Total return includes reinvestment of dividends and any capital gains paid and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. The fund’s return reflects the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through February 1, 2022, at which time it may be extended, modified or terminated. Had these expenses not been absorbed, returns would have been lower.
2 Source: Lipper Inc. — The MSCI Emerging Markets Index is a free float-adjusted, market capitalization-weighted index that is designed to measure equity market performance of emerging markets. It reflects reinvestment of net dividends and, where applicable, capital gain distributions. Investors cannot invest directly in any index.
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.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
The ability of the fund to achieve its investment goal depends, in part, on the ability of BNY Mellon Investment Adviser, Inc. to allocate effectively the fund’s assets among investment strategies, sub-advisers and underlying funds. There can be no assurance that the actual allocations will be effective in achieving the fund’s investment goal or that an investment strategy, sub-adviser or underlying fund will achieve its particular investment objective.
Each strategy of the sub-adviser makes investment decisions independently, and it is possible that the investment styles of the individual strategies of the sub-adviser may not complement one another. As a result, the fund’s exposure to a given stock, industry, sector, market capitalization, geographic area or investment style could unintentionally be greater or smaller than it would have been if the fund had a single investment strategy.
The risks of investing in other investment companies, including ETFs, typically reflect the risks associated with the types of instruments in which the investment companies and ETFs invest. When the fund or an underlying fund invests in another investment company or ETF, shareholders of the fund will bear indirectly their proportionate share of the expenses of the other investment company or ETF (including management fees) in addition to the expenses of the fund. ETFs are exchange-traded investment companies that are, in many cases, designed to provide investment results corresponding to an index. The value of the underlying securities can fluctuate in response to activities of individual companies or in response to general market and/or economic conditions.
The fund may, but is not required to, use derivative instruments. A small investment in derivatives could have a potentially large impact on the fund’s performance. The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets.
5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in BNY Mellon Diversified Emerging Markets Fund from October 1, 2020 to March 31, 2021. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended March 31, 2021 |
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| Class A | Class C | Class I | Class Y |
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Expenses paid per $1,000† | $8.60 | $12.73 | $6.77 | $6.38 |
| |
Ending value (after expenses) | $1,224.20 | $1,220.20 | $1,226.80 | $1,226.70 |
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COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended March 31, 2021 |
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| Class A | Class C | Class I | Class Y |
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Expenses paid per $1,000† | $7.80 | $11.55 | $6.14 | $5.79 |
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Ending value (after expenses) | $1,017.20 | $1,013.46 | $1,018.85 | $1,019.20 |
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† | Expenses are equal to the fund’s annualized expense ratio of 1.55% for Class A, 2.30% for Class C, 1.22% for Class I and 1.15% for Class Y, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS
March 31, 2021 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 62.6% | |||||||
Brazil - 2.3% | |||||||
B3 - Brasil Bolsa Balcao | 41,900 | 406,967 | |||||
Banco do Brasil | 129,700 | 703,498 | |||||
BB Seguridade Participacoes | 36,100 | 155,530 | |||||
BRF | 12,700 | a | 56,837 | ||||
Cia Siderurgica Nacional | 49,500 | a | 331,809 | ||||
Cyrela Brazil Realty Empreendimentos e Participacoes | 100,500 | 440,128 | |||||
EDP - Energias do Brasil | 133,100 | 470,573 | |||||
IRB Brasil Resseguros | 10,600 | 11,544 | |||||
JBS | 57,400 | 306,955 | |||||
Minerva | 227,900 | 414,610 | |||||
Petroleo Brasileiro, ADR | 35,631 | 302,151 | |||||
TIM | 57,300 | 129,287 | |||||
Vale | 49,200 | 852,509 | |||||
WEG | 17,900 | 238,162 | |||||
4,820,560 | |||||||
Chile - .1% | |||||||
Enel Americas | 1,715,057 | 285,908 | |||||
Enel Generacion Chile | 64,627 | a | 22,697 | ||||
308,605 | |||||||
China - 22.7% | |||||||
Agile Group Holdings | 328,000 | 537,518 | |||||
Agricultural Bank of China, Cl. H | 1,284,000 | 513,659 | |||||
Alibaba Group Holding, ADR | 34,386 | a | 7,796,338 | ||||
Anhui Conch Cement, Cl. H | 187,200 | a | 1,217,242 | ||||
ANTA Sports Products | 15,200 | 247,921 | |||||
BAIC Motor, Cl. H | 111,000 | a,b | 35,553 | ||||
Baidu, ADR | 2,797 | a | 608,487 | ||||
CGN Power, Cl. H | 1,770,000 | b | 428,037 | ||||
China Construction Bank, Cl. H | 2,637,700 | a | 2,218,978 | ||||
China Everbright Bank, Cl. A | 711,600 | a | 442,918 | ||||
China Evergrande Group | 38,000 | a | 72,343 | ||||
China Galaxy Securities, Cl. H | 780,500 | a | 481,908 | ||||
China Hongqiao Group | 351,000 | 468,656 | |||||
China Life Insurance, Cl. H | 271,400 | 560,667 | |||||
China Medical System Holdings | 227,100 | 449,286 | |||||
China Merchants Bank, Cl. H | 85,500 | a | 652,735 | ||||
China Minsheng Banking, Cl. H | 797,000 | a | 462,365 | ||||
China National Building Material, Cl. H | 242,300 | 349,700 | |||||
China Pacific Insurance Group, Cl. H | 65,500 | a | 258,239 | ||||
China Shenhua Energy, Cl. H | 888,800 | 1,831,540 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 62.6% (continued) | |||||||
China - 22.7% (continued) | |||||||
China Vanke, Cl. H | 13,600 | a | 53,269 | ||||
Chongqing Rural Commercial Bank, Cl. H | 731,700 | a | 315,303 | ||||
Cosco Shipping Holdings, Cl. H | 592,000 | a | 761,503 | ||||
Country Garden Services Holdings | 27,000 | 273,678 | |||||
ENN Energy Holdings | 58,700 | 941,574 | |||||
Fosun International | 158,600 | 221,964 | |||||
GSX Techedu, ADR | 671 | a | 22,733 | ||||
Industrial & Commercial Bank of China, Cl. H | 91,200 | 65,460 | |||||
Industrial Bank, Cl. A | 94,200 | a | 346,190 | ||||
JD.com, ADR | 11,095 | a | 935,641 | ||||
Jointown Pharmaceutical Group, CI. A | 194,300 | a | 535,029 | ||||
Kingdee International Software Group | 6,000 | a | 18,600 | ||||
Lenovo Group | 360,000 | 512,162 | |||||
Li Ning | 34,500 | 224,110 | |||||
Longfor Group Holdings | 9,000 | b | 59,621 | ||||
Meituan, Cl. B | 42,800 | a,b | 1,641,728 | ||||
Momo, ADR | 10,435 | a | 153,812 | ||||
NetEase, ADR | 3,677 | 379,687 | |||||
New China Life Insurance, Cl. H | 260,200 | a | 1,007,450 | ||||
NIO, ADR | 10,666 | a | 415,761 | ||||
PICC Property & Casualty, Cl. H | 594,000 | a | 514,987 | ||||
Pinduoduo, ADR | 3,221 | a | 431,227 | ||||
Ping An Insurance Group Company of China, Cl. H | 119,000 | 1,416,685 | |||||
Shandong Weigao Group Medical Polymer, Cl. H | 6,800 | 13,418 | |||||
Shanghai Pharmaceuticals Holding, Cl. H | 269,800 | a | 529,598 | ||||
Sinopharm Group, Cl. H | 106,000 | 256,611 | |||||
Sinotruk Hong Kong | 384,700 | a | 1,152,997 | ||||
Tencent Holdings | 141,300 | 11,087,199 | |||||
Times China Holdings | 256,000 | 352,349 | |||||
Tingyi Cayman Islands Holding | 431,800 | 793,160 | |||||
Uni-President China Holdings | 395,200 | 480,904 | |||||
Vipshop Holdings, ADR | 7,073 | a | 211,200 | ||||
Weichai Power, Cl. H | 298,000 | a | 735,982 | ||||
Yanzhou Coal Mining, Cl. H | 571,500 | a | 676,323 | ||||
Yihai International Holding | 6,000 | 62,129 | |||||
Yum China Holdings | 1,648 | 97,578 | |||||
Zhongsheng Group Holdings | 54,200 | 382,058 | |||||
Zoomlion Heavy Industry Science & Technology, Cl. A | 228,500 | a | 443,056 |
8
Description | Shares | Value ($) | |||||
Common Stocks - 62.6% (continued) | |||||||
China - 22.7% (continued) | |||||||
Zoomlion Heavy Industry Science & Technology, Cl. H | 322,700 | a | 460,757 | ||||
48,617,583 | |||||||
Colombia - .1% | |||||||
Interconexion Electrica | 31,645 | 194,449 | |||||
Greece - .1% | |||||||
Hellenic Telecommunications Organization | 19,164 | a | 307,439 | ||||
Hong Kong - 1.7% | |||||||
Bosideng International Holdings | 1,422,500 | 640,428 | |||||
China Overseas Land & Investment | 19,700 | 51,188 | |||||
China Resources Cement Holdings | 366,000 | 411,003 | |||||
China Resources Land | 36,000 | 174,348 | |||||
China Taiping Insurance Holdings | 152,600 | a | 310,928 | ||||
Kingboard Laminates Holdings | 108,000 | 233,668 | |||||
Kunlun Energy | 84,000 | 88,278 | |||||
Nine Dragons Paper Holdings | 153,500 | 224,699 | |||||
Shanghai Industrial Holdings | 900 | 1,343 | |||||
Shanghai Industrial Urban Development Group | 108,200 | 10,578 | |||||
Shenzhen International Holdings | 97,500 | 163,292 | |||||
Shimao Group Holdings | 190,500 | 599,134 | |||||
SITC International Holdings | 220,000 | 745,681 | |||||
3,654,568 | |||||||
Hungary - .3% | |||||||
MOL Hungarian Oil & Gas | 1,692 | a | 12,251 | ||||
Richter Gedeon | 20,978 | 618,504 | |||||
630,755 | |||||||
India - 5.6% | |||||||
Amara Raja Batteries | 33,584 | 392,184 | |||||
Aurobindo Pharma | 13,240 | 159,593 | |||||
Bajaj Finance | 3,525 | a | 248,287 | ||||
Cipla | 19,163 | a | 213,636 | ||||
Dr. Reddy's Laboratories | 4,492 | a | 277,456 | ||||
HCL Technologies | 39,930 | 536,660 | |||||
Hero MotoCorp | 17,500 | 697,379 | |||||
Hindalco Industries | 32,484 | a | 145,217 | ||||
Hindustan Unilever | 12,196 | 405,595 | |||||
Housing Development Finance | 25,841 | a | 882,917 | ||||
Indus Towers | 46,842 | 156,965 | |||||
Infosys | 82,523 | 1,544,109 | |||||
ITC | 95,008 | 283,931 | |||||
LIC Housing Finance | 76,749 | a | 449,490 | ||||
Mindtree | 22,370 | 637,593 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 62.6% (continued) | |||||||
India - 5.6% (continued) | |||||||
Motherson Sumi Systems | 244,760 | a | 674,386 | ||||
Nestle India | 752 | 176,550 | |||||
Petronet LNG | 121,377 | 372,944 | |||||
REC | 211,438 | 379,273 | |||||
Reliance Industries | 11,956 | a | 327,559 | ||||
Shriram Transport Finance | 39,085 | 760,330 | |||||
Tata Consultancy Services | 14,202 | 617,282 | |||||
Tata Motors | 117,759 | a | 486,087 | ||||
Tech Mahindra | 15,090 | 204,626 | |||||
The Tata Power Company | 322 | a | 455 | ||||
UPL | 60,304 | a | 529,396 | ||||
Wipro | 58,165 | 329,473 | |||||
11,889,373 | |||||||
Indonesia - .4% | |||||||
Gudang Garam | 53,700 | a | 133,742 | ||||
Indah Kiat Pulp & Paper | 210,000 | a | 151,084 | ||||
Indofood CBP Sukses Makmur | 295,100 | a | 186,914 | ||||
Indofood Sukses Makmur | 1,024,900 | a | 465,703 | ||||
XL Axiata | 172,000 | a | 24,749 | ||||
962,192 | |||||||
Malaysia - .9% | |||||||
Hartalega Holdings | 84,700 | 182,412 | |||||
RHB Bank | 441,500 | 571,773 | |||||
Sime Darby | 880,000 | 509,345 | |||||
Supermax | 108,900 | 100,062 | |||||
Top Glove | 431,100 | 469,932 | |||||
1,833,524 | |||||||
Mexico - 1.2% | |||||||
America Movil, Ser. L | 1,174,700 | 800,585 | |||||
Coca-Cola Femsa | 6,585 | 30,284 | |||||
Fibra Uno Administracion | 14,300 | 16,742 | |||||
Gruma, Cl. B | 39,405 | 466,548 | |||||
Grupo Financiero Banorte, Cl. O | 89,400 | a | 504,090 | ||||
Grupo Mexico, Ser. B | 152,300 | 802,799 | |||||
2,621,048 | |||||||
Philippines - .4% | |||||||
Aboitiz Equity Ventures | 280,240 | 199,192 | |||||
Ayala Land | 50,700 | 35,880 | |||||
Globe Telecom | 2,720 | 105,354 | |||||
International Container Terminal Services | 192,540 | 479,986 | |||||
Metro Pacific Investments | 70,000 | 5,394 |
10
Description | Shares | Value ($) | |||||
Common Stocks - 62.6% (continued) | |||||||
Philippines - .4% (continued) | |||||||
SM Prime Holdings | 54,300 | a | 39,155 | ||||
864,961 | |||||||
Poland - .3% | |||||||
CD Projekt | 560 | a | 26,995 | ||||
KGHM Polska Miedz | 6,904 | a | 332,281 | ||||
Polskie Gornictwo Naftowe i Gazownictwo | 120,430 | a | 183,270 | ||||
542,546 | |||||||
Qatar - .2% | |||||||
Ooredoo | 153,686 | 298,362 | |||||
The Commercial Bank | 148,340 | 197,515 | |||||
495,877 | |||||||
Russia - 2.4% | |||||||
Lukoil, ADR | 25,127 | 2,031,770 | |||||
MMC Norilsk Nickel, ADR | 12,128 | 378,151 | |||||
Polyus | 358 | 66,214 | |||||
Sberbank of Russia, ADR | 131,144 | 2,020,273 | |||||
Sistema, GDR | 3,869 | a | 34,976 | �� | |||
Tatneft, ADR | 3,588 | 170,215 | |||||
X5 Retail Group, GDR | 10,810 | 348,514 | |||||
5,050,113 | |||||||
Saudi Arabia - .9% | |||||||
Abdullah Al Othaim Markets | 8,861 | 298,651 | |||||
Al Rajhi Bank | 23,984 | 631,848 | |||||
Almarai | 16,382 | 227,146 | |||||
Bupa Arabia for Cooperative Insurance | 10,881 | a | 347,004 | ||||
Jarir Marketing | 7,864 | 381,636 | |||||
The Savola Group | 2,639 | a | 27,655 | ||||
1,913,940 | |||||||
South Africa - 2.7% | |||||||
Anglo American Platinum | 949 | 138,373 | |||||
AngloGold Ashanti | 4,138 | 90,229 | |||||
Clicks Group | 31,430 | 511,909 | |||||
Growthpoint Properties | 19,705 | 17,622 | |||||
Impala Platinum Holdings | 78,119 | 1,448,748 | |||||
Investec | 104,690 | 306,906 | |||||
Kumba Iron Ore | 6,606 | 272,341 | |||||
Mediclinic International | 110,419 | a | 435,360 | ||||
MTN Group | 59,041 | a | 347,406 | ||||
Naspers, Cl. N | 2,366 | 566,126 | |||||
Ninety One | 203 | 660 | |||||
Redefine Properties | 23,528 | a | 5,978 | ||||
Resilient REIT | 2,677 | 8,250 |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 62.6% (continued) | |||||||
South Africa - 2.7% (continued) | |||||||
Sibanye Stillwater | 393,295 | 1,731,990 | |||||
5,881,898 | |||||||
South Korea - 8.9% | |||||||
Celltrion | 1,536 | a | 440,431 | ||||
CJ CheilJedang | 946 | 343,544 | |||||
DB Insurance | 12,005 | 501,733 | |||||
DL E&C | 1,309 | a | 139,372 | ||||
Dl Holdings | 305 | 23,581 | |||||
Doosan Bobcat | 3,338 | 124,170 | |||||
Doosan Heavy Industries & Construction | 12,840 | a | 147,488 | ||||
Hana Financial Group | 13,217 | 499,834 | |||||
Hyundai Glovis | 1,682 | 278,661 | |||||
Hyundai Mobis | 7,728 | 1,993,882 | |||||
Kakao | 978 | 430,346 | |||||
KB Financial Group | 13,085 | 649,770 | |||||
Kia Motors | 5,509 | 403,531 | |||||
Korea Investment Holdings | 7,588 | 573,919 | |||||
Kumho Petrochemical | 6,484 | 1,518,233 | |||||
LG Electronics | 8,021 | 1,063,088 | |||||
Mirae Asset Daewoo | 90,918 | 792,093 | |||||
NAVER | 96 | 31,979 | |||||
NCSoft | 221 | 170,473 | |||||
POSCO | 3,120 | 882,174 | |||||
Posco International | 1,191 | 21,205 | |||||
Samsung Biologics | 120 | a,b | 79,311 | ||||
Samsung Electronics | 84,541 | 6,080,528 | |||||
Samsung SDI | 140 | 81,643 | |||||
Samsung Securities | 24,523 | 854,811 | |||||
Seegene | 600 | 68,973 | |||||
Shinhan Financial Group | 26,202 | 867,033 | |||||
19,061,806 | |||||||
Taiwan - 9.7% | |||||||
Accton Technology | 6,000 | a | 58,038 | ||||
Asia Cement | 221,000 | a | 370,231 | ||||
Chailease Holding | 321,895 | a | 2,222,456 | ||||
Evergreen Marine | 334,000 | a | 532,611 | ||||
Feng Tay Enterprise | 19,440 | a | 132,857 | ||||
Hotai Motor | 5,000 | a | 103,039 | ||||
Lite-On Technology | 84,000 | a | 184,881 | ||||
MediaTek | 81,000 | a | 2,750,815 | ||||
Micro-Star International | 122,000 | a | 743,981 | ||||
Nanya Technology | 7,000 | a | 22,546 | ||||
Powertech Technology | 77,000 | a | 284,705 |
12
Description | Shares | Value ($) | |||||
Common Stocks - 62.6% (continued) | |||||||
Taiwan - 9.7% (continued) | |||||||
Realtek Semiconductor | 43,000 | a | 744,471 | ||||
Standard Foods | 111,000 | a | 227,968 | ||||
Taiwan Semiconductor Manufacturing | 554,600 | 11,409,603 | |||||
Uni-President Enterprises | 101,000 | a | 258,403 | ||||
United Microelectronics | 225,000 | a | 395,857 | ||||
Zhen Ding Technology Holding | 81,000 | a | 342,078 | ||||
20,784,540 | |||||||
Thailand - .5% | |||||||
Advanced Info Service, NVDR | 44,000 | 244,288 | |||||
Krungthai Card | 9,600 | 24,269 | |||||
PTT Exploration & Production, NVDR | 29,000 | 105,792 | |||||
Thai Union Group, NVDR | 721,400 | 339,347 | |||||
Thanachart Capital | 297,700 | 362,003 | |||||
1,075,699 | |||||||
Turkey - .7% | |||||||
BIM Birlesik Magazalar | 61,739 | 527,873 | |||||
Emlak Konut Gayrimenkul Yatirim Ortakligi | 16,792 | 3,884 | |||||
Eregli Demir ve Celik Fabrikalari | 379,416 | 701,189 | |||||
KOC Holding | 12,702 | 29,858 | |||||
Turkcell Iletisim Hizmetleri | 99,082 | 179,631 | |||||
Turkiye Vakiflar Bankasi, Cl. D | 25,869 | 10,840 | |||||
1,453,275 | |||||||
United Arab Emirates - ..3% | |||||||
Dubai Islamic Bank | 534,005 | 661,482 | |||||
Emaar Properties | 35,277 | a | 33,998 | ||||
695,480 | |||||||
Uruguay - .2% | |||||||
Globant | 2,106 | a | 437,227 | ||||
Total Common Stocks (cost $90,683,595) | 134,097,458 | ||||||
Exchange-Traded Funds - 1.4% | |||||||
United States - 1.4% | |||||||
iShares MSCI Emerging Markets ETF | 54,038 | 2,882,387 | |||||
Preferred Dividend | |||||||
Preferred Stocks - .7% | |||||||
Brazil - .6% | |||||||
Banco do Estado do Rio Grande do Sul, Cl. B | 5.33 | 184,700 | 396,068 | ||||
Cia Energetica de Minas Gerais | 4.71 | 143,100 | 331,014 |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Preferred Dividend | Shares | Value ($) | ||||
Preferred Stocks - .7% (continued) | |||||||
Brazil - .6% (continued) | |||||||
Cia Paranaense de Energia | 4.35 | 373,900 | 474,296 | ||||
1,201,378 | |||||||
South Korea - .1% | |||||||
Samsung Electronics | 3.52 | 4,773 | 307,867 | ||||
Total Preferred Stocks (cost $1,422,623) | 1,509,245 | ||||||
Investment Companies - 34.2% | |||||||
Registered Investment Companies - 34.2% | |||||||
BNY Mellon Global Emerging Markets Fund, Cl. Y | 2,714,179 | c | 73,309,975 | ||||
Total Investments (cost $131,817,239) | 98.9% | 211,799,065 | |||||
Cash and Receivables (Net) | 1.1% | 2,396,563 | |||||
Net Assets | 100.0% | 214,195,628 |
ADR—American Depository Receipt
ETF—Exchange-Traded Fund
GDR—Global Depository Receipt
NVDR—Non-Voting Depository Receipt
REIT—Real Estate Investment Trust
a Non-income producing security.
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, 2021, these securities were valued at $2,244,250 or 1.05% of net assets.
c Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
14
Portfolio Summary (Unaudited) † | Value (%) |
Investment Companies | 35.6 |
Semiconductors & Semiconductor Equipment | 7.3 |
Banks | 6.7 |
Materials | 6.3 |
Media & Entertainment | 6.0 |
Retailing | 5.8 |
Technology Hardware & Equipment | 4.0 |
Diversified Financials | 3.3 |
Energy | 2.8 |
Food, Beverage & Tobacco | 2.5 |
Insurance | 2.4 |
Capital Goods | 2.2 |
Automobiles & Components | 2.2 |
Software & Services | 2.0 |
Utilities | 1.5 |
Transportation | 1.4 |
Consumer Durables & Apparel | 1.3 |
Telecommunication Services | 1.2 |
Health Care Equipment & Services | 1.2 |
Pharmaceuticals Biotechnology & Life Sciences | 1.1 |
Real Estate | 1.0 |
Food & Staples Retailing | .8 |
Household & Personal Products | .2 |
Commercial & Professional Services | .1 |
Consumer Services | .0 |
98.9 |
† Based on net assets.
See notes to financial statements.
15
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS (Unaudited)
Investment Companies | Value | Purchases ($) | † | Sales ($) | Net Realized | |
Registered Investment Companies: | ||||||
BNY Mellon Global Emerging Markets Fund, Cl. Y | 57,827,175 | 6,329,907 | (4,604,420) | 1,343,920 | ||
Investment of Cash Collateral for | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 21,750 | 424,709 | (446,459) | - | ||
Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares | - | 4,612,269 | (4,612,269) | - | ||
Total | 57,848,925 | 11,366,885 | (9,663,148) | 1,343,920 |
Investment Companies | Net Change in | Value | Net | Dividends/ | ||
Registered Investment Companies: | ||||||
BNY Mellon Global Emerging Markets Fund, Cl. Y | 12,413,393 | 73,309,975 | 34.2 | 231,405 | ||
Investment of Cash Collateral for | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | - | - | - | 32††† | ||
Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares | - | - | - | 1,657††† | ||
Total | 12,413,393 | 73,309,975 | 34.2 | 233,094 |
† Includes reinvested dividends/distributions.
†† Effective November 9, 2020, cash collateral for securities lending was transferred from Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares to Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares.
††† Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities to financial statements.
See notes to financial statements.
16
STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS March 31, 2021 (Unaudited)
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation ($) |
Morgan Stanley | |||||
United States Dollar | 112,162 | South African Rand | 1,653,180 | 4/1/2021 | 175 |
Gross Unrealized Appreciation | 175 |
See notes to financial statements.
17
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 94,958,501 |
| 138,489,090 |
| ||
Affiliated issuers |
| 36,858,738 |
| 73,309,975 |
| |
Cash |
|
|
|
| 1,700,904 |
|
Cash denominated in foreign currency |
|
| 950,853 |
| 936,748 |
|
Dividends and securities lending income receivable |
| 512,890 |
| |||
Receivable for shares of Beneficial Interest subscribed |
| 326,753 |
| |||
Tax reclaim receivable |
| 15,242 |
| |||
Unrealized appreciation on forward foreign |
| 175 |
| |||
Prepaid expenses |
|
|
|
| 47,272 |
|
|
|
|
|
| 215,339,049 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 211,932 |
| |||
Payable for investment securities purchased |
| 386,643 |
| |||
Foreign capital gains tax payable |
| 272,817 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 204,356 |
| |||
Trustees’ fees and expenses payable |
| 1,486 |
| |||
Other accrued expenses |
|
|
|
| 66,187 |
|
|
|
|
|
| 1,143,421 |
|
Net Assets ($) |
|
| 214,195,628 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 155,355,690 |
|
Total distributable earnings (loss) |
|
|
|
| 58,839,938 |
|
Net Assets ($) |
|
| 214,195,628 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 541,452 | 13,463 | 5,729,251 | 207,911,462 |
|
Shares Outstanding | 17,248 | 460.19 | 184,117 | 6,674,278 |
|
Net Asset Value Per Share ($) | 31.39 | 29.26 | 31.12 | 31.15 |
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
|
18
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends (net of $197,026 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 1,545,014 |
| ||
Affiliated issuers |
|
| 231,405 |
| ||
Income from securities lending—Note 1(c) |
|
| 1,689 |
| ||
Total Income |
|
| 1,778,108 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 695,242 |
| ||
Custodian fees—Note 3(c) |
|
| 233,859 |
| ||
Professional fees |
|
| 72,952 |
| ||
Administration fee—Note 3(a) |
|
| 63,325 |
| ||
Registration fees |
|
| 34,471 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 7,809 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 7,642 |
| ||
Prospectus and shareholders’ reports |
|
| 5,751 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 3,710 |
| ||
Loan commitment fees—Note 2 |
|
| 3,039 |
| ||
Distribution fees—Note 3(b) |
|
| 99 |
| ||
Miscellaneous |
|
| 13,893 |
| ||
Total Expenses |
|
| 1,141,792 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (330) |
| ||
Net Expenses |
|
| 1,141,462 |
| ||
Investment Income—Net |
|
| 636,646 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions: |
|
| ||||
Unaffiliated issuers |
|
|
| 3,143,205 |
| |
Affiliated issuers |
|
|
| 1,343,920 |
| |
Net realized gain (loss) on forward foreign currency exchange contracts | (22,346) |
| ||||
Net Realized Gain (Loss) |
|
| 4,464,779 |
| ||
Net change in unrealized appreciation (depreciation) on investments |
|
| ||||
Unaffiliated issuers |
|
|
| 19,872,061 |
| |
Affiliated issuers |
|
|
| 12,413,393 |
| |
Net change in unrealized appreciation (depreciation) on | (2,023) |
| ||||
Net Change in Unrealized Appreciation (Depreciation) |
|
| 32,283,431 |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 36,748,210 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 37,384,856 |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
19
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 636,646 |
|
|
| 3,304,205 |
| |
Net realized gain (loss) on investments |
| 4,464,779 |
|
|
| 4,277,700 |
| ||
Net change in unrealized appreciation |
| 32,283,431 |
|
|
| 19,719,219 |
| ||
Net Increase (Decrease) in Net Assets | 37,384,856 |
|
|
| 27,301,124 |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (1,490) |
|
|
| (4,209) |
| |
Class C |
|
| - |
|
|
| (230) |
| |
Class I |
|
| (27,119) |
|
|
| (85,164) |
| |
Class Y |
|
| (1,141,669) |
|
|
| (4,635,350) |
| |
Total Distributions |
|
| (1,170,278) |
|
|
| (4,724,953) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 146,754 |
|
|
| 37,178 |
| |
Class I |
|
| 2,759,954 |
|
|
| 4,071,189 |
| |
Class Y |
|
| 24,387,996 |
|
|
| 32,168,702 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 1,177 |
|
|
| 4,103 |
| |
Class C |
|
| - |
|
|
| 140 |
| |
Class I |
|
| 24,958 |
|
|
| 74,367 |
| |
Class Y |
|
| 172,643 |
|
|
| 708,904 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (15,725) |
|
|
| (64,475) |
| |
Class C |
|
| (22,338) |
|
|
| - |
| |
Class I |
|
| (1,320,685) |
|
|
| (4,837,945) |
| |
Class Y |
|
| (18,973,210) |
|
|
| (93,223,924) |
| |
Increase (Decrease) in Net Assets | 7,161,524 |
|
|
| (61,061,761) |
| |||
Total Increase (Decrease) in Net Assets | 43,376,102 |
|
|
| (38,485,590) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 170,819,526 |
|
|
| 209,305,116 |
| |
End of Period |
|
| 214,195,628 |
|
|
| 170,819,526 |
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class A |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 4,839 |
|
|
| 1,516 |
| |
Shares issued for distributions reinvested |
|
| 40 |
|
|
| 167 |
| |
Shares redeemed |
|
| (502) |
|
|
| (2,835) |
| |
Net Increase (Decrease) in Shares Outstanding | 4,377 |
|
|
| (1,152) |
| |||
Class C |
|
|
|
|
|
|
|
| |
Shares issued for distributions reinvested |
|
| - |
|
|
| 6 |
| |
Shares redeemed |
|
| (724) |
|
|
| - |
| |
Net Increase (Decrease) in Shares Outstanding | (724) |
|
|
| 6 |
| |||
Class Ia |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 95,389 |
|
|
| 175,581 |
| |
Shares issued for distributions reinvested |
|
| 848 |
|
|
| 3,055 |
| |
Shares redeemed |
|
| (45,476) |
|
|
| (222,389) |
| |
Net Increase (Decrease) in Shares Outstanding | 50,761 |
|
|
| (43,753) |
| |||
Class Ya |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 772,866 |
|
|
| 1,549,992 |
| |
Shares issued for distributions reinvested |
|
| 5,860 |
|
|
| 29,113 |
| |
Shares redeemed |
|
| (642,498) |
|
|
| (4,304,456) |
| |
Net Increase (Decrease) in Shares Outstanding | 136,228 |
|
|
| (2,725,351) |
| |||
|
|
|
|
|
|
|
|
|
|
a | During the period ended March 31, 2021, 91,372 Class Y shares representing $2,639,827 were exchanged for 91,482 Class I shares and during the period ended September 30, 2020, 166,105 Class Y shares representing $3,853,381 were exchanged for 166,268 Class I shares. | ||||||||
See notes to financial statements. |
21
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||
March 31, 2021 | Year Ended September 30, | |||||||
Class A Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | ||
Per Share Data ($): | ||||||||
Net asset value, beginning of period | 25.72 | 22.25 | 22.69 | 24.18 | 19.92 | 17.23 | ||
Investment Operations: | ||||||||
Investment income—neta | .05 | .21 | .13 | .19 | .02 | .02 | ||
Net realized and unrealized | 5.71 | 3.59 | (.55) | (1.50) | 4.26 | 2.72 | ||
Total from Investment Operations | 5.76 | 3.80 | (.42) | (1.31) | 4.28 | 2.74 | ||
Distributions: | ||||||||
Dividends from investment | (.09) | (.33) | (.02) | (.18) | (.02) | (.08) | ||
Proceeds from redemption | - | .00b | .00b | .00b | .00b | .03 | ||
Net asset value, end of period | 31.39 | 25.72 | 22.25 | 22.69 | 24.18 | 19.92 | ||
Total Return (%)c | 22.42d | 17.12 | (1.87) | (5.50) | 21.48 | 16.20 | ||
Ratios/Supplemental Data (%): | ||||||||
Ratio of total expenses | 1.67f | 1.62 | 1.51 | 1.26 | 1.28 | 1.39 | ||
Ratio of net expenses | 1.55f | 1.55 | 1.51 | 1.26 | 1.27 | 1.39 | ||
Ratio of net investment income | .33f | .89 | .60 | .77 | .08 | .10 | ||
Portfolio Turnover Rate | 24.57d | 47.02 | 44.24 | 41.37 | 50.35 | 62.91 | ||
Net Assets, end of period ($ x 1,000) | 541 | 331 | 312 | 479 | 901 | 949 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
e Amount does not include the expenses of the underlying funds.
f Annualized.
See notes to financial statements.
22
Six Months Ended | |||||||
March 31, 2021 | Year Ended September 30, | ||||||
Class C Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 23.99 | 20.81 | 21.37 | 22.85 | 18.98 | 16.50 | |
Investment Operations: | |||||||
Investment income (loss)—neta | (.06) | .03 | .04 | (.11) | (.16) | (.13) | |
Net realized and unrealized | 5.33 | 3.35 | (.60) | (1.37) | 4.03 | 2.58 | |
Total from Investment Operations | 5.27 | 3.38 | (.56) | (1.48) | 3.87 | 2.45 | |
Distributions: | |||||||
Dividends from investment | - | (.20) | - | - | - | - | |
Proceeds from redemption | - | .00b | .00b | .00b | .00b | .03 | |
Net asset value, end of period | 29.26 | 23.99 | 20.81 | 21.37 | 22.85 | 18.98 | |
Total Return (%)c | 22.02d | 16.21 | (2.62) | (6.48) | 20.39 | 15.03 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | 2.71f | 2.51 | 2.27 | 2.59 | 2.32 | 2.23 | |
Ratio of net expenses | 2.30f | 2.30 | 2.27 | 2.26 | 2.25 | 2.23 | |
Ratio of net investment income (loss) | (.42)f | .15 | .21 | (.47) | (.83) | (.74) | |
Portfolio Turnover Rate | 24.57d | 47.02 | 44.24 | 41.37 | 50.35 | 62.91 | |
Net Assets, end of period ($ x 1,000) | 13 | 28 | 25 | 29 | 28 | 64 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
e Amount does not include the expenses of the underlying funds.
f Annualized.
See notes to financial statements.
23
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||
March 31, 2021 | Year Ended September 30, | ||||||
Class I Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 25.52 | 22.11 | 22.66 | 24.13 | 19.86 | 17.16 | |
Investment Operations: | |||||||
Investment income—neta | .09 | .36 | .33 | .32 | .13 | .02 | |
Net realized and unrealized | 5.68 | 3.54 | (.64) | (1.52) | 4.22 | 2.75 | |
Total from Investment Operations | 5.77 | 3.90 | (.31) | (1.20) | 4.35 | 2.77 | |
Distributions: | |||||||
Dividends from investment | (.17) | (.49) | (.24) | (.27) | (.08) | (.10) | |
Proceeds from redemption | - | .00b | .00b | .00b | .00b | .03 | |
Net asset value, end of period | 31.12 | 25.52 | 22.11 | 22.66 | 24.13 | 19.86 | |
Total Return (%) | 22.68c | 17.71 | (1.26) | (5.10) | 22.05 | 16.45 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | 1.22e | 1.01 | .90 | .89 | .95 | 1.11 | |
Ratio of net expenses | 1.22e | 1.01 | .90 | .89 | .94 | 1.11 | |
Ratio of net investment income | .60e | 1.53 | 1.49 | 1.26 | .57 | .12 | |
Portfolio Turnover Rate | 24.57c | 47.02 | 44.24 | 41.37 | 50.35 | 62.91 | |
Net Assets, end of period ($ x 1,000) | 5,729 | 3,403 | 3,916 | 4,700 | 3,550 | 1,207 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Not annualized.
d Amount does not include the expenses of the underlying funds.
e Annualized.
See notes to financial statements.
24
Six Months Ended | ||||||||||
March 31, 2021 | Year Ended September 30, | |||||||||
Class Y Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | ||||
Per Share Data ($): | ||||||||||
Net asset value, | 25.55 | 22.14 | 22.69 | 24.16 | 19.90 | 17.18 | ||||
Investment Operations: | ||||||||||
Investment income—neta | .10 | .39 | .35 | .31 | .13 | .07 | ||||
Net realized and unrealized | 5.68 | 3.53 | (.63) | (1.50) | 4.23 | 2.74 | ||||
Total from Investment Operations | 5.78 | 3.92 | .28 | 1.19 | 4.36 | 2.81 | ||||
Distributions: | ||||||||||
Dividends from investment | (.18) | (.51) | (.27) | (.28) | (.10) | (.12) | ||||
Proceeds from redemption | - | .00b | .00b | .00b | .00b | .03 | ||||
Net asset value, end of period | 31.15 | 25.55 | 22.14 | 22.69 | 24.16 | 19.90 | ||||
Total Return (%) | 22.67c | 17.84 | (1.15) | (5.06) | 22.06 | 16.64 | ||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | 1.15e | .91 | .82 | .80 | .86 | 1.01 | ||||
Ratio of net expenses | 1.15e | .91 | .82 | .80 | .85 | 1.01 | ||||
Ratio of net investment income | .64e | 1.71 | 1.59 | 1.24 | .61 | .42 | ||||
Portfolio Turnover Rate | 24.57c | 47.02 | 44.24 | 41.37 | 50.35 | 62.91 | ||||
Net Assets, end of period ($ x 1,000) | 207,911 | 167,057 | 205,052 | 225,899 | 213,397 | 147,926 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Not annualized.
d Amount does not include the expenses of the underlying funds.
e Annualized.
See notes to financial statements.
25
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Diversified Emerging Markets Fund (the “fund”) is a separate diversified series of BNY Mellon Investment Funds I (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering seven series, including the fund. The fund’s investment objective is to seek long-term growth of capital. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Mellon Investments Corporation (the “Sub-Adviser”), a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser, serves as the fund’s sub-investment adviser.
On February 10, 2021, BNY Mellon Investment Management announced its intention to realign several of its investment firms. As a result of this realignment, which is scheduled to occur, subject to regulatory requirements, in the third quarter of 2021 (the “Effective Date”), portfolio managers responsible for the day-to-day management of the portions of the fund’s portfolio allocated to the Active Equity Strategy and Multi-Factor Equity Strategy as employees of the Sub-Adviser, will become employees of Newton Investment Management North America, LLC (“Newton”), which, like the Sub-Adviser, will be an affiliate of the Adviser, the fund’s investment adviser, and will no longer be employees of Mellon. Consequently, effective as of the Effective Date and subject to the approval of the Trust’s Board of Trustees (the “Board”), the Adviser will engage Newton to serve as the fund’s sub-adviser, pursuant to a sub-investment advisory agreement between the Adviser and Newton, replacing the Sub-Adviser. As the fund’s sub-adviser, Newton will provide the day-to-day management of the portions of the fund’s portfolio allocated to the Active Equity Strategy and Multi-Factor Equity Strategy, subject to the Adviser’s supervision and approval. It is currently anticipated that the fund’s portfolio managers who are responsible for the day-to-day management of the fund’s investments will continue to manage the fund’s investments as of the Effective Date. It is also currently anticipated that there will be no material changes to the fund’s investment objective, strategies or policies, no reduction in the nature or level of services provided to the fund, and no increase in the management fee payable by the fund as a result of the engagement of Newton as the fund’s sub-adviser. As is the case under the sub-investment advisory agreement between the Adviser and Sub-Adviser, the Adviser (and not the fund) will
26
pay Newton for its sub-advisory services. The rate of sub-investment advisory fee payable by the Adviser to Newton will be the same as that currently payable by the Adviser to the Sub-Adviser pursuant to the respective sub-investment advisory agreements. In addition, all other material terms and conditions of the proposed sub-investment advisory agreement between the Adviser and Newton will be substantially similar to those of the sub-investment advisory agreement between the Adviser and Sub-Adviser.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C, Class I and Class Y. Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class A shares bought without an initial sales charge as part of an investment of $1 million or more may be charged a contingent deferred sales charge (“CDSC”) of 1.00% if redeemed within one year. Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares eight years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and 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.
27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Trust enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
As of March 31, 2021, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held all of the outstanding Class C shares of the fund.
(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.).
28
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in equity securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: 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.
29
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward foreign currency exchange contracts (“forward contracts”) are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of March 31, 2021 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 - Common Stocks | 134,097,458 | - | - | 134,097,458 | ||
Equity Securities - Preferred Stocks | 1,509,245 | - | - | 1,509,245 | ||
Exchange-Traded Funds | 2,882,387 | - | - | 2,882,387 | ||
Investment Companies | 73,309,975 | - | - | 73,309,975 | ||
Other Financial Instruments: | ||||||
Forward Foreign Currency Exchange contracts†† | - | 175 | - | 175 |
† See Statement of Investments for additional detailed categorizations, if any.
†† Amount shown represents unrealized appreciation (depreciation) at period end, but only variation margin on exchanged traded and centrally cleared derivatives, if any, are reported in the Statement of Assets and Liabilities.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually
30
received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
Foreign taxes: The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invests. These foreign taxes, if any, are paid by the fund and are reflected in the Statement of Operations, if applicable. Foreign taxes payable or deferred or those subject to reclaims as of March 31, 2021, if any, are disclosed in the fund’s Statement of Assets and Liabilities.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended March 31, 2021, The Bank of New York Mellon earned $227 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
31
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political, economic developments and public health conditions. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
(f) Dividends and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and
32
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, 2021, 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, 2021, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2020 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
The fund has an unused capital loss carryover of $22,277,630 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to September 30, 2020. The fund has $20,864,082 of short-term capital losses and $1,413,548 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, 2020 was as follows: ordinary income $4,724,953. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $688.5 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $135 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended March 31, 2021, the fund did not borrow under the Facilities.
33
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 3—Investment Advisory Fee, Sub-Investment Advisory Fee, Administration Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with the Adviser, the fund has agreed to pay an investment advisory fee at the annual rate of 1.10% of the value of the fund’s average daily net assets other than assets allocated to investments in other investment companies (other underlying funds, which may consist of affiliated funds, mutual funds and exchange traded funds) and is payable monthly. Therefore the fund’s investment advisory fee will fluctuate based on the fund’s allocation between underlying and direct investments. The Adviser has also contractually agreed, from October 1, 2020 through February 1, 2022, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings, and extraordinary expenses) exceed 1.30% of the value of the fund’s average daily net assets. On or after February 1, 2022, the Adviser, Inc. may terminate this expense limitation at any time. Because “acquired fund fees and expenses” are incurred indirectly by the fund as a result of its investment in underlying funds, such fees and expenses are not included in the expense limitation. The reduction in expenses, pursuant to the undertaking, amounted to $330 during the period ended March 31, 2021.
Pursuant to separate sub-investment advisory agreements between the Adviser and the Sub-Adviser, the Sub-Adviser serves as the fund’s sub-investment adviser responsible for the day-to-day management of a portion of the fund’s portfolio. The Adviser pays the sub-investment adviser a monthly fee at an annual percentage of the value of the fund’s average daily net assets. The Adviser has obtained an exemptive order from the SEC (the “Order”), upon which the fund may rely, to use a manager of managers approach that permits the Adviser, subject to certain conditions and approval by the Board, to enter into and materially amend sub-investment advisory agreements with one or more sub-investment advisers who are either unaffiliated with the Adviser or are wholly-owned subsidiaries (as defined under the Act) of the Adviser’s ultimate parent company, BNY Mellon, without obtaining shareholder approval. The Order also allows the fund to disclose the sub-investment advisory fee paid by the Adviser to any unaffiliated sub-investment adviser in the aggregate with other unaffiliated sub-investment advisers in documents filed with the SEC and provided to shareholders. In addition, pursuant to the Order, it is not necessary to disclose the sub-investment advisory fee payable by the Adviser separately to a sub-investment adviser that is a wholly-owned subsidiary of BNY Mellon in documents filed with the SEC and provided
34
to shareholders; such fees are to be aggregated with fees payable to the Adviser. The Adviser has ultimate responsibility (subject to oversight by the Board) to supervise any sub-investment adviser and recommend the hiring, termination, and replacement of any sub-investment adviser to the Board.
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with the Adviser, whereby the Adviser performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate the Adviser for providing accounting and recordkeeping services, administration, compliance monitoring, regulatory and shareholder reporting, as well as related facilities, equipment and clerical help. The fee is based on the fund’s average daily net assets and computed at the following annual rates: .10% of the first $500 million, .065% of the next $500 million and .02% in excess of $1 billion.
In addition, after applying any expense limitations or fee waivers that reduce the fees paid to the Adviser for this service, the Adviser has contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both the Adviser’ costs in providing these services and a reasonable allocation of the costs incurred by the Adviser and its affiliates related to the support and oversight of these services. The fund also reimburses the Adviser for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration Agreement, the fund was charged $63,325 during the period ended March 31, 2021.
During the period ended March 31, 2021, the Distributor retained $5 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, 2021, Class C shares were charged $99 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
35
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended March 31, 2021, Class A and Class C shares were charged $576 and $33, respectively, pursuant to the Shareholder Services Plan.
Under its terms, the Distribution Plan and Shareholder Services Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of a majority of those Trustees who are not “interested persons” of the Trust and who have no direct or indirect financial interest in the operation of or in any agreement related to the Distribution Plan or Shareholder Services Plan.
The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. For financial reporting purposes, the fund includes net earnings credits, if any, as shareholder servicing costs in the Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, 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, 2021, the fund was charged $1,851 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended March 31, 2021, the fund was charged $233,859 pursuant to the custody agreement.
During the period ended March 31, 2021, the fund was charged $7,642 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
36
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees of $127,959, administration fees of $11,660, Distribution Plan fees of $9, Shareholder Services Plan fees of $119, custodian fees of $67,571, Chief Compliance Officer fees of $3,931 and transfer agency fees of $683.
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward contracts, during the period ended March 31, 2021, amounted to $53,614,011 and $47,061,882, 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 instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.
Each type of derivative instrument that was held by the fund during the period ended March 31, 2021 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
37
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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, 2021 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, 2021, derivative assets and liabilities (by type) on a gross basis are as follows:
Derivative Financial Instruments: |
| Assets ($) |
| Liabilities ($) |
|
Forward contracts |
| 175 |
| - |
|
Total gross amount of derivative |
|
|
|
|
|
assets and liabilities in the |
|
|
|
|
|
Statement of Assets and Liabilities |
| 175 |
| - |
|
Derivatives not subject to |
|
|
|
|
|
Master Agreements |
| - |
| - |
|
Total gross amount of assets |
|
|
|
|
|
and liabilities subject to |
|
|
|
|
|
Master Agreements |
| 175 |
| - |
|
38
The following table presents derivative assets net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of March 31, 2021:
|
|
| Financial |
|
|
|
|
|
| Instruments |
|
|
|
|
|
| and Derivatives |
|
|
|
| Gross Amount of |
| Available | Collateral |
| Net Amount of |
Counterparty | Assets ($) | 1 | for Offset ($) | Received ($) |
| Assets ($) |
Morgan Stanley | 175 |
| - | - |
| 175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Absent a default event or early termination, OTC derivative assets and liabilities are presented at gross amounts |
The following summarizes the average market value of derivatives outstanding during the period ended March 31, 2021:
|
| Average Market Value ($) |
Forward contracts |
| 259,280 |
At March 31, 2021, accumulated net unrealized appreciation on investments inclusive of derivative contracts was $79,982,001, consisting of $83,367,401 gross unrealized appreciation and $3,385,400 gross unrealized depreciation.
At March 31, 2021, the cost of investments inclusive of derivative contracts for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
39
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 24-25, 2021, the Board considered the renewal of the fund’s Investment Advisory Agreement and Administration Agreement, pursuant to which the Adviser provides the fund with investment advisory services and administrative services (the “Agreement”) and the Sub-Investment Advisory Agreement (together, the “Agreements”), pursuant to which Mellon Investments Corporation (the “Subadviser”) provides day-to-day management of the fund’s investments. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser and the Subadviser. In considering the renewal of the Agreements, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s supervisory activities over the Subadviser. The Board also considered portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data based on classifications provided by Thomson Reuters Lipper, which included information comparing (1) the performance of the fund’s Class I shares with the performance of a group of institutional emerging markets funds selected by Broadridge as comparable to the fund (the “Performance Group”) and with a broader group of funds consisting of all
40
retail and institutional emerging markets funds (the “Performance Universe”), all for various periods ended December 31, 2020, and (2) the fund’s actual and contractual management fees and total expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of all institutional emerging markets funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
The Board noted that, prior to January 31, 2014, the fund did not use a “manager of managers” or “fund of funds” approach and the fund’s investments strategies were different than the strategies currently in place. The Board noted that different investments strategies may lead to different performance results and that the fund’s performance for periods prior to January 31, 2014 reflects the investment strategies in effect during those periods.
Performance Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser and the Subadviser the results of the comparisons and considered that the fund’s total return performance was above the Performance Group median for all periods except the four-year and five- year period when it was below median and above the Performance Universe median for all periods. The Board considered the relative proximity of the fund’s performance to the Performance Group medians in the periods when performance was below median. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in six of the ten calendar years shown.
Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management and sub-advisory services provided by the Adviser and the Subadviser, respectively. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was higher than the Expense Group median contractual management fee, the fund’s actual management fee was lower than the Expense Group median and the Expense Universe median actual management fee and the fund’s total expenses were lower than the Expense Group median and the Expense Universe median total expenses.
Representatives of the Adviser stated that the Adviser has contractually agreed, until February 1, 2022, to waive receipt of its fees and/or assume the direct expenses of the
41
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
fund so that the direct expenses of none of its classes (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 1.30% of the fund’s average daily net assets.
Representatives of the Adviser reviewed with the Board the management or investment advisory fees paid by funds advised or administered by the Adviser that are in the same Lipper category as the fund (the “Similar Funds”), and explained the nature of the Similar Funds. 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 Funds to evaluate the appropriateness of the fund’s management fee. Representatives of the Adviser noted that there were no separate accounts and/or other types of client portfolios advised by the Adviser that are considered to have similar investment strategies and policies as the fund.
The Board considered the fee to the Subadviser in relation to the fee paid to the Adviser by the fund and the respective services provided by the Subadviser and the Adviser. The Board also took into consideration that the Subadviser’s fee is paid by the Adviser (out of its fee from the fund) and not the fund.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the mix of services provided by the Adviser and the Subadviser, including the nature, extent and quality of such services, supported the renewal of the Agreements and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Since the Adviser, and not the fund, pays the Subadviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Subadviser’s profitability to be relevant to its deliberations. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a
42
result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser and the Subadviser from acting as investment adviser and sub-investment adviser, respectively, and took into consideration the soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreements. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by the Adviser and the Subadviser are adequate and appropriate.
· The Board was satisfied with the fund’s performance.
· The Board concluded that the fees paid to the Adviser and the Subadviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates and the Subadviser, of the Adviser and the Subadviser and the services provided to the fund by the Adviser and the Subadviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreements, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially
43
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
44
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45
BNY Mellon Diversified Emerging Markets Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Mellon Investments Corporation
BNY Mellon Center
One Boston Place
Boston, MA 02108-4408
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class A: DBEAX Class C: DBECX Class I: SBCEX Class Y: SBYEX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@bnymellon.com
Internet Information can be viewed online or downloaded at www.im.bnymellon.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-PORT. The fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.im.bnymellon.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2021 BNY Mellon Securities Corporation |
BNY Mellon International Equity Fund
SEMIANNUAL REPORT March 31, 2021 |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.im.bnymellon.com and sign up for eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
Information About the Renewal of |
FOR MORE INFORMATION
Back Cover
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from October 1, 2020 through March 31, 2021, as provided by portfolio managers Paul Markham and Jeff Munroe, of Newton Investment Management Limited, Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended March 31, 2021, BNY Mellon International Equity Fund’s Class A shares produced a total return of 20.23%, Class C shares returned 19.84%, Class I shares returned 20.43% and Class Y shares returned 20.39%.1,2 In comparison, the fund’s benchmark, the MSCI EAFE Index (the “Index”), produced a net return of 20.08% for the same period.3
International equity markets generally provided positive returns over the reporting period, amid supportive central bank policies and improving investor sentiment due to anticipated economic reopening, vaccine approval and rollouts. The fund's relative performance as compared to the Index was primarily due to stock selection within the consumer discretionary sector and an underweight to the energy sector.
The Fund’s Investment Approach
The fund seeks long-term growth of capital. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in common stocks or securities convertible into common stocks of foreign companies and depositary receipts evidencing ownership in such securities. At least 75% of the fund’s net assets will be invested in countries represented in the Index.
The core of the investment philosophy of Newton Investment Management Limited (“Newton”), the fund’s sub-investment adviser, is the belief that no company, market or economy can be considered in isolation; each must be understood within a global context. Newton believes that a global comparison of companies is the most effective method of stock analysis, and Newton’s global analysts research investment opportunities by global sector rather than by region.
The process begins by identifying a core list of investment themes that Newton believes will positively or negatively affect certain sectors or industries and cause stocks within these sectors or industries to outperform or underperform others. Newton then identifies specific companies, using these investment themes, to help focus on areas where thematic and strategic research indicates superior returns are likely to be achieved. Sell decisions for individual stocks will typically be a result of one or more of the following: a change in investment theme or strategy, profit-taking, a significant change in the prospects of a company, price movement and market activity creating an extreme valuation, and the valuation of a company becoming expensive against its peers.
A Tale of Two Markets
After a strong summer rally, volatility crept back into equity markets in the fall of 2020 as increasing COVID-19 infection rates began to concern investors. By October, several countries had begun to reinstitute some degree of behavioral restriction among residents in order to stem the spread of the virus. In addition, mounting political rhetoric in the U.S. due to the election, renewed trade difficulties between the U.S. and China, and other geopolitical events stoked investor anxiety. However, resolution in the U.S. presidential election and
2
promising progress towards a COVID-19 vaccine during the month of November 2020 helped stocks resurrect their upward momentum.
December 2020 brought vaccine approvals and passage of another U.S. fiscal stimulus package, both of which helped to support the rally. Ten-year U.S. Treasury rates began to rise as market participants anticipated the beginning of a strong global economic recovery. A strong rotation began out of companies that were able to benefit in the COVID-19-economy, such as technology and growth stocks. Investors began to support COVID-19-sensitive sectors of the market, which had previously lagged, as well as cyclical areas of the market on the theory that these sectors were offering more attractive valuations and would benefit most from economic reopening. As the stock rally continued, and sentiment strengthened, the yield curve continued to steepen on increasing concerns over inflation rates, which could lead to tightening by the U.S. Federal Reserve (the “Fed”). Despite small pockets of volatility, stocks generally rose through the end of the period, and stocks produced strong results for the six months.
Stock Selection Drives Fund Performance
Stock picking in the consumer discretionary sector weighed on performance over the review period as China-based online commerce company Alibaba Group Holding emerged as the portfolio’s primary detractor. Alibaba Group Holding fell as the listing of Ant Group was suspended amid growing regulatory scrutiny of the company’s ecosystem. The overhang of an ongoing antitrust investigation into the company’s practices continued to hamper investor sentiment for the remainder of the review period. Despite these headwinds, we find it difficult to envisage a scenario in which Alibaba Group Holding will not continue to be the leading e-commerce and cloud platform in China. With management outlining plans for an accelerated shift to the cloud, SAP disappointed with its results for the third quarter as both full year and mid-term guidance were cut meaningfully. A cautious message on the pandemic’s ongoing impact on demand was also unhelpful for shares. An underweight to the energy sector also weighed as optimism around a rapid global economic recovery boosted the commodity price backdrop.
Conversely, stock selection was particularly strong in information technology, consumer staples and financials. Financial company Barclays reported results for the third quarter that were significantly ahead of consensus expectations, driven by better revenues across all businesses and lower loan losses. While a strong print in investment banking came as no surprise, a better-than-expected recovery in retail and commercial was a welcome development. The bank went on to issue another positive set of results for the fourth quarter and continued to find favor with investors encouraged by the prospects for its diversified business model. A backdrop of rising yields, perceived to be supportive of banking profitability, also aided shares as the market considered the prospect of a sharper-than-expected rebound for the global economy. Such a prospect also fueled a rally in mining stocks. Indeed, Anglo American contributed positively to relative returns as part of a buoyant mining sector boosted by the commodity-price backdrop. A void in sizeable Index constituent Nestle also proved beneficial.
Maintaining a Clear Focus in the Face of Uncertainty
Although the European Union’s recent vaccine-related travails will undoubtedly dent investor confidence in the bloc’s ability to recover economically from the pandemic over the
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
second quarter, we remain positive on the prospects of a broader recovery led by the U.S. and fueled by a major stimulus package and an increasing pace of vaccinations. A key question remains the extent to which such a recovery has been built into valuations already and, as we move toward the end of the year, we anticipate that the market will need to see the beginnings of earnings progression in those more cyclically exposed names that have performed well of late. Although short-term market gyrations remain a consideration, our primary focus continues to be on those companies in which we have a strong long-term conviction. In this context, our thematic framework is able to serve as a valuable guide to our stock picking.
As highlighted over recent quarters, we continue with a balanced portfolio, with longer-term, secular growth situations being represented at higher weightings in most cases and more cyclical, higher-beta names being weighted intentionally modestly in order to reduce stock-specific risk within the more value-oriented areas.
April 15, 2021
1 DUE TO RECENT MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE DIFFERENT THAN THE FIGURES SHOWN. Investors should note that the fund’s short-term performance is highly unusual, in part to unusually favorable market conditions, and is unlikely to be repeated or consistently achieved in the future. BNY Mellon Investment Adviser, Inc. serves as the investment adviser for the fund. Newton Investment Management Limited (Newton) is the fund’s sub-investment adviser. Newton’s comments are provided as a general market overview and should not be considered investment advice or predictive of any future market performance. Newton’s views are current as of the date of this communication and are subject to change rapidly as economic and market conditions dictate.
2 Total return includes reinvestment of dividends and any capital gains paid and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Past performance is no guarantee of future results. Share price, yield and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. The fund’s return reflects the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through February 1, 2022, at which time it may be extended, modified or terminated. Had these expenses not been absorbed, returns would have been lower.
3 Source: Lipper Inc. — The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted, market capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. It reflects reinvestment of net dividends and, where applicable, capital gain distributions. Investors cannot invest directly in any index.
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.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
Investing internationally involves special risks, including changes in currency exchange rates, political, economic, and social instability, a lack of comprehensive company information, differing auditing and legal standards and less market liquidity.
The fund may, but is not required to, use derivative instruments. A small investment in derivatives could have a potentially large impact on the fund’s performance. The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets.
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 BNY Mellon International Equity Fund from October 1, 2020 to March 31, 2021. 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 |
| |||||
Assume actual returns for the six months ended March 31, 2021 |
| |||||
|
|
|
|
|
|
|
|
| Class A | Class C | Class I | Class Y |
|
Expenses paid per $1,000† | $5.88 | $9.98 | $4.51 | $4.51 |
| |
Ending value (after expenses) | $1,202.30 | $1,198.40 | $1,204.30 | $1,203.90 |
|
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, 2021 |
| |||||
|
|
|
|
|
|
|
|
| Class A | Class C | Class I | Class Y |
|
Expenses paid per $1,000† | $5.39 | $9.15 | $4.13 | $4.13 |
| |
Ending value (after expenses) | $1,019.60 | $1,015.86 | $1,020.84 | $1,020.84 |
| |
† | Expenses are equal to the fund’s annualized expense ratio of 1.07% for Class A, 1.82% for Class C, .82% for Class I and .82% for Class Y, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). |
5
STATEMENT OF INVESTMENTS
March 31, 2021 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 98.5% | |||||||
China - 7.2% | |||||||
Alibaba Group Holding | 555,296 | a | 15,714,375 | ||||
Meituan, Cl. B | 176,528 | a,b | 6,771,285 | ||||
Ping An Insurance Group Company of China, Cl. H | 905,000 | 10,773,948 | |||||
Tencent Holdings | 261,335 | 20,505,827 | |||||
53,765,435 | |||||||
Denmark - .7% | |||||||
Chr. Hansen Holding | 57,212 | a | 5,198,754 | ||||
France - 11.1% | |||||||
AXA | 420,988 | 11,298,156 | |||||
Bureau Veritas | 465,069 | 13,236,528 | |||||
L'Oreal | 23,565 | 9,031,012 | |||||
Thales | 94,753 | 9,413,819 | |||||
Total | 266,402 | 12,426,093 | |||||
Valeo | 331,411 | 11,259,065 | |||||
Vivendi | 473,191 | 15,537,510 | |||||
82,202,183 | |||||||
Germany - 9.4% | |||||||
Bayer | 137,414 | 8,695,406 | |||||
Continental | 81,878 | 10,821,266 | |||||
Deutsche Post | 250,473 | 13,723,051 | |||||
HELLA GmbH & Co. | 78,874 | a | 4,423,137 | ||||
Infineon Technologies | 319,480 | 13,545,622 | |||||
SAP | 155,152 | 18,998,880 | |||||
70,207,362 | |||||||
Hong Kong - 2.7% | |||||||
AIA Group | 1,641,712 | 19,914,002 | |||||
India - 1.3% | |||||||
Housing Development Finance | 180,568 | a | 6,169,522 | ||||
Vakrangee | 4,872,018 | a | 3,734,955 | ||||
9,904,477 | |||||||
Ireland - 1.5% | |||||||
CRH | 245,663 | 11,514,917 | |||||
Japan - 22.0% | |||||||
Ebara | 279,800 | 11,409,320 | |||||
FANUC | 34,700 | 8,206,092 | |||||
M3 | 87,300 | 5,969,278 | |||||
Pan Pacific International Holdings | 451,300 | 10,642,080 | |||||
Recruit Holdings | 429,813 | 20,965,636 | |||||
Sony Group | 267,500 | 28,012,305 | |||||
Sugi Holdings | 110,100 | 8,720,497 |
6
Description | Shares | Value ($) | |||||
Common Stocks - 98.5% (continued) | |||||||
Japan - 22.0% (continued) | |||||||
Suntory Beverage & Food | 166,700 | 6,195,263 | |||||
Suzuki Motor | 411,500 | 18,674,983 | |||||
TechnoPro Holdings | 263,400 | 21,933,150 | |||||
Topcon | 505,100 | 6,121,871 | |||||
Toyota Industries | 189,200 | 16,848,155 | |||||
163,698,630 | |||||||
Netherlands - 3.1% | |||||||
ASML Holding | 37,778 | 22,904,269 | |||||
Norway - 1.7% | |||||||
Mowi | 248,893 | 6,174,929 | |||||
TOMRA Systems | 149,297 | 6,463,663 | |||||
12,638,592 | |||||||
South Korea - 2.3% | |||||||
Samsung SDI | 28,988 | 16,904,864 | |||||
Sweden - 1.6% | |||||||
Swedbank, Cl. A | 661,065 | 11,649,223 | |||||
Switzerland - 8.7% | |||||||
Alcon | 93,048 | 6,515,280 | |||||
Lonza Group | 22,520 | 12,590,137 | |||||
Novartis | 157,536 | 13,462,607 | |||||
Roche Holding | 51,044 | 16,496,207 | |||||
Zurich Insurance Group | 35,749 | 15,258,051 | |||||
64,322,282 | |||||||
Taiwan - 2.2% | |||||||
Taiwan Semiconductor Manufacturing, ADR | 139,967 | 16,555,297 | |||||
Thailand - 1.0% | |||||||
Kasikornbank | 1,639,200 | 7,605,888 | |||||
United Kingdom - 22.0% | |||||||
Anglo American | 428,994 | 16,810,861 | |||||
Associated British Foods | 223,942 | a | 7,455,743 | ||||
Barclays | 7,645,519 | 19,596,177 | |||||
Diageo | 460,559 | 18,981,132 | |||||
GlaxoSmithKline | 695,394 | 12,347,672 | |||||
Informa | 1,041,565 | a | 8,038,177 | ||||
Linde | 40,479 | 11,340,517 | |||||
Natwest Group | 3,096,502 | 8,377,594 | |||||
Persimmon | 167,074 | 6,771,649 | |||||
Prudential | 769,718 | 16,346,757 | |||||
RELX | 472,614 | 11,871,702 | |||||
St. James's Place | 594,338 | 10,438,575 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 98.5% (continued) | |||||||
United Kingdom - 22.0% (continued) | |||||||
Unilever | 270,725 | 15,105,661 | |||||
163,482,217 | |||||||
Total Common Stocks (cost $485,675,698) | 732,468,392 | ||||||
1-Day | |||||||
Investment Companies - 2.5% | |||||||
Registered Investment Companies - 2.5% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 0.06 | 18,816,298 | c | 18,816,298 | |||
Total Investments (cost $504,491,996) | 101.0% | 751,284,690 | |||||
Liabilities, Less Cash and Receivables | (1.0%) | (7,624,574) | |||||
Net Assets | 100.0% | 743,660,116 |
ADR—American Depository Receipt
a Non-income producing security.
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, 2021, these securities were valued at $6,771,285 or .91% of net assets.
c Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
8
Portfolio Summary (Unaudited) † | Value (%) |
Commercial & Professional Services | 10.0 |
Insurance | 9.9 |
Pharmaceuticals Biotechnology & Life Sciences | 8.6 |
Automobiles & Components | 8.3 |
Banks | 7.2 |
Semiconductors & Semiconductor Equipment | 7.1 |
Materials | 6.0 |
Media & Entertainment | 5.9 |
Food, Beverage & Tobacco | 5.2 |
Consumer Durables & Apparel | 4.7 |
Retailing | 4.5 |
Capital Goods | 3.9 |
Household & Personal Products | 3.2 |
Technology Hardware & Equipment | 3.1 |
Software & Services | 3.1 |
Investment Companies | 2.5 |
Transportation | 1.8 |
Health Care Equipment & Services | 1.7 |
Energy | 1.7 |
Diversified Financials | 1.4 |
Food & Staples Retailing | 1.2 |
101.0 |
† Based on net assets.
See notes to financial statements.
9
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS (Unaudited)
Investment Companies | Value | Purchases ($)† | Sales ($) | Value | Net | Dividends/ |
Registered Investment Companies; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund; Institutional Shares | 7,538,541 | 102,047,317 | (90,769,560) | 18,816,298 | 2.5 | 3,406 |
Investment of Cash Collateral for Securities Loaned; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | - | 4,561,740 | (4,561,740) | - | - | 118†† |
Total | 7,538,541 | 106,609,057 | (95,331,300) | 18,816,298 | 2.5 | 3,524 |
† Includes reinvested dividends/distributions.
†† Represents securities lending income earned from reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
See notes to financial statements.
10
STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS March 31, 2021 (Unaudited)
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation) ($) |
CIBC World Markets Corp. | |||||
British Pound | 802,934 | United States Dollar | 1,106,556 | 4/1/2021 | 372 |
HSBC | |||||
United States Dollar | 97,267 | Japanese Yen | 10,724,130 | 4/1/2021 | 412 |
United States Dollar | 20,099,308 | Euro | 16,962,831 | 5/11/2021 | 189,860 |
J.P. Morgan Securities | |||||
Euro | 1,559,513 | United States Dollar | 1,831,272 | 4/1/2021 | (2,394) |
RBS Securities | |||||
Australian Dollar | 18,192,334 | Swiss Franc | 18,370,522 | 6/17/2021 | (178,188) |
Australian Dollar | 13,213,689 | Swiss Franc | 13,054,328 | 6/17/2021 | 159,361 |
State Street Bank and Trust Company | |||||
Euro | 16,962,831 | United States Dollar | 20,617,000 | 5/11/2021 | (707,552) |
Gross Unrealized Appreciation | 350,005 | ||||
Gross Unrealized Depreciation | (888,134) |
See notes to financial statements.
11
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 485,675,698 |
| 732,468,392 |
| ||
Affiliated issuers |
| 18,816,298 |
| 18,816,298 |
| |
Cash denominated in foreign currency |
|
| 158,524 |
| 156,901 |
|
Tax reclaim receivable |
| 3,150,773 |
| |||
Dividends receivable |
| 2,158,858 |
| |||
Cash collateral held by broker—Note 4 |
| 800,000 |
| |||
Receivable for shares of Beneficial Interest subscribed |
| 517,570 |
| |||
Unrealized appreciation on forward foreign |
| 350,005 |
| |||
Prepaid expenses |
|
|
|
| 41,834 |
|
|
|
|
|
| 758,460,631 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 521,195 |
| |||
Payable for investment securities purchased |
| 11,652,498 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 1,193,314 |
| |||
Unrealized depreciation on forward foreign |
| 888,134 |
| |||
Foreign capital gains tax payable |
| 445,091 |
| |||
Trustees’ fees and expenses payable |
| 9,455 |
| |||
Other accrued expenses |
|
|
|
| 90,828 |
|
|
|
|
|
| 14,800,515 |
|
Net Assets ($) |
|
| 743,660,116 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 546,043,111 |
|
Total distributable earnings (loss) |
|
|
|
| 197,617,005 |
|
Net Assets ($) |
|
| 743,660,116 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 7,568,870 | 1,537,923 | 191,317,407 | 543,235,916 |
|
Shares Outstanding | 302,759 | 62,767 | 7,719,796 | 22,025,357 |
|
Net Asset Value Per Share ($) | 25.00 | 24.50 | 24.78 | 24.66 |
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
|
12
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends (net of $545,953 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 5,278,073 |
| ||
Affiliated issuers |
|
| 3,406 |
| ||
Income from securities lending—Note 1(c) |
|
| 118 |
| ||
Total Income |
|
| 5,281,597 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 2,717,736 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 79,173 |
| ||
Professional fees |
|
| 76,063 |
| ||
Custodian fees—Note 3(c) |
|
| 62,044 |
| ||
Registration fees |
|
| 35,098 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 28,373 |
| ||
Prospectus and shareholders’ reports |
|
| 13,990 |
| ||
Loan commitment fees—Note 2 |
|
| 10,707 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 7,642 |
| ||
Distribution fees—Note 3(b) |
|
| 5,450 |
| ||
Interest expense—Note 2 |
|
| 156 |
| ||
Miscellaneous |
|
| 17,798 |
| ||
Total Expenses |
|
| 3,054,230 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (65,555) |
| ||
Net Expenses |
|
| 2,988,675 |
| ||
Investment Income—Net |
|
| 2,292,922 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions | 26,348,857 |
| ||||
Net realized gain (loss) on forward foreign currency exchange contracts | 1,103,236 |
| ||||
Net Realized Gain (Loss) |
|
| 27,452,093 |
| ||
Net change in unrealized appreciation (depreciation) on investments | 102,613,435 |
| ||||
Net change in unrealized appreciation (depreciation) on | (236,609) |
| ||||
Net Change in Unrealized Appreciation (Depreciation) |
|
| 102,376,826 |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 129,828,919 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 132,121,841 |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
13
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 2,292,922 |
|
|
| 8,689,552 |
| |
Net realized gain (loss) on investments |
| 27,452,093 |
|
|
| 9,473,878 |
| ||
Net change in unrealized appreciation |
| 102,376,826 |
|
|
| (6,899,715) |
| ||
Net Increase (Decrease) in Net Assets | 132,121,841 |
|
|
| 11,263,715 |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (96,467) |
|
|
| (145,643) |
| |
Class C |
|
| (7,668) |
|
|
| (25,255) |
| |
Class I |
|
| (2,905,331) |
|
|
| (5,603,959) |
| |
Class Y |
|
| (8,112,047) |
|
|
| (22,376,787) |
| |
Total Distributions |
|
| (11,121,513) |
|
|
| (28,151,644) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 2,810,117 |
|
|
| 2,766,434 |
| |
Class C |
|
| 121,437 |
|
|
| 73,850 |
| |
Class I |
|
| 12,945,177 |
|
|
| 37,658,622 |
| |
Class Y |
|
| 31,345,421 |
|
|
| 40,097,530 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 95,166 |
|
|
| 142,532 |
| |
Class C |
|
| 7,668 |
|
|
| 25,107 |
| |
Class I |
|
| 2,831,297 |
|
|
| 5,456,699 |
| |
Class Y |
|
| 3,210,607 |
|
|
| 8,244,551 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (2,871,683) |
|
|
| (2,570,930) |
| |
Class C |
|
| (175,122) |
|
|
| (473,511) |
| |
Class I |
|
| (33,840,601) |
|
|
| (85,992,364) |
| |
Class Y |
|
| (65,573,765) |
|
|
| (387,950,937) |
| |
Increase (Decrease) in Net Assets | (49,094,281) |
|
|
| (382,522,417) |
| |||
Total Increase (Decrease) in Net Assets | 71,906,047 |
|
|
| (399,410,346) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 671,754,069 |
|
|
| 1,071,164,415 |
| |
End of Period |
|
| 743,660,116 |
|
|
| 671,754,069 |
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class A |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 117,200 |
|
|
| 136,909 |
| |
Shares issued for distributions reinvested |
|
| 4,002 |
|
|
| 6,608 |
| |
Shares redeemed |
|
| (118,834) |
|
|
| (126,262) |
| |
Net Increase (Decrease) in Shares Outstanding | 2,368 |
|
|
| 17,255 |
| |||
Class C |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 5,115 |
|
|
| 3,987 |
| |
Shares issued for distributions reinvested |
|
| 328 |
|
|
| 1,186 |
| |
Shares redeemed |
|
| (7,686) |
|
|
| (25,911) |
| |
Net Increase (Decrease) in Shares Outstanding | (2,243) |
|
|
| (20,738) |
| |||
Class Ia |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 551,549 |
|
|
| 2,086,495 |
| |
Shares issued for distributions reinvested |
|
| 120,174 |
|
|
| 255,463 |
| |
Shares redeemed |
|
| (1,436,408) |
|
|
| (4,521,220) |
| |
Net Increase (Decrease) in Shares Outstanding | (764,685) |
|
|
| (2,179,262) |
| |||
Class Ya |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 1,328,012 |
|
|
| 2,138,690 |
| |
Shares issued for distributions reinvested |
|
| 136,971 |
|
|
| 387,796 |
| |
Shares redeemed |
|
| (2,831,801) |
|
|
| (21,527,805) |
| |
Net Increase (Decrease) in Shares Outstanding | (1,366,818) |
|
|
| (19,001,319) |
| |||
|
|
|
|
|
|
|
|
|
|
a | During the period ended March 31, 2021, 130,916 Class Y shares representing $3,079,237 were exchanged for 130,297 Class I shares and during the period ended September 30, 2020, 469,553 Class Y shares representing $9,271,632 were exchanged for 467,400 Class I shares. | ||||||||
See notes to financial statements. |
15
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||
March 31, 2021 | Year Ended September 30, | |||||
Class A Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 |
Per Share Data ($): | ||||||
Net asset value, | 21.07 | 20.28 | 21.97 | 21.55 | 18.97 | 18.54 |
Investment Operations: | ||||||
Investment income—neta | .05 | .16 | .33 | .32 | .19 | .22 |
Net realized and unrealized | 4.20 | 1.13 | (1.66) | .34 | 2.57 | .39 |
Total from Investment Operations | 4.25 | 1.29 | (1.33) | .66 | 2.76 | .61 |
Distributions: | ||||||
Dividends from | (.32) | (.50) | (.36) | (.24) | (.18) | (.18) |
Net asset value, end of period | 25.00 | 21.07 | 20.28 | 21.97 | 21.55 | 18.97 |
Total Return (%)b | 20.23c | 6.31 | (5.89) | 3.06 | 14.76 | 3.27 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.18d | 1.19 | 1.18 | 1.14 | 1.23 | 1.23 |
Ratio of net expenses | 1.07d | 1.07 | 1.07 | 1.07 | 1.18 | 1.23 |
Ratio of net investment income | .41d | .78 | 1.66 | 1.45 | .99 | 1.16 |
Portfolio Turnover Rate | 9.23c | 32.45 | 36.45 | 31.58 | 37.78 | 34.87 |
Net Assets, | 7,569 | 6,329 | 5,743 | 5,697 | 3,845 | 5,839 |
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, 2021 | Year Ended September 30, | |||||
Class C Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 |
Per Share Data ($): | ||||||
Net asset value, | 20.57 | 19.78 | 21.38 | 21.04 | 18.50 | 18.10 |
Investment Operations: | ||||||
Investment income (loss)—neta | (.04) | .00b | .17 | .15 | .06 | .07 |
Net realized and unrealized | 4.09 | 1.10 | (1.59) | .33 | 2.50 | .38 |
Total from Investment Operations | 4.05 | 1.10 | (1.42) | .48 | 2.56 | .45 |
Distributions: | ||||||
Dividends from | (.12) | (.31) | (.18) | (.14) | (.02) | (.05) |
Net asset value, end of period | 24.50 | 20.57 | 19.78 | 21.38 | 21.04 | 18.50 |
Total Return (%)c | 19.84d | 5.47 | (6.55) | 2.27 | 13.83 | 2.50 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.96e | 1.96 | 1.93 | 1.90 | 1.99 | 2.02 |
Ratio of net expenses | 1.82e | 1.82 | 1.82 | 1.82 | 1.95 | 2.02 |
Ratio of net investment income | (.34)e | .00f | .89 | .68 | .32 | .37 |
Portfolio Turnover Rate | 9.23d | 32.45 | 36.45 | 31.58 | 37.78 | 34.87 |
Net Assets, | 1,538 | 1,337 | 1,696 | 2,217 | 1,784 | 1,470 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
f Amount represents less than .01%.
See notes to financial statements.
17
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||
March 31, 2021 | Year Ended September 30, | |||||
Class I Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 |
Per Share Data ($): | ||||||
Net asset value, | 20.90 | 20.12 | 21.79 | 21.38 | 18.85 | 18.39 |
Investment Operations: | ||||||
Investment income—neta | .07 | .20 | .36 | .42 | .27 | .27 |
Net realized and unrealized | 4.17 | 1.13 | (1.62) | .29 | 2.51 | .41 |
Total from Investment Operations | 4.24 | 1.33 | (1.26) | .71 | 2.78 | .68 |
Distributions: | ||||||
Dividends from | (.36) | (.55) | (.41) | (.30) | (.25) | (.22) |
Net asset value, end of period | 24.78 | 20.90 | 20.12 | 21.79 | 21.38 | 18.85 |
Total Return (%) | 20.43b | 6.53 | (5.62) | 3.30 | 15.02 | 3.66 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .89c | .88 | .86 | .87 | .93 | .94 |
Ratio of net expenses | .82c | .82 | .82 | .82 | .89 | .94 |
Ratio of net investment income | .62c | 1.02 | 1.84 | 1.97 | 1.42 | 1.44 |
Portfolio Turnover Rate | 9.23b | 32.45 | 36.45 | 31.58 | 37.78 | 34.87 |
Net Assets, | 191,317 | 177,360 | 214,538 | 292,092 | 112,714 | 80,458 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
18
Six Months Ended | ||||||
March 31, 2021 | Year Ended September 30, | |||||
Class Y Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 |
Per Share Data ($): | ||||||
Net asset value, | 20.81 | 20.03 | 21.70 | 21.29 | 18.77 | 18.31 |
Investment Operations: | ||||||
Investment income—neta | .08 | .20 | .37 | .36 | .27 | .28 |
Net realized and unrealized | 4.13 | 1.13 | (1.63) | .35 | 2.51 | .40 |
Total from | 4.21 | 1.33 | (1.26) | .71 | 2.78 | .68 |
Distributions: | ||||||
Dividends from | (.36) | (.55) | (.41) | (.30) | (.26) | (.22) |
Net asset value, end of period | 24.66 | 20.81 | 20.03 | 21.70 | 21.29 | 18.77 |
Total Return (%) | 20.39b | 6.58 | (5.63) | 3.33 | 15.11 | 3.68 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .82c | .82 | .80 | .80 | .86 | .88 |
Ratio of net expenses | .82c | .82 | .80 | .80 | .86 | .88 |
Ratio of net investment income | .64c | 1.00 | 1.88 | 1.64 | 1.42 | 1.49 |
Portfolio Turnover Rate | 9.23b | 32.45 | 36.45 | 31.58 | 37.78 | 34.87 |
Net Assets, | 543,236 | 486,727 | 849,188 | 1,068,449 | 1,027,565 | 1,043,195 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
19
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon International Equity Fund (the “fund”) is a separate diversified series of BNY Mellon Investment Funds I (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering seven series, including the fund. The fund’s investment objective is to seek long-term growth of capital. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Newton Investment Management Limited (the “Sub-Adviser”), a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser, serves as the fund’s sub-investment adviser.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C, Class I and Class Y. Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class A shares bought without an initial sales charge as part of an investment of $1 million or more may be charged a contingent deferred sales charge (“CDSC”) of 1.00% if redeemed within one year. Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares eight years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and
20
unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Trust enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
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:
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in equity securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Trust’s Board of Trustees (the “Board”). Certain factors may be considered when
22
fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward foreign currency exchange contracts (“forward contracts”) are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of March 31, 2021 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 - Common Stocks | 732,468,392 | - | - | 732,468,392 | ||
Investment Companies | 18,816,298 | - | - | 18,816,298 | ||
Other Financial Instruments: | ||||||
Forward Foreign Currency Exchange contracts†† | - | 350,005 | - | 350,005 | ||
Liabilities ($) | ||||||
Other Financial Instruments: | ||||||
Forward Foreign Currency Exchange contracts†† | - | (888,134) | - | (888,134) |
† See Statement of Investments for additional detailed categorizations, if any.
†† Amount shown represents unrealized appreciation (depreciation) at period end, but only variation margin on exchanged traded and centrally cleared derivatives, if any, are reported in the Statement of Assets and Liabilities.
23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
Foreign taxes: The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invests. These foreign taxes, if any, are paid by the fund and are reflected in the Statement of Operations, if applicable. Foreign taxes payable or deferred or those subject to reclaims as of March 31, 2021, if any, are disclosed in the fund’s Statement of Assets and Liabilities.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on
24
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, 2021, The Bank of New York Mellon earned $19 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political, economic developments and public health conditions. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
(f) Dividends and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make
25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended March 31, 2021, 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, 2021, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2020 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
The fund has an unused capital loss carryover of $62,524,371 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to September 30, 2020. These short-term capital losses can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended September 30, 2020 was as follows: ordinary income $28,151,644. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an
26
amount equal to $688.5 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $135 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing.
The average amount of borrowings outstanding under the Facilities during the period ended March 31, 2021 was approximately $24,725 with a related weighted average annualized interest rate of 1.26%.
NOTE 3—Investment Advisory Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with the Adviser, the investment advisory fee was computed at the annual rate of .75% of the value of the fund’s average daily net assets and is payable monthly. The Adviser has contractually agreed, from October 1, 2020 through February 1, 2022, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the direct expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .82% of the value of the fund’s average daily net assets. On or after February 1, 2022, the Adviser may terminate this expense limitation at any time. The reduction in expenses, pursuant to the undertaking, amounted to $65,555 during the period ended March 31, 2021.
Pursuant to a sub-investment advisory agreement between the Adviser and the Sub-Adviser, the Adviser pays the Sub-Adviser a monthly fee at an annual rate of .36% of the value of the fund’s average daily net assets.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended March 31, 2021, Class C shares were charged $5,450 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
27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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, 2021, Class A and Class C shares were charged $8,964 and $1,817, respectively, pursuant to the Shareholder Services Plan.
Under its terms, the Distribution Plan and Shareholder Services Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of a majority of those Trustees who are not “interested persons” of the Trust and who have no direct or indirect financial interest in the operation of or in any agreement related to the Distribution Plan or Shareholder Services Plan.
The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. For financial reporting purposes, the fund includes net earnings credits, if any, as shareholder servicing costs in the Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, 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, 2021, the fund was charged $2,808 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended March 31, 2021, the fund was charged $62,044 pursuant to the custody agreement.
During the period ended March 31, 2021, the fund was charged $7,642 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
28
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees of $475,628, Distribution Plan fees of $981, Shareholder Services Plan fees of $1,940, custodian fees of $44,000, Chief Compliance Officer fees of $3,931 and transfer agency fees of $1,051, which are offset against an expense reimbursement currently in effect in the amount of $6,336.
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward contracts, during the period ended March 31, 2021, amounted to $64,542,515 and $121,651,281, 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 instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.
Each type of derivative instrument that was held by the fund during the period ended March 31, 2021 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
29
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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, 2021 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, 2021, derivative assets and liabilities (by type) on a gross basis are as follows:
Derivative Financial Instruments: |
| Assets ($) |
| Liabilities ($) |
|
Forward contracts |
| 350,005 |
| (888,134) |
|
Total gross amount of derivative |
|
|
|
|
|
assets and liabilities in the |
|
|
|
|
|
Statement of Assets and Liabilities |
| 350,005 |
| (888,134) |
|
Derivatives not subject to |
|
|
|
|
|
Master Agreements |
| - |
| - |
|
Total gross amount of assets |
|
|
|
|
|
and liabilities subject to |
|
|
|
|
|
Master Agreements |
| 350,005 |
| (888,134) |
|
30
The following tables present derivative assets and liabilities net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of March 31, 2021:
|
|
| Financial |
|
|
|
|
|
| Instruments |
|
|
|
|
|
| and Derivatives |
|
|
|
| Gross Amount of |
| Available | Collateral |
| Net Amount of |
Counterparty | Assets ($) | 1 | for Offset ($) | Received ($) | 2 | Assets ($) |
CIBC World Markets | 372 |
| - | - |
| 372 |
HSBC | 190,272 |
| - | - |
| 190,272 |
RBS Securities | 159,361 |
| (159,361) | - |
| - |
Total | 350,005 |
| (159,361) | - |
| 190,644 |
|
|
|
|
|
|
|
|
|
| Financial |
|
|
|
|
|
| Instruments |
|
|
|
|
|
| and Derivatives |
|
|
|
| Gross Amount of |
| Available | Collateral |
| Net Amount of |
Counterparty | Liabilities ($) | 1 | for Offset ($) | Pledged ($) | 2 | Liabilities ($) |
J.P. Morgan Securities | (2,394) |
| - | - |
| (2,394) |
RBS Securities | (178,188) |
| 159,361 | - |
| (18,827) |
State Street Bank | (707,552) |
| - | 400,000 |
| (307,552) |
Total | (888,134) |
| 159,361 | 400,000 |
| (328,773) |
|
|
|
|
|
|
|
1 Absent a default event or early termination, OTC derivative assets and liabilities are presented at gross amounts | ||||||
2 In some instances, the actual collateral received and/or pledged may be more than the amount shown due to |
The following summarizes the average market value of derivatives outstanding during the period ended March 31, 2021:
|
| Average Market Value ($) |
Forward contracts |
| 37,395,395 |
At March 31, 2021, accumulated net unrealized appreciation on investments inclusive of derivative contracts was $246,254,565, consisting of $263,630,553 gross unrealized appreciation and $17,375,988 gross unrealized depreciation.
At March 31, 2021, the cost of investments inclusive of derivative contracts for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
31
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 24-25, 2021, the Board considered the renewal of the fund’s Management Agreement pursuant to which the Adviser provides the fund with investment advisory and administrative services (the “Agreement”), and the Sub-Investment Advisory Agreement (together, the “Agreements”), pursuant to which Newton Investment Management Limited (the “Subadviser”) provides day-to-day management of the fund’s investments. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser and the Subadviser. In considering the renewal of the Agreements, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s supervisory activities over the Subadviser. The Board also considered portfolio management’s brokerage policies and practices (including 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 based on classifications provided by Thomson Reuters Lipper, which included information comparing (1) the performance of the fund’s Class I shares with the performance of a group of institutional international multi-cap growth funds selected by Broadridge as
32
comparable to the fund (the “Performance Group”) and with a broader group of funds consisting of all retail and institutional international multi-cap growth funds (the “Performance Universe”), all for various periods ended December 31, 2020, and (2) the fund’s actual and contractual management fees and total expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of all institutional international multi-cap growth funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Performance Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser and the Subadviser the results of the comparisons and considered that the fund’s total return performance was below the Performance Group and Performance Universe medians for all periods. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in five of the ten calendar years shown.
Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management and sub-advisory services provided by the Adviser and the Subadviser, respectively. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year which included reductions for a fee waiver arrangement in place that reduced the investment advisory fee paid to the Adviser. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons.
The Board considered that the fund’s contractual management fee was equal to the Expense Group median contractual management fee, the fund’s actual management fee was equal to the Expense Group median and slightly higher than the Expense Universe median actual management fee and the fund’s total expenses were approximately equal to the Expense Group median and lower than the Expense Universe median total expenses.
Representatives of the Adviser stated that the Adviser has contractually agreed, until February 1, 2022, to waive receipt of its fees and/or assume the direct expenses of the fund so that the direct expenses of none of its classes (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .82% of the fund’s average daily net assets.
33
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
Representatives of the Adviser reviewed with the Board the management or investment advisory fees paid to the Adviser or the Subadviser or its affiliates, for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness of the fund’s management fee. Representatives of the Adviser noted that there were no other funds advised or administered by the Adviser that are in the same Lipper category as the fund.
The Board considered the fee to the Subadviser in relation to the fee paid to the Adviser by the fund and the respective services provided by the Subadviser and the Adviser. The Board also took into consideration that the Subadviser’s fee is paid by the Adviser (out of its fee from the fund) and not the fund.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also considered the expense limitation arrangement and its effect on the profitability of the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the mix of services provided by the Adviser and the Subadviser, including the nature, extent and quality of such services, supported the renewal of the Agreements and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Since the Adviser, and not the fund, pays the Subadviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Subadviser’s profitability to be relevant to its deliberations. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect
34
potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser and the Subadviser from acting as investment adviser and sub-investment adviser, respectively, and took into consideration there were no soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreements. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by the Adviser and the Subadviser are adequate and appropriate.
· The Board agreed to closely monitor performance.
· The Board concluded that the fees paid to the Adviser and the Subadviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates and the Subadviser, of the Adviser and the Subadviser and the services provided to the fund by the Adviser and the Subadviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreements, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
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BNY Mellon International Equity Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Newton Investment Management Limited
160 Queen Victoria Street
London, EC4V, 4LA, UK
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class A: NIEAX Class C: NIECX Class I: SNIEX Class Y: NIEYX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@bnymellon.com
Internet Information can be viewed online or downloaded at www.im.bnymellon.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-PORT. The fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.im.bnymellon.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2021 BNY Mellon Securities Corporation |
BNY Mellon Small Cap Growth Fund
SEMIANNUAL REPORT March 31, 2021 |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.im.bnymellon.com and sign up for eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
Information About the Renewal of the |
FOR MORE INFORMATION
Back Cover
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from October 1, 2020 through March 31, 2021, 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, 2021, BNY Mellon Small Cap Growth Fund’s Class I shares produced a total return of 24.05%, and Class Y shares returned 24.06%.1 In comparison, the fund’s benchmark, the Russell 2000® Growth Index (the “Index”), posted a total return of 35.92% for the same period.2
Small-cap growth stocks produced positive returns during the period, amid an environment of continued supportive central bank activities and improving investor sentiment due in part to vaccine approval and rollout. The fund underperformed the Index, mainly due to security selection within the information technology and communication services sectors.
The Fund’s Investment Approach
The fund seeks long-term growth of capital. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of small-cap U.S. companies—i.e., those with total market capitalizations equal to or less than that of the largest company in the Index.
We employ a growth-oriented investment style in managing the fund’s portfolio. This means the portfolio managers seek to identify those small-cap companies that are experiencing, or are expected to experience, rapid earnings or revenue growth. We focus on high-quality companies and individual stock selection, instead of trying to predict which industries or sectors will perform best, and select stocks by:
· Using fundamental research to identify and follow companies considered to have attractive characteristics, such as strong business and competitive positions, solid cash flows and balance sheets, high-quality management and high sustainable growth.
· Investing in a company when the research indicates that the company will experience accelerating revenues and expanding operating margins, which may lead to rising estimate trends and favorable earnings surprises.
The fund’s investment strategy may lead it to emphasize certain industries, such as technology, health care, business services and communications.
A Tale of Two Markets
After a strong summer rally, volatility crept back into equity markets in the fall of 2020 as increasing COVID-19 infection rates began to concern investors. By October, several countries had begun to reinstitute some degree of behavioral restriction among residents in order to stem the spread of the virus. In addition, mounting political rhetoric in the U.S. due to the election, renewed trade difficulties between the U.S. and China, and other geopolitical events stoked investor anxiety. However, resolution in the U.S. presidential election and promising progress towards a COVID-19 vaccine during the month of November 2020 helped stocks resurrect their upward momentum.
2
December 2020 brought vaccine approvals and passage of another U.S. fiscal stimulus package, both of which helped to support the rally. Ten-year U.S. Treasury rates began to rise as market participants anticipated the beginning of a strong global economic recovery. A strong rotation began out of companies that were able to benefit in the COVID-19-economy, such as technology and growth stocks. Investors began to support COVID-19-sensitive sectors of the market, which had previously lagged, as well as cyclical areas of the market on the theory that these sectors were offering more attractive valuations and would benefit most from economic reopening. As the stock rally continued, and sentiment strengthened, the yield curve continued to steepen on increasing concerns over inflation rates, which could lead to tightening by the U.S. Federal Reserve (the “Fed”). Despite small pockets of volatility, stocks generally rose through the end of the period, and stocks produced strong results for the six months.
Security Selections Drive Fund Performance
The fund’s underperformance was driven by security selections within the information technology, communication services, financials, and industrials sectors. A relative overweight to the communication services sector and underweights to the industrials and consumer discretionary sectors also weighed on results. From an individual stock perspective, business communication services company Bandwidth was among the top detractors from portfolio returns. The company benefited from the COVID-19 lockdown due to the increased need for video conferencing software. The rotation out of lockdown-beneficiary stocks into stocks that would benefit from economic reopening provided a headwind to the price of Bandwidth. Insurance services provider Palomar Holdings was also a leading detractor from total results as was iRhythm Technologies, a company which makes remote cardiac monitoring tools.
Conversely, stock selection within the health care and consumer staples sectors benefited returns, as did a lack of exposure to the utilities sector. From an individual stock perspective, Denali Therapeutics was among the leading contributors to fund performance. The company generates treatments for diseases such as Parkinson’s and Alzheimer’s. Preliminary trial data for the company’s therapies is promising and the stock rose during the period. Also, within the health care sector, life sciences tools company Pacific Biosciences of California and Twist Bioscience were among the leading contributors.
Remaining Focused in the Face of Uncertainty
If economic data remains strong, we expect markets may maintain a cyclical bias for the near future. Since October 2020, investors have been gravitating toward riskier segments of the market due to expectations of economic reopening. Prior to last fall, many value-oriented, cyclical names traded at massive discounts, giving them a lot of room to appreciate as they did over the last six months. However, it is our opinion that as the rally continues, we will see broader buoyancy to stock prices as opposed to appreciation being concentrated in small pockets of the markets. We expect that growth stocks will benefit from this widespread buoyancy. Over the longer term, we do not necessarily expect that this preference for cyclical stocks will hold. The pandemic has accelerated the trend toward a more remote workforce, which reinforces the need for technology. In addition, companies have spent money during the pandemic to increase productivity through investment in their
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
technological infrastructure, which may diminish their future need to expand their workforce.
April 15, 2021
1 DUE TO RECENT MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE DIFFERENT THAN THE FIGURES SHOWN. Investors should note that the fund’s short-term performance is highly unusual, in part to unusually favorable market conditions, and is unlikely to be repeated or consistently achieved in the future. Total return includes reinvestment of dividends and any capital gains paid. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. The fund’s return reflects the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through February 1, 2022, at which time it may be extended, modified or terminated. Had these expenses not been absorbed, returns would have been lower. Past performance is no guarantee of future results.
2 Source: Lipper Inc. — The Russell 2000® Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher growth earning potential as defined by Russell’s leading style methodology. The Russell 2000® Growth Index is constructed to provide a comprehensive and unbiased barometer for the small-cap growth segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set, and that the represented companies continue to reflect growth characteristics. Investors cannot invest directly in any index.
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.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
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.
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 BNY Mellon Small Cap Growth Fund from October 1, 2020 to March 31, 2021. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended March 31, 2021 |
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| Class I | Class Y |
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Expenses paid per $1,000† | $5.59 | $5.59 |
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Ending value (after expenses) | $1,240.50 | $1,240.60 |
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COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended March 31, 2021 |
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| Class I | Class Y |
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Expenses paid per $1,000† | $5.04 | $5.04 |
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Ending value (after expenses) | $1,019.95 | $1,019.95 |
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† | Expenses are equal to the fund’s annualized expense ratio of 1.00% for Class I and 1.00% for Class Y, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). |
5
STATEMENT OF INVESTMENTS
March 31, 2021 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% | |||||||
Capital Goods - 12.9% | |||||||
AerCap Holdings | 7,581 | a | 445,308 | ||||
Armstrong World Industries | 1,879 | 169,279 | |||||
Array Technologies | 8,907 | a | 265,607 | ||||
Construction Partners, Cl. A | 20,318 | a | 607,102 | ||||
Curtiss-Wright | 1,892 | 224,391 | |||||
Energy Recovery | 18,742 | a,b | 343,728 | ||||
Holicity, Cl. A | 16,563 | a,b | 195,278 | ||||
Kornit Digital | 9,232 | a | 915,076 | ||||
Mercury Systems | 6,535 | a | 461,698 | ||||
Proto Labs | 972 | a | 118,341 | ||||
Ribbit LEAP | 1,199 | a | 13,189 | ||||
SiteOne Landscape Supply | 1,713 | a,b | 292,478 | ||||
The AZEK Company | 4,774 | a | 200,747 | ||||
TPG Pace Tech Opportunities, Cl. A | 27,412 | a | 271,653 | ||||
4,523,875 | |||||||
Commercial & Professional Services - 1.4% | |||||||
CACI International, Cl. A | 2,025 | a | 499,486 | ||||
Consumer Durables & Apparel - 2.0% | |||||||
Callaway Golf | 11,204 | a | 299,707 | ||||
YETI Holdings | 5,812 | a,b | 419,684 | ||||
719,391 | |||||||
Consumer Services - 2.1% | |||||||
OneSpaWorld Holdings | 8,675 | a,b | 92,389 | ||||
Planet Fitness, Cl. A | 8,517 | a | 658,364 | ||||
750,753 | |||||||
Energy - .9% | |||||||
Cactus, Cl. A | 10,878 | 333,084 | |||||
Food & Staples Retailing - 1.2% | |||||||
Grocery Outlet Holding | 11,127 | a,b | 410,475 | ||||
Food, Beverage & Tobacco - 5.1% | |||||||
AppHarvest | 16,912 | a,b | 309,490 | ||||
Calavo Growers | 5,486 | 425,933 | |||||
Freshpet | 6,754 | a,b | 1,072,603 | ||||
1,808,026 | |||||||
Health Care Equipment & Services - 11.0% | |||||||
1Life Healthcare | 20,242 | a,b | 791,057 | ||||
Accolade | 259 | a,b | 11,751 | ||||
Acutus Medical | 8,147 | a,b | 108,925 | ||||
American Well, Cl. A | 244 | a,b | 4,238 | ||||
AtriCure | 5,333 | a,b | 349,418 | ||||
Evolent Health, Cl. A | 14,079 | a,b | 284,396 |
6
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Health Care Equipment & Services - 11.0% (continued) | |||||||
Health Catalyst | 6,578 | a,b | 307,653 | ||||
iRhythm Technologies | 3,314 | a,b | 460,182 | ||||
Nevro | 1,536 | a,b | 214,272 | ||||
Oak Street Health | 63 | a,b | 3,419 | ||||
Outset Medical | 17 | a,b | 925 | ||||
Tabula Rasa HealthCare | 9,813 | a,b | 451,889 | ||||
Teladoc Health | 3,114 | a | 565,969 | ||||
TransMedics Group | 7,736 | a,b | 320,967 | ||||
3,875,061 | |||||||
Household & Personal Products - 1.9% | |||||||
Inter Parfums | 9,375 | b | 664,969 | ||||
Insurance - 1.7% | |||||||
BRP Group, Cl. A | 9,617 | a | 262,063 | ||||
Palomar Holdings | 4,800 | a,b | 321,792 | ||||
583,855 | |||||||
Materials - 1.3% | |||||||
Alamos Gold, Cl. A | 15,627 | 122,047 | |||||
Constellium | 21,693 | a | 318,887 | ||||
440,934 | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 23.5% | |||||||
10X Genomics, CI. A | 2,340 | a | 423,540 | ||||
Acceleron Pharma | 1,405 | a | 190,532 | ||||
Adaptive Biotechnologies | 3,282 | a | 132,133 | ||||
Arena Pharmaceuticals | 5,628 | a | 390,527 | ||||
Ascendis Pharma, ADR | 911 | a | 117,410 | ||||
AVROBIO | 7,104 | a,b | 90,150 | ||||
Beam Therapeutics | 2,588 | a,b | 207,143 | ||||
Biohaven Pharmaceutical Holding | 5,036 | a | 344,211 | ||||
Blueprint Medicines | 2,025 | a | 196,891 | ||||
CareDx | 3,328 | a | 226,603 | ||||
Cerevel Therapeutics Holdings | 15,692 | a,b | 215,451 | ||||
Crinetics Pharmaceuticals | 11,565 | a | 176,713 | ||||
Dyne Therapeutics | 9,435 | a | 146,526 | ||||
FibroGen | 7,029 | a,b | 243,977 | ||||
Generation Bio | 7,155 | a,b | 203,631 | ||||
Iovance Biotherapeutics | 6,449 | a,b | 204,175 | ||||
MeiraGTx Holdings | 4,839 | a | 69,827 | ||||
NanoString Technologies | 6,359 | a | 417,850 | ||||
Natera | 5,004 | a | 508,106 | ||||
NeoGenomics | 6,404 | a,b | 308,865 | ||||
Pacific Biosciences of California | 12,888 | a | 429,299 | ||||
Passage Bio | 10,996 | a | 192,210 | ||||
Pliant Therapeutics | 6,583 | a,b | 258,909 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 23.5% (continued) | |||||||
PTC Therapeutics | 4,868 | a | 230,500 | ||||
Quanterix | 8,938 | a | 522,605 | ||||
Sarepta Therapeutics | 2,310 | a,b | 172,164 | ||||
Twist Bioscience | 3,849 | a,b | 476,737 | ||||
Ultragenyx Pharmaceutical | 2,338 | a,b | 266,205 | ||||
uniQure | 4,543 | a | 153,054 | ||||
Veracyte | 3,608 | a,b | 193,930 | ||||
Xenon Pharmaceuticals | 19,357 | a | 346,490 | ||||
Zogenix | 10,413 | a,b | 203,262 | ||||
8,259,626 | |||||||
Real Estate - 1.7% | |||||||
Physicians Realty Trust | 9,276 | c | 163,907 | ||||
Redfin | 6,337 | a,b | 421,981 | ||||
585,888 | |||||||
Retailing - 3.5% | |||||||
National Vision Holdings | 13,579 | a,b | 595,168 | ||||
Ollie's Bargain Outlet Holdings | 3,041 | a,b | 264,567 | ||||
Stitch Fix, Cl. A | 7,199 | a,b | 356,638 | ||||
1,216,373 | |||||||
Semiconductors & Semiconductor Equipment - 2.4% | |||||||
Power Integrations | 4,889 | 398,356 | |||||
Semtech | 6,479 | a | 447,051 | ||||
845,407 | |||||||
Software & Services - 19.1% | |||||||
Everbridge | 5,987 | a,b | 725,505 | ||||
HubSpot | 1,660 | a | 753,989 | ||||
Medallia | 26,695 | a,b | 744,523 | ||||
Mimecast | 7,793 | a | 313,356 | ||||
nCino | 2,917 | a,b | 194,622 | ||||
Proofpoint | 3,168 | a | 398,503 | ||||
Q2 Holdings | 4,759 | a,b | 476,852 | ||||
Rapid7 | 9,885 | a,b | 737,520 | ||||
Shift4 Payments, Cl. A | 5,542 | a,b | 454,499 | ||||
Twilio, Cl. A | 4,007 | a | 1,365,425 | ||||
Zendesk | 4,252 | a,b | 563,900 | ||||
6,728,694 | |||||||
Technology Hardware & Equipment - 3.6% | |||||||
Calix | 5,118 | a | 177,390 | ||||
Littelfuse | 826 | 218,427 | |||||
Lumentum Holdings | 4,286 | a,b | 391,526 | ||||
NETGEAR | 4,089 | a,b | 168,058 |
8
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Technology Hardware & Equipment - 3.6% (continued) | |||||||
nLight | 9,243 | a | 299,473 | ||||
1,254,874 | |||||||
Telecommunication Services - 2.9% | |||||||
Bandwidth, Cl. A | 7,970 | a,b | 1,010,118 | ||||
Total Common Stocks (cost $25,681,342) | 34,510,889 | ||||||
1-Day | |||||||
Investment Companies - 16.9% | |||||||
Registered Investment Companies - 16.9% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 0.06 | 5,936,304 | d | 5,936,304 | |||
Investment of Cash Collateral for Securities Loaned - 2.7% | |||||||
Registered Investment Companies - 2.7% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares | 0.02 | 947,891 | d | 947,891 | |||
Total Investments (cost $32,565,537) | 117.8% | 41,395,084 | |||||
Liabilities, Less Cash and Receivables | (17.8%) | (6,258,457) | |||||
Net Assets | 100.0% | 35,136,627 |
ADR—American Depository Receipt
a Non-income producing security.
b Security, or portion thereof, on loan. At March 31, 2021, the value of the fund’s securities on loan was $11,363,280 and the value of the collateral was $11,357,829, consisting of cash collateral of $947,891 and U.S. Government & Agency securities valued at $10,409,938.
c Investment in real estate investment trust within the United States.
d Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Portfolio Summary (Unaudited) † | Value (%) |
Health Care | 34.5 |
Information Technology | 25.1 |
Investment Companies | 19.6 |
Industrials | 12.9 |
Consumer Staples | 8.2 |
Consumer Discretionary | 7.6 |
Communication Services | 2.9 |
Real Estate | 1.7 |
Financials | 1.7 |
Diversified | 1.4 |
Materials | 1.3 |
Energy | .9 |
117.8 |
† Based on net assets.
See notes to financial statements.
10
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS (Unaudited)
Investment Companies | Value | Purchases($)† | Sales ($) | Value | Net | Dividends/ |
Registered Investment Companies; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 828,418 | 15,168,118 | (10,060,232) | 5,936,304 | 16.9 | 437 |
Investment of Cash Collateral for Securities Loaned:†† | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 773,076 | 2,069,863 | (2,842,939) | - | - | 741††† |
Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares | - | 6,751,359 | (5,803,468) | 947,891 | 2.7 | 24,053††† |
Total | 1,601,494 | 23,989,340 | (18,706,639) | 6,884,195 | 19.6 | 25,231 |
† Includes reinvested dividends/distributions.
†† Effective November 9, 2020, cash collateral for securities lending was transferred from Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares to Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares.
††† Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
See notes to financial statements.
11
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 25,681,342 |
| 34,510,889 |
| ||
Affiliated issuers |
| 6,884,195 |
| 6,884,195 |
| |
Receivable for shares of Beneficial Interest subscribed |
| 95,640 |
| |||
Dividends and securities lending income receivable |
| 12,966 |
| |||
Prepaid expenses |
|
|
|
| 19,168 |
|
|
|
|
|
| 41,522,858 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(b) |
| 14,907 |
| |||
Payable for investment securities purchased |
| 5,354,214 |
| |||
Liability for securities on loan—Note 1(c) |
| 947,891 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 8,906 |
| |||
Trustees’ fees and expenses payable |
| 84 |
| |||
Other accrued expenses |
|
|
|
| 60,229 |
|
|
|
|
|
| 6,386,231 |
|
Net Assets ($) |
|
| 35,136,627 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 25,438,252 |
|
Total distributable earnings (loss) |
|
|
|
| 9,698,375 |
|
Net Assets ($) |
|
| 35,136,627 |
|
Net Asset Value Per Share | Class I | Class Y |
|
Net Assets ($) | 35,053,188 | 83,439 |
|
Shares Outstanding | 679,492 | 1,613.28 |
|
Net Asset Value Per Share ($) | 51.59 | 51.72 |
|
|
|
|
|
See notes to financial statements. |
|
|
|
12
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends (net of $77 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 18,931 |
| ||
Affiliated issuers |
|
| 437 |
| ||
Income from securities lending—Note 1(c) |
|
| 24,794 |
| ||
Interest |
|
| 1 |
| ||
Total Income |
|
| 44,163 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 99,840 |
| ||
Professional fees |
|
| 45,753 |
| ||
Registration fees |
|
| 19,094 |
| ||
Shareholder servicing costs—Note 3(b) |
|
| 12,100 |
| ||
Custodian fees—Note 3(b) |
|
| 8,000 |
| ||
Chief Compliance Officer fees—Note 3(b) |
|
| 7,642 |
| ||
Administration fee—Note 3(a) |
|
| 7,488 |
| ||
Prospectus and shareholders’ reports |
|
| 6,358 |
| ||
Trustees’ fees and expenses—Note 3(c) |
|
| 1,012 |
| ||
Loan commitment fees—Note 2 |
|
| 313 |
| ||
Miscellaneous |
|
| 8,530 |
| ||
Total Expenses |
|
| 216,130 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (90,886) |
| ||
Net Expenses |
|
| 125,244 |
| ||
Investment (Loss)—Net |
|
| (81,081) |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 1,199,490 |
| ||||
Net change in unrealized appreciation (depreciation) on investments | 3,319,574 |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 4,519,064 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 4,437,983 |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
13
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment (loss)—net |
|
| (81,081) |
|
|
| (83,891) |
| |
Net realized gain (loss) on investments |
| 1,199,490 |
|
|
| 1,160,577 |
| ||
Net change in unrealized appreciation |
| 3,319,574 |
|
|
| 3,462,584 |
| ||
Net Increase (Decrease) in Net Assets | 4,437,983 |
|
|
| 4,539,270 |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class I |
|
| (971,604) |
|
|
| - |
| |
Class Y |
|
| (3,457) |
|
|
| - |
| |
Total Distributions |
|
| (975,061) |
|
|
| - |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class I |
|
| 18,772,065 |
|
|
| 11,913,135 |
| |
Class Y |
|
| 9,624 |
|
|
| 8,697 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class I |
|
| 949,632 |
|
|
| - |
| |
Class Y |
|
| 379 |
|
|
| - |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class I |
|
| (5,217,686) |
|
|
| (6,344,473) |
| |
Class Y |
|
| (4,043) |
|
|
| (22,080) |
| |
Increase (Decrease) in Net Assets | 14,509,971 |
|
|
| 5,555,279 |
| |||
Total Increase (Decrease) in Net Assets | 17,972,893 |
|
|
| 10,094,549 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 17,163,734 |
|
|
| 7,069,185 |
| |
End of Period |
|
| 35,136,627 |
|
|
| 17,163,734 |
| |
Capital Share Transactions (Shares): |
| ||||||||
Class I |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 363,574 |
|
|
| 329,263 |
| |
Shares issued for distributions reinvested |
|
| 19,792 |
|
|
| - |
| |
Shares redeemed |
|
| (97,241) |
|
|
| (182,331) |
| |
Net Increase (Decrease) in Shares Outstanding | 286,125 |
|
|
| 146,932 |
| |||
Class Y |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 189 |
|
|
| 268 |
| |
Shares issued for distributions reinvested |
|
| 8 |
|
|
| - |
| |
Shares redeemed |
|
| (80) |
|
|
| (700) |
| |
Net Increase (Decrease) in Shares Outstanding | 117 |
|
|
| (432) |
| |||
|
|
|
|
|
|
|
|
|
|
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. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||
Class I Shares | March 31, 2021 | Year Ended September 30, | ||||||||
(Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 43.47 | 28.46 | 35.83 | 31.65 | 30.32 | 35.16 | ||||
Investment Operations: | ||||||||||
Investment (loss)—neta | (.16) | (.28) | (.20) | (.19) | (.07) | (.08) | ||||
Net realized and unrealized | 10.45 | 15.29 | (2.91) | 8.54 | 5.52 | 4.08 | ||||
Total from Investment Operations | 10.29 | 15.01 | (3.11) | 8.35 | 5.45 | 4.00 | ||||
Distributions: | ||||||||||
Dividends from net realized | (2.17) | - | (4.26) | (4.17) | (4.12) | (8.84) | ||||
Net asset value, end of period | 51.59 | 43.47 | 28.46 | 35.83 | 31.65 | 30.32 | ||||
Total Return (%) | 24.05b | 52.74 | (7.64) | 30.01 | 19.75 | 13.83 | ||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | 1.73c | 2.65 | 3.47 | 3.51 | 3.08 | 2.06 | ||||
Ratio of net expenses | 1.00c | 1.00 | 1.00 | 1.00 | 1.00 | .98 | ||||
Ratio of net investment (loss) | (.65)c | (.79) | (.66) | (.58) | (.23) | (.26) | ||||
Portfolio Turnover Rate | 13.90b | 74.21 | 90.11 | 87.65 | 125.73 | 197.34 | ||||
Net Assets, end of period ($ x 1,000) | 35,053 | 17,099 | 7,014 | 7,051 | 5,377 | 6,441 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
15
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||
Class Y Shares | March 31, 2021 | Year Ended September 30, | |||||
(Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | ||
Per Share Data ($): | |||||||
Net asset value, beginning of period | 43.58 | 28.54 | 35.89 | 31.70 | 30.35 | 35.18 | |
Investment Operations: | |||||||
Investment (loss)—neta | (.17) | (.27) | (.19) | (.20) | (.21) | (.07) | |
Net realized and unrealized | 10.48 | 15.31 | (2.90) | 8.56 | 5.68 | 4.08 | |
Total from Investment Operations | 10.31 | 15.04 | (3.09) | 8.36 | 5.47 | 4.01 | |
Distributions: | |||||||
Dividends from net realized | (2.17) | - | (4.26) | (4.17) | (4.12) | (8.84) | |
Net asset value, end of period | 51.72 | 43.58 | 28.54 | 35.89 | 31.70 | 30.35 | |
Total Return (%) | 24.06b | 52.70 | (7.57) | 30.00 | 19.81 | 13.85 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | 1.71c | 2.64 | 3.45 | 3.27 | 3.18 | 2.17 | |
Ratio of net expenses | 1.00c | 1.00 | 1.00 | 1.00 | 1.00 | .97 | |
Ratio of net investment (loss) | (.66)c | (.77) | (.59) | (.59) | (.69) | (.23) | |
Portfolio Turnover Rate | 13.90b | 74.21 | 90.11 | 87.65 | 125.73 | 197.34 | |
Net Assets, end of period ($ x 1,000) | 83 | 65 | 55 | 743 | 1,541 | 70 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
16
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Small Cap Growth Fund (the “fund”) is a separate diversified series of BNY Mellon Investment Funds I (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering seven series, including the fund. The fund’s investment objective is to seek long-term growth of capital. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
On February 10, 2021, BNY Mellon Investment Management announced its intention to realign several of its investment firms. As a result of this realignment, which is scheduled to occur, subject to regulatory requirements, in the third quarter of 2021 (the “Effective Date”), portfolio managers responsible for managing the fund’s investments who are employees of Mellon Investments Corporation (“Mellon”) in a dual employment arrangement with the Adviser, will become employees of Newton Investment Management North America, LLC (“Newton”), which, like Mellon, will be an affiliate of the Adviser, and will no longer be employees of Mellon. Consequently, effective as of the Effective Date and subject to the approval of the Trust’s Board of Trustees (the “Board”), the Adviser will engage Newton to serve as the fund’s sub-adviser, pursuant to a sub-investment advisory agreement between the Adviser and Newton. As the fund’s sub-adviser, Newton will provide the day-to-day management of the fund’s investments, subject to the Adviser’s supervision and approval. It is currently anticipated that the fund’s portfolio managers who are responsible for the day-to-day management of the fund’s investments will continue to manage the fund’s investments as of the Effective Date. It is also currently anticipated that there will be no material changes to the fund’s investment objective, strategies or policies, no reduction in the nature or level of services provided to the fund, and no increase in the management fee payable by the fund as a result of the engagement of Newton as the fund’s sub-adviser. The Adviser (and not the fund) will pay Newton for its sub-advisory services.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class I and Class Y. Class I shares are sold primarily to bank trust departments and
17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or contingent deferred sales charge. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Trust enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in
18
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 equity securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities
19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
and other appropriate indicators, such as prices of relevant ADRs and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of March 31, 2021 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 - Common Stocks | 34,510,889 | - | - | 34,510,889 | ||
Investment Companies | 6,884,195 | - | - | 6,884,195 |
† See Statement of Investments for additional detailed categorizations, if any.
(b) Foreign taxes: The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invests. These foreign taxes, if any, are paid by the fund and are reflected in the Statement of Operations, if applicable. Foreign
20
taxes payable or deferred or those subject to reclaims as of March 31, 2021, if any, are disclosed in the fund’s Statement of Assets and Liabilities.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. At March 31, 2021, the market value of the collateral was 99.95% of the market value of the securities on loan. The fund received additional collateral subsequent to year end which resulted in the market value of the collateral to be at least 100% of the market value of the securities on loan. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended March 31, 2021, The Bank of New York Mellon earned $3,378 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(e) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
(f) Dividends and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended March 31, 2021, 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, 2021, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2020 remains subject to examination by the Internal Revenue Service and state taxing authorities.
22
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $688.5 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $135 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended March 31, 2021, the fund did not borrow under the Facilities.
NOTE 3—Investment Advisory Fee, Administration Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with the Adviser, the investment advisory fee is computed at the annual rate of .80% of the value of the fund’s average daily net assets and is payable monthly. The Adviser has contractually agreed, from October 1, 2020 through February 1, 2022, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the direct expenses of neither class (excluding taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 1.00% of the value of the fund’s average daily net assets. On or after February 1, 2022, the Adviser may terminate this expense limitation agreement at any time. The reduction in expenses, pursuant to the undertaking, amounted to $90,886 during the period ended March 31, 2021.
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with the Adviser, whereby the Adviser performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate the Adviser for providing accounting and recordkeeping services, administration, compliance monitoring, regulatory and shareholder reporting, as well as related facilities, equipment and clerical help. The fee is based on the fund’s average daily net assets and computed at the following annual rates: .06% of the first $500 million, .04% of the next $500 million and .02% in excess of $1 billion.
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NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
In addition, after applying any expense limitations or fee waivers that reduce the fees paid to the Adviser for this service, the Adviser has contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both the Adviser’ costs in providing these services and a reasonable allocation of the costs incurred by the Adviser and its affiliates related to the support and oversight of these services. The fund also reimburses the Adviser for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration Agreement, the fund was charged $7,488 during the period ended March 31, 2021.
(b) The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. For financial reporting purposes, the fund includes net earnings credits, if any, as shareholder servicing costs in the Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, 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, 2021, the fund was charged $922 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended March 31, 2021, the fund was charged $8,000 pursuant to the custody agreement.
During the period ended March 31, 2021, the fund was charged $7,642 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment
24
advisory fees of $19,911, administration fees of $1,493, custodian fees of $3,200, Chief Compliance Officer fees of $3,931 and transfer agency fees of $334, which are offset against an expense reimbursement currently in effect in the amount of $13,962.
(c) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended March 31, 2021, amounted to $17,640,779 and $3,334,152, respectively.
At March 31, 2021, accumulated net unrealized appreciation on investments was $8,829,547, consisting of $9,327,414 gross unrealized appreciation and $497,867 gross unrealized depreciation.
At March 31, 2021, 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 AND ADMINISTRATION AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 24-25, 2021, the Board considered the renewal of the fund’s Investment Advisory Agreement and Administration Agreement, pursuant to which BNY Mellon Investment Adviser provides the fund with investment advisory services and administrative services (together, the “Agreement”). The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser. In considering the renewal of the Agreement, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures. The Board also considered portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data based on classifications provided by Thomson Reuters Lipper, which included information comparing (1) the performance of the fund’s Class I shares with the performance of a group of institutional small-cap growth funds selected by Broadridge as comparable to the fund (the “Performance Group”) and with a broader group of funds consisting of all retail and institutional small-cap growth funds (the “Performance Universe”), all for various periods ended December 31, 2020, and (2) the fund’s actual and contractual
26
management fees and total expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of all institutional small cap growth funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Performance Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser the results of the comparisons and considered that the fund’s total return performance was in the first quartile of the Performance Group and Performance Universe for all periods (ranked first or second in the Performance Group for all periods). The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in six of the ten calendar years shown.
Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate (i.e., the aggregate of the investment advisory and administration fees pursuant to the Agreement) payable by the fund to the Adviser in light of the nature, extent and quality of the management services provided by the Adviser. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year which included reductions for a fee waiver arrangement in place that reduced the management fee paid to the Adviser. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons.
The Board considered that the fund’s contractual management fee was lower than the Expense Group median contractual management fee, the fund’s actual management fee was lower than the Expense Group median and Expense Universe median actual management fee and the fund’s total expenses were lower than the Expense Group median and slightly higher than the Expense Universe median total expenses.
Representatives of the Adviser stated that the Adviser has contractually agreed, until February 1, 2022, to waive receipt of its fees and/or assume the direct expenses of the fund so that the direct expenses of neither class (excluding interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 1.00% of the fund’s average daily net assets.
Representatives of the Adviser reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by the Adviser that are in the same Lipper category as the fund and (2) paid to the Adviser, or the primary employer of the fund’s primary portfolio manager(s) that is affiliated with the Adviser, for advising any separate accounts and/or other types of client portfolios that are
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS (Unaudited) (continued)
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. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also considered the expense limitation arrangement and its effect on the profitability of the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement, considered in relation to the mix of services provided by the Adviser, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser from acting as investment adviser and took into consideration the soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by the Adviser are adequate and appropriate.
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· The Board was satisfied with the fund’s performance.
· The Board concluded that the fee paid to the Adviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates, of the Adviser and the services provided to the fund by the Adviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreement, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreement for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
29
BNY Mellon Small Cap Growth Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class I: SSETX Class Y: SSYGX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@bnymellon.com
Internet Information can be viewed online or downloaded at www.im.bnymellon.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-PORT. The fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.im.bnymellon.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2021 BNY Mellon Securities Corporation |
BNY Mellon Small Cap Value Fund
SEMIANNUAL REPORT March 31, 2021 |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.im.bnymellon.com and sign up for eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
Information About the Renewal of the |
FOR MORE INFORMATION
Back Cover
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from October 1, 2020 through March 31, 2021, as provided by Joseph M. Corrado, CFA, Stephanie K. Brandaleone, CFA, Jonathan Piskorowski, CFA and Nicholas Cohn, Portfolio Managers
Market and Fund Performance Overview
For the six-month period ended March 31, 2021, BNY Mellon Small Cap Value Fund’s Class A shares produced a total return of 61.14%, Class C shares returned 60.48%, Class I shares returned 61.43% and Class Y shares returned 61.51%.1 In comparison, the fund’s benchmark, the Russell 2000® Value Index (the “Index”), posted a total return of 61.59% for the same period.2
Small-cap value stocks produced positive returns during the period, amid an environment of continued supportive central bank activities and improving investor sentiment due in part to vaccine approval and rollout. The fund slightly underperformed the Index, due primarily to stock selection within the information technology and energy sectors.
The Fund’s Investment Approach
The fund seeks long-term growth of capital. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of small-cap U.S. companies—i.e., those with market capitalizations that are equal to or less than the total market capitalization of the largest company in the Index.
We use fundamental research and qualitative analysis to select stocks from among portfolio candidates. We look for companies with strong competitive positions, high-quality management and financial strength.
We use a variety of screening methods to identify small-cap companies that might be attractive investments. Once attractive investments have been identified, we use a consistent, three-step, fundamental research process to evaluate the stocks. The first step is valuation—to identify small-cap companies that are considered to be attractively priced relative to their earnings potential. Second, fundamentals—to verify the strength of the underlying business position. Third, catalyst—to identify a specific event that has the potential to cause the stocks to appreciate in value.
We primarily focus on individual stock selection instead of trying to predict which industries or sectors will perform best. The stock selection process is designed to produce a diversified portfolio of companies that we believe are undervalued relative to expected business growth.
A Tale of Two Markets
After a strong summer rally, volatility crept back into equity markets in the fall of 2020 as increasing COVID-19 infection rates began to concern investors. By October, several countries had begun to reinstitute some degree of behavioral restriction among residents in order to stem the spread of the virus. In addition, mounting political rhetoric in the U.S. due to the election, renewed trade difficulties between the U.S. and China, and other geopolitical events stoked investor anxiety. However, resolution in the U.S. presidential election and promising progress towards a COVID-19 vaccine during the month of November 2020 helped stocks resurrect their upward momentum.
December 2020 brought vaccine approvals and passage of another U.S. fiscal stimulus package, both of which helped to support the rally. Ten-year U.S. Treasury rates began to rise as market participants anticipated the beginning of a strong global economic recovery. A strong rotation began out of companies that were able to benefit in the COVID-19-economy, such as technology and growth stocks. Investors began to support COVID-19-sensitive sectors of the market, which had previously lagged, as well as cyclical areas of the market on the theory that these sectors were offering more attractive valuations and would benefit most from economic reopening. As the stock rally continued and sentiment strengthened, the yield curve continued to steepen on increasing concerns over inflation rates, which could lead to tightening by the U.S. Federal Reserve (the “Fed”). Despite small pockets of
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volatility, stocks generally rose through the end of the period, and stocks produced strong results for the six months.
Stock Selection Drives Fund Performance
The largest detractors from relative performance were stock selection within the information technology, energy, real estate and materials sectors. An underweight to the energy sector and overweight to the real estate sector also weighed on results. From the perspective of individual positions, a lack of exposure to GameStop was a leading detractor from portfolio returns. The stock was up over 1,000% during the period after trades placed by members of an online forum drove up the stock price. The fund did not hold the position as we did not believe the fundamentals were sound. The position is in the Index, so fund performance lagged the Index. Medical center REIT Physicians Realty Trust and mining company Alamos Gold were also among the leading detractors.
Conversely, security selection within the financials, health care, consumer discretionary and industrials sectors bolstered results. An underweight to the health care sector was also helpful. Top individual contributors included small regional bank Webster Financial. The stock has risen on the back of increasing interest rates, which are favorable for financial institutions. Financial technology company Silvergate Capital was also a leading contributor. The company has built an exchange network for cryptocurrencies, which capital markets companies can use to place transactions using cryptocurrency. Kohl’s department store also bolstered returns for the six months.
Poised for Potential Recovery
The recent increase in interest rates and expected reopening of the economy is supporting an upswing for COVID-19-sensitive sectors. The industrials space is also getting a boost, due to the impending infrastructure spending bill. It is our opinion that many of small-cap infrastructure companies would benefit from implementation of the infrastructure plan, such as those that are connected to electric vehicles, the power grid and renewable energy. Small-cap companies tend to outperform at the beginning of a recovery cycle, and it is our opinion that we are currently at that stage of the economic cycle. We believe the current backdrop looks favorable for small-cap value companies.
April 15, 2021
1 DUE TO RECENT MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE DIFFERENT THAN THE FIGURES SHOWN. Investors should note that the fund’s short-term performance is highly unusual, in part to unusually favorable market conditions, and is unlikely to be repeated or consistently achieved in the future. Total return includes reinvestment of dividends and any capital gains paid and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. The fund’s return reflects the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through February 1, 2022, 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.
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.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
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.
3
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in BNY Mellon Small Cap Value Fund from October 1, 2020 to March 31, 2021. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended March 31, 2021 |
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| Class A | Class C | Class I | Class Y |
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Expenses paid per $1,000† | $8.92 | $14.42 | $6.78 | $6.52 |
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Ending value (after expenses) | $1,611.40 | $1,604.80 | $1,614.30 | $1,615.10 |
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COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended March 31, 2021 |
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| Class A | Class C | Class I | Class Y |
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Expenses paid per $1,000† | $6.89 | $11.15 | $5.24 | $5.04 |
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Ending value (after expenses) | $1,018.10 | $1,013.86 | $1,019.75 | $1,019.95 |
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† | Expenses are equal to the fund’s annualized expense ratio of 1.37% for Class A, 2.22% for Class C, 1.04% for Class I and 1.00% for Class Y, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). |
4
STATEMENT OF INVESTMENTS
March 31, 2021 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 98.9% | |||||||
Automobiles & Components - 1.5% | |||||||
Stoneridge | 33,253 | a | 1,057,778 | ||||
Visteon | 16,950 | a | 2,067,052 | ||||
3,124,830 | |||||||
Banks - 17.3% | |||||||
Banner | 37,057 | 1,976,250 | |||||
Central Pacific Financial | 65,929 | 1,758,986 | |||||
Columbia Banking System | 46,312 | b | 1,995,584 | ||||
Cullen/Frost Bankers | 9,538 | b | 1,037,353 | ||||
CVB Financial | 53,366 | 1,178,855 | |||||
Essent Group | 49,655 | 2,358,116 | |||||
First Bancorp | 29,593 | 1,287,295 | |||||
First Hawaiian | 11,391 | 311,772 | |||||
First Interstate BancSystem, Cl. A | 53,407 | 2,458,858 | |||||
First Merchants | 21,200 | 985,800 | |||||
Heritage Commerce | 144,255 | 1,762,796 | |||||
Heritage Financial | 33,758 | b | 953,326 | ||||
Old National Bancorp | 98,102 | 1,897,293 | |||||
Seacoast Banking Corp. of Florida | 65,091 | a | 2,358,898 | ||||
Silvergate Capital, Cl. A | 10,300 | a | 1,464,351 | ||||
TriState Capital Holdings | 20,671 | a | 476,673 | ||||
UMB Financial | 28,427 | 2,624,665 | |||||
United Community Bank | 109,353 | 3,731,124 | |||||
Webster Financial | 106,208 | 5,853,123 | |||||
36,471,118 | |||||||
Capital Goods - 13.4% | |||||||
Dycom Industries | 23,013 | a | 2,136,757 | ||||
EMCOR Group | 10,856 | 1,217,609 | |||||
EnerSys | 25,815 | 2,344,002 | |||||
Fluor | 116,563 | a | 2,691,440 | ||||
GrafTech International | 132,963 | 1,626,137 | |||||
Granite Construction | 63,833 | b | 2,569,278 | ||||
Holicity, Cl. A | 38,076 | a,b | 448,916 | ||||
Hyster-Yale Materials Handling | 8,902 | 775,542 | |||||
Kaman | 17,801 | 913,013 | |||||
Kennametal | 24,073 | 962,198 | |||||
Matrix Service | 91,691 | a | 1,202,069 | ||||
Rexnord | 56,903 | 2,679,562 | |||||
Spirit AeroSystems Holdings, Cl. A | 32,296 | 1,571,200 | |||||
The Gorman-Rupp Company | 8,043 | 266,304 | |||||
The Greenbrier Companies | 46,495 | b | 2,195,494 | ||||
TriMas | 43,884 | a | 1,330,563 |
5
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 98.9% (continued) | |||||||
Capital Goods - 13.4% (continued) | |||||||
Valmont Industries | 7,022 | 1,668,919 | |||||
Wabash National | 86,626 | 1,628,569 | |||||
28,227,572 | |||||||
Commercial & Professional Services - 3.4% | |||||||
Huron Consulting Group | 22,615 | a | 1,139,344 | ||||
KBR | 101,915 | 3,912,517 | |||||
Korn Ferry | 35,205 | 2,195,736 | |||||
7,247,597 | |||||||
Consumer Durables & Apparel - 5.9% | |||||||
Capri Holdings | 43,633 | a | 2,225,283 | ||||
Helen of Troy | 5,807 | a,b | 1,223,303 | ||||
KB Home | 36,508 | 1,698,717 | |||||
Meritage Homes | 12,327 | a | 1,133,098 | ||||
Oxford Industries | 27,170 | 2,375,201 | |||||
Skechers USA, CI. A | 60,838 | a | 2,537,553 | ||||
Tri Pointe Homes | 57,691 | a | 1,174,589 | ||||
12,367,744 | |||||||
Consumer Services - 2.5% | |||||||
Houghton Mifflin Harcourt | 178,318 | a | 1,358,783 | ||||
The Cheesecake Factory | 68,514 | a,b | 4,008,754 | ||||
5,367,537 | |||||||
Diversified Financials - 2.7% | |||||||
Federated Hermes | 77,498 | 2,425,687 | |||||
LPL Financial Holdings | 15,985 | 2,272,428 | |||||
WisdomTree Investments | 144,064 | 900,400 | |||||
5,598,515 | |||||||
Energy - 5.3% | |||||||
Cactus, Cl. A | 82,805 | 2,535,489 | |||||
Cimarex Energy | 17,854 | 1,060,349 | |||||
CNX Resources | 191,146 | a | 2,809,846 | ||||
Comstock Resources | 229,003 | a | 1,268,677 | ||||
Helix Energy Solutions Group | 492,898 | a,b | 2,489,135 | ||||
Viper Energy Partners | 64,659 | 941,435 | |||||
11,104,931 | |||||||
Food & Staples Retailing - .6% | |||||||
The Chefs' Warehouse | 44,728 | a,b | 1,362,415 | ||||
Food, Beverage & Tobacco - .7% | |||||||
Calavo Growers | 13,141 | 1,020,267 | |||||
Fresh Del Monte Produce | 14,846 | 425,041 | |||||
1,445,308 | |||||||
Health Care Equipment & Services - 3.8% | |||||||
Acadia Healthcare | 50,256 | a,b | 2,871,628 | ||||
Apria | 49,219 | a | 1,374,687 |
6
Description | Shares | Value ($) | |||||
Common Stocks - 98.9% (continued) | |||||||
Health Care Equipment & Services - 3.8% (continued) | |||||||
Evolent Health, Cl. A | 93,830 | a,b | 1,895,366 | ||||
NuVasive | 28,500 | a | 1,868,460 | ||||
8,010,141 | |||||||
Insurance - 1.1% | |||||||
Kemper | 18,330 | 1,461,268 | |||||
Safety Insurance Group | 10,321 | 869,544 | |||||
2,330,812 | |||||||
Materials - 7.0% | |||||||
Alamos Gold, Cl. A | 151,391 | 1,182,364 | |||||
Cabot | 39,483 | 2,070,489 | |||||
Carpenter Technology | 49,451 | 2,034,909 | |||||
Chase | 5,810 | 676,226 | |||||
Coeur Mining | 171,875 | a | 1,552,031 | ||||
Ferro | 35,698 | a | 601,868 | ||||
Hecla Mining | 156,894 | b | 892,727 | ||||
Materion | 15,004 | 993,865 | |||||
MP Materials | 46,668 | a,b | 1,677,715 | ||||
Schnitzer Steel Industries, Cl. A | 52,741 | 2,204,046 | |||||
Stepan | 6,995 | 889,134 | |||||
14,775,374 | |||||||
Media & Entertainment - 3.2% | |||||||
Gray Television | 115,875 | 2,132,100 | |||||
John Wiley & Sons, Cl. A | 20,669 | 1,120,260 | |||||
MSG Networks, Cl. A | 119,908 | a,b | 1,803,416 | ||||
TEGNA | 92,442 | 1,740,683 | |||||
6,796,459 | |||||||
Pharmaceuticals Biotechnology & Life Sciences - .2% | |||||||
FibroGen | 14,960 | a,b | 519,262 | ||||
Real Estate - 9.9% | |||||||
Agree Realty | 26,314 | c | 1,771,195 | ||||
Cousins Properties | 22,867 | c | 808,348 | ||||
Equity Commonwealth | 49,412 | c | 1,373,654 | ||||
Newmark Group, Cl. A | 202,436 | 2,025,372 | |||||
Pebblebrook Hotel Trust | 71,479 | b,c | 1,736,225 | ||||
Physicians Realty Trust | 134,507 | c | 2,376,739 | ||||
Potlatchdeltic | 63,977 | c | 3,385,663 | ||||
Rayonier | 48,555 | c | 1,565,899 | ||||
STAG Industrial | 31,786 | c | 1,068,327 | ||||
Sunstone Hotel Investors | 218,380 | a,c | 2,721,015 | ||||
Weingarten Realty Investors | 75,623 | c | 2,035,015 | ||||
20,867,452 | |||||||
Retailing - 5.4% | |||||||
Bed Bath & Beyond | 25,797 | a,b | 751,983 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 98.9% (continued) | |||||||
Retailing - 5.4% (continued) | |||||||
Dillard's, Cl. A | 24,067 | b | 2,324,150 | ||||
Funko, Cl. A | 25,010 | a | 492,197 | ||||
Kohl's | 44,997 | 2,682,271 | |||||
Nordstrom | 41,766 | a | 1,581,678 | ||||
Sally Beauty Holdings | 45,399 | a,b | 913,882 | ||||
Urban Outfitters | 71,313 | a,b | 2,652,130 | ||||
11,398,291 | |||||||
Semiconductors & Semiconductor Equipment - 1.4% | |||||||
Diodes | 37,819 | a | 3,019,469 | ||||
Software & Services - 4.6% | |||||||
A10 Networks | 87,137 | a | 837,387 | ||||
Cognyte Software | 44,975 | a | 1,250,755 | ||||
CSG Systems International | 37,196 | 1,669,728 | |||||
MAXIMUS | 18,411 | 1,639,315 | |||||
Progress Software | 37,015 | 1,630,881 | |||||
Verint Systems | 22,196 | a | 1,009,696 | ||||
Xperi Holding | 36,781 | 800,722 | |||||
Zuora, Cl. A | 59,316 | a | 877,877 | ||||
9,716,361 | |||||||
Technology Hardware & Equipment - 2.5% | |||||||
ADTRAN | 96,809 | 1,614,774 | |||||
NETGEAR | 68,007 | a,b | 2,795,088 | ||||
nLight | 26,770 | a | 867,348 | ||||
5,277,210 | |||||||
Transportation - 2.0% | |||||||
SkyWest | 75,919 | a | 4,136,067 | ||||
Utilities - 4.5% | |||||||
Avista | 39,841 | 1,902,408 | |||||
Chesapeake Utilities | 14,304 | b | 1,660,408 | ||||
NorthWestern | 28,995 | 1,890,474 | |||||
Portland General Electric | 35,469 | 1,683,713 | |||||
Southwest Gas Holdings | 27,143 | 1,864,996 | |||||
Spire | 7,423 | 548,485 | |||||
9,550,484 | |||||||
Total Common Stocks (cost $143,610,393) | 208,714,949 |
8
Description | 1-Day | Shares | Value ($) | ||||
Investment Companies - 1.0% | |||||||
Registered Investment Companies - 1.0% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 0.06 | 2,161,616 | d | 2,161,616 | |||
Investment of Cash Collateral for Securities Loaned - 2.7% | |||||||
Registered Investment Companies - 2.7% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares | 0.02 | 5,696,159 | d | 5,696,159 | |||
Total Investments (cost $151,468,168) | 102.6% | 216,572,724 | |||||
Liabilities, Less Cash and Receivables | (2.6%) | (5,420,357) | |||||
Net Assets | 100.0% | 211,152,367 |
a Non-income producing security.
b Security, or portion thereof, on loan. At March 31, 2021, the value of the fund’s securities on loan was $33,481,138 and the value of the collateral was $34,366,546, consisting of cash collateral of $5,696,159 and U.S. Government & Agency securities valued at $28,670,387.
c Investment in real estate investment trust within the United States.
d Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
Portfolio Summary (Unaudited) † | Value (%) |
Financials | 21.0 |
Industrials | 18.6 |
Consumer Discretionary | 15.3 |
Real Estate | 9.9 |
Information Technology | 8.5 |
Materials | 7.0 |
Energy | 5.3 |
Utilities | 4.5 |
Health Care | 4.1 |
Investment Companies | 3.7 |
Communication Services | 3.2 |
Consumer Staples | 1.3 |
Diversified | .2 |
102.6 |
† Based on net assets.
See notes to financial statements.
9
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS (Unaudited)
Investment Companies | Value | Purchases($)† | Sales ($) | Value | Net | Dividends/ |
Registered Investment Companies; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | - | 36,608,341 | (34,446,725) | 2,161,616 | 1.0 | 845 |
Investment of Cash Collateral for Securities Loaned;†† | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 3,012,229 | 4,818,689 | (7,830,918) | - | - | 72,648††† |
Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares | - | 34,280,296 | (28,584,137) | 5,696,159 | 2.7 | 147,337††† |
Total | 3,012,229 | 75,707,326 | (70,861,780) | 7,857,775 | 3.7 | 220,830 |
† Includes reinvested dividends/distributions.
†† Effective November 9, 2020, cash collateral for securities lending was transferred from Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares to Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares.
††† Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securitites to financial statements.
See notes to financial statements.
10
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 143,610,393 |
| 208,714,949 |
| ||
Affiliated issuers |
| 7,857,775 |
| 7,857,775 |
| |
Receivable for investment securities sold |
| 347,271 |
| |||
Dividends and securities lending income receivable |
| 153,308 |
| |||
Receivable for shares of Beneficial Interest subscribed |
| 61,845 |
| |||
Prepaid expenses |
|
|
|
| 33,539 |
|
|
|
|
|
| 217,168,687 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 175,427 |
| |||
Liability for securities on loan—Note 1(c) |
| 5,696,159 |
| |||
Payable for investment securities purchased |
| 47,327 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 29,420 |
| |||
Trustees’ fees and expenses payable |
| 828 |
| |||
Other accrued expenses |
|
|
|
| 67,159 |
|
|
|
|
|
| 6,016,320 |
|
Net Assets ($) |
|
| 211,152,367 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 141,115,416 |
|
Total distributable earnings (loss) |
|
|
|
| 70,036,951 |
|
Net Assets ($) |
|
| 211,152,367 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 27,225,417 | 1,105,298 | 135,018,787 | 47,802,865 |
|
Shares Outstanding | 1,089,715 | 45,667 | 5,371,872 | 1,888,922 |
|
Net Asset Value Per Share ($) | 24.98 | 24.20 | 25.13 | 25.31 |
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
|
11
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends (net of $1,222 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 1,466,241 |
| ||
Affiliated issuers |
|
| 845 |
| ||
Income from securities lending—Note 1(c) |
|
| 219,985 |
| ||
Total Income |
|
| 1,687,071 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 717,609 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 70,671 |
| ||
Administration fee—Note 3(a) |
|
| 53,821 |
| ||
Professional fees |
|
| 48,204 |
| ||
Registration fees |
|
| 33,421 |
| ||
Prospectus and shareholders’ reports |
|
| 10,838 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 7,642 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 7,133 |
| ||
Custodian fees—Note 3(c) |
|
| 4,036 |
| ||
Distribution fees—Note 3(b) |
|
| 3,988 |
| ||
Loan commitment fees—Note 2 |
|
| 2,684 |
| ||
Interest expense—Note 2 |
|
| 921 |
| ||
Miscellaneous |
|
| 10,413 |
| ||
Total Expenses |
|
| 971,381 |
| ||
Investment Income—Net |
|
| 715,690 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 16,033,171 |
| ||||
Net change in unrealized appreciation (depreciation) on investments | 65,882,386 |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 81,915,557 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 82,631,247 |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
12
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 715,690 |
|
|
| 1,435,899 |
| |
Net realized gain (loss) on investments |
| 16,033,171 |
|
|
| (6,129,254) |
| ||
Net change in unrealized appreciation |
| 65,882,386 |
|
|
| (24,248,610) |
| ||
Net Increase (Decrease) in Net Assets | 82,631,247 |
|
|
| (28,941,965) |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (114,484) |
|
|
| (2,022,089) |
| |
Class C |
|
| - |
|
|
| (129,047) |
| |
Class I |
|
| (889,463) |
|
|
| (9,644,441) |
| |
Class Y |
|
| (326,361) |
|
|
| (3,635,523) |
| |
Total Distributions |
|
| (1,330,308) |
|
|
| (15,431,100) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 888,797 |
|
|
| 923,182 |
| |
Class C |
|
| 5,258 |
|
|
| 47,887 |
| |
Class I |
|
| 8,242,082 |
|
|
| 23,297,929 |
| |
Class Y |
|
| 2,057,083 |
|
|
| 2,218,593 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 109,265 |
|
|
| 1,935,640 |
| |
Class C |
|
| - |
|
|
| 114,926 |
| |
Class I |
|
| 840,147 |
|
|
| 9,102,667 |
| |
Class Y |
|
| 326,286 |
|
|
| 3,634,781 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (2,712,913) |
|
|
| (4,140,271) |
| |
Class C |
|
| (339,476) |
|
|
| (652,400) |
| |
Class I |
|
| (15,954,049) |
|
|
| (35,743,011) |
| |
Class Y |
|
| (4,946,919) |
|
|
| (9,078,634) |
| |
Increase (Decrease) in Net Assets | (11,484,439) |
|
|
| (8,338,711) |
| |||
Total Increase (Decrease) in Net Assets | 69,816,500 |
|
|
| (52,711,776) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 141,335,867 |
|
|
| 194,047,643 |
| |
End of Period |
|
| 211,152,367 |
|
|
| 141,335,867 |
|
13
STATEMENT OF CHANGES IN NET ASSETS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class Aa |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 38,907 |
|
|
| 53,183 |
| |
Shares issued for distributions reinvested |
|
| 5,356 |
|
|
| 95,966 |
| |
Shares redeemed |
|
| (134,211) |
|
|
| (245,966) |
| |
Net Increase (Decrease) in Shares Outstanding | (89,948) |
|
|
| (96,817) |
| |||
Class Ca |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 268 |
|
|
| 2,836 |
| |
Shares issued for distributions reinvested |
|
| - |
|
|
| 5,846 |
| |
Shares redeemed |
|
| (17,589) |
|
|
| (38,383) |
| |
Net Increase (Decrease) in Shares Outstanding | (17,321) |
|
|
| (29,701) |
| |||
Class Ia |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 373,383 |
|
|
| 1,441,490 |
| |
Shares issued for distributions reinvested |
|
| 40,983 |
|
|
| 449,292 |
| |
Shares redeemed |
|
| (778,286) |
|
|
| (2,133,921) |
| |
Net Increase (Decrease) in Shares Outstanding | (363,920) |
|
|
| (243,139) |
| |||
Class Y |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 94,453 |
|
|
| 131,670 |
| |
Shares issued for distributions reinvested |
|
| 15,808 |
|
|
| 178,264 |
| |
Shares redeemed |
|
| (245,539) |
|
|
| (527,472) |
| |
Net Increase (Decrease) in Shares Outstanding | (135,278) |
|
|
| (217,538) |
| |||
|
|
|
|
|
|
|
|
|
|
a | During the period ended March 31, 2021, 664 Class C shares representing $12,830 were automatically converted to 642 Class A shares and during the period ended September 30, 2020, 221 Class I shares representing $3,772 were exchanged for 215 Class C shares. | ||||||||
See notes to financial statements. |
14
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. These figures have been derived from the fund’s financial statements.
Six Months Ended March 31, 2021 | Year Ended September 30, | |||||
Class A Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016a |
Per Share Data ($): | ||||||
Net asset value, | 15.58 | 20.11 | 24.49 | 25.18 | 23.19 | 22.77 |
Investment Operations: | ||||||
Investment income—netb | .05 | .10 | .10 | .04 | .05 | .02 |
Net realized and unrealized | 9.45 | (3.01) | (1.71) | 3.37 | 3.94 | .40 |
Total from Investment Operations | 9.50 | (2.91) | (1.61) | 3.41 | 3.99 | .42 |
Distributions: | ||||||
Dividends from investment | (.10) | (.10) | (0.03) | (.06) | (.09) | - |
Dividends from net realized | - | (1.52) | (2.74) | (4.04) | (1.91) | - |
Total Distributions | (.10) | (1.62) | (2.77) | (4.10) | (2.00) | - |
Net asset value, end of period | 24.98 | 15.58 | 20.11 | 24.49 | 25.18 | 23.19 |
Total Return (%)c | 61.14d | (16.27) | (5.05) | 15.08 | 17.58 | 1.84d |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.37e | 1.42 | 1.31 | 1.36 | 1.37 | 1.37e |
Ratio of net expenses | 1.37e | 1.42 | 1.31 | 1.36 | 1.37 | 1.37e |
Ratio of net investment income | .51e | .55 | .49 | .15 | .21 | .46e |
Portfolio Turnover Rate | 32.24d | 79.73 | 69.41 | 84.28 | 76.86 | 78.56 |
Net Assets, end of period | 27,225 | 18,379 | 25,664 | 33,037 | 231 | 10 |
a From August 1, 2016 (commencement of initial offering) to September 30, 2016.
b Based on average shares outstanding.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
See notes to financial statements.
15
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended March 31, 2021 | Year Ended September 30, | |||||
Class C Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016a |
Per Share Data ($): | ||||||
Net asset value, | 15.08 | 19.58 | 24.07 | 24.94 | 23.16 | 22.77 |
Investment Operations: | ||||||
Investment (loss)—netb | (.03) | (.06) | (.06) | (.15) | (.20) | (.01) |
Net realized and unrealized | 9.15 | (2.92) | (1.69) | 3.32 | 3.95 | .40 |
Total from Investment Operations | 9.12 | (2.98) | (1.75) | 3.17 | 3.75 | .39 |
Distributions: | ||||||
Dividends from investment | - | - | - | - | (.06) | - |
Dividends from net realized | - | (1.52) | (2.74) | (4.04) | (1.91) | - |
Total Distributions | - | (1.52) | (2.74) | (4.04) | (1.97) | - |
Net asset value, end of period | 24.20 | 15.08 | 19.58 | 24.07 | 24.94 | 23.16 |
Total Return (%)c | 60.48d | (17.04) | (5.76) | 14.11 | 16.49 | 1.71d |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 2.22e | 2.31 | 2.08 | 2.19 | 2.30 | 2.13e |
Ratio of net expenses | 2.22e | 2.31 | 2.08 | 2.19 | 2.30 | 2.13e |
Ratio of net investment (loss) | (.34)e | (.36) | (.30) | (.67) | (.79) | (.30)e |
Portfolio Turnover Rate | 32.24d | 79.73 | 69.41 | 84.28 | 76.86 | 78.56 |
Net Assets, end of period | 1,105 | 950 | 1,815 | 2,646 | 27 | 10 |
a From August 1, 2016 (commencement of initial offering) to September 30, 2016.
b Based on average shares outstanding.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
See notes to financial statements.
16
Six Months Ended March 31, 2021 | Year Ended September 30, | ||||||
Class I Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | |
Per Share Data ($): | |||||||
Net asset value, | 15.69 | 20.23 | 24.64 | 25.27 | 23.20 | 21.95 | |
Investment Operations: | |||||||
Investment income—neta | .09 | .16 | .15 | .11 | .15 | .14 | |
Net realized and unrealized | 9.51 | (3.02) | (1.72) | 3.40 | 3.93 | 3.11 | |
Total from Investment Operations | 9.60 | (2.86) | (1.57) | 3.51 | 4.08 | 3.25 | |
Distributions: | |||||||
Dividends from investment | (.16) | (.16) | (.10) | (.10) | (.10) | (.17) | |
Dividends from net realized | - | (1.52) | (2.74) | (4.04) | (1.91) | (1.83) | |
Total Distributions | (.16) | (1.68) | (2.84) | (4.14) | (2.01) | (2.00) | |
Net asset value, end of period | 25.13 | 15.69 | 20.23 | 24.64 | 25.27 | 23.20 | |
Total Return (%) | 61.43b | (16.03) | (4.72) | 15.43 | 17.98 | 15.91 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | 1.04c | 1.07 | 1.02 | 1.01 | 1.03 | 1.00 | |
Ratio of net expenses | 1.04c | 1.07 | 1.02 | 1.01 | 1.03 | 1.00 | |
Ratio of net investment income | .84c | .92 | .75 | .46 | .62 | .63 | |
Portfolio Turnover Rate | 32.24b | 79.73 | 69.41 | 84.28 | 76.86 | 78.56 | |
Net Assets, end of period ($ x 1,000) | 135,019 | 90,017 | 120,937 | 215,318 | 208,377 | 205,339 |
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, 2021 | Year Ended September 30, | |||||
Class Y Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016a |
Per Share Data ($): | ||||||
Net asset value, | 15.80 | 20.36 | 24.74 | 25.25 | 23.20 | 22.77 |
Investment Operations: | ||||||
Investment income (loss)—netb | .09 | .17 | .23 | (.04) | .10 | .03 |
Net realized and unrealized | 9.59 | (3.04) | (1.79) | 3.57 | 3.97 | .40 |
Total from Investment Operations | 9.68 | (2.87) | (1.56) | 3.53 | 4.07 | .43 |
Distributions: | ||||||
Dividends from investment | (.17) | (.17) | (.08) | - | (.11) | - |
Dividends from net realized | - | (1.52) | (2.74) | (4.04) | (1.91) | - |
Total Distributions | (.17) | (1.69) | (2.82) | (4.04) | (2.02) | - |
Net asset value, end of period | 25.31 | 15.80 | 20.36 | 24.74 | 25.25 | 23.20 |
Total Return (%) | 61.51c | (15.94) | (4.67) | 15.49 | 17.93 | 1.89c |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.00d | 1.01 | 1.01 | .97 | 1.00 | 1.12d |
Ratio of net expenses | 1.00d | 1.00 | 1.00 | .95 | 1.00 | 1.12d |
Ratio of net investment income (loss) | .87d | .97 | 1.23 | (.14) | .42 | .72d |
Portfolio Turnover Rate | 32.24c | 79.73 | 69.41 | 84.28 | 76.86 | 78.56 |
Net Assets, end of period ($ x 1,000) | 47,803 | 31,990 | 45,631 | 11 | 7,427 | 10 |
a From August 1, 2016 (commencement of initial offering) to September 30, 2016.
b Based on average shares outstanding.
c Not annualized.
d Annualized.
See notes to financial statements.
18
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Small Cap Value Fund (the “fund”) is a separate diversified series of BNY Mellon Investment Funds I (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering seven series, including the fund. The fund’s investment objective is to seek long-term growth of capital. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
On February 10, 2021, BNY Mellon Investment Management announced its intention to realign several of its investment firms. As a result of this realignment, which is scheduled to occur, subject to regulatory requirements, in the third quarter of 2021 (the “Effective Date”), portfolio managers responsible for managing the fund’s investments who are employees of Mellon Investments Corporation (“Mellon”) in a dual employment arrangement with the Adviser, will become employees of Newton Investment Management North America, LLC (“Newton”), which, like Mellon, will be an affiliate of the Adviser, and will no longer be employees of Mellon. Consequently, effective as of the Effective Date and subject to the approval of the Trust’s Board of Trustees (the “Board”), the Adviser will engage Newton to serve as the fund’s sub-adviser, pursuant to a sub-investment advisory agreement between the Adviser and Newton. As the fund’s sub-adviser, Newton will provide the day-to-day management of the fund’s investments, subject to the Adviser’s supervision and approval. It is currently anticipated that the fund’s portfolio managers who are responsible for the day-to-day management of the fund’s investments will continue to manage the fund’s investments as of the Effective Date. It is also currently anticipated that there will be no material changes to the fund’s investment objective, strategies or policies, no reduction in the nature or level of services provided to the fund, and no increase in the management fee payable by the fund as a result of the engagement of Newton as the fund’s sub-adviser. The Adviser (and not the fund) will pay Newton for its sub-advisory services.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C, Class I and Class Y. Class A and Class C shares are sold primarily to
19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class A shares bought without an initial sales charge as part of an investment of $1 million or more may be charged a contingent deferred sales charge (“CDSC”) of 1.00% if redeemed within one year. Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares eight years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Trust enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The
20
fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in equity securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant American Depository Receipts and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of March 31, 2021 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 - Common Stocks | 208,714,949 | - | - | 208,714,949 | ||
Investment Companies | 7,857,775 | - | - | 7,857,775 |
† See Statement of Investments for additional detailed categorizations, if any.
22
(b) Foreign taxes: The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invests. These foreign taxes, if any, are paid by the fund and are reflected in the Statement of Operations, if applicable. Foreign taxes payable or deferred or those subject to reclaims as of March 31, 2021, if any, are disclosed in the fund’s Statement of Assets and Liabilities.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended March 31, 2021, The Bank of New York Mellon earned $31,486 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(e) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the
23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
(f) Dividends and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended March 31, 2021, 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, 2021, the fund did not incur any interest or penalties.
24
Each tax year in the three-year period ended September 30, 2020 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, 2020 was as follows: ordinary income $1,558,223 and long-term capital gains $13,872,877. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $688.5 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $135 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing.
The average amount of borrowings outstanding under the Facilities during the period ended March 31, 2021 was approximately $146,154 with a related weighted average annualized interest rate of 1.26%.
NOTE 3—Investment Advisory Fee, Administration Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with the Adviser, the investment advisory fee is computed at the annual rate of .80% of the value of the fund’s average daily net assets and is payable monthly. The Adviser has contractually agreed, from October 1, 2020 through February 1, 2022, to waive receipt of its fees and/or assume the direct expenses of Class Y shares, so that the annual fund operating expenses of Class Y shares (excluding taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed 1.00% of the value of Class Y shares average daily net assets. On or after February 1, 2022, the Adviser may terminate this expense limitation agreement at any time. During the period ended March 31, 2021, there were no reimbursements pursuant to the Agreements.
25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with the Adviser, whereby the Adviser performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate the Adviser for providing accounting and recordkeeping services, administration, compliance monitoring, regulatory and shareholder reporting, as well as related facilities, equipment and clerical help. The fee is based on the fund’s average daily net assets and computed at the following annual rates: .06% of the first $500 million, .04% of the next $500 million and .02% in excess of $1 billion.
In addition, after applying any expense limitations or fee waivers that reduce the fees paid to the Adviser for this service, the Adviser has contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both the Adviser’ costs in providing these services and a reasonable allocation of the costs incurred by the Adviser and its affiliates related to the support and oversight of these services. The fund also reimburses the Adviser for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration Agreement, the fund was charged $53,821 during the period ended March 31, 2021.
During the period ended March 31, 2021, the Distributor retained $203 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, 2021, Class C shares were charged $3,988 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, 2021, Class A and Class C shares were charged $29,167 and $1,329, respectively, pursuant to the Shareholder Services Plan.
26
Under its terms, the Distribution Plan and Shareholder Services Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of a majority of those Trustees who are not “interested persons” of the Trust and who have no direct or indirect financial interest in the operation of or in any agreement related to the Distribution Plan or Shareholder Services Plan.
The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. For financial reporting purposes, the fund includes net earnings credits, if any, as shareholder servicing costs in the Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, 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, 2021, the fund was charged $8,104 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended March 31, 2021, the fund was charged $4,036 pursuant to the custody agreement.
During the period ended March 31, 2021, the fund was charged $7,642 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees of $145,216, administration fees of $10,839, Distribution Plan fees of $711, Shareholder Services Plan fees of $6,081, custodian fees of $5,619, Chief Compliance Officer fees of $3,931 and transfer agency fees of $3,030.
27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended March 31, 2021, amounted to $55,430,910 and $69,334,247, respectively.
At March 31, 2021, accumulated net unrealized appreciation on investments was $65,104,556, consisting of $66,323,639 gross unrealized appreciation and $1,219,083 gross unrealized depreciation.
At March 31, 2021, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
28
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 24-25, 2021, the Board considered the renewal of the fund’s Investment Advisory Agreement and Administration Agreement, pursuant to which BNY Mellon Investment Adviser provides the fund with investment advisory services and administrative services (together, the “Agreement”). The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser. In considering the renewal of the Agreement, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures. The Board also considered portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data based on classifications provided by Thomson Reuters Lipper, which included information comparing (1) the performance of the fund’s Class I shares with the performance of a group of institutional small-cap core funds selected by Broadridge as comparable to the fund (the “Performance Group”) and with a broader group of funds consisting of all retail and institutional small-cap core funds (the “Performance Universe”), all for various periods ended December 31, 2020, and (2) the fund’s actual and contractual management fees and total expenses with those of the same group of funds in the
29
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS (Unaudited) (continued)
Performance Group (the “Expense Group”) and with a broader group of all institutional small cap core funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Performance Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser the results of the comparisons and considered that the fund’s total return performance was above the Performance Group medians for all periods except for the one- and two-year periods and above the Performance Universe medians for the three-, five- and ten-year periods and only slightly below the median for the four-year period. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in seven of the ten calendar years shown.
Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate (i.e., the aggregate of the investment advisory and administration fees pursuant to the Agreement) payable by the fund to the Adviser in light of the nature, extent and quality of the management services provided by the Adviser. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was lower than the Expense Group median contractual management fee, the fund’s actual management fee was higher than the Expense Group median and Expense Universe median actual management fee and the fund’s total expenses were higher than the Expense Group median and Expense Universe median total expenses.
Representatives of the Adviser stated that the Adviser has contractually agreed, until February 1, 2022, to waive receipt of its fees and/or assume the direct expenses of Class Y shares 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 fund’s average daily net assets.
Representatives of the Adviser reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by the Adviser that are in the same Lipper category as the fund and (2) paid to the Adviser, or the primary employer of the fund’s primary portfolio manager(s) that is affiliated with the Adviser, for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services
30
provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement, considered in relation to the mix of services provided by the Adviser, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser from acting as investment adviser and took into consideration the soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by the Adviser are adequate and appropriate.
· The Board generally was satisfied with the fund’s performance.
31
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND ADMINISTRATION AGREEMENTS (Unaudited) (continued)
· The Board concluded that the fee paid to the Adviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates, of the Adviser and the services provided to the fund by the Adviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreement, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreement for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
32
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33
BNY Mellon Small Cap Value Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class A: RUDAX Class C: BOSCX Class I: STSVX Class Y: BOSYX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@bnymellon.com
Internet Information can be viewed online or downloaded at www.im.bnymellon.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-PORT. The fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.im.bnymellon.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2021 BNY Mellon Securities Corporation |
BNY Mellon Small/Mid Cap Growth Fund
SEMIANNUAL REPORT March 31, 2021 |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.im.bnymellon.com and sign up for eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
FOR MORE INFORMATION
Back Cover
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from October 1, 2020 through March 31, 2021, as provided by John R. Porter, Todd W. Wakefield, CFA, and Robert C. Zeuthen, CFA, of Mellon Investments Corporation, Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended March 31, 2021, BNY Mellon Small/Mid Cap Growth Fund’s Class A shares produced a total return of 18.26%, Class C shares returned 17.81%, Class I shares returned 18.43%, Class Y shares returned 18.42% and Class Z shares returned 18.34%.1 In comparison, the fund’s benchmark, the Russell 2500™ Growth Index (the “Index”), posted a total return of 29.02% for the same period.2
Small- and mid-cap growth stocks produced positive returns during the period, amid an environment of continued supportive central bank activities and improving investor sentiment due in part to vaccine approval and rollout. The fund underperformed the Index, mainly due to security selections in the industrials, health care and communications services sectors.
The Fund’s Investment Approach
The fund seeks long-term growth of capital. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of small-cap and mid-cap U.S. companies (those with market capitalizations equal to or less than the total market capitalization of the largest company in the Index).
We employ a growth-oriented investment style in managing the fund’s portfolio. This means we seek to identify those small-cap and mid-cap companies that are experiencing, or are expected to experience, rapid earnings or revenue growth. We focus on high-quality companies and individual stock selection, instead of trying to predict which industries or sectors will perform best, and select stocks by:
· Using fundamental research to identify and follow companies considered to have attractive characteristics, such as strong business and competitive positions, solid cash flows and balance sheets, high-quality management and high sustainable growth.
· Investing in a company when the portfolio managers’ research indicates that the company will experience accelerating revenues and expanding operating margins, which may lead to rising estimate trends and favorable earnings surprises.
The fund’s investment strategy may lead it to emphasize certain industries, such as technology, health care, business services and communications.
A Tale of Two Markets
After a strong summer rally, volatility crept back into equity markets in the fall of 2020 as increasing COVID-19 infection rates began to concern investors. By October, several countries had begun to reinstitute some degree of behavioral restriction among residents in order to stem the spread of the virus. In addition, mounting political rhetoric in the U.S. due to the election, renewed trade difficulties between the U.S. and China, and other geopolitical events stoked investor anxiety. However, resolution in the U.S. presidential election and
2
promising progress towards a COVID-19 vaccine during the month of November 2020 helped stocks resurrect their upward momentum.
December 2020 brought vaccine approvals and passage of another U.S. fiscal stimulus package, both of which helped to support the rally. Ten-year U.S. Treasury rates began to rise as market participants anticipated the beginning of a strong global economic recovery. A strong rotation began out of companies that were able to benefit in the COVID-19-economy, such as technology and growth stocks. Investors began to support COVID-19-sensitive sectors of the market, which had previously lagged, as well as cyclical areas of the market, on the theory that these sectors were offering more attractive valuations and would benefit most from economic reopening. As the stock rally continued, and sentiment strengthened, the yield curve continued to steepen on increasing concerns over inflation rates, which could lead to tightening by the U.S. Federal Reserve (the “Fed”). Despite small pockets of volatility, stocks generally rose through the end of the period, and stocks produced strong results for the six months.
Security Selections Drive Fund Performance
The fund’s underperformance was driven by security selections within the industrials, health care, communication services, consumer discretionary and information technology sectors. A relative overweight to the communication services sector and an underweight to the industrials sector also weighed on results. From an individual stock perspective, business communication services company Bandwidth was among the top detractors from portfolio returns. The company benefited from the COVID-19-lockdown due to the increased need for video conferencing software. The rotation out of lockdown-beneficiary stocks into stocks that would benefit from economic reopening provided a headwind to the price of Bandwidth. Software company Splunk also weighed on results. The stock fell after the company reported disappointing earnings during the period. Telehealth provider Teladoc was also among the leading detractors.
Conversely, an overweight to the energy sector and underweights to the real estate and consumer staples sectors provided a tailwind to fund returns. From an individual stock perspective, Twist Bioscience was among the leading contributors to results. The company has developed a proprietary synthetic DNA manufacturing process, making them a preferred provider in a growing industry. The stock was up over the period. Slack Technologies, a real-time collaboration application, was also a leading contributor, as was Align Technology, maker of the Invisalign orthodontic device.
Remaining Focused in the Face of Uncertainty
If economic data remains strong, we expect markets may maintain a cyclical bias for the near future. Since October 2020, investors have been gravitating toward riskier segments of the market due to expectations of economic reopening. Prior to last fall, many value-oriented, cyclical names traded at massive discounts, giving them a lot of room to appreciate as they did over the last six months. However, it is our opinion that as the rally continues, we will see broader buoyancy to stock prices as opposed to appreciation being concentrated in small pockets of the markets. We expect that growth stocks will benefit from this widespread buoyancy. Over the longer term, we do not necessarily expect that this preference for cyclical stocks will hold. The pandemic has accelerated the trend toward a more remote workforce, which reinforces the need for technology. In addition, companies have spent
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
money during the pandemic to increase productivity through investment in their technological infrastructure, which may diminish their future need to expand their workforce.
April 15, 2021
1 DUE TO RECENT MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE DIFFERENT THAN THE FIGURES SHOWN. Investors should note that the fund’s short-term performance is highly unusual, in part to unusually favorable market conditions, and is unlikely to be repeated or consistently achieved in the future. 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.
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.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
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.
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 BNY Mellon Small/Mid Cap Growth Fund from October 1, 2020 to March 31, 2021. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended March 31, 2021 |
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| Class A | Class C | Class I | Class Y | Class Z |
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Expenses paid per $1,000† | $5.17 | $9.29 | $3.81 | $3.43 | $4.25 |
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Ending value (after expenses) | $1,182.60 | $1,178.10 | $1,184.30 | $1,184.20 | $1,183.40 |
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COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended March 31, 2021 |
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| Class A | Class C | Class I | Class Y | Class Z |
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Expenses paid per $1,000† | $4.78 | $8.60 | $3.53 | $3.18 | $3.93 |
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Ending value (after expenses) | $1,020.19 | $1,016.40 | $1,021.44 | $1,021.79 | $1,021.04 |
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† | Expenses are equal to the fund’s annualized expense ratio of .95% for Class A, 1.71% for Class C, .70% for Class I, .63% for Class Y and .78% for Class Z, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). |
5
STATEMENT OF INVESTMENTS
March 31, 2021 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 98.9% | |||||||
Capital Goods - 9.6% | |||||||
AerCap Holdings | 710,564 | a | 41,738,529 | ||||
Armstrong World Industries | 259,152 | 23,347,004 | |||||
Array Technologies | 1,054,621 | a | 31,448,798 | ||||
Colfax | 441,118 | a,b | 19,325,380 | ||||
Curtiss-Wright | 242,683 | 28,782,204 | |||||
Graco | 447,243 | 32,031,544 | |||||
Holicity, Cl. A | 1,211,622 | a,b | 14,285,023 | ||||
Kornit Digital | 470,406 | a | 46,626,643 | ||||
Masco | 674,403 | 40,396,740 | |||||
Mercury Systems | 788,564 | a | 55,712,047 | ||||
Rexnord | 605,441 | 28,510,217 | |||||
Ribbit LEAP | 273,588 | a | 3,009,468 | ||||
SiteOne Landscape Supply | 129,086 | a,b | 22,040,144 | ||||
The AZEK Company | 689,504 | a | 28,993,643 | ||||
TPG Pace Tech Opportunities, Cl. A | 2,347,528 | a | 23,264,002 | ||||
Virgin Galactic Holdings | 1,100,701 | a,b | 33,714,472 | ||||
473,225,858 | |||||||
Commercial & Professional Services - 3.9% | |||||||
CACI International, Cl. A | 234,939 | a | 57,950,054 | ||||
Clarivate | 2,580,633 | a | 68,102,905 | ||||
CoStar Group | 44,038 | a | 36,194,392 | ||||
FTI Consulting | 204,384 | a,b | 28,636,242 | ||||
190,883,593 | |||||||
Consumer Durables & Apparel - 5.3% | |||||||
Callaway Golf | 1,034,556 | a | 27,674,373 | ||||
Lululemon Athletica | 179,435 | a | 55,034,509 | ||||
Peloton Interactive, Cl. A | 1,566,847 | a | 176,176,277 | ||||
258,885,159 | |||||||
Consumer Services - 4.9% | |||||||
Aramark | 597,873 | 22,587,642 | |||||
Chegg | 299,042 | a,b | 25,615,938 | ||||
DraftKings, Cl. A | 1,164,768 | a,b | 71,435,221 | ||||
Norwegian Cruise Line Holdings | 746,567 | a,b | 20,597,783 | ||||
OneSpaWorld Holdings | 736,322 | a,b | 7,841,829 | ||||
Planet Fitness, Cl. A | 1,172,636 | a | 90,644,763 | ||||
238,723,176 | |||||||
Diversified Financials - 2.4% | |||||||
Ares Management, Cl. A | 767,020 | 42,976,131 | |||||
Morningstar | 194,034 | 43,665,411 | |||||
Tradeweb Markets, Cl. A | 441,435 | 32,666,190 | |||||
119,307,732 |
6
Description | Shares | Value ($) | |||||
Common Stocks - 98.9% (continued) | |||||||
Energy - .7% | |||||||
Cactus, Cl. A | 1,091,055 | 33,408,104 | |||||
Food & Staples Retailing - .8% | |||||||
Grocery Outlet Holding | 1,039,977 | a,b | 38,364,751 | ||||
Health Care Equipment & Services - 10.9% | |||||||
1Life Healthcare | 2,410,150 | a,b | 94,188,662 | ||||
ABIOMED | 243,388 | a | 77,575,057 | ||||
Align Technology | 156,940 | a | 84,987,718 | ||||
American Well, Cl. A | 54,081 | a,b | 939,387 | ||||
DexCom | 247,541 | a | 88,963,760 | ||||
Insulet | 237,755 | a,b | 62,035,035 | ||||
Nevro | 176,820 | a,b | 24,666,390 | ||||
Oak Street Health | 20,393 | a,b | 1,106,728 | ||||
Outset Medical | 3,865 | a,b | 210,217 | ||||
Teladoc Health | 462,028 | a,b | 83,973,589 | ||||
Teleflex | 39,990 | 16,614,245 | |||||
535,260,788 | |||||||
Insurance - 1.5% | |||||||
Markel | 24,888 | a | 28,362,863 | ||||
Palomar Holdings | 306,647 | a,b | 20,557,615 | ||||
Reinsurance Group of America | 214,099 | 26,987,179 | |||||
75,907,657 | |||||||
Materials - 1.1% | |||||||
Alamos Gold, Cl. A | 2,260,153 | 17,651,795 | |||||
Constellium | 2,420,358 | a | 35,579,263 | ||||
53,231,058 | |||||||
Media & Entertainment - 1.6% | |||||||
Liberty Media Corp-Liberty Formula One, Cl. C | 926,451 | a | 40,106,064 | ||||
Live Nation Entertainment | 464,211 | a,b | 39,295,461 | ||||
79,401,525 | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 16.5% | |||||||
10X Genomics, CI. A | 413,836 | a,b | 74,904,316 | ||||
Acceleron Pharma | 249,371 | a | 33,817,201 | ||||
Adaptive Biotechnologies | 468,541 | a | 18,863,461 | ||||
Arena Pharmaceuticals | 300,626 | a | 20,860,438 | ||||
Ascendis Pharma, ADR | 202,518 | a,b | 26,100,520 | ||||
AVROBIO | 527,751 | a,b | 6,697,160 | ||||
Biohaven Pharmaceutical Holding | 690,772 | a,b | 47,214,266 | ||||
Bio-Techne | 104,586 | 39,944,531 | |||||
Blueprint Medicines | 337,940 | a | 32,857,906 | ||||
FibroGen | 1,264,426 | a,b | 43,888,226 | ||||
Horizon Therapeutics | 1,088,732 | a | 100,206,893 | ||||
Iovance Biotherapeutics | 792,013 | a,b | 25,075,132 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 98.9% (continued) | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 16.5% (continued) | |||||||
Natera | 351,987 | a | 35,740,760 | ||||
Neurocrine Biosciences | 473,750 | a,b | 46,072,187 | ||||
PTC Therapeutics | 315,693 | a | 14,948,064 | ||||
Repligen | 195,618 | a | 38,030,095 | ||||
Sarepta Therapeutics | 693,306 | a,b | 51,672,096 | ||||
Twist Bioscience | 471,498 | a,b | 58,399,742 | ||||
Ultragenyx Pharmaceutical | 273,485 | a,b | 31,139,002 | ||||
uniQure | 355,964 | a | 11,992,427 | ||||
Veracyte | 424,397 | a,b | 22,811,339 | ||||
Zogenix | 1,316,630 | a,b | 25,700,618 | ||||
806,936,380 | |||||||
Real Estate - .7% | |||||||
Americold Realty Trust | 904,519 | c | 34,796,846 | ||||
Retailing - 5.2% | |||||||
Expedia Group | 425,066 | a | 73,162,360 | ||||
Farfetch, Cl. A | 595,814 | a,b | 31,590,058 | ||||
National Vision Holdings | 1,760,636 | a,b | 77,168,676 | ||||
Ollie's Bargain Outlet Holdings | 449,497 | a,b | 39,106,239 | ||||
Stitch Fix, Cl. A | 671,002 | a,b | 33,241,439 | ||||
254,268,772 | |||||||
Semiconductors & Semiconductor Equipment - 2.1% | |||||||
Power Integrations | 634,131 | 51,668,994 | |||||
Semtech | 720,129 | a | 49,688,901 | ||||
101,357,895 | |||||||
Software & Services - 24.6% | |||||||
Affirm Holdings | 8,139 | a | 575,590 | ||||
Bill.com Holdings | 205,334 | a | 29,876,097 | ||||
DocuSign | 241,197 | a | 48,830,333 | ||||
Euronet Worldwide | 509,692 | a | 70,490,404 | ||||
Everbridge | 431,472 | a,b | 52,285,777 | ||||
HubSpot | 240,747 | a | 109,349,695 | ||||
Medallia | 3,667,503 | a,b | 102,286,659 | ||||
nCino | 428,058 | a,b | 28,560,030 | ||||
Nuance Communications | 1,716,773 | a | 74,919,974 | ||||
Proofpoint | 674,966 | a | 84,903,973 | ||||
Q2 Holdings | 645,713 | a,b | 64,700,443 | ||||
Rapid7 | 1,034,415 | a,b | 77,177,703 | ||||
Shift4 Payments, Cl. A | 601,288 | a,b | 49,311,629 | ||||
Splunk | 466,006 | a | 63,134,493 | ||||
Square, Cl. A | 546,849 | a | 124,162,065 | ||||
Twilio, Cl. A | 466,299 | a | 158,896,047 |
8
Description | Shares | Value ($) | |||||
Common Stocks - 98.9% (continued) | |||||||
Software & Services - 24.6% (continued) | |||||||
Zendesk | 516,591 | a,b | 68,510,298 | ||||
1,207,971,210 | |||||||
Technology Hardware & Equipment - 4.0% | |||||||
Cognex | 267,395 | 22,191,111 | |||||
Littelfuse | 101,242 | 26,772,434 | |||||
Lumentum Holdings | 670,742 | a,b | 61,272,282 | ||||
nLight | 808,065 | a | 26,181,306 | ||||
Trimble | 338,011 | a | 26,293,876 | ||||
Zebra Technologies, Cl. A | 73,045 | a | 35,439,973 | ||||
198,150,982 | |||||||
Telecommunication Services - 2.6% | |||||||
Bandwidth, Cl. A | 996,291 | a,b | 126,269,921 | ||||
Transportation - .5% | |||||||
Lyft, Cl. A | 377,943 | a | 23,878,439 | ||||
Total Common Stocks (cost $3,147,862,256) | 4,850,229,846 | ||||||
Exchange-Traded Funds - .5% | |||||||
Registered Investment Companies - .5% | |||||||
iShares Russell 2000 Growth ETF | 81,919 | b | 24,636,320 | ||||
1-Day | |||||||
Investment Companies - .6% | |||||||
Registered Investment Companies - .6% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 0.06 | 27,919,255 | d | 27,919,255 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | 1-Day | Shares | Value ($) | ||||
Investment of Cash Collateral for Securities Loaned - 1.3% | |||||||
Registered Investment Companies - 1.3% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares | 0.02 | 64,846,246 | d | 64,846,246 | |||
Total Investments (cost $3,252,480,044) | 101.3% | 4,967,631,667 | |||||
Liabilities, Less Cash and Receivables | (1.3%) | (64,060,494) | |||||
Net Assets | 100.0% | 4,903,571,173 |
ADR—American Depository Receipt
ETF—Exchange-Traded Fund
a Non-income producing security.
b Security, or portion thereof, on loan. At March 31, 2021, the value of the fund’s securities on loan was $895,776,986 and the value of the collateral was $906,467,470, consisting of cash collateral of $64,846,246 and U.S. Government & Agency securities valued at $841,621,224.
c Investment in real estate investment trust within the United States.
d Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
Portfolio Summary (Unaudited) † | Value (%) |
Information Technology | 30.7 |
Health Care | 27.4 |
Consumer Discretionary | 15.3 |
Industrials | 13.2 |
Communication Services | 4.2 |
Financials | 4.0 |
Investment Companies | 2.4 |
Materials | 1.1 |
Diversified | .8 |
Consumer Staples | .8 |
Real Estate | .7 |
Energy | .7 |
101.3 |
† Based on net assets.
See notes to financial statements.
10
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS (Unaudited)
Investment Companies | Value | Purchases($)† | Sales ($) | Value | Net | Dividends/ |
Registered Investment Companies; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 21,664,248 | 837,132,565 | (830,877,558) | 27,919,255 | .6 | 36,369 |
Investment of Cash Collateral for Securities Loaned;†† | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 105,376,347 | 168,282,199 | (273,658,546) | - | - | 124,404††† |
Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares | - | 577,272,077 | (512,425,831) | 64,846,246 | 1.3 | 809,851††† |
Total | 127,040,595 | 1,582,686,841 | (1,616,961,935) | 92,765,501 | 1.9 | 970,624 |
† Includes reinvested dividends/distributions.
†† Effective November 9, 2020, cash collateral for securities lending was transferred from Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares to Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares.
††† Represents securities lending income earned from reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
See notes to financial statements.
11
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 3,159,714,543 |
| 4,874,866,166 |
| ||
Affiliated issuers |
| 92,765,501 |
| 92,765,501 |
| |
Receivable for investment securities sold |
| 24,455,194 |
| |||
Receivable for shares of Beneficial Interest subscribed |
| 23,017,025 |
| |||
Dividends and securities lending income receivable |
| 398,433 |
| |||
Prepaid expenses |
|
|
|
| 212,874 |
|
|
|
|
|
| 5,015,715,193 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 2,842,374 |
| |||
Liability for securities on loan—Note 1(c) |
| 64,846,246 |
| |||
Payable for investment securities purchased |
| 38,453,780 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 5,441,208 |
| |||
Trustees’ fees and expenses payable |
| 20,988 |
| |||
Other accrued expenses |
|
|
|
| 539,424 |
|
|
|
|
|
| 112,144,020 |
|
Net Assets ($) |
|
| 4,903,571,173 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 2,994,403,850 |
|
Total distributable earnings (loss) |
|
|
|
| 1,909,167,323 |
|
Net Assets ($) |
|
| 4,903,571,173 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y | Class Z |
|
Net Assets ($) | 739,461,899 | 102,454,031 | 3,463,119,191 | 417,627,132 | 180,908,920 |
|
Shares Outstanding | 20,640,282 | 3,363,097 | 92,233,133 | 11,023,580 | 4,830,179 |
|
Net Asset Value Per Share ($) | 35.83 | 30.46 | 37.55 | 37.88 | 37.45 |
|
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
|
|
12
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends (net of $14,265 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 3,245,032 |
| ||
Affiliated issuers |
|
| 36,369 |
| ||
Income from securities lending—Note 1(c) |
|
| 934,255 |
| ||
Total Income |
|
| 4,215,656 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 13,604,463 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 2,350,206 |
| ||
Distribution fees—Note 3(b) |
|
| 499,633 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 190,099 |
| ||
Registration fees |
|
| 165,298 |
| ||
Administration fee—Note 3(a) |
|
| 100,773 |
| ||
Prospectus and shareholders’ reports |
|
| 91,959 |
| ||
Loan commitment fees—Note 2 |
|
| 64,092 |
| ||
Professional fees |
|
| 55,729 |
| ||
Custodian fees—Note 3(c) |
|
| 43,860 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 7,642 |
| ||
Miscellaneous |
|
| 83,312 |
| ||
Total Expenses |
|
| 17,257,066 |
| ||
Investment (Loss)—Net |
|
| (13,041,410) |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 239,029,968 |
| ||||
Net change in unrealized appreciation (depreciation) on investments | 402,427,088 |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 641,457,056 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 628,415,646 |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
13
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment (loss)—net |
|
| (13,041,410) |
|
|
| (12,125,862) |
| |
Net realized gain (loss) on investments |
| 239,029,968 |
|
|
| 397,123,301 |
| ||
Net change in unrealized appreciation |
| 402,427,088 |
|
|
| 772,083,078 |
| ||
Net Increase (Decrease) in Net Assets | 628,415,646 |
|
|
| 1,157,080,517 |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (51,073,262) |
|
|
| - |
| |
Class C |
|
| (9,451,282) |
|
|
| - |
| |
Class I |
|
| (230,046,227) |
|
|
| - |
| |
Class Y |
|
| (30,298,600) |
|
|
| - |
| |
Class Z |
|
| (14,141,108) |
|
|
| - |
| |
Total Distributions |
|
| (335,010,479) |
|
|
| - |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 211,442,379 |
|
|
| 117,773,547 |
| |
Class C |
|
| 23,239,639 |
|
|
| 18,557,850 |
| |
Class I |
|
| 1,006,859,786 |
|
|
| 871,515,029 |
| |
Class Y |
|
| 88,913,792 |
|
|
| 66,552,781 |
| |
Class Z |
|
| 1,186,822 |
|
|
| 1,644,317 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 47,675,490 |
|
|
| - |
| |
Class C |
|
| 8,993,788 |
|
|
| - |
| |
Class I |
|
| 221,085,493 |
|
|
| - |
| |
Class Y |
|
| 29,697,863 |
|
|
| - |
| |
Class Z |
|
| 13,203,544 |
|
|
| - |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (83,284,353) |
|
|
| (101,136,817) |
| |
Class C |
|
| (21,294,708) |
|
|
| (21,492,449) |
| |
Class I |
|
| (427,455,524) |
|
|
| (477,845,957) |
| |
Class Y |
|
| (61,103,472) |
|
|
| (67,100,042) |
| |
Class Z |
|
| (6,742,468) |
|
|
| (11,395,960) |
| |
Increase (Decrease) in Net Assets | 1,052,418,071 |
|
|
| 397,072,299 |
| |||
Total Increase (Decrease) in Net Assets | 1,345,823,238 |
|
|
| 1,554,152,816 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 3,557,747,935 |
|
|
| 2,003,595,119 |
| |
End of Period |
|
| 4,903,571,173 |
|
|
| 3,557,747,935 |
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class Aa,b |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 5,689,620 |
|
|
| 4,251,878 |
| |
Shares issued for distributions reinvested |
|
| 1,373,142 |
|
|
| - |
| |
Shares redeemed |
|
| (2,247,736) |
|
|
| (4,012,789) |
| |
Net Increase (Decrease) in Shares Outstanding | 4,815,026 |
|
|
| 239,089 |
| |||
Class Ca,b |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 727,315 |
|
|
| 788,775 |
| |
Shares issued for distributions reinvested |
|
| 303,844 |
|
|
| - |
| |
Shares redeemed |
|
| (658,957) |
|
|
| (982,762) |
| |
Net Increase (Decrease) in Shares Outstanding | 372,202 |
|
|
| (193,987) |
| |||
Class Ib |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 25,691,842 |
|
|
| 30,816,864 |
| |
Shares issued for distributions reinvested |
|
| 6,080,459 |
|
|
| - |
| |
Shares redeemed |
|
| (11,085,158) |
|
|
| (18,282,340) |
| |
Net Increase (Decrease) in Shares Outstanding | 20,687,143 |
|
|
| 12,534,524 |
| |||
Class Yb |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 2,245,222 |
|
|
| 2,350,552 |
| |
Shares issued for distributions reinvested |
|
| 809,647 |
|
|
| - |
| |
Shares redeemed |
|
| (1,571,346) |
|
|
| (2,460,347) |
| |
Net Increase (Decrease) in Shares Outstanding | 1,483,523 |
|
|
| (109,795) |
| |||
Class Zb |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 30,698 |
|
|
| 64,484 |
| |
Shares issued for distributions reinvested |
|
| 363,934 |
|
|
| - |
| |
Shares redeemed |
|
| (176,079) |
|
|
| (413,141) |
| |
Net Increase (Decrease) in Shares Outstanding | 218,553 |
|
|
| (348,657) |
| |||
|
|
|
|
|
|
|
|
|
|
a | During the period ended March 31, 2021, 1,794 Class C shares representing $60,416 were automatically converted to 1,527 Class A shares and during the period ended September 30, 2020, 291 Class C shares representing $5,676 were automatically converted to 253 Class A shares. | ||||||||
b | During the period ended March 31, 2021, 1,161 Class A shares representing $40,274 were exchanged for 1,113 Class I shares. During the period ended September 30, 2020, 144 Class A shares representing $3,288 were exchanged for 139 Class I shares, 366 Class C shares representing $8,292 were exchanged for 306 Class I shares, 12,657 Class Y shares representing $364,276 were exchanged for 12,755 Class I shares and 229 Class Z shares representing $6,909 were exchanged for 238 Class A shares. | ||||||||
See notes to financial statements. |
15
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. These figures have been derived from the fund’s financial statements.
Six Months Ended | |||||||
March 31, 2021 | Year Ended September 30, | ||||||
Class A Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 32.98 | 21.08 | 24.00 | 19.87 | 16.66 | 15.83 | |
Investment Operations: | |||||||
Investment (loss)—neta | (.14) | (.17) | (.12) | (.11) | (.04) | (.06) | |
Net realized and unrealized | 6.08 | 12.07 | (1.23) | 6.05 | 3.63 | 1.92 | |
Total from Investment Operations | 5.94 | 11.90 | (1.35) | 5.94 | 3.59 | 1.86 | |
Distributions: | |||||||
Dividends from net realized | (3.09) | - | (1.57) | (1.81) | (.38) | (1.03) | |
Net asset value, end of period | 35.83 | 32.98 | 21.08 | 24.00 | 19.87 | 16.66 | |
Total Return (%)b | 18.26c | 56.50 | (5.17) | 32.33 | 21.95 | 12.11 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | .95d | .96 | .98 | 1.00 | 1.04 | 1.04 | |
Ratio of net expenses | .95d | .96 | .98 | 1.00 | 1.03 | 1.04 | |
Ratio of net investment (loss) | (.76)d | (.65) | (.58) | (.53) | (.20) | (.41) | |
Portfolio Turnover Rate | 14.49c | 55.49 | 49.35 | 56.70 | 67.52 | 120.54 | |
Net Assets, end of period ($ x 1,000) | 739,462 | 521,990 | 328,595 | 339,848 | 225,374 | 222,978 |
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, 2021 | Year Ended September 30, | ||||||
Class C Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 28.55 | 18.39 | 21.31 | 17.96 | 15.20 | 14.64 | |
Investment Operations: | |||||||
Investment (loss)—neta | (.24) | (.32) | (.25) | (.24) | (.16) | (.17) | |
Net realized and unrealized | 5.24 | 10.48 | (1.10) | 5.40 | 3.30 | 1.76 | |
Total from Investment Operations | 5.00 | 10.16 | (1.35) | 5.16 | 3.14 | 1.59 | |
Distributions: | |||||||
Dividends from net realized | (3.09) | - | (1.57) | (1.81) | (.38) | (1.03) | |
Net asset value, end of period | 30.46 | 28.55 | 18.39 | 21.31 | 17.96 | 15.20 | |
Total Return (%)b | 17.81c | 55.25 | (5.88) | 31.34 | 21.00 | 11.28 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | 1.71d | 1.73 | 1.74 | 1.73 | 1.79 | 1.83 | |
Ratio of net expenses | 1.71d | 1.73 | 1.74 | 1.73 | 1.79 | 1.83 | |
Ratio of net investment (loss) | (1.53)d | (1.42) | (1.34) | (1.27) | (.97) | (1.19) | |
Portfolio Turnover Rate | 14.49c | 55.49 | 49.35 | 56.70 | 67.52 | 120.54 | |
Net Assets, end of period ($ x 1,000) | 102,454 | 85,398 | 58,574 | 62,107 | 37,725 | 33,779 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
17
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||
March 31, 2021 | Year Ended September 30, | ||||||
Class I Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 34.40 | 21.94 | 24.85 | 20.46 | 17.09 | 16.18 | |
Investment Operations: | |||||||
Investment income (loss)—neta | (.10) | (.12) | (.08) | (.07) | .02 | (.03) | |
Net realized and unrealized | 6.34 | 12.58 | (1.26) | 6.27 | 3.73 | 1.97 | |
Total from Investment Operations | 6.24 | 12.46 | (1.34) | 6.20 | 3.75 | 1.94 | |
Distributions: | |||||||
Dividends from net realized | (3.09) | - | (1.57) | (1.81) | (.38) | (1.03) | |
Net asset value, end of period | 37.55 | 34.40 | 21.94 | 24.85 | 20.46 | 17.09 | |
Total Return (%) | 18.43b | 56.79 | (4.95) | 32.69 | 22.34 | 12.36 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | .70c | .73 | .74 | .74 | .75 | .79 | |
Ratio of net expenses | .70c | .73 | .74 | .74 | .75 | .79 | |
Ratio of net investment income | (.52)c | (.42) | (.35) | (.29) | .10 | (.16) | |
Portfolio Turnover Rate | 14.49b | 55.49 | 49.35 | 56.70 | 67.52 | 120.54 | |
Net Assets, end of period ($ x 1,000) | 3,463,119 | 2,461,228 | 1,294,518 | 1,207,703 | 497,604 | 511,768 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
18
Six Months Ended | ||||||||
March 31, 2021 | Year Ended September 30, | |||||||
Class Y Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | ||
Per Share Data ($): | ||||||||
Net asset value, beginning of period | 34.67 | 22.09 | 24.99 | 20.55 | 17.15 | 16.21 | ||
Investment Operations: | ||||||||
Investment income (loss)—neta | (.09) | (.09) | (.06) | (.03) | .01 | (.00)b | ||
Net realized and unrealized | 6.39 | 12.67 | (1.27) | 6.28 | 3.77 | 1.97 | ||
Total from Investment Operations | 6.30 | 12.58 | (1.33) | 6.25 | 3.78 | 1.97 | ||
Distributions: | ||||||||
Dividends from net realized | (3.09) | - | (1.57) | (1.81) | (.38) | (1.03) | ||
Net asset value, end of period | 37.88 | 34.67 | 22.09 | 24.99 | 20.55 | 17.15 | ||
Total Return (%) | 18.42c | 56.99 | (4.87) | 32.79 | 22.44 | 12.53 | ||
Ratios/Supplemental Data (%): | ||||||||
Ratio of total expenses | .63d | .64 | .64 | .65 | .68 | .68 | ||
Ratio of net expenses | .63d | .64 | .64 | .65 | .68 | .68 | ||
Ratio of net investment income | (.45)d | (.33) | (.25) | (.16) | .05 | (.03) | ||
Portfolio Turnover Rate | 14.49c | 55.49 | 49.35 | 56.70 | 67.52 | 120.54 | ||
Net Assets, end of period ($ x 1,000) | 417,627 | 330,796 | 213,183 | 221,008 | 420,380 | 117,953 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Not annualized.
d Annualized.
See notes to financial statements.
19
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||
March 31, 2021 | Year Ended September 30, | |||||||
Class Z Shares | (Unaudited) | 2020 | 2019 | 2018a | ||||
Per Share Data ($): | ||||||||
Net asset value, beginning of period | 34.33 | 21.92 | 24.83 | 20.86 | ||||
Investment Operations: | ||||||||
Investment (loss)—netb | (.12) | (.14) | (.08) | (.07) | ||||
Net realized and unrealized | 6.33 | 12.55 | (1.26) | 4.04 | ||||
Total from Investment Operations | 6.21 | 12.41 | (1.34) | 3.97 | ||||
Distributions: | ||||||||
Dividends from net realized | (3.09) | - | (1.57) | - | ||||
Net asset value, end of period | 37.45 | 34.33 | 21.92 | 24.83 | ||||
Total Return (%) | 18.34c | 56.66 | (4.95) | 19.03c | ||||
Ratios/Supplemental Data (%): | ||||||||
Ratio of total expenses | .78d | .84 | .76 | .84d | ||||
Ratio of net expenses | .78d | .84 | .76 | .84d | ||||
Ratio of net investment (loss) | (.60)d | (.52) | (.36) | (.42)d | ||||
Portfolio Turnover Rate | 14.49c | 55.49 | 49.35 | 56.70 | ||||
Net Assets, end of period ($ x 1,000) | 180,909 | 158,335 | 108,725 | 123,486 |
a From January 19, 2018, (commencement of initial offering) to September 30, 2018.
b Based on average shares outstanding.
c Not annualized.
d Annualized.
See notes to financial statements.
20
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Small/Mid Cap Growth Fund (the “fund”) is a separate non-diversified series of BNY Mellon Investment Funds I (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering seven series, including the fund. The fund’s investment objective is to seek long-term growth of capital. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Mellon Investments Corporation (the “Sub-Adviser”), a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser, serves as the fund’s sub-investment adviser.
On February 10, 2021, BNY Mellon Investment Management announced its intention to realign several of its investment firms. As a result of this realignment, which is scheduled to occur, subject to regulatory requirements, in the third quarter of 2021 (the “Effective Date”), portfolio managers responsible for managing the fund’s investments as employees of the Sub-Adviser will become employees of Newton Investment Management North America, LLC (“Newton”), which, like the Sub-Adviser, will be an affiliate of the Adviser, and will no longer be employees of the Sub-Adviser. Consequently, effective as of the Effective Date and subject to the approval of the Trust’s Board of Trustees (the “Board”), the Adviser will engage Newton to serve as the fund's sub-adviser, pursuant to a sub-investment advisory agreement between the Adviser and Newton, replacing the Sub-Adviser. As the fund’s sub-adviser, Newton will provide the day-to-day management of the fund’s investments, subject to the Adviser's supervision and approval. It is currently anticipated that the fund’s portfolio managers who are responsible for the day-to-day management of the fund’s investments will continue to manage the fund’s investments as of the Effective Date. It is also currently anticipated that there will be no material changes to the fund’s investment objective, strategies or policies, no reduction in the nature or level of services provided to the fund, and no increase in the management fee payable by the fund as a result of the engagement of Newton as the fund’s sub-adviser. As is the case under the sub-investment advisory agreement between the Adviser and the Sub-Adviser, the Adviser (and not the fund) will pay Newton for its sub-advisory services. The rate of sub-investment advisory fee payable by the Adviser to Newton will be the same as that currently payable by the Adviser to the Sub-Adviser pursuant to the respective sub-investment advisory agreements. In addition, all other
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
material terms and conditions of the proposed sub-investment advisory agreement between the Adviser and Newton will be substantially similar to those of the sub-investment advisory agreement between the Adviser and the Sub-Adviser.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C, Class I, Class Y and Class Z. Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class A shares bought without an initial sales charge as part of an investment of $1 million or more may be charged a contingent deferred sales charge (“CDSC”) of 1.00% if redeemed within one year. Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares eight years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and 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
22
authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Trust enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
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.
23
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 equity securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADR and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
24
The following is a summary of the inputs used as of March 31, 2021 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 - Common Stocks | 4,850,229,846 | - | - | 4,850,229,846 | ||
Exchange-Traded Funds | 24,636,320 | - | - | 24,636,320 | ||
Investment Companies | 92,765,501 | - | - | 92,765,501 |
† See Statement of Investments for additional detailed categorizations, if any.
(b) Foreign taxes: The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invests. These foreign taxes, if any, are paid by the fund and are reflected in the Statement of Operations, if applicable. Foreign taxes payable or deferred or those subject to reclaims as of March 31, 2021, if any, are disclosed in the fund’s Statement of Assets and Liabilities.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result
25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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, 2021, The Bank of New York Mellon earned $126,985 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(e) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
(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
26
gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended March 31, 2021, 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, 2021, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2020 remains subject to examination by the Internal Revenue Service and state taxing authorities.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $688.5 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $135 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended March 31, 2021, the fund did not borrow under the Facilities.
NOTE 3—Investment Advisory Fee, Sub-Investment Advisory Fee, Administration Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with the Adviser, the 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.
27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Pursuant to a sub-investment advisory agreement between the Adviser and the Sub-Adviser, the Sub-Adviser serves as the fund’s sub-investment adviser responsible for the day-to-day management of the fund’s portfolio. The Adviser pays the Sub-Adviser a monthly fee at an annual percentage of the value of the fund’s average daily net assets. The Adviser has obtained an exemptive order from the SEC (the “Order”), upon which the fund may rely, to use a manager of managers approach that permits the Adviser, subject to certain conditions and approval by the Board, to enter into and materially amend sub-investment advisory agreements with one or more sub-investment advisers who are either unaffiliated with the Adviser or are wholly-owned subsidiaries (as defined under the Act) of the Adviser’s ultimate parent company, BNY Mellon, without obtaining shareholder approval. The Order also allows the fund to disclose the sub-investment advisory fee paid by the Adviser to any unaffiliated sub-investment adviser in the aggregate with other unaffiliated sub-investment advisers in documents filed with the SEC and provided to shareholders. In addition, pursuant to the Order, it is not necessary to disclose the sub-investment advisory fee payable by the Adviser separately to a sub-investment adviser that is a wholly-owned subsidiary of BNY Mellon in documents filed with the SEC and provided to shareholders; such fees are to be aggregated with fees payable to the Adviser. The Adviser has ultimate responsibility (subject to oversight by the Board) to supervise any sub-investment adviser and recommend the hiring, termination, and replacement of any sub-investment adviser to the Board.
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with the Adviser, whereby the Adviser performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate the Adviser for providing accounting and recordkeeping services, administration, compliance monitoring, regulatory and shareholder reporting, as well as related facilities, equipment and clerical help. The fee is based on the fund’s average daily net assets and computed at the following annual rates: .06% of the first $500 million, .04% of the next $500 million and .02% in excess of $1 billion.
In addition, after applying any expense limitations or fee waivers that reduce the fees paid to the Adviser for this service, the Adviser has contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both the Adviser’ costs in providing these services and a reasonable allocation of the costs incurred by the Adviser and its affiliates related to the support and oversight of these services. The fund also reimburses the Adviser for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration
28
Agreement, the fund was charged $100,773 during the period ended March 31, 2021.
During the period ended March 31, 2021, the Distributor retained $61,453 from commissions earned on sales of the fund’s Class A shares and $5,559 from CDSC fees on redemptions of the fund’s Class C shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended March 31, 2021, Class C shares were charged $388,888 pursuant to the Distribution Plan.
Under the Service Plan adopted pursuant to Rule 12b-1 under the Act, Class Z shares reimburse the Distributor for distributing its shares and servicing shareholder accounts at an amount not to exceed an annual rate of up to .25% of the value of the average daily net assets of Class Z shares. During the period ended March 31, 2021, Class Z shares were charged $110,745 pursuant to the Service Plan.
(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended March 31, 2021, Class A and Class C shares were charged $845,217 and $129,629, respectively, pursuant to the Shareholder Services Plan.
Under its terms, the Distribution Plan and Shareholder Services Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of a majority of those Trustees who are not “interested persons” of the Trust and who have no direct or indirect financial interest in the operation of or in any agreement related to the Distribution Plan or Shareholder Services Plan.
The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. For financial reporting purposes, the fund includes net earnings credits, if any, as shareholder servicing costs in the Statement of Operations.
29
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, 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, 2021, the fund was charged $69,654 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended March 31, 2021, the fund was charged $43,860 pursuant to the custody agreement.
During the period ended March 31, 2021, the fund was charged $7,642 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees of $2,504,500, administration fees of $17,165, Distribution Plan fees of $85,242, Shareholder Services Plan fees of $180,026, custodian fees of $24,230, Chief Compliance Officer fees of $3,931 and transfer agency fees of $27,280.
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended March 31, 2021, amounted to $1,331,602,541 and $630,338,778, respectively.
At March 31, 2021, accumulated net unrealized appreciation on investments was $1,715,151,623, consisting of $1,800,197,194 gross unrealized appreciation and $85,045,571 gross unrealized depreciation.
30
At March 31, 2021, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
31
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 24-25, 2021, the Board considered the renewal of the fund’s Investment Advisory Agreement and Administration Agreement, pursuant to which BNY Mellon Investment Adviser provides the fund with investment advisory services and administrative services (together, the “Agreement”), and the Sub-Investment Advisory Agreement (together, the “Agreements”), pursuant to which Mellon Investments Corporation (the “Subadviser”) provides day-to-day management of the fund’s investments. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser and the Subadviser. In considering the renewal of the Agreements, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s supervisory activities over the Subadviser. The Board also considered portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data based on classifications provided by Thomson Reuters Lipper, which included information comparing (1) the performance of the fund’s Class I shares with the performance of a
32
group of institutional mid-cap growth funds selected by Broadridge as comparable to the fund (the “Performance Group”) and with a broader group of funds consisting of all retail and institutional mid-cap growth funds (the “Performance Universe”), all for various periods ended December 31, 2020, and (2) the fund’s actual and contractual management fees and total expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of all institutional mid-cap growth funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Performance Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser and the Subadviser the results of the comparisons and considered that the fund’s total return performance was in the first quartile of the Performance Group and the Performance Universe for all periods except the ten-year period, when the fund’s total return performance was in the second quartile of the Performance Group. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in six of the ten calendar years shown.
Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate (i.e., the aggregate of the investment advisory and administration fees pursuant to the Agreement) payable by the fund to the Adviser in light of the nature, extent and quality of the management and sub-advisory services provided by the Adviser and the Subadviser, respectively. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was lower than the Expense Group median contractual management fee, the fund’s actual management fee was lower than the Expense Group median and Expense Universe median actual management fee and the fund’s total expenses were lower than the Expense Group median and Expense Universe median total expenses.
Representatives of the Adviser reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by the Adviser that are in the same Lipper category as the fund and (2) paid to the Adviser or the Subadviser or its affiliates, for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in
33
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
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 the Adviser by the fund and the respective services provided by the Subadviser and the Adviser. The Board also took into consideration that the Subadviser’s fee is paid by the Adviser (out of its fee from the fund) and not the fund.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the mix of services provided by the Adviser and the Subadviser, including the nature, extent and quality of such services, supported the renewal of the Agreements and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Since the Adviser, and not the fund, pays the Subadviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Subadviser’s profitability to be relevant to its deliberations. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser and the Subadviser from acting as investment adviser and sub-investment adviser, respectively, and took into consideration the soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreements. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
34
· The Board concluded that the nature, extent and quality of the services provided by the Adviser and the Subadviser are adequate and appropriate.
· The Board was satisfied with the fund’s performance.
· The Board concluded that the fees paid to the Adviser and the Subadviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates and the Subadviser, of the Adviser and the Subadviser and the services provided to the fund by the Adviser and the Subadviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreements, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
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37
BNY Mellon Small/Mid Cap Growth Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Mellon Investments Corporation
BNY Mellon Center
One Boston Place
Boston, MA 02108
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class A: DBMAX Class C: DBMCX Class I: SDSCX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@bnymellon.com
Internet Information can be viewed online or downloaded at www.im.bnymellon.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-PORT. The fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.im.bnymellon.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2021 BNY Mellon Securities Corporation |
BNY Mellon Tax Sensitive Total Return Bond Fund
SEMIANNUAL REPORT March 31, 2021 |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.im.bnymellon.com and sign up for eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
FOR MORE INFORMATION
Back Cover
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from October 1, 2020 through March 31, 2021, as provided by Thomas Casey, Daniel Rabasco, and Jeffrey Burger, Mellon Investments Corporation, Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended March 31, 2021, BNY Mellon Tax Sensitive Total Return Bond Fund’s Class A shares produced a total return of 1.63%, Class C shares returned 1.30%, Class I shares returned 1.76% and Class Y shares returned 1.78%.1 In comparison, the fund’s benchmark, the Bloomberg’ Barclays 3-, 5-, 7-, 10-Year U.S. Municipal Bond Index (the “Index”), provided a total return of 0.72% for the same period.2
Municipal bonds rose during the reporting period as the market continued to recover from the market turmoil that resulted from the COVID-19 pandemic. The fund outperformed the Index, primarily due to favorable sector allocation and security selection.
The Fund’s Investment Approach
The fund seeks high, after-tax total return. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in bonds. The fund normally invests at least 65% of its net assets in municipal bonds that provide income exempt from federal personal income tax. The fund may invest up to 35% of its net assets in taxable bonds. The fund invests principally in bonds rated investment grade at the time of purchase or, if unrated, determined to be of comparable quality by the fund’s subadviser.3 The fund may invest up to 25% of its assets in bonds rated below investment grade.
We seek relative value opportunities among municipal bonds and invest selectively in taxable securities with the potential to enhance after-tax total return and/or reduce volatility. We use a combination of fundamental credit analysis and macroeconomic and quantitative inputs to identify undervalued sectors and securities, and we select municipal bonds using fundamental credit analysis to estimate the relative value and attractiveness of various sectors and securities and to exploit pricing inefficiencies.
Market Recovery Continues
The municipal bond market experienced extraordinary volatility early in 2020 as the COVID-19 virus spread, and government shutdowns caused the economy to slow dramatically. Support from the Federal Reserve (the “Fed”), an easing of government-mandated lockdowns and strong inflows to municipal bond funds toward the end of 2020 bolstered the market.
Approval of multiple COVID-19 vaccines and passage of a federal stimulus package also contributed further to demand. Although the stimulus package did not include direct relief for states and municipalities, the market took a favorable view of funding for hospitals and mass transit, among other segments, as well as for consumers and small businesses.
The results of the November 2020 election also provided support. A Democrat-controlled Congress made federal relief for state and local governments more likely. It also made income tax hikes more likely, adding to the appeal of tax-exempt municipal securities. The prospect of an increase in the corporate tax rate made municipal bonds more appealing to institutional buyers as well, and relatively high interest rates also attracted foreign investors.
2
Investors were also encouraged by the fiscal health of municipal issuers, which turned out to be much stronger than expected. Tax revenues remained robust because real estate and income tax collections failed to decline as much as predicted. Progressive tax regimes proved advantageous because higher-earning, white-collar workers were largely unaffected by the pandemic. In addition, federal support to households, school systems, the transportation system and other segments bolstered the economy and prevented sales taxes from declining as much as originally feared.
Revenue bonds generally outperformed general obligation bonds late in the period as hard-hit market segments such as transportation and hospitals recovered when investors became more confident that the end of the pandemic was likely. Yield spreads of municipal bonds over Treasury bonds compressed late in the reporting period. This was due to both a rise in long-term Treasury yields and to a decline in long-term municipal bond yields. Although the municipal bond market experienced some turmoil late in the period as the prospects of a stronger economy and an increase in inflation have grown, most of the volatility occurred among longer maturities.
Despite an increase in volatility, the municipal bond market has benefited from strong fundamentals due in part to a $350 billion relief package from the federal government. In addition, inflows to municipal bond mutual funds in 2021 have been the strongest on record.
Sector Allocation and Security Selection Enhanced Returns
The fund’s performance versus the Index was helped primarily by sector allocation and security selection decisions. The fund’s overweight to revenue bonds and underweight to general obligation bonds contributed positively to returns, with prepaid gas bonds and health care bonds performing particularly well. Other positive contributors included New Jersey Transportation Trust Fund bonds and New Jersey Economic Development bonds. Holdings of Chicago water and sewer bonds, Illinois Finance Authority and Port of Seattle bonds also were beneficial. Derivatives were not used during the reporting period.
On the other hand, the fund’s relatively longer duration versus the Index detracted somewhat from performance. Yield curve positioning, specifically positions in the eight- to 10-year part of the municipal yield curve, were detrimental. Other exposures that detracted included an allocation to taxable and tobacco-backed bonds, Connecticut general obligation bonds, Pennsylvania turnpike bonds and New York City general obligation bonds.
A Positive Stance
The economic fundamentals, as well as supply and demand factors, bode well for the municipal bond market. Issuers have weathered the pandemic in a better fashion than anticipated, with tax receipts exceeding expectations. In addition, federal relief programs, both directly to municipal issuers and indirectly to businesses and consumers, have kept state and local budgets relatively healthy.
Municipal issuers will also benefit from a federal infrastructure spending package that is likely to pass in the near term. This will not only affect infrastructure directly but also benefit state and local economies with job creation and economic activity.
Demand for municipal bonds is likely to remain strong, given the likelihood of higher corporate and personal income tax rates. We also anticipate that supply of tax-exempt
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
municipals will remain manageable since much issuance is occurring in the taxable market. The possibility of inflation remains a risk, but we anticipate that long-term interest rates will rise only gradually.
April 15, 2021
1 Total return includes reinvestment of dividends and any capital gains paid and does not take into consideration the maximum initial sales charge in the case of Class A shares or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Share price, yield and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. Dividends paid by the fund will be exempt from federal income tax to the extent such dividends are derived from interest paid on principal obligations. The fund also may invest a portion of its assets in securities that generate income that is not exempt from federal or state income tax. Income may be subject to state and local taxes, and some income may be subject to the federal alternative minimum tax (AMT) for certain investors. Capital gains, if any, are taxable. Return figures provided reflect the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc., pursuant to an agreement in effect through February 1, 2022, 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, and 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.
Bonds are subject generally to interest-rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
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 BNY Mellon Tax Sensitive Total Return Bond Fund from October 1, 2020 to March 31, 2021. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended March 31, 2021 |
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| Class A | Class C | Class I | Class Y |
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Expenses paid per $1,000† | $3.62 | $7.38 | $2.36 | $2.36 |
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Ending value (after expenses) | $1,016.30 | $1,013.00 | $1,017.60 | $1,017.80 |
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COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended March 31, 2021 |
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| Class A | Class C | Class I | Class Y |
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Expenses paid per $1,000† | $3.63 | $7.39 | $2.37 | $2.37 |
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Ending value (after expenses) | $1,021.34 | $1,017.60 | $1,022.59 | $1,022.59 |
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† | Expenses are equal to the fund’s annualized expense ratio of ..72% for Class A, 1.47% for Class C, .47% for Class I and .47% for Class Y, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period). |
5
STATEMENT OF INVESTMENTS
March 31, 2021 (Unaudited)
Description | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
Bonds and Notes - 5.8% | |||||||||
Asset-Backed Certificates - .0% | |||||||||
Carrington Mortgage Loan Trust, Ser. 2006-NC5, Cl. A2, 1 Month LIBOR +.11% | 0.22 | 1/25/2037 | 37,645 | a | 37,458 | ||||
Asset-Backed Ctfs./Auto Receivables - 1.4% | |||||||||
Capital Auto Receivables Asset Trust, Ser. 2018-1, Cl. A4 | 2.93 | 6/20/2022 | 280,134 | b | 280,937 | ||||
Enterprise Fleet Financing, Ser. 2018-1, Cl. A2 | 2.87 | 10/20/2023 | 22,781 | b | 22,834 | ||||
Ford Credit Floorplan Master Owner Trust A, Ser. 2018-1, Cl. A1 | 2.95 | 5/15/2023 | 1,000,000 | 1,002,919 | |||||
OSCAR US Funding Trust VIII, Ser. 2018-1A, Cl. A3 | 3.23 | 5/10/2022 | 57,240 | b | 57,263 | ||||
1,363,953 | |||||||||
Banks - 2.1% | |||||||||
Citigroup, Sr. Unscd. Notes, 6 Month LIBOR +.95% | 2.88 | 7/24/2023 | 1,000,000 | 1,030,255 | |||||
JPMorgan Chase & Co., Sr. Unscd. Notes, 6 Month LIBOR +.89% | 3.80 | 7/23/2024 | 1,000,000 | 1,070,673 | |||||
2,100,928 | |||||||||
Health Care - 2.3% | |||||||||
SSM Health Care Corp., Sr. Unscd. Notes, Ser. 2018 | 3.69 | 6/1/2023 | 2,145,000 | 2,273,305 | |||||
Total Bonds and Notes | 5,775,644 | ||||||||
Long-Term Municipal Investments - 93.1% | |||||||||
Arizona - 1.8% | |||||||||
Maricopa County Industrial Development Authority, Revenue Bonds (Benjamin Franklin Charter School Obligated Group) | 4.80 | 7/1/2028 | 1,600,000 | b | 1,799,380 | ||||
Arkansas - 2.1% | |||||||||
Arkansas Development Finance Authority, Revenue Bonds, Refunding (Washington Regional Medical Center) Ser. B | 5.00 | 2/1/2025 | 1,835,000 | 2,119,863 | |||||
California - 1.8% | |||||||||
California Municipal Finance Authority, Revenue Bonds, Refunding (William Jessup University) | 5.00 | 8/1/2027 | 1,100,000 | 1,248,153 |
6
Description | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
Long-Term Municipal Investments - 93.1% (continued) | |||||||||
California - 1.8% (continued) | |||||||||
California Statewide Communities Development Authority, Revenue Bonds (Loma Linda University Medical Center Obligated Group) Ser. A | 5.00 | 12/1/2031 | 525,000 | b | 603,106 | ||||
1,851,259 | |||||||||
Colorado - 2.4% | |||||||||
Colorado Health Facilities Authority, Revenue Bonds, Refunding (CommonSpirit Health Obligated Group) Ser. A | 5.00 | 8/1/2029 | 1,000,000 | 1,279,129 | |||||
Denver Convention Center Hotel Authority, Revenue Bonds, Refunding | 5.00 | 12/1/2031 | 1,000,000 | 1,157,205 | |||||
2,436,334 | |||||||||
Connecticut - 1.7% | |||||||||
Connecticut, Revenue Bonds, Ser. A | 5.00 | 9/1/2033 | 1,000,000 | 1,137,874 | |||||
Connecticut, Revenue Bonds, Ser. A | 5.00 | 9/1/2026 | 500,000 | 574,574 | |||||
1,712,448 | |||||||||
Florida - 5.0% | |||||||||
Atlantic Beach, Revenue Bonds (Fleet Landing Project) Ser. B2 | 3.00 | 11/15/2023 | 1,250,000 | 1,250,403 | |||||
Florida Higher Educational Facilities Financial Authority, Revenue Bonds, Refunding (Nova Southeastern University Project) | 5.00 | 4/1/2026 | 1,000,000 | 1,181,734 | |||||
Miami Beach Redevelopment Agency, Tax Allocation Bonds, Refunding | 5.00 | 2/1/2033 | 1,000,000 | 1,120,270 | |||||
Reedy Creek Improvement District, GO, Refunding, Ser. A | 1.87 | 6/1/2026 | 1,435,000 | 1,488,209 | |||||
5,040,616 | |||||||||
Georgia - 6.8% | |||||||||
Fulton County Development Authority, Revenue Bonds, Ser. A | 5.00 | 4/1/2036 | 1,000,000 | 1,193,440 | |||||
Georgia Municipal Electric Authority, Revenue Bonds (Plant Vogtle Unis 3&4 Project) | 5.00 | 1/1/2030 | 1,145,000 | 1,424,089 | |||||
Main Street Natural Gas, Revenue Bonds, Ser. B, 1 Month LIBOR x.67 +.75% | 0.82 | 9/1/2023 | 1,000,000 | a | 1,005,594 | ||||
Main Street Natural Gas, Revenue Bonds, Ser. C | 4.00 | 9/1/2026 | 1,750,000 | 2,017,846 | |||||
The Atlanta Development Authority, Revenue Bonds, Ser. A1 | 5.00 | 7/1/2029 | 1,000,000 | 1,150,314 | |||||
6,791,283 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
Long-Term Municipal Investments - 93.1% (continued) | |||||||||
Hawaii - 1.2% | |||||||||
Hawaii Airports System, Revenue Bonds, Ser. A | 5.00 | 7/1/2028 | 1,000,000 | 1,254,802 | |||||
Illinois - 14.3% | |||||||||
Chicago Il Wastewater Transmission, Revenue Bonds (Insured; Assured Guaranty Municipal Corp.) | 5.00 | 1/1/2032 | 1,000,000 | 1,116,188 | |||||
Chicago Il Wastewater Transmission, Revenue Bonds, Refunding, Ser. C | 5.00 | 1/1/2026 | 1,000,000 | 1,161,220 | |||||
Chicago Il Waterworks, Revenue Bonds (2nd LIEN Project) | 5.00 | 11/1/2026 | 1,000,000 | 1,152,040 | |||||
Chicago O'Hare International Airport, Revenue Bonds | 5.25 | 1/1/2024 | 1,000,000 | 1,075,384 | |||||
Chicago O'Hare International Airport, Revenue Bonds, Refunding, Ser. B | 5.00 | 1/1/2035 | 750,000 | 877,692 | |||||
Chicago Park District, GO, Refunding, Ser. B | 5.00 | 1/1/2028 | 1,000,000 | 1,098,248 | |||||
Cook County II, Revenue Bonds, Refunding | 5.00 | 11/15/2035 | 1,000,000 | 1,241,366 | |||||
Illinois Finance Authority, Revenue Bonds, Refunding (Rush University Medical Center Obligated Group) Ser. A | 5.00 | 11/15/2026 | 1,000,000 | 1,170,034 | |||||
Illinois Toll Highway Authority, Revenue Bonds, Ser. B | 5.00 | 1/1/2031 | 1,000,000 | 1,192,926 | |||||
Illinois Toll Highway Authority, Revenue Bonds, Ser. B | 5.00 | 1/1/2027 | 1,000,000 | 1,201,698 | |||||
Northern Illinois University, Revenue Bonds, Refunding (Insured; Build America Mutual) Ser. B | 5.00 | 4/1/2027 | 550,000 | 667,408 | |||||
Sales Tax Securitization Corp., Revenue Bonds, Refunding, Ser. A | 5.00 | 1/1/2029 | 750,000 | 940,104 | |||||
University of Illinois, Revenue Bonds, Refunding (Auxiliary Facilities System) Ser. C | 5.00 | 4/1/2025 | 1,450,000 | 1,482,349 | |||||
14,376,657 | |||||||||
Iowa - .7% | |||||||||
Iowa Finance Authority, Revenue Bonds, Refunding (Iowa Fertilizer Co.) | 3.13 | 12/1/2022 | 665,000 | 677,767 | |||||
Kansas - .5% | |||||||||
Kansas Development Finance Authority, Revenue Bonds (Village Shalom Project) Ser. B | 4.00 | 11/15/2025 | 475,000 | 477,170 |
8
Description | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
Long-Term Municipal Investments - 93.1% (continued) | |||||||||
Kentucky - 1.2% | |||||||||
Louisville & Jefferson County Metropolitan Government, Revenue Bonds (Norton Healthcare Obligated Group) Ser. C | 5.00 | 10/1/2026 | 1,000,000 | 1,218,836 | |||||
Maryland - 1.2% | |||||||||
Maryland Health & Higher Educational Facilities Authority, Revenue Bonds, Refunding (University of Maryland Medical System Obligated Group) Ser. B | 5.00 | 7/1/2032 | 1,000,000 | 1,208,686 | |||||
Massachusetts - 4.5% | |||||||||
Massachusetts Development Finance Agency, Revenue Bonds, Refunding (Suffolk University) | 5.00 | 7/1/2028 | 1,000,000 | 1,226,386 | |||||
Massachusetts Educational Financing Authority, Revenue Bonds, Ser. B | 5.00 | 7/1/2026 | 1,000,000 | 1,197,804 | |||||
Massachusetts Educational Financing Authority, Revenue Bonds, Ser. B | 5.00 | 7/1/2026 | 1,200,000 | 1,437,365 | |||||
Massachusetts Port Authority, Revenue Bonds, Refunding (Bosfuel Project) Ser. A | 5.00 | 7/1/2032 | 500,000 | 621,776 | |||||
4,483,331 | |||||||||
Michigan - 1.1% | |||||||||
Michigan Finance Authority, Revenue Bonds, Refunding (Great Lakes Water Authority) (Insured; Assured Guaranty Municipal Corp.) Ser. C3 | 5.00 | 7/1/2030 | 1,000,000 | 1,139,984 | |||||
Minnesota - .9% | |||||||||
Duluth Independent School District No. 709, COP, Refunding, Ser. B | 5.00 | 2/1/2024 | 800,000 | 892,875 | |||||
Missouri - 1.2% | |||||||||
Missouri Health & Educational Facilities Authority, Revenue Bonds, Refunding (St. Luke's Health System Obligated Group) | 5.00 | 11/15/2027 | 1,000,000 | 1,208,931 | |||||
Multi-State - 1.3% | |||||||||
Federal Home Loan Mortgage Corp. Multifamily Variable Rate Certificates, Revenue Bonds, Ser. M048 | 3.15 | 1/15/2036 | 1,195,000 | b | 1,308,091 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
Long-Term Municipal Investments - 93.1% (continued) | |||||||||
New Jersey - 6.2% | |||||||||
New Jersey Economic Development Authority, Revenue Bonds, Refunding (Port Newark Container Terminal Project) | 5.00 | 10/1/2023 | 1,000,000 | 1,089,553 | |||||
New Jersey Economic Development Authority, Revenue Bonds, Refunding, Ser. XX | 5.00 | 6/15/2026 | 1,000,000 | 1,165,030 | |||||
New Jersey Higher Education Student Assistance Authority, Revenue Bonds, Ser. 2015-1A | 5.00 | 12/1/2024 | 1,000,000 | 1,152,261 | |||||
New Jersey Transportation Trust Fund Authority, Revenue Bonds | 5.00 | 6/15/2029 | 1,120,000 | 1,399,981 | |||||
The Camden County Improvement Authority, Revenue Bonds, Refunding (Rowan University Foundation Project) (Insured; Build America Mutual) Ser. A | 5.00 | 7/1/2032 | 500,000 | 641,250 | |||||
Tobacco Settlement Financing Corp., Revenue Bonds, Refunding, Ser. B | 3.20 | 6/1/2027 | 735,000 | 754,022 | |||||
6,202,097 | |||||||||
New York - 9.3% | |||||||||
New York City, GO, Ser. C | 5.00 | 8/1/2032 | 400,000 | 521,784 | |||||
New York City, GO, Ser. D2 | 3.86 | 12/1/2028 | 2,000,000 | 2,250,399 | |||||
New York State Dormitory Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. A | 5.00 | 10/1/2030 | 1,000,000 | 1,267,418 | |||||
New York State Dormitory Authority, Revenue Bonds, Refunding (Orange Regional Medical Center Obligated Group) | 5.00 | 12/1/2027 | 800,000 | b | 959,703 | ||||
New York State Urban Development Corp., Revenue Bonds, Refunding, Ser. B | 2.67 | 3/15/2023 | 1,000,000 | 1,040,890 | |||||
Niagara Area Development Corp., Revenue Bonds, Refunding (Covanta Holding Project) Ser. B | 3.50 | 11/1/2024 | 1,000,000 | b | 1,040,482 | ||||
TSASC, Revenue Bonds, Refunding, Ser. A | 5.00 | 6/1/2032 | 1,000,000 | 1,218,540 | |||||
TSASC, Revenue Bonds, Refunding, Ser. B | 5.00 | 6/1/2022 | 1,000,000 | 1,039,693 | |||||
9,338,909 | |||||||||
Oklahoma - 1.0% | |||||||||
Oklahoma Development Finance Authority, Revenue Bonds (Gilcrease Developers) | 1.63 | 7/6/2023 | 1,000,000 | 1,004,981 |
10
Description | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
Long-Term Municipal Investments - 93.1% (continued) | |||||||||
Oregon - .6% | |||||||||
Medford Hospital Facilities Authority, Revenue Bonds, Refunding (Asante Project) Ser. A | 5.00 | 8/15/2029 | 500,000 | 645,419 | |||||
Pennsylvania - 10.5% | |||||||||
Commonwealth Financing Authority, Revenue Bonds | 5.00 | 6/1/2028 | 1,000,000 | 1,262,215 | |||||
Luzerne County Industrial Development Authority, Revenue Bonds, Refunding (Pennsylvania-American Water Co.) | 2.45 | 12/3/2029 | 1,500,000 | 1,605,730 | |||||
Montgomery County Industrial Development Authority, Revenue Bonds, Refunding (ACTS Retirement-Life Communities Obligated Group) | 5.00 | 11/15/2036 | 1,000,000 | 1,158,463 | |||||
Pennsylvania Higher Educational Facilities Authority, Revenue Bonds, Refunding (Insured; Assured Guaranty Municipal Corp.) Ser. AX | 5.00 | 6/15/2028 | 500,000 | 636,716 | |||||
Pennsylvania Housing Finance Agency, Revenue Bonds, Refunding, Ser. 114A | 3.35 | 10/1/2026 | 1,000,000 | 1,012,446 | |||||
Philadelphia Airport, Revenue Bonds, Refunding, Ser. B | 5.00 | 7/1/2027 | 1,000,000 | 1,226,517 | |||||
Philadelphia Gas Works, Revenue Bonds (Insured; Assured Guaranty Municipal Corp.) Ser. A | 5.00 | 8/1/2030 | 750,000 | 980,872 | |||||
Philadelphia Gas Works, Revenue Bonds (Insured; Assured Guaranty Municipal Corp.) Ser. A | 5.00 | 8/1/2026 | 600,000 | 728,124 | |||||
Philadelphia Water & Wastewater, Revenue Bonds, Refunding | 5.00 | 10/1/2033 | 500,000 | 659,206 | |||||
The School District of Philadelphia, GO (Insured; State Aid Withholding) Ser. A | 5.00 | 9/1/2027 | 1,000,000 | 1,223,920 | |||||
10,494,209 | |||||||||
Rhode Island - 2.6% | |||||||||
Rhode Island Student Loan Authority, Revenue Bonds, Ser. A | 5.00 | 12/1/2025 | 1,250,000 | 1,468,112 | |||||
Rhode Island Tobacco Settlement Financing Corp., Revenue Bonds, Refunding, Ser. A | 5.00 | 6/1/2026 | 1,000,000 | 1,178,914 | |||||
2,647,026 | |||||||||
Tennessee - 2.7% | |||||||||
Tennessee Energy Acquisition Corp., Revenue Bonds, Ser. A | 5.25 | 9/1/2026 | 1,120,000 | 1,360,391 |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity Date | Principal Amount ($) | Value ($) | |||||
Long-Term Municipal Investments - 93.1% (continued) | |||||||||
Tennessee - 2.7% (continued) | |||||||||
Tennessee Energy Acquisition Corp., Revenue Bonds, Ser. A | 4.00 | 5/1/2023 | 1,250,000 | 1,335,617 | |||||
2,696,008 | |||||||||
Texas - 7.7% | |||||||||
Central Texas Regional Mobility Authority, Revenue Bonds, Refunding | 5.00 | 1/1/2027 | 1,250,000 | 1,485,010 | |||||
Central Texas Regional Mobility Authority, Revenue Bonds, Ser. A | 5.00 | 1/1/2031 | 1,175,000 | 1,353,370 | |||||
Clifton Higher Education Finance Corp., Revenue Bonds (IDEA Public Schools) (Insured; Permanent School Fund Guarantee Program) | 4.00 | 8/15/2032 | 500,000 | 604,337 | |||||
Clifton Higher Education Finance Corp., Revenue Bonds, Ser. D | 5.75 | 8/15/2033 | 1,000,000 | 1,157,199 | |||||
Harris County-Houston Sports Authority, Revenue Bonds, Refunding, Ser. A | 5.00 | 11/15/2029 | 750,000 | 839,782 | |||||
Love Field Airport Modernization Corp., Revenue Bonds | 5.00 | 11/1/2027 | 1,000,000 | 1,188,060 | |||||
Mission Economic Development Corp., Revenue Bonds, Refunding (Natgasoline Project) | 4.63 | 10/1/2031 | 1,000,000 | b | 1,062,889 | ||||
7,690,647 | |||||||||
Virginia - 1.0% | |||||||||
Virginia Small Business Financing Authority, Revenue Bonds (95 Express Lanes) | 5.00 | 7/1/2034 | 1,000,000 | 1,030,415 | |||||
Washington - 1.8% | |||||||||
Port of Seattle, Revenue Bonds | 5.00 | 4/1/2027 | 1,000,000 | 1,223,153 | |||||
Spokane Water & Wastewater, Revenue Bonds (Green Bond) | 4.00 | 12/1/2031 | 500,000 | 557,868 | |||||
1,781,021 | |||||||||
Total Long-Term Municipal Investments | 93,529,045 | ||||||||
Total Investments (cost $93,445,403) | 98.9% | 99,304,689 | |||||||
Cash and Receivables (Net) | 1.1% | 1,104,717 | |||||||
Net Assets | 100.0% | 100,409,406 |
a Variable rate security—Interest rate resets periodically and rate shown is the interest rate in effect at period end. Security description also includes the reference rate and spread if published and available.
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, 2021, these securities were valued at $7,134,685 or 7.11% of net assets.
12
Portfolio Summary (Unaudited) † | Value (%) |
Education | 13.9 |
Medical | 13.8 |
General | 13.4 |
Transportation | 10.2 |
Water | 6.3 |
Airport | 6.2 |
Tobacco Settlement | 5.4 |
Student Loan | 5.2 |
General Obligation | 4.3 |
Development | 4.0 |
Nursing Homes | 2.9 |
Utilities | 2.8 |
Banks | 2.1 |
Power | 1.4 |
Asset-Backed | 1.4 |
Multifamily Housing | 1.3 |
School District | 1.2 |
Facilities | 1.1 |
Pollution | 1.0 |
Single Family Housing | 1.0 |
98.9 |
† Based on net assets.
See notes to financial statements.
13
Summary of Abbreviations (Unaudited) | |||
ABAG | Association of Bay Area Governments | AGC | ACE Guaranty Corporation |
AGIC | Asset Guaranty Insurance Company | AMBAC | American Municipal Bond Assurance Corporation |
BAN | Bond Anticipation Notes | CIFG | CDC Ixis Financial Guaranty |
COP | Certificate of Participation | CP | Commercial Paper |
DRIVERS | Derivative Inverse Tax-Exempt Receipts | FGIC | Financial Guaranty Insurance Company |
FHA | Federal Housing Administration | FHLB | Federal Home Loan Bank |
FHLMC | Federal Home Loan Mortgage Corporation | FNMA | Federal National Mortgage Association |
GAN | Grant Anticipation Notes | GIC | Guaranteed Investment Contract |
GNMA | Government National Mortgage Association | GO | General Obligation |
IDC | Industrial Development Corporation | LIBOR | London Interbank Offered Rate |
LOC | Letter of Credit | LR | Lease Revenue |
NAN | Note Anticipation Notes | MFHR | Multi-Family Housing Revenue |
MFMR | Multi-Family Mortgage Revenue | MUNIPSA | Securities Industry and Financial Markets Association Municipal Swap Index Yield |
OBFR | Overnight Bank Funding Rate | PILOT | Payment in Lieu of Taxes |
PRIME | Prime Lending Rate | PUTTERS | Puttable Tax-Exempt Receipts |
RAC | Revenue Anticipation Certificates | RAN | Revenue Anticipation Notes |
RIB | Residual Interest Bonds | SFHR | Single Family Housing Revenue |
SFMR | Single Family Mortgage Revenue | SOFR | Secured Overnight Financing Rate |
TAN | Tax Anticipation Notes | TRAN | Tax and Revenue Anticipation Notes |
U.S. T-Bill | U.S. Treasury Bill Money Market Yield | XLCA | XL Capital Assurance |
See notes to financial statements.
14
STATEMENT OF ASSETS AND LIABILITIES
March 31, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments | 93,445,403 |
| 99,304,689 |
| ||
Cash |
|
|
|
| 123,628 |
|
Interest receivable |
| 1,125,326 |
| |||
Prepaid expenses |
|
|
|
| 38,734 |
|
|
|
|
|
| 100,592,377 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 29,582 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 99,070 |
| |||
Trustees’ fees and expenses payable |
| 3,021 |
| |||
Other accrued expenses |
|
|
|
| 51,298 |
|
|
|
|
|
| 182,971 |
|
Net Assets ($) |
|
| 100,409,406 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 93,543,125 |
|
Total distributable earnings (loss) |
|
|
|
| 6,866,281 |
|
Net Assets ($) |
|
| 100,409,406 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 3,656,451 | 49,656 | 96,702,309 | 990 |
|
Shares Outstanding | 163,582 | 2,220 | 4,322,709 | 44.28 |
|
Net Asset Value Per Share ($) | 22.35 | 22.37 | 22.37 | 22.36 |
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
|
15
STATEMENT OF OPERATIONS
Six Months Ended March 31, 2021 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Interest Income |
|
| 1,477,899 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 219,306 |
| ||
Professional fees |
|
| 45,206 |
| ||
Administration fee—Note 3(a) |
|
| 32,897 |
| ||
Registration fees |
|
| 32,567 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 8,498 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 7,642 |
| ||
Prospectus and shareholders’ reports |
|
| 4,158 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 2,661 |
| ||
Loan commitment fees—Note 2 |
|
| 2,351 |
| ||
Custodian fees—Note 3(c) |
|
| 1,720 |
| ||
Distribution fees—Note 3(b) |
|
| 285 |
| ||
Miscellaneous |
|
| 11,660 |
| ||
Total Expenses |
|
| 368,951 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (101,927) |
| ||
Less—reduction in fees due to earnings credits—Note 3(c) |
|
| (1,718) |
| ||
Net Expenses |
|
| 265,306 |
| ||
Investment Income—Net |
|
| 1,212,593 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 980,237 |
| ||||
Net change in unrealized appreciation (depreciation) on investments | (130,830) |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 849,407 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 2,062,000 |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
16
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 1,212,593 |
|
|
| 3,286,826 |
| |
Net realized gain (loss) on investments |
| 980,237 |
|
|
| 6,230,638 |
| ||
Net change in unrealized appreciation |
| (130,830) |
|
|
| (6,156,088) |
| ||
Net Increase (Decrease) in Net Assets | 2,062,000 |
|
|
| 3,361,376 |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (159,927) |
|
|
| (185,222) |
| |
Class C |
|
| (3,600) |
|
|
| (6,353) |
| |
Class I |
|
| (4,778,274) |
|
|
| (7,324,701) |
| |
Class Y |
|
| (9,352) |
|
|
| (14,947) |
| |
Total Distributions |
|
| (4,951,153) |
|
|
| (7,531,223) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 134,459 |
|
|
| 825,856 |
| |
Class C |
|
| - |
|
|
| 39,016 |
| |
Class I |
|
| 7,158,830 |
|
|
| 13,902,471 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 157,616 |
|
|
| 179,366 |
| |
Class C |
|
| 3,194 |
|
|
| 5,865 |
| |
Class I |
|
| 4,608,845 |
|
|
| 6,674,188 |
| |
Class Y |
|
| - |
|
|
| 537 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (289,891) |
|
|
| (1,628,684) |
| |
Class C |
|
| (47,268) |
|
|
| (84,828) |
| |
Class I |
|
| (21,954,058) |
|
|
| (174,036,128) |
| |
Class Y |
|
| (251,578) |
|
|
| - |
| |
Increase (Decrease) in Net Assets | (10,479,851) |
|
|
| (154,122,341) |
| |||
Total Increase (Decrease) in Net Assets | (13,369,004) |
|
|
| (158,292,188) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 113,778,410 |
|
|
| 272,070,598 |
| |
End of Period |
|
| 100,409,406 |
|
|
| 113,778,410 |
|
17
STATEMENT OF CHANGES IN NET ASSETS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class A |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 5,952 |
|
|
| 36,145 |
| |
Shares issued for distributions reinvested |
|
| 7,004 |
|
|
| 7,877 |
| |
Shares redeemed |
|
| (12,795) |
|
|
| (69,865) |
| |
Net Increase (Decrease) in Shares Outstanding | 161 |
|
|
| (25,843) |
| |||
Class C |
|
|
|
|
|
|
|
| |
Shares sold |
|
| - |
|
|
| 1,699 |
| |
Shares issued for distributions reinvested |
|
| 142 |
|
|
| 258 |
| |
Shares redeemed |
|
| (2,100) |
|
|
| (3,772) |
| |
Net Increase (Decrease) in Shares Outstanding | (1,958) |
|
|
| (1,815) |
| |||
Class I |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 313,363 |
|
|
| 605,211 |
| |
Shares issued for distributions reinvested |
|
| 204,574 |
|
|
| 292,430 |
| |
Shares redeemed |
|
| (970,517) |
|
|
| (7,469,456) |
| |
Net Increase (Decrease) in Shares Outstanding | (452,580) |
|
|
| (6,571,815) |
| |||
Class Y |
|
|
|
|
|
|
|
| |
Shares issued for distributions reinvested |
|
| - |
|
|
| 23 |
| |
Shares redeemed |
|
| (11,175) |
|
|
| - |
| |
Net Increase (Decrease) in Shares Outstanding | (11,175) |
|
|
| 23 |
| |||
|
|
|
|
|
|
|
|
|
|
See notes to financial statements. |
18
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. These figures have been derived from the fund’s financial statements.
Six Months Ended | |||||||||
March 31, 2021 | Year Ended September 30, | ||||||||
Class A Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | |||
Per Share Data ($): | |||||||||
Net asset value, beginning of period | 22.95 | 23.53 | 22.46 | 23.05 | 23.43 | 23.00 | |||
Investment Operations: | |||||||||
Investment income—neta | .22 | .49 | .51 | .49 | .48 | .49 | |||
Net realized and unrealized | .15 | .20 | 1.08 | (.57) | (.35) | .51 | |||
Total from Investment Operations | .37 | .69 | 1.59 | (.08) | .13 | 1.00 | |||
Distributions: | |||||||||
Dividends from Investment | (.22) | (.49) | (.51) | (.48) | (.47) | (.48) | |||
Dividends from net realized gain | (.75) | (.78) | (.01) | (.03) | (.04) | (.09) | |||
Total Distributions | (.97) | (1.27) | (.52) | (.51) | (.51) | (.57) | |||
Net asset value, end of period | 22.35 | 22.95 | 23.53 | 22.46 | 23.05 | 23.43 | |||
Total Return (%)b | 1.63c | 3.09 | 7.17 | (.36) | .59 | 4.40 | |||
Ratios/Supplemental Data (%): | |||||||||
Ratio of total expenses | .96d | .94 | .88 | .85 | .85 | .88 | |||
Ratio of net expenses | .72d | .70 | .70 | .70 | .70 | .70 | |||
Ratio of net investment income | 1.97d | 2.17 | 2.24 | 2.10 | 2.08 | 2.07 | |||
Portfolio Turnover Rate | 4.90c | 16.34 | 29.19 | 31.75 | 20.30 | 29.16 | |||
Net Assets, end of period ($ x 1,000) | 3,656 | 3,750 | 4,454 | 6,469 | 16,714 | 5,551 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
19
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||||
March 31, 2021 | Year Ended September 30, | ||||||||
Class C Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | |||
Per Share Data ($): | |||||||||
Net asset value, beginning of period | 22.96 | 23.54 | 22.47 | 23.06 | 23.43 | 23.00 | |||
Investment Operations: | |||||||||
Investment income—neta | .14 | .32 | .34 | .29 | .30 | .31 | |||
Net realized and unrealized | .16 | .20 | 1.08 | (.54) | (.33) | .51 | |||
Total from Investment Operations | .30 | .52 | 1.42 | (.25) | (.03) | .82 | |||
Distributions: | |||||||||
Dividends from investment | (.14) | (.32) | (.34) | (.31) | (.30) | (.30) | |||
Dividends from net realized gain | (.75) | (.78) | (.01) | (.03) | (.04) | (.09) | |||
Total Distributions | (.89) | (1.10) | (.35) | (.34) | (.34) | (.39) | |||
Net asset value, end of period | 22.37 | 22.96 | 23.54 | 22.47 | 23.06 | 23.43 | |||
Total Return (%)b | 1.30c | 2.32 | 6.36 | (1.12) | (.11) | 3.62 | |||
Ratios/Supplemental Data (%): | |||||||||
Ratio of total expenses | 2.67d | 2.34 | 2.02 | 1.84 | 1.64 | 1.70 | |||
Ratio of net expenses | 1.47d | 1.44 | 1.45 | 1.45 | 1.45 | 1.45 | |||
Ratio of net investment income | 1.21d | 1.45 | 1.49 | 1.33 | 1.34 | 1.32 | |||
Portfolio Turnover Rate | 4.90c | 16.34 | 29.19 | 31.75 | 20.30 | 29.16 | |||
Net Assets, end of period ($ x 1,000) | 50 | 96 | 141 | 191 | 585 | 754 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
20
Six Months Ended | |||||||
March 31, 2021 | Year Ended September 30, | ||||||
Class I Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 22.97 | 23.55 | 22.48 | 23.07 | 23.44 | 23.01 | |
Investment Operations: | |||||||
Investment income—neta | .25 | .54 | .57 | .54 | .53 | .54 | |
Net realized and unrealized | .15 | .21 | 1.08 | (.56) | (.33) | .51 | |
Total from Investment Operations | .40 | .75 | 1.65 | (.02) | .20 | 1.05 | |
Distributions: | |||||||
Dividends from Investment | (.25) | (.55) | (.57) | (.54) | (.53) | (.53) | |
Dividends from net realized gain | (.75) | (.78) | (.01) | (.03) | (.04) | (.09) | |
Total Distributions | (1.00) | (1.33) | (.58) | (.57) | (.57) | (.62) | |
Net asset value, end of period | 22.37 | 22.97 | 23.55 | 22.48 | 23.07 | 23.44 | |
Total Return (%) | 1.76b | 3.35 | 7.48 | (.10) | .84 | 4.65 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | .66c | .65 | .55 | .55 | .56 | .57 | |
Ratio of net expenses | .47c | .45 | .45 | .45 | .45 | .45 | |
Ratio of net investment income | 2.22c | 2.43 | 2.49 | 2.36 | 2.33 | 2.32 | |
Portfolio Turnover Rate | 4.90b | 16.34 | 29.19 | 31.75 | 20.30 | 29.16 | |
Net Assets, end of period ($ x 1,000) | 96,702 | 109,675 | 267,212 | 262,833 | 248,973 | 217,617 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
21
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||
March 31, 2021 | Year Ended September 30, | |||||||
Class Y Shares | (Unaudited) | 2020 | 2019 | 2018 | 2017 | 2016 | ||
Per Share Data ($): | ||||||||
Net asset value, beginning of period | 22.96 | 23.55 | 22.48 | 23.06 | 23.43 | 23.00 | ||
Investment Operations: | ||||||||
Investment income—neta | .28 | .56 | .57 | .54 | .54 | .54 | ||
Net realized and unrealized | .12 | .18 | 1.08 | (.55) | (.34) | .51 | ||
Total from Investment Operations | .40 | .74 | 1.65 | (.01) | .20 | 1.05 | ||
Distributions: | ||||||||
Dividends from Investment | (.25) | (.55) | (.57) | (.54) | (.53) | (.53) | ||
Dividends from net realized gain | (.75) | (.78) | (.01) | (.03) | (.04) | (.09) | ||
Total Distributions | (1.00) | (1.33) | (.58) | (.57) | (.57) | (.62) | ||
Net asset value, end of period | 22.36 | 22.96 | 23.55 | 22.48 | 23.06 | 23.43 | ||
Total Return (%) | 1.78b | 3.31 | 7.48 | (.11) | .88 | 4.66 | ||
Ratios/Supplemental Data (%): | ||||||||
Ratio of total expenses | .69c | .67 | .57 | .56 | .55 | .57 | ||
Ratio of net expenses | .47c | .45 | .45 | .45 | .45 | .45 | ||
Ratio of net investment income | 2.16c | 2.43 | 2.49 | 2.35 | 2.33 | 2.32 | ||
Portfolio Turnover Rate | 4.90b | 16.34 | 29.19 | 31.75 | 20.30 | 29.16 | ||
Net Assets, end of period ($ x 1,000) | 1 | 258 | 264 | 507 | 6,980 | 995 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
22
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Tax Sensitive Total Return Bond Fund (the “fund”) is a separate non-diversified series of BNY Mellon Investment Funds I (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering seven series, including the fund. The fund’s investment objective is to seek a high after-tax total return. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Mellon Investments Corporation (the “Sub-Adviser”), a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser, serves as the fund’s sub-investment adviser.
On February 10, 2021, BNY Mellon Investment Management announced its intention to realign several of its investment firms. As a result of this realignment, which is scheduled to occur, subject to regulatory requirements, in the third quarter of 2021 (the “Effective Date”), portfolio managers responsible for managing the fund’s investments as employees of the Sub-Adviser will become employees of Insight North America LLC (“INA”), which, like the Sub-Adviser, will be an affiliate of the Adviser, and will no longer be employees of the Sub-Adviser. Consequently, effective as of the Effective Date and subject to the approval of the Trust’s Board of Trustees (the “Board”), the Adviser will engage INA to serve as the fund’s sub-adviser, pursuant to a sub-investment advisory agreement between the Adviser and INA, replacing the Sub-Adviser. As the fund’s sub-adviser, INA will provide the day-to-day management of the fund’s investments, subject to the Adviser’s supervision and approval. It is currently anticipated that the fund’s portfolio managers who are responsible for the day-to-day management of the fund’s investments will continue to manage the fund’s investments as of the Effective Date. It is also currently anticipated that there will be no material changes to the fund’s investment objective, strategies or policies, no reduction in the nature or level of services provided to the fund, and no increase in the management fee payable by the fund as a result of the engagement of INA as the fund’s sub-adviser. As is the case under the sub-investment advisory agreement between the Adviser and Sub-Adviser, the Adviser (and not the fund) will pay INA for its sub-advisory services. The rate of sub-investment advisory fee payable by the Adviser to INA will be the same as that currently payable by the Adviser to the Sub-Adviser pursuant to the respective sub-investment advisory agreements. In addition, all other
23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
material terms and conditions of the proposed sub-investment advisory agreement between the Adviser and INA will be substantially similar to those of the sub-investment advisory agreement between the Adviser and Sub-Adviser.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C, Class I and Class Y. Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class A shares bought without an initial sales charge as part of an investment of $1 million or more may be charged a contingent deferred sales charge (“CDSC”) of 1.00% if redeemed within one year. Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares eight years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and 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
24
authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Trust enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
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.
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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:
Registered investment companies that are not traded on an exchange are valued at their net asset value and are generally categorized within Level 1 of the fair value hierarchy.
Investments in debt securities, excluding short-term investments (other than U.S. Treasury Bills), are valued each business day by one or more independent pricing services (each, a “Service”) approved by the Board. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of a Service are valued at the mean between the quoted bid prices (as obtained by a Service from dealers in such securities) and asked prices (as calculated by a Service based upon its evaluation of the market for such securities). Securities are valued as determined by a Service, based on methods which include consideration of the following: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. These securities are generally categorized within Level 2 of the fair value hierarchy.
Each Service and independent valuation firm is engaged under the general oversight of the Board.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of March 31, 2021 in valuing the fund’s investments:
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Level 1-Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | Level 3-Significant Unobservable Inputs | Total | |||
Assets ($) | ||||||
Investments In Securities:† | ||||||
Asset-Backed | - | 1,401,411 | - | 1,401,411 | ||
Corporate Bonds | - | 4,374,233 | - | 4,374,233 | ||
Municipal Securities | - | 93,529,045 | - | 93,529,045 |
† See Statement of Investments for additional detailed categorizations, if any.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when issued or delayed delivery basis may be settled a month or more after the trade date.
(c) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
The fund invests primarily in debt securities. Failure of an issuer of the debt securities to make timely interest or principal payments, or a decline or the perception of a decline in the credit quality of a debt security, can
27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
cause the debt security’s price to fall, potentially lowering the fund’s share price. In addition, the value of debt securities may decline due to general market conditions that are not specifically related to a particular issuer, such as real or perceived adverse economic conditions, changes in outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment. Such values may also decline because of factors that affect a particular industry.
(d) Dividends and distributions to shareholders: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, which can distribute tax-exempt dividends, by complying with the applicable provisions of the Code, and to make distributions of income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended March 31, 2021, 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, 2021, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended September 30, 2020 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, 2020 was as follows: tax-exempt income $2,958,583, ordinary income $1,452,801 and long-term capital gains $3,119,839. The tax character of current year distributions will be determined at the end of the current fiscal year.
(f) New accounting pronouncements: In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), and in January 2021, the FASB issued Accounting Standards Update 2021-01, Reference Rate Reform (Topic
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848): Scope (“ASU 2021-01”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates as of the end of 2021. The temporary relief provided by ASU 2020-04 and ASU 2021-01 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 and ASU 2021-01 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform. Management is also currently actively working with other financial institutions and counterparties to modify contracts as required by applicable regulation and within the regulatory deadlines.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $688.5 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $135 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended March 31, 2021, the fund did not borrow under the Facilities.
NOTE 3—Investment Advisory Fee, Sub-Investment Advisory Fee, Administration Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with the Adviser, the fund has agreed to pay an investment advisory fee at the annual rate of .40% of the value of the fund’s average daily net assets and is payable monthly. The Adviser had contractually agreed, from October 1, 2020 through January 31, 2021, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the direct expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) did not exceed .45% of
29
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
the value of the fund’s average daily net assets. The Adviser has contractually agreed, from February 1, 2021 through February 1, 2022, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the direct expenses of none of the classes (excluding expenses describe above) exceed .50% of the value of the fund’s average daily net assets. On or after February 1, 2022, the Adviser. may terminate this expense limitation agreement at any time. The reduction in expenses, pursuant to the undertaking, amounted to $101,927 during the year ended March 31, 2021.
Pursuant to a sub-investment advisory agreement between the Adviser and the Sub-Adviser, the Sub-Adviser serves as the fund’s sub-investment adviser responsible for the day-to-day management of the fund’s portfolio. The Adviser pays the sub-investment adviser a monthly fee at an annual percentage of the value of the fund’s average daily net asset. The Adviser has obtained an exemptive order from the SEC (the “Order”), upon which the fund may rely, to use a manager of managers approach that permits the Adviser, subject to certain conditions and approval by the Board, to enter into and materially amend sub-investment advisory agreements with one or more sub-investment advisers who are either unaffiliated with the Adviser or are wholly-owned subsidiaries (as defined under the Act) of the Adviser’s ultimate parent company, BNY Mellon, without obtaining shareholder approval. The Order also allows the fund to disclose the sub-investment advisory fee paid by the Adviser to any unaffiliated sub-investment adviser in the aggregate with other unaffiliated sub-investment advisers in documents filed with the SEC and provided to shareholders. In addition, pursuant to the Order, it is not necessary to disclose the sub-investment advisory fee payable by the Adviser separately to a sub-investment adviser that is a wholly-owned subsidiary of BNY Mellon in documents filed with the SEC and provided to shareholders; such fees are to be aggregated with fees payable to the Adviser. The Adviser has ultimate responsibility (subject to oversight by the Board) to supervise any sub-investment adviser and recommend the hiring, termination, and replacement of any sub-investment adviser to the Board.
The fund has a Fund Accounting and Administrative Services Agreement (the “Administration Agreement”) with the Adviser, whereby the Adviser performs administrative, accounting and recordkeeping services for the fund. The fund has agreed to compensate the Adviser for providing accounting and recordkeeping services, administration, compliance monitoring, regulatory and shareholder reporting, as well as related facilities, equipment and clerical help. The fee is based on the fund’s average daily net assets and computed at the following annual rates: .06%
30
of the first $500 million, .04% of the next $500 million and .02% in excess of $1 billion.
In addition, after applying any expense limitations or fee waivers that reduce the fees paid to the Adviser for this service, the Adviser has contractually agreed in writing to waive any remaining fees for this service to the extent that they exceed both the Adviser’ costs in providing these services and a reasonable allocation of the costs incurred by the Adviser and its affiliates related to the support and oversight of these services. The fund also reimburses the Adviser for the out-of-pocket expenses incurred in performing this service for the fund. Pursuant to the Administration Agreement, the fund was charged $32,897 during the period ended March 31, 2021.
(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, 2021, Class C shares were charged $285 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, 2021, Class A and Class C shares were charged $4,684 and $95, 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 transfer agent net earnings credits, if any, as shareholder servicing costs and includes custody
31
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
net earnings credits, if any, as an expense offset in the in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, 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, 2021, the fund was charged $1,914 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended March 31, 2021, the fund was charged $1,720 pursuant to the custody agreement. These fees were partially offset by earnings credits of $1,718.
During the period ended March 31, 2021, the fund was charged $7,642 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees of $34,555, administration fees of $5,183, Distribution Plan fees of $32, Shareholder Services Plan fees of $786, custodian fees of $908, Chief Compliance Officer fees of $3,931 and transfer agency fees of $819, which are offset against an expense reimbursement currently in effect in the amount of $16,632.
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of investment securities, excluding short-term securities, during the period ended March 31, 2021, amounted to $5,263,818 and $18,582,200, respectively.
At March 31, 2021, accumulated net unrealized appreciation on investments was $5,859,286, consisting of $5,887,404 gross unrealized appreciation and $28,118 gross unrealized depreciation.
32
At March 31, 2021, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
33
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 24-25, 2021, the Board considered the renewal of the fund’s Investment Advisory Agreement and Administration Agreement, pursuant to which BNY Mellon Investment Adviser provides the fund with investment advisory services and administrative services (together, the “Agreement”), and the Sub-Investment Advisory Agreement (together, the “Agreements”), pursuant to which Mellon Investments Corporation (the “Subadviser”) provides day-to-day management of the fund’s investments. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser and the Subadviser. In considering the renewal of the Agreements, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s supervisory activities over the Subadviser.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data based on classifications provided by Thomson Reuters Lipper, which included information comparing (1) the performance of the fund’s Class I shares with the performance of a group of all institutional intermediate municipal debt funds selected by Broadridge as comparable to the fund (the “Performance Group”) and with a broader group of funds consisting of all retail and institutional intermediate municipal debt funds (the “Performance Universe”), all for various periods ended December 31, 2020, and (2) the
34
fund’s actual and contractual management fees and total expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of institutional intermediate municipal debt funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Performance Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser and the Subadviser the results of the comparisons and considered that the fund’s total return performance was below the Performance Group median and at or above the Performance Universe median for all periods. The Board also considered that the fund’s yield performance was at or above the Performance Group and above the Performance Universe medians for six of the ten one-year periods ended December 31st. The Board considered the relative proximity of the fund’s performance to the Performance Group and/or Performance Universe medians in certain periods when performance was below median. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in six of the ten calendar years shown.
Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate (i.e., the aggregate of the investment advisory and administration fees pursuant to the Agreement) payable by the fund to the Adviser in light of the nature, extent and quality of the management and sub-advisory services provided by the Adviser and the Subadviser, respectively. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year which included reductions for a fee waiver arrangement in place that reduced the investment advisory fee paid to the Adviser. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was equal to the Expense Group median contractual management fee, the fund’s actual management fee was lower than the Expense Group median and Expense Universe median actual management fee and the fund’s total expenses were lower than the Expense Group median and Expense Universe median total expenses.
Representatives of the Adviser stated that the Adviser has contractually agreed, until February 1, 2022, to waive receipt of its fees and/or assume the direct expenses of the fund so that the direct expenses of none of its classes (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on
35
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY, ADMINISTRATION AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
borrowings and extraordinary expenses) exceed .50% of the fund’s average daily net assets.
Representatives of the Adviser reviewed with the Board the management or investment advisory fees paid by funds advised or administered by the Adviser that are in the same Lipper category as the fund (the “Similar Funds”), and explained the nature of the Similar Funds. 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 Funds to evaluate the appropriateness of the fund’s management fee. Representatives of the Adviser noted that there were no separate accounts and/or other types of client portfolios advised by the Adviser that are considered to have similar investment strategies and policies as the fund.
The Board considered the fee to the Subadviser in relation to the fee paid to the Adviser by the fund and the respective services provided by the Subadviser and the Adviser. The Board also took into consideration that the Subadviser’s fee is paid by the Adviser (out of its fee from the fund) and not the fund.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also considered the expense limitation arrangement and its effect on the profitability of the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the mix of services provided by the Adviser and the Subadviser, including the nature, extent and quality of such services, supported the renewal of the Agreements and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Since the Adviser, and not the fund, pays the Subadviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Subadviser’s profitability to be relevant to its deliberations. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the
36
extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser and the Subadviser from acting as investment adviser and sub-investment adviser, respectively, and took into consideration that there were no soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreements. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by the Adviser and the Subadviser are adequate and appropriate.
· The Board generally was satisfied with the fund’s overall performance.
· The Board concluded that the fees paid to the Adviser and the Subadviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates and the Subadviser, of the Adviser and the Subadviser and the services provided to the fund by the Adviser and the Subadviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreements, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
37
BNY Mellon Tax Sensitive Total Return Bond Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Mellon Investments Corporation
BNY Mellon Center
One Boston Place
Boston, MA 02108-4408
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class A: DSDAX Class C: DSDCX Class I: SDITX Class Y: SDYTX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@bnymellon.com
Internet Information can be viewed online or downloaded at www.im.bnymellon.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-PORT. The fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.im.bnymellon.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2021 BNY Mellon Securities Corporation |
Item 2. | Code of Ethics. |
Not applicable.
Item 3. | Audit Committee Financial Expert. |
Not applicable.
Item 4. | Principal Accountant Fees and Services. |
Not applicable.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
Item 6. | Investments. |
(a) Not applicable.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers. |
Not applicable.
Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no material changes to the procedures applicable to Item 10.
Item 11. | Controls and Procedures. |
(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes to the Registrant's internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
Not applicable.
Item 13. | Exhibits. |
(a)(1) Not applicable.
(a)(3) Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
BNY Mellon Investment Funds I
By: /s/ David DiPetrillo
David DiPetrillo
President (Principal Executive Officer)
Date: May 26, 2021
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/ David DiPetrillo
David DiPetrillo
President (Principal Executive Officer)
Date: May 26, 2021
By: /s/ James Windels
James Windels
Treasurer (Principal Financial Officer)
Date: May 26, 2021
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)