UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number |
811-3940 | |||||
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Strategic Funds, Inc |
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(Exact name of Registrant as specified in charter) |
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c/o The Dreyfus Corporation 200 Park Avenue New York, New York 10166 |
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(Address of principal executive offices) (Zip code) |
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John Pak, Esq. 200 Park Avenue New York, New York 10166 |
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(Name and address of agent for service) |
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Registrant's telephone number, including area code: |
(212) 922-6000 | |||||
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Date of fiscal year end:
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11/30 |
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Date of reporting period: |
5/31/14 |
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The following N-CSR relates only to the Registrant’s series listed below and does not affect the other series of the Registrant, which have different fiscal year ends and, therefore, different N-CSR reporting requirements. Separate N-CSR Forms will be filed for these series, as appropriate.
Dreyfus Select Managers Small Cap Value Fund
Dreyfus U.S. Equity Fund
Global Stock Fund
International Stock Fund
Dreyfus
Select Managers
Small Cap Value Fund
SEMIANNUAL REPORT May 31, 2014
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The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value
Contents | |
THE FUND | |
2 |
A Letter from the President |
3 |
Discussion of Fund Performance |
6 |
Understanding Your Fund’s Expenses |
6 |
Comparing Your Fund’s Expenses With Those of Other Funds |
7 |
Statement of Investments |
23 |
Statement of Assets and Liabilities |
24 |
Statement of Operations |
25 |
Statement of Changes in Net Assets |
27 |
Financial Highlights |
31 |
Notes to Financial Statements |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus
Select Managers
Small Cap Value Fund
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Select Managers Small Cap Value Fund, covering the six-month period from December 1, 2013, through May 31, 2014. 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.
The end of 2013 witnessed a firming U.S. labor market, further improvements housing data, and generally strong corporate earnings growth, but U.S. GDP growth over the opening months of 2014 generally stalled due to harsh winter weather, the expiration of extended unemployment benefits, and the deceleration of inventory accumulation by businesses. Although stocks encountered volatility under these mixed conditions, investors largely appeared to shrug off recent economic shortfalls as some broad measures of U.S. stock market performance either achieved or approached new all-time highs by the reporting period’s end.
We already have seen evidence that the economic recovery’s pause over the winter 2014 may prove temporary, and we currently expect to see accelerating growth over the next few years as past financial stresses continue to fade and fiscal drags abate the public sector. However, stocks generally have risen to higher valuations after the sustained market rally, and in our judgment, selectivity is likely to be key to successful equity investing in the months ahead. As always, we encourage you to discuss our observations and appropriate investment strategies with your financial advisor.
Thank you for your continued confidence and support.
J. Charles Cardona
President
The Dreyfus Corporation
June 16, 2014
2
DISCUSSION OF FUND PERFORMANCE
For the period of December 1, 2013, through May 31, 2014, as provided by Keith L. Stransky and Robert B. Mayerick, Portfolio Allocation Managers, EACM Advisors LLC
Fund and Market Performance Overview
For the six-month period ended May 31, 2014, Dreyfus Select Managers Small Cap Value Fund’s Class A shares produced a total return of 2.02%, Class C shares returned 1.60%, Class I shares returned 2.19%, and ClassY shares returned 2.19%.1 In comparison, the Russell 2000 Value Index (the “Index”), the fund’s benchmark, returned 1.67% for the same period.2
Although U.S. equities generally continued to rally over the reporting period, small-cap stocks lagged their larger counterparts. The fund outperformed its benchmark, primarily due to favorable results in the information technology and health care sectors.
During the reporting period, the fund eliminated its investment inVulcanValue Partners, LLC, and established a new relationship with Channing Capital Management, LLC.
The Fund’s Investment Approach
The fund seeks capital appreciation. To pursue its goal, the fund normally invests at least 80% of its net assets in the stocks of small-cap companies. The fund uses a “multi-manager” approach by selecting one or more sub-advisers to manage its assets. As the fund’s portfolio allocation managers, we seek sub-advisers that complement one another’s style of investing, consistent with the fund’s investment goal.We monitor and evaluate the performance of the sub-advisers and will make corresponding recommendations to Dreyfus and the fund’s Board based on our evaluations.
The fund’s assets are currently under the day-to-day portfolio management of seven sub-advisers, each acting independently of one another and using their own methodology to select portfolio investments.As of the end of the reporting period, 17% of the fund’s assets are under the management of Thompson, Siegel, and Walmsley, LLC, which employs a combination of quantitative and qualitative security selection methods based on a four-factor valuation model. Approximately 22% of the fund’s assets are under the management of Walthausen & Co., LLC, which uses a proprietary valuation model to identify companies that are trading at a discount to their intrinsic
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
values.Approximately 17% of the fund’s assets are under the management of Neuberger Berman Management LLC, which uses fundamental analysis and a bottom-up stock selection process to identify publicly traded small-cap companies selling at a material discount to their intrinsic value.Approximately 16% of the fund’s assets are under the management of Lombardia Capital Partners, which uses fundamental analysis and a bottom-up value-oriented approach in seeking stocks trading below their intrinsic values. Approximately 12% of the fund’s assets are under the management of Iridian Asset Management LLC, which employs bottom-up stock selection and a disciplined valuation process to identify and invest in corporate change.Approximately 11% of the fund’s assets are under the management of Kayne Anderson Rudnick Investment Management, LLC, which employs a fundamental, bottom-up, research-driven investment process in seeking to identify high-quality companies whose securities are trading at attractive valuations. Approximately 5% of the fund’s assets are under the management of Channing Capital Management, LLC, which employs intensive, fundamental, bottom-up research to identify high-quality companies with strong balance sheets and management teams. These percentages can change over time, within ranges described in the prospectus.
Market Environment—Late Period Rotation
Stocks across most capitalization ranges continued to climb at the start of the reporting period during a sustained U.S. economic recovery fueled by falling unemployment, rebounding housing markets, and historically low short-term interest rates. The rally stalled in January 2014 amid concerns regarding economic and political instability in the emerging markets, but stocks generally rebounded when investors’ worst fears did not materialize.
However, market sentiment during the renewed rally shifted away from smaller, more speculative companies toward large-cap stocks. Consequently, some measures of large-cap stock market performance achieved record highs by the reporting period’s end, while small-cap stocks produced mostly flat returns.
Stock Selections Buoyed Fund Results
The fund’s underlying investment managers generally added value during the reporting period. In the aggregate, they achieved especially robust results through overweighted exposure to and successful stock selections within the information technology sector. For example, sapphire equipment maker GT AdvancedTechnologies
4
encountered strong demand for components used in consumer electronics products, and printing devices producer ZebraTechnologies achieved record 2013 sales. Strong stock selections in the health care sector included Furiex Pharmaceuticals, which moved closer to regulatory approval of a new product. Drug delivery platform specialist Flamel Technologies reported higher sales of a key product.
Disappointments included overweighted exposure to real estate investment trusts, which rallied when long-term bond yields fell.Among consumer staples companies, Nu Skin Enterprises was hurt by an investigation by Chinese regulators into its sales practices, and Elizabeth Arden posted an unexpected quarterly loss.
Finding Attractive Values Among Small-Cap Companies
We remain constructive regarding small-cap value stocks.Attractively valued small-cap companies may be poised for gains due to their focus on domestic revenue sources at a time when the U.S. economy is recovering more robustly than most overseas markets. Moreover, we expect heightened mergers-and-acquisitions activity as larger companies seek to fuel future growth. Indeed, in our view, recent relative weakness among small-cap stocks has created a firmer foundation for future gains.
June 16, 2014
Please note, the position in any security highlighted with italicized typeface was sold during the reporting period. Equity funds are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
The prices of small company stocks tend to be more volatile than the prices of large company stocks, mainly because these companies have less established and more volatile earnings histories.They also tend to be less liquid than larger company stocks.
1 |
Total return includes reinvestment of dividends and any capital gains paid, and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. Return figures provided reflect the absorption of certain fund expenses by The Dreyfus Corporation pursuant to an undertaking in effect through April 1, 2015, at which time it may be extended, terminated, or modified. Had these expenses not been absorbed, the fund’s returns would have been lower for Class A, C, andY shares. |
2 |
SOURCE: LIPPER INC. — Reflects the reinvestment of dividends and, where applicable, capital gain distributions.The Russell 2000 Value Index is an unmanaged index, which measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. Investors cannot invest directly in any index. |
The Fund 5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Select Managers Small CapValue Fund from December 1, 2013 to May 31, 2014. 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 May 31, 2014 | ||||||||
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $ | 6.55 | $ | 10.30 | $ | 4.79 | $ | 5.29 |
Ending value (after expenses) | $ | 1,020.20 | $ | 1,016.00 | $ | 1,021.90 | $ | 1,021.90 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment | ||||||||||
assuming a hypothetical 5% annualized return for the six months ended May 31, 2014 | ||||||||||
Class A | Class C | Class I | Class Y | |||||||
Expenses paid per $1,000† | $ | 6.54 | $ | 10.30 | $ | 4.78 | $ | 5.29 | ||
Ending value (after expenses) | $ | 1,018.45 | $ | 1,014.71 | $ | 1,020.19 | $ | 1,019.70 | ||
† Expenses are equal to the fund’s annualized expense ratio of 1.30% for Class A, 2.05% for Class C, .95% for | ||||||||||
Class I and 1.05% for ClassY, multiplied by the average account value over the period, multiplied by 182/365 (to | ||||||||||
reflect the one-half year period). |
STATEMENT OF INVESTMENTS
May 31, 2014 (Unaudited)
Common Stocks—96.4% | Shares | Value ($) | |
Automobiles & Components—1.7% | |||
Cooper Tire & Rubber | 104,180 | 2,899,329 | |
Dana Holding | 65,030 | 1,439,764 | |
Gentherm | 35,500 | a | 1,460,115 |
Modine Manufacturing | 82,990 | a | 1,267,257 |
Motorcar Parts of America | 61,600 | a | 1,467,312 |
Remy International | 12,170 | 289,524 | |
Superior Industries International | 45,750 | 910,425 | |
Thor Industries | 42,925 | 2,575,500 | |
12,309,226 | |||
Banks—10.8% | |||
Atlantic Coast Financial Corporation | 222,150 | a | 950,802 |
Bancorp | 70,700 | a | 1,109,990 |
Bank of Hawaii | 33,620 | 1,874,651 | |
Bank of the Ozarks | 12,440 | 734,458 | |
BankUnited | 86,760 | 2,823,171 | |
BBCN Bancorp | 92,075 | 1,404,144 | |
BofI Holding | 14,900 | a | 1,144,767 |
Bryn Mawr Bank | 50,990 | 1,448,626 | |
Centerstate Banks | 114,570 | 1,216,733 | |
City Holding | 23,570 | b | 1,018,460 |
City National | 13,850 | 984,596 | |
Columbia Banking System | 82,442 | 2,042,088 | |
Comerica | 30,107 | 1,444,233 | |
Community Bank System | 44,345 | 1,574,691 | |
Customers Bancorp | 82,890 | a | 1,574,910 |
CVB Financial | 115,870 | 1,689,385 | |
Dime Community Bancshares | 76,510 | 1,156,831 | |
Eagle Bancorp | 59,820 | a | 1,912,445 |
East West Bancorp | 57,982 | 1,941,237 | |
F.N.B | 97,846 | 1,197,635 | |
First Commonwealth Financial | 138,000 | 1,186,800 | |
First Financial Bankshares | 39,480 | b | 2,348,270 |
First Merchants | 49,737 | 986,782 | |
First Midwest Bancorp | 75,358 | 1,205,728 | |
First Niagara Financial Group | 354,176 | 3,049,456 | |
FirstMerit | 92,089 | 1,719,302 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Banks (continued) | |||
Great Southern Bancorp | 11,800 | 345,622 | |
Hancock Holding | 90,263 | 3,049,084 | |
Heritage Financial | 75,368 | 1,187,046 | |
Heritage Financial Group | 65,289 | 1,194,789 | |
Home Loan Servicing Solutions | 83,800 | 1,868,740 | |
Huntington Bancshares | 230,580 | 2,137,477 | |
IBERIABANK | 43,459 | 2,714,449 | |
Independent Bank | 36,607 | 1,325,173 | |
Investors bancorp | 108,278 | 1,169,402 | |
MB Financial | 28,745 | 771,516 | |
MGIC Investment | 52,290 | a | 443,419 |
National Bank Holdings, Cl. A | 39,039 | 763,993 | |
PacWest Bancorp | 51,124 | 2,066,432 | |
Park Sterling | 176,309 | 1,137,193 | |
Popular | 51,000 | a | 1,539,180 |
Sterling Bancorp | 98,440 | 1,115,325 | |
TCF Financial | 100,850 | 1,602,507 | |
Texas Capital Bancshares | 54,470 | a | 2,788,864 |
Trustmark | 41,642 | 964,012 | |
Umpqua Holdings | 83,650 | 1,386,081 | |
Union Bankshares | 44,804 | 1,118,756 | |
United Financial Bancorp | 94,195 | 1,268,807 | |
Westamerica Bancorporation | 38,800 | b | 1,900,036 |
Wilshire Bancorp | 58,380 | 589,054 | |
Wintrust Financial | 35,200 | 1,534,016 | |
75,721,164 | |||
Capital Goods—11.4% | |||
A.O. Smith | 16,841 | 831,609 | |
AAON | 46,660 | 1,455,792 | |
Aegion | 18,386 | a | 440,712 |
Aerovironment | 12,750 | a | 409,530 |
Albany International, Cl. A | 50,950 | 1,897,887 | |
Blount International | 160,560 | a | 1,955,621 |
CLARCOR | 41,500 | 2,428,995 | |
Columbus McKinnon | 47,610 | 1,340,698 | |
DigitalGlobe | 28,700 | a | 871,332 |
8
Common Stocks (continued) | Shares | Value ($) | |
Capital Goods (continued) | |||
DXP Enterprises | 13,900 | a | 967,023 |
Dycom Industries | 25,810 | a | 767,847 |
EnerSys | 24,150 | 1,667,316 | |
ESCO Technologies | 17,144 | 576,381 | |
Franklin Electric | 15,866 | 607,668 | |
FreightCar America | 71,812 | 1,846,287 | |
GenCorp | 36,000 | a,b | 669,960 |
Generac Holdings | 25,700 | 1,251,076 | |
General Cable | 49,730 | 1,268,115 | |
Gibraltar Industries | 67,786 | a | 1,075,086 |
Global Brass & Copper Holdings | 63,310 | 1,020,557 | |
Graco | 45,300 | 3,305,994 | |
GrafTech International | 92,525 | a,b | 966,886 |
Granite Construction | 33,240 | 1,180,685 | |
Greenbrier Cos. | 21,900 | a | 1,215,450 |
H&E Equipment Services | 41,200 | a | 1,427,580 |
Harsco | 42,400 | 1,143,952 | |
Hexcel | 81,272 | a | 3,336,216 |
Hyster-Yale Materials Handling | 14,120 | 1,187,210 | |
ITT | 28,230 | 1,233,086 | |
John Bean Technologies | 38,010 | 1,087,086 | |
KBR | 73,940 | 1,796,003 | |
KEYW Holding | 37,230 | a,b | 394,638 |
Lawson Products | 34,950 | a | 573,180 |
Lindsay | 12,608 | b | 1,062,728 |
LSI Industries | 80,505 | 639,210 | |
Lydall | 35,311 | a | 974,230 |
Manitowoc | 46,150 | 1,248,358 | |
Meritor | 80,910 | a | 1,117,367 |
Miller Industries | 39,470 | 801,636 | |
Mueller Industries | 26,610 | 766,900 | |
Mueller Water Products, Cl. A | 349,750 | 2,948,393 | |
National Presto Industries | 13,350 | b | 939,707 |
NCI Building Systems | 99,020 | a | 1,658,585 |
Orion Marine Group | 96,023 | a | 1,086,020 |
Owens Corning | 14,200 | 582,342 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | ||
Capital Goods (continued) | ||||
Quanex Building Products | 37,980 | 676,044 | ||
Regal-Beloit | 21,464 | 1,638,347 | ||
Spirit Aerosystems Holdings, Cl. A | 69,110 | a | 2,242,620 | |
Standex International | 35,640 | 2,631,658 | ||
Sun Hydraulics | 25,000 | 923,000 | ||
Teledyne Technologies | 20,640 | a | 1,956,053 | |
Textron | 62,000 | 2,431,640 | ||
Titan International | 47,470 | b | 750,501 | |
TriMas | 98,319 | a | 3,451,980 | |
Triumph Group | 17,147 | 1,188,287 | ||
Tutor Perini | 38,600 | a | 1,182,318 | |
Twin Disc | 36,880 | 1,196,756 | ||
Valmont Industries | 4,530 | 701,924 | ||
Wabash National | 72,400 | a | 991,156 | |
Woodward | 45,684 | 2,042,075 | ||
80,027,293 | ||||
Commercial & Professional Services—4.4% | ||||
ABM Industries | 73,459 | 2,003,227 | ||
Acacia Research | 61,250 | b | 988,575 | |
ACCO Brands | 130,123 | a | 783,340 | |
Barrett Business Services | 22,600 | 1,065,816 | ||
Brady, Cl. A | 1,558 | 42,268 | ||
CBIZ | 143,682 | a | 1,225,607 | |
CDI | 104,648 | 1,457,746 | ||
Clean Harbors | 28,500 | a | 1,741,635 | |
Corporate Executive Board | 47,400 | 3,231,258 | ||
Covanta Holding | 104,740 | 1,999,487 | ||
Deluxe | 86,172 | 4,833,388 | ||
Ennis | 34,224 | 518,494 | ||
FTI Consulting | 80,316 | a | 2,591,798 | |
Korn/Ferry International | 56,905 | a | 1,728,205 | |
MSA Safety | 14,988 | 819,244 | ||
Multi-Color | 12,200 | 428,586 | ||
Steelcase, Cl. A | 209,316 | 3,430,690 | ||
Tetra Tech | 68,805 | 1,830,901 | ||
30,720,265 |
10
Common Stocks (continued) | Shares | Value ($) | |
Consumer Durables & Apparel—3.1% | |||
Crocs | 70,622 | a | 1,054,386 |
CSS Industries | 37,240 | 897,112 | |
Deckers Outdoor | 26,700 | a | 2,063,643 |
Ethan Allen Interiors | 23,586 | 552,856 | |
Harman International Industries | 4,002 | 420,330 | |
Iconix Brand Group | 61,604 | a | 2,583,672 |
JAKKS Pacific | 134,691 | b | 1,189,322 |
LeapFrog Enterprises | 131,241 | a,b | 909,500 |
M.D.C. Holdings | 56,230 | 1,608,740 | |
M/I Homes | 130,260 | a | 2,971,231 |
Skullcandy | 154,300 | a | 1,143,363 |
Smith & Wesson Holding | 71,400 | a,b | 1,133,832 |
UCP, Cl. A | 66,933 | 886,193 | |
Unifi | 70,260 | a | 1,635,653 |
Universal Electronics | 29,800 | a | 1,355,304 |
Wolverine World Wide | 55,000 | 1,422,850 | |
21,827,987 | |||
Consumer Services—1.6% | |||
American Public Education | 36,300 | a | 1,282,842 |
Bob Evans Farms | 22,380 | 999,715 | |
Capella Education | 31,690 | 1,813,936 | |
DeVry Education Group | 17,140 | 723,822 | |
Hillenbrand | 26,281 | 796,051 | |
Ignite Restaurant Group | 48,572 | a,b | 745,580 |
International Game Technology | 29,635 | 371,919 | |
Interval Leisure Group | 107,400 | 2,200,626 | |
LifeLock | 91,900 | a | 1,031,118 |
Ruth’s Hospitality Group | 69,022 | 845,520 | |
Wendy’s | 94,500 | 774,900 | |
11,586,029 | |||
Diversified Financials—3.9% | |||
Ares Capital | 125,628 | 2,165,827 | |
Asta Funding | 28,000 | a | 234,640 |
Eaton Vance | 70,732 | 2,627,694 | |
Encore Capital Group | 62,264 | a,b | 2,695,409 |
Evercore Partners, Cl. A | 16,084 | 885,263 |
The Fund 11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | ||
Diversified Financials (continued) | ||||
Fifth Street Finance | 60,048 | b | 557,846 | |
First Cash Financial Services | 74,300 | a | 3,902,236 | |
Gain Capital Holdings | 50,591 | 399,163 | ||
Janus Capital Group | 125,002 | 1,460,023 | ||
New Mountain Finance | 48,923 | 695,685 | ||
PHH | 135,677 | a | 3,455,693 | |
PICO Holdings | 48,287 | a | 1,119,776 | |
Stifel Financial | 83,687 | a | 3,782,653 | |
Voya Financial | 38,580 | 1,381,164 | ||
Walter Investment Management | 8,953 | a,b | 258,831 | |
World Acceptance | 23,763 | a,b | 1,877,039 | |
27,498,942 | ||||
Energy—6.0% | ||||
Atwood Oceanics | 29,915 | a | 1,476,305 | |
Bill Barrett | 80,200 | a | 2,005,000 | |
Cal Dive International | 842,960 | a,b | 1,087,418 | |
CARBO Ceramics | 26,800 | 3,686,876 | ||
Clayton Williams Energy | 19,950 | a | 2,485,570 | |
Delek US Holdings | 47,800 | 1,485,146 | ||
Emerald Oil | 221,340 | a,b | 1,438,710 | |
Energy XXI | 53,300 | b | 1,143,285 | |
ERA Group | 59,440 | a | 1,736,837 | |
Goodrich Petroleum | 79,520 | a,b | 2,306,080 | |
GulfMark Offshore, Cl. A | 21,960 | 1,019,164 | ||
Helix Energy Solutions Group | 62,400 | a | 1,458,912 | |
ION Geophysical | 213,270 | a | 889,336 | |
Kodiak Oil & Gas | 86,948 | a | 1,106,848 | |
McDermott International | 290,970 | a,b | 2,112,442 | |
Newpark Resources | 90,600 | a,b | 1,020,156 | |
PBF Energy, Cl. A | 24,000 | 765,840 | ||
PDC Energy | 33,020 | a | 2,119,554 | |
PetroQuest Energy | 58,974 | a | 360,921 | |
Rosetta Resources | 9,331 | a | 439,770 | |
Sanchez Energy | 19,340 | a | 665,876 |
12
Common Stocks (continued) | Shares | Value ($) | ||
Energy (continued) | ||||
Stone Energy | 39,200 | a | 1,740,088 | |
Synergy Resources | 143,260 | a | 1,681,872 | |
Tesco | 41,159 | 876,687 | ||
TETRA Technologies | 164,390 | a | 1,895,417 | |
Tidewater | 33,012 | 1,720,585 | ||
Triangle Petroleum | 97,292 | a,b | 977,785 | |
Ultra Petroleum | 24,630 | a | 665,503 | |
Warren Resources | 198,265 | a | 908,054 | |
WPX Energy | 32,970 | a | 698,305 | |
41,974,342 | ||||
Exchange-Traded Funds—.3% | ||||
iShares Russell 2000 ETF | 10,771 | b | 1,215,615 | |
iShares Russell 2000 Value ETF | 12,400 | b | 1,225,988 | |
2,441,603 | ||||
Food & Staples Retailing—.3% | ||||
Andersons | 19,050 | 970,407 | ||
SpartanNash | 40,294 | 978,338 | ||
Village Super Market, Cl. A | 22,000 | 539,880 | ||
2,488,625 | ||||
Food, Beverage & Tobacco—1.8% | ||||
Crimson Wine Group | 117,740 | a | 1,041,999 | |
Darling Ingredients | 163,570 | a | 3,269,764 | |
Dean Foods | 104,150 | 1,810,127 | ||
Hillshire Brands | 30,460 | 1,622,909 | ||
Lancaster Colony | 9,075 | 810,307 | ||
National Beverage | 118,300 | a | 2,190,916 | |
TreeHouse Foods | 29,000 | a | 2,173,550 | |
12,919,572 | ||||
Health Care Equipment & Services—4.4% | ||||
Accuray | 56,090 | a,b | 494,714 | |
Air Methods | 24,500 | a | 1,180,900 | |
Allscripts Healthcare Solutions | 186,870 | a | 2,754,463 | |
AmSurg | 22,894 | a | 1,036,640 | |
AngioDynamics | 52,339 | a | 750,018 | |
The Fund 13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Health Care Equipment & Services (continued) | |||
Anika Therapeutics | 10,000 | a | 468,300 |
Antares Pharma | 357,440 | a,b | 1,054,448 |
Chemed | 10,580 | b | 931,886 |
Cynosure, Cl. A | 74,000 | a | 1,611,720 |
Derma Sciences | 2,340 | 23,821 | |
Gentiva Health Services | 175,540 | a | 2,392,610 |
HealthSouth | 20,510 | 720,311 | |
Hill-Rom Holdings | 46,006 | 1,825,978 | |
Invacare | 43,914 | 724,581 | |
Kindred Healthcare | 80,803 | 2,005,530 | |
MedAssets | 36,211 | a | 848,062 |
Merit Medical Systems | 62,621 | a | 878,573 |
Owens & Minor | 65,100 | 2,257,668 | |
Patterson | 56,000 | 2,192,960 | |
Providence Service | 38,800 | a | 1,559,760 |
Symmetry Medical | 139,873 | a | 1,233,680 |
Syneron Medical | 98,920 | a | 1,083,174 |
Team Health Holdings | 25,100 | a | 1,274,327 |
WellCare Health Plans | 17,546 | a | 1,358,938 |
30,663,062 | |||
Household & Personal Products—.8% | |||
Elizabeth Arden | 20,560 | a | 557,793 |
Nu Skin Enterprises, Cl. A | 27,912 | 2,061,022 | |
WD-40 | 46,000 | 3,319,820 | |
5,938,635 | |||
Insurance—5.0% | |||
American Equity Investment Life Holding | 130,903 | 2,947,936 | |
American Financial Group | 10,630 | 620,579 | |
American National Insurance | 9,950 | 1,139,275 | |
Argo Group International Holdings | 15,794 | 765,219 | |
Assurant | 10,420 | 706,580 | |
Endurance Specialty Holdings | 38,000 | 1,965,360 | |
FBL Financial Group, Cl. A | 8,214 | 359,034 | |
Fidelity National Financial, Cl. A | 37,370 | 1,245,916 |
14
Common Stocks (continued) | Shares | Value ($) | |
Insurance (continued) | |||
First American Financial | 35,994 | 1,008,552 | |
HCC Insurance Holdings | 29,905 | 1,404,937 | |
Horace Mann Educators | 145,510 | 4,250,347 | |
Infinity Property & Casualty | 16,500 | 1,056,165 | |
Kemper | 61,230 | 2,139,989 | |
Maiden Holdings | 130,000 | 1,591,200 | |
Primerica | 85,460 | 3,849,118 | |
RLI | 74,000 | 3,300,400 | |
Stewart Information Services | 80,335 | 2,577,147 | |
Symetra Financial | 32,440 | 676,374 | |
The Hanover Insurance Group | 33,529 | 2,013,416 | |
Validus Holdings | 35,882 | 1,339,475 | |
34,957,019 | |||
Materials—6.4% | |||
American Vanguard | 151,290 | b | 2,302,634 |
AptarGroup | 11,700 | 779,103 | |
Avery Dennison | 64,380 | 3,264,066 | |
Balchem | 25,000 | 1,378,500 | |
Chemtura | 90,440 | a | 2,259,191 |
Cliffs Natural Resources | 41,030 | b | 643,350 |
Crown Holdings | 58,410 | a | 2,853,328 |
Cytec Industries | 24,466 | 2,430,698 | |
FutureFuel | 68,100 | 1,169,958 | |
Greif, Cl. A | 24,529 | 1,339,774 | |
Haynes International | 22,130 | 1,175,103 | |
Headwaters | 125,100 | a | 1,617,543 |
Intrepid Potash | 131,230 | a,b | 2,127,238 |
Kaiser Aluminum | 52,001 | 3,560,509 | |
Koppers Holdings | 21,890 | 795,483 | |
Kraton Performance Polymers | 98,040 | a | 2,438,255 |
LSB Industries | 47,600 | a | 1,816,416 |
Materion | 47,190 | 1,608,707 | |
Mercer International | 150,505 | a | 1,330,464 |
Olympic Steel | 38,740 | 916,588 |
The Fund 15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Materials (continued) | |||
PH Glatfelter | 46,973 | 1,236,329 | |
PolyOne | 82,615 | 3,315,340 | |
RPM International | 12,995 | 559,695 | |
Sealed Air | 42,700 | 1,406,111 | |
Sonoco Products | 23,493 | 992,344 | |
Stillwater Mining | 43,860 | a | 737,287 |
Worthington Industries | 21,530 | 867,659 | |
44,921,673 | |||
Media—1.6% | |||
CBS Outdoor Americas | 22,750 | b | 738,692 |
Cinemark Holdings | 77,000 | 2,427,040 | |
E.W. Scripps, Cl. A | 64,400 | a | 1,257,088 |
LIN Media, Cl. A | 52,000 | a | 1,307,280 |
Media General | 82,700 | a,b | 1,466,271 |
Meredith | 17,778 | 799,299 | |
New Media Investment Group | 82,641 | a | 1,154,495 |
Starz, Cl. A | 35,460 | a | 1,085,076 |
World Wrestling Entertainment, Cl. A | 83,100 | b | 937,368 |
11,172,609 | |||
Pharmaceuticals, Biotech & | |||
Life Sciences—2.3% | |||
Affymetrix | 114,970 | a,b | 949,652 |
Cambrex | 193,380 | a | 4,155,736 |
Charles River Laboratories International | 64,398 | a | 3,450,445 |
Flamel Technologies, ADR | 305,279 | a | 3,413,019 |
Furiex Pharmaceuticals | 5,900 | a | 609,824 |
Impax Laboratories | 78,120 | a | 2,168,611 |
Mallinckrodt | 4,860 | a,b | 377,914 |
Sagent Pharmaceuticals | 47,699 | a | 1,068,935 |
16,194,136 | |||
Real Estate—2.6% | |||
Altisource Portfolio Solutions | 18,500 | a,b | 2,038,885 |
AV Homes | 72,550 | a | 1,203,604 |
Capstead Mortgage | 74,900 | b,c | 986,433 |
Corporate Office Properties Trust | 33,150 | c | 913,282 |
16
Common Stocks (continued) | Shares | Value ($) | |
Real Estate (continued) | |||
First Potomac Realty Trust | 73,866 | c | 966,167 |
Hersha Hospitality Trust | 385,316 | c | 2,439,050 |
iStar Financial | 66,715 | a,c | 963,365 |
LaSalle Hotel Properties | 58,683 | c | 1,935,952 |
Lexington Realty Trust | 161,800 | c | 1,836,430 |
Medical Properties Trust | 105,325 | c | 1,423,994 |
Newcastle Investment | 380,100 | c | 1,832,082 |
Omega Healthcare Investors | 31,411 | b,c | 1,158,752 |
Ramco-Gershenson Properties Trust | 45,049 | c | 747,813 |
18,445,809 | |||
Retailing—3.6% | |||
ANN | 21,922 | a | 852,108 |
Ascena Retail Group | 113,190 | a | 1,889,707 |
Big 5 Sporting Goods | 40,190 | 466,606 | |
Big Lots | 76,260 | a | 3,236,474 |
Children’s Place Retail Stores | 33,200 | 1,606,216 | |
CST Brands | 52,950 | 1,751,056 | |
Express | 49,670 | a | 626,339 |
Finish Line, Cl. A | 31,769 | 910,817 | |
Genesco | 19,268 | a | 1,442,981 |
GNC Holdings, Cl. A | 20,190 | 745,415 | |
Lithia Motors, Cl. A | 12,169 | 954,415 | |
New York & Co. | 69,880 | a | 276,725 |
Office Depot | 302,288 | a | 1,547,715 |
Rent-A-Center | 93,880 | 2,624,885 | |
Select Comfort | 126,025 | a | 2,336,504 |
Sonic Automotive, Cl. A | 72,975 | 1,920,702 | |
Stage Stores | 62,200 | 1,142,614 | |
TravelCenters of America | 96,500 | a | 821,215 |
25,152,494 | |||
Semiconductors & Semiconductor | |||
Equipment—4.9% | |||
Amkor Technology | 297,200 | a | 3,004,692 |
ANADIGICS | 748,676 | a | 808,570 |
Axcelis Technologies | 845,305 | a | 1,589,173 |
The Fund 17
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Semiconductors & Semiconductor | |||
Equipment (continued) | |||
Brooks Automation | 82,900 | 804,959 | |
Cabot Microelectronics | 125,830 | a | 5,414,465 |
Ceva | 35,730 | a | 559,174 |
ChipMOS TECHNOLOGIES | 60,800 | 1,484,128 | |
Cirrus Logic | 48,300 | a,b | 1,068,879 |
FormFactor | 127,950 | a | 928,917 |
Freescale Semiconductor | 70,120 | a | 1,555,963 |
GT Advanced Technologies | 244,740 | a,b | 4,126,316 |
Integrated Silicon Solution | 47,954 | a | 673,274 |
Magnachip Semiconductor | 57,740 | a | 717,131 |
Mellanox Technologies | 27,990 | a,b | 883,924 |
Microsemi | 37,795 | a | 919,552 |
Rambus | 171,580 | a | 2,076,118 |
Silicon Image | 195,200 | a | 1,020,896 |
Spansion, Cl. A | 85,360 | a | 1,626,108 |
Teradyne | 115,752 | b | 2,060,386 |
Ultratech | 59,290 | a | 1,504,780 |
Veeco Instruments | 12,700 | a | 423,164 |
Xcerra | 132,137 | a | 1,275,122 |
34,525,691 | |||
Software & Services—7.7% | |||
American Software, Cl. A | 157,931 | 1,517,717 | |
AVG Technologies | 75,100 | a | 1,453,936 |
Bankrate | 54,130 | a | 820,069 |
Booz Allen Hamilton Holdings | 38,314 | 847,889 | |
Broadridge Financial Solutions | 17,990 | 737,950 | |
CACI International, Cl. A | 19,184 | a | 1,369,738 |
Cadence Design Systems | 77,910 | a | 1,300,318 |
Cass Information Systems | 59,268 | 2,988,293 | |
Computer Services | 38,643 | 1,342,844 | |
Comverse | 91,423 | a | 2,262,719 |
Convergys | 135,700 | 2,960,974 | |
Conversant | 107,460 | a,b | 2,533,907 |
CoreLogic | 81,530 | a | 2,326,051 |
18
Common Stocks (continued) | Shares | Value ($) | |
Software & Services (continued) | |||
Covisint | 52,500 | b | 265,650 |
Digital River | 118,680 | a | 1,868,023 |
DST Systems | 28,090 | 2,560,404 | |
ExlService Holdings | 66,380 | a | 1,881,209 |
FalconStor Software | 799,739 | a | 1,239,595 |
Gigamon | 35,200 | b | 598,752 |
Jack Henry & Associates | 53,700 | 3,114,063 | |
MoneyGram International | 74,560 | a | 982,701 |
Monotype Imaging Holdings | 32,000 | 824,000 | |
NeuStar, Cl. A | 36,200 | a,b | 1,014,324 |
Nuance Communications | 56,650 | a | 916,880 |
Rovi | 127,690 | a | 3,086,267 |
SeaChange International | 118,320 | a | 1,133,506 |
SS&C Technologies Holdings | 43,700 | a | 1,863,805 |
Stamps.com | 10,900 | a | 352,288 |
Syntel | 34,000 | a | 2,750,600 |
TIBCO Software | 54,530 | a | 1,172,940 |
Unwired Planet | 740,415 | a | 1,599,296 |
VeriFone Systems | 34,160 | a | 1,120,790 |
Verint Systems | 67,268 | a | 3,116,533 |
53,924,031 | |||
Technology Hardware & Equipment—7.2% | |||
Anixter International | 18,939 | 1,950,717 | |
ARRIS Group | 87,880 | a | 2,909,707 |
Aviat Networks | 1,003,708 | a | 1,063,930 |
Badger Meter | 45,825 | 2,269,712 | |
Bel Fuse, Cl. B | 37,990 | 1,042,446 | |
Belden | 13,774 | 991,590 | |
Black Box | 41,610 | 1,014,036 | |
Brocade Communications Systems | 118,680 | 1,082,362 | |
Ceragon Networks | 79,940 | a | 185,461 |
Ciena | 81,530 | a | 1,581,682 |
Cognex | 42,000 | a | 1,512,000 |
CTS | 40,305 | 705,740 | |
Diebold | 10,131 | 380,216 |
The Fund 19
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Technology Hardware & Equipment (continued) | |||
Dolby Laboratories, Cl. A | 24,610 | a,b | 1,022,299 |
Electronics For Imaging | 31,595 | a | 1,285,601 |
Emulex | 190,420 | a | 1,020,651 |
GSI Group | 67,750 | a | 821,130 |
II-VI | 61,430 | a | 826,848 |
Infinera | 170,120 | a | 1,548,092 |
Ingram Micro, Cl. A | 45,702 | a | 1,269,145 |
InvenSense | 57,100 | a,b | 1,102,030 |
Itron | 24,830 | a | 954,714 |
Jabil Circuit | 72,640 | 1,367,085 | |
Lexmark International, Cl. A | 57,480 | 2,505,553 | |
Littelfuse | 9,456 | 828,913 | |
Maxwell Technologies | 17,820 | a | 309,355 |
Mercury Systems | 64,590 | a | 756,995 |
Methode Electronics | 44,700 | 1,392,405 | |
Oplink Communications | 67,154 | a | 1,132,216 |
OSI Systems | 9,610 | a | 547,290 |
Park Electrochemical | 38,668 | 1,038,622 | |
Plantronics | 10,949 | 496,428 | |
Plexus | 12,119 | a | 506,089 |
QLogic | 40,178 | a | 399,369 |
Quantum | 715,879 | a | 816,102 |
Sanmina | 101,050 | a | 2,056,368 |
ScanSource | 32,337 | a | 1,199,703 |
Sierra Wireless | 57,180 | a | 1,073,840 |
Sonus Networks | 359,440 | a | 1,319,145 |
SYNNEX | 30,890 | a | 2,042,138 |
Vishay Intertechnology | 268,659 | b | 4,008,392 |
Vishay Precision Group | 45,220 | a | 731,207 |
51,067,324 |
20
Common Stocks (continued) | Shares | Value ($) | |
Telecommunication | |||
Services—.4% | |||
FairPoint Communications | 91,000 | a,b | 1,283,100 |
Telephone & Data Systems | 23,640 | 655,064 | |
US Cellular | 15,440 | 663,148 | |
2,601,312 | |||
Transportation—1.8% | |||
Air Transport Services Group | 107,065 | a | 972,150 |
ArcBest | 20,585 | 880,420 | |
Celadon Group | 29,400 | 686,784 | |
Danaos | 120,101 | a,b | 714,601 |
JetBlue Airways | 221,100 | a | 2,135,826 |
Landstar System | 57,300 | 3,720,489 | |
Ryder System | 24,970 | 2,167,146 | |
SkyWest | 35,878 | 410,444 | |
Werner Enterprises | 32,111 | 847,730 | |
12,535,590 | |||
Utilities—2.4% | |||
ALLETE | 16,915 | 840,168 | |
Dynegy | 59,120 | a | 1,992,344 |
Hawaiian Electric Industries | 81,705 | b | 1,965,005 |
New Jersey Resources | 14,258 | 784,333 | |
NorthWestern | 37,700 | 1,809,600 | |
NRG Energy | 36,991 | 1,318,359 | |
Ormat Technologies | 46,150 | 1,374,347 | |
PNM Resources | 52,800 | 1,502,688 | |
Portland General Electric | 76,432 | 2,527,606 | |
Questar | 108,000 | 2,599,560 | |
16,714,010 | |||
Total Common Stocks | |||
(cost $558,607,698) | 678,328,443 |
The Fund 21
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Investment of Cash Collateral | ||||
for Securities Loaned—7.2% | Shares | Value ($) | ||
Registered Investment Company; | ||||
Dreyfus Institutional Cash Advantage Fund | ||||
(cost $50,941,122) | 50,941,122 | d | 50,941,122 | |
Total Investments (cost $609,548,820) | 103.6 | % | 729,269,565 | |
Liabilities, Less Cash and Receivables | (3.6 | %) | (25,386,380 | ) |
Net Assets | 100.0 | % | 703,883,185 |
ADR—American Depository Receipts
ETF—Exchange-Traded Funds
a |
Non-income producing security. | |
b |
Security, or portion thereof, on loan.At May 31, 2014, the value of the fund’s securities on loan was $49,924,448 | |
and the value of the collateral held by the fund was $51,981,039, consisting of cash collateral of $50,941,122 and | ||
U. S. Government & Agency securities valued at $1,039,917. | ||
c |
Investment in real estate investment trust. | |
d |
Investment in affiliated money market mutual fund. | |
|
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Capital Goods | 11.4 | Real Estate | 2.6 |
Banks | 10.8 | Utilities | 2.4 |
Software & Services | 7.7 | Pharmaceuticals, | |
Money Market Investment | 7.2 | Biotech & Life Sciences | 2.3 |
Technology Hardware & Equipment | 7.2 | Food, Beverage & Tobacco | 1.8 |
Materials | 6.4 | Transportation | 1.8 |
Energy | 6.0 | Automobiles & Components | 1.7 |
Insurance | 5.0 | Consumer Services | 1.6 |
Semiconductors & | Media | 1.6 | |
Semiconductor Equipment | 4.9 | Household & Personal Products | .8 |
Commercial & Professional Services | 4.4 | Telecommunication Services | .4 |
Health Care Equipment & Services | 4.4 | Exchange-Traded Funds | .3 |
Diversified Financials | 3.9 | Food & Staples Retailing | .3 |
Retailing | 3.6 | ||
Consumer Durables & Apparel | 3.1 | 103.6 | |
† Based on net assets. | |||
See notes to financial statements. |
22
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2014 (Unaudited)
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments (including | ||||
securities on loan, valued at $49,924,448)—Note 1(b): | ||||
Unaffiliated issuers | 558,607,698 | 678,328,443 | ||
Affiliated issuers | 50,941,122 | 50,941,122 | ||
Cash | 24,308,871 | |||
Receivable for investment securities sold | 5,479,370 | |||
Dividends and securities lending income receivable | 505,307 | |||
Receivable for shares of Common Stock subscribed | 454,726 | |||
Prepaid expenses | 36,018 | |||
760,053,857 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 557,554 | |||
Liability for securities on loan—Note 1(b) | 50,941,122 | |||
Payable for investment securities purchased | 4,543,064 | |||
Payable for shares of Common Stock redeemed | 74,489 | |||
Accrued expenses | 54,443 | |||
56,170,672 | ||||
Net Assets ($) | 703,883,185 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 525,878,805 | |||
Accumulated undistributed investment income—net | 515,833 | |||
Accumulated net realized gain (loss) on investments | 57,767,802 | |||
Accumulated net unrealized appreciation | ||||
(depreciation) on investments | 119,720,745 | |||
Net Assets ($) | 703,883,185 | |||
Net Asset Value Per Share | ||||
Class A | Class C | Class I | Class Y | |
Net Assets ($) | 1,862,044 | 237,006 | 699,973,266 | 1,810,869 |
Shares Outstanding | 75,777 | 10,097 | 28,170,675 | 72,918 |
Net Asset Value Per Share ($) | 24.57 | 23.47 | 24.85 | 24.83 |
See notes to financial statements. |
The Fund 23
STATEMENT OF OPERATIONS
Six Months Ended May 31, 2014 (Unaudited)
Investment Income ($): | ||
Income: | ||
Cash dividends (net of $4,434 foreign taxes withheld at source) | 3,958,966 | |
Income from securities lending—Note 1(b) | 304,282 | |
Total Income | 4,263,248 | |
Expenses: | ||
Management fee—Note 3(a) | 3,117,039 | |
Custodian fees—Note 3(c) | 48,395 | |
Professional fees | 37,411 | |
Registration fees | 37,011 | |
Directors’ fees and expenses—Note 3(d) | 27,458 | |
Prospectus and shareholders’ reports | 9,798 | |
Shareholder servicing costs—Note 3(c) | 6,667 | |
Loan commitment fees—Note 2 | 2,270 | |
Distribution fees—Note 3(b) | 885 | |
Miscellaneous | 16,719 | |
Total Expenses | 3,303,653 | |
Less—reduction in expenses due to undertaking—Note 3(a) | (512 | ) |
Less—reduction in fees due to earnings credits—Note 3(c) | (6 | ) |
Net Expenses | 3,303,135 | |
Investment Income—Net | 960,113 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments and foreign currency transactions | 61,740,180 | |
Net unrealized appreciation (depreciation) on | ||
investments and foreign currency transactions | (46,802,029 | ) |
Net Realized and Unrealized Gain (Loss) on Investments | 14,938,151 | |
Net Increase in Net Assets Resulting from Operations | 15,898,264 | |
See notes to financial statements. |
24
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
May 31, 2014 | Year Ended | |||
(Unaudited) | November 30, 2013a | |||
Operations ($): | ||||
Investment income—net | 960,113 | 3,406,946 | ||
Net realized gain (loss) on investments | 61,740,180 | 57,242,086 | ||
Net unrealized appreciation | ||||
(depreciation) on investments | (46,802,029 | ) | 133,980,280 | |
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 15,898,264 | 194,629,312 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A | (5,087 | ) | (8 | ) |
Class I | (3,895,063 | ) | (1,841,668 | ) |
Class Y | (6 | ) | — | |
Net realized gain on investments: | ||||
Class A | (138,419 | ) | (41,592 | ) |
Class C | (19,582 | ) | (6,501 | ) |
Class I | (56,713,713 | ) | (21,618,710 | ) |
Class Y | (94 | ) | — | |
Total Dividends | (60,771,964 | ) | (23,508,479 | ) |
Capital Stock Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A | 677,388 | 474,459 | ||
Class C | 12,505 | 76,163 | ||
Class I | 59,353,877 | 161,203,345 | ||
Class Y | 1,787,752 | 1,000 | ||
Dividends reinvested: | ||||
Class A | 141,899 | 41,600 | ||
Class C | 19,582 | 6,501 | ||
Class I | 30,393,174 | 11,970,795 | ||
Cost of shares redeemed: | ||||
Class A | (362,664 | ) | (250,905 | ) |
Class C | (10,475 | ) | (67,468 | ) |
Class I | (51,605,751 | ) | (67,007,781 | ) |
Class Y | (5,086 | ) | — | |
Increase (Decrease) in Net Assets | ||||
from Capital Stock Transactions | 40,402,201 | 106,447,709 | ||
Total Increase (Decrease) in Net Assets | (4,471,499 | ) | 277,568,542 | |
Net Assets ($): | ||||
Beginning of Period | 708,354,684 | 430,786,142 | ||
End of Period | 703,883,185 | 708,354,684 | ||
Undistributed investment income—net | 515,833 | 3,455,876 |
The Fund 25
STATEMENT OF CHANGES IN NET ASSETS (continued)
Six Months Ended | ||||
May 31, 2014 | Year Ended | |||
(Unaudited) | November 30, 2013a | |||
Capital Share Transactions: | ||||
Class Ab | ||||
Shares sold | 27,318 | 21,746 | ||
Shares issued for dividends reinvested | 5,770 | 2,155 | ||
Shares redeemed | (15,054 | ) | (11,476 | ) |
Net Increase (Decrease) in Shares Outstanding | 18,034 | 12,425 | ||
Class Cb | ||||
Shares sold | 532 | 3,519 | ||
Shares issued for dividends reinvested | 831 | 349 | ||
Shares redeemed | (445 | ) | (3,372 | ) |
Net Increase (Decrease) in Shares Outstanding | 918 | 496 | ||
Class I | ||||
Shares sold | 2,401,730 | 7,324,503 | ||
Shares issued for dividends reinvested | 1,223,987 | 614,943 | ||
Shares redeemed | (2,072,076 | ) | (2,977,564 | ) |
Net Increase (Decrease) in Shares Outstanding | 1,553,641 | 4,961,882 | ||
Class Y | ||||
Shares sold | 73,076 | 43.94 | ||
Shares redeemed | (202 | ) | — | |
Net Increase (Decrease) in Shares Outstanding | 72,874 | 43.94 |
a |
Effective July 1, 2013, the fund commenced offering ClassY shares. |
b |
During the period ended November 30, 2013, 1,060 Class C shares representing $22,840 were exchanged for 1,021 Class A shares. |
See notes to financial statements.
26
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||||
May 31, 2014 | Year Ended November 30, | |||||||||||
Class A Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | a | |||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 26.25 | 19.62 | 18.66 | 19.63 | 15.24 | 12.50 | ||||||
Investment Operations: | ||||||||||||
Investment income (loss)—netb | (.01 | ) | .06 | .02 | (.04 | ) | (.05 | ) | (.00 | )c | ||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .54 | 7.57 | 2.56 | .23 | 4.47 | 2.74 | ||||||
Total from Investment Operations | .53 | 7.63 | 2.58 | .19 | 4.42 | 2.74 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.08 | ) | (.00 | )c | — | — | — | — | ||||
Dividends from net realized | ||||||||||||
gain on investments | (2.13 | ) | (1.00 | ) | (1.62 | ) | (1.16 | ) | (.03 | ) | — | |
Total Distributions | (2.21 | ) | (1.00 | ) | (1.62 | ) | (1.16 | ) | (.03 | ) | — | |
Net asset value, end of period | 24.57 | 26.25 | 19.62 | 18.66 | 19.63 | 15.24 | ||||||
Total Return (%)d | 2.02 | e | 40.73 | 15.04 | .62 | 29.05 | 21.92 | e | ||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.32 | f | 1.33 | 1.40 | 1.29 | 1.34 | 2.94 | f | ||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.30 | f | 1.30 | 1.36 | 1.27 | 1.32 | 1.40 | f | ||||
Ratio of net investment income | ||||||||||||
(loss) to average net assets | (.08 | )f | .25 | .12 | (.18 | ) | (.27 | ) | (.02 | )f | ||
Portfolio Turnover Rate | 64.41 | e | 68.30 | 74.74 | 67.49 | 56.03 | 48.43 | e | ||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 1,862 | 1,516 | 889 | 1,071 | 7,308 | 6,289 |
a |
From December 17, 2008 (commencement of operations) to November 30, 2009. |
b |
Based on average shares outstanding at each month end. |
c |
Amount represents less than $.01 per share. |
d |
Exclusive of sales charge. |
e |
Not annualized. |
f |
Annualized. |
See notes to financial statements.
The Fund 27
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||||
May 31, 2014 | Year Ended November 30, | |||||||||||
Class C Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | a | |||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 25.19 | 19.00 | 18.25 | 19.34 | 15.13 | 12.50 | ||||||
Investment Operations: | ||||||||||||
Investment (loss)—netb | (.10 | ) | (.10 | ) | (.12 | ) | (.18 | ) | (.18 | ) | (.10 | ) |
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .51 | 7.29 | 2.49 | .25 | 4.42 | 2.73 | ||||||
Total from Investment Operations | .41 | 7.19 | 2.37 | .07 | 4.24 | 2.63 | ||||||
Distributions: | ||||||||||||
Dividends from net realized | ||||||||||||
gain on investments | (2.13 | ) | (1.00 | ) | (1.62 | ) | (1.16 | ) | (.03 | ) | — | |
Net asset value, end of period | 23.47 | 25.19 | 19.00 | 18.25 | 19.34 | 15.13 | ||||||
Total Return (%)c | 1.60 | d | 39.69 | 14.16 | (.03 | ) | 28.07 | 21.04 | d | |||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 2.19 | e | 2.16 | 2.15 | 2.03 | 2.10 | 3.70 | e | ||||
Ratio of net expenses | ||||||||||||
to average net assets | 2.05 | e | 2.06 | 2.12 | 2.02 | 2.08 | 2.15 | e | ||||
Ratio of net investment (loss) | ||||||||||||
to average net assets | (.83 | )e | (.48 | ) | (.64 | ) | (.92 | ) | (1.02 | ) | (.77 | )e |
Portfolio Turnover Rate | 64.41 | d | 68.30 | 74.74 | 67.49 | 56.03 | 48.43 | d | ||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 237 | 231 | 165 | 164 | 916 | 617 |
a |
From December 17, 2008 (commencement of operations) to November 30, 2009. |
b |
Based on average shares outstanding at each month end. |
c |
Exclusive of sales charge. |
d |
Not annualized. |
e |
Annualized. |
See notes to financial statements.
28
Six Months Ended | ||||||||||||
May 31, 2014 | Year Ended November 30, | |||||||||||
Class I Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | a | |||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 26.55 | 19.84 | 18.83 | 19.72 | 15.28 | 12.50 | ||||||
Investment Operations: | ||||||||||||
Investment income—netb | .03 | .14 | .10 | .04 | .00 | c | .03 | |||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .55 | 7.65 | 2.57 | .23 | 4.47 | 2.75 | ||||||
Total from Investment Operations | .58 | 7.79 | 2.67 | .27 | 4.47 | 2.78 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.15 | ) | (.08 | ) | (.04 | ) | — | (.00 | )c | — | ||
Dividends from net realized | ||||||||||||
gain on investments | (2.13 | ) | (1.00 | ) | (1.62 | ) | (1.16 | ) | (.03 | ) | — | |
Total Distributions | (2.28 | ) | (1.08 | ) | (1.66 | ) | (1.16 | ) | (.03 | ) | — | |
Net asset value, end of period | 24.85 | 26.55 | 19.84 | 18.83 | 19.72 | 15.28 | ||||||
Total Return (%) | 2.19 | d | 41.27 | 15.45 | 1.04 | 29.32 | 22.24 | d | ||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .95 | e | .95 | .99 | .99 | 1.07 | 1.91 | e | ||||
Ratio of net expenses | ||||||||||||
to average net assets | .95 | e | .95 | .99 | .99 | 1.06 | 1.15 | e | ||||
Ratio of net investment income | ||||||||||||
to average net assets | .28 | e | .60 | .52 | .20 | .02 | .26 | e | ||||
Portfolio Turnover Rate | 64.41 | d | 68.30 | 74.74 | 67.49 | 56.03 | 48.43 | d | ||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 699,973 | 706,606 | 429,732 | 297,086 | 243,304 | 63,379 |
a |
From December 17, 2008 (commencement of operations) to November 30, 2009. |
b |
Based on average shares outstanding at each month end. |
c |
Amount represents less than $.01 per share. |
d |
Not annualized. |
e |
Annualized. |
See notes to financial statements.
The Fund 29
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||
May 31, 2014 | Period Ended | ||
Class Y Shares | (Unaudited) | November 30, 2013a | |
Per Share Data ($): | |||
Net asset value, beginning of period | 26.54 | 22.76 | |
Investment Operations: | |||
Investment income—netb | .02 | .02 | |
Net realized and unrealized | |||
gain (loss) on investments | .55 | 3.76 | |
Total from Investment Operations | .57 | 3.78 | |
Distributions: | |||
Dividends from investment income—net | (.15 | ) | — |
Dividends from net realized gain on investments | (2.13 | ) | — |
Total Distributions | (2.28 | ) | — |
Net asset value, end of period | 24.83 | 26.54 | |
Total Return (%)c | 2.19 | 16.61 | |
Ratios/Supplemental Data (%): | |||
Ratio of total expenses to average net assetsd | 1.25 | 1.01 | |
Ratio of net expenses to average net assetsd | 1.05 | .99 | |
Ratio of net investment income | |||
to average net assetsd | .24 | .07 | |
Portfolio Turnover Rate | 64.41 | c | 68.30 |
Net Assets, end of period ($ x 1,000) | 1,811 | 1 |
a |
From July 1, 2013 (commencement of initial offering) to November 30, 2013. |
b |
Based on average shares outstanding at each month end. |
c |
Not annualized. |
d |
Annualized. |
See notes to financial statements.
30
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus Select Managers Small CapValue Fund (the “fund”) is a separate non-diversified series of Strategic 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 nine series, including the fund.The fund’s investment objective is to seek capital appreciation. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of NewYork Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. EACM Advisors LLC (“EACM”), a subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s portfolio allocation manager. Thompson, Siegel and Walmsley, LLC (“TS&W”),Walthausen & Co., LLC (“Walthausen”), Neuberger Berman Management LLC (“Neuberger Berman”), Lombardia Capital Partners, LLC (“Lombardia”), Iridian Asset Management LLC (“Iridian”), Kayne Anderson Rudnick Investment Management, LLC (“Kayne”) and Channing Capital Management, LLC (“Channing”) serve as the fund’s sub-investment advisers, each managing an allocated portion of the fund’s portfolio. At a December 26, 2013 meeting, the Company’s Board of Directors (the “Board”) voted to terminate the fund’s sub-investment advisory agreement with Vulcan Value Partners, LLC effective March 26, 2014. At a May 5, 2014 meeting, the Board approved a new sub-investment advisory agreement with Channing, which became effective on May 16, 2014.
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 100 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class C, Class I and Class Y. 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.
The Fund 31
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
As of May 31, 2014, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held all of the outstanding Class Y shares of the fund.
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 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).
32
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. 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, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
The Fund 33
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 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 May 31, 2014 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities— | ||||
Domestic | ||||
Common Stocks† | 663,091,611 | — | — | 663,091,611 |
Equity Securities— | ||||
Foreign | ||||
Common Stocks† | 12,795,229 | — | — | 12,795,229 |
34
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) (continued) | ||||
Investments in | ||||
Securities (continued): | ||||
Exchange-Traded | ||||
Funds | 2,441,603 | — | — | 2,441,603 |
Mutual Funds | 50,941,122 | — | — | 50,941,122 |
† See Statement of Investments for additional detailed categorizations. |
At May 31, 2014, there were no transfers between Level 1 and Level 2 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 sub-
The Fund 35
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
rogated to the fund’s rights against the borrower and the collateral. During the period ended May 31, 2014, The Bank of New York Mellon earned $85,996 from lending portfolio securities, pursuant to the securities lending agreement.
(d) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended May 31, 2014 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 11/30/2013 ($) | Purchases ($) | Sales ($) | 5/31/2014 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Cash | |||||
Advantage | |||||
Fund | 54,693,360 | 138,488,364 | 142,240,602 | 50,941,122 | 7.2 |
(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 May 31, 2014, 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
36
expense in the Statement of Operations. During the period ended May 31, 2014, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended November 30, 2013 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The tax character of distributions paid to shareholders during the fiscal year ended November 30, 2013 was as follows: ordinary income $11,546,395 and long-term capital gains $11,962,084.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 $265 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. 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 May 31, 2014, the fund did not borrow under the Facilities.
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .90% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus has contractually agreed, from December 1, 2013 through April 1, 2015, to waive receipt of its fees and/or assume the expenses of the fund so that the direct expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest
The Fund 37
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 $512 during the period ended May 31, 2014.
Pursuant to a Portfolio Allocation Agreement between Dreyfus and EACM, Dreyfus pays EACM a monthly fee at an annual percentage of the value of the fund’s average daily net assets.
Pursuant to separate Sub-Investment Advisory Agreements between Dreyfus and TS&W, Walthausen, Neuberger Berman, Lombardia, Iridian, Kayne and Channing, each serves as the fundís sub-adviser responsible for the day-toñday management of a portion of the fundís portfolio. Dreyfus has obtained an exemptive order from the SEC, upon which the fund may rely, to use a manager of managers approach that permits Dreyfus, subject to certain conditions and approval by the Board, to enter into and materially amend sub-investment advisory agreements with one or more sub-advisers who are either unaffiliated with Dreyfus or are wholly-owned subsidiaries (as defined under the Act) of Dreyfusí ultimate parent company, BNY Mellon, without obtaining shareholder approval. The order also relieves the fund from disclosing the sub-investment advisory fee paid by Dreyfus to an unaffiliated sub-adviser in documents filed with the SEC and provided to shareholders. In addition, pursuant to the order, it is not necessary to disclose the sub-investment advisory fee payable by Dreyfus separately to a sub-adviser that is a wholly-owned subsidiary of BNY Mellon in documents filed with the SEC and provided to shareholders; such fees are to be aggregated with fees payable to Dreyfus. Dreyfus has ultimate responsibility (subject to oversight by the Board) to supervise any sub-adviser and recommend the hiring, termination, and replacement of any sub-adviser to the Board.
(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 May 31, 2014, Class C shares were charged $885 pursuant to the Distribution Plan.
38
(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 May 31, 2014, Class A and Class C shares were charged $2,165 and $295, 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 DreyfusTransfer, 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 May 31, 2014, the fund was charged $1,645 for transfer agency services and $62 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 $6.
The fund compensates The Bank of NewYork 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 May 31, 2014, the fund was charged $48,395 pursuant to the custody agreement.
The Fund 39
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
During the period ended May 31, 2014, the fund was charged $4,622 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 $528,970, Distribution Plan fees $155, Shareholder Services Plan fees $435, custodian fees $25,930, Chief Compliance Officer fees $1,472 and transfer agency fees $869, which are offset against an expense reimbursement currently in effect in the amount of $277.
(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 May 31, 2014, amounted to $434,429,408 and $447,163,378, respectively.
At May 31, 2014, accumulated net unrealized appreciation on investments was $119,720,745, consisting of $136,055,979 gross unrealized appreciation and $16,335,234 gross unrealized depreciation.
At May 31, 2014, 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).
40
NOTES
For More Information
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
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 http://www.sec.gov and may be
reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on
the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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 http://www.dreyfus.com and on the SEC’s website
at http://www.sec.gov. The description of the policies and procedures
is also available without charge, upon request, by calling 1-800-DREYFUS.
Dreyfus
U.S. Equity Fund
SEMIANNUAL REPORT May 31, 2014
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes.
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value
Contents | |
THE FUND | |
2 |
A Letter from the President |
3 |
Discussion of Fund Performance |
6 |
Understanding Your Fund’s Expenses |
6 |
Comparing Your Fund’s Expenses With Those of Other Funds |
7 |
Statement of Investments |
10 |
Statement of Assets and Liabilities |
11 |
Statement of Operations |
12 |
Statement of Changes in Net Assets |
14 |
Financial Highlights |
18 |
Notes to Financial Statements |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus
U.S. Equity Fund
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus U.S. Equity Fund covering the six-month period from December 1, 2013, through May 31, 2014. 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.
The end of 2013 witnessed a firming U.S. labor market, further improvements in housing data, and generally strong corporate earnings growth, but U.S. GDP growth over the opening months of 2014 generally stalled due to harsh winter weather, the expiration of extended unemployment benefits, and the deceleration of inventory accumulation by businesses. Although stocks encountered volatility under these mixed conditions, investors largely appeared to shrug off recent economic shortfalls as some broad measures of U.S. stock market performance either achieved or approached new all-time highs by the reporting period’s end.
We already have seen evidence that the economic recovery’s pause over the winter of 2014 may prove temporary, and we currently expect to see accelerating growth over the next few years as past financial stresses continue to fade and fiscal drags abate in the public sector. However, stocks generally have risen to higher valuations after the sustained market rally, and in our judgment, selectivity is likely to be key to successful equity investing in the months ahead. As always, we encourage you to discuss our observations and appropriate investment strategies with your financial advisor.
Thank you for your continued confidence and support.
J. Charles Cardona
President
The Dreyfus Corporation
June 16, 2014
2
DISCUSSION OF FUND PERFORMANCE
For the period of December 1, 2013, through May 31, 2014, as provided by Charlie Macquaker and Roy Leckie of Walter Scott & Partners Limited (Walter Scott), Sub-investment adviser
Fund and Market Performance Overview
For the six-month period ended May 31, 2014, Dreyfus U.S. Equity Fund’s Class A shares achieved a return of 2.03%, Class C shares returned 1.64%, Class I shares returned 2.18%, and Class Y shares returned 2.24%.1 In comparison, the fund’s benchmark, the Morgan Stanley Capital International USA Index (“MSCI USA Index”), achieved a 7.40% return over the same period.2
Despite the adverse impact of harsh winter weather on U.S. economic growth during the reporting period, improving employment data helped support moderate stock market gains.The fund underperformed its benchmark, mainly due to the disappointing performance of a number of stocks in the consumer discretionary sector.
The Fund’s Investment Approach
The fund seeks long-term real returns by investing in stocks of companies that are located in the United States. When selecting stocks, Walter Scott seeks companies with fundamental strengths that indicate the potential for sustainable growth. The firm focuses on individual stock selection through extensive fundamental research. Candidates are initially selected for research if they meet certain broad absolute and trend criteria. Financial statements are analyzed in an effort to identify the nature of their cash generation and to understand the variables that add value to their businesses. Companies meeting the financial criteria are subjected to a detailed investigation of their products, costs and pricing, competition, industry position, and outlook.
Stocks Advanced Amid Economic Uncertainty
Although the market encountered occasional bouts of heightened volatility over the reporting period, stocks generally continued to climb during an uneven economic recovery fueled by falling unemployment and low short-term interest rates. These factors proved especially supportive of stock prices toward the end of 2013, when the market rally was led by smaller, more speculative growth companies that tend to be more sensitive to changes in economic conditions.
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
Market sentiment appeared to change in January 2014, when U.S. equities gave back some of their previous gains due to concerns about economic slowdowns and geopolitical turmoil in the emerging markets. Later, the U.S. Department of Commerce estimated that U.S. GDP contracted at a 1.0% annualized rate over the first quarter of 2014 due to the dampening effects of severe winter weather on consumer spending and housing market activity, as well as by reduced export activity and slowing inventory accumulation by businesses.
Nonetheless, stocks rebounded during the spring when some of these worries proved to be overblown.The spring rally generally was led by larger, value-oriented companies with track records of consistent earnings across a variety of economic climates, and more speculative growth-oriented companies typically lagged. On average, U.S. stocks posted solid gains for the reporting period overall. In fact, some broad measures of large-cap stock market performance either established or approached new record highs by the reporting period’s end.
Conservative Posture Limited Participation in Market Gains
The fund is designed to hold up better than market averages during periods of market weakness, and it tends to lag during rallies.The reporting period was no exception.The fund’s conservative investment posture, and quality bias, prevented it from participating more fully in the upward market moves which were particularly evident among lower quality stocks.
In addition, the fund’s relative results were hurt by its exposure to, and the disappointing performance of a number of stocks in the consumer discretionary sector. Fashion accessories maker Coach fell sharply due to intensifying competitive pressures and declining market share. Discount retailer Family Dollar Stores reported lower-than-expected sales and profit margins as its management team has failed to improve operational performance in an increasingly competitive category.Apparel seller Urban Outfitters saw a lackluster consumer response to recent designs. In the health care sector, diagnostic equipment producer Meridian Bioscience announced disappointing sales of a key product, and a relatively uneventful flu season hurt vaccine sales.
The fund achieved better relative results with energy exploration-and-production company EOG Resources and oil services provider Schlumberger, which benefited from greater drilling activity in the midst of a domestic shale oil-and-gas boom. Industrial products distributor MSC Industrial Direct, Cl.A saw good results from its
4
initiative to sell products through vending machines. In the information technology sector, enterprise software developer Oracle achieved higher licensing revenues from cloud computing, and hardware maker Cisco Systems achieved better-than-expected sales and margins partly due to the success of new switching/routing products.
Maintaining a Consistently Prudent Investment Process
We have maintained a cautious outlook in light of richer equity valuations and aggressively accommodative policies from central banks worldwide.
Guessing what Ms.Yellen and her colleagues at the Federal Reserve are likely to do in the year ahead is not something that should preoccupy us here atWalter Scott. It is true that U.S. stocks have risen strongly in recent years and have in many cases touched all-time highs. However, from our perspective valuations do not appear overly expensive provided that the anticipated growth is delivered.As stocks become more fully valued, the market may well become more discerning. In that environment, we believe that the patient, cautious, stock picker should benefit.
The research team at Walter Scott remains focused on building a fund that aims to deliver on our target of enhancing the after inflation purchasing power of our clients’ assets. Through careful financial analysis and in-depth research of both the companies and their end markets we remain confident that the fund, and any new investment ideas, should enable us to meet that objective.
June 16, 2014
Please note, the position in any security highlighted with italicized typeface was sold during the reporting period. Equity funds 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 redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. Return figures for Class A and Class C provided reflect the absorption of certain fund expenses by The Dreyfus Corporation pursuant to an undertaking in effect through April 1, 2015, at which time it may be extended, terminated or modified. Had these expenses not been absorbed, Class A and Class C returns would have been lower. |
2 |
SOURCE: LIPPER INC. – Reflects reinvestment of net dividends and, where applicable, capital gain distributions. The Morgan Stanley Capital International USA (MSCI USA) Index is an unmanaged, market capitalization weighted index that is designed to measure the performance of publicly traded stocks issued by companies in the United States. Investors cannot invest directly in any index. |
The Fund 5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus U.S. Equity Fund from December 1, 2013 to May 31, 2014. 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 May 31, 2014 | ||||||||
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $ | 5.74 | $ | 9.35 | $ | 3.98 | $ | 3.58 |
Ending value (after expenses) | $ | 1,020.30 | $ | 1,016.40 | $ | 1,021.80 | $ | 1,022.40 |
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 May 31, 2014 | |||||||||||
Class A | Class C | Class I | Class Y | ||||||||
Expenses paid per $1,000† | $ | 5.74 | $ | 9.35 | $ | 3.98 | $ | 3.58 | |||
Ending value (after expenses) | $ | 1,019.25 | $ | 1,015.66 | $ | 1,020.99 | $ | 1,021.39 | |||
† Expenses are equal to the fund’s annualized expense ratio of 1.14% for Class A, 1.86% for Class C, .79% for | |||||||||||
Class I and .71% for ClassY, multiplied by the average account value over the period, multiplied by 182/365 (to | |||||||||||
reflect the one-half year period). |
STATEMENT OF INVESTMENTS
May 31, 2014 (Unaudited)
Common Stocks—98.8% | Shares | Value ($) | |
Capital Goods—18.6% | |||
Boeing | 130,600 | 17,663,650 | |
Donaldson | 404,100 | 16,458,993 | |
Emerson Electric | 242,700 | 16,195,371 | |
Fastenal | 370,500 | 18,061,875 | |
Flowserve | 203,800 | 15,028,212 | |
MSC Industrial Direct, Cl. A | 208,200 | 19,148,154 | |
Precision Castparts | 67,860 | 17,167,223 | |
Rockwell Collins | 224,700 | 17,760,288 | |
W.W. Grainger | 64,100 | 16,561,517 | |
154,045,283 | |||
Consumer Durables & Apparel—5.0% | |||
Coach | 277,000 | 11,276,670 | |
DSW, Cl. A | 492,700 | 12,342,135 | |
NIKE, Cl. B | 235,700 | 18,127,687 | |
41,746,492 | |||
Consumer Services—4.6% | |||
McDonald’s | 170,600 | 17,303,958 | |
Panera Bread, Cl. A | 43,300 | a | 6,651,313 |
Starbucks | 192,200 | 14,076,728 | |
38,031,999 | |||
Energy—9.1% | |||
Apache | 182,500 | 17,012,650 | |
EOG Resources | 202,920 | 21,468,936 | |
Occidental Petroleum | 165,500 | 16,498,695 | |
Schlumberger | 197,750 | 20,573,910 | |
75,554,191 | |||
Food & Staples Retailing—1.8% | |||
Wal-Mart Stores | 188,900 | 14,501,853 | |
Food, Beverage & Tobacco—2.1% | |||
Coca-Cola | 417,800 | 17,092,198 | |
Health Care Equipment & Services—11.5% | |||
C.R. Bard | 124,650 | 18,436,981 | |
Intuitive Surgical | 20,200 | a | 7,468,748 |
Meridian Bioscience | 636,600 | 12,993,006 | |
ResMed | 356,800 | b | 17,861,408 |
Stryker | 218,100 | 18,427,269 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Health Care Equipment & Services (continued) | |||
Varian Medical Systems | 241,900 | a | 19,944,655 |
95,132,067 | |||
Household & Personal Products—2.0% | |||
Colgate-Palmolive | 247,200 | 16,908,480 | |
Materials—8.3% | |||
FMC | 220,500 | 16,881,480 | |
Monsanto | 139,100 | 16,949,335 | |
Praxair | 131,600 | 17,402,784 | |
Sigma-Aldrich | 174,000 | 17,144,220 | |
68,377,819 | |||
Pharmaceuticals, | |||
Biotech & Life Sciences—4.0% | |||
Celgene | 109,800 | a | 16,802,694 |
Johnson & Johnson | 160,500 | 16,284,330 | |
33,087,024 | |||
Retailing—4.8% | |||
The TJX Companies | 315,300 | 17,168,085 | |
Tractor Supply | 120,200 | 7,815,404 | |
Urban Outfitters | 431,600 | a | 14,467,232 |
39,450,721 | |||
Software & Services—16.2% | |||
Adobe Systems | 236,000 | a | 15,231,440 |
Automatic Data Processing | 222,200 | 17,704,896 | |
Google, Cl. A | 16,960 | a | 9,695,184 |
Google, Cl. C | 16,960 | a | 9,514,221 |
MasterCard, Cl. A | 283,700 | 21,688,865 | |
Microsoft | 433,100 | 17,731,114 | |
Oracle | 408,400 | 17,160,968 | |
Paychex | 372,000 | 15,292,920 | |
Teradata | 241,600 | a | 10,144,784 |
134,164,392 | |||
Technology Hardware & Equipment—6.7% | |||
Amphenol, Cl. A | 191,800 | 18,374,440 | |
Cisco Systems | 776,000 | 19,105,120 | |
QUALCOMM | 218,500 | 17,578,325 | |
55,057,885 |
8
Common Stocks (continued) | Shares | Value ($) | ||
Transportation—4.1% | ||||
C.H. Robinson Worldwide | 299,300 | 17,916,098 | ||
Expeditors International of Washington | 354,000 | 16,110,540 | ||
34,026,638 | ||||
Total Common Stocks | ||||
(cost $583,360,002) | 817,177,042 | |||
Other Investment—1.1% | ||||
Registered Investment Company; | ||||
Dreyfus Institutional Preferred | ||||
Plus Money Market Fund | ||||
(cost $9,309,000) | 9,309,000 | c | 9,309,000 | |
Investment of Cash Collateral | ||||
for Securities Loaned—2.2% | ||||
Registered Investment Company; | ||||
Dreyfus Institutional Cash Advantage Fund | ||||
(cost $17,847,744) | 17,847,744 | c | 17,847,744 | |
Total Investments (cost $610,516,746) | 102.1 | % | 844,333,786 | |
Liabilities, Less Cash and Receivables | (2.1 | %) | (16,968,684 | ) |
Net Assets | 100.0 | % | 827,365,102 |
a |
Non-income producing security. | |
b |
Security, or portion thereof, on loan.At May 31, 2014, the value of the fund’s securities on loan was $17,682,794 | |
and the value of the collateral held by the fund was $18,104,417, consisting of cash collateral of $17,847,744 and | ||
U. S. Government and Agency securities valued at $256,673. | ||
c |
Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Capital Goods | 18.6 | Consumer Services | 4.6 |
Software & Services | 16.2 | Transportation | 4.1 |
Health Care Equipment & Services | 11.5 | Pharmaceuticals, Biotech & Life Sciences | 4.0 |
Energy | 9.1 | Money Market Investments | 3.3 |
Materials | 8.3 | Food, Beverage & Tobacco | 2.1 |
Technology Hardware & Equipment | 6.7 | Household & Personal Products | 2.0 |
Consumer Durables & Apparel | 5.0 | Food & Staples Retailing | 1.8 |
Retailing | 4.8 | 102.1 | |
† Based on net assets. | |||
See notes to financial statements. |
The Fund 9
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2014 (Unaudited)
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments (including | ||||
securities on loan, valued at $17,682,794)—Note 1(b): | ||||
Unaffiliated issuers | 583,360,002 | 817,177,042 | ||
Affiliated issuers | 27,156,744 | 27,156,744 | ||
Cash | 166,580 | |||
Dividends and securities lending income receivable | 1,204,142 | |||
Receivable for shares of Common Stock subscribed | 371,473 | |||
Prepaid expenses | 45,616 | |||
846,121,597 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 546,737 | |||
Liability for securities on loan—Note 1(b) | 17,847,744 | |||
Payable for shares of Common Stock redeemed | 323,430 | |||
Accrued expenses | 38,584 | |||
18,756,495 | ||||
Net Assets ($) | 827,365,102 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 582,778,949 | |||
Accumulated undistributed investment income—net | 2,652,727 | |||
Accumulated net realized gain (loss) on investments | 8,116,386 | |||
Accumulated net unrealized appreciation | ||||
(depreciation) on investments | 233,817,040 | |||
Net Assets ($) | 827,365,102 | |||
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
Net Assets ($) | 2,538,832 | 930,417 | 823,894,704 | 1,149 |
Shares Outstanding | 127,447 | 48,314 | 41,196,691 | 57.44 |
Net Asset Value Per Share ($) | 19.92 | 19.26 | 20.00 | 20.00 |
See notes to financial statements. |
10
STATEMENT OF OPERATIONS
Six Months Ended May 31, 2014 (Unaudited)
Investment Income ($): | ||
Income: | ||
Cash dividends: | ||
Unaffiliated issuers | 6,182,287 | |
Affiliated issuers | 5,132 | |
Income from securities lending—Note 1(b) | 163,883 | |
Total Income | 6,351,302 | |
Expenses: | ||
Management fee—Note 3(a) | 3,085,084 | |
Professional fees | 33,039 | |
Registration fees | 32,264 | |
Custodian fees—Note 3(c) | 31,039 | |
Directors’ fees and expenses—Note 3(d) | 24,455 | |
Shareholder servicing costs—Note 3(c) | 9,201 | |
Prospectus and shareholders’ reports | 5,383 | |
Distribution fees—Note 3(b) | 3,640 | |
Loan commitment fees—Note 2 | 2,148 | |
Miscellaneous | 15,390 | |
Total Expenses | 3,241,643 | |
Less—reduction in expenses due to undertaking—Note 3(a) | (551 | ) |
Less—reduction in fees due to earnings credits—Note 3(c) | (5 | ) |
Net Expenses | 3,241,087 | |
Investment Income—Net | 3,110,215 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments | 8,126,513 | |
Net unrealized appreciation (depreciation) on investments | 6,431,821 | |
Net Realized and Unrealized Gain (Loss) on Investments | 14,558,334 | |
Net Increase in Net Assets Resulting from Operations | 17,668,549 | |
See notes to financial statements. |
The Fund 11
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
May 31, 2014 | Year Ended | |||
(Unaudited) | November 30, 2013a | |||
Operations ($): | ||||
Investment income—net | 3,110,215 | 5,469,390 | ||
Net realized gain (loss) on investments | 8,126,513 | 6,813,165 | ||
Net unrealized appreciation | ||||
(depreciation) on investments | 6,431,821 | 157,019,159 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 17,668,549 | 169,301,714 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A | (8,495 | ) | (11,577 | ) |
Class C | (610 | ) | — | |
Class I | (5,059,950 | ) | (5,289,594 | ) |
Class Y | (7 | ) | — | |
Net realized gain on investments: | ||||
Class A | (10,199 | ) | — | |
Class C | (4,325 | ) | — | |
Class I | (3,404,196 | ) | — | |
Class Y | (5 | ) | — | |
Total Dividends | (8,487,787 | ) | (5,301,171 | ) |
Capital Stock Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A | 209,948 | 1,448,507 | ||
Class C | 5,426 | 680,433 | ||
Class I | 98,907,576 | 223,234,167 | ||
Class Y | — | 1,000 | ||
Dividends reinvested: | ||||
Class A | 17,062 | 10,342 | ||
Class C | 2,404 | — | ||
Class I | 3,833,304 | 1,722,258 | ||
Cost of shares redeemed: | ||||
Class A | (165,737 | ) | (1,281,984 | ) |
Class C | (104,369 | ) | (55,422 | ) |
Class I | (105,851,985 | ) | (105,535,449 | ) |
Increase (Decrease) in Net Assets | ||||
from Capital Stock Transactions | (3,146,371 | ) | 120,223,852 | |
Total Increase (Decrease) in Net Assets | 6,034,391 | 284,224,395 | ||
Net Assets ($): | ||||
Beginning of Period | 821,330,711 | 537,106,316 | ||
End of Period | 827,365,102 | 821,330,711 | ||
Undistributed investment income—net | 2,652,727 | 4,611,574 |
12
Six Months Ended | ||||
May 31, 2014 | Year Ended | |||
(Unaudited) | November 30, 2013a | |||
Capital Share Transactions: | ||||
Class A | ||||
Shares sold | 10,724 | 81,245 | ||
Shares issued for dividends reinvested | 859 | 675 | ||
Shares redeemed | (8,464 | ) | (74,757 | ) |
Net Increase (Decrease) in Shares Outstanding | 3,119 | 7,163 | ||
Class C | ||||
Shares sold | 285 | 38,087 | ||
Shares issued for dividends reinvested | 125 | — | ||
Shares redeemed | (5,497 | ) | (3,229 | ) |
Net Increase (Decrease) in Shares Outstanding | (5,087 | ) | 34,858 | |
Class I | ||||
Shares sold | 5,043,161 | 12,849,116 | ||
Shares issued for dividends reinvested | 192,435 | 112,272 | ||
Shares redeemed | (5,416,001 | ) | (6,076,012 | ) |
Net Increase (Decrease) in Shares Outstanding | (180,405 | ) | 6,885,376 | |
Class Y | ||||
Shares sold | — | 57.44 | ||
a Effective July 1, 2013, the fund commenced offering ClassY shares. | ||||
See notes to financial statements. |
The Fund 13
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | |||||||||||
May 31, 2014 | Year Ended November 30, | ||||||||||
Class A Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | |||||
Per Share Data ($): | |||||||||||
Net asset value, | |||||||||||
beginning of period | 19.67 | 15.45 | 14.20 | 12.83 | 11.68 | 9.14 | |||||
Investment Operations: | |||||||||||
Investment income—neta | .04 | .08 | .08 | .04 | .01 | .04 | |||||
Net realized and unrealized | |||||||||||
gain (loss) on investments | .36 | 4.25 | 1.17 | 1.39 | 1.16 | 2.53 | |||||
Total from Investment Operations | .40 | 4.33 | 1.25 | 1.43 | 1.17 | 2.57 | |||||
Distributions: | |||||||||||
Dividends from | |||||||||||
investment income—net | (.07 | ) | (.11 | ) | — | — | (.02 | ) | (.03 | ) | |
Dividends from net realized | |||||||||||
gain on investments | (.08 | ) | — | — | (.06 | ) | — | — | |||
Total Distributions | (.15 | ) | (.11 | ) | — | (.06 | ) | (.02 | ) | (.03 | ) |
Net asset value, end of period | 19.92 | 19.67 | 15.45 | 14.20 | 12.83 | 11.68 | |||||
Total Return (%)b | 2.03 | c | 28.20 | 8.80 | 11.17 | 10.01 | 28.19 | ||||
Ratios/Supplemental Data (%): | |||||||||||
Ratio of total expenses | |||||||||||
to average net assets | 1.15 | d | 1.15 | 1.22 | 1.15 | 1.76 | 4.65 | ||||
Ratio of net expenses | |||||||||||
to average net assets | 1.14 | d | 1.14 | 1.22 | 1.15 | 1.40 | 1.40 | ||||
Ratio of net investment income | |||||||||||
to average net assets | .40 | d | .48 | .57 | .29 | .04 | .42 | ||||
Portfolio Turnover Rate | 3.99 | c | 7.13 | 5.73 | 10.61 | 13.62 | 31.79 | ||||
Net Assets, end of period | |||||||||||
($ x 1,000) | 2,539 | 2,446 | 1,810 | 988 | 2,424 | 3,884 |
a |
Based on average shares outstanding at each month end. |
b |
Exclusive of sales charge. |
c |
Not annualized. |
d |
Annualized. |
See notes to financial statements.
14
Six Months Ended | ||||||||||||
May 31, 2014 | Year Ended November 30, | |||||||||||
Class C Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 19.04 | 14.97 | 13.88 | 12.65 | 11.58 | 9.11 | ||||||
Investment Operations: | ||||||||||||
Investment (loss)—neta | (.03 | ) | (.06 | ) | (.05 | ) | (.06 | ) | (.09 | ) | (.03 | ) |
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .34 | 4.13 | 1.14 | 1.35 | 1.16 | 2.50 | ||||||
Total from Investment Operations | .31 | 4.07 | 1.09 | 1.29 | 1.07 | 2.47 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.01 | ) | — | — | — | — | — | |||||
Dividends from net realized | ||||||||||||
gain on investments | (.08 | ) | — | — | (.06 | ) | — | — | ||||
Total Distributions | (.09 | ) | — | — | (.06 | ) | — | — | ||||
Net asset value, end of period | 19.26 | 19.04 | 14.97 | 13.88 | 12.65 | 11.58 | ||||||
Total Return (%)b | 1.64 | c | 27.19 | 7.85 | 10.22 | 9.24 | 27.11 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.95 | d | 2.02 | 2.08 | 1.94 | 2.52 | 5.83 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.86 | d | 1.93 | 2.08 | 1.94 | 2.15 | 2.15 | |||||
Ratio of net investment (loss) | ||||||||||||
to average net assets | (.32 | )d | (.34 | ) | (.33 | ) | (.47 | ) | (.71 | ) | (.27 | ) |
Portfolio Turnover Rate | 3.99 | c | 7.13 | 5.73 | 10.61 | 13.62 | 31.79 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 930 | 1,016 | 278 | 214 | 312 | 497 |
a |
Based on average shares outstanding at each month end. |
b |
Exclusive of sales charge. |
c |
Not annualized. |
d |
Annualized. |
See notes to financial statements.
The Fund 15
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||||
May 31, 2014 | Year Ended November 30, | |||||||||||
Class I Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 19.77 | 15.51 | 14.27 | 12.88 | 11.70 | 9.16 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .07 | .14 | .14 | .09 | .07 | .05 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .36 | 4.27 | 1.17 | 1.38 | 1.15 | 2.54 | ||||||
Total from Investment Operations | .43 | 4.41 | 1.31 | 1.47 | 1.22 | 2.59 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.12 | ) | (.15 | ) | (.07 | ) | (.02 | ) | (.04 | ) | (.05 | ) |
Dividends from net realized | ||||||||||||
gain on investments | (.08 | ) | — | — | (.06 | ) | — | — | ||||
Total Distributions | (.20 | ) | (.15 | ) | (.07 | ) | (.08 | ) | (.04 | ) | (.05 | ) |
Net asset value, end of period | 20.00 | 19.77 | 15.51 | 14.27 | 12.88 | 11.70 | ||||||
Total Return (%) | 2.18 | b | 28.75 | 9.23 | 11.46 | 10.47 | 28.36 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .79 | c | .79 | .80 | .82 | .94 | 3.77 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .79 | c | .79 | .80 | .82 | .94 | 1.15 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | .76 | c | .81 | .95 | .67 | .56 | .54 | |||||
Portfolio Turnover Rate | 3.99 | b | 7.13 | 5.73 | 10.61 | 13.62 | 31.79 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 823,895 | 817,867 | 535,019 | 376,490 | 144,771 | 1,870 |
a |
Based on average shares outstanding at each month end. |
b |
Not annualized. |
c |
Annualized. |
See notes to financial statements.
16
Six Months Ended | |||
May 31, 2014 | Period Ended | ||
Class Y Shares | (Unaudited) | November 30, 2013a | |
Per Share Data ($): | |||
Net asset value, beginning of period | 19.76 | 17.41 | |
Investment Operations: | |||
Investment income—netb | .08 | .06 | |
Net realized and unrealized | |||
gain (loss) on investments | .36 | 2.29 | |
Total from Investment Operations | .44 | 2.35 | |
Distributions: | |||
Dividends from investment income—net | (.12 | ) | — |
Dividends from net realized | |||
gain on investments | (.08 | ) | — |
Total Distributions | (.20 | ) | — |
Net asset value, end of period | 20.00 | 19.76 | |
Total Return (%)c | 2.24 | 13.50 | |
Ratios/Supplemental Data (%): | |||
Ratio of total expenses to average net assetsd | .71 | .76 | |
Ratio of net expenses to average net assetsd | .71 | .76 | |
Ratio of net investment income | |||
to average net assetsd | .81 | .78 | |
Portfolio Turnover Rate | 3.99 | c | 7.13 |
Net Assets, end of period ($ x 1,000) | 1 | 1 |
a |
From July 1, 2013 (commencement of initial offering) to November 30, 2013. |
b |
Based on average shares outstanding at each month end. |
c |
Not annualized. |
d |
Annualized. |
See notes to financial statements.
The Fund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus U.S. Equity Fund (the “fund”) is a separate diversified series of Strategic 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 nine series, including the fund.The fund’s investment objective is to seek long-term total return. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.Walter Scott & Partners Limited (“Walter Scott”), a subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser. Effective March 31, 2014, the fund is closed to new investors.
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 100 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class C, Class I and ClassY. 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.
As of May 31, 2014, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held all of the outstanding ClassY shares of the fund.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are
18
charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates.
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.
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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. 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, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant American Depository Receipts and financial futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
20
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 May 31, 2014 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities— | ||||
Domestic | ||||
Common Stocks† | 817,177,042 | — | — | 817,177,042 |
Mutual Funds | 27,156,744 | — | — | 27,156,744 |
† See Statement of Investments for additional detailed categorizations. |
At May 31, 2014, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(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 NewYork 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 the Manager or U.S. Government and Agency secu-rities.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 NewYork 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. During the period ended May 31, 2014,The Bank of NewYork Mellon earned $47,827 from lending portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended May 31, 2014 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 11/30/2013 ($) | Purchases ($) | Sales ($) | 5/31/2014 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Preferred | |||||
Plus Money | |||||
Market | |||||
Fund | 24,553,000 | 56,625,000 | 71,869,000 | 9,309,000 | 1.1 |
22
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 11/30/2013 ($) | Purchases ($) | Sales ($) | 5/31/2014 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Cash | |||||
Advantage | |||||
Fund | 37,652,600 | 128,461,584 | 148,266,440 | 17,847,744 | 2.2 |
Total | 62,205,600 | 185,086,584 | 220,135,440 | 27,156,744 | 3.3 |
(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 May 31, 2014, 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 May 31, 2014, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended November 30, 2013 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The tax character of distributions paid to shareholders during the fiscal year ended November 30, 2013 was as follows: ordinary income $5,301,171. The tax character of current year distributions will be determined at the end of the current fiscal year.
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $265 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. 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 May 31, 2014, the fund did not borrow under the Facilities.
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .75% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus has contractually agreed, from December 1, 2013 through April 1, 2015, 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 $551 during the period ended May 31, 2014.
Pursuant to a sub-investment advisory agreement between Dreyfus and Walter Scott, Dreyfus pays Walter Scott a monthly fee at an annual percentage of the fund’s average daily net assets.
During the period ended May 31, 2014, the Distributor retained $125 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
24
an annual rate of .75% of the value of its average daily net assets. During the period ended May 31, 2014, Class C shares were charged $3,640 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 May 31, 2014, Class A and Class C shares were charged $3,117 and $1,213, 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 DreyfusTransfer, 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 May 31, 2014, the fund was charged $2,526 for transfer agency services and $54 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 $5.
The Fund 25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The fund compensates The Bank of NewYork 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 May 31, 2014, the fund was charged $31,039 pursuant to the custody agreement.
During the period ended May 31, 2014, the fund was charged $4,622 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 $523,384, Distribution Plan fees $588, Shareholder Services Plan fees $732, custodian fees $19,600, Chief Compliance Officer fees $1,472 and transfer agency fees $961.
(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 May 31, 2014, amounted to $39,129,122 and $32,343,258, respectively.
At May 31, 2014, accumulated net unrealized appreciation on investments was $233,817,040, consisting of $247,840,723 gross unrealized appreciation and $14,023,683 gross unrealized depreciation.
At May 31, 2014, 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
NOTES
NOTES
NOTES
For More Information
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
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
funds Forms N-Q are available on the SECs website at http://www.sec.gov and may be
reviewed and copied at the SECs Public Reference Room in Washington, DC. Information on
the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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
http://www.dreyfus.com and on the SECs website at http://www.sec.gov. The
description of the policies and procedures is also available without charge,
upon request, by calling 1-800-DREYFUS.
Global Stock Fund
SEMIANNUAL REPORT May 31, 2014
Save time. Save paper. View your next shareholder report online as soon as its available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. Its simple and only takes a few minutes.
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured Not Bank-Guaranteed May Lose Value
Contents |
|
THE FUND |
|
2 |
A Letter from the President |
3 |
Discussion of Fund Performance |
6 |
Understanding Your Funds Expenses |
6 |
Comparing Your Funds Expenses With Those of Other Funds |
7 |
Statement of Investments |
10 |
Statement of Assets and Liabilities |
11 |
Statement of Operations |
12 |
Statement of Changes in Net Assets |
14 |
Financial Highlights |
18 |
Notes to Financial Statements |
FOR MORE INFORMATION |
|
Back Cover |
Global Stock Fund
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Global Stock Fund, covering the six-month period from December 1, 2013, through May 31, 2014. 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.
The mild gains produced by most broad measures of international equity performance over the reporting period masked what appeared to be a major change in market leadership. Over the final month of 2013, relatively speculative, growth-oriented companies gained value in response to reports of accelerating economic growth in the United States and Europe. However, more disappointing economic data, several geopolitical crises, and persistent weakness in the worlds emerging markets weighed on investor sentiment over the first five months of 2014, causing growth-oriented stocks to fall out of favor. Instead, investors preferred the stocks of value-oriented companies that tend to fare relatively well under a variety of economic climates.
We believe that the global economic recovery is likely to persist, led by the more developed markets. However, we may see stark differences in the investment prospects of individual countries, industry groups, and companies depending on their underlying fundamentals. In our judgment, extensive and professional research into individual companies may be the best way to identify suitable stocks for investment.As always, we encourage you to discuss our observations and appropriate investment strategies with your financial advisor.
Thank you for your continued confidence and support.
J. Charles Cardona
President
The Dreyfus Corporation
June 16, 2014
2
DISCUSSION OF FUND PERFORMANCE
For the period of December 1, 2013, through May 31, 2014, as provided by Charlie Macquaker and Roy Leckie of Walter Scott & Partners Limited (Walter Scott), Sub-investment adviser
Fund and Market Performance Overview
For the six-month period ended May 31, 2014, Global Stock Fund’s Class A shares produced a total return of 3.14%, Class C shares returned 2.67%, Class I shares returned 3.26%, and Class Y shares returned 3.22%.1 In comparison, the fund’s benchmark, the Morgan Stanley Capital International World Index (the “MSCI World Index”), achieved a 6.52% return over the same period.2
Improving economic data in Europe and the United States helped support moderate gains in global stock markets for the reporting period.The fund underperformed its benchmark, mainly due to weakness in some energy and consumer-oriented holdings.
The Fund’s Investment Approach
The fund seeks long-term real returns by investing in high-quality companies that we believe are capable of sustainable growth and wealth creation over a long time horizon. The firm focuses on individual stock selection through extensive fundamental research. Candidates are initially selected for research if they meet certain broad absolute and trend criteria. Financial statements are analyzed in an effort to identify the nature of the cash generation that is looked for in any investment and to understand the variables that demonstrate robust financial health and define long-term competitive advantage. Companies meeting the financial criteria are then subjected to a detailed investigation of products, costs and pricing, competition, industry position, and outlook.
Recovering European Economy Fueled Markets’ Gains
Investors generally responded positively to mild improvements in global economic data over the reporting period.After several years of economic weakness in Europe, growth picked up in core countries, such as Germany, France, and Switzerland. Moreover, signs of recovery emerged in some of Europe’s previously hard hit, peripheral economies, including Spain and Italy. In the United Kingdom, investor sentiment improved and stocks rallied when employment and economic trends appeared to strengthen. Meanwhile, U.S. equities continued to rally as employment data improved despite the dampening effects of harsh winter weather.
However, the Japanese stock market pulled back during the reporting period as it digested earlier gains and investors responded cautiously to the potentially dampening
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
effects of an increase in the nation’s value added tax.With some exceptions, the world’s emerging markets generally continued to struggle with sluggish growth trends, rising geopolitical tensions, and weakening currency values.
In this environment, the MSCI World Index advanced moderately over the reporting period despite experiencing a sharp selloff in January 2014.The rally was paced by U.K. and European stocks, with markets in the Pacific Rim generally rising. Smaller and lower quality stocks outperformed market averages in the first half of the reporting period but lagged over the second half when market leadership shifted from economically sensitive growth stocks toward large, high-quality, globally dominant companies with consistent earnings under a variety of economic conditions.
Conservative Posture Limited Participation in Market Gains
The fund is designed to hold up better than market averages during periods of market weakness, and it tends to lag during rallies.The reporting period was no exception.The fund’s conservative investment posture, and quality bias, prevented it from participating more fully in upward market moves which were particularly evident among lower quality stocks.
In addition, the fund’s relative results were hurt by positions in the emerging markets, which generally trailed their more developed counterparts. Chinese energy producers CNOOC and China Shenhua Energy struggled with oil production shortfalls and falling coal prices, respectively. In Brazil, energy giant Petroleo Brasileiro was hurt by pricing pressures stemming from government intervention. In Japan, carmaker Honda Motor encountered lower sales related to harsh winter weather in the United States. U.K. supermarket chain Tesco experienced intensifying competitive pressures from lower cost rivals. Petroleo Brasileiro and Tesco were subsequently sold from the fund.
The fund achieved better relative results with U.S. energy exploration-and-production company EOG Resources and oil services giant Schlumberger, which benefited from a domestic shale oil-and-gas boom. Danish pharmaceutical developer Novo Nordisk was rewarded as competitive pressures dissipated and investors recognized the strength of its new product pipeline.Taiwan Semiconductor Manufacturing Company, ADR achieved dominant market shares with new technologies and products. U.S. technology leader Oracle received strong results from its hardware, software, and licensing businesses.
During the reporting period, we eliminated three positions that either reached fuller/richer valuations or failed to fulfill their investment theses, and we replaced them with two companies that we believe are better positioned for long-term gains.
4
Maintaining a Consistently Prudent Investment Process
The direction of travel of most developed markets has remained unchanged. Since the global financial crisis, now neatly referenced and almost consigned to a footnote in history, many markets have been on a strongly upward track. Central bankers and monetary authorities may have set that path but, as quantitative easing in the US winds down, will markets continue on that rising path? If markets, over time, reflect the strength of the underlying assets, then equity markets must rely on earnings growth. That growth is now evident and P/Es have subsequently stabilized. From our perspective, equities across most developed markets can now be reasonably described as fairly valued and the outlook for corporate earnings is encouraging. There is reason for optimism.
Where there is optimism, there is always cause for caution. The list of geopolitical concerns around the world seems to grow longer, and more serious, by the day.Yet markets are largely unmoved, capitalist antennae perhaps only alert to what might impact financial markets - the cost of oil, so far unmoved.
An eye must of course remain on the spiraling situation in the Middle East and, if Mario Draghi lives up to his promise that the European bank stress tests will this time be meaningful, the cloak of mystery that surrounds the balance sheets of many European banks may be lifted with serious consequences.
For now, sentiment remains positive. With the wind-down of quantitative easing, the baton has been taken by global corporates, and they are running with it. M&A activity and current IPO pipelines all reflect growing confidence.
June 16, 2014
Equity funds are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
Investing internationally involves special risks, including changes in currency exchange rates, political, economic, and social instability, a lack of comprehensive company information, differing auditing and legal standards, and less market liquidity.These risks generally are greater with emerging market countries than with more economically and politically established foreign 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. Had these charges been reflected, returns would have been lower. Past performance is no guarantee of future results. Share price, yield and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. |
2 |
SOURCE: LIPPER INC. — Reflects reinvestment of net dividends and, where applicable, capital gain distributions.The Morgan Stanley Capital International (MSCI) World Index is an unmanaged index of global stock market performance, including the United States, Canada, Europe,Australia, New Zealand, and the Far East. |
Investors cannot invest directly in any index. |
The Fund 5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Global Stock Fund from December 1, 2013 to May 31, 2014. 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 May 31, 2014 | ||||||||
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $ | 6.23 | $ | 10.16 | $ | 4.61 | $ | 4.76 |
Ending value (after expenses) | $ | 1,031.40 | $ | 1,026.70 | $ | 1,032.60 | $ | 1,032.20 |
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 May 31, 2014 | ||||||||
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $ | 6.19 | $ | 10.10 | $ | 4.58 | $ | 4.73 |
Ending value (after expenses) | $ | 1,018.80 | $ | 1,014.91 | $ | 1,020.39 | $ | 1,020.24 |
† Expenses are equal to the fund’s annualized expense ratio of 1.23% for Class A, 2.01% for Class C, .91% for | ||||||||
Class I and .94% for ClassY, multiplied by the average account value over the period, multiplied by 182/365 (to | ||||||||
reflect the one-half year period). |
STATEMENT OF INVESTMENTS
May 31, 2014 (Unaudited)
Common Stocks—98.8% | Shares | Value ($) |
Australia—3.6% | ||
CSL | 559,000 | 36,723,197 |
Woodside Petroleum | 790,000 | 31,003,890 |
67,727,087 | ||
Canada—1.6% | ||
Suncor Energy | 789,500 | 30,384,428 |
China—3.1% | ||
China Shenhua Energy, Cl. H | 6,460,500 | 17,707,534 |
CNOOC | 23,952,000 | 41,089,082 |
58,796,616 | ||
Denmark—2.2% | ||
Novo Nordisk, Cl. B | 992,000 | 41,997,279 |
France—4.7% | ||
Essilor International | 275,200 | 28,908,398 |
L’Oreal | 227,100 | 39,625,404 |
LVMH Moet Hennessy Louis Vuitton | 100,700 | 20,034,576 |
88,568,378 | ||
Hong Kong—6.0% | ||
AIA Group | 7,866,200 | 39,417,495 |
China Mobile | 2,855,500 | 27,936,421 |
CLP Holdings | 1,301,000 | 10,706,093 |
Hong Kong & China Gas | 14,047,434 | 33,954,677 |
112,014,686 | ||
Japan—9.9% | ||
Chugai Pharmaceutical | 371,100 | 9,922,733 |
Denso | 512,700 | 23,484,480 |
FANUC | 215,100 | 36,596,582 |
Honda Motor | 825,400 | 28,889,000 |
Keyence | 46,457 | 18,046,582 |
Komatsu | 1,357,500 | 29,563,630 |
Shin-Etsu Chemical | 656,700 | 39,021,398 |
185,524,405 | ||
Singapore—2.1% | ||
DBS Group Holdings | 2,857,369 | 38,499,192 |
Spain—1.8% | ||
Inditex | 226,000 | 32,809,880 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Sweden—2.0% | |||
Hennes & Mauritz, Cl. B | 861,000 | 36,385,356 | |
Switzerland—9.0% | |||
Nestle | 453,700 | 35,591,764 | |
Novartis | 230,000 | 20,624,232 | |
Roche Holding | 128,700 | 37,869,849 | |
SGS | 7,800 | 19,554,439 | |
Swatch Group-BR | 30,300 | 17,882,245 | |
Syngenta | 97,700 | 37,585,315 | |
169,107,844 | |||
Taiwan—2.1% | |||
Taiwan Semiconductor Manufacturing, ADR | 1,932,800 | 39,738,368 | |
United Kingdom—8.4% | |||
BG Group | 1,932,000 | 39,540,924 | |
HSBC Holdings | 3,700,885 | 39,031,778 | |
Reckitt Benckiser Group | 435,700 | 37,246,182 | |
Standard Chartered | 1,865,425 | 41,977,456 | |
157,796,340 | |||
United States—42.3% | |||
Adobe Systems | 604,400 | a | 39,007,976 |
Amphenol, Cl. A | 202,800 | 19,428,240 | |
Automatic Data Processing | 459,800 | 36,636,864 | |
C.R. Bard | 125,200 | 18,518,332 | |
Cisco Systems | 1,553,400 | 38,244,708 | |
Colgate-Palmolive | 565,100 | 38,652,840 | |
EOG Resources | 401,000 | 42,425,800 | |
Fastenal | 381,900 | 18,617,625 | |
Google, Cl. A | 35,400 | a | 20,236,410 |
Google, Cl. C | 35,400 | a | 19,858,692 |
Intuitive Surgical | 42,600 | a | 15,750,924 |
Johnson & Johnson | 381,700 | 38,727,282 | |
MasterCard, Cl. A | 492,000 | 37,613,400 | |
Microsoft | 967,600 | 39,613,544 | |
NIKE, Cl. B | 490,600 | 37,732,046 | |
Oracle | 950,200 | 39,927,404 | |
Praxair | 279,400 | 36,947,856 | |
Precision Castparts | 153,300 | 38,781,834 |
8
Common Stocks (continued) | Shares | Value ($) | |
United States (continued) | |||
QUALCOMM | 458,600 | 36,894,370 | |
Schlumberger | 379,500 | 39,483,180 | |
Sigma-Aldrich | 202,600 | 19,962,178 | |
Stryker | 448,300 | 37,876,867 | |
The TJX Companies | 611,100 | 33,274,395 | |
W.W. Grainger | 68,100 | 17,594,997 | |
Wal-Mart Stores | 417,800 | 32,074,506 | |
793,882,270 | |||
Total Common Stocks | |||
(cost $1,436,129,362) | 1,853,232,129 | ||
Other Investment—1.0% | |||
Registered Investment Company; | |||
Dreyfus Institutional Preferred | |||
Plus Money Market Fund | |||
(cost $19,035,000) | 19,035,000 | b | 19,035,000 |
Total Investments (cost $1,455,164,362) | 99.8 | % | 1,872,267,129 |
Cash and Receivables (Net) | .2 | % | 3,775,949 |
Net Assets | 100.0 | % | 1,876,043,078 |
ADR—American Depository Receipts
BR—Bearer Certificate
a |
Non-income producing security. |
b |
Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Information Technology | 20.5 | Industrial | 8.5 |
Health Care | 15.3 | Materials | 7.1 |
Energy | 12.9 | Utilities | 2.4 |
Consumer Discretionary | 12.3 | Telecommunications | 1.5 |
Consumer Staples | 9.8 | Money Market Investment | 1.0 |
Financial | 8.5 | 99.8 | |
† Based on net assets. | |||
See notes to financial statements. |
The Fund 9
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2014 (Unaudited)
Cost | Value | ||||
Assets ($): | |||||
Investments in securities—See Statement of Investments: | |||||
Unaffiliated issuers | 1,436,129,362 | 1,853,232,129 | |||
Affiliated issuers | 19,035,000 | 19,035,000 | |||
Cash | 127,964 | ||||
Cash denominated in foreign currencies | 1,405,377 | 1,407,564 | |||
Dividends receivable | 5,433,715 | ||||
Receivable for shares of Common Stock subscribed | 211,666 | ||||
Prepaid expenses | 74,332 | ||||
1,879,522,370 | |||||
Liabilities ($): | |||||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 1,507,202 | ||||
Payable for shares of Common Stock redeemed | 1,843,890 | ||||
Accrued expenses | 128,200 | ||||
3,479,292 | |||||
Net Assets ($) | 1,876,043,078 | ||||
Composition of Net Assets ($): | |||||
Paid-in capital | 1,458,612,876 | ||||
Accumulated undistributed investment income—net | 11,339,515 | ||||
Accumulated net realized gain (loss) on investments | (10,996,056 | ) | |||
Accumulated net unrealized appreciation (depreciation) | |||||
on investments and foreign currency transactions | 417,086,743 | ||||
Net Assets ($) | 1,876,043,078 | ||||
Net Asset Value Per Share | |||||
Class A | Class C | Class I | Class Y | ||
Net Assets ($) | 86,596,808 | 23,142,158 | 1,727,475,688 | 38,828,424 | |
Shares Outstanding | 4,687,175 | 1,279,770 | 92,268,679 | 2,076,062 | |
Net Asset Value Per Share ($) | 18.48 | 18.08 | 18.72 | 18.70 | |
See notes to financial statements. |
10
STATEMENT OF OPERATIONS
Six Months Ended May 31, 2014 (Unaudited)
Investment Income ($): | ||
Income: | ||
Cash dividends (net of $1,449,442 foreign taxes withheld at source): | ||
Unaffiliated issuers | 19,650,896 | |
Affiliated issuers | 16,374 | |
Total Income | 19,667,270 | |
Expenses: | ||
Management fee—Note 3(a) | 7,476,899 | |
Shareholder servicing costs—Note 3(c) | 261,968 | |
Custodian fees—Note 3(c) | 211,520 | |
Distribution fees—Note 3(b) | 86,905 | |
Directors’ fees and expenses—Note 3(d) | 72,534 | |
Professional fees | 70,768 | |
Registration fees | 62,701 | |
Prospectus and shareholders’ reports | 20,767 | |
Loan commitment fees—Note 2 | 7,581 | |
Miscellaneous | 36,896 | |
Total Expenses | 8,308,539 | |
Less—reduction in fees due to earnings credits—Note 3(c) | (26 | ) |
Net Expenses | 8,308,513 | |
Investment Income—Net | 11,358,757 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments and foreign currency transactions | (8,836,629 | ) |
Net realized gain (loss) on forward foreign currency exchange contracts | 69,096 | |
Net Realized Gain (Loss) | (8,767,533 | ) |
Net unrealized appreciation (depreciation) on | ||
investments and foreign currency transactions | 58,422,646 | |
Net Realized and Unrealized Gain (Loss) on Investments | 49,655,113 | |
Net Increase in Net Assets Resulting from Operations | 61,013,870 | |
See notes to financial statements. |
The Fund 11
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
May 31, 2014 | Year Ended | |||
(Unaudited) | November 30, 2013a | |||
Operations ($): | ||||
Investment income—net | 11,358,757 | 14,132,930 | ||
Net realized gain (loss) on investments | (8,767,533 | ) | 2,889,168 | |
Net unrealized appreciation | ||||
(depreciation) on investments | 58,422,646 | 226,811,107 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 61,013,870 | 243,833,205 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A | (512,902 | ) | (320,140 | ) |
Class I | (13,098,083 | ) | (6,883,220 | ) |
Class Y | (142,507 | ) | — | |
Total Dividends | (13,753,492 | ) | (7,203,360 | ) |
Capital Stock Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A | 8,807,081 | 35,004,750 | ||
Class C | 1,114,638 | 6,888,808 | ||
Class I | 218,479,457 | 818,048,770 | ||
Class Y | 16,112,728 | 23,098,999 | ||
Dividends reinvested: | ||||
Class A | 486,350 | 309,658 | ||
Class I | 10,562,290 | 4,696,246 | ||
Class Y | 142,498 | — | ||
Cost of shares redeemed: | ||||
Class A | (13,798,341 | ) | (21,347,106 | ) |
Class C | (2,129,241 | ) | (2,640,193 | ) |
Class I | (112,819,273 | ) | (143,116,756 | ) |
Class Y | (1,500,000 | ) | — | |
Increase (Decrease) in Net Assets | ||||
from Capital Stock Transactions | 125,458,187 | 720,943,176 | ||
Total Increase (Decrease) in Net Assets | 172,718,565 | 957,573,021 | ||
Net Assets ($): | ||||
Beginning of Period | 1,703,324,513 | 745,751,492 | ||
End of Period | 1,876,043,078 | 1,703,324,513 | ||
Undistributed investment income—net | 11,339,515 | 13,734,250 |
12
Six Months Ended | ||||
May 31, 2014 | Year Ended | |||
(Unaudited) | November 30, 2013a | |||
Capital Share Transactions: | ||||
Class Ab | ||||
Shares sold | 491,989 | 2,125,139 | ||
Shares issued for dividends reinvested | 26,870 | 20,095 | ||
Shares redeemed | (771,321 | ) | (1,319,501 | ) |
Net Increase (Decrease) in Shares Outstanding | (252,462 | ) | 825,733 | |
Class Cb | ||||
Shares sold | 64,023 | 421,400 | ||
Shares redeemed | (121,382 | ) | (163,680 | ) |
Net Increase (Decrease) in Shares Outstanding | (57,359 | ) | 257,720 | |
Class I | ||||
Shares sold | 12,168,542 | 50,129,888 | ||
Shares issued for dividends reinvested | 576,544 | 301,235 | ||
Shares redeemed | (6,228,331 | ) | (8,528,852 | ) |
Net Increase (Decrease) in Shares Outstanding | 6,516,755 | 41,902,271 | ||
Class Y | ||||
Shares sold | 886,949 | 1,267,093 | ||
Shares issued for dividends reinvested | 7,783 | — | ||
Shares redeemed | (85,763 | ) | — | |
Net Increase (Decrease) in Shares Outstanding | 808,969 | 1,267,093 |
a |
Effective July 1, 2013, the fund commenced offering ClassY shares. |
b |
During the period ended November 30, 2013, 10,068 Class C shares representing $168,940 were exchanged for 9,874 Class A shares. |
See notes to financial statements.
The Fund 13
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||||
May 31, 2014 | Year Ended November 30, | |||||||||||
Class A Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 18.02 | 15.02 | 13.51 | 12.99 | 12.23 | 8.91 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .09 | .13 | .11 | .11 | .07 | .06 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .47 | 2.95 | 1.62 | .52 | .75 | 3.28 | ||||||
Total from Investment Operations | .56 | 3.08 | 1.73 | .63 | .82 | 3.34 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.10 | ) | (.08 | ) | (.10 | ) | (.07 | ) | (.06 | ) | (.02 | ) |
Dividends from net realized | ||||||||||||
gain on investments | — | — | (.12 | ) | (.04 | ) | — | — | ||||
Total Distributions | (.10 | ) | (.08 | ) | (.22 | ) | (.11 | ) | (.06 | ) | (.02 | ) |
Net asset value, end of period | 18.48 | 18.02 | 15.02 | 13.51 | 12.99 | 12.23 | ||||||
Total Return (%)b | 3.14 | c | 20.60 | 13.08 | 4.86 | 6.70 | 37.57 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.23 | d | 1.24 | 1.28 | 1.27 | 1.32 | 1.38 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.23 | d | 1.24 | 1.28 | 1.27 | 1.32 | 1.38 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | .96 | d | .76 | .80 | .80 | .56 | .53 | |||||
Portfolio Turnover Rate | 3.73 | c | 6.39 | 6.05 | 8.54 | 7.50 | 12.75 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 86,597 | 89,024 | 61,806 | 48,872 | 37,152 | 8,212 |
a |
Based on average shares outstanding at each month end. |
b |
Exclusive of sales charge. |
c |
Not annualized. |
d |
Annualized. |
See notes to financial statements.
14
Six Months Ended | ||||||||||||
May 31, 2014 | Year Ended November 30, | |||||||||||
Class C Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 17.61 | 14.71 | 13.24 | 12.78 | 12.07 | 8.83 | ||||||
Investment Operations: | ||||||||||||
Investment income (loss)—neta | .02 | .00 | b | .01 | .01 | (.02 | ) | (.01 | ) | |||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .45 | 2.90 | 1.59 | .50 | .73 | 3.25 | ||||||
Total from Investment Operations | .47 | 2.90 | 1.60 | .51 | .71 | 3.24 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | — | — | (.01 | ) | (.01 | ) | (.00 | )b | — | |||
Dividends from net realized | ||||||||||||
gain on investments | — | — | (.12 | ) | (.04 | ) | — | — | ||||
Total Distributions | — | — | (.13 | ) | (.05 | ) | (.00 | )b | — | |||
Net asset value, end of period | 18.08 | 17.61 | 14.71 | 13.24 | 12.78 | 12.07 | ||||||
Total Return (%)c | 2.67 | d | 19.72 | 12.21 | 4.01 | 5.90 | 36.69 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 2.01 | e | 2.01 | 2.05 | 2.03 | 2.09 | 2.12 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 2.01 | e | 2.01 | 2.05 | 2.03 | 2.09 | 2.09 | |||||
Ratio of net investment income | ||||||||||||
(loss) to average net assets | .19 | e | .00 | f | .05 | .05 | (.17 | ) | (.11 | ) | ||
Portfolio Turnover Rate | 3.73 | d | 6.39 | 6.05 | 8.54 | 7.50 | 12.75 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 23,142 | 23,543 | 15,883 | 13,872 | 10,243 | 1,873 |
a |
Based on average shares outstanding at each month end. |
b |
Amount represents less than $.01 per share. |
c |
Exclusive of sales charge. |
d |
Not annualized. |
e |
Annualized. |
f |
Amount represents less than .01%. |
See notes to financial statements.
The Fund 15
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||||
May 31, 2014 | Year Ended November 30, | |||||||||||
Class I Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 18.28 | 15.24 | 13.70 | 13.15 | 12.36 | 8.99 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .12 | .19 | .16 | .16 | .12 | .11 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .47 | 2.98 | 1.64 | .53 | .76 | 3.31 | ||||||
Total from | ||||||||||||
Investment Operations | .59 | 3.17 | 1.80 | .69 | .88 | 3.42 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.15 | ) | (.13 | ) | (.14 | ) | (.10 | ) | (.09 | ) | (.05 | ) |
Dividends from net realized | ||||||||||||
gain on investments | — | — | (.12 | ) | (.04 | ) | — | — | ||||
Total Distributions | (.15 | ) | (.13 | ) | (.26 | ) | (.14 | ) | (.09 | ) | (.05 | ) |
Net asset value, end of period | 18.72 | 18.28 | 15.24 | 13.70 | 13.15 | 12.36 | ||||||
Total Return (%) | 3.26 | b | 20.93 | 13.49 | 5.23 | 7.12 | 38.22 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .91 | c | .91 | .93 | .93 | .96 | .99 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .91 | c | .91 | .93 | .93 | .96 | .99 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 1.32 | c | 1.12 | 1.14 | 1.13 | .94 | 1.05 | |||||
Portfolio Turnover Rate | 3.73 | b | 6.39 | 6.05 | 8.54 | 7.50 | 12.75 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 1,727,476 | 1,567,608 | 668,063 | 472,646 | 364,688 | 263,694 |
a |
Based on average shares outstanding at each month end. |
b |
Not annualized. |
c |
Annualized. |
See notes to financial statements.
16
Six Months Ended | |||
May 31, 2014 | Period Ended | ||
Class Y Shares | (Unaudited) | November 30, 2013a | |
Per Share Data ($): | |||
Net asset value, beginning of period | 18.27 | 16.40 | |
Investment Operations: | |||
Investment income—netb | .13 | .01 | |
Net realized and unrealized | |||
gain (loss) on investments | .45 | 1.86 | |
Total from Investment Operations | .58 | 1.87 | |
Distributions: | |||
Dividends from investment income—net | (.15 | ) | — |
Net asset value, end of period | 18.70 | 18.27 | |
Total Return (%)c | 3.22 | 11.40 | |
Ratios/Supplemental Data (%): | |||
Ratio of total expenses to average net assetsd | .94 | .90 | |
Ratio of net expenses to average net assetsd | .94 | .90 | |
Ratio of net investment income | |||
to average net assetsd | 1.42 | .83 | |
Portfolio Turnover Rate | 3.73 | c | 6.39 |
Net Assets, end of period ($ x 1,000) | 38,828 | 23,149 |
a |
From July 1, 2013 (commencement of initial offering) to November 30, 2013. |
b |
Based on average shares outstanding at each month end. |
c |
Not annualized. |
d |
Annualized. |
See notes to financial statements.
The Fund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Global Stock Fund (the “fund”) is a separate diversified series of Strategic 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 nine series, including the fund.The fund’s investment objective is to seek long-term total return. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Walter Scott & Partners Limited (“Walter Scott”), a subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser. Effective March 31, 2014, the fund was closed to new investors.
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 500 million shares of $.001 par value Common Stock.The fund currently offers four classes of shares: Class A (100 million shares authorized), Class C (100 million shares authorized), Class I (200 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”) 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
18
charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates.
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.
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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. 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, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
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.
20
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.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward foreign currency exchange contracts (“forward contracts”) are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of May 31, 2014 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities— | ||||
Domestic | ||||
Common | ||||
Stocks† | 793,882,270 | — | — | 793,882,270 |
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities | ||||
(continued): | ||||
Equity Securities— | ||||
Foreign | ||||
Common | ||||
Stocks† | 1,059,349,859 | — | — | 1,059,349,859 |
Mutual Funds | 19,035,000 | — | — | 19,035,000 |
† See Statement of Investments for additional detailed categorizations.
At May 31, 2014, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
22
(d) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended May 31, 2014 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 11/30/2013 ($) | Purchases ($) | Sales ($) | 5/31/2014 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Preferred | |||||
Plus Money | |||||
Market | |||||
Fund | 38,300,000 | 224,760,000 | 244,025,000 | 19,035,000 | 1.0 |
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S.These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S.
(f) Dividends 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.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
As of and during the period ended May 31, 2014, 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 May 31, 2014, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended November 30, 2013 remains subject to examination by the Internal Revenue Service and state taxing authorities.
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 fund has an unused capital loss of $2,035,266 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to November 30, 2013. These post-enactment long-term capital losses can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended November 30, 2013 was as follows: ordinary income $7,203,360. 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 $265 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 commit-
24
ment 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 May 31, 2014, the fund did not borrow under the Facilities.
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .85% of the value of the fund’s average daily net assets and is payable monthly.
Pursuant to a sub-investment advisory agreement between Dreyfus and Walter Scott, Dreyfus pays Walter Scott a monthly fee at an annual percentage of the value of the fund’s average daily net assets.
During the period ended May 31, 2014, the Distributor retained $2,570 from CDSCs on redemptions of the fund’s Class C shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended May 31, 2014, Class C shares were charged $86,905, 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 May 31, 2014, Class A and Class C shares were charged $107,880 and $28,968, respectively, pursuant to the Shareholder Services Plan.
The Fund 25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 DreyfusTransfer, 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 May 31, 2014, the fund was charged $5,846 for transfer agency services and $282 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 $26.
The fund compensates The Bank of NewYork 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 May 31, 2014, the fund was charged $211,520 pursuant to the custody agreement.
During the period ended May 31, 2014, the fund was charged $4,622 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 $1,344,076, Distribution Plan fees $14,688, Shareholder Services Plan fees $23,346, custodian fees $120,910, Chief Compliance Officer fees $1,472 and transfer agency fees $2,710.
(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.
26
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward contracts, during the period ended May 31, 2014, amounted to $206,525,409 and $64,633,913, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. Each type of derivative instrument that was held by the fund during the period ended May 31, 2014 is discussed below.
Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments.The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. At May 31, 2104, there were no forward contracts outstanding.
The Fund 27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The following summarizes the average market value of derivatives outstanding during the period ended May 31, 2014:
Average Market Value ($) | |
Forward contracts | 6,275,271 |
At May 31, 2014, accumulated net unrealized appreciation on investments was $417,102,767, consisting of $427,719,501 gross unrealized appreciation and $10,616,734 gross unrealized depreciation.
At May 31, 2014, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
28
NOTES
For More Information
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
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 http://www.sec.gov and may be
reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on
the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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
http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The
description of the policies and procedures is also available without charge,
upon request, by calling 1-800-DREYFUS.
International
Stock Fund
SEMIANNUAL REPORT May 31, 2014
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus eCommunications. It’s simple and only takes a few minutes.
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value
Contents | |
THE FUND | |
2 |
A Letter from the President |
3 |
Discussion of Fund Performance |
6 |
Understanding Your Fund’s Expenses |
6 |
Comparing Your Fund’s Expenses With Those of Other Funds |
7 |
Statement of Investments |
10 |
Statement of Assets and Liabilities |
11 |
Statement of Operations |
12 |
Statement of Changes in Net Assets |
14 |
Financial Highlights |
18 |
Notes to Financial Statements |
FOR MORE INFORMATION | |
Back Cover |
International
Stock Fund
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for International Stock Fund, covering the six-month period from December 1, 2013, through May 31, 2014. 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.
The mild gains produced by most broad measures of international equity performance over the reporting period masked what appeared to be a major change in market leadership. Over the final month of 2013, relatively speculative, growth-oriented companies gained value in response to reports of accelerating economic growth in the United States and Europe. However, more disappointing economic data, several geopolitical crises, and persistent weakness in the world’s emerging markets weighed on investor sentiment over the first five months of 2014, causing growth-oriented stocks to fall out of favor. Instead, investors preferred the stocks of value-oriented companies that tend to fare relatively well under a variety of economic climates.
We believe that the global economic recovery is likely to persist, led by the more developed markets. However, we may see stark differences in the investment prospects of individual countries, industry groups, and companies depending on their underlying fundamentals. In our judgment, extensive and professional research into individual companies may be the best way to identify suitable stocks for investment. As always, we encourage you to discuss our observations and appropriate investment strategies with your financial advisor.
Thank you for your continued confidence and support.
J. Charles Cardona
President
The Dreyfus Corporation
June 16, 2014
2
DISCUSSION OF FUND PERFORMANCE
For the period of December 1, 2013, through May 31, 2014, as provided by Charlie Macquaker and Roy Leckie of Walter Scott & Partners Limited (Walter Scott), Sub-investment adviser
Fund and Market Performance Overview
For the six-month period ended May 31, 2014, International Stock Fund’s Class A shares achieved a return of 1.75%, Class C shares returned 1.41%, Class I shares returned 1.92%, and Class Y shares returned 1.03%.1 In comparison, the fund’s benchmark index, the Morgan Stanley Capital International Europe,Australasia, Far East Index (the “MSCI EAFE Index”), achieved a 5.33% return over the same period.2 Improving economic data in Europe helped support moderate gains in international stock markets for the reporting period. The fund underperformed its benchmark, mainly due to weakness in some energy and consumer-oriented holdings.
The Fund’s Investment Approach
The fund seeks long-term real return by investing in high-quality companies believed to be capable of sustainable growth and wealth creation over a long time horizon.The fund invests in stocks of foreign companies that are predominantly located in the world’s developed markets outside of the United States.When selecting stocks,Walter Scott seeks companies with fundamental strengths that indicate the potential for sustainable growth.The firm focuses on individual stock selection through extensive fundamental research. Candidates are initially selected for research if they meet certain broad absolute and trend criteria. Financial statements are analyzed in an effort to identify the nature of their cash generation and to understand the variables that could add value to their businesses. Companies meeting the financial criteria are subjected to a detailed investigation of products, costs and pricing, competition, industry position, and outlook.
Recovering European Economy Fueled Markets’ Gains
After several years of economic weakness in Europe, growth picked up in core countries, such as Germany, France, and Switzerland. Moreover, signs of recovery emerged in some of Europe’s previously hard hit, peripheral economies, including Spain and Italy. In the United Kingdom, investor sentiment improved and stocks rallied when employment and economic trends appeared to strengthen. However, the Japanese stock market pulled back during the reporting period as it digested earlier gains and investors responded cautiously to the potentially dampening effects of an increase in the nation’s value added tax. With some exceptions, the world’s
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
emerging markets generally continued to struggle with sluggish growth trends, rising geopolitical tensions, and weakening currency values.
In this environment, the MSCI EAFE Index advanced moderately over the reporting period despite experiencing a sharp selloff in January 2014. The rally was paced by U.K. and European stocks, with markets in the Pacific Rim generally rising. Smaller and lower quality stocks outperformed market averages in the first half of the reporting period but lagged over the second half when market leadership shifted from smaller, economically sensitive growth stocks toward large, high-quality, globally dominant companies with consistent earnings under a variety of economic conditions.
Conservative Posture Limited Participation in Market Gains
The fund is designed to hold up better than market averages during periods of market weakness, and it tends to lag during rallies.The reporting period was no exception.The fund’s conservative investment posture, and quality bias, prevented it from participating more fully in the upward market moves, which were particularly evident among lower quality stocks.
In addition, the fund’s relative results were hurt by positions in the emerging markets, which generally trailed their more developed counterparts. Chinese energy producers CNOOC and China Shenhua Energy, Cl. H struggled with oil production shortfalls and falling coal prices, respectively. In Brazil, energy giant Petroleo Brasileiro,ADR was hurt by pricing pressures stemming from government intervention (the holding was subsequently sold from the fund). Australian beverage bottler Coca-Cola Amatil struggled with rising competitive pressures, weakness in some Asian markets, and the need to cut costs. In developed markets, Japanese carmaker Honda Motor encountered weak U.S. sales due to unusually harsh winter weather.
The fund achieved better relative results with U.K. medical technology provider Smith & Nephew, which gained value amid takeover speculation in a consolidating industry. Japanese energy producer INPEX rose in anticipation of higher production volumes from a new project. Danish pharmaceutical developer Novo Nordisk, Cl. B was rewarded as competitive pressures dissipated and investors recognized the strength of its new product pipeline.Taiwan Semiconductor Manufacturing Company, ADR achieved dominant market shares with new technologies and products. Australian energy company Woodside Petroleum advanced as investors looked forward to the announcement of a special dividend.
During the reporting period, we eliminated three positions that either reached fuller/richer valuations or failed to fulfill their investment theses, and we replaced them with two companies that we believe are better positioned for long-term gains.
4
Maintaining a Consistently Prudent Investment Process
The direction of travel of most developed markets has remained unchanged. Since the global financial crisis, now neatly referenced and almost consigned to a footnote in history, many markets have been on a strongly upward track. Central bankers and monetary authorities may have set that path but, as quantitative easing in the US winds down, will markets continue on that rising path? If markets, over time, reflect the strength of the underlying assets, then equity markets must rely on earnings growth. That growth is now evident and P/Es have subsequently stabilized. From our perspective, equities across most developed markets can now be reasonably described as fairly valued and the outlook for corporate earnings is encouraging. There is reason for optimism.
Where there is optimism, there is always cause for caution. The list of geopolitical concerns around the world seems to grow longer, and more serious, by the day.Yet markets are largely unmoved, capitalist antennae perhaps only alert to what might impact financial markets - the cost of oil, so far unmoved.
An eye must of course remain on the spiraling situation in the Middle East and, if Mario Draghi lives up to his promise that the European bank stress tests will this time be meaningful, the cloak of mystery that surrounds the balance sheets of many European banks may be lifted with serious consequences.
For now, sentiment remains positive.With the wind-down of quantitative easing, the baton has been taken by global corporates, and they are running with it. M&A activity and current IPO pipelines all reflect growing confidence.
June 16, 2014
Please note, the position in any security highlighted with italicized typeface was sold during the reporting period. Equity funds are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
Investing internationally involves special risks, including changes in currency exchange rates, political, economic, and social instability, a lack of comprehensive company information, differing auditing and legal standards, and less market liquidity.
1 |
Total return includes reinvestment of dividends and any capital gains paid, and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. |
2 |
SOURCE: LIPPER INC. – Reflects reinvestment of net dividends and, where applicable, capital gain distributions. The Morgan Stanley Capital International Europe,Australasia, Far East (MSCI EAFE) Index is an unmanaged index composed of a sample of companies representative of the market structure of European and Pacific Basin countries. Returns are calculated on a month-end basis. Investors cannot invest directly in any index. |
The Fund 5
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in International Stock Fund from December 1, 2013 to May 31, 2014. 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 May 31, 2014 | ||||||||
Class A | Class C | Class I | Class Y | |||||
Expenses paid per $1,000† | $ | 6.44 | $ | 10.19 | $ | 4.68 | $ | 4.66 |
Ending value (after expenses) | $ | 1,017.50 | $ | 1,014.10 | $ | 1,019.20 | $ | 1,010.30 |
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 May 31, 2014 | ||||||||||
Class A | Class C | Class I | Class Y | |||||||
Expenses paid per $1,000† | $ | 6.44 | $ | 10.20 | $ | 4.68 | $ | 4.68 | ||
Ending value (after expenses) | $ | 1,018.55 | $ | 1,014.81 | $ | 1,020.29 | $ | 1,020.29 | ||
† Expenses are equal to the fund’s annualized expense ratio of 1.28% for Class A, 2.03% for Class C, .93% for | ||||||||||
Class I and .93% for ClassY, multiplied by the average account value over the period, multiplied by 182/365 (to | ||||||||||
reflect the one-half year period). |
STATEMENT OF INVESTMENTS
May 31, 2014 (Unaudited)
Common Stocks—98.6% | Shares | Value ($) |
Australia—8.7% | ||
Coca-Cola Amatil | 5,950,000 | 52,383,390 |
Cochlear | 356,600 | 19,869,004 |
CSL | 1,163,000 | 76,402,645 |
Woodside Petroleum | 1,890,000 | 74,173,863 |
Woolworths | 2,180,100 | 76,144,839 |
298,973,741 | ||
Belgium—1.4% | ||
Colruyt | 849,000 | 47,571,729 |
Canada—2.2% | ||
Suncor Energy | 1,982,200 | 76,286,273 |
China—3.3% | ||
China Shenhua Energy, Cl. H | 13,469,000 | 36,917,077 |
CNOOC | 43,963,000 | 75,417,473 |
112,334,550 | ||
Denmark—2.3% | ||
Novo Nordisk, Cl. B | 1,840,000 | 77,898,178 |
Finland—2.0% | ||
Kone, Cl. B | 1,651,000 | 67,967,393 |
France—8.7% | ||
Air Liquide | 483,000 | 70,350,672 |
Danone | 943,000 | 70,224,635 |
Essilor International | 507,576 | 53,318,347 |
L’Oreal | 396,500 | 69,183,058 |
LVMH Moet Hennessy Louis Vuitton | 176,800 | 35,174,907 |
298,251,619 | ||
Germany—3.8% | ||
Adidas | 603,300 | 64,755,302 |
SAP | 850,000 | 65,071,770 |
129,827,072 | ||
Hong Kong—9.3% | ||
AIA Group | 15,860,600 | 79,477,400 |
China Mobile | 5,678,500 | 55,554,882 |
CLP Holdings | 6,249,000 | 51,423,806 |
Hang Lung Properties | 17,457,000 | 55,390,813 |
Hong Kong & China Gas | 32,891,026 | 79,502,361 |
321,349,262 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) |
Italy—.5% | ||
Tenaris, ADR | 388,800 | 17,437,680 |
Japan—18.8% | ||
AEON Mall | 953,590 | 23,961,525 |
Chugai Pharmaceutical | 628,000 | 16,791,906 |
Daito Trust Construction | 644,500 | 69,799,730 |
Denso | 1,270,300 | 58,186,728 |
FANUC | 409,400 | 69,654,303 |
Honda Motor | 1,597,100 | 55,898,500 |
INPEX | 5,600,000 | 80,754,420 |
Keyence | 140,020 | 54,391,856 |
Komatsu | 3,423,300 | 74,552,614 |
Shimamura | 204,300 | 19,727,593 |
Shin-Etsu Chemical | 1,132,900 | 67,317,408 |
Tokio Marine Holdings | 1,759,700 | 55,591,308 |
646,627,891 | ||
Singapore—1.9% | ||
DBS Group Holdings | 2,401,226 | 32,353,280 |
Oversea-Chinese Banking | 4,445,061 | 34,552,615 |
66,905,895 | ||
Spain—2.0% | ||
Inditex | 477,000 | 69,249,171 |
Sweden—2.1% | ||
Hennes & Mauritz, Cl. B | 1,718,000 | 72,601,674 |
Switzerland—10.0% | ||
Nestle | 879,000 | 68,955,611 |
Novartis | 839,000 | 75,233,613 |
Roche Holding | 238,400 | 70,148,967 |
SGS | 11,090 | 27,802,401 |
Swatch Group-BR | 52,100 | 30,748,018 |
Syngenta | 181,000 | 69,630,932 |
342,519,542 | ||
Taiwan—2.2% | ||
Taiwan Semiconductor Manufacturing, ADR | 3,648,400 | 75,011,104 |
United Kingdom—19.4% | ||
BG Group | 3,575,000 | 73,167,083 |
Burberry Group | 2,506,000 | 64,394,274 |
Centrica | 11,790,000 | 66,322,332 |
8
Common Stocks (continued) | Shares | Value ($) | ||
United Kingdom (continued) | ||||
Compass Group | 4,369,900 | 72,918,343 | ||
HSBC Holdings | 6,329,895 | 66,758,912 | ||
Intertek Group | 678,100 | 33,166,761 | ||
Reckitt Benckiser Group | 895,900 | 76,586,768 | ||
SABMiller | 1,418,000 | 78,697,229 | ||
Smith & Nephew | 3,304,900 | 57,944,743 | ||
Standard Chartered | 3,488,706 | 78,505,972 | ||
668,462,417 | ||||
Total Common Stocks | ||||
(cost $2,808,109,746) | 3,389,275,191 | |||
Other Investment—.9% | ||||
Registered Investment Company; | ||||
Dreyfus Institutional Preferred | ||||
Plus Money Market Fund | ||||
(cost $31,200,000) | 31,200,000 | a | 31,200,000 | |
Total Investments (cost $2,839,309,746) | 99.5 | % | 3,420,475,191 | |
Cash and Receivables (Net) | .5 | % | 16,832,879 | |
Net Assets | 100.0 | % | 3,437,308,070 | |
ADR—American Depository Receipts | ||||
a Investment in affiliated money market mutual fund. | ||||
Portfolio Summary (Unaudited)† | ||||
Value (%) | Value (%) | |||
Consumer Discretionary | 15.8 | Materials | 6.0 | |
Consumer Staples | 15.7 | Information Technology | 5.7 | |
Financial | 14.5 | Utilities | 5.7 | |
Health Care | 13.0 | Telecommunication Services | 1.6 | |
Energy | 12.6 | Money Market Investment | .9 | |
Industrial | 8.0 | 99.5 | ||
† Based on net assets. | ||||
See notes to financial statements. |
The Fund 9
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2014 (Unaudited)
Cost | Value | |||
Assets ($): | ||||
Investments in securities—See Statement of Investments: | ||||
Unaffiliated issuers | 2,808,109,746 | 3,389,275,191 | ||
Affiliated issuers | 31,200,000 | 31,200,000 | ||
Cash | 1,023,548 | |||
Cash denominated in foreign currencies | 4,797,417 | 4,795,411 | ||
Dividends receivable | 16,309,091 | |||
Receivable for shares of Common Stock subscribed | 2,657,114 | |||
Prepaid expenses | 95,385 | |||
3,445,355,740 | ||||
Liabilities ($): | ||||
Due to The Dreyfus Corporation and affiliates—Note 3(c) | 2,826,394 | |||
Payable for shares of Common Stock redeemed | 4,963,918 | |||
Accrued expenses | 257,358 | |||
8,047,670 | ||||
Net Assets ($) | 3,437,308,070 | |||
Composition of Net Assets ($): | ||||
Paid-in capital | 2,927,706,524 | |||
Accumulated undistributed investment income—net | 23,622,434 | |||
Accumulated net realized gain (loss) on investments | (95,115,512) | |||
Accumulated net unrealized appreciation (depreciation) | ||||
on investments and foreign currency transactions | 581,094,624 | |||
Net Assets ($) | 3,437,308,070 | |||
Net Asset Value Per Share | ||||
Class A | Class C | Class I | Class Y | |
Net Assets ($) | 226,523,562 | 30,558,381 | 3,180,225,037 | 1,090 |
Shares Outstanding | 14,464,222 | 1,984,575 | 201,290,261 | 69.01 |
Net Asset Value Per Share ($) | 15.66 | 15.40 | 15.80 | 15.79 |
See notes to financial statements. |
10
Investment Income ($): | ||
Income: | ||
Cash dividends (net of $4,777,665 foreign taxes withheld at source): | ||
Unaffiliated issuers | 49,264,647 | |
Affiliated issuers | 30,384 | |
Interest | 383 | |
Total Income | 49,295,414 | |
Expenses: | ||
Management fee—Note 3(a) | 13,801,977 | |
Shareholder servicing costs—Note 3(c) | 832,478 | |
Custodian fees—Note 3(c) | 466,729 | |
Directors’ fees and expenses—Note 3(d) | 130,246 | |
Distribution fees—Note 3(b) | 121,745 | |
Registration fees | 98,962 | |
Prospectus and shareholders’ reports | 89,933 | |
Professional fees | 81,350 | |
Loan commitment fees—Note 2 | 14,887 | |
Miscellaneous | 70,032 | |
Total Expenses | 15,708,339 | |
Less—reduction in fees due to earnings credits—Note 3(c) | (51 | ) |
Net Expenses | 15,708,288 | |
Investment Income—Net | 33,587,126 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments and foreign currency transactions | (29,099,386 | ) |
Net realized gain (loss) on forward foreign currency exchange contracts | 163,200 | |
Net Realized Gain (Loss) | (28,936,186 | ) |
Net unrealized appreciation (depreciation) on | ||
investments and foreign currency transactions | 64,049,316 | |
Net Realized and Unrealized Gain (Loss) on Investments | 35,113,130 | |
Net Increase in Net Assets Resulting from Operations | 68,700,256 | |
See notes to financial statements. |
The Fund 11
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
May 31, 2014 | Year Ended | |||
(Unaudited) | November 30, 2013a | |||
Operations ($): | ||||
Investment income—net | 33,587,126 | 42,401,039 | ||
Net realized gain (loss) on investments | (28,936,186 | ) | (27,337 | ) |
Net unrealized appreciation | ||||
(depreciation) on investments | 64,049,316 | 260,328,361 | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 68,700,256 | 302,702,063 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Class A | (3,239,116 | ) | (2,453,861 | ) |
Class C | (172,199 | ) | (156,624 | ) |
Class I | (43,347,767 | ) | (32,893,538 | ) |
Class Y | (16 | ) | — | |
Total Dividends | (46,759,098 | ) | (35,504,023 | ) |
Capital Stock Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Class A | 24,487,367 | 147,162,705 | ||
Class C | 762,401 | 13,865,416 | ||
Class I | 578,189,644 | 1,149,860,399 | ||
Class Y | — | 1,000 | ||
Dividends reinvested: | ||||
Class A | 3,140,068 | 2,370,457 | ||
Class C | 120,295 | 110,933 | ||
Class I | 32,088,480 | 22,258,109 | ||
Cost of shares redeemed: | ||||
Class A | (85,242,996 | ) | (62,177,277 | ) |
Class C | (6,310,785 | ) | (4,965,563 | ) |
Class I | (382,516,957 | ) | (418,895,968 | ) |
Increase (Decrease) in Net Assets | ||||
from Capital Stock Transactions | 164,717,517 | 849,590,211 | ||
Total Increase (Decrease) in Net Assets | 186,658,675 | 1,116,788,251 | ||
Net Assets ($): | ||||
Beginning of Period | 3,250,649,395 | 2,133,861,144 | ||
End of Period | 3,437,308,070 | 3,250,649,395 | ||
Undistributed investment income—net | 23,622,434 | 36,794,406 |
12
Six Months Ended | ||||
May 31, 2014 | Year Ended | |||
(Unaudited) | November 30, 2013a | |||
Capital Share Transactions: | ||||
Class Ab | ||||
Shares sold | 1,622,537 | 9,880,843 | ||
Shares issued for dividends reinvested | 202,978 | 164,615 | ||
Shares redeemed | (5,641,131 | ) | (4,140,282 | ) |
Net Increase (Decrease) in Shares Outstanding | (3,815,616 | ) | 5,905,176 | |
Class Cb | ||||
Shares sold | 51,292 | 951,707 | ||
Shares issued for dividends reinvested | 7,883 | 7,807 | ||
Shares redeemed | (427,310 | ) | (336,282 | ) |
Net Increase (Decrease) in Shares Outstanding | (368,135 | ) | 623,232 | |
Class I | ||||
Shares sold | 38,086,076 | 77,060,413 | ||
Shares issued for dividends reinvested | 2,059,595 | 1,535,042 | ||
Shares redeemed | (25,187,853 | ) | (27,918,325 | ) |
Net Increase (Decrease) in Shares Outstanding | 14,957,818 | 50,677,130 | ||
Class Y | ||||
Shares sold | — | 69 |
a |
Effective July 1, 2013, the fund commenced offering ClassY shares. |
b |
During the period ended November 30, 2013, 6,275 Class C shares representing $95,883 were exchanged for 6,174 Class A shares. |
See notes to financial statements.
The Fund 13
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||||
May 31, 2014 | Year Ended November 30, | |||||||||||
Class A Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 15.57 | 14.13 | 12.58 | 12.83 | 11.97 | 8.43 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .12 | .17 | .21 | .15 | .09 | .05 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .15 | 1.46 | 1.46 | (.31 | ) | .86 | 3.58 | |||||
Total from Investment Operations | .27 | 1.63 | 1.67 | (.16 | ) | .95 | 3.63 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.18 | ) | (.19 | ) | (.12 | ) | (.09 | ) | (.09 | ) | (.09 | ) |
Net asset value, end of period | 15.66 | 15.57 | 14.13 | 12.58 | 12.83 | 11.97 | ||||||
Total Return (%)b | 1.75 | c | 11.65 | 13.40 | (1.32 | ) | 7.99 | 43.33 | ||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.28 | d | 1.30 | 1.31 | 1.27 | 1.34 | 1.43 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.28 | d | 1.30 | 1.31 | 1.27 | 1.34 | 1.42 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 1.58 | d | 1.14 | 1.62 | 1.08 | .69 | .50 | |||||
Portfolio Turnover Rate | 4.31 | c | 2.58 | 5.47 | 5.07 | 5.91 | 21.67 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 226,524 | 284,575 | 174,825 | 192,351 | 124,347 | 18,059 |
a |
Based on average shares outstanding at each month end. |
b |
Exclusive of sales charge. |
c |
Not annualized. |
d |
Annualized. |
See notes to financial statements.
14
Six Months Ended | ||||||||||||
May 31, 2014 | Year Ended November 30, | |||||||||||
Class C Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 15.26 | 13.86 | 12.33 | 12.64 | 11.83 | 8.32 | ||||||
Investment Operations: | ||||||||||||
Investment income (loss)—neta | .07 | .06 | .12 | .04 | (.02 | ) | (.01 | ) | ||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .14 | 1.43 | 1.43 | (.30 | ) | .87 | 3.53 | |||||
Total from Investment Operations | .21 | 1.49 | 1.55 | (.26 | ) | .85 | 3.52 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.07 | ) | (.09 | ) | (.02 | ) | (.05 | ) | (.04 | ) | (.01 | ) |
Net asset value, end of period | 15.40 | 15.26 | 13.86 | 12.33 | 12.64 | 11.83 | ||||||
Total Return (%)b | 1.41 | c | 10.78 | 12.58 | (2.08 | ) | 7.18 | 42.31 | ||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 2.03 | d | 2.04 | 2.06 | 2.05 | 2.13 | 2.25 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 2.03 | d | 2.04 | 2.06 | 2.05 | 2.13 | 2.22 | |||||
Ratio of net investment income | ||||||||||||
(loss) to average net assets | .88 | d | .42 | .90 | .33 | (.12 | ) | (.13 | ) | |||
Portfolio Turnover Rate | 4.31 | c | 2.58 | 5.47 | 5.07 | 5.91 | 21.67 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 30,558 | 35,905 | 23,962 | 23,319 | 13,959 | 1,224 |
a |
Based on average shares outstanding at each month end. |
b |
Exclusive of sales charge. |
c |
Not annualized. |
d |
Annualized. |
See notes to financial statements.
The Fund 15
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||||
May 31, 2014 | Year Ended November 30, | |||||||||||
Class I Shares | (Unaudited) | 2013 | 2012 | 2011 | 2010 | 2009 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 15.73 | 14.26 | 12.70 | 12.93 | 12.04 | 8.47 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .16 | .23 | .26 | .19 | .14 | .12 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .14 | 1.48 | 1.46 | (.31 | ) | .86 | 3.57 | |||||
Total from | ||||||||||||
Investment Operations | .30 | 1.71 | 1.72 | (.12 | ) | 1.00 | 3.69 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.23 | ) | (.24 | ) | (.16 | ) | (.11 | ) | (.11 | ) | (.12 | ) |
Net asset value, end of period 15.80 | 15.73 | 14.26 | 12.70 | 12.93 | 12.04 | |||||||
Total Return (%) | 1.92 | b | 12.13 | 13.74 | (1.01 | ) | 8.38 | 43.98 | ||||
Ratios/Supplemental | ||||||||||||
Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .93 | c | .92 | .93 | .93 | .97 | 1.01 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .93 | c | .92 | .93 | .93 | .97 | 1.01 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 2.12 | c | 1.54 | 1.96 | 1.41 | 1.11 | 1.18 | |||||
Portfolio Turnover Rate | 4.31 | b | 2.58 | 5.47 | 5.07 | 5.91 | 21.67 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 3,180,225 | 2,930,169 | 1,935,074 | 1,116,202 | 688,992 | 339,535 |
a |
Based on average shares outstanding at each month end. |
b |
Not annualized. |
c |
Annualized. |
See notes to financial statements.
16
Six Months Ended | |||
May 31, 2014 | Period Ended | ||
Class Y Shares | (Unaudited) | November 30, 2013a | |
Per Share Data ($): | |||
Net asset value, beginning of period | 15.72 | 14.49 | |
Investment Operations: | |||
Investment income—netb | .16 | .06 | |
Net realized and unrealized | |||
gain (loss) on investments | .14 | 1.17 | |
Total from Investment Operations | .30 | 1.23 | |
Distributions: | |||
Dividends from investment income—net | (.23 | ) | — |
Net asset value, end of period | 15.79 | 15.72 | |
Total Return (%)c | 1.03 | 8.49 | |
Ratios/Supplemental Data (%): | |||
Ratio of total expenses to average net assetsd | .93 | .91 | |
Ratio of net expenses to average net assetsd | .93 | .91 | |
Ratio of net investment income | |||
to average net assetsd | 2.08 | .93 | |
Portfolio Turnover Rate | 4.31 | c | 2.58 |
Net Assets, end of period ($ x 1,000) | 1 | 1 |
a |
From July 1, 2013 (commencement of initial offering) to November 30, 2013. |
b |
Based on average shares outstanding at each month end. |
c |
Not annualized. |
d |
Annualized. |
See notes to financial statements.
The Fund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
International Stock Fund (the “fund”) is a separate diversified series of Strategic 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 nine series, including the fund.The fund’s investment objective is to seek long-term total return. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of NewYork Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.Walter Scott & Partners Limited (“Walter Scott”), a subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-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 600 million shares of $.001 par value Common Stock.The fund currently offers four classes of shares: Class A (100 million shares authorized), Class C (100 million shares authorized), Class I (300 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”) 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.
As of May 31, 2014, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held all of the outstanding Class Y shares of the fund.
18
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 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
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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. 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, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
20
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.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward foreign currency exchange contracts (“forward contracts”) are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The following is a summary of the inputs used as of May 31, 2014 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities— | ||||
Foreign | ||||
Common | ||||
Stocks† | 3,389,275,191 | — | — | 3,389,275,191 |
Mutual Funds | 31,200,000 | — | — | 31,200,000 |
† See Statement of Investments for additional detailed categorizations. |
At May 31, 2014, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis.
22
Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
(d) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended May 31, 2014 were as follows:
Affiliated | ||||
Investment | Value | Value | Net | |
Company | 11/30/2013 | ($) | Purchases ($) Sales ($) 5/31/2014 ($) | Assets (%) |
Dreyfus | ||||
Institutional | ||||
Preferred | ||||
Plus Money | ||||
Market | ||||
Fund | 93,800,000 | 377,880,000 440,480,000 31,200,000 | .9 |
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S.These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S.
(f) Dividends 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.
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended May 31, 2014, 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 May 31, 2014, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended November 30, 2013 remains subject to examination by the Internal Revenue Service and state taxing authorities.
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 $63,676,108 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to November 30, 2013. If not applied, $598,805 of the carryover expires in fiscal year 2016, $15,114,500 expires in fiscal year 2017 and $16,297,830 expires in fiscal year 2019. The fund has $5,721,194 of post-enactment short-term capital losses and $25,943,779 of post-enactment long-term capital losses which can be carried forward for an unlimited period.
24
The tax character of distributions paid to shareholders during the fiscal year ended November 30, 2013 was as follows: ordinary income $35,504,023. 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 $265 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 May 31, 2014, the fund did not borrow under the Facilities.
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .85% of the value of the fund’s average daily net assets and is payable monthly.
Pursuant to a sub-investment advisory agreement between Dreyfus and Walter Scott, Dreyfus pays Walter Scott a monthly fee at an annual percentage of the value of the fund’s average daily net assets.
During the period ended May 31, 2014, the Distributor retained $7,365 from commissions earned on sales of the fund’s Class A shares and $6,430 from CDSCs on redemptions of the fund’s Class C shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at
The Fund 25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
an annual rate of .75% of the value of its average daily net assets. During the period ended May 31, 2014, Class C shares were charged $121,745, 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 May 31, 2014, Class A and Class C shares were charged $309,948 and $40,581, 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 May 31, 2014, the fund was charged $13,790 for transfer agency services and $538 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 $51.
The fund compensates The Bank of NewYork Mellon under a custody agreement for providing custodial services for the fund.These fees are determined based on net assets, geographic region and transaction
26
activity. During the period ended May 31, 2014, the fund was charged $466,729 pursuant to the custody agreement.
During the period ended May 31, 2014, the fund was charged $4,622 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 $2,463,503, Distribution Plan fees $19,566, Shareholder Services Plan fees $54,942, custodian fees $280,035, Chief Compliance Officer fees $1,472 and transfer agency fees $6,876.
(d) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward contracts, during the period ended May 31, 2014, amounted to $342,075,044 and $137,533,924, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. Each type of derivative instrument that was held by the fund during the period ended May 31, 2014 is discussed below.
Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future.With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract decreases between those dates.With respect to pur-
The Fund 27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
chases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract increases between those dates.Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations.The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments.The fund is also exposed to credit risk associated with counterparty nonper-formance on these forward contracts, which is generally limited to the unrealized gain on each open contract.At May 31, 2104, there were no forward contracts outstanding.
The following summarizes the average market value of derivatives outstanding during the period ended May 31, 2014:
Average Market Value ($) | |
Forward contracts | 13,433,864 |
At May 31, 2014, accumulated net unrealized appreciation on investments was $581,165,445, consisting of $633,248,958 gross unrealized appreciation and $52,083,513 gross unrealized depreciation.
At May 31, 2014, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
28
NOTES
For More Information
Telephone Call your financial representative or 1-800-DREYFUS
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
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 http://www.sec.gov and may be
reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on
the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
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
http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The
description of the policies and procedures is also available without charge,
upon request, by calling 1-800-DREYFUS.
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.
Not applicable. [CLOSED END FUNDS ONLY]
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures applicable to Item 10.
Item 11. Controls and Procedures.
(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes to the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable.
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.
(a)(3) Not applicable.
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Strategic Funds, Inc.
By: /s/ Bradley J. Skapyak
Bradley J. Skapyak,
President
Date: July 21, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ Bradley J. Skapyak
Bradley J. Skapyak,
President
Date: July 21, 2014
By: /s/ James Windels
James Windels,
Treasurer
Date: July 21, 2014
EXHIBIT INDEX
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940. (EX-99.CERT)
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940. (EX-99.906CERT)
[EX-99.CERT]—Exhibit (a)(2)
SECTION 302 CERTIFICATION
I, Bradley J. Skapyak, certify that:
1. I have reviewed this report on Form N-CSR of Strategic Funds, Inc;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
By: /s/ Bradley J. Skapyak |
Bradley J. Skapyak, |
President |
Date: July 21, 2014 |
SECTION 302 CERTIFICATION
I, James Windels, certify that:
1. I have reviewed this report on Form N-CSR of Strategic Funds, Inc;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;
5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
By: /s/ James Windels |
James Windels, |
Treasurer |
Date: July 21, 2014 |
[EX-99.906CERT]
Exhibit (b)
SECTION 906 CERTIFICATIONS
In connection with this report on Form N-CSR for the Registrant as furnished to the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
By: /s/ Bradley J. Skapyak |
Bradley J. Skapyak, |
President |
|
Date: July 21, 2014 |
|
By: /s/ James Windels |
James Windels, |
Treasurer |
|
Date: July 21, 2014 |
|
This certificate is furnished pursuant to the requirements of Form N-CSR and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.
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