We are pleased to present this semiannual report for Dreyfus Large Cap Equity Fund, covering the six-month period from January 1, 2016 through June 30, 2016. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
Financial markets experienced heightened turbulence over the first half of 2016 when global economic challenges fueled dramatic swings in market sentiment. At the start of the year, investors reacted cautiously to an economic slowdown in China, sluggish growth in Europe, plummeting commodity prices, and rising short-term interest rates in the United States. These worries sparked sharp declines in U.S. and global equity markets, while high-quality bonds gained value as investors flocked to traditional safe havens.
Investor sentiment subsequently rebounded when U.S. monetary policymakers refrained from additional rate hikes, major central banks eased their monetary policies further, and commodity prices improved. Stocks rallied strongly during the spring, recouping earlier losses, and bonds continued to benefit from robust investor demand. Still, by June, uncertainty continued to dominate the capital markets amid worries about Great Britain’s exit from the European Union and disappointing job growth in the United States.
We remain encouraged by the resilience of the stock and bond markets, but we expect volatility to persist until global economic uncertainty abates. In addition, wide differences in underlying fundamental and technical influences across various asset classes, economic sectors, and regional markets suggest that selectivity may be an important determinant of investment success over the second half of 2016. As always, we encourage you to discuss the implications of our observations with your financial advisor.
Thank you for your continued confidence and support.
DISCUSSION OF FUND PERFORMANCE
For the period of January 1, 2016, through June 30, 2016, as provided by Irene D. O’Neill, Portfolio Manager
Market and Fund Performance Overview
For the six-month period ended June 30, 2016, Dreyfus Large Cap Equity Fund’s Class A shares achieved a total return of 0.83%, Class C shares returned 0.44%, Class I shares returned 0.91%, and Class Y shares returned 0.94%.1 In comparison, the fund’s benchmark, the Standard & Poor’s® 500 Composite Stock Price Index (the “S&P 500 Index”), produced a total return of 3.82% for the same period.2
U.S. stocks posted moderately positive total returns, on average, over the first half of 2016, masking heightened market volatility. Investors favored traditionally defensive and higher-yielding stocks. As a result, the stocks of growth companies in which the fund invests generally lagged market averages and caused the fund to produce lower returns than its benchmark.
The Fund’s Investment Approach
The fund seeks to provide long-term capital appreciation. To pursue its goal, the fund normally invests at least 80% of its assets in equity securities of large-capitalization companies with market capitalizations of $5 billion or more at the time of purchase.
The fund invests primarily in large, established companies that we believe have proven track records and the potential for superior relative earnings growth. The investment process begins with a top-down assessment of broad economic, political, and social trends and their implications for different market and industry sectors. Using a bottom-up approach, fundamental research is used to identify companies with characteristics such as: earnings power unrecognized by the market, sustainable revenue and cash flow growth, positive operational and/or financial catalysts, attractive relative value versus history and peers, and strong or improving financial condition.
Risk Aversion Dominated the U.S. Stock Market
Large-cap stocks generally proved volatile over the first half of 2016 as investors grew more averse to risks in light of concerns regarding global economic headwinds. In January 2016, disappointing economic data and stock market turbulence in China sparked severe declines in commodity prices, and investors worried that higher short-term interest rates from the Federal Reserve Board (the “Fed”) might weigh on the domestic economic recovery. Consequently, U.S. stocks fell sharply at the start of the year.
The market’s slide continued into February, but relatively strong U.S. economic data and better-than-expected corporate earnings helped trigger a rebound later in the month. The rally continued through the spring when the Fed refrained from implementing additional interest-rate hikes, commodity prices rebounded, and foreign currencies strengthened against the U.S. dollar. Although a vote in the United Kingdom to leave the European Union, known as the Brexit, introduced renewed market turmoil toward the end of June, U.S. markets bounced back quickly, enabling the S&P 500 Index to end the reporting period with a moderately positive total return.
Traditionally Defensive Sectors Led the Market’s Advance
Investors generally remained cautious in this volatile market environment, focusing mainly on traditionally defensive and higher-yielding industry groups. In contrast, more growth-oriented stocks remained out of favor.
The impact of the market’s defensive bias was especially apparent in the information technology sector, where the fund did not own some of the slower-growing, legacy companies that led sector
3
DISCUSSION OF FUND PERFORMANCE (continued)
averages. In addition, cybersecurity firm Palo Alto Networks gave back previous gains due to slower sales in commodity-producing countries, and new products from cloud computing specialist ServiceNow took longer than expected to gain traction. Financials were the weakest sector in the S&P 500 Index for the reporting period, and the fund was undermined by the adverse impact of low interest rates on fund holdings such as brokerage firm Charles Schwab and financial services provider Voya Financial. Investment manager Invesco was hurt by its exposure to European markets following the Brexit vote, and U.S. bank Capital One struggled with higher-than-expected loan losses. In the energy sector, oil refiners Valero Energy and Marathon Petroleum were hurt by an oversupply of gasoline.
On a more positive note, the fund’s investments in the industrials sector produced relatively attractive returns when Ingersoll-Rand, Illinois Tool Works, and Honeywell International rebounded from previous weakness after reporting better than expected earnings. In the consumer discretionary sector, restaurant operator Yum! Brands benefited from plans to spin off its assets in China, entertainment provider Time Warner saw higher advertising revenues and affiliate fees, and media company Comcast was rewarded for stable earnings and dividend growth.
Poised for a Renewed Focus on Growth
We currently expect the U.S. economic recovery to continue, and we have seen evidence of improved conditions in overseas markets. Therefore, while interest rates appear likely to remain low in the near term, we believe that stocks with the ability to grow their earnings in a constructive business environment have the potential to return to favor among investors. As the market refocuses on growth, we have positioned the fund to benefit through overweighted exposure to growing companies in the information technology, energy, and materials sectors. In contrast, we have identified relatively few companies meeting our investment criteria in the telecommunication services and utilities sectors.
July 15, 2016
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.
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 the redemption of Class C shares. Had these charges been reflected, returns would have been lower. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. Return figures provided reflect the absorption of certain fund expenses by The Dreyfus Corporation pursuant to an agreement through May 1, 2017, at which time it may be extended, terminated, or modified. Had these expenses not been absorbed, the fund’s returns would have been lower.
2 SOURCE: LIPPER INC. -- Reflects reinvestment of dividends and, where applicable, capital gain distributions. The Standard & Poor’s 500® Composite Stock Price Index is a widely accepted, unmanaged index of U.S. stock market performance. Investors cannot invest directly in any index.
4
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Large Cap Equity Fund from January 1, 2016 to June 30, 2016. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| | | | | | | | | | | | |
Expenses and Value of a $1,000 Investment | | |
assuming actual returns for the six months ended June 30, 2016 | |
| | | Class A | Class C | Class I | Class Y |
Expenses paid per $1,000† | | $5.44 | | $9.37 | | $3.75 | | $3.85 |
Ending value (after expenses) | | $1,008.30 | | $1,004.40 | | $1,009.10 | | $1,009.40 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| | | | | | | | | | | | | |
Expenses and Value of a $1,000 Investment | | |
assuming a hypothetical 5% annualized return for the six months ended June 30, 2016 | |
| | Class A | | Class C | | Class I | | Class Y |
Expenses paid per $1,000† | | $5.47 | | $9.42 | | $3.77 | | $3.87 |
Ending value (after expenses) | | $1,019.44 | | $1,015.51 | | $1,021.13 | | $1,021.03 |
† Expenses are equal to the fund’s annualized expense ratio of 1.09% for Class A, 1.88% for Class C, .75% for Class I and .77% for Class Y, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
June 30, 2016 (Unaudited)
| | | | | | |
| |
Common Stocks - 99.4% | | Shares | | Value ($) | |
Banks - 3.7% | | | | | |
Bank of America | | 567,470 | | 7,530,327 | |
Citizens Financial Group | | 178,020 | | 3,556,840 | |
Wells Fargo & Co. | | 126,000 | | 5,963,580 | |
| | | | | 17,050,747 | |
Capital Goods - 9.8% | | | | | |
3M | | 30,748 | | 5,384,590 | |
Eaton | | 100,390 | | 5,996,295 | |
General Electric | | 169,710 | | 5,342,471 | |
Honeywell International | | 68,772 | | 7,999,559 | |
Illinois Tool Works | | 72,773 | | 7,580,036 | |
Ingersoll-Rand | | 111,550 | | 7,103,504 | |
United Technologies | | 53,670 | | 5,503,858 | |
| | | | | 44,910,313 | |
Consumer Durables & Apparel - 1.1% | | | | | |
NIKE, Cl. B | | 88,536 | | 4,887,187 | |
Consumer Services - 2.4% | | | | | |
Panera Bread, Cl. A | | 24,102 | a,b | 5,108,178 | |
Yum! Brands | | 73,640 | | 6,106,229 | |
| | | | | 11,214,407 | |
Diversified Financials - 7.0% | | | | | |
Ally Financial | | 217,630 | b | 3,714,944 | |
Capital One Financial | | 87,150 | | 5,534,896 | |
Charles Schwab | | 217,110 | | 5,495,054 | |
Intercontinental Exchange | | 34,297 | | 8,778,660 | |
Invesco | | 200,886 | | 5,130,628 | |
Voya Financial | | 130,430 | | 3,229,447 | |
| | | | | 31,883,629 | |
Energy - 8.8% | | | | | |
Chevron | | 62,045 | | 6,504,177 | |
Devon Energy | | 101,580 | | 3,682,275 | |
Exxon Mobil | | 54,110 | | 5,072,271 | |
Halliburton | | 96,810 | | 4,384,525 | |
Marathon Petroleum | | 127,560 | | 4,842,178 | |
Pioneer Natural Resources | | 24,867 | | 3,760,139 | |
Schlumberger | | 73,090 | | 5,779,957 | |
Valero Energy | | 122,150 | | 6,229,650 | |
| | | | | 40,255,172 | |
6
| | | | | | |
| |
Common Stocks - 99.4% (continued) | | Shares | | Value ($) | |
Food & Staples Retailing - 1.3% | | | | | |
Costco Wholesale | | 22,328 | | 3,506,389 | |
CVS Health | | 26,431 | | 2,530,504 | |
| | | | | 6,036,893 | |
Food, Beverage & Tobacco - 7.5% | | | | | |
Constellation Brands, Cl. A | | 32,382 | | 5,355,983 | |
Mondelez International, Cl. A | | 94,980 | | 4,322,540 | |
Monster Beverage | | 41,197 | a,b | 6,620,770 | |
PepsiCo | | 82,407 | | 8,730,198 | |
Philip Morris International | | 90,136 | | 9,168,634 | |
| | | | | 34,198,125 | |
Health Care Equipment & Services - 4.5% | | | | | |
Abbott Laboratories | | 82,840 | | 3,256,440 | |
Aetna | | 35,611 | | 4,349,171 | |
Cardinal Health | | 50,930 | | 3,973,049 | |
Universal Health Services, Cl. B | | 31,777 | | 4,261,296 | |
Zimmer Biomet Holdings | | 38,369 | | 4,618,860 | |
| | | | | 20,458,816 | |
Household & Personal Products - 1.7% | | | | | |
Procter & Gamble | | 90,935 | | 7,699,466 | |
Insurance - 1.3% | | | | | |
Hartford Financial Services Group | | 134,630 | | 5,974,879 | |
Materials - 3.1% | | | | | |
Celanese, Ser. A | | 75,280 | | 4,927,076 | |
Dow Chemical | | 104,210 | | 5,180,279 | |
Nucor | | 80,350 | | 3,970,094 | |
| | | | | 14,077,449 | |
Media - 3.7% | | | | | |
Comcast, Cl. A | | 93,000 | | 6,062,670 | |
Time Warner | | 103,440 | | 7,606,978 | |
Walt Disney | | 35,543 | | 3,476,816 | |
| | | | | 17,146,464 | |
Pharmaceuticals, Biotechnology & Life Sciences - 10.3% | | | | | |
Agilent Technologies | | 114,210 | | 5,066,356 | |
Allergan | | 20,402 | b | 4,714,698 | |
Amgen | | 23,600 | | 3,590,740 | |
Biogen | | 11,149 | b | 2,696,051 | |
BioMarin Pharmaceutical | | 21,283 | b | 1,655,817 | |
Bristol-Myers Squibb | | 70,310 | | 5,171,301 | |
Celgene | | 18,354 | b | 1,810,255 | |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | | | | | |
| |
Common Stocks - 99.4% (continued) | | Shares | | Value ($) | |
Pharmaceuticals, Biotechnology & Life Sciences - 10.3% (continued) | | | | | |
Eli Lilly & Co. | | 42,720 | | 3,364,200 | |
Johnson & Johnson | | 57,656 | | 6,993,673 | |
Merck & Co. | | 77,800 | | 4,482,058 | |
Pfizer | | 218,680 | | 7,699,723 | |
| | | | | 47,244,872 | |
Real Estate - 1.3% | | | | | |
American Tower | | 54,545 | c | 6,196,857 | |
Retailing - 4.7% | | | | | |
Amazon.com | | 17,554 | b | 12,561,993 | |
Home Depot | | 52,926 | | 6,758,121 | |
Netflix | | 26,290 | b | 2,405,009 | |
| | | | | 21,725,123 | |
Semiconductors & Semiconductor Equipment - 6.0% | | | | | |
Broadcom | | 66,423 | | 10,322,134 | |
Intel | | 198,540 | | 6,512,112 | |
NXP Semiconductors | | 74,390 | b | 5,827,713 | |
Taiwan Semiconductor Manufacturing, ADR | | 174,720 | | 4,582,906 | |
| | | | | 27,244,865 | |
Software & Services - 12.6% | | | | | |
Accenture, Cl. A | | 31,785 | | 3,600,923 | |
Adobe Systems | | 81,510 | b | 7,807,843 | |
Alphabet, Cl. A | | 20,756 | b | 14,602,469 | |
Facebook, Cl. A | | 120,994 | b | 13,827,194 | |
Microsoft | | 90,660 | | 4,639,072 | |
salesforce.com | | 99,480 | b | 7,899,707 | |
Visa, Cl. A | | 68,150 | | 5,054,686 | |
| | | | | 57,431,894 | |
Technology Hardware & Equipment - 2.8% | | | | | |
Apple | | 72,590 | | 6,939,604 | |
Palo Alto Networks | | 46,540 | b | 5,707,666 | |
| | | | | 12,647,270 | |
Telecommunication Services - 2.7% | | | | | |
AT&T | | 197,470 | | 8,532,679 | |
Verizon Communications | | 69,730 | | 3,893,723 | |
| | | | | 12,426,402 | |
Utilities - 3.1% | | | | | |
Dominion Resources | | 76,680 | | 5,975,672 | |
Dynegy | | 237,100 | b | 4,087,604 | |
8
| | | | | | |
| |
Common Stocks - 99.4% (continued) | | Shares | | Value ($) | |
Utilities - 3.1% (continued) | | | | | |
Exelon | | 110,680 | | 4,024,325 | |
| | | | | 14,087,601 | |
Total Common Stocks (cost $384,328,404) | | | | 454,798,431 | |
Other Investment - .5% | | | | | |
Registered Investment Company; | | | | | |
Dreyfus Institutional Preferred Plus Money Market Fund
(cost $2,179,416) | | 2,179,416 | d | 2,179,416 | |
Investment of Cash Collateral for Securities Loaned - 1.1% | | | | | |
Registered Investment Company; | | | | | |
Dreyfus Institutional Cash Advantage Fund, Institutional Shares
(cost $5,071,272) | | 5,071,272 | d | 5,071,272 | |
Total Investments (cost $391,579,092) | | 101.0% | | 462,049,119 | |
Liabilities, Less Cash and Receivables | | (1.0%) | | (4,598,573) | |
Net Assets | | 100.0% | | 457,450,546 | |
ADR—American Depository Receipt
aSecurity, or portion thereof, on loan. At June 30, 2016, the value of the fund’s securities on loan was $4,959,174 and the value of the collateral held by the fund was $5,071,272.
bNon-income producing security.
cInvestment in real estate investment trust.
dInvestment in affiliated money market mutual fund.
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
| | |
Portfolio Summary (Unaudited) † | Value (%) |
Software & Services | 12.6 |
Pharmaceuticals, Biotechnology & Life Sciences | 10.3 |
Capital Goods | 9.8 |
Energy | 8.8 |
Food, Beverage & Tobacco | 7.5 |
Diversified Financials | 7.0 |
Semiconductors & Semiconductor Equipment | 6.0 |
Retailing | 4.7 |
Health Care Equipment & Services | 4.5 |
Banks | 3.7 |
Media | 3.7 |
Materials | 3.1 |
Utilities | 3.1 |
Technology Hardware & Equipment | 2.8 |
Telecommunication Services | 2.7 |
Consumer Services | 2.4 |
Household & Personal Products | 1.7 |
Money Market Investments | 1.6 |
Food & Staples Retailing | 1.3 |
Insurance | 1.3 |
Real Estate | 1.3 |
Consumer Durables & Apparel | 1.1 |
| | 101.0 |
† Based on net assets.
See notes to financial statements.
10
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2016 (Unaudited)
| | | | | | | |
| | | | | | |
| | | Cost | | Value | |
Assets ($): | | | | |
Investments in securities—See Statement of Investments
(including securities on loan, valued at $4,959,174)—Note 1(b): | | | | |
Unaffiliated issuers | | 384,328,404 | | 454,798,431 | |
Affiliated issuers | | 7,250,688 | | 7,250,688 | |
Cash | | | | | 252,551 | |
Receivable for investment securities sold | | | | | 2,413,820 | |
Dividends and securities lending income receivable | | | | | 491,443 | |
Receivable for shares of Common Stock subscribed | | | | | 362,266 | |
Prepaid expenses | | | | | 29,032 | |
| | | | | 465,598,231 | |
Liabilities ($): | | | | |
Due to The Dreyfus Corporation and affiliates—Note 3(c) | | | | | 287,204 | |
Liability for securities on loan—Note 1(b) | | | | | 5,071,272 | |
Payable for investment securities purchased | | | | | 2,502,478 | |
Payable for shares of Common Stock redeemed | | | | | 247,789 | |
Accrued expenses | | | | | 38,942 | |
| | | | | 8,147,685 | |
Net Assets ($) | | | 457,450,546 | |
Composition of Net Assets ($): | | | | |
Paid-in capital | | | | | 387,320,179 | |
Accumulated undistributed investment income—net | | | | | 2,364,763 | |
Accumulated net realized gain (loss) on investments | | | | | (2,704,423) | |
Accumulated net unrealized appreciation (depreciation)
on investments | | | | | 70,470,027 | |
Net Assets ($) | | | 457,450,546 | |
| | | | | | |
Net Asset Value Per Share | Class A | Class C | Class I | Class Y | |
Net Assets ($) | 2,963,376 | 525,121 | 34,950,941 | 419,011,108 | |
Shares Outstanding | 187,593 | 32,912 | 2,101,290 | 25,191,232 | |
Net Asset Value Per Share ($) | 15.80 | 15.96 | 16.63 | 16.63 | |
See notes to financial statements.
11
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2016 (Unaudited)
| | | | | | | |
| | | | | | |
| | | | | | |
Investment Income ($): | | | | |
Income: | | | | |
Cash dividends: | | | | |
Unaffiliated issuers | | | 4,069,765 | |
Affiliated issuers | | | 4,802 | |
Income from securities lending—Note 1(b) | | | 4,029 | |
Total Income | | | 4,078,596 | |
Expenses: | | | | |
Management fee—Note 3(a) | | | 1,560,882 | |
Professional fees | | | 38,050 | |
Registration fees | | | 32,532 | |
Directors’ fees and expenses—Note 3(d) | | | 22,713 | |
Custodian fees—Note 3(c) | | | 19,397 | |
Shareholder servicing costs—Note 3(c) | | | 18,086 | |
Prospectus and shareholders’ reports | | | 6,097 | |
Loan commitment fees—Note 2 | | | 1,979 | |
Distribution fees—Note 3(b) | | | 1,911 | |
Miscellaneous | | | 11,217 | |
Total Expenses | | | 1,712,864 | |
Less—reduction in expenses due to undertaking—Note 3(a) | | | (711) | |
Less—reduction in fees due to earnings credits—Note 3(c) | | | (198) | |
Net Expenses | | | 1,711,955 | |
Investment Income—Net | | | 2,366,641 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | | |
Net realized gain (loss) on investments | (1,634,617) | |
Net unrealized appreciation (depreciation) on investments | | | 3,762,919 | |
Net Realized and Unrealized Gain (Loss) on Investments | | | 2,128,302 | |
Net Increase in Net Assets Resulting from Operations | | 4,494,943 | |
See notes to financial statements.
12
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | | | |
| | | | | | | | | | |
| | | | Six Months Ended
June 30, 2016 (Unaudited) | | | | Year Ended
December 31, 2015a | |
Operations ($): | | | | | | | | |
Investment income—net | | | 2,366,641 | | | | 4,700,338 | |
Net realized gain (loss) on investments | | (1,634,617) | | | | 19,188,891 | |
Net unrealized appreciation (depreciation)
on investments | | 3,762,919 | | | | (10,664,199) | |
Net Increase (Decrease) in Net Assets
Resulting from Operations | 4,494,943 | | | | 13,225,030 | |
Dividends to Shareholders from ($): | | | | | | | | |
Investment income—net: | | | | | | | | |
Class A | | | - | | | | (19,294) | |
Class I | | | - | | | | (4,685,153) | |
Class Y | | | (125,338) | | | | (11) | |
Net realized gain on investments: | | | | | | | | |
Class A | | | - | | | | (128,711) | |
Class C | | | - | | | | (20,572) | |
Class I | | | - | | | | (19,093,501) | |
Class Y | | | - | | | | (45) | |
Total Dividends | | | (125,338) | | | | (23,947,287) | |
Capital Stock Transactions ($): | | | | | | | | |
Net proceeds from shares sold: | | | | | | | | |
Class A | | | 128,728 | | | | 2,890,364 | |
Class C | | | 62,112 | | | | 279,633 | |
Class I | | | 16,176,123 | | | | 86,003,438 | |
Class Y | | | 414,284,146 | | | | 1,000 | |
Dividends reinvested: | | | | | | | | |
Class A | | | - | | | | 126,146 | |
Class C | | | - | | | | 15,054 | |
Class I | | | - | | | | 12,001,927 | |
Class Y | | | 20,314 | | | | - | |
Cost of shares redeemed: | | | | | | | | |
Class A | | | (254,451) | | | | (1,966,763) | |
Class C | | | (51,066) | | | | (278,657) | |
Class I | | | (403,483,927) | | | | (81,895,708) | |
Class Y | | | (31,617,730) | | | | - | |
Increase (Decrease) in Net Assets
from Capital Stock Transactions | (4,735,751) | | | | 17,176,434 | |
Total Increase (Decrease) in Net Assets | (366,146) | | | | 6,454,177 | |
Net Assets ($): | | | | | | | | |
Beginning of Period | | | 457,816,692 | | | | 451,362,515 | |
End of Period | | | 457,450,546 | | | | 457,816,692 | |
Undistributed investment income—net | 2,364,763 | | | | 123,460 | |
13
STATEMENT OF CHANGES IN NET ASSETS (continued)
| | | | | | | | | | |
| | | | | | | | | | |
| | | | Six Months Ended
June 30, 2016 (Unaudited) | | | | Year Ended
December 31, 2015a | |
Capital Share Transactions (Shares): | | | | | | | | |
Class A | | | | | | | | |
Shares sold | | | 8,444 | | | | 171,472 | |
Shares issued for dividends reinvested | | | - | | | | 8,208 | |
Shares redeemed | | | (16,351) | | | | (124,544) | |
Net Increase (Decrease) in Shares Outstanding | (7,907) | | | | 55,136 | |
Class C | | | | | | | | |
Shares sold | | | 4,100 | | | | 16,599 | |
Shares issued for dividends reinvested | | | - | | | | 966 | |
Shares redeemed | | | (3,348) | | | | (16,912) | |
Net Increase (Decrease) in Shares Outstanding | 752 | | | | 653 | |
Class Ib | | | | | | | | |
Shares sold | | | 1,039,273 | | | | 4,988,054 | |
Shares issued for dividends reinvested | | | - | | | | 742,496 | |
Shares redeemed | | | (26,497,333) | | | | (4,689,277) | |
Net Increase (Decrease) in Shares Outstanding | (25,458,060) | | | | 1,041,273 | |
Class Yb | | | | | | | | |
Shares sold | | | 27,120,884 | | | | 61 | |
Shares issued for dividends reinvested | | | 1,248 | | | | - | |
Shares redeemed | | | (1,930,961) | | | | - | |
Net Increase (Decrease) in Shares Outstanding | 25,191,171 | | | | 61 | |
| | | | | | | | | | |
a Effective October 1, 2015, the fund commenced offering Class Y shares. | |
b During the period ended June 30, 2016, 25,517,015 Class I shares representing $388,158,360 were exchanged for 25,517,013 Class Y shares. | |
See notes to financial statements.
14
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
| | | | | | | | | | | |
| | | | | |
Six Months Ended | |
June 30, 2016 | Year Ended December 31, |
Class A Shares | (Unaudited) | 2015 | 2014 | 2013 | 2012 | 2011 |
Per Share Data ($): | | | | | | |
Net asset value,
beginning of period | 15.67 | 16.12 | 15.06 | 11.38 | 9.79 | 10.45 |
Investment Operations: | | | | | | |
Investment income—neta | .06 | .12 | .11 | .11 | .11 | .06 |
Net realized and unrealized
gain (loss) on investments | .07 | .27 | 1.33 | 3.69 | 1.54 | (.66) |
Total from Investment Operations | .13 | .39 | 1.44 | 3.80 | 1.65 | (.60) |
Distributions: | | | | | | |
Dividends from
investment income—net | – | (.11) | (.20) | (.12) | (.06) | (.06) |
Dividends from net realized
gain on investments | – | (.73) | (.18) | – | – | – |
Total Distributions | – | (.84) | (.38) | (.12) | (.06) | (.06) |
Net asset value, end of period | 15.80 | 15.67 | 16.12 | 15.06 | 11.38 | 9.79 |
Total Return (%)b | .83c | 2.55 | 9.58 | 33.64 | 16.90 | (5.78) |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses
to average net assets | 1.12d | 1.09 | 1.13 | 1.19 | 1.30 | 1.34 |
Ratio of net expenses
to average net assets | 1.09d | 1.09 | 1.11 | 1.13 | 1.25 | 1.17 |
Ratio of net investment income
to average net assets | .74d | .69 | .72 | .81 | .96 | .56 |
Portfolio Turnover Rate | 23.28c | 50.77 | 57.11 | 66.65 | 34.07 | 47.87 |
Net Assets, end of period
($ x 1,000) | 2,963 | 3,064 | 2,262 | 1,501 | 657 | 503 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
15
FINANCIAL HIGHLIGHTS (continued)
| | | | | | | | | | |
| | | | | |
Six Months Ended | |
June 30, 2016 | Year Ended December 31, |
Class C Shares | (Unaudited) | 2015 | 2014 | 2013 | 2012 | 2011 |
Per Share Data ($): | | | | | | |
Net asset value,
beginning of period | 15.89 | 16.35 | 15.22 | 11.57 | 9.97 | 10.68 |
Investment Operations: | | | | | | |
Investment income (loss)—neta | (.00)b | (.02) | (.00)b | .01 | .03 | (.03) |
Net realized and unrealized
gain (loss) on investments | .07 | .29 | 1.33 | 3.74 | 1.57 | (.66) |
Total from Investment Operations | .07 | .27 | 1.33 | 3.75 | 1.60 | (.69) |
Distributions: | | | | | | |
Dividends from
investment income—net | – | – | (.02) | (.10) | – | (.02) |
Dividends from net realized
gain on investments | – | (.73) | (.18) | – | – | – |
Total Distributions | – | (.73) | (.20) | (.10) | – | (.02) |
Net asset value, end of period | 15.96 | 15.89 | 16.35 | 15.22 | 11.57 | 9.97 |
Total Return (%)c | .44d | 1.76 | 8.74 | 32.57 | 16.05 | (6.47) |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses
to average net assets | 1.98e | 1.93 | 2.05 | 2.03 | 2.21 | 2.04 |
Ratio of net expenses
to average net assets | 1.88e | 1.87 | 1.89 | 1.90 | 2.02 | 2.00 |
Ratio of net investment income
(loss) to average net assets | (.05)e | (.11) | (.00)f | .07 | .31 | (.24) |
Portfolio Turnover Rate | 23.28d | 50.77 | 57.11 | 66.65 | 34.07 | 47.87 |
Net Assets, end of period
($ x 1,000) | 525 | 511 | 515 | 287 | 185 | 94 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
f Amount represents less than .01%.
See notes to financial statements.
16
| | | | | | | | | | | |
| | | | | |
Six Months Ended | |
June 30, 2016 | Year Ended December 31, |
Class I Shares | (Unaudited) | 2015 | 2014 | 2013 | 2012 | 2011 |
Per Share Data ($): | | | | | | |
Net asset value,
beginning of period | 16.48 | 16.92 | 15.81 | 11.95 | 10.26 | 10.95 |
Investment Operations: | | | | | | |
Investment income—neta | .10 | .18 | .17 | .16 | .16 | .10 |
Net realized and unrealized
gain (loss) on investments | .05 | .29 | 1.40 | 3.88 | 1.63 | (.69) |
Total from Investment Operations | .15 | .47 | 1.57 | 4.04 | 1.79 | (.59) |
Distributions: | | | | | | |
Dividends from
investment income—net | – | (.18) | (.28) | (.18) | (.10) | (.10) |
Dividends from net realized
gain on investments | – | (.73) | (.18) | – | – | – |
Total Distributions | – | (.91) | (.46) | (.18) | (.10) | (.10) |
Net asset value, end of period | 16.63 | 16.48 | 16.92 | 15.81 | 11.95 | 10.26 |
Total Return (%) | .91b | 2.91 | 9.95 | 34.12 | 17.46 | (5.46) |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses
to average net assets | .75c | .75 | .76 | .78 | .81 | .81 |
Ratio of net expenses
to average net assets | .75c | .75 | .76 | .78 | .81 | .81 |
Ratio of net investment income
to average net assets | 1.21c | 1.03 | 1.05 | 1.14 | 1.39 | .92 |
Portfolio Turnover Rate | 23.28b | 50.77 | 57.11 | 66.65 | 34.07 | 47.87 |
Net Assets, end of period
($ x 1,000) | 34,951 | 454,240 | 448,585 | 382,652 | 226,648 | 168,688 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
17
FINANCIAL HIGHLIGHTS (continued)
| | | | | | |
| | |
| | Six Months Ended | |
| | June 30, 2016 | Year Ended |
Class Y Shares | | | | (Unaudited) | December 31, 2015a |
Per Share Data ($): | | | | | |
Net asset value, beginning of period | | | | 16.48 | 16.35 |
Investment Operations: | | | | | |
Investment income—netb | | | | .08 | .05 |
Net realized and unrealized gain (loss) on investments | | | | .07 | .98 |
Total from Investment Operations | | | | .15 | 1.03 |
Distributions: | | | | | |
Dividends from investment income—net | | | | (.00)c | (.17) |
Dividends from net realized gain on investments | | | | – | (.73) |
Total Distributions | | | | (.00)c | (.90) |
Net asset value, end of period | | | | 16.63 | 16.48 |
Total Return (%)d | | | | .94 | 6.46 |
Ratios/Supplemental Data (%): | | | | | |
Ratio of total expenses to average net assetse | | | | .77 | .75 |
Ratio of net expenses to average net assetse | | | | .77 | .75 |
Ratio of net investment income to average net assetse | | | | .99 | 1.14 |
Portfolio Turnover Rate | | | | 23.28d | 50.77 |
Net Assets, end of period ($ x 1,000) | | | | 419,011 | 1 |
a From October 1, 2015 (commencement of initial offering) to December 31, 2015.
b Based on average shares outstanding.
c Amount represents less than $.01 per share.
d Not annualized.
e Annualized.
See notes to financial statements.
18
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus Large Cap Equity Fund (the “fund”) is a separate diversified series of Dreyfus Premier Investment Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering five series, including the fund. The fund’s investment objective is to seek to provide long-term capital appreciation. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 350 million shares of $.001 par value Common Stock. The fund currently offers four classes of shares: Class A (100 million shares authorized), Class C (50 million shares authorized), Class I (100 million shares authorized) and Class Y (100 million shares authorized). Class A shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I and Class Y shares are sold at net asset value per share generally to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is
20
used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and financial futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Directors (the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of June 30, 2016 in valuing the fund’s investments:
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
| | | | | |
| | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total |
Assets ($) | | | | |
Investments in Securities: | | | | |
Equity Securities - Domestic Common Stocks† | 434,065,678 | — | — | 434,065,678 |
Equity Securities - Foreign Common Stocks† | 20,732,753 | — | — | 20,732,753 |
Mutual Funds | 7,250,688 | — | — | 7,250,688 |
† See Statement of Investments for additional detailed categorizations.
At June 30, 2016, there were no transfers between levels of the fair value hierarchy.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by Dreyfus, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended June 30, 2016, The Bank of New York Mellon
22
earned $1,215 from lending portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended June 30, 2016 were as follows:
| | | | | | |
Affiliated Investment Company | Value 12/31/2015 ($) | Purchases ($) | Sales ($) | Value 6/30/2016 ($) | Net Assets (%) |
Dreyfus Institutional Cash Advantage Fund, Institutional Shares | — | 37,401,902 | 32,330,630 | 5,071,272 | 1.1 |
Dreyfus Institutional Preferred Plus Money Market Fund | 11,226,587 | 19,125,154 | 28,172,325 | 2,179,416 | .5 |
Total | 11,226,587 | 56,527,056 | 60,502,955 | 7,250,688 | 1.6 |
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended June 30, 2016, 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 June 30, 2016, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended December 31, 2015 remains subject to examination by the Internal Revenue Service and state taxing authorities.
23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2015 was as follows: ordinary income $4,704,458 and long-term capital gains $19,242,829. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2 - Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $555 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. Prior to January 11, 2016, the unsecured credit facility with Citibank, N.A. was $480 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended June 30, 2016, the fund did not borrow under the Facilities.
NOTE 3—Management Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .70% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus has contractually agreed, from January 1, 2016 through May 1, 2017, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .90% of the value of the fund’s average daily net assets. The reduction in expenses, pursuant to the undertaking, amounted to $711 during the period ended June 30, 2016.
During the period ended June 30, 2016, the Distributor retained $204 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 June 30, 2016, Class C shares were charged $1,911 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
24
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 June 30, 2016, Class A and Class C shares were charged $3,658 and $638, respectively, pursuant to the Shareholder Services Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended June 30, 2016, the fund was charged $5,944 for transfer agency services and $424 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $198.
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 June 30, 2016, the fund was charged $19,397 pursuant to the custody agreement.
During the period ended June 30, 2016, the fund was charged $4,812 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $263,982, Distribution Plan fees $327, Shareholder Services Plan fees $719, custodian fees $12,000, Chief Compliance Officer fees $4,812 and transfer agency fees $5,404, which are offset against an expense reimbursement currently in effect in the amount of $40.
(d) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 4 - Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2016, amounted to $106,802,708 and $104,492,652, respectively.
At June 30, 2016, accumulated net unrealized appreciation on investments was $70,470,027, consisting of $82,665,579 gross unrealized appreciation and $12,195,552 gross unrealized depreciation.
At June 30, 2016, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
26
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Directors held on February 17-18, 2016, the Board considered the renewal of the fund’s Management Agreement pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the “Agreement”). The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from Dreyfus representatives. In considering the renewal of the Agreement, the Board considered all factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered Dreyfus’ extensive administrative, accounting and compliance infrastructures. The Board also considered portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Lipper, Inc. (“Lipper”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for
27
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
various periods ended December 31st, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Lipper as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds. The Board discussed the results of the comparisons and noted that the fund’s total return performance was above the Performance Group and Performance Universe medians for the various periods, except for the five- and ten-year periods when the fund’s performance was below the Performance Group and Performance Universe medians. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board noted that the fund’s contractual management fee was above the Expense Group median, the fund’s actual management fee was above the Expense Group and Expense Universe medians and the fund’s total expenses were above the Expense Group median and below the Expense Universe median.
Dreyfus representatives noted that Dreyfus has contractually agreed to waive receipt of its fees and/or assume the direct expenses of the fund, until May 1, 2017, so that annual direct fund operating expenses (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed 0.90% of the fund’s average daily net assets.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Lipper category as the fund and (2) paid to Dreyfus or the Dreyfus-affiliated primary employer of the fund’s primary portfolio manager(s) for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance
28
of the fee information provided for the Similar Clients to evaluate the appropriateness and reasonableness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by Dreyfus. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement bear a reasonable relationship to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Dreyfus representatives noted that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to Dreyfus from acting as investment adviser and noted 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.
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
· The Board concluded that the nature, extent and quality of the services provided by Dreyfus are adequate and appropriate.
· The Board was satisfied with the fund’s performance.
· The Board concluded that the fee paid to Dreyfus was reasonable in light of the considerations described above.
· The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with Dreyfus and its affiliates, of the fund and the services provided to the fund by Dreyfus. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreement, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the same or similar arrangements in prior years. The Board determined to renew the Agreement.
30
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31
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Dreyfus Large Cap Equity Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York Mellon
225 Liberty Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
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Ticker Symbols: | Class A: DLQAX Class C: DEYCX Class I: DLQIX Class Y: DLACX |
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. (phone 1-800-SEC-0330 for information).
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.dreyfus.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
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© 2016 MBSC Securities Corporation
6535SA0616 | 
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