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 | 811-00524 | |||||
BNY Mellon Investment Funds III | ||||||
(Exact name of Registrant as specified in charter) | ||||||
c/o BNY Mellon Investment Adviser, Inc. 240 Greenwich Street New York, New York 10286 | ||||||
(Address of principal executive offices) (Zip code) | ||||||
Deirdre Cunnane, Esq. 240 Greenwich Street New York, New York 10286 | ||||||
(Name and address of agent for service) | ||||||
Registrant's telephone number, including area code: | (212) 922-6400 | |||||
Date of fiscal year end:
| 10/31 | |||||
Date of reporting period: | 04/30/2022
| |||||
The following N-CSR relates only to the Registrant's series listed below and does not relate to any series of the Registrant with a different fiscal year end and, therefore, different N-CSR reporting requirements. A separate N-CSR will be filed for any series with a different fiscal year end, as appropriate.
BNY Mellon Global Equity Income Fund
BNY Mellon International Bond Fund
FORM N-CSR
Item 1. | Reports to Stockholders. |
BNY Mellon Global Equity Income Fund
SEMI-ANNUAL REPORT April 30, 2022 |
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The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
Information About the Renewal of | |
FOR MORE INFORMATION
Back Cover
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from November 1, 2021, through April 30, 2022, as provided by portfolio managers Jon Bell, Paul Flood, Ilga Haubelt and Robert Hay of Newton Investment Management Limited, sub-adviser
Market and Fund Performance Overview
For the six-month period ended April 30, 2022, the BNY Mellon Global Equity Income Fund’s (the “fund”) Class A shares produced a total return of −1.64%, Class C shares returned −1.97%, Class I shares returned −1.46% and Class Y shares returned −1.60%.1 In comparison, the fund’s benchmark, the FTSE World Index (the “Index”), produced a total return of −10.78% for the same period.2
Global markets lost ground during the reporting period under pressure from slowing Chinese economic growth, increasing inflation and uncertainties related to Russia’s invasion of Ukraine. The fund outperformed the Index by a substantial margin largely due to its bias in favor of dividend yield, which led it to emphasize shares in cyclical and value-oriented companies at a time when the market favored such issues.
The Fund’s Investment Approach
The fund seeks total return (consisting of capital appreciation and income). To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities. The fund seeks to focus on dividend-paying stocks of companies located in the developed-capital markets, such as the United States, Canada, Japan, Australia, Hong Kong and Western Europe. The fund may invest in the securities of companies of any market capitalization, and it may invest up to 30% of its assets in emerging markets. The fund’s portfolio managers typically will purchase stocks that, at the time of purchase, have a yield premium to the yield of the Index.
The portfolio managers will combine a top-down approach, emphasizing current economic trends and current investment themes on a global basis, with a bottom-up stock selection, based on fundamental research. Within markets and sectors determined to be relatively attractive, the portfolio managers seek what are believed to be attractively priced companies that possess a sustainable competitive advantage in their market or sector.
Markets Favor Value Over Growth as Russia Invades Ukraine, and Inflation Rises
The upward trajectory of global equities was interrupted toward the end of November 2022 as the new COVID-19 Omicron variant came to the fore. The picture for equities was muddied still further when the U.S. Federal Reserve (the “Fed”) surprised markets by embracing a more hawkish tone with regard to the tapering of the Fed’s asset-purchase program. Nevertheless, risk assets largely recovered these losses in December. However, the start of 2022 was the most challenging period faced by equity investors since the outbreak of the COVID-19 pandemic two years ago. While Russia’s invasion of Ukraine was the defining geopolitical and economic event contributing to equity market weakness during the period, by the time the invasion took place in February 2022, equity indices had already come under considerable pressure. The proximate cause was tightening U.S. monetary policy, as the Fed, having fallen ‘behind the curve’ in addressing inflationary pressures, signaled that U.S. interest-rate increases would now come earlier and potentially be more aggressive than previously foreshadowed. The prospect of quickly rising rates drove government bond yields steeply higher and put acute pressure on equities leveraged to future cash flows. Meanwhile, the oil price soared as tight supply/demand conditions already present were exacerbated by the invasion of Ukraine.
2
These forces drove a major rotation in the market from so-called “growth” to “value” stocks. Growth-oriented shares suffered as political instability and the threat of rising interest rates caused investors to question the relative value of future earnings. However, stocks in energy producers surged along with oil and gas prices, while cyclical and value-oriented sectors, such as utilities and consumer staples, proved relatively resilient.
Benefited from the Rotation into Cyclical and Value Stocks
The fund benefited from the market’s rotation away from growth stocks, which are viewed as being particularly sensitive to inflation and the prospect of higher interest rates, in favor of cyclical and value companies. On a sector basis, the biggest positive contribution to the fund’s performance relative to the Index came from positioning in information technology, owing in part to the fund’s zero weightings in non-dividend-paying Meta Platforms and Alphabet, but also to good performance from several individual fund holdings including Qualcomm and Infosys. The fund’s relative returns also benefited from positions in the consumer staples sector, led by British American Tobacco, which found favor with investors due to its attractive valuation and robust cash flow attributable to strong cigarette pricing. PepsiCo also performed well, reporting better-than-expected quarterly earnings and revenue, and raising its full-year revenue forecast. Yet another area of relatively positive performance was health care, with pharmaceutical giant Merck & Co. announcing robust growth on the back of very strong sales of its Keytruda cancer drug, vaccines and COVID-19 antiviral treatment. Bayer further aided relative returns in health care, with improvement in the outlook for the company’s pharmaceutical pipeline and crop division, and significant share repurchases. Finally, stock selection in industrials and financials proved positive, with particular strength in UK aerospace and defense contractor BAE Systems, which benefited from numerous governments announcing increased defense spending in response to the Russian invasion of the Ukraine, and U.S. regional bank First Horizon, which announced a successful takeover bid by Canadian bank Toronto Dominion at a premium to the pre-acquisition stock price.
Due to the fund’s strong relative returns, few holdings detracted notably from performance compared to the Index. Underweight exposure to the basic materials and energy sectors resulted in a modest headwind as oil and other commodity prices soared. Among individual holdings, shares in automotive companies Continental and Volkswagen underperformed amid supply-chain disruptions that negatively affected production and concerns regarding the potential impact of inflation on car demand.
Maintaining the Fund’s Disciplined Focus
Dividends have rebounded more strongly and rapidly than we typically see in the aftermath of a recession. Profit margins are expected to hit new all-time highs in the coming year—not only in the United States, where the technology sector has led to continued margin expansion in the past, but also in the rest of the world. At the same time, the valuations of income stocks remain attractive despite the recent market rotation toward value. The appeal of income stocks is further enhanced by the strong demand for income from the world’s aging populations and the asset class’s attractive spread over yields from fixed-income assets, such as government, corporate and high yield bonds. As recent history demonstrates, income stocks are likely to continue to outperform growth stocks as long as investors focus on inflation worries and expectations of higher interest rates. While there are some transitory aspects to the pickup in inflation, we believe that changes such as increased wages, the continuing impact of Russia’s invasion of Ukraine and a more hawkish stance by central bankers signal a return to the long-term trend of dividends driving equity market returns. To navigate this backdrop, we believe following an active, disciplined approach that emphasizes themes of structural change, quality, ESG (environmental,
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
social and governance) considerations and income, and that has stood the test of time, is as relevant today as it has ever been.
As of April 30, 2022, the fund retains its clear bias to income over growth, with no exposure to large-cap U.S. growth stocks. Among sectors, the fund holds significantly underweight exposure to technology, countered by overweight positions in stable, cash-generative businesses with sustainable dividend streams within the consumer staples, healthcare and utility sectors coupled with positive interest-rates sensitivity through the overweight in financials.
May 16, 2022
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. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. Had these expenses not been absorbed, returns would have been lower. Past performance is no guarantee of future results.
2 Source: Lipper Inc. — Reflects reinvestment of net dividends and, where applicable, capital gain distributions. The FTSE World Index is a market capitalization-weighted index representing the performance of the large- and mid-cap stocks from the Developed and Advanced Emerging segments of the FTSE Global Equity Index Series. Investors cannot invest directly in any index.
Please note: the position in any security highlighted with italicized typeface was sold during the reporting period.
Equities are subject generally to market, market sector, market liquidity, issuer and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
The fund’s performance will be influenced by political, social and economic factors affecting investments in foreign companies. Special risks associated with investments in foreign companies include exposure to currency fluctuations, less liquidity, less developed or less efficient trading markets, lack of comprehensive company information, political instability and differing auditing and legal standards. These risks generally are greater with emerging-market countries than with more economically and politically established foreign countries.
4
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in BNY Mellon Global Equity Income Fund from November 1, 2021 to April 30, 2022. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
| |||||
Assume actual returns for the six months ended April 30, 2022 |
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| Class A | Class C | Class I | Class Y |
|
Expenses paid per $1,000† | $5.75 | $9.48 | $4.48 | $4.18 |
| |
Ending value (after expenses) | $983.60 | $980.30 | $985.40 | $984.00 |
|
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended April 30, 2022 |
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| Class A | Class C | Class I | Class Y |
|
Expenses paid per $1,000† | $5.86 | $9.64 | $4.56 | $4.26 |
| |
Ending value (after expenses) | $1,018.99 | $1,015.22 | $1,020.28 | $1,020.58 |
| |
† | Expenses are equal to the fund’s annualized expense ratio of 1.17% for Class A, 1.93% for Class C, .91% for Class I and .85% for Class Y, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
5
STATEMENT OF INVESTMENTS
April 30, 2022 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 92.9% | |||||||
Australia - 1.1% | |||||||
Insurance Australia Group | 1,109,395 | 3,518,684 | |||||
China - 1.1% | |||||||
Ping An Insurance Group Company of China, Cl. H | 533,500 | 3,430,890 | |||||
France - 3.2% | |||||||
Sanofi | 74,794 | 7,872,146 | |||||
TotalEnergies | 38,130 | 1,878,726 | |||||
9,750,872 | |||||||
Germany - 6.7% | |||||||
Bayer | 106,600 | 7,026,293 | |||||
Continental | 51,963 | 3,617,969 | |||||
Deutsche Post | 102,190 | 4,411,289 | |||||
Muenchener Rueckversicherungs-Gesellschaft | 22,283 | 5,332,098 | |||||
20,387,649 | |||||||
Hong Kong - 1.2% | |||||||
Link REIT | 411,800 | 3,550,763 | |||||
India - 1.6% | |||||||
Infosys, ADR | 238,976 | 4,748,453 | |||||
Ireland - 2.6% | |||||||
Medtronic | 77,321 | 8,069,219 | |||||
Peru - 1.0% | |||||||
Credicorp | 21,222 | a | 2,947,523 | ||||
Spain - 2.2% | |||||||
Industria de Diseno Textil | 323,849 | 6,791,098 | |||||
Sweden - 1.8% | |||||||
Svenska Handelsbanken, Cl. A | 543,728 | 5,480,936 | |||||
Switzerland - 7.9% | |||||||
Cie Financiere Richemont, CI. A | 34,597 | a | 4,021,657 | ||||
Nestle | 46,427 | 5,993,980 | |||||
Roche Holding | 20,477 | 7,583,998 | |||||
Zurich Insurance Group | 14,657 | 6,666,543 | |||||
24,266,178 | |||||||
Taiwan - 1.9% | |||||||
Delta Electronics | 697,000 | a | 5,817,942 | ||||
United Kingdom - 17.6% | |||||||
AstraZeneca | 61,069 | 8,112,517 | |||||
BAE Systems | 744,578 | 6,935,393 | |||||
British American Tobacco | 194,123 | 8,180,938 | |||||
British American Tobacco, ADR | 58,741 | 2,454,199 | |||||
Bunzl | 59,760 | 2,314,489 |
6
Description | Shares | Value ($) | |||||
Common Stocks - 92.9% (continued) | |||||||
United Kingdom - 17.6% (continued) | |||||||
Informa | 877,051 | a | 6,252,935 | ||||
RELX | 328,249 | 9,803,297 | |||||
Smiths Group | 58,372 | 1,068,020 | |||||
Taylor Wimpey | 2,077,284 | 3,262,225 | |||||
The Sage Group | 597,247 | 5,495,381 | |||||
53,879,394 | |||||||
United States - 43.0% | |||||||
Chesapeake Energy | 45,128 | 3,701,398 | |||||
Cisco Systems | 213,731 | 10,468,544 | |||||
CME Group | 23,268 | 5,103,603 | |||||
CMS Energy | 85,330 | 5,861,318 | |||||
Comerica | 68,537 | 5,613,180 | |||||
Dominion Energy | 80,238 | 6,550,630 | |||||
Emerson Electric | 88,393 | 7,971,281 | |||||
Exelon | 167,308 | 7,826,668 | |||||
First Horizon | 215,502 | 4,822,935 | |||||
Hasbro | 51,348 | 4,521,705 | |||||
Hewlett Packard Enterprise | 249,024 | 3,837,460 | |||||
Hubbell | 26,704 | 5,216,893 | |||||
JPMorgan Chase & Co. | 28,203 | 3,366,310 | |||||
Marathon Petroleum | 65,301 | 5,698,165 | |||||
Merck & Co. | 91,022 | 8,072,741 | |||||
MetLife | 80,213 | 5,268,390 | |||||
Organon & Co. | 112,506 | 3,637,319 | |||||
PepsiCo | 66,823 | 11,474,177 | |||||
Philip Morris International | 50,334 | 5,033,400 | |||||
Qualcomm | 32,698 | 4,567,584 | |||||
State Street | 44,996 | 3,013,382 | |||||
Sysco | 51,355 | 4,389,825 | |||||
Texas Instruments | 17,335 | 2,951,284 | |||||
The Procter & Gamble Company | 15,043 | 2,415,154 | |||||
131,383,346 | |||||||
Total Common Stocks (cost $242,153,526) | 284,022,947 | ||||||
Preferred Dividend | |||||||
Preferred Stocks - 3.2% | |||||||
Germany - 1.1% | |||||||
Volkswagen | 5.14 | 21,842 | 3,426,564 | ||||
South Korea - 2.1% | |||||||
Samsung Electronics | 2.41 | 138,568 | 6,470,920 | ||||
Total Preferred Stocks (cost $10,305,298) | 9,897,484 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Maturity | Number of Warrants | Value ($) | ||||
Warrants - .1% | |||||||
Switzerland - .1% | |||||||
Cie Financiere Richemont | 11/22/2023 | 188,850 | 133,957 | ||||
1-Day | Shares | ||||||
Investment Companies - 3.0% | |||||||
Registered Investment Companies - 3.0% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 0.38 | 9,273,929 | b | 9,273,929 | |||
Total Investments (cost $261,732,753) | 99.2% | 303,328,317 | |||||
Cash and Receivables (Net) | .8% | 2,334,468 | |||||
Net Assets | 100.0% | 305,662,785 |
ADR—American Depository Receipt
REIT—Real Estate Investment Trust
a Non-income producing security.
b Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
8
Portfolio Summary (Unaudited) † | Value (%) |
Pharmaceuticals Biotechnology & Life Sciences | 13.8 |
Food, Beverage & Tobacco | 10.8 |
Technology Hardware & Equipment | 8.7 |
Insurance | 7.9 |
Capital Goods | 7.7 |
Banks | 7.3 |
Utilities | 6.6 |
Consumer Durables & Apparel | 3.9 |
Energy | 3.7 |
Software & Services | 3.4 |
Commercial & Professional Services | 3.2 |
Investment Companies | 3.0 |
Diversified Financials | 2.7 |
Health Care Equipment & Services | 2.6 |
Semiconductors & Semiconductor Equipment | 2.5 |
Automobiles & Components | 2.3 |
Retailing | 2.2 |
Media & Entertainment | 2.1 |
Transportation | 1.4 |
Food & Staples Retailing | 1.4 |
Real Estate | 1.2 |
Household & Personal Products | .8 |
99.2 |
† Based on net assets.
See notes to financial statements.
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Affiliated Issuers | ||||||
Description | Value ($) 10/31/2021 | Purchases ($)† | Sales ($) | Value ($) 4/30/2022 | Dividends/ | |
Registered Investment Companies - 3.0% | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares - 3.0% | 7,082,007 | 68,324,319 | (66,132,397) | 9,273,929 | 5,492 | |
Investment of Cash Collateral for Securities Loaned - .0% | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares - .0% | - | 6,806,864 | (6,806,864) | - | 532 | †† |
Total - 3.0% | 7,082,007 | 75,131,183 | (72,939,261) | 9,273,929 | 6,024 |
† Includes reinvested dividends/distributions.
†† Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
See notes to financial statements.
10
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2022 (Unaudited)
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| Cost |
| Value |
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Assets ($): |
|
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|
| ||
Investments in securities—See Statement of Investments |
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|
| |||
Unaffiliated issuers | 252,458,824 |
| 294,054,388 |
| ||
Affiliated issuers |
| 9,273,929 |
| 9,273,929 |
| |
Cash |
|
|
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| 28,203 |
|
Cash denominated in foreign currency |
|
| 264,830 |
| 262,703 |
|
Receivable for shares of Beneficial Interest subscribed |
| 3,106,111 |
| |||
Tax reclaim receivable—Note 1(b) |
| 1,579,819 |
| |||
Dividends receivable |
| 932,028 |
| |||
Receivable for investment securities sold |
| 753,249 |
| |||
Prepaid expenses |
|
|
|
| 42,878 |
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|
|
|
|
| 310,033,308 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 238,613 |
| |||
Payable for investment securities purchased |
| 3,744,908 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 312,598 |
| |||
Trustees’ fees and expenses payable |
| 3,510 |
| |||
Other accrued expenses |
|
|
|
| 70,894 |
|
|
|
|
|
| 4,370,523 |
|
Net Assets ($) |
|
| 305,662,785 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 236,553,765 |
|
Total distributable earnings (loss) |
|
|
|
| 69,109,020 |
|
Net Assets ($) |
|
| 305,662,785 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 52,524,118 | 15,967,928 | 237,121,988 | 48,751 |
|
Shares Outstanding | 3,642,372 | 1,063,012 | 17,465,997 | 3,595 |
|
Net Asset Value Per Share ($) | 14.42 | 15.02 | 13.58 | 13.56 |
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|
See notes to financial statements. |
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11
STATEMENT OF OPERATIONS
Six Months Ended April 30, 2022 (Unaudited)
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Investment Income ($): |
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| ||
Income: |
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| ||
Cash dividends (net of $291,492 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 4,276,916 |
| ||
Affiliated issuers |
|
| 5,492 |
| ||
Income from securities lending—Note 1(c) |
|
| 532 |
| ||
Total Income |
|
| 4,282,940 |
| ||
Expenses: |
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|
|
| ||
Management fee—Note 3(a) |
|
| 1,160,347 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 195,357 |
| ||
Distribution fees—Note 3(b) |
|
| 64,483 |
| ||
Professional fees |
|
| 47,515 |
| ||
Registration fees |
|
| 38,448 |
| ||
Custodian fees—Note 3(c) |
|
| 17,523 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 14,055 |
| ||
Prospectus and shareholders’ reports |
|
| 10,612 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 10,209 |
| ||
Loan commitment fees—Note 2 |
|
| 2,906 |
| ||
Miscellaneous |
|
| 10,807 |
| ||
Total Expenses |
|
| 1,572,262 |
| ||
Net Investment Income |
|
| 2,710,678 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions | 31,535,598 |
| ||||
Net realized gain (loss) on forward foreign currency exchange contracts | (5,581) |
| ||||
Net Realized Gain (Loss) |
|
| 31,530,017 |
| ||
Net change in unrealized appreciation (depreciation) on investments | (38,879,902) |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (7,349,885) |
| ||
Net (Decrease) in Net Assets Resulting from Operations |
| (4,639,207) |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
12
STATEMENT OF CHANGES IN NET ASSETS
|
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| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
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| |
Net investment income |
|
| 2,710,678 |
|
|
| 5,766,488 |
| |
Net realized gain (loss) on investments |
| 31,530,017 |
|
|
| 34,686,927 |
| ||
Net change in unrealized appreciation |
| (38,879,902) |
|
|
| 43,729,454 |
| ||
Net Increase (Decrease) in Net Assets | (4,639,207) |
|
|
| 84,182,869 |
| |||
Distributions ($): |
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Distributions to shareholders: |
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| |
Class A |
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| (5,503,984) |
|
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| (925,932) |
| |
Class C |
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| (1,625,812) |
|
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| (192,813) |
| |
Class I |
|
| (24,995,341) |
|
|
| (4,780,369) |
| |
Class Y |
|
| (4,587) |
|
|
| (762) |
| |
Total Distributions |
|
| (32,129,724) |
|
|
| (5,899,876) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 4,164,294 |
|
|
| 11,932,795 |
| |
Class C |
|
| 531,925 |
|
|
| 878,761 |
| |
Class I |
|
| 51,099,454 |
|
|
| 46,660,220 |
| |
Class Y |
|
| 7,914 |
|
|
| 7,881 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 4,186,925 |
|
|
| 701,787 |
| |
Class C |
|
| 1,406,560 |
|
|
| 166,151 |
| |
Class I |
|
| 20,328,783 |
|
|
| 3,912,304 |
| |
Class Y |
|
| 4,588 |
|
|
| 762 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (5,298,844) |
|
|
| (14,670,732) |
| |
Class C |
|
| (2,197,501) |
|
|
| (13,796,463) |
| |
Class I |
|
| (40,055,285) |
|
|
| (65,254,810) |
| |
Class Y |
|
| (201) |
|
|
| (2,732) |
| |
Increase (Decrease) in Net Assets | 34,178,612 |
|
|
| (29,464,076) |
| |||
Total Increase (Decrease) in Net Assets | (2,590,319) |
|
|
| 48,818,917 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 308,253,104 |
|
|
| 259,434,187 |
| |
End of Period |
|
| 305,662,785 |
|
|
| 308,253,104 |
|
13
STATEMENT OF CHANGES IN NET ASSETS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class Aa |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 276,162 |
|
|
| 778,886 |
| |
Shares issued for distributions reinvested |
|
| 282,243 |
|
|
| 45,508 |
| |
Shares redeemed |
|
| (350,490) |
|
|
| (960,861) |
| |
Net Increase (Decrease) in Shares Outstanding | 207,915 |
|
|
| (136,467) |
| |||
Class Ca |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 33,981 |
|
|
| 53,790 |
| |
Shares issued for distributions reinvested |
|
| 90,972 |
|
|
| 10,446 |
| |
Shares redeemed |
|
| (139,589) |
|
|
| (874,740) |
| |
Net Increase (Decrease) in Shares Outstanding | (14,636) |
|
|
| (810,504) |
| |||
Class I |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 3,607,422 |
|
|
| 3,197,764 |
| |
Shares issued for distributions reinvested |
|
| 1,455,627 |
|
|
| 268,020 |
| |
Shares redeemed |
|
| (2,815,030) |
|
|
| (4,483,100) |
| |
Net Increase (Decrease) in Shares Outstanding | 2,248,019 |
|
|
| (1,017,316) |
| |||
Class Y |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 559 |
|
|
| 539 |
| |
Shares issued for distributions reinvested |
|
| 328 |
|
|
| 52 |
| |
Shares redeemed |
|
| (14) |
|
|
| (194) |
| |
Net Increase (Decrease) in Shares Outstanding | 873 |
|
|
| 397 |
| |||
|
|
|
|
|
|
|
|
|
|
a | During the period ended October 31, 2021, 2,180 Class C shares representing $34,519 were automatically converted to 2,260 Class A shares. | ||||||||
See notes to financial statements. |
14
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||
April 30, 2022 | Year Ended October 31, | |||||
Class A Shares | (Unaudited) | 2021 | 2020 | 2019 | 2018 | 2017 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 16.25 | 12.40 | 13.99 | 13.45 | 13.65 | 12.57 |
Investment Operations: | ||||||
Net investment incomea | .12 | .28 | .26 | .33 | .31 | .24 |
Net realized and unrealized | (.34) | 3.84 | (1.45) | 1.36 | .13 | 1.49 |
Total from Investment Operations | (.22) | 4.12 | (1.19) | 1.69 | .44 | 1.73 |
Distributions: | ||||||
Dividends from net | (.11) | (.27) | (.27) | (.33) | (.32) | (.27) |
Dividends from net realized | (1.50) | - | (.13) | (.82) | (.32) | (.38) |
Total Distributions | (1.61) | (.27) | (.40) | (1.15) | (.64) | (.65) |
Net asset value, end of period | 14.42 | 16.25 | 12.40 | 13.99 | 13.45 | 13.65 |
Total Return (%)b | (1.64)c | 33.36 | (8.72) | 13.85 | 3.14 | 14.30 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.17d | 1.18 | 1.19 | 1.17 | 1.18 | 1.28 |
Ratio of net investment income | 1.58d | 1.77 | 1.95 | 2.54 | 2.26 | 1.93 |
Portfolio Turnover Rate | 35.39c | 26.61 | 18.42 | 27.51 | 21.82 | 26.35 |
Net Assets, end of period ($ x 1,000) | 52,524 | 55,804 | 44,269 | 56,173 | 50,382 | 54,546 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
15
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||
April 30, 2022 | Year Ended October 31, | |||||
Class C Shares | (Unaudited) | 2021 | 2020 | 2019 | 2018 | 2017 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 16.86 | 12.85 | 14.47 | 13.86 | 13.98 | 12.79 |
Investment Operations: | ||||||
Net investment incomea | .06 | .15 | .17 | .24 | .22 | .18 |
Net realized and unrealized | (.36) | 4.00 | (1.51) | 1.41 | .12 | 1.50 |
Total from Investment Operations | (.30) | 4.15 | (1.34) | 1.65 | .34 | 1.68 |
Distributions: | ||||||
Dividends from net | (.04) | (.14) | (.15) | (.22) | (.14) | (.11) |
Dividends from net realized | (1.50) | - | (.13) | (.82) | (.32) | (.38) |
Total Distributions | (1.54) | (.14) | (.28) | (1.04) | (.46) | (.49) |
Net asset value, end of period | 15.02 | 16.86 | 12.85 | 14.47 | 13.86 | 13.98 |
Total Return (%)b | (1.97)c | 32.34 | (9.42) | 13.00 | 2.41 | 13.56 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.93d | 1.95 | 1.94 | 1.91 | 1.91 | 2.01 |
Ratio of net investment income | .79d | .97 | 1.21 | 1.79 | 1.53 | 1.36 |
Portfolio Turnover Rate | 35.39c | 26.61 | 18.42 | 27.51 | 21.82 | 26.35 |
Net Assets, end of period ($ x 1,000) | 15,968 | 18,165 | 24,255 | 49,830 | 49,068 | 56,969 |
a Based on average shares outstanding.
b Exclusive of sales charge.
c Not annualized.
d Annualized.
See notes to financial statements.
16
Six Months Ended | ||||||
April 30, 2022 | Year Ended October 31, | |||||
Class I Shares | (Unaudited) | 2021 | 2020 | 2019 | 2018 | 2017 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 15.39 | 11.76 | 13.30 | 12.83 | 13.10 | 12.11 |
Investment Operations: | ||||||
Net investment incomea | .13 | .30 | .28 | .35 | .33 | .31 |
Net realized and unrealized | (.31) | 3.64 | (1.39) | 1.30 | .12 | 1.39 |
Total from Investment Operations | (.18) | 3.94 | (1.11) | 1.65 | .45 | 1.70 |
Distributions: | ||||||
Dividends from net | (.13) | (.31) | (.30) | (.36) | (.40) | (.33) |
Dividends from net realized | (1.50) | - | (.13) | (.82) | (.32) | (.38) |
Total Distributions | (1.63) | (.31) | (.43) | (1.18) | (.72) | (.71) |
Net asset value, end of period | 13.58 | 15.39 | 11.76 | 13.30 | 12.83 | 13.10 |
Total Return (%) | (1.46)b | 33.67 | (8.53) | 14.20 | 3.43 | 14.65 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .91c | .93 | .94 | .91 | .90 | .99 |
Ratio of net investment income | 1.86c | 2.02 | 2.22 | 2.78 | 2.55 | 2.42 |
Portfolio Turnover Rate | 35.39b | 26.61 | 18.42 | 27.51 | 21.82 | 26.35 |
Net Assets, end of period ($ x 1,000) | 237,122 | 234,242 | 190,883 | 309,206 | 262,268 | 296,215 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
17
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||
April 30, 2022 | Year Ended October 31, | |||||
Class Y Shares | (Unaudited) | 2021 | 2020 | 2019 | 2018 | 2017 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 15.39 | 11.75 | 13.29 | 12.82 | 13.09 | 12.11 |
Investment Operations: | ||||||
Net investment incomea | .14 | .30 | .32 | .37 | .34 | .31 |
Net realized and unrealized | (.34) | 3.65 | (1.42) | 1.29 | .12 | 1.39 |
Total from Investment Operations | (.20) | 3.95 | (1.10) | 1.66 | .46 | 1.70 |
Distributions: | ||||||
Dividends from net | (.13) | (.31) | (.31) | (.37) | (.41) | (.34) |
Dividends from net realized | (1.50) | - | (.13) | (.82) | (.32) | (.38) |
Total Distributions | (1.63) | (.31) | (.44) | (1.19) | (.73) | (.72) |
Net asset value, end of period | 13.56 | 15.39 | 11.75 | 13.29 | 12.82 | 13.09 |
Total Return (%) | (1.60)b | 33.79 | (8.47) | 14.29 | 3.53 | 14.68 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .85c | .92 | .85 | .84 | .83 | .92 |
Ratio of net investment income | 1.97c | 2.03 | 2.48 | 2.93 | 2.61 | 2.45 |
Portfolio Turnover Rate | 35.39b | 26.61 | 18.42 | 27.51 | 21.82 | 26.35 |
Net Assets, end of period ($ x 1,000) | 49 | 42 | 27 | 39,585 | 43,267 | 40,786 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
18
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Global Equity Income Fund (the “fund”) is a separate diversified series of BNY Mellon Investment Funds III (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering four series, including the fund. The fund’s investment objective is to seek total return (consisting of capital appreciation and income). BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Newton Investment Management Limited (the “Sub-Adviser”), a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser, serves as the fund’s Sub-Adviser.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C, Class I and Class Y. Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class A shares bought without an initial sales charge as part of an investment of $1 million or more may be charged a contingent deferred sales charge (“CDSC”) of 1.00% if redeemed within one year. Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares eight years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including BNY Mellon and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Trust enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
20
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in equity securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Trust’s Board of Trustees (the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
The following is a summary of the inputs used as of April 30, 2022 in valuing the fund’s investments:
Level 1-Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | Level 3-Significant Unobservable Inputs | Total | |||
Assets ($) | ||||||
Investments in Securities:† | ||||||
Equity Securities - Common Stocks | 149,602,740 | 134,420,207 | †† | - | 284,022,947 | |
Equity Securities - Preferred Stocks | - | 9,897,484 | †† | - | 9,897,484 | |
Investment Companies | 9,273,929 | - | - | 9,273,929 | ||
Warrants | 133,957 | - | - | 133,957 |
† See Statement of Investments for additional detailed categorizations, if any.
†† Securities classified within Level 2 at period end as the values were determined pursuant to the fund’s fair valuation procedures.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments 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.
22
Foreign taxes: The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invests. These foreign taxes, if any, are paid by the fund and are reflected in the Statement of Operations, if applicable. Foreign taxes payable or deferred or those subject to reclaims as of April 30, 2022, if any, are disclosed in the fund’s Statement of Assets and Liabilities.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with BNY Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, BNY Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended April 30, 2022, BNY Mellon earned $72 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political, economic developments and public health conditions. Moreover, securities issued in
23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. The COVID-19 pandemic has had, and any other outbreak of an infectious disease or other serious public health concern could have, a significant negative impact on economic and market conditions and could trigger a prolonged period of global economic slowdown. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
(f) Dividends and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from net investment income are normally declared and paid quarterly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and
24
net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended April 30, 2022, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended April 30, 2022, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended October 31, 2021 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 October 31, 2021 was as follows: ordinary income $5,899,876. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by BNY Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $688.5 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $135 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended April 30, 2022, 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 the Adviser and the Trust, the Trust had agreed to pay the Adviser a management fee computed at the annual rate of .75% of the value of the fund’s average daily net assets and is payable monthly.
25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Pursuant to a sub-investment advisory agreement between the Adviser and the Sub-Adviser, the Adviser pays the Sub-Adviser a monthly fee at an annual rate of .36% of the value of the fund’s average daily net assets.
During the period ended April 30, 2022, the Distributor retained $1,770 from commissions earned on sales of the fund’s Class A shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. The Distributor may pay one or more Service Agents in respect of advertising, marketing and other distribution services, and determines the amounts, if any, to be paid to Service Agents and the basis on which such payments are made. During the period ended April 30, 2022, Class C shares were charged $64,483 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 services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2022, Class A and Class C shares were charged $68,525 and $21,494, respectively, pursuant to the Shareholder Services Plan.
Under its terms, the Distribution Plan and Shareholder Services Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of a majority of those Trustees who are not “interested persons” of the Trust and who have no direct or indirect financial interest in the operation of or in any agreement related to the Distribution Plan or Shareholder Services Plan.
The fund has an arrangement with BNY Mellon Transfer, Inc., (the “Transfer Agent”), a subsidiary of BNY Mellon and an affiliate of the Adviser, whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. For financial reporting purposes, the fund includes net earnings credits, if any, as shareholder servicing costs in the Statement of Operations.
The fund has an arrangement with The Bank of New York Mellon (the “Custodian”), a subsidiary of BNY Mellon and an affiliate of the Adviser, whereby the fund will receive interest income or be charged overdraft fees
26
when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statement of Operations.
The fund compensates the Transfer Agent, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, for the fund. The majority of Transfer Agent fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended April 30, 2022, the fund was charged $5,565 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates the Custodian under a custody agreement, for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended April 30, 2022, the fund was charged $17,523 pursuant to the custody agreement.
During the period ended April 30, 2022, the fund was charged $10,209 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: management fees of $193,370, Distribution Plan fees of $10,289, Shareholder Services Plan fees of $14,638, Custodian fees of $11,200, Chief Compliance Officer fees of $7,335 and Transfer Agent fees of $1,781.
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward foreign currency exchange contracts (“forward contracts”), during the period ended April 30, 2022, amounted to $109,575,075 and $106,471,197, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its over-the-counter (“OTC”) derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements
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NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.
Each type of derivative instrument that was held by the fund during the period ended April 30, 2022 is discussed below.
Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. At April 30, 2022 there were no forward contracts outstanding.
The following summarizes the average market value of derivatives outstanding during the period ended April 30, 2022:
|
| Average Market Value ($) |
Forward contracts |
| 91,421 |
At April 30, 2022, accumulated net unrealized appreciation on investments was $41,595,564, consisting of $58,214,083 gross unrealized appreciation and $16,618,519 gross unrealized depreciation.
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At April 30, 2022, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
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INFORMATION ABOUT THE RENEWAL OF THE FUND'S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on March 2-3, 2022, the Board considered the renewal of the fund’s Management Agreement, pursuant to which the Adviser provides the fund with investment advisory and administrative services, and the Sub-Investment Advisory Agreement (together with the Management Agreement, the “Agreements”), pursuant to which Newton Investment Management Limited (the “Sub-Adviser”) provides day-to-day management of the fund’s investments. The Board members, a majority of whom are not “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser and the Sub-Adviser. In considering the renewal of the Agreements, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s supervisory activities over the Sub-Adviser. The Board also considered portfolio management’s brokerage policies and practices (including that there are no soft dollar arrangements in place for the fund) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data based on classifications provided by Thomson Reuters Lipper, which included information comparing (1) the performance of the fund’s Class I shares with the performance of a
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group of institutional global equity income funds selected by Broadridge as comparable to the fund (the “Performance Group”) and with a broader group of funds consisting of all retail and institutional global equity income funds (the “Performance Universe”), all for various periods ended December 31, 2021, and (2) the fund’s actual and contractual management fees and total expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of all institutional global equity income funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Performance Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser and the Sub-Adviser the results of the comparisons and considered that the fund’s total return performance was above the Performance Group median for all periods, except the one- and two-year periods when it was below the median, and above the Performance Universe median for all periods, except the one-year period when it was below the median. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark indices. The Board noted that the fund had a four star rating for all periods and a four star overall rating from Morningstar based on Morningstar’s risk-adjusted return measures.
Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management services and the sub-advisory services provided by the Adviser and the Sub-Adviser, respectively. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons.
The Board considered that the fund’s contractual management fee was higher than the Expense Group median contractual management fee, the fund’s actual management fee was higher than the Expense Group median and higher than the Expense Universe median actual management fee and the fund’s total expenses were slightly higher than the Expense Group median and slightly higher than the Expense Universe median total expenses.
Representatives of the Adviser reviewed with the Board the management or investment advisory fees paid to the Adviser or the Sub-Adviser or its affiliates for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Client”), and explained the nature of the Similar Client. They discussed differences in fees paid and
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INFORMATION ABOUT THE RENEWAL OF THE FUND'S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Client to evaluate the appropriateness of the fund’s management fee. Representatives of the Adviser noted that there were no other funds advised by the Adviser that are in the same Lipper category as the fund.
The Board considered the fee payable to the Sub-Adviser in relation to the fee payable to the Adviser by the fund and the respective services provided by the Sub-Adviser and the Adviser. The Board also took into consideration that the Sub-Adviser’s fee is paid by the Adviser, out of its fee from the fund, and not the fund.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the mix of services provided by the Adviser and the Sub-Adviser, including the nature, extent and quality of such services, supported the renewal of the Agreements and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Since the Adviser, and not the fund, pays the Sub-Adviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Sub-Adviser’s profitability to be relevant to its deliberations. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser and the Sub-Adviser from acting as investment adviser and sub-investment adviser, respectively, and took into consideration that there were no soft dollar arrangements in effect for trading the fund’s investments.
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At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreements. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by the Adviser and the Sub-Adviser are adequate and appropriate.
· The Board was satisfied with the fund’s performance.
· The Board concluded that the fees paid to the Adviser and the Sub-Adviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Management Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates and the Sub-Adviser, of the Adviser and the Sub-Adviser and the services provided to the fund by the Adviser and the Sub-Adviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreements, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on its consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
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LIQUIDITY RISK MANAGEMENT PROGRAM (Unaudited)
Effective June 1, 2019, the fund adopted a liquidity risk management program (the “Liquidity Risk Management Program”) pursuant to the requirements of Rule 22e-4 under the Investment Company Act of 1940, as amended. Rule 22e-4 requires registered open-end funds, including mutual funds and exchange-traded funds but not money market funds, to establish liquidity risk management programs in order to effectively manage fund liquidity and shareholder redemptions. The rule is designed to mitigate the risk that a fund could not meet redemption requests without significantly diluting the interests of remaining investors.
The rule requires the fund to assess, manage and review their liquidity risk at least annually considering applicable factors such as investment strategy and liquidity during normal and foreseeable stressed conditions, including whether the strategy is appropriate for an open-end fund and whether the fund has a relatively concentrated portfolio or large positions in particular issuers. The fund must also assess its use of borrowings and derivatives, short-term and long-term cash flow projections in normal and stressed conditions, holdings of cash and cash equivalents, and borrowing arrangements and other funding sources.
The rule also requires the fund to classify its investments as highly liquid, moderately liquid, less liquid or illiquid based on the number of days the fund expects it would take to liquidate the investment, and to review these classifications at least monthly or more often under certain conditions. The periods range from three or fewer business days for a highly liquid investment to greater than seven calendar days for settlement of a less liquid investment. Illiquid investments are those a fund does not expect to be able to sell or dispose of within seven calendar days without significantly changing the market value. The fund is prohibited from acquiring an investment if, after the acquisition, its holdings of illiquid assets will exceed 15% of its net assets. In addition, if a fund permits redemptions in-kind, the rule requires the fund to establish redemption in-kind policies and procedures governing how and when it will engage in such redemptions.
Pursuant to the rule’s requirements, the Liquidity Risk Management Program has been reviewed and approved by the Board. Furthermore, the Board has received a written report prepared by the Program’s Administrator that addresses the operation of the Program, assesses its adequacy and effectiveness and describes any material changes made to the Program.
Assessment of Program
In the opinion of the Program Administrator, the Program approved by the Board continues to be adequate for the fund and the Program has been implemented effectively. The Program Administrator has monitored the fund’s liquidity risk and the liquidity classification of the securities held by the fund and has determined that the Program is operating effectively.
During the period from January 1, 2021 to December 31, 2021, there were no material changes to the Program and no material liquidity events that impacted the fund. During the period, the fund held sufficient highly liquid assets to meet fund redemptions.
Under normal expected foreseeable fund redemption forecasts and foreseeable stressed fund redemption forecasts, the Program Administrator believes that the fund maintains sufficient highly liquid assets to meet expected fund redemptions.
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BNY Mellon Global Equity Income Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Newton Investment Management Limited
160 Queen Victoria Street
London, EC4V, 4LA, UK
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class A: DEQAX Class C: DEQCX Class I: DQEIX Class Y: DEQYX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@bnymellon.com
Internet Information can be viewed online or downloaded at www.im.bnymellon.com
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-PORT. The fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.im.bnymellon.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2022 BNY Mellon Securities Corporation |
BNY Mellon International Bond Fund
SEMI-ANNUAL REPORT April 30, 2022 |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.im.bnymellon.com and sign up for eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
Information About the Renewal | |
FOR MORE INFORMATION
Back Cover
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from November 1, 2021, through April 30, 2022, as provided by David Leduc, CFA, Brendan Murphy, CFA and Scott Zaleski, CFA, Portfolio Managers employed by the fund’s sub-adviser, Insight North America LLC (“INA”)
Market and Fund Performance Overview
For the six-month period ended April 30, 2022, the BNY Mellon International Bond Fund’s (the “fund”) Class A shares produced a total return of −12.28%, Class C shares returned −12.65%, Class I shares returned −12.18% and Class Y shares returned −12.07%.1 In comparison, the fund’s benchmark, the Bloomberg Global Aggregate ex USD Index (Unhedged) (the “Index”), produced a total return of −13.25% for the same period.2
International bonds lost ground during the period primarily as a result of sharply rising interest rates and, to a lesser extent, increasing strength in the U.S. dollar. The fund outperformed the Index, largely due to effective yield curve management and beneficial currency allocation.
The Fund’s Investment Approach
The fund seeks to maximize total return through capital appreciation and income. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in fixed-income securities. The fund also normally invests at least 65% of its assets in non-U.S. dollar-denominated, fixed-income securities of foreign governments and companies located in various countries, including emerging markets.
Generally, the fund seeks to maintain a portfolio with an average credit quality of investment grade. The fund’s portfolio managers focus on identifying undervalued government bond markets, currencies, sectors and securities and look for fixed-income securities with the most potential for added value, such as those involving the potential for credit upgrades, unique structural characteristics or innovative features. The portfolio managers select securities for the fund’s portfolio by using fundamental economic research and quantitative analysis to allocate assets among countries and currencies, focusing on sectors and individual securities that appear to be relatively undervalued, and actively trading among sectors.
Rising Rates Undermine Bond Markets
International bond investors faced turbulent geopolitical, macroeconomic and market conditions during the reporting period. Inflationary pressures increased early in the period due to pandemic-related government stimulus and accommodative monetary policies, along with rising commodity prices and supply-chain bottlenecks. These pressures intensified in February 2022 when Russia attacked Ukraine, causing already elevated energy and commodity prices to spike higher. Outbreaks of the Omicron variant of COVID-19 led to lockdowns of varying severity and duration across the globe, particularly in China, interrupting economic activity while adding to supply-chain strains and further exacerbating inflation. Despite the risks to growth from war and pandemic, central banks felt compelled to act to try to curb inflation. Numerous rate increases took place globally, and many more were priced in by financial markets. Several central banks also began the process of quantitative tightening. These conditions produced a distinctly unfavorable backdrop for bonds, which fell sharply in value, with no real safe havens. International bond prices were
2
further undermined in U.S. dollar terms by the rising value of the U.S. dollar relative to most of the world’s currencies.
Yield Curve and Currency Positioning Enhance Relative Returns
While the fund’s returns were subject to the same broadly negative forces as the rest of the international bond market, returns relative to the Index benefited from strategic management decisions made during the reporting period. Early in the period, we positioned the fund defensively with regard to its duration and yield curve, underweighting the middle part of the curve in the United States and UK fixed-income markets. This approach reflected our belief that the potential for central bank rate hikes was underappreciated by the market. As a result, the fund was affected by rapidly increasing inflationary pressures less severely than the Index. As the market priced in more aggressive central bank tightening, we gradually covered some of the fund’s short duration positioning. To a lesser degree, the fund’s relative performance also benefited from small, long U.S. dollar positions held periodically during the period.
On the other hand, the fund’s sector positioning produced mixed results. Corporate bond exposure, both investment-grade and high yield, detracted from returns, despite a defensive valuation posture. Exposure to emerging-market securities detracted as well. The fund reduced its positions in these sectors as the period progressed, shifting toward an increasingly conservative sector profile. These negatives were largely offset by overweight exposure to sovereign securities. On balance, the fund’s sector positioning had little impact on relative performance. The fund used futures and interest-rate swaps to manage its duration and country positioning, used currency forwards to help manage its FX position and selectively used credit derivatives hedge its credit positions.
Remaining Defensively Positioned While Awaiting Clarity on Inflation
With markets currently pricing in more realistic expectations of upcoming central bank tightening, spreads have widened, and nominal yields have backed up significantly. Accordingly, we believe valuations have grown more attractive among sovereign bonds and select credit markets, with pricing currently much closer to fair value than six months ago. These changes have increased our optimism regarding the market’s potential going forward, leading us to shift the fund’s rate position closer to neutral relative to the Index. Nevertheless, significant challenges clearly remain in place, with the key unresolved questions focused on when inflation will peak, and how central banks will react as it does. Given these uncertainties, we continue to keep a close eye on inflation while waiting for greater clarity on how the rate hikes already priced in may affect the market outlook. As of April 30, 2022, we are maintaining the fund’s defensive credit positioning, with significantly
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
underweight exposure to investment-grade credit, high yield credit and emerging-market credit compared to the Index and the fund’s historical averages.
May 16, 2022
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. Class I and Class Y shares are not subject to any initial or deferred sales charge. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. The fund’s return reflects the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through March 1, 2023, at which time it may be extended, modified or terminated. Had these expenses not been absorbed, returns would have been lower.
2 Source: Lipper Inc. — The Bloomberg Global Aggregate ex USD Index (Unhedged) is a flagship measure of global investment grade debt from 24 local currency markets, excluding U.S. dollar-denominated bonds. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed- and emerging-market issuers. Investors cannot invest directly in any index.
Bonds are subject generally to interest-rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund's exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
High yield bonds are subject to increased credit risk and are considered speculative in terms of the issuer’s perceived ability to continue making interest payments on a timely basis and to repay principal upon maturity.
Foreign bonds are subject to special risks, including exposure to currency fluctuations, changing political and economic conditions and potentially less liquidity. These risks are generally greater with emerging-market countries than with more economically and politically established foreign countries.
The fund may, but is not required to, use derivative instruments. A small investment in derivatives could have a potentially large impact on the fund’s performance. The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets.
Investments in foreign currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedged positions, that the U.S. dollar will decline relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time. A decline in the value of foreign currencies relative to the U.S. dollar will reduce the value of securities held by the fund and denominated in those currencies. The use of leverage may magnify the fund’s gains or losses. For derivatives with a leveraging component, adverse changes in the value or level of the underlying asset can result in a loss that is much greater than the original investment in the derivative.
4
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in BNY Mellon International Bond Fund from November 1, 2021 to April 30, 2022. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended April 30, 2022 |
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| Class A | Class C | Class I | Class Y |
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Expenses paid per $1,000† | $4.75 | $8.22 | $3.35 | $2.94 |
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Ending value (after expenses) | $877.20 | $873.50 | $878.20 | $879.30 |
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COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended April 30, 2022 |
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| Class A | Class C | Class I | Class Y |
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Expenses paid per $1,000† | $5.11 | $8.85 | $3.61 | $3.16 |
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Ending value (after expenses) | $1,019.74 | $1,016.02 | $1,021.22 | $1,021.67 |
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† | Expenses are equal to the fund’s annualized expense ratio of 1.02% for Class A, 1.77% for Class C, .72% for Class I and .63% for Class Y, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
5
STATEMENT OF INVESTMENTS
April 30, 2022 (Unaudited)
Description | Coupon | Maturity Date | Principal Amount ($) | a | Value ($) | ||||
Bonds and Notes - 97.8% | |||||||||
Australia - .2% | |||||||||
Australia, Sr. Unscd. Bonds, Ser. 150 | AUD | 3.00 | 3/21/2047 | 685,000 | 447,255 | ||||
Austria - 4.4% | |||||||||
Austria, Sr. Unscd. Bonds | EUR | 0.03 | 2/20/2031 | 2,675,000 | b | 2,518,514 | |||
Austria, Sr. Unscd. Bonds | EUR | 0.72 | 10/20/2028 | 5,050,000 | b | 4,965,036 | |||
Austria, Sr. Unscd. Bonds | EUR | 1.20 | 10/20/2025 | 2,700,000 | b | 2,903,598 | |||
Raiffeisen Bank International, Sr. Unscd. Notes | EUR | 0.05 | 9/1/2027 | 300,000 | 278,778 | ||||
Raiffeisen Bank International, Sub. Notes | EUR | 2.88 | 6/18/2032 | 600,000 | 566,316 | ||||
11,232,242 | |||||||||
Belgium - 4.6% | |||||||||
Belgium, Sr. Unscd. Bonds, Ser. 90 | EUR | 0.40 | 6/22/2040 | 2,100,000 | b | 1,720,048 | |||
Belgium, Sr. Unscd. Bonds, Ser. 92 | EUR | 0.96 | 10/22/2031 | 7,340,000 | b | 6,776,206 | |||
Kingdom of Belgium, Sr. Unscd. Bonds, Ser. 74 | EUR | 0.80 | 6/22/2025 | 3,000,000 | b | 3,185,156 | |||
11,681,410 | |||||||||
Bermuda - .3% | |||||||||
Textainer Marine Containers VII, Ser. 2021-1A, Cl. A | 1.68 | 2/20/2046 | 974,667 | b | 871,180 | ||||
Canada - 6.7% | |||||||||
BMW Canada Auto Trust, Ser. 2019-1, Cl. A3 | CAD | 2.35 | 2/20/2024 | 528,519 | 411,628 | ||||
BMW Canada Auto Trust, Ser. 2021-1A, Cl. A3 | CAD | 0.76 | 12/20/2025 | 1,175,000 | b | 874,017 | |||
Canada, Bonds | CAD | 1.25 | 6/1/2030 | 13,600,000 | 9,400,933 | ||||
Canada, Bonds | CAD | 2.00 | 12/1/2051 | 3,950,000 | 2,613,894 | ||||
CNH Capital Canada Receivables Trust, Ser. 2021-1A, Cl. A2 | CAD | 1.00 | 11/16/2026 | 1,125,000 | b | 849,523 | |||
Ford Auto Securitization Trust, Ser. 2020-AA, Cl. A3 | CAD | 1.15 | 11/15/2025 | 1,075,000 | b | 801,762 | |||
GMF Canada Leasing Trust, Ser. 2020-1A, Cl. A3 | CAD | 1.05 | 11/20/2025 | 850,000 | b | 658,192 | |||
GMF Canada Leasing Trust, Ser. 2021-1A, Cl. A3 | CAD | 0.87 | 5/20/2026 | 1,125,000 | b | 853,569 | |||
MBarc Credit Canada, Ser. 2021-AA, Cl. A3 | CAD | 0.93 | 2/17/2026 | 875,000 | b | 657,961 | |||
17,121,479 | |||||||||
Cayman Islands - 1.8% | |||||||||
Arbor Realty Commercial Real Estate Notes CLO, Ser. 2021-FL4, Cl. A, 1 Month LIBOR +1.35% | 1.90 | 11/15/2036 | 885,000 | b,c | 880,264 | ||||
Carlyle US CLO, Ser. 2017-2A, Cl. A1R, 3 Month LIBOR +1.05% | 2.11 | 7/20/2031 | 1,125,000 | b,c | 1,117,182 |
6
Description | Coupon | Maturity Date | Principal Amount ($) | a | Value ($) | ||||
Bonds and Notes - 97.8% (continued) | |||||||||
Cayman Islands - 1.8% (continued) | |||||||||
Race Point IX CLO, Ser. 2015-9A, CI. A1A2, 3 Month LIBOR +.94% | 1.98 | 10/15/2030 | 975,000 | b,c | 969,319 | ||||
RIN IV CLO, Ser. 2021-1A, CI. A, 3 Month LIBOR +1.30% | 1.55 | 4/20/2033 | 700,000 | b,c | 693,659 | ||||
TCI-Flatiron CLO, Ser. 2017-1A, CI. AR, 3 Month LIBOR +.96% | 1.43 | 11/18/2030 | 925,000 | b,c | 918,213 | ||||
4,578,637 | |||||||||
Chile - .1% | |||||||||
VTR Comunicaciones, Sr. Scd. Notes | 5.13 | 1/15/2028 | 201,000 | b | 181,110 | ||||
China - 5.9% | |||||||||
China, Bonds | CNY | 3.73 | 5/25/2070 | 56,900,000 | 9,324,889 | ||||
China, Bonds | CNY | 3.76 | 3/22/2071 | 7,300,000 | 1,204,727 | ||||
China, Unscd. Bonds | CNY | 3.81 | 9/14/2050 | 27,900,000 | 4,579,231 | ||||
15,108,847 | |||||||||
Colombia - .2% | |||||||||
Colombia, Sr. Unscd. Notes | 4.13 | 5/15/2051 | 200,000 | 134,500 | |||||
Colombia, Sr. Unscd. Notes | 5.20 | 5/15/2049 | 480,000 | 362,400 | |||||
496,900 | |||||||||
Dominican Republic - ..3% | |||||||||
Dominican Republic, Sr. Unscd. Bonds | 6.00 | 2/22/2033 | 775,000 | b | 705,934 | ||||
Finland - 3.0% | |||||||||
Finland, Sr. Unscd. Notes | EUR | 0.35 | 9/15/2026 | 7,490,000 | b | 7,611,657 | |||
France - 8.1% | |||||||||
Credit Agricole Home Loan SFH, Covered Notes | EUR | 1.25 | 3/24/2031 | 1,600,000 | 1,623,663 | ||||
Electricite de France, Jr. Sub. Notes | EUR | 2.63 | 12/1/2027 | 1,400,000 | d | 1,251,072 | |||
France, Bonds | EUR | 1.25 | 5/25/2036 | 3,570,000 | b | 3,572,526 | |||
France, Bonds | EUR | 2.50 | 5/25/2030 | 11,625,000 | 13,499,788 | ||||
Orano, Sr. Unscd. Notes | EUR | 2.75 | 3/8/2028 | 500,000 | 497,508 | ||||
Orano, Sr. Unscd. Notes | EUR | 4.88 | 9/23/2024 | 200,000 | 223,586 | ||||
20,668,143 | |||||||||
Germany - 2.0% | |||||||||
Bundesrepublik Deutschland Bundesanleihe, Bonds | EUR | 0.50 | 2/15/2026 | 2,700,000 | 2,842,252 | ||||
Bundesrepublik Deutschland Bundesanleihe, Sr. Unscd. Bonds | EUR | 0.39 | 8/15/2052 | 3,150,000 | 2,400,971 | ||||
5,243,223 | |||||||||
Greece - 1.6% | |||||||||
Hellenic Republic, Sr. Unscd. Notes | EUR | 2.00 | 4/22/2027 | 4,000,000 | b | 4,138,161 | |||
Ireland - 5.9% | |||||||||
AerCap Global Aviation Trust, Gtd. Notes | 3.00 | 10/29/2028 | 1,105,000 | 961,968 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity Date | Principal Amount ($) | a | Value ($) | ||||
Bonds and Notes - 97.8% (continued) | |||||||||
Ireland - 5.9% (continued) | |||||||||
AerCap Global Aviation Trust, Gtd. Notes | 3.30 | 1/30/2032 | 778,000 | 647,733 | |||||
Hammerson Ireland Finance DAC, Gtd. Notes | EUR | 1.75 | 6/3/2027 | 1,400,000 | 1,320,059 | ||||
Ireland, Bonds | EUR | 2.00 | 2/18/2045 | 1,610,000 | 1,750,061 | ||||
Ireland, Unscd. Bonds | EUR | 0.35 | 10/18/2032 | 5,100,000 | 4,741,900 | ||||
Irish Government, Unscd. Bonds | EUR | 1.00 | 5/15/2026 | 5,350,000 | 5,698,729 | ||||
15,120,450 | |||||||||
Italy - 1.7% | |||||||||
Banco BPM, Sub. Notes | EUR | 2.88 | 6/29/2031 | 200,000 | 196,012 | ||||
Banco BPM, Sub. Notes | EUR | 3.38 | 1/19/2032 | 200,000 | 195,822 | ||||
Italy Buoni Poliennali Del Tesoro, Sr. Unscd. Bonds, Ser. CAC | EUR | 2.45 | 9/1/2050 | 4,260,000 | b | 3,898,778 | |||
4,290,612 | |||||||||
Japan - 13.6% | |||||||||
Japan (10 Year Issue), Bonds, Ser. 348 | JPY | 0.10 | 9/20/2027 | 363,850,000 | 2,815,163 | ||||
Japan (20 Year Issue), Bonds, Ser. 156 | JPY | 0.40 | 3/20/2036 | 2,311,900,000 | 17,704,934 | ||||
Japan (30 Year Issue), Bonds, Ser. 66 | JPY | 0.40 | 3/20/2050 | 2,144,550,000 | 14,384,757 | ||||
34,904,854 | |||||||||
Luxembourg - .5% | |||||||||
DH Europe Finance II, Gtd. Bonds | EUR | 0.20 | 3/18/2026 | 280,000 | 279,635 | ||||
EIG Pearl Holdings, Sr. Scd. Bonds | 4.39 | 11/30/2046 | 470,000 | b | 399,361 | ||||
JBS Finance Luxembourg, Gtd. Notes | 3.63 | 1/15/2032 | 250,000 | 212,640 | |||||
JBS Finance Luxembourg, Gtd. Notes | 3.63 | 1/15/2032 | 550,000 | b | 470,250 | ||||
1,361,886 | |||||||||
Malaysia - .6% | |||||||||
Malaysia, Bonds, Ser. 219 | MYR | 3.89 | 8/15/2029 | 7,530,000 | 1,660,666 | ||||
Mexico - 2.3% | |||||||||
Alsea, Gtd. Notes | 7.75 | 12/14/2026 | 747,000 | b | 750,974 | ||||
Braskem Idesa, Sr. Scd. Notes | 6.99 | 2/20/2032 | 275,000 | b | 247,276 | ||||
Mexico, Bonds, Ser. M | MXN | 7.75 | 5/29/2031 | 100,000,000 | 4,496,852 | ||||
Petroleos Mexicanos, Gtd. Notes | 6.70 | 2/16/2032 | 469,000 | 405,045 | |||||
5,900,147 | |||||||||
Netherlands - 6.1% | |||||||||
Airbus, Sr. Unscd. Notes | EUR | 2.38 | 6/9/2040 | 634,000 | 600,548 | ||||
Braskem Netherlands Finance, Gtd. Notes | 5.88 | 1/31/2050 | 420,000 | b | 376,287 | ||||
Coca-Cola HBC Finance, Gtd. Notes | EUR | 0.63 | 11/21/2029 | 905,000 | 822,195 | ||||
Coca-Cola HBC Finance, Gtd. Notes | EUR | 1.00 | 5/14/2027 | 100,000 | 99,577 | ||||
Enel Finance International, Gtd. Notes | EUR | 0.38 | 6/17/2027 | 690,000 | 675,121 | ||||
Netherlands, Bonds | EUR | 0.15 | 7/15/2031 | 5,300,000 | b | 5,047,834 |
8
Description | Coupon | Maturity Date | Principal Amount ($) | a | Value ($) | ||||
Bonds and Notes - 97.8% (continued) | |||||||||
Netherlands - 6.1% (continued) | |||||||||
Netherlands, Bonds | EUR | 0.27 | 1/15/2026 | 5,500,000 | 5,653,098 | ||||
Prosus, Sr. Unscd. Notes | 4.19 | 1/19/2032 | 900,000 | b | 760,271 | ||||
Wintershall Dea Finance, Gtd. Bonds | EUR | 0.84 | 9/25/2025 | 400,000 | 390,238 | ||||
Wintershall Dea Finance, Gtd. Bonds | EUR | 1.33 | 9/25/2028 | 1,200,000 | 1,072,174 | ||||
Wintershall Dea Finance, Gtd. Bonds | EUR | 1.82 | 9/25/2031 | 100,000 | 86,015 | ||||
15,583,358 | |||||||||
Philippines - .1% | |||||||||
Philippine, Sr. Unscd. Notes | 4.20 | 3/29/2047 | 283,000 | 264,134 | |||||
Romania - .3% | |||||||||
Romania, Sr. Unscd. Notes | EUR | 2.50 | 2/8/2030 | 405,000 | b | 370,722 | |||
Romania, Unscd. Notes | EUR | 2.75 | 4/14/2041 | 425,000 | b | 301,879 | |||
672,601 | |||||||||
Singapore - 1.9% | |||||||||
Singapore, Bonds | SGD | 2.63 | 5/1/2028 | 6,560,000 | 4,794,713 | ||||
South Africa - .7% | |||||||||
South Africa, Sr. Unscd. Bonds, Ser. 2035 | ZAR | 8.88 | 2/28/2035 | 32,181,000 | 1,776,399 | ||||
Spain - 1.8% | |||||||||
Lorca Telecom Bondco, Sr. Scd. Bonds | EUR | 4.00 | 9/18/2027 | 925,000 | b | 896,717 | |||
Spain, Sr. Unscd. Bonds | EUR | 2.90 | 10/31/2046 | 3,224,000 | b | 3,718,528 | |||
4,615,245 | |||||||||
Supranational - .7% | |||||||||
The African Export-Import Bank, Sr. Unscd. Notes | 5.25 | 10/11/2023 | 1,850,000 | 1,887,740 | |||||
Thailand - .5% | |||||||||
GC Treasury Center, Gtd. Notes | 4.40 | 3/30/2032 | 929,000 | b | 886,193 | ||||
Thaioil Treasury Center, Gtd. Notes | 5.38 | 11/20/2048 | 425,000 | 389,665 | |||||
1,275,858 | |||||||||
United Arab Emirates - .3% | |||||||||
Mamoura Diversified Global Holding, Gtd. Notes | 2.50 | 11/7/2024 | 755,000 | 740,967 | |||||
United Kingdom - 8.3% | |||||||||
BAT International Finance, Gtd. Notes | EUR | 2.25 | 1/16/2030 | 395,000 | 371,610 | ||||
Brass No. 10, Ser. 10-A, Cl. A1 | 0.67 | 4/16/2069 | 354,524 | b | 342,190 | ||||
British American Tobacco, Sub. Notes | EUR | 3.00 | 12/27/2026 | 700,000 | d | 635,305 | |||
Gemgarto, Ser. 2021-1A, Cl. A, 3 Month SONIO +.59% | GBP | 0.87 | 12/16/2067 | 761,979 | b,c | 956,934 | |||
Lanark Master Issuer, Ser. 2020-1A, Cl. 2A, 3 Month SONIO +.57% | GBP | 0.75 | 12/22/2069 | 768,750 | b,c | 968,918 | |||
MARB BondCo, Gtd. Bonds | 3.95 | 1/29/2031 | 225,000 | b | 187,310 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity Date | Principal Amount ($) | a | Value ($) | ||||
Bonds and Notes - 97.8% (continued) | |||||||||
United Kingdom - 8.3% (continued) | |||||||||
Paragon Mortgages, Ser. 2025, Cl. B, 3 Month SONIO +1.07% | GBP | 1.64 | 5/15/2050 | 250,000 | c | 313,736 | |||
Penarth Master Issuer, Ser. 2019-1A, Cl. A2, 1 Month SONIO +.70% | GBP | 1.34 | 7/18/2024 | 1,180,000 | b,c | 1,484,951 | |||
Tower Bridge Funding, Ser. 2021-2, CI. A, 3 Month SONIO +.78% | GBP | 0.95 | 11/20/2063 | 609,653 | c | 764,920 | |||
United Kingdom, Bonds | GBP | 0.38 | 10/22/2026 | 2,200,000 | 2,607,091 | ||||
United Kingdom, Bonds | GBP | 0.63 | 10/22/2050 | 3,845,000 | 3,385,829 | ||||
United Kingdom, Bonds | GBP | 1.00 | 1/31/2032 | 4,970,000 | 5,736,747 | ||||
United Kingdom, Bonds | GBP | 1.50 | 7/22/2047 | 3,000,000 | 3,345,094 | ||||
21,100,635 | |||||||||
United States - 13.3% | |||||||||
Air Lease, Sr. Unscd. Notes | 2.88 | 1/15/2026 | 600,000 | 561,926 | |||||
Ally Financial, Jr. Sub. Notes, Ser. B | 4.70 | 5/15/2026 | 800,000 | d | 693,300 | ||||
Americredit Automobile Receivables Trust, Ser. 2022-1, CI. A2 | 2.05 | 1/20/2026 | 310,000 | 308,583 | |||||
Arbor Multifamily Mortgage Securities Trust, Ser. 2021-MF3, CI. A5 | 2.57 | 10/15/2054 | 420,000 | b | 370,771 | ||||
BX Commercial Mortgage Trust, Ser. 2021-ACNT, Cl. A, 1 Month LIBOR +.85% | 1.41 | 11/15/2038 | 1,185,000 | b,c | 1,163,219 | ||||
CHC Commercial Mortgage Trust, Ser. 2019-CHC, Cl. B, 1 Month LIBOR +1.50% | 2.05 | 6/15/2034 | 868,660 | b,c | 850,144 | ||||
Cheniere Energy, Sr. Scd. Notes | 4.63 | 10/15/2028 | 575,000 | 557,043 | |||||
Cheniere Energy Partners, Gtd. Notes | 4.00 | 3/1/2031 | 725,000 | 657,329 | |||||
CPS Auto Receivables Trust, Ser. 2021-D, Cl. B | 1.09 | 10/15/2027 | 1,280,000 | b | 1,233,494 | ||||
DataBank Issuer, Ser. 2021-1A, Cl. A2 | 2.06 | 2/27/2051 | 875,000 | b | 802,532 | ||||
DataBank Issuer, Ser. 2021-2A, CI. A2 | 2.40 | 10/25/2051 | 870,000 | b | 800,022 | ||||
Energy Transfer, Jr. Sub. Bonds, Ser. A | 6.25 | 2/15/2023 | 680,000 | d,e | 578,850 | ||||
Energy Transfer, Jr. Sub. Bonds, Ser. F | 6.75 | 5/15/2025 | 260,000 | d | 250,900 | ||||
Energy Transfer, Sr. Unscd. Notes | 4.00 | 10/1/2027 | 380,000 | 368,223 | |||||
EQT, Sr. Unscd. Notes | 3.13 | 5/15/2026 | 100,000 | b | 94,394 | ||||
Exeter Automobile Receivables Trust, Ser. 2021-2A, Cl. C | 0.98 | 6/15/2026 | 675,000 | 651,626 | |||||
Federal Agricultural Mortgage Corporation Mortgage Trust, Ser. 2021-1, CI. A | 2.18 | 1/25/2051 | 669,755 | b | 601,328 |
10
Description | Coupon | Maturity Date | Principal Amount ($) | a | Value ($) | ||||
Bonds and Notes - 97.8% (continued) | |||||||||
United States - 13.3% (continued) | |||||||||
Federal Home Loan Mortgage Corp. Multifamily Structured Credit Risk, Ser. 2021-MN1, Cl. M1, 1 Month SOFR +2.00% | 2.29 | 1/25/2051 | 236,793 | b,c,f | 230,259 | ||||
Fidelity National Information Services, Sr. Unscd. Notes | EUR | 1.50 | 5/21/2027 | 196,000 | 200,909 | ||||
Ford Motor, Sr. Unscd. Notes | 3.25 | 2/12/2032 | 500,000 | 407,168 | |||||
Ford Motor, Sr. Unscd. Notes | 4.75 | 1/15/2043 | 625,000 | 504,334 | |||||
HCA, Gtd. Notes | 3.50 | 9/1/2030 | 348,000 | 312,248 | |||||
HCA, Gtd. Notes | 5.88 | 2/1/2029 | 435,000 | 453,742 | |||||
Invitation Homes Operating Partnership, Gtd. Notes | 4.15 | 4/15/2032 | 1,471,000 | 1,407,241 | |||||
Kraft Heinz Foods, Gtd. Notes | 4.88 | 10/1/2049 | 255,000 | 237,888 | |||||
Level 3 Financing, Gtd. Notes | 4.25 | 7/1/2028 | 287,000 | b | 242,991 | ||||
MPT Operating Partnership, Gtd. Bonds | EUR | 0.99 | 10/15/2026 | 575,000 | 539,434 | ||||
Netflix, Sr. Unscd. Notes | 4.88 | 4/15/2028 | 1,157,000 | 1,134,346 | |||||
New Economy Assets Phase 1 Sponsor, Ser. 2021-1, Cl. A1 | 1.91 | 10/20/2061 | 1,355,000 | b | 1,217,783 | ||||
Rocket Mortgage, Gtd. Notes | 3.63 | 3/1/2029 | 775,000 | b | 663,652 | ||||
Santander Drive Auto Receivables Trust, Ser. 2021-4, CI. C | 1.26 | 2/16/2027 | 620,000 | 588,020 | |||||
SBA Tower Trust, Asset Backed Notes | 2.59 | 10/15/2031 | 695,000 | b | 606,562 | ||||
SLM, Sr. Unscd. Notes | 4.20 | 10/29/2025 | 260,000 | 254,280 | |||||
Stellantis Finance US, Gtd. Notes | 2.69 | 9/15/2031 | 650,000 | b | 538,120 | ||||
The Southern Company, Jr. Sub. Notes | EUR | 1.88 | 9/15/2081 | 625,000 | 561,274 | ||||
U.S. Treasury Notes | 1.88 | 2/28/2029 | 11,550,000 | 10,788,422 | |||||
VICI Properties, Gtd. Notes | 3.88 | 2/15/2029 | 320,000 | 305,600 | |||||
VICI Properties, Gtd. Notes | 5.75 | 2/1/2027 | 775,000 | 785,153 | |||||
Wells Fargo Commercial Mortgage Trust, Ser. 2021-SAVE, Cl. A, 1 Month LIBOR +1.15% | 1.70 | 2/15/2040 | 568,139 | b,c | 560,713 | ||||
Western Midstream Operating, Sr. Unscd. Notes | 4.55 | 2/1/2030 | 410,000 | 377,227 | |||||
Western Midstream Operating, Sr. Unscd. Notes | 4.65 | 7/1/2026 | 465,000 | 459,178 | |||||
33,920,228 | |||||||||
Total Bonds and Notes | 249,956,671 |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description /Number of Contracts/Counterparty | Exercise | Expiration Date | Notional Amount ($) | a | Value ($) | ||||
Options Purchased - .2% | |||||||||
Call Options - .2% | |||||||||
Australian Dollar, Contracts 1,439,000 Goldman Sachs | 0.73 | 5/2/2022 | 1,439,000 | 46,221 | |||||
Australian Dollar, Contracts 1,341,000 Goldman Sachs | 0.73 | 5/19/2022 | 1,341,000 | 42,445 | |||||
Australian Dollar, Contracts 1,439,000 Goldman Sachs | 0.74 | 5/2/2022 | 1,439,000 | 66,268 | |||||
Brazilian Real, Contracts 959,000 Goldman Sachs | 5.00 | 6/15/2022 | 959,000 | 29,594 | |||||
Euro, Contracts 1,439,000 Goldman Sachs | 1.10 | 5/2/2022 | 1,439,000 | 50,405 | |||||
Euro, Contracts 1,303,000 Barclays Capital | EUR | 1.10 | 5/5/2022 | 1,303,000 | 32 | ||||
Euro, Contracts 1,303,000 Goldman Sachs | EUR | 1.12 | 5/5/2022 | 1,303,000 | 4 | ||||
Mexican Peso, Contracts 1,393,000 Goldman Sachs | 21.00 | 6/9/2022 | 1,393,000 | 12,397 | |||||
New Zealand Dollar Cross Currency, Contracts 1,303,000 Goldman Sachs | EUR | 1.57 | 5/5/2022 | 1,303,000 | 52,659 | ||||
New Zealand Dollar Cross Currency, Contracts 1,303,000 Barclays Capital | EUR | 1.60 | 5/5/2022 | 1,303,000 | 28,194 | ||||
Pound Sterling Cross Currency, Contracts 1,275,000 Goldman Sachs | EUR | 0.84 | 5/11/2022 | 1,275,000 | 6,748 | ||||
Pound Sterling Cross Currency, Contracts 1,275,000 Goldman Sachs | EUR | 0.85 | 5/11/2022 | 1,275,000 | 2,633 | ||||
Swaption Receiver Markit CDX North America Investment Grade Index Series 38 , Payer 3 Month Fixed Rate of 1.00% terminating on 06/20/2027, Contracts 11,600,000 Goldman Sachs | 0.80 | 7/20/2022 | 11,600,000 | g | 32,442 | ||||
Swaption Receiver Markit CDX North America Investment Grade Index Series 38 , Payer 3 Month Fixed Rate of 1.00% terminating on 06/20/2027, Contracts 11,800,000 Goldman Sachs | 0.78 | 7/20/2022 | 11,800,000 | g | 27,184 | ||||
Swaption Receiver Markit iTraxx Europe Index Series 37 , Payer 3 Month Fixed Rate of 1.00% terminating on 06/20/2027, Contracts 10,700,000 Citigroup | EUR | 0.88 | 7/20/2022 | 10,700,000 | g | 37,122 |
12
Description /Number of Contracts/Counterparty | Exercise | Expiration Date | Notional Amount ($) | a | Value ($) | ||||
Options Purchased - .2% (continued) | |||||||||
Call Options - .2% (continued) | |||||||||
Swaption Receiver Markit iTraxx Europe Index Series 37 , Payer 3 Month Fixed Rate of 1.00% terminating on 06/20/2027, Contracts 10,800,000 Citigroup | EUR | 0.80 | 7/20/2022 | 10,800,000 | g | 16,783 | |||
Taiwan Dollar, Contracts 1,233,000 Barclays Capital | 29.42 | 5/16/2022 | 1,233,000 | 7,105 | |||||
458,236 | |||||||||
Put Options - .0% | |||||||||
Australian Dollar, Contracts 1,341,000 Barclays Capital | 0.75 | 5/19/2022 | 1,341,000 | 585 | |||||
Australian Dollar, Contracts 1,341,000 Goldman Sachs | 0.76 | 5/19/2022 | 1,341,000 | 224 | |||||
Australian Dollar, Contracts 1,439,000 Goldman Sachs | 0.76 | 5/2/2022 | 1,439,000 | 0 | |||||
Brazilian Real, Contracts 959,000 Barclays Capital | 4.63 | 6/15/2022 | 959,000 | 3,956 | |||||
Brazilian Real, Contracts 959,000 Goldman Sachs | 4.40 | 6/15/2022 | 959,000 | 862 | |||||
Euro, Contracts 1,439,000 Goldman Sachs | 1.11 | 5/2/2022 | 1,439,000 | 0 | |||||
Euro, Contracts 1,439,000 Goldman Sachs | 1.13 | 5/2/2022 | 1,439,000 | 0 | |||||
Euro, Contracts 1,303,000 Goldman Sachs | EUR | 1.08 | 5/5/2022 | 1,303,000 | 30,129 | ||||
Mexican Peso, Contracts 1,393,000 Barclays Capital | 20.12 | 6/9/2022 | 1,393,000 | 10,611 | |||||
Mexican Peso, Contracts 1,393,000 Goldman Sachs | 19.60 | 6/9/2022 | 1,393,000 | 2,961 | |||||
New Zealand Dollar, Contracts 1,534,000 Goldman Sachs | 0.70 | 5/5/2022 | 1,534,000 | 2 | |||||
New Zealand Dollar Cross Currency, Contracts 1,371,000 Barclays Capital | EUR | 1.54 | 5/5/2022 | 1,371,000 | 7 | ||||
Pound Sterling Cross Currency, Contracts 1,275,000 Goldman Sachs | EUR | 0.83 | 5/11/2022 | 1,275,000 | 1,698 | ||||
Swedish Krona, Contracts 1,534,000 Barclays Capital | 9.35 | 5/5/2022 | 1,534,000 | 109 | |||||
Taiwan Dollar, Contracts 1,233,000 Barclays Capital | 28.34 | 5/16/2022 | 1,233,000 | 338 | |||||
Taiwan Dollar, Contracts 1,233,000 Goldman Sachs | 28.75 | 5/16/2022 | 1,233,000 | 1,169 | |||||
52,651 | |||||||||
Total Options Purchased | 510,887 |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | 1-Day | Shares | Value ($) | ||||||
Investment Companies - .7% | |||||||||
Registered Investment Companies - .7% | |||||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 0.38 | 1,818,971 | h | 1,818,971 | |||||
Total Investments (cost $284,509,430) | 98.7% | 252,286,529 | |||||||
Cash and Receivables (Net) | 1.3% | 3,422,274 | |||||||
Net Assets | 100.0% | 255,708,803 |
LIBOR—London Interbank Offered Rate
SOFR—Secured Overnight Financing Rate
SONIA—Sterling Overnight Index Average
AUD—Australian Dollar
CAD—Canadian Dollar
CNY—Chinese Yuan Renminbi
EUR—Euro
GBP—British Pound
JPY—Japanese Yen
MXN—Mexican Peso
MYR—Malaysian Ringgit
SGD—Singapore Dollar
ZAR—South African Rand
a Amount stated in U.S. Dollars unless otherwise noted above.
b Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2022, these securities were valued at $80,464,144 or 31.47% of net assets.
c Variable rate security—interest rate resets periodically and rate shown is the interest rate in effect at period end. Security description also includes the reference rate and spread if published and available.
d Security is a perpetual bond with no specified maturity date. Maturity date shown is next reset date of the bond.
e Security, or portion thereof, on loan. At April 30, 2022, the value of the fund’s securities on loan was $578,850 and the value of the collateral was $586,249, consisting of U.S. Government & Agency securities. In addition, the value of collateral may include pending sales that are also on loan.
f The Federal Housing Finance Agency (“FHFA”) placed the Federal Home Loan Mortgage Corporation and Federal National Mortgage Association into conservatorship with FHFA as the conservator. As such, the FHFA oversees the continuing affairs of these companies.
g Exercise price is referenced as basis points.
h Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
14
Portfolio Summary (Unaudited) † | Value (%) |
Foreign Governmental | 70.0 |
U.S. Treasury Securities | 4.2 |
Asset-Backed Certificates/Auto Receivables | 2.8 |
Commercial Mortgage Pass-Through Certificates | 2.5 |
Diversified Financials | 2.4 |
Energy | 2.4 |
Real Estate | 1.9 |
Collateralized Loan Obligations Debt | 1.8 |
Asset-Backed Certificates | 1.8 |
Utilities | 1.0 |
Internet Software & Services | .7 |
Supranational Bank | .7 |
Investment Companies | .7 |
Chemicals | .6 |
Asset-Backed Certificates/Credit Cards | .6 |
Automobiles & Components | .6 |
Telecommunication Services | .5 |
Banks | .5 |
Food Products | .4 |
Health Care | .4 |
Agriculture | .4 |
Beverage Products | .4 |
Retailing | .3 |
Metals & Mining | .3 |
U.S. Government Agencies Collateralized Mortgage Obligations | .2 |
Aerospace & Defense | .2 |
Options Purchased | .2 |
U.S. Government Agencies Collateralized Municipal-Backed Securities | .1 |
Information Technology | .1 |
98.7 |
† Based on net assets.
See notes to financial statements.
Affiliated Issuers | ||||||
Description | Value ($) 10/31/2021 | Purchases ($)† | Sales ($) | Value ($) 4/30/2022 | Dividends/ | |
Registered Investment Companies - .7% | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares - .7% | 506,878 | 75,728,808 | (74,416,715) | 1,818,971 | 3,282 |
15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Value ($) 10/31/2021 | Purchases ($)† | Sales ($) | Value ($) 4/30/2022 | Dividends/ | |
Investment of Cash Collateral for Securities Loaned - .0% | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares - .0% | 3,000,950 | 10,775,601 | (13,776,551) | - | 5,285 | †† |
Total - .7% | 3,507,828 | 86,504,409 | (88,193,266) | 1,818,971 | 8,567 |
† Includes reinvested dividends/distributions.
†† Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
See notes to financial statements.
Futures | ||||||
Description | Number of | Expiration | Notional | Market | Unrealized Appreciation (Depreciation) ($) | |
Futures Long | ||||||
Australian 10 Year Bond | 173 | 6/15/2022 | 16,075,394a | 15,173,995 | (901,399) | |
Euro-Bobl | 112 | 6/8/2022 | 15,103,939a | 15,026,877 | (77,062) | |
Euro-Schatz | 130 | 6/8/2022 | 15,166,611a | 15,105,671 | (60,940) | |
U.S. Treasury 10 Year Notes | 3 | 6/21/2022 | 360,802 | 357,469 | (3,333) | |
U.S. Treasury 2 Year Notes | 60 | 6/30/2022 | 12,678,198 | 12,648,750 | (29,448) | |
U.S. Treasury 5 Year Notes | 146 | 6/30/2022 | 16,486,363 | 16,450,094 | (36,269) | |
Futures Short | ||||||
Canadian 10 Year Bond | 46 | 6/21/2022 | 4,878,402a | 4,524,625 | 353,777 | |
Euro 30 Year Bond | 12 | 6/8/2022 | 2,200,861a | 2,164,504 | 36,357 | |
Euro BTP Italian Government Bond | 21 | 6/8/2022 | 3,161,200a | 2,887,546 | 273,654 | |
Euro-Bond | 61 | 6/8/2022 | 9,965,680a | 9,883,816 | 81,864 | |
Japanese 10 Year Bond | 9 | 6/13/2022 | 10,398,181a | 10,376,267 | 21,914 | |
Long Gilt | 72 | 6/28/2022 | 10,659,010a | 10,723,131 | (64,121) | |
U.S. Treasury Ultra Long Bond | 13 | 6/21/2022 | 2,208,352 | 2,085,688 | 122,664 | |
Ultra 10 Year U.S. Treasury Notes | 8 | 6/21/2022 | 1,055,290 | 1,032,000 | 23,290 | |
Gross Unrealized Appreciation | 913,520 | |||||
Gross Unrealized Depreciation | (1,172,572) |
a Notional amounts in foreign currency have been converted to USD using relevant foreign exchange rates.
See notes to financial statements.
16
Options Written | ||||||
Description/ Contracts/ Counterparties | Exercise Price | Expiration Date | Notional Amount | a | Value ($) | |
Call Options: | ||||||
Swaption Receiver Markit iTraxx Europe Index Series 37 , Payer 3 Month Fixed Rate of 1.00% terminating on 06/20/2027, | 0.80 | 5/18/2022 | 2,700,000 | bEUR | (837) | |
Australian Dollar, | 0.73 | 5/19/2022 | 1,341,000 | (42,445) | ||
Australian Dollar, | 0.73 | 5/2/2022 | 1,439,000 | (46,222) | ||
Australian Dollar, | 0.74 | 5/2/2022 | 1,439,000 | (66,268) | ||
Brazilian Real, | 5.00 | 6/15/2022 | 959,000 | (29,594) | ||
Chinese Yuan, | 6.63 | 5/24/2022 | 670,000 | (6,087) | ||
Euro, | 1.10 | 5/2/2022 | 1,439,000 | (50,405) | ||
Euro, | 1.10 | 5/5/2022 | 1,303,000 | EUR | (32) | |
Euro, | 1.12 | 5/5/2022 | 1,303,000 | EUR | (4) | |
Mexican Peso, | 21.00 | 6/9/2022 | 1,393,000 | (12,397) | ||
New Zealand Dollar Cross Currency, | 1.57 | 5/5/2022 | 1,303,000 | EUR | (52,658) | |
New Zealand Dollar Cross Currency, | 1.60 | 5/5/2022 | 1,303,000 | EUR | (28,194) | |
Pound Sterling Cross Currency, | 0.84 | 5/11/2022 | 1,275,000 | EUR | (6,748) |
17
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Options Written | ||||||
Description/ Contracts/ Counterparties | Exercise Price | Expiration Date | Notional Amount | a | Value ($) | |
Call Options:(continued) | ||||||
Pound Sterling Cross Currency, | 0.85 | 5/11/2022 | 1,275,000 | EUR | (2,633) | |
Taiwan Dollar, | 29.42 | 5/16/2022 | 1,233,000 | (7,105) | ||
U.S Treasury 10 Year June Future, | 121.00 | 5/20/2022 | 4,300,000 | (13,438) | ||
U.S Treasury 5 Year June Future, | 114.00 | 5/20/2022 | 14,500,000 | (23,789) | ||
Put Options: | ||||||
Swaption Payer Markit CDX North America Investment Grade Index Series 38 , Receiver 3 Month Fixed Rate of 1.00% terminating on 06/20/2027, | 0.98 | 7/20/2022 | 11,800,000 | b | (45,367) | |
Swaption Payer Markit CDX North America Investment Grade Index Series 38 , Receiver 3 Month Fixed Rate of 1.00% terminating on 06/20/2027, | 1.00 | 7/20/2022 | 11,600,000 | b | (42,373) | |
Swaption Payer Markit iTraxx Europe Index Series 37 , Receiver 3 Month Fixed Rate of 1.00% terminating on 06/20/2027, | 0.80 | 5/18/2022 | 2,700,000 | bEUR | (16,417) | |
Swaption Payer Markit iTraxx Europe Index Series 37 , Receiver 3 Month Fixed Rate of 1.00% terminating on 06/20/2027, | 1.00 | 7/20/2022 | 10,800,000 | bEUR | (50,644) | |
Swaption Payer Markit iTraxx Europe Index Series 37 , Receiver 3 Month Fixed Rate of 1.00% terminating on 06/20/2027, | 1.08 | 7/20/2022 | 10,700,000 | bEUR | (39,981) |
18
Options Written | ||||||
Description/ Contracts/ Counterparties | Exercise Price | Expiration Date | Notional Amount | a | Value ($) | |
Put Options:(continued) | ||||||
Australian Dollar, | 0.75 | 5/19/2022 | 1,341,000 | (585) | ||
Australian Dollar, | 0.76 | 5/19/2022 | 1,341,000 | (224) | ||
Australian Dollar, | 0.76 | 5/2/2022 | 1,439,000 | - | ||
Brazilian Real, | 4.40 | 6/15/2022 | 959,000 | (862) | ||
Brazilian Real, | 4.63 | 6/15/2022 | 959,000 | (3,956) | ||
Euro, | 1.08 | 5/5/2022 | 1,303,000 | EUR | (30,129) | |
Euro, | 1.11 | 5/2/2022 | 1,439,000 | - | ||
Euro, | 1.13 | 5/2/2022 | 1,439,000 | - | ||
Mexican Peso, | 19.60 | 6/9/2022 | 1,393,000 | (2,961) | ||
Mexican Peso, | 20.12 | 6/9/2022 | 1,393,000 | (10,611) | ||
New Zealand Dollar, | 0.70 | 5/5/2022 | 1,534,000 | (2) | ||
New Zealand Dollar Cross Currency, | 1.54 | 5/5/2022 | 1,303,000 | EUR | (7) | |
Pound Sterling Cross Currency, | 0.83 | 5/11/2022 | 1,275,000 | EUR | (1,698) | |
Swedish Krona, | 9.10 | 5/5/2022 | 1,534,000 | (4) | ||
Taiwan Dollar, | 28.34 | 5/16/2022 | 1,233,000 | (338) |
19
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Options Written | ||||||
Description/ Contracts/ Counterparties | Exercise Price | Expiration Date | Notional Amount | a | Value ($) | |
Put Options:(continued) | ||||||
Taiwan Dollar, | 28.75 | 5/16/2022 | 1,233,000 | (1,169) | ||
U.S Treasury 10 Year June Future, | 118.50 | 5/20/2022 | 4,300,000 | (29,562) | ||
U.S Treasury 5 Year June Future, | 112.00 | 5/20/2022 | 9,900,000 | (36,351) | ||
U.S Treasury 5 Year June Future, | 113.50 | 5/20/2022 | 4,800,000 | (53,625) | ||
Total Options Written (premiums received $543,739) | (755,722) |
a Notional amount stated in U.S. Dollars unless otherwise indicated.
b Exercise price is referenced as basis points.
EUR—Euro
See notes to financial statements.
Forward Foreign Currency Exchange Contracts | |||||
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation) ($) |
Barclays Capital | |||||
Euro | 744,000 | British Pound | 623,817 | 5/10/2022 | 829 |
United States Dollar | 221,643 | Malaysian Ringgit | 935,000 | 5/10/2022 | 6,917 |
United States Dollar | 516,000 | Japanese Yen | 63,937,606 | 5/10/2022 | 23,146 |
British Pound | 6,506,657 | United States Dollar | 8,538,411 | 5/10/2022 | (356,742) |
United States Dollar | 5,995,352 | British Pound | 4,600,000 | 5/10/2022 | 211,171 |
Chinese Yuan Renminbi | 24,891,512 | United States Dollar | 3,881,674 | 5/10/2022 | (138,351) |
South Korean Won | 7,308,879,000 | United States Dollar | 5,987,351 | 5/10/2022 | (168,335) |
Hungarian Forint | 129,034,000 | United States Dollar | 384,617 | 5/10/2022 | (25,260) |
Czech Koruna | 14,634,007 | United States Dollar | 659,936 | 5/10/2022 | (33,392) |
Indian Rupee | 113,140,000 | United States Dollar | 1,482,394 | 5/10/2022 | (4,240) |
United States Dollar | 452,958 | Indian Rupee | 34,798,000 | 5/10/2022 | (1,672) |
Euro | 9,613,008 | United States Dollar | 10,566,826 | 5/10/2022 | (421,019) |
20
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation) ($) |
Barclays Capital(continued) | |||||
United States Dollar | 1,902,563 | Euro | 1,756,086 | 5/10/2022 | 49,146 |
Indonesian Rupiah | 31,056,789,000 | United States Dollar | 2,159,421 | 5/10/2022 | (18,661) |
United States Dollar | 2,144,806 | Indonesian Rupiah | 31,056,789,000 | 5/10/2022 | 4,046 |
Chilean Peso | 212,617,000 | United States Dollar | 269,986 | 5/10/2022 | (21,145) |
New Zealand Dollar | 1,435,162 | United States Dollar | 995,153 | 5/10/2022 | (68,587) |
New Zealand Dollar | 1,118,591 | Norwegian Krone | 6,781,094 | 5/10/2022 | (796) |
United States Dollar | 322,000 | Canadian Dollar | 403,623 | 5/10/2022 | 7,822 |
Citigroup | |||||
United States Dollar | 268,000 | Polish Zloty | 1,149,850 | 5/10/2022 | 8,918 |
United States Dollar | 5,415,556 | Mexican Peso | 108,003,874 | 5/10/2022 | 134,680 |
United States Dollar | 1,966,634 | South African Rand | 28,921,202 | 5/10/2022 | 137,618 |
Australian Dollar | 8,382,715 | United States Dollar | 6,301,162 | 5/10/2022 | (377,284) |
United States Dollar | 636,132 | South Korean Won | 779,370,000 | 5/10/2022 | 15,631 |
Chinese Yuan Renminbi | 2,888,844 | United States Dollar | 436,000 | 5/10/2022 | (1,560) |
Goldman Sachs | |||||
Israeli Shekel | 2,380,000 | United States Dollar | 740,269 | 5/10/2022 | (27,049) |
Indonesian Rupiah | 31,056,789,000 | United States Dollar | 2,140,519 | 6/15/2022 | (4,488) |
Euro | 119,795 | Chinese Yuan Renminbi | 845,468 | 5/10/2022 | (711) |
Indonesian Rupiah | 31,056,789,000 | United States Dollar | 2,144,806 | 5/10/2022 | (4,046) |
United States Dollar | 2,146,882 | Indonesian Rupiah | 31,056,789,000 | 5/10/2022 | 6,122 |
New Zealand Dollar | 987,404 | Euro | 629,000 | 5/10/2022 | (26,377) |
Euro | 1,824,000 | United States Dollar | 1,967,694 | 5/10/2022 | (42,599) |
United States Dollar | 3,430,075 | Euro | 3,158,690 | 5/10/2022 | 96,316 |
Chinese Yuan Renminbi | 18,245,942 | United States Dollar | 2,838,000 | 5/10/2022 | (94,075) |
21
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation) ($) |
Goldman Sachs(continued) | |||||
United States Dollar | 335,000 | Chinese Yuan Renminbi | 2,190,958 | 5/10/2022 | 5,512 |
New Zealand Dollar | 2,057,605 | United States Dollar | 1,413,000 | 5/10/2022 | (84,574) |
United States Dollar | 1,413,000 | New Zealand Dollar | 2,083,519 | 5/10/2022 | 67,844 |
United States Dollar | 5,126,000 | Japanese Yen | 629,818,804 | 5/10/2022 | 271,128 |
Thai Baht | 60,850,000 | United States Dollar | 1,817,503 | 5/10/2022 | (40,684) |
HSBC | |||||
Australian Dollar | 617,871 | Euro | 420,113 | 5/10/2022 | (6,762) |
United States Dollar | 905,936 | Indian Rupee | 69,594,000 | 5/10/2022 | (3,297) |
Chinese Yuan Renminbi | 154,923,142 | United States Dollar | 24,280,721 | 5/10/2022 | (768,672) |
British Pound | 520,592 | Euro | 629,000 | 5/10/2022 | (9,254) |
Swiss Franc | 2,325,770 | United States Dollar | 2,515,340 | 5/10/2022 | (123,225) |
Euro | 1,317,514 | New Zealand Dollar | 2,100,285 | 5/10/2022 | 34,556 |
New Zealand Dollar | 1,058,370 | Euro | 674,000 | 5/10/2022 | (28,054) |
United States Dollar | 1,085,000 | Canadian Dollar | 1,357,231 | 5/10/2022 | 28,540 |
Japanese Yen | 21,823,723 | Euro | 161,052 | 5/10/2022 | (1,753) |
United States Dollar | 4,184,898 | Singapore Dollar | 5,680,000 | 5/10/2022 | 77,891 |
Australian Dollar | 1,000,000 | United States Dollar | 708,515 | 5/10/2022 | (1,837) |
Swedish Krona | 20,737,272 | United States Dollar | 2,216,105 | 5/10/2022 | (103,706) |
Chinese Yuan Renminbi | 8,710,000 | United States Dollar | 1,361,884 | 5/10/2022 | (52,026) |
United States Dollar | 2,746,000 | Chinese Yuan Renminbi | 17,940,270 | 5/10/2022 | 48,043 |
Norwegian Krone | 6,727,701 | New Zealand Dollar | 1,110,000 | 5/10/2022 | 650 |
United States Dollar | 12,833,470 | Euro | 11,787,732 | 5/10/2022 | 392,405 |
Japanese Yen | 3,355,124,666 | United States Dollar | 27,364,313 | 5/10/2022 | (1,501,794) |
Colombian Peso | 1,969,000,000 | United States Dollar | 519,416 | 5/10/2022 | (22,871) |
J.P. Morgan Securities | |||||
British Pound | 1,049,158 | United States Dollar | 1,373,000 | 5/10/2022 | (53,757) |
22
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation) ($) |
J.P. Morgan Securities(continued) | |||||
United States Dollar | 2,705,000 | British Pound | 2,077,931 | 5/10/2022 | 92,146 |
Norwegian Krone | 5,040,000 | United States Dollar | 577,234 | 5/10/2022 | (39,886) |
Japanese Yen | 540,460,199 | United States Dollar | 4,376,000 | 5/10/2022 | (209,937) |
United States Dollar | 3,103,000 | Japanese Yen | 392,991,311 | 5/10/2022 | 73,680 |
United States Dollar | 386,174 | Thai Baht | 12,960,000 | 5/10/2022 | 7,742 |
Danish Krone | 7,000,000 | United States Dollar | 1,040,207 | 5/10/2022 | (47,061) |
Polish Zloty | 4,260,000 | United States Dollar | 1,009,724 | 5/10/2022 | (49,868) |
Australian Dollar | 380,181 | United States Dollar | 284,000 | 5/10/2022 | (15,334) |
Canadian Dollar | 1,450,368 | United States Dollar | 1,157,042 | 5/10/2022 | (28,085) |
United States Dollar | 4,281,160 | Canadian Dollar | 5,359,343 | 5/10/2022 | 109,481 |
United States Dollar | 6,714,000 | Chinese Yuan Renminbi | 42,925,975 | 5/10/2022 | 258,556 |
Euro | 6,282,472 | United States Dollar | 6,864,000 | 5/10/2022 | (233,323) |
United States Dollar | 3,062,990 | Euro | 2,835,037 | 5/10/2022 | 70,822 |
Gross Unrealized Appreciation | 2,241,358 | ||||
Gross Unrealized Depreciation | (5,262,149) |
See notes to financial statements.
Centrally Cleared Interest Rate Swaps | ||||
Received | Paid | Maturity Date | Notional | Unrealized Appreciation ($) |
USD - 3 Month LIBOR | USD Fixed at 0.97 | 6/28/2026 | 13,875,000 | 1,073,560 |
USD - 3 Month LIBOR | USD Fixed at 1.63 | 4/16/2031 | 36,925,000 | 3,736,634 |
Gross Unrealized Appreciation | 4,810,194 |
USD—United States Dollar
See notes to financial statements.
23
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Centrally Cleared Credit Default Swaps | |||||
Reference | Maturity | Notional | Market | Upfront | Unrealized (Depreciation)($) |
Purchased Contracts:1 | |||||
Markit CDX North America High Yield Index Series 38Paid Fixed Rate of 5.00% 3 Month | 6/20/2027 | 11,920,000 | (245,827) | (187,734) | (58,093) |
Gross Unrealized Depreciation | (58,093) |
1 If the fund is a buyer of protection and a credit event occurs, as defined under the terms of the swap agreement, the fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the reference obligation or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the reference obligation.
See notes to financial statements.
24
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2022 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 282,690,458 |
| 250,467,558 |
| ||
Affiliated issuers |
| 1,818,971 |
| 1,818,971 |
| |
Cash denominated in foreign currency |
|
| 3,492,863 |
| 3,473,303 |
|
Cash collateral held by broker—Note 4 |
| 7,560,013 |
| |||
Unrealized appreciation on forward foreign |
| 2,241,358 |
| |||
Dividends, interest and securities lending income receivable |
| 1,514,215 |
| |||
Receivable for shares of Beneficial Interest subscribed |
| 217,392 |
| |||
Receivable for swap variation margin—Note 4 |
| 171,212 |
| |||
Receivable for investment securities sold |
| 83,076 |
| |||
Tax reclaim receivable—Note 1(b) |
| 3,315 |
| |||
Prepaid expenses |
|
|
|
| 41,843 |
|
|
|
|
|
| 267,592,256 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 120,151 |
| |||
Cash overdraft due to Custodian |
|
|
|
| 776,394 |
|
Unrealized depreciation on forward foreign |
| 5,262,149 |
| |||
Payable for investment securities purchased |
| 4,217,370 |
| |||
Outstanding options written, at value |
| 755,722 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 576,113 |
| |||
Payable for futures variation margin—Note 4 |
| 8,665 |
| |||
Trustees’ fees and expenses payable |
| 8,100 |
| |||
Interest payable—Note 2 |
| 157 |
| |||
Other accrued expenses |
|
|
|
| 158,632 |
|
|
|
|
|
| 11,883,453 |
|
Net Assets ($) |
|
| 255,708,803 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 463,434,740 |
|
Total distributable earnings (loss) |
|
|
|
| (207,725,937) |
|
Net Assets ($) |
|
| 255,708,803 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 31,030,523 | 2,157,253 | 186,405,757 | 36,115,270 |
|
Shares Outstanding | 2,421,454 | 175,525 | 14,273,654 | 2,760,191 |
|
Net Asset Value Per Share ($) | 12.81 | 12.29 | 13.06 | 13.08 |
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
|
25
STATEMENT OF OPERATIONS
Six Months Ended April 30, 2022 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Interest (net of $55,999 foreign taxes withheld at source) |
|
| 2,275,007 |
| ||
Dividends from affiliated issuers |
|
| 3,282 |
| ||
Income from securities lending—Note 1(c) |
|
| 5,285 |
| ||
Total Income |
|
| 2,283,574 |
| ||
Expenses: |
|
|
|
| ||
Management fee—Note 3(a) |
|
| 752,785 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 366,850 |
| ||
Professional fees |
|
| 53,522 |
| ||
Registration fees |
|
| 32,450 |
| ||
Custodian fees—Note 3(c) |
|
| 24,659 |
| ||
Prospectus and shareholders’ reports |
|
| 24,088 |
| ||
Trustees’ fees and expenses—Note 3(d) |
|
| 14,755 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 10,209 |
| ||
Distribution fees—Note 3(b) |
|
| 9,365 |
| ||
Loan commitment fees—Note 2 |
|
| 1,481 |
| ||
Interest expense—Note 2 |
|
| 157 |
| ||
Miscellaneous |
|
| 19,810 |
| ||
Total Expenses |
|
| 1,310,131 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (178,649) |
| ||
Net Expenses |
|
| 1,131,482 |
| ||
Net Investment Income |
|
| 1,152,092 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions | (12,156,767) |
| ||||
Net realized gain (loss) on futures | 2,616,913 |
| ||||
Net realized gain (loss) on options transactions | (10,385) |
| ||||
Net realized gain (loss) on forward foreign currency exchange contracts | (1,535,997) |
| ||||
Net realized gain (loss) on swap agreements | 256,445 |
| ||||
Net Realized Gain (Loss) |
|
| (10,829,791) |
| ||
Net change in unrealized appreciation (depreciation) on investments | (29,580,879) |
| ||||
Net change in unrealized appreciation (depreciation) on futures | 199,445 |
| ||||
Net change in unrealized appreciation (depreciation) on | (145,288) |
| ||||
Net change in unrealized appreciation (depreciation) on | (3,383,025) |
| ||||
Net change in unrealized appreciation (depreciation) on swap agreements | 5,139,334 |
| ||||
Net Change in Unrealized Appreciation (Depreciation) |
|
| (27,770,413) |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (38,600,204) |
| ||
Net (Decrease) in Net Assets Resulting from Operations |
| (37,448,112) |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
26
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Net investment income |
|
| 1,152,092 |
|
|
| 3,849,009 |
| |
Net realized gain (loss) on investments |
| (10,829,791) |
|
|
| 20,256,192 |
| ||
Net change in unrealized appreciation |
| (27,770,413) |
|
|
| (24,569,408) |
| ||
Net Increase (Decrease) in Net Assets | (37,448,112) |
|
|
| (464,207) |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (536,157) |
|
|
| (1,064,518) |
| |
Class C |
|
| (26,650) |
|
|
| (166,033) |
| |
Class I |
|
| (3,277,704) |
|
|
| (6,996,254) |
| |
Class Y |
|
| (663,868) |
|
|
| (1,841,023) |
| |
Total Distributions |
|
| (4,504,379) |
|
|
| (10,067,828) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 1,842,950 |
|
|
| 12,424,807 |
| |
Class C |
|
| 13,121 |
|
|
| 74,088 |
| |
Class I |
|
| 34,177,847 |
|
|
| 57,054,309 |
| |
Class Y |
|
| 2,926,046 |
|
|
| 11,304,272 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 491,834 |
|
|
| 960,971 |
| |
Class C |
|
| 23,557 |
|
|
| 158,251 |
| |
Class I |
|
| 2,826,155 |
|
|
| 6,113,196 |
| |
Class Y |
|
| 653,326 |
|
|
| 1,755,686 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (7,282,996) |
|
|
| (14,026,251) |
| |
Class C |
|
| (359,965) |
|
|
| (5,747,011) |
| |
Class I |
|
| (48,725,364) |
|
|
| (101,204,458) |
| |
Class Y |
|
| (7,915,272) |
|
|
| (37,258,624) |
| |
Increase (Decrease) in Net Assets | (21,328,761) |
|
|
| (68,390,764) |
| |||
Total Increase (Decrease) in Net Assets | (63,281,252) |
|
|
| (78,922,799) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 318,990,055 |
|
|
| 397,912,854 |
| |
End of Period |
|
| 255,708,803 |
|
|
| 318,990,055 |
|
27
STATEMENT OF CHANGES IN NET ASSETS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class Aa,b |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 129,311 |
|
|
| 801,549 |
| |
Shares issued for distributions reinvested |
|
| 33,682 |
|
|
| 60,783 |
| |
Shares redeemed |
|
| (518,374) |
|
|
| (907,597) |
| |
Net Increase (Decrease) in Shares Outstanding | (355,381) |
|
|
| (45,265) |
| |||
Class Cb |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 954 |
|
|
| 4,937 |
| |
Shares issued for distributions reinvested |
|
| 1,681 |
|
|
| 10,357 |
| |
Shares redeemed |
|
| (25,830) |
|
|
| (383,555) |
| |
Net Increase (Decrease) in Shares Outstanding | (23,195) |
|
|
| (368,261) |
| |||
Class Ia |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 2,336,559 |
|
|
| 3,617,074 |
| |
Shares issued for distributions reinvested |
|
| 190,013 |
|
|
| 380,363 |
| |
Shares redeemed |
|
| (3,408,695) |
|
|
| (6,415,981) |
| |
Net Increase (Decrease) in Shares Outstanding | (882,123) |
|
|
| (2,418,544) |
| |||
Class Y |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 199,834 |
|
|
| 714,046 |
| |
Shares issued for distributions reinvested |
|
| 43,856 |
|
|
| 109,005 |
| |
Shares redeemed |
|
| (555,184) |
|
|
| (2,377,596) |
| |
Net Increase (Decrease) in Shares Outstanding | (311,494) |
|
|
| (1,554,545) |
| |||
|
|
|
|
|
|
|
|
|
|
a | During the period ended April 30, 2022, 468 Class A shares representing $5,982 were exchanged for 459 Class I shares and during the period ended October 31, 2021, 1,292 Class A shares representing $19,238 were exchanged for 1,268 Class I shares. | ||||||||
b | During the period ended April 30, 2022, 520 Class C shares representing $7,182 were automatically converted to 500 Class A shares and during the period ended October 31, 2021, 3,984 Class C shares representing $59,788 were automatically converted to 3,833 Class A shares. | ||||||||
See notes to financial statements. |
28
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||
April 30, 2022 | Year Ended October 31, | |||||
Class A Shares | (Unaudited) | 2021 | 2020 | 2019 | 2018 | 2017 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 14.81 | 15.33 | 15.04 | 14.68 | 16.09 | 15.35 |
Investment Operations: | ||||||
Net investment incomea | .03 | .12 | .12 | .23 | .41 | .25 |
Net realized and unrealized | (1.83) | (.25) | .17b | .51 | (1.17) | .54 |
Total from Investment Operations | (1.80) | (.13) | .29 | .74 | (.76) | .79 |
Distributions: | ||||||
Dividends from | (.20) | (.39) | - | (.38) | (.65) | (.05) |
Net asset value, end of period | 12.81 | 14.81 | 15.33 | 15.04 | 14.68 | 16.09 |
Total Return (%)c | (12.28)d | (1.03) | 1.93 | 5.10 | (4.90) | 5.16 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.97e | 1.80 | 1.66 | 1.41 | 1.29 | 1.35 |
Ratio of net expenses | 1.02e | 1.02 | 1.02 | 1.02 | 1.02 | 1.35 |
Ratio of net investment income | .48e | .77 | .83 | 1.53 | 2.59 | 1.64 |
Portfolio Turnover Rate | 71.64d | 141.06 | 103.49 | 107.73 | 95.31 | 118.36 |
Net Assets, end of period ($ x 1,000) | 31,031 | 41,115 | 43,274 | 55,243 | 56,842 | 73,657 |
a Based on average shares outstanding.
b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the fund’s investments.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
See notes to financial statements.
29
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||
April 30, 2022 | Year Ended October 31, | |||||
Class C Shares | (Unaudited) | 2021 | 2020 | 2019 | 2018 | 2017 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 14.20 | 14.76 | 14.58 | 14.28 | 15.67 | 14.97 |
Investment Operations: | ||||||
Net investment income (loss)a | (.02) | .01 | .03 | .13 | .31 | .18 |
Net realized and unrealized | (1.75) | (.26) | .15b | .50 | (1.14) | .53 |
Total from Investment Operations | (1.77) | (.25) | .18 | .63 | (.83) | .71 |
Distributions: | ||||||
Dividends from | (.14) | (.31) | - | (.33) | (.56) | (.01) |
Net asset value, end of period | 12.29 | 14.20 | 14.76 | 14.58 | 14.28 | 15.67 |
Total Return (%)c | (12.65)d | (1.78) | 1.23 | 4.51 | (5.56) | 4.74 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.77e | 1.73 | 1.71 | 1.68 | 1.65 | 1.79 |
Ratio of net expenses | 1.77e | 1.73 | 1.71 | 1.68 | 1.65 | 1.79 |
Ratio of net investment income | (.24)e | .07 | .21 | .94 | 1.99 | 1.20 |
Portfolio Turnover Rate | 71.64d | 141.06 | 103.49 | 107.73 | 95.31 | 118.36 |
Net Assets, end of period ($ x 1,000) | 2,157 | 2,823 | 8,368 | 16,745 | 31,007 | 38,224 |
a Based on average shares outstanding.
b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the fund’s investments.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
See notes to financial statements.
30
Six Months Ended | |||||||
April 30, 2022 | Year Ended October 31, | ||||||
Class I Shares | (Unaudited) | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 15.09 | 15.59 | 15.24 | 14.85 | 16.28 | 15.48 | |
Investment Operations: | |||||||
Net investment incomea | .06 | .17 | .18 | .29 | .49 | .35 | |
Net realized and unrealized | (1.87) | (.26) | .17b | .50 | (1.18) | .54 | |
Total from Investment Operations | (1.81) | (.09) | .35 | .79 | (.69) | .89 | |
Distributions: | |||||||
Dividends from | (.22) | (.41) | - | (.40) | (.74) | (.09) | |
Net asset value, end of period | 13.06 | 15.09 | 15.59 | 15.24 | 14.85 | 16.28 | |
Total Return (%) | (12.18)c | (.71) | 2.30 | 5.49 | (4.53) | 5.73 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | .72d | .70 | .69 | .66 | .63 | .75 | |
Ratio of net expenses | .72d | .70 | .69 | .66 | .63 | .75 | |
Ratio of net investment income | .80d | 1.10 | 1.21 | 1.94 | 3.09 | 2.23 | |
Portfolio Turnover Rate | 71.64c | 141.06 | 103.49 | 107.73 | 95.31 | 118.36 | |
Net Assets, end of period ($ x 1,000) | 186,406 | 228,633 | 274,030 | 478,195 | 816,809 | 657,117 |
a Based on average shares outstanding.
b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the fund’s investments.
c Not annualized.
d Annualized.
See notes to financial statements.
31
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||
April 30, 2022 | Year Ended October 31, | ||||||
Class Y Shares | (Unaudited) | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | |||||||
Net asset value, beginning of period | 15.11 | 15.62 | 15.25 | 14.85 | 16.29 | 15.49 | |
Investment Operations: | |||||||
Net investment incomea | .06 | .19 | .19 | .30 | .50 | .37 | |
Net realized and unrealized | (1.87) | (.28) | .18b | .52 | (1.19) | .53 | |
Total from Investment Operations | (1.81) | (.09) | .37 | .82 | (.69) | .90 | |
Distributions: | |||||||
Dividends from | (.22) | (.42) | - | (.42) | (.75) | (.10) | |
Net asset value, end of period | 13.08 | 15.11 | 15.62 | 15.25 | 14.85 | 16.29 | |
Total Return (%) | (12.07)c | (.65) | 2.36 | 5.65 | (4.52) | 5.85 | |
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | .63d | .61 | .59 | .57 | .56 | .68 | |
Ratio of net expenses | .63d | .61 | .59 | .57 | .56 | .68 | |
Ratio of net investment income | .89d | 1.18 | 1.25 | 1.99 | 3.14 | 2.30 | |
Portfolio Turnover Rate | 71.64c | 141.06 | 103.49 | 107.73 | 95.31 | 118.36 | |
Net Assets, end of period ($ x 1,000) | 36,115 | 46,419 | 72,241 | 77,966 | 89,726 | 72,325 |
a Based on average shares outstanding.
b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the fund’s investments.
c Not annualized.
d Annualized.
See notes to financial statements.
32
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon International Bond Fund (the “fund”) is a separate non-diversified series of BNY Mellon Investment Funds III (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering four series, including the fund. The fund’s investment objective is to seek to maximize total return through capital appreciation and income. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Insight North America LLC (the “Sub-Adviser”) a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser, serves as the fund’s sub-adviser.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C, Class I and Class Y. Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class A shares bought without an initial sales charge as part of an investment of $1 million or more may be charged a contingent deferred sales charge (“CDSC”) of 1.00% if redeemed within one year. Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares eight years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including BNY Mellon and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
33
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The Trust accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Trust enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
34
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:
Registered investment companies that are not traded on an exchange are valued at their net asset value and are generally categorized within Level 1 of the fair value hierarchy.
Investments in debt securities, excluding short-term investments (other than U.S. Treasury Bills), futures, options and forward foreign currency exchange contracts (“forward contracts”) are valued each business day by one or more independent pricing services (each, a “Service”) approved by the Trust’s Board of Trustees (the “Board”). Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of a Service are valued at the mean between the quoted bid prices (as obtained by a Service from dealers in such securities) and asked prices (as calculated by a Service based upon its evaluation of the market for such securities). Securities are valued as determined by a Service, based on methods which include consideration of the following: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. These securities are generally categorized within Level 2 of the fair value hierarchy.
Each Service and independent valuation firm is engaged under the general oversight of the Board.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on
35
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward contracts are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy. Futures and options, which are traded on an exchange, are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day and are generally categorized within Level 1 of the fair value hierarchy. Options traded over-the-counter (“OTC”) are valued at the mean between the bid and asked price and are generally categorized within Level 2 of the fair value hierarchy. Investments in swap agreements are valued each business day by a Service. Swaps agreements are valued by a Service by using a swap pricing model which incorporates among other factors, default probabilities, recovery rates, credit curves of the underlying issuer and swap spreads on interest rates and are generally categorized within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of April 30, 2022 in valuing the fund’s investments:
Level 1-Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | Level 3-Significant Unobservable Inputs | Total | |||
Assets ($) | ||||||
Investments in Securities:† | ||||||
Asset-Backed Securities | - | 13,064,843 | - | 13,064,843 | ||
Collateralized Loan Obligations | - | 4,578,637 | - | 4,578,637 | ||
Commercial Mortgage-Backed | - | 6,291,545 | - | 6,291,545 | ||
Corporate Bonds | - | 35,340,053 | - | 35,340,053 | ||
Foreign Governmental | - | 179,061,584 | - | 179,061,584 |
36
Level 1-Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | Level 3-Significant Unobservable Inputs | Total | |||
Assets ($)(continued) | ||||||
Investments in Securities:†(continued) | ||||||
Investment Companies | 1,818,971 | - | - | 1,818,971 | ||
U.S. Government Agencies Collateralized Mortgage Obligations | - | 601,328 | - | 601,328 | ||
U.S. Government Agencies Collateralized Municipal-Backed Securities | - | 230,259 | - | 230,259 | ||
U.S. Treasury Securities | - | 10,788,422 | - | 10,788,422 | ||
Other Financial Instruments: | ||||||
Forward Foreign Currency Exchange Contracts†† | - | 2,241,358 | - | 2,241,358 | ||
Futures†† | 913,520 | - | - | 913,520 | ||
Options Purchased | - | 510,887 | - | 510,887 | ||
Swap Agreements†† | - | 4,810,194 | - | 4,810,194 | ||
Liabilities ($) | ||||||
Other Financial Instruments: | ||||||
Forward Foreign Currency Exchange Contracts†† | - | (5,262,149) | - | (5,262,149) | ||
Futures†† | (1,172,572) | - | - | (1,172,572) | ||
Options Written | (156,765) | (598,957) | - | (755,722) | ||
Swap Agreements†† | - | (58,093) | - | (58,093) |
† See Statement of Investments for additional detailed categorizations, if any.
†† Amount shown represents unrealized appreciation (depreciation) at period end, but only variation margin on exchange-traded and centrally cleared derivatives, if any, are reported in the Statement of Assets and Liabilities.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
37
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
Foreign taxes: The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invests. These foreign taxes, if any, are paid by the fund and are reflected in the Statement of Operations, if applicable. Foreign taxes payable or deferred or those subject to reclaims as of April 30, 2022, if any, are disclosed in the fund’s Statement of Assets and Liabilities.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with BNY Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, BNY Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending
38
transactions are on an overnight and continuous basis. During the period ended April 30, 2022, BNY Mellon earned $720 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political, economic developments and public health conditions. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. The COVID-19 pandemic has had, and any other outbreak of an infectious disease or other serious public health concern could have, a significant negative impact on economic and market conditions and could trigger a prolonged period of global economic slowdown. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
The fund invests primarily in debt securities. Failure of an issuer of the debt securities to make timely interest or principal payments, or a decline or the perception of a decline in the credit quality of a debt security, can cause the debt security’s price to fall, potentially lowering the fund’s share price. In addition, the value of debt securities may decline due to general
39
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
market conditions that are not specifically related to a particular issuer, such as real or perceived adverse economic conditions, changes in outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment. Such values may also decline because of factors that affect a particular industry or country.
The fund invests in collateralized loan obligations (“CLO”). CLOs and other structured credit investments are generally backed by an asset or a pool of assets (typically senior secured loans, certain subordinated loans and other credit-related assets in the case of CLOs) which serve as collateral. The cash flows from CLOs and structured credit investments are split into two or more portions, called tranches, varying in risk and yield. The fund and other investors in CLOs and structured finance securities ultimately bear the credit risk of the underlying collateral. If there are defaults or the relevant collateral otherwise underperforms, scheduled payments to senior tranches of such securities take precedence over those of mezzanine tranches, and scheduled payments to mezzanine tranches take precedence over those to subordinated/equity tranches. The riskiest portion is the “equity” tranche, which is subordinate to the other tranches in the event of defaults. Senior tranches typically have higher ratings and lower yields than its underlying securities, and may be rated investment grade. The ratings reflect both the credit quality of underlying collateral as well as how much protection a given tranche is afforded by tranches that are subordinate to it.
CLOs and other structured finance securities may present risks similar to those of the other types of debt obligations and, in fact, such risks may be of greater significance in the case of CLOs and other structured finance securities. In addition to the general risks associated with investing in debt securities, CLO securities carry additional risks, including, but not limited to: (1) the possibility that distributions from collateral assets will not be adequate to make interest or other payments; (2) the quality of the collateral may decline in value or default; (3) the possibility that the class of CLOs held by the fund is subordinate to other senior classes; and (4) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results. Additionally, changes in the collateral held by CLOs may cause payments on the instruments the fund holds to be reduced, either temporarily or permanently. Structured investments, particularly the subordinated interests in which the fund invests, are less liquid than many other types of securities and may be more volatile than the assets underlying the CLOs the fund may target. In addition, CLOs and other structured credit investments may be subject to prepayment risk. The fund will not invest in CLO equity tranches.
40
(f) Dividends and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from net investment income are normally declared and paid quarterly. 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.
On April 29, 2022, the Board declared a cash dividend of $.060, $.037, $.071 and $.074 per share from undistributed net investment income for Class A, Class C, Class I and Class Y shares, respectively, payable on May 2, 2022, to shareholders of record as of the close of business on April 29, 2022. The ex-dividend date was May 2, 2022.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended April 30, 2022, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended April 30, 2022, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended October 31, 2021 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
The fund has an unused capital loss carryover of $166,603,515 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to October 31, 2021. The fund has $106,582,554 of short-term capital losses and $60,020,961 of long-term capital losses which can be carried forward for an unlimited period.
41
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2021 was as follows: ordinary income $10,067,828. The tax character of current year distributions will be determined at the end of the current fiscal year.
(h) New accounting pronouncements: In March 2020, the FASB issued Accounting Standards Update 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”), and in January 2021, the FASB issued Accounting Standards Update 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”), which provides optional, temporary relief with respect to the financial reporting of contracts subject to certain types of modifications due to the planned discontinuation of the LIBOR and other interbank offered rates as of the end of 2021. The temporary relief provided by ASU 2020-04 and ASU 2021-01 is effective for certain reference rate-related contract modifications that occur during the period from March 12, 2020 through December 31, 2022. Management is evaluating the impact of ASU 2020-04 and ASU 2021-01 on the fund’s investments, derivatives, debt and other contracts that will undergo reference rate-related modifications as a result of the reference rate reform. Management is also currently actively working with other financial institutions and counterparties to modify contracts as required by applicable regulation and within the regulatory deadlines.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by BNY Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $688.5 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $135 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing.
The average amount of borrowings outstanding under the Facilities during the period ended April 30, 2022 was approximately $24,862 with a related weighted average annualized interest rate of 1.27%.
42
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement with the Adviser and the Trust, the Trust has agreed to pay the Adviser a management fee computed at the annual rate of .50% of the value of the fund’s average daily net assets and is payable monthly. The Adviser has contractually agreed, from November 1, 2021 through March 1, 2023, to waive receipt of its fees and/or assume the direct expenses of the Class A shares of the fund, so that the direct expenses of Class A shares (excluding Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowing and extraordinary expenses) do not exceed .77% of the value of the fund’s average daily net assets. On or after March 1, 2023, the Adviser may terminate this expense limitation at any time. The reduction in expenses, pursuant to the undertaking, amounted to $178,649 during the period ended April 30, 2022.
Pursuant to a sub-investment advisory agreement between the Adviser and the Sub-Adviser, the Adviser pays the Sub-Adviser a monthly fee at an annual rate of .24% of the value of the fund’s average daily net assets.
During the period ended April 30, 2022, the Distributor retained $5 from CDSC fees on redemptions of the fund’s Class C shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. The Distributor may pay one or more Service Agents in respect of advertising, marketing and other distribution services, and determines the amounts, if any, to be paid to Service Agents and the basis on which such payments are made. During the period ended April 30, 2022, Class C shares were charged $9,365 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 services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2022, Class A and Class C shares were charged $46,922 and $3,122, respectively, pursuant to the Shareholder Services Plan.
43
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Under its terms, the Distribution Plan and Shareholder Services Plan shall remain in effect from year to year, provided such continuance is approved annually by a vote of a majority of those Trustees who are not “interested persons” of the Trust and who have no direct or indirect financial interest in the operation of or in any agreement related to the Distribution Plan or Shareholder Services Plan.
The fund has an arrangement with BNY Mellon Transfer, Inc., (the “Transfer Agent”), a subsidiary of BNY Mellon and an affiliate of the Adviser, whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. For financial reporting purposes, the fund includes net earnings credits, if any, as shareholder servicing costs in the Statement of Operations.
The fund has an arrangement with The Bank of New York Mellon (the “Custodian”), a subsidiary of BNY Mellon and an affiliate of the Adviser, whereby the fund will receive interest income or be charged overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statement of Operations.
The fund compensates the Transfer Agent, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, for the fund. The majority of Transfer Agent fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended April 30, 2022, the fund was charged $20,660 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates the Custodian under a custody agreement, for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended April 30, 2022, the fund was charged $24,659 pursuant to the custody agreement.
During the period ended April 30, 2022, the fund was charged $10,209 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: management fees of $111,604, Distribution Plan fees of $1,380, Shareholder Services Plan fees of $7,104, Custodian fees of $16,800, Chief Compliance Officer
44
fees of $7,335 and Transfer Agent fees of $5,255, which are offset against an expense reimbursement currently in effect in the amount of $29,327.
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of investment securities, excluding short-term securities, futures, options transactions, forward contracts and swap agreements, during the period ended April 30, 2022, amounted to $207,195,745 and $228,576,706, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.
Each type of derivative instrument that was held by the fund during the period ended April 30, 2022 is discussed below.
Futures: In the normal course of pursuing its investment objective, the fund is exposed to market risk, including interest rate risk, as a result of changes in value of underlying financial instruments. The fund invests in futures in order to manage its exposure to or protect against changes in the market. A futures contract represents a commitment for the future purchase or a sale of an asset at a specified date. Upon entering into such contracts, these investments require initial margin deposits with a counterparty, which consist of cash or cash equivalents. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses which are recorded in the Statement of Operations. When the contracts are closed, the fund recognizes a realized gain or loss which is reflected in the Statement of Operations. There is minimal counterparty credit risk to the fund with futures since they are exchange traded, and the
45
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
exchange guarantees the futures against default. Futures open at April 30, 2022 are set forth in the Statement of Investments.
Options Transactions: The fund purchases and writes (sells) put and call options to hedge against changes in the values of interest rate, currency or as a substitute for an investment. The fund is subject to market risk, currency risk and interest rate risk in the course of pursuing its investment objectives through its investments in options contracts. A call option gives the purchaser of the option the right (but not the obligation) to buy, and obligates the writer to sell, the underlying financial instrument at the exercise price at any time during the option period, or at a specified date. Conversely, a put option gives the purchaser of the option the right (but not the obligation) to sell, and obligates the writer to buy the underlying financial instrument at the exercise price at any time during the option period, or at a specified date.
As a writer of call options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument decreases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument increases between those dates. The maximum payout for those contracts is limited to the number of call option contracts written and the related strike prices, respectively.
As a writer of put options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument increases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument decreases between those dates. The maximum payout for those contracts is limited to the number of put option contracts written and the related strike prices, respectively.
As a writer of an option, the fund has no control over whether the underlying financial instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the financial instrument underlying the written option. There is a risk of loss from a change in value of such options which may exceed the related premiums received. This risk is mitigated by Master Agreements between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. The Statement of Operations reflects any unrealized gains or losses which
46
occurred during the period as well as any realized gains or losses which occurred upon the expiration or closing of the option transaction. Swaptions purchase and write options on swaps (“swaptions”) primarily preserve a return or spread on a particular investment or portion of the fund holdings. The purchaser and writer of a swaption is buying or granting the right to enter into a previously agreed upon interest rate or credit default swap agreement (interest rate risk and/or credit risk) at any time before the expiration of the option. Options purchased and written open at April 30, 2022 are set forth in the Statement of Investments.
Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. Forward contracts open at April 30, 2022 are set forth in the Statement of Investments.
Swap Agreements: The fund enters into swap agreements to exchange the interest rate on, or return generated by, one nominal instrument for the return generated by another nominal instrument. Swap agreements are privately negotiated in the OTC market or centrally cleared. The fund enters into these agreements to hedge certain market or interest rate risks, to manage the interest rate sensitivity (sometimes called duration) of fixed income securities, to provide a substitute for purchasing or selling particular securities or to increase potential returns.
47
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
For OTC swaps, the fund accrues for interim payments on a daily basis, with the net amount recorded within unrealized appreciation (depreciation) on swap agreements in the Statement of Assets and Liabilities. Once the interim payments are settled in cash, the net amount is recorded as a realized gain (loss) on swaps, in addition to realized gain (loss) recorded upon the termination of swap agreements in the Statement of Operations. Upfront payments made and/or received by the fund, are recorded as an asset and/or liability in the Statement of Assets and Liabilities and are recorded as a realized gain or loss ratably over the agreement’s term/event with the exception of forward starting interest rate swaps which are recorded as realized gains or losses on the termination date.
Upon entering into centrally cleared swap agreements, an initial margin deposit is required with a counterparty, which consists of cash or cash equivalents. The amount of these deposits is determined by the exchange on which the agreement is traded and is subject to change. The change in valuation of centrally cleared swaps is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities. Payments received from (paid to) the counterparty, including upon termination, are recorded as realized gain (loss) in the Statement of Operations.
Fluctuations in the value of swap agreements are recorded for financial statement purposes as unrealized appreciation or depreciation on swap agreements.
Interest Rate Swaps: Interest rate swaps involve the exchange of commitments to pay and receive interest based on a notional principal amount. The fund may elect to pay a fixed rate and receive a floating rate, or receive a fixed rate and pay a floating rate on a notional principal amount. The net interest received or paid on interest rate swap agreements is included within realized gain (loss) on swap agreements in the Statement of Operations. Interest rate swap agreements are subject to general market risk, liquidity risk, counterparty risk and interest rate risk.
For OTC swaps, the fund’s maximum risk of loss from counterparty risk is the discounted value of the cash flows to be received from the counterparty over the agreement’s remaining life, to the extent that the amount is positive. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. There is minimal counterparty risk to the fund with centrally cleared swaps since they are exchange traded and the exchange guarantees these swaps against default. Interest rate swaps open at April 30, 2022 are set forth in the Statement of Investments.
48
Credit Default Swaps: Credit default swaps involve commitments to pay a fixed interest rate in exchange for payment if a credit event affecting a third party (the referenced obligation or index) occurs. Credit events may include a failure to pay interest or principal, bankruptcy, or restructuring. The fund enters into these agreements to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. For those credit default swaps in which the fund is paying a fixed rate, the fund is buying credit protection on the instrument. In the event of a credit event, the fund would receive the full notional amount for the reference obligation. For those credit default swaps in which the fund is receiving a fixed rate, the fund is selling credit protection on the underlying instrument. The maximum payouts for these agreements are limited to the notional amount of each swap. Credit default swaps may involve greater risks than if the fund had invested in the reference obligation directly and are subject to general market risk, liquidity risk, counterparty risk and credit risk. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty.
The maximum potential amount of future payments (undiscounted) that a fund as a seller of protection could be required to make under a credit default swap agreement would be an amount equal to the notional amount of the agreement which may exceed the amount of unrealized appreciation or depreciation reflected in the Statement of Assets and Liabilities. Notional amounts of all credit default swap agreements are disclosed in the Statement of Swap Agreements, which summarizes open credit default swaps entered into by the fund. These potential amounts would be partially offset by any recovery values of the respective referenced obligations, underlying securities comprising the referenced index, upfront payments received upon entering into the agreement, or net amounts received from the settlement of buy protection credit default swap agreements entered into by the fund for the same referenced entity or entities. Credit default swaps open at April 30, 2022 are set forth in the Statement of Investments.
GAAP requires disclosure for (i) the nature and terms of the credit derivative, reasons for entering into the credit derivative, the events or circumstances that would require the seller to perform under the credit derivative, and the current status of the payment/performance risk of the credit derivative, (ii) the maximum potential amount of future payments (undiscounted) the seller could be required to make under the credit derivative, (iii) the fair value of the credit derivative, and (iv) the nature of any recourse provisions and assets held either as collateral or by third
49
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
parties. All required disclosures have been made and are incorporated within the current period as part of the Notes to the Statement of Investments and disclosures within this Note.
The following tables show the fund’s exposure to different types of market risk as it relates to the Statement of Assets and Liabilities and the Statement of Operations, respectively.
Fair value of derivative instruments as of April 30, 2022 is shown below:
|
| Derivative |
|
|
| Derivative |
|
Interest rate risk | 5,723,714 | 1,2 | Interest rate risk | (1,329,337) | 1,3 | ||
Foreign exchange risk | 2,638,714 | 4,5 | Foreign exchange risk | (5,665,487) | 3,5 | ||
Credit risk | 113,531 | 4 | Credit risk | (253,712) | 2,3 | ||
Gross fair value of | 8,475,959 |
|
|
| (7,248,536) |
| |
|
|
|
|
|
|
| |
| Statement of Assets and Liabilities location: |
| |||||
1 | Includes cumulative appreciation (depreciation) on futures as reported in the Statement of Futures, but only the | ||||||
2 | Includes cumulative appreciation (depreciation) on swap agreements as reported in the Statement of Swap | ||||||
3 | Outstanding options written, at value. | ||||||
4 | Options purchased are included in Investments in securities—Unaffiliated issuers, at value. | ||||||
5 | Unrealized appreciation (depreciation) on forward foreign currency exchange contracts. |
The effect of derivative instruments in the Statement of Operations during the period ended April 30, 2022 is shown below:
Amount of realized gain (loss) on derivatives recognized in income ($) |
| |||||||||
Underlying | Futures | 1 | Options | 2 | Forward | 3 | Swap | 4 | Total |
|
Interest rate | 2,616,913 |
| - |
| - |
| (13,311) |
| 2,603,602 |
|
Foreign | - |
| (10,385) |
| (1,535,997) |
| - |
| (1,546,382) |
|
Credit | - |
| - |
| - |
| 269,756 |
| 269,756 |
|
Total | 2,616,913 |
| (10,385) |
| (1,535,997) |
| 256,445 |
| 1,326,976 |
|
|
|
|
|
|
|
|
|
|
|
|
50
Net change in unrealized appreciation (depreciation) |
| ||||||||||
Underlying | Futures | 5 | Options | 6 | Forward | 7 | Swap | 8 | Total |
| |
Interest rate | 199,445 |
| 15,690 |
| - |
| 5,183,571 |
| 5,398,706 |
| |
Foreign | - |
| (116,469) |
| (3,383,025) |
| - |
| (3,499,494) |
| |
Credit | - |
| (44,509) |
| - |
| (44,237) |
| (88,746) |
| |
Total | 199,445 |
| (145,288) |
| (3,383,025) |
| 5,139,334 |
| 1,810,466 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Statement of Operations location: |
| |||||||||
1 | Net realized gain (loss) on futures. | ||||||||||
2 | Net realized gain (loss) on options transactions. | ||||||||||
3 | Net realized gain (loss) on forward foreign currency exchange contracts. | ||||||||||
4 | Net realized gain (loss) on swap agreements. | ||||||||||
5 | Net change in unrealized appreciation (depreciation) on futures. | ||||||||||
6 | Net change in unrealized appreciation (depreciation) on options transactions. | ||||||||||
7 | Net change in unrealized appreciation (depreciation) on forward foreign currency exchange contracts. | ||||||||||
8 | Net change in unrealized appreciation (depreciation) on swap agreements. |
The provisions of ASC Topic 210 “Disclosures about Offsetting Assets and Liabilities” require disclosure on the offsetting of financial assets and liabilities. These disclosures are required for certain investments, including derivative financial instruments subject to Master Agreements which are eligible for offsetting in the Statement of Assets and Liabilities and require the fund to disclose both gross and net information with respect to such investments. For financial reporting purposes, the fund does not offset derivative assets and derivative liabilities that are subject to Master Agreements in the Statement of Assets and Liabilities.
At April 30, 2022, derivative assets and liabilities (by type) on a gross basis are as follows:
Derivative Financial Instruments: |
| Assets ($) |
| Liabilities ($) |
|
Futures |
| 913,520 |
| (1,172,572) |
|
Options |
| 510,887 |
| (755,722) |
|
Forward contracts |
| 2,241,358 |
| (5,262,149) |
|
Swaps |
| 4,810,194 |
| (58,093) |
|
Total gross amount of derivative |
|
|
|
|
|
assets and liabilities in the |
|
|
|
|
|
Statement of Assets and Liabilities |
| 8,475,959 |
| (7,248,536) |
|
Derivatives not subject to |
|
|
|
|
|
Master Agreements |
| (5,723,714) |
| 1,387,430 |
|
Total gross amount of assets |
|
|
|
|
|
and liabilities subject to |
|
|
|
|
|
Master Agreements |
| 2,752,245 |
| (5,861,106) |
|
51
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The following tables present derivative assets and liabilities net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of April 30, 2022:
|
|
| Financial |
|
|
|
|
|
| Instruments |
|
|
|
|
|
| and Derivatives |
|
|
|
| Gross Amount of |
| Available | Collateral |
| Net Amount of |
Counterparty | Assets ($) | 1 | for Offset ($) | Received ($) | 2 | Assets ($) |
Barclays Capital | 354,014 |
| (354,014) | - |
| - |
Citigroup | 350,752 |
| (350,752) | - |
| - |
Goldman Sachs | 852,967 |
| (654,405) | - |
| 198,562 |
HSBC | 582,085 |
| (582,085) | - |
| - |
J.P. Morgan Securities | 612,427 |
| (612,427) | - |
| - |
Total | 2,752,245 |
| (2,553,683) | - |
| 198,562 |
|
|
|
|
|
|
|
|
|
| Financial |
|
|
|
|
|
| Instruments |
|
|
|
|
|
| and Derivatives |
|
|
|
| Gross Amount of |
| Available | Collateral |
| Net Amount of |
Counterparty | Liabilities ($) | 1 | for Offset ($) | Pledged ($) | 2 | Liabilities ($) |
Barclays Capital | (1,436,730) |
| 354,014 | 1,082,716 |
| - |
Citigroup | (469,469) |
| 350,752 | - |
| (118,717) |
Goldman Sachs | (654,405) |
| 654,405 | - |
| - |
HSBC | (2,623,251) |
| 582,085 | 1,641,000 |
| (400,166) |
J.P. Morgan Securities | (677,251) |
| 612,427 | - |
| (64,824) |
Total | (5,861,106) |
| 2,553,683 | 2,723,716 |
| (583,707) |
|
|
|
|
|
|
|
1 Absent a default event or early termination, OTC derivative assets and liabilities are presented at gross amounts | ||||||
2 In some instances, the actual collateral received and/or pledged may be more than the amount shown due to |
The following summarizes the average market value of derivatives outstanding during the period ended April 30, 2022:
|
| Average Market Value ($) |
Interest rate futures |
| 136,034,223 |
Interest rate options contracts |
| 22,395 |
Foreign currency options contracts |
| 267,657 |
Forward contracts |
| 180,295,010 |
Credit options contracts |
| 47,110 |
The following summarizes the average notional value of swap agreements outstanding during the period ended April 30, 2022:
52
|
| Average Notional Value ($) |
Interest rate swap agreements |
| 53,596,429 |
Credit default swap agreements |
| 18,081,906 |
|
|
|
At April 30, 2022, accumulated net unrealized depreciation on investments inclusive of derivative contracts was $30,962,625, consisting of $8,811,884 gross unrealized appreciation and $39,774,509 gross unrealized depreciation.
At April 30, 2022, 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).
53
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on March 2-3, 2022, the Board considered the renewal of the fund’s Management Agreement, pursuant to which the Adviser provides the fund with investment advisory and administrative services, and the Sub-Investment Advisory Agreement (together with the Management Agreement, the “Agreements”), pursuant to which Insight North America LLC (the “Sub-Adviser”) provides day-to-day management of the fund’s investments. The Board members, a majority of whom are not “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser and the Sub-Adviser. In considering the renewal of the Agreements, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s supervisory activities over the Sub-Adviser.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data based on classifications provided by Thomson Reuters Lipper, which included information comparing (1) the performance of the fund’s Class I shares with the performance of a group of institutional international income funds selected by Broadridge as comparable to the fund (the “Performance Group”) and with a broader group of funds consisting of all retail and institutional international income funds (the “Performance Universe”), all for various periods ended December 31, 2021, and (2) the fund’s actual and contractual management fees and total expenses with those of the same group of funds in the Performance Group (the “Expense Group”) and with a broader group of all
54
institutional international income funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Performance Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser and the Sub-Adviser the results of the comparisons and considered that the fund’s total return performance was above the Performance Group median for the one- and ten-year periods, at the Performance Group median for the five-year period, and below the Performance Group median for the two-, three- and four-year periods and the Performance Universe median for each period, except the ten-year period when the fund’s performance was above the Performance Universe median.
The Board also considered that the fund’s yield performance was above the Performance Group medians for seven of the ten one-year periods ended December 31st and at the Performance Group median for the other periods, and above the Performance Universe median for seven of the ten one-year periods ended December 31st, including, in each case, in the most recent one-year period. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in six of the ten calendar years shown.
Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management services and the sub-advisory services provided by the Adviser and the Sub-Adviser, respectively. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons.
The Board considered that the fund’s contractual management fee was lower than the Expense Group median contractual management fee, the fund’s actual management fee was lower than the Expense Group median and equal to the Expense Universe median actual management fee and the fund’s total expenses were slightly higher than the Expense Group median and higher than the Expense Universe median total expenses.
Representatives of the Adviser stated that the Adviser has contractually agreed, until March 1, 2023, to waive receipt of its fees and/or assume the direct expenses of the fund so that the direct expenses of the fund’s Class A shares (excluding shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed .77% of the fund’s average daily net assets.
55
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
Representatives of the Adviser reviewed with the Board the management or investment advisory fees paid to the Adviser or the Sub-Adviser or its affiliates for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness of the fund’s management fee. Representatives of the Adviser noted that there were no other funds advised by the Adviser that are in the same Lipper category as the fund.
The Board considered the fee payable to the Sub-Adviser in relation to the fee payable to the Adviser by the fund and the respective services provided by the Sub-Adviser and the Adviser. The Board also took into consideration that the Sub-Adviser’s fee is paid by the Adviser, out of its fee from the fund, and not the fund.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the mix of services provided by the Adviser and the Sub-Adviser, including the nature, extent and quality of such services, supported the renewal of the Agreements and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Since the Adviser, and not the fund, pays the Sub-Adviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Sub-Adviser’s profitability to be relevant to its deliberations. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or
56
even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser and the Sub-Adviser from acting as investment adviser and sub-investment adviser, respectively, and took into consideration that there were no soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreements. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by the Adviser and the Sub-Adviser are adequate and appropriate.
· The Board was satisfied with the fund’s performance.
· The Board concluded that the fees paid to the Adviser and the Sub-Adviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Management Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates and the Sub-Adviser, of the Adviser and the Sub-Adviser and the services provided to the fund by the Adviser and the Sub-Adviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreements, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on its consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
57
LIQUIDITY RISK MANAGEMENT PROGRAM (Unaudited)
Effective June 1, 2019, the fund adopted a liquidity risk management program (the “Liquidity Risk Management Program”) pursuant to the requirements of Rule 22e-4 under the Investment Company Act of 1940, as amended. Rule 22e-4 requires registered open-end funds, including mutual funds and exchange-traded funds but not money market funds, to establish liquidity risk management programs in order to effectively manage fund liquidity and shareholder redemptions. The rule is designed to mitigate the risk that a fund could not meet redemption requests without significantly diluting the interests of remaining investors.
The rule requires the fund to assess, manage and review their liquidity risk at least annually considering applicable factors such as investment strategy and liquidity during normal and foreseeable stressed conditions, including whether the strategy is appropriate for an open-end fund and whether the fund has a relatively concentrated portfolio or large positions in particular issuers. The fund must also assess its use of borrowings and derivatives, short-term and long-term cash flow projections in normal and stressed conditions, holdings of cash and cash equivalents, and borrowing arrangements and other funding sources.
The rule also requires the fund to classify its investments as highly liquid, moderately liquid, less liquid or illiquid based on the number of days the fund expects it would take to liquidate the investment, and to review these classifications at least monthly or more often under certain conditions. The periods range from three or fewer business days for a highly liquid investment to greater than seven calendar days for settlement of a less liquid investment. Illiquid investments are those a fund does not expect to be able to sell or dispose of within seven calendar days without significantly changing the market value. The fund is prohibited from acquiring an investment if, after the acquisition, its holdings of illiquid assets will exceed 15% of its net assets. In addition, if a fund permits redemptions in-kind, the rule requires the fund to establish redemption in-kind policies and procedures governing how and when it will engage in such redemptions.
Pursuant to the rule’s requirements, the Liquidity Risk Management Program has been reviewed and approved by the Board. Furthermore, the Board has received a written report prepared by the Program’s Administrator that addresses the operation of the Program, assesses its adequacy and effectiveness and describes any material changes made to the Program.
Assessment of Program
In the opinion of the Program Administrator, the Program approved by the Board continues to be adequate for the fund and the Program has been implemented effectively. The Program Administrator has monitored the fund’s liquidity risk and the liquidity classification of the securities held by the fund and has determined that the Program is operating effectively.
During the period from January 1, 2021 to December 31, 2021, there were no material changes to the Program and no material liquidity events that impacted the fund. During the period, the fund held sufficient highly liquid assets to meet fund redemptions.
Under normal expected foreseeable fund redemption forecasts and foreseeable stressed fund redemption forecasts, the Program Administrator believes that the fund maintains sufficient highly liquid assets to meet expected fund redemptions.
58
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59
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61
BNY Mellon International Bond Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Insight North America LLC
200 Park Avenue, 7th Floor
New York, NY 10166
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class A: DIBAX Class C: DIBCX Class I: DIBRX Class Y: DIBYX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@bnymellon.com
Internet Information can be viewed online or downloaded at www.im.bnymellon.com
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-PORT. The fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.im.bnymellon.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2022 BNY Mellon Securities Corporation |
Item 2. | Code of Ethics. |
Not applicable.
Item 3. | Audit Committee Financial Expert. |
Not applicable.
Item 4. | Principal Accountant Fees and Services. |
Not applicable.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
Item 6. | Investments. |
(a) Not applicable.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers. |
Not applicable.
Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no material changes to the procedures applicable to Item 10.
Item 11. | Controls and Procedures. |
(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes to the Registrant's internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
Not applicable.
Item 13. | Exhibits. |
(a)(1) Not applicable.
(a)(3) Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
BNY Mellon Investment Funds III
By: /s/ David DiPetrillo
David DiPetrillo
President (Principal Executive Officer)
Date: June 17, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ David DiPetrillo
David DiPetrillo
President (Principal Executive Officer)
Date: June 17, 2022
By: /s/ James Windels
James Windels
Treasurer (Principal Financial Officer)
Date: June 17, 2022
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)