We are pleased to present this semiannual report for Dreyfus Diversified International Fund, covering the six-month period from November 1, 2016 through April 30, 2017. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
Stocks advanced solidly but higher-quality bonds lost a degree of value over the reporting period amid heightened market volatility stemming from various economic and political developments. After giving back a portion of their previous gains due to uncertainty in advance of U.S. elections, equity markets rallied to a series of new highs in the wake of the election’s unexpected outcome as investors revised their expectations for U.S. fiscal, regulatory, and tax policies. Generally strong economic data and corporate earnings continued to support stock prices over the first four months of 2017. In the bond market, yields of U.S. government securities moved higher and prices fell in response to two short-term interest-rate hikes and rising longer-term rates, while lower-rated corporate-backed bonds continued to advance in anticipation of a more business-friendly market environment.
Some asset classes and industry groups seem likely to continue to benefit from a changing economic and geopolitical landscape, while others probably will face challenges as conditions evolve. Consequently, selectivity seems likely to be an important determinant of investment success in the months ahead. As always, we encourage you to discuss the implications of our observations with your financial advisor.
Thank you for your continued confidence and support.
DISCUSSION OF FUND PERFORMANCE
For the period from November 1, 2016 through April 30, 2017, as provided by Jeffrey M. Mortimer, CFA, and Keith L. Stransky, CFA, Portfolio Managers
Market and Fund Performance Overview
For the six-month period ended April 30, 2017, Dreyfus Diversified International Fund’s Class A shares produced a total return of 10.01%, Class C shares returned 9.58%, Class I shares returned 10.13%, and Class Y shares returned 10.13%.1 In comparison, the fund’s benchmark, the MSCI EAFE Index (the “Index”), produced a total return of 11.47% for the same period.2
International stocks gained ground over the reporting period in the midst of improving global economic data and expectations of more business-friendly policies from a new presidential administration in the United States. The fund produced lower returns than its benchmark due to the underperformance of its underlying mutual funds over the reporting period’s first half.
The Fund’s Investment Approach
The fund seeks long-term capital appreciation. To pursue its goal, the fund normally allocates its assets among other mutual funds advised by The Dreyfus Corporation or its affiliates, referred to as underlying funds, that invest primarily in stocks issued by foreign companies. The underlying funds are selected by the portfolio managers based on their investment objectives and management policies, portfolio holdings, risk/reward profiles, historical performance, and other factors. The portfolio managers will rebalance the fund’s investments in the underlying funds at least annually, but may do so more often in response to market conditions. As of April 30, 2017, the fund’s market value was allocated as follows:
Underlying Funds %
International Stock Fund 23.13
Dreyfus/Newton International Equity Fund 27.38
Dreyfus International Equity Fund 39.10
Dreyfus Emerging Markets Fund 3.14
Dreyfus International Small Cap Fund 7.25
Improved Economic Outlook Bolstered International Stocks
Despite the eroding effects of weakening foreign currencies against the U.S. dollar over much of the reporting period, international equities generally fared well in anticipation of higher levels of global economic growth stemming in part from more business-friendly fiscal, regulatory, and tax policies under a newly elected U.S. government. Although the Index declined relatively mildly in the immediate wake of the election’s widely unexpected outcome in November, improved investor sentiment and expectations of stronger global economic growth later sparked a market rally that persisted through the end of the reporting period.
In addition, central banks in Europe and Japan have long maintained accommodative monetary policies, which are expected to provide further support to international economies that already have shown signs of recovering from an extended period of sluggishness. In Europe, financial markets were further buoyed in the spring by reassuringly mainstream election results in the Netherlands. Japanese equities benefited from a return to positive bond yields, which supported earnings for the country’s financial institutions.
3
DISCUSSION OF FUND PERFORMANCE (continued)
Rapid Leadership Change in the Markets
Global equity markets early in the reporting period were led by value-oriented stocks, especially those in the financials and materials sectors. Market leadership shifted dramatically over the second half, when growth-oriented stocks in sectors such as health care and info tech outperformed. The fund struggled relative to the Index over the reporting period’s first half, but significantly outperformed the market over the second half.
For the reporting period overall, Dreyfus International Equity Fund produced double-digit gains, mainly due to overweighted exposure to the rebounding financials sector. Dreyfus International Small Cap Fund comprises a relatively small portion of the fund, but it advanced strongly as a result of favorable stock selections in Australia and Canada and underweighted exposure to the lagging Hong Kong market. Dreyfus Emerging Markets Fund produced total returns that were roughly in line with the Index.
On the other hand, some of the fund’s more defensively positioned investments trailed market averages. Most notably, International Stock Fund was hurt by substantially underweighted exposure to financial stocks at a time when they recovered from previous weakness. Dreyfus/Newton International Equity Fund struggled with an overweighted position in the traditionally defensive consumer staples sector, which was the second-worst performer in the first half of the period and could not recover enough in the second half.
A Slightly More Constructive Investment Posture
The global economic recovery appears to have gained momentum, and corporate earnings have continued to come in higher than many analysts expected. However, the market’s currently constructive conditions could be undermined by geopolitical instability and uncertainty surrounding the new U.S. presidential administration’s ability to enact its policy proposals into law.
During the reporting period, we modestly reduced the fund’s exposure to the relatively defensively positioned International Stock Fund and Dreyfus/Newton International Equity Fund, and we slightly increased its position in Dreyfus International Equity Fund. In our judgment, this adjustment better positions the fund for a constructive market environment over the foreseeable future.
May 15, 2017
Equities are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors, to varying degrees, all of which are more fully described in the prospectus of the fund and that of each underlying fund.
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.
The shares of smaller companies tend to trade less frequently than those of larger, more established companies.
The ability of the fund to achieve its investment goal depends, in part, on the ability of the portfolio managers to allocate effectively the fund’s assets among the underlying funds. There can be no assurance that the actual allocations will be effective in achieving the fund’s investment goal.
Each underlying fund’s performance will be influenced by political, social, and economic factors affecting investments in foreign companies. Special risks associated with such companies 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. These risks are higher in emerging market countries.
1 Total return includes reinvestment of dividends and any capital gains paid, and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. 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 pursuant to an agreement by The Dreyfus Corporation through March 1, 2018, at which time it may be extended, terminated, or modified. Had these expenses not been absorbed, the fund’s returns would have been lower. Past performance is no guarantee of future results.
2 Source: Lipper Inc. — Reflects reinvestment of net dividends and, where applicable, capital gain distributions. The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. Investors cannot invest directly in any index.
4
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Diversified International Fund from November 1, 2016 to April 30, 2017. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
| | | | | | | | | | | | | |
Expenses and Value of a $1,000 Investment | | |
assuming actual returns for the six months ended April 30, 2017 |
| | | | | | | | |
| | | | Class A | Class C | Class I | Class Y |
Expenses paid per $1,000† | | $1.98 | | $5.87 | | $.52 | | $.21 |
Ending value (after expenses) | | $1,100.10 | | $1,095.80 | | $1,101.30 | | $1,101.30 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
| | | | | | | | | | | | |
Expenses and Value of a $1,000 Investment | | |
assuming a hypothetical 5% annualized return for the six months ended April 30, 2017 |
| | | | | | | | |
| | | | Class A | Class C | Class I | Class Y |
Expenses paid per $1,000† | | $1.91 | | $5.66 | | $.50 | | $.20 |
Ending value (after expenses) | | $1,022.91 | | $1,019.19 | | $1,024.30 | | $1,024.60 |
† Expenses are equal to the fund’s annualized expense ratio of .38% for Class A, 1.13% for Class C, .10% for Class I and .04% for Class Y, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
April 30, 2017 (Unaudited)
| | | | | | |
| |
Registered Investment Companies - 98.4% | | Shares | | Value ($) | |
Foreign Equity - 98.4% | | | | | |
Dreyfus Emerging Markets Fund, Cl. Y | | 2,416,710 | a | 24,553,771 | |
Dreyfus International Equity Fund, Cl. Y | | 8,435,585 | a,b | 305,368,194 | |
Dreyfus International Small Cap Fund, Cl. Y | | 3,902,825 | a | 56,629,988 | |
Dreyfus/Newton International Equity Fund, Cl. Y | | 10,916,418 | a,b | 213,852,639 | |
International Stock Fund, Cl. Y | | 11,007,579 | a | 180,634,366 | |
Total Investments (cost $624,482,092) | | 98.4% | | 781,038,958 | |
Cash and Receivables (Net) | | 1.6% | | 12,374,615 | |
Net Assets | | 100.0% | | 793,413,573 | |
aInvestment in affiliated mutual fund.
bThe fund's investment in the Dreyfus International Equity Fund and Dreyfus/Newton International Equity Fund represents 38.5% and 26.9%, respectively, of the fund's net assets. Both funds seek to provide long-term capital appreciation.
| | |
Portfolio Summary (Unaudited) † | Value (%) |
Mutual Funds: Foreign | 98.4 |
| | |
† Based on net assets.
See notes to financial statements.
6
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2017 (Unaudited)
| | | | | | | |
| | | | | | |
| | | Cost | | Value | |
Assets ($): | | | | |
Investments in affiliated issuers—See Statement of Investments | | 624,482,092 | | 781,038,958 | |
Cash | | | | | 9,734,641 | |
Receivable for investment securities sold | | | | | 2,761,091 | |
Receivable for shares of Common Stock subscribed | | | | | 366,975 | |
Due from The Dreyfus Corporation and affiliates—Note 3(c) | | | | | 8,162 | |
Prepaid expenses | | | | | 37,443 | |
| | | | | 793,947,270 | |
Liabilities ($): | | | | |
Payable for shares of Common Stock redeemed | | | | | 420,441 | |
Accrued expenses | | | | | 113,256 | |
| | | | | 533,697 | |
Net Assets ($) | | | 793,413,573 | |
Composition of Net Assets ($): | | | | |
Paid-in capital | | | | | 665,391,434 | |
Accumulated undistributed investment income—net | | | | | 47,893 | |
Accumulated net realized gain (loss) on investments | | | | | (28,582,620) | |
Accumulated net unrealized appreciation (depreciation)
on investments | | | | 156,556,866 | |
Net Assets ($) | | | 793,413,573 | |
| | | | | | |
Net Asset Value Per Share | Class A | Class C | Class I | Class Y | |
Net Assets ($) | 6,256,660 | 77,158 | 19,314,109 | 767,765,646 | |
Shares Outstanding | 526,836 | 6,485 | 1,625,489 | 64,684,046 | |
Net Asset Value Per Share ($) | 11.88 | 11.90 | 11.88 | 11.87 | |
| | | | | | |
See notes to financial statements. | | | | | |
7
STATEMENT OF OPERATIONS
Six Months Ended April 30, 2017 (Unaudited)
| | | | | | | |
| | | | | | | |
| | | | | | |
| | | | | | |
Investment Income ($): | | | | |
Income: | | | | |
Cash dividends from affiliated issuers | | | 12,150,196 | |
Interest | | | 580 | |
Total Income | | | 12,150,776 | |
Expenses: | | | | |
Shareholder servicing costs—Note 3(c) | | | 105,370 | |
Professional fees | | | 76,065 | |
Directors’ fees and expenses—Note 3(d) | | | 36,560 | |
Registration fees | | | 33,940 | |
Loan commitment fees—Note 2 | | | 11,307 | |
Prospectus and shareholders’ reports | | | 6,084 | |
Distribution fees—Note 3(b) | | | 327 | |
Miscellaneous | | | 9,258 | |
Total Expenses | | | 278,911 | |
Less—reduction in expenses due to undertaking—Note 3(a) | | | (87,360) | |
Less—reduction in fees due to earnings credits—Note 3(c) | | | (124) | |
Net Expenses | | | 191,427 | |
Investment Income—Net | | | 11,959,349 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | | |
Net realized gain (loss) on investments: | | |
Affiliated issuers | | | | (5,914,774) | |
Net unrealized appreciation (depreciation) on investments: | | | | |
Affiliated issuers | | | | 69,518,368 | |
Net Realized and Unrealized Gain (Loss) on Investments | | | 63,603,594 | |
Net Increase in Net Assets Resulting from Operations | | 75,562,943 | |
| | | | | | | |
See notes to financial statements. | | | | | |
8
STATEMENT OF CHANGES IN NET ASSETS
| | | | | | | | | | |
| | | | | | | | | | |
| | | | Six Months Ended
April 30, 2017 (Unaudited) | | | | Year Ended
October 31, 2016 | |
Operations ($): | | | | | | | | |
Investment income—net | | | 11,959,349 | | | | 8,399,650 | |
Net realized gain (loss) on investments | | (5,914,774) | | | | (8,123,192) | |
Net unrealized appreciation (depreciation)
on investments | | 69,518,368 | | | | (1,478,478) | |
Net Increase (Decrease) in Net Assets
Resulting from Operations | 75,562,943 | | | | (1,202,020) | |
Distributions to Shareholders from ($): | | | | | | | | |
Investment income—net: | | | | | | | | |
Class A | | | (106,348) | | | | (84,254) | |
Class I | | | (170,351) | | | | (8,417,162) | |
Class Y | | | (11,503,602) | | | | (12) | |
Total Distributions | | | (11,780,301) | | | | (8,501,428) | |
Capital Stock Transactions ($): | | | | | | | | |
Net proceeds from shares sold: | | | | | | | | |
Class A | | | 543,740 | | | | 2,668,791 | |
Class C | | | - | | | | 39,000 | |
Class I | | | 11,299,186 | | | | 205,878,714 | |
Class Y | | | 49,910,281 | | | | 860,410,664 | |
Distributions reinvested: | | | | | | | | |
Class A | | | 105,901 | | | | 83,750 | |
Class I | | | 142,752 | | | | 1,335,589 | |
Class Y | | | 1,402,013 | | | | - | |
Cost of shares redeemed: | | | | | | | | |
Class A | | | (5,666,696) | | | | (2,882,025) | |
Class C | | | (60,498) | | | | (46,832) | |
Class I | | | (6,443,526) | | | | (822,911,508) | |
Class Y | | | (156,810,909) | | | | (126,246,476) | |
Increase (Decrease) in Net Assets
from Capital Stock Transactions | (105,577,756) | | | | 118,329,667 | |
Total Increase (Decrease) in Net Assets | (41,795,114) | | | | 108,626,219 | |
Net Assets ($): | | | | | | | | |
Beginning of Period | | | 835,208,687 | | | | 726,582,468 | |
End of Period | | | 793,413,573 | | | | 835,208,687 | |
Undistributed (distributions in excess of)
investment income—net | 47,893 | | | | (131,155) | |
9
STATEMENT OF CHANGES IN NET ASSETS (continued)
| | | | | | | | | | |
| | | | Six Months Ended
April 30, 2017 (Unaudited) | | | | Year Ended
October 31, 2016 | |
Capital Share Transactions (Shares): | | | | | | | | |
Class Aa | | | | | | | | |
Shares sold | | | 49,589 | | | | 250,229 | |
Shares issued for distributions reinvested | | | 9,916 | | | | 7,719 | |
Shares redeemed | | | (520,380) | | | | (270,329) | |
Net Increase (Decrease) in Shares Outstanding | (460,875) | | | | (12,381) | |
Class C | | | | | | | | |
Shares sold | | | - | | | | 3,914 | |
Shares redeemed | | | (5,519) | | | | (4,317) | |
Net Increase (Decrease) in Shares Outstanding | (5,519) | | | | (403) | |
Class Ia | | | | | | | | |
Shares sold | | | 1,024,818 | | | | 19,964,744 | |
Shares issued for distributions reinvested | | | 13,366 | | | | 123,096 | |
Shares redeemed | | | (582,844) | | | | (82,395,681) | |
Net Increase (Decrease) in Shares Outstanding | 455,340 | | | | (62,307,841) | |
Class Ya | | | | | | | | |
Shares sold | | | 4,528,163 | | | | 85,980,379 | |
Shares issued for distributions reinvested | | | 131,521 | | | | - | |
Shares redeemed | | | (14,181,365) | | | | (11,774,747) | |
Net Increase (Decrease) in Shares Outstanding | (9,521,681) | | | | 74,205,632 | |
| | | | | | | | | | |
aDuring the period ended April 30, 2017, 345,530 Class Y shares representing $3,846,718 were exchanged for 345,139 Class I shares and 6,547 Class A shares representing $71,947 were exchanged for 6,552 Class Y shares. During the period ended October 31, 2016, 75,872,879 Class I shares representing $753,669,788 were exchanged for 75,950,002 Class Y shares. | |
See notes to financial statements. | | | | | | | | |
10
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
| | | | | | | |
| | | |
| | Six Months Ended
April 30, 2017 | Year Ended October 31, |
Class A Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 10.91 | 11.23 | 11.57 | 11.69 | 9.78 | 9.38 |
Investment Operations: | | | | | | |
Investment income—neta | .20 | .09 | .19 | .11 | .17 | .16 |
Net realized and unrealized
gain (loss) on investments | .88 | (.32) | (.33) | (.09) | 1.89 | .42 |
Total from Investment Operations | 1.08 | (.23) | (.14) | .02 | 2.06 | .58 |
Distributions: | | | | | | |
Dividends from investment
income—net | (.11) | (.09) | (.20) | (.14) | (.15) | (.18) |
Net asset value, end of period | 11.88 | 10.91 | 11.23 | 11.57 | 11.69 | 9.78 |
Total Return (%)b | 10.01c | (2.08) | (1.15) | .20 | 21.29 | 6.39 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to
average net assetsd | 2.58e | 1.78 | 1.57 | .97 | .40 | .41 |
Ratio of net expenses to
average net assetsd | .38e | .39 | .40 | .34 | .34 | .41 |
Ratio of net investment income to
average net assetsd | 3.59e | .84 | 1.64 | .95 | 1.64 | 1.70 |
Portfolio Turnover Rate | 8.68c | 11.12 | 18.00 | 9.48 | 10.28 | 30.63 |
Net Assets, end of period ($ x 1,000) | 6,257 | 10,778 | 11,228 | 11,418 | 8,702 | 8,675 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Amounts do not include the expenses of the underlying funds.
e Annualized.
See notes to financial statements.
11
FINANCIAL HIGHLIGHTS (continued)
| | | | | | | |
| | | |
| | Six Months Ended
April 30, 2017 | Year Ended October 31, |
Class C Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 10.86 | 11.17 | 11.51 | 11.65 | 9.69 | 9.35 |
Investment Operations: | | | | | | |
Investment income (loss)—neta | .11 | (.01) | .12 | .05 | .05 | .17 |
Net realized and unrealized
gain (loss) on investments | .93 | (.30) | (.34) | (.11) | 1.92 | .34 |
Total from Investment Operations | 1.04 | (.31) | (.22) | (.06) | 1.97 | .51 |
Distributions: | | | | | | |
Dividends from investment
income—net | - | - | (.12) | (.08) | (.01) | (.17) |
Net asset value, end of period | 11.90 | 10.86 | 11.17 | 11.51 | 11.65 | 9.69 |
Total Return (%)b | 9.58c | (2.78) | (1.87) | (.54) | 20.33 | 5.65 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to
average net assetsd | 1.79e | 1.59 | 1.48 | 1.45 | 1.63 | 1.47 |
Ratio of net expenses to
average net assetsd | 1.13e | 1.14 | 1.15 | 1.09 | 1.10 | 1.17 |
Ratio of net investment income (loss) to
average net assetsd | 2.03e | (.05) | 1.02 | .46 | .47 | 1.71 |
Portfolio Turnover Rate | 8.68c | 11.12 | 18.00 | 9.48 | 10.28 | 30.63 |
Net Assets, end of period ($ x 1,000) | 77 | 130 | 139 | 212 | 186 | 116 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Amounts do not include the expenses of the underlying funds.
e Annualized.
See notes to financial statements.
12
| | | | | | | |
| | | |
| | Six Months Ended
April 30, 2017 | Year Ended October 31, |
Class I Shares | (Unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | 10.94 | 11.27 | 11.60 | 11.72 | 9.81 | 9.39 |
Investment Operations: | | | | | | |
Investment income—neta | .13 | .41 | .22 | .15 | .21 | .18 |
Net realized and unrealized
gain (loss) on investments | .96 | (.61) | (.31) | (.09) | 1.89 | .44 |
Total from Investment Operations | 1.09 | (.20) | (.09) | .06 | 2.10 | .62 |
Distributions: | | | | | | |
Dividends from investment
income—net | (.15) | (.13) | (.24) | (.18) | (.19) | (.20) |
Net asset value, end of period | 11.88 | 10.94 | 11.27 | 11.60 | 11.72 | 9.81 |
Total Return (%) | 10.13b | (1.77) | (.75) | .46 | 21.69 | 6.82 |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to
average net assetsc | .10d | .05 | .03 | .04 | .04 | .06 |
Ratio of net expenses to
average net assetsc | .10d | .04 | .03 | .04 | .04 | .06 |
Ratio of net investment income to
average net assetsc | 2.36d | 3.76 | 1.96 | 1.24 | 1.94 | 1.91 |
Portfolio Turnover Rate | 8.68b | 11.12 | 18.00 | 9.48 | 10.28 | 30.63 |
Net Assets, end of period ($ x 1,000) | 19,314 | 12,802 | 715,214 | 661,931 | 470,634 | 462,450 |
a Based on average shares outstanding.
b Not annualized.
c Amounts do not include the expenses of the underlying funds.
d Annualized.
See notes to financial statements.
13
FINANCIAL HIGHLIGHTS (continued)
| | | | | | | | |
| | | | | | |
| | | | | Six Months Ended
April 30, 2017 | Year Ended October 31, |
Class Y Shares | | | | (Unaudited) | 2016 | 2015a |
Per Share Data ($): | | | | | | |
Net asset value, beginning of period | | | | 10.94 | 11.26 | 10.53 |
Investment Operations: | | | | | | |
Investment income (loss)—netb | | | | .17 | (.00)c | (.00)c |
Net realized and unrealized
gain (loss) on investments | | | | .92 | (.19) | .73 |
Total from Investment Operations | | | | 1.09 | (.19) | .73 |
Distributions: | | | | | | |
Dividends from investment
income—net | | | | (.16) | (.13) | - |
Net asset value, end of period | | | | 11.87 | 10.94 | 11.26 |
Total Return (%) | | | | 10.13d | (1.71) | 6.93d |
Ratios/Supplemental Data (%): | | | | | | |
Ratio of total expenses to
average net assetse | | | | .04f | .03 | 2.42f |
Ratio of net expenses to
average net assetse | | | | .04f | .03 | .21f |
Ratio of net investment income (loss) to
average net assetse | | | | 3.04f | (.03) | (.21)f |
Portfolio Turnover Rate | | | | 8.68d | 11.12 | 18.00 |
Net Assets, end of period ($ x 1,000) | | | | 767,766 | 811,498 | 1 |
a From October 1, 2015 (commencement of initial offering) to October 31, 2015.
b Based on average shares outstanding.
c Amount represents less than $.01 per share.
d Not annualized.
e Amounts do not include the expenses of the underlying fund.
f Annualized.
See notes to financial statements.
14
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus Diversified International 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 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.
Effective March 31, 2017, the fund authorized the issuance of Class T shares, but, as of the date of this report, the fund did not offer Class T shares for purchase. The fund’s authorized shares were increased from 500 million to 600 million and 100 million Class T shares were authorized.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 600 million shares of $.001 par value Common Stock. The fund currently has authorized five classes of shares: Class A (150 million shares authorized), Class C (75 million shares authorized), Class I (75 million shares authorized), Class T (100 million shares authorized) and Class Y (200 million shares authorized). Class A and Class T shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I 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 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
15
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
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.
Investments are valued at the net asset value of each underlying fund determined as of the close of the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date and are generally categorized within Level 1 of the fair value hierarchy.
16
The following is a summary of the inputs used as of April 30, 2017 in valuing the fund’s investments:
| | | | | | |
| | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | | Level 3 -Significant Unobservable Inputs | Total |
Assets ($) | | | | |
Investments in Securities: | | | | |
Registered Investment Companies† | 781,038,958 | - | | - | 781,038,958 |
† See Statement of Investments for additional detailed categorizations.
At April 30, 2017, there were no transfers between levels of the fair value hierarchy.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
(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 April 30, 2017 were as follows:
| | | | | | |
Affiliated Investment Company | Value 10/31/2016 ($) | Purchases ($) | † | Sales ($) | Net Realized Gain (Loss) ($) |
Dreyfus Emerging Markets Fund, Cl. Y | 23,706,377 | 722,896 | | 2,045,894 | (28,638) |
Dreyfus International Equity Fund, Cl. Y | 249,591,479 | 50,644,021 | | 22,929,025 | (2,146,362) |
Dreyfus International Small Cap Fund,
Cl. Y | 54,185,388 | 1,987,454 | | 4,773,752 | 276,037 |
Dreyfus/Newton International Equity Fund, Cl. Y | 241,954,844 | 7,968,390 | | 52,958,937 | (4,671,730) |
International Stock Fund, Cl. Y | 253,828,476 | 6,454,871 | | 90,901,224 | 655,919 |
Total | 823,266,564 | 67,777,632 | | 173,608,832 | (5,914,774) |
17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
| | | | | |
Affiliated Investment Company | Change in Net Unrealized Appreciation (Depreciation) ($) | Value 4/30/2017 ($) | Net Assets (%) | Dividends/ Distributions ($) |
Dreyfus Emerging Markets Fund, Cl. Y | 2,199,030 | 24,553,771 | 3.1 | 266,444 |
Dreyfus International Equity Fund, Cl. Y | 30,208,081 | 305,368,194 | 38.5 | 5,070,742 |
Dreyfus International Small Cap Fund,
Cl. Y | 4,954,861 | 56,629,988 | 7.1 | 922,399 |
Dreyfus/Newton International Equity Fund, Cl. Y | 21,560,072 | 213,852,639 | 26.9 | 3,403,872 |
International Stock Fund, Cl. Y | 10,596,324 | 180,634,366 | 22.8 | 2,486,739 |
Total | 69,518,368 | 781,038,958 | 98.4 | 12,150,196 |
† Includes reinvested dividends/distributions.
(d) Dividends and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended April 30, 2017, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended April 30, 2017, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended October 31, 2016 remains subject to examination by the Internal Revenue Service and state taxing authorities.
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Under the Regulated Investment Company Modernization Act of 2010 (the “2010 Act”), the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 (“post-enactment losses”) for an unlimited period. Furthermore, post-enactment capital loss carryovers retain their character as either short-term or long-term capital losses rather than short-term as they were under previous statute. The 2010 Act requires post-enactment losses to be utilized before the utilization of losses incurred in taxable years prior to the effective date of the 2010 Act (“pre-enactment losses”). As a result of this ordering rule, pre-enactment losses may be more likely to expire unused.
The fund has an unused capital loss carryover of $3,850,153 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to October 31, 2016. If not applied, $415,833 of the carryover expires in fiscal year 2018 and $943,756 expires in fiscal year 2019. The fund has $68,821 of post-enactment short-term capital losses and $2,421,743 of post-enactment long-term capital losses which can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2016 was as follows: ordinary income $8,501,428. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in an $810 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended April 30, 2017, 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, there is no management fee paid to Dreyfus. The fund invests in other affiliated mutual funds advised by Dreyfus. All fees and expenses of the underlying funds are reflected in the underlying fund’s net asset value. Dreyfus has contractually agreed, from November 1, 2016 through March 1, 2018, to assume the expenses of the fund, so that the total annual fund and
19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
underlying fund (acquired funds) operating 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 1.05% of the value of the fund’s average daily net assets. The reduction in expenses, pursuant to the undertaking, amounted to $87,360 during the period ended April 30, 2017.
During the period ended April 30, 2017, 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 April 30, 2017, Class C shares were charged $327 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 April 30, 2017, Class A and Class C shares were charged $9,902 and $109, 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 April 30, 2017, the fund was charged $2,856 for transfer agency services and $138 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 $124.
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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 April 30, 2017, the fund was charged $0 pursuant to the custody agreement.
During the period ended April 30, 2017, the fund was charged $4,601 for services performed by the Chief Compliance Officer and his staff.
The components of “Due from The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: Distribution Plan fees $50, Shareholder Services Plan fees $1,272, custodian fees $400, Chief Compliance Officer fees $3,089 and transfer agency fees $1,627, which are offset against an expense reimbursement currently in effect in the amount of $14,600.
(d) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended April 30, 2017, amounted to $67,777,632 and $173,608,832, respectively.
At April 30, 2017, accumulated net unrealized appreciation on investments was $156,556,866, consisting of gross unrealized appreciation.
At April 30, 2017, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
21
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Directors held on March 9-10, 2017, 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.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended January 31, 2017, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be
22
applicable to the fund and comparison funds. The Board discussed with representatives of Dreyfus and/or its affiliates the results of the comparisons and considered that the fund’s total return performance was at or below the Performance Group median for all periods and below the Performance Universe median for all periods. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index and noted that the fund’s return was above the return of the index in seven of the ten calendar years shown.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that, like most other funds in the Expense Group, the fund pays management fees only at the underlying fund (acquired fund) level, so that the contractual and actual management fees of the fund were zero. The Board further considered that the fund’s total expenses (including acquired fund fees and expenses) were below the Expense Group and Expense Universe medians.
Dreyfus representatives stated that Dreyfus has contractually agreed to assume the expenses of the fund, until March 1, 2018, so that the total annual fund and underlying funds (acquired funds) operating expenses of none of the classes (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 1.05% of the fund’s average daily net assets.
Dreyfus representatives reviewed with the Board the management or investment advisory fees paid by funds advised or administered by Dreyfus that are in the same Broadridge category as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed 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 also considered the expense limitation arrangement with Dreyfus. Since the fund pays no fees to Dreyfus under the Agreement, the Board did not consider profitability or economies of scale with respect to the fund. The Board also considered potential benefits to Dreyfus from acting as investment adviser 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 Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by Dreyfus are adequate and appropriate.
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
· The Board expressed concern about the fund’s performance and agreed to closely monitor performance.
In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with Dreyfus and its affiliates, of Dreyfus and the services provided to the fund by Dreyfus. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreement, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of the Agreement for the fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, during which lengthy discussions took place between the Board and Dreyfus representatives. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or similar arrangements for other Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreement.
24
NOTES
25
Dreyfus Diversified International Fund
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York Mellon
225 Liberty Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
| | |
Ticker Symbol: | Class A: DFPAX Class C: DFPCX Class I: DFPIX Class Y: DDIFX |
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, D.C. (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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© 2017 MBSC Securities Corporation
6209SA0417 | 
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