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 | 811-03940 | |||||
BNY Mellon Strategic Funds, Inc. | ||||||
(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:
| 11/30 | |||||
Date of reporting period: | 11/30/21
| |||||
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 Stock Fund
BNY Mellon International Stock Fund
BNY Mellon Select Managers Small Cap Value Fund
BNY Mellon U.S. Equity Fund
FORM N-CSR
Item 1. Reports to Stockholders.
BNY Mellon Global Stock Fund
ANNUAL REPORT November 30, 2021 |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.im.bnymellon.com and sign up for eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
Information About the Renewal of | |
FOR MORE INFORMATION
Back Cover
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from December 1, 2020 through November 30, 2021, as provided by Charlie Macquaker, Roy Leckie and Jane Henderson, the three members of the Investment Executive at Walter Scott & Partners Limited (WS), Sub-Investment Adviser
Market and Fund Performance Overview
For the 12-month period ended November 30, 2021, the BNY Mellon Global Stock Fund’s Class A shares achieved a total return of 16.72%, Class C shares returned 15.83%, Class I shares returned 17.07% and Class Y shares returned 17.11%.1 For the same period, the fund’s benchmark, the MSCI World Index (the “Index”), achieved a total return of 21.78%.2
Global stocks gained ground during the period, supported by an environment of economic growth and strong corporate financial results. The fund trailed the Index, due primarily to allocation and stock selection effects in the financials sector, as well as stock selection in the industrials, consumer discretionary and energy sectors. From a geographic perspective, relative returns suffered most significantly from underweight exposure and disappointing stock selections in the strong U.S. market.
The Fund’s Investment Approach
The fund seeks long-term total return. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in stocks. The fund’s investments will be focused on companies located in developed markets. The fund ordinarily invests in at least three countries and is not geographically limited in its investment selection but, at times, may invest a substantial portion of its assets in a single country. The fund may invest in the securities of companies of any market capitalization. Walter Scott seeks investment opportunities in companies with fundamental strengths that indicate the potential for sustainable growth. Walter Scott focuses on individual stock selection, building the fund’s portfolio from the bottom up through extensive fundamental research. The investment process begins with the screening of reported company financials. Companies that meet certain broad, absolute and trend criteria are candidates for more detailed financial analysis. The fund’s Investment Team collectively reviews and selects those stocks that meet Walter Scott’s criteria, and where the expected growth rate is combined with a reasonable valuation for the underlying equity. Geographic and sector allocations are the result of, not part of, the investment process, because the Investment Team’s sole focus is on the analysis of and investment in individual companies.
Markets Gain on Accommodative Monetary Policy and Corporate Earnings Strength
Global equity markets started the period in an upswing thanks to the arrival of COVID-19 vaccines. Even with infection rates rising and the reimposition of strict restrictions across much of the developed world, the first sight of light at the end of the pandemic tunnel was cause for widespread market euphoria. With central banks keeping their foot on the monetary policy pedal, politicians rediscovering their appetite for fiscal largesse, economies firmly in recovery mode and company earnings growing strongly, it was little surprise that markets sustained strong momentum through much of the period.
Not that the period was free of concerns. Most notably, investors grew increasingly worried by supply-chain dislocations and inflationary pressures once dismissed by policymakers as “transient.” The unexpected persistence and vigor of rising input costs, in tandem with robust economic growth, brought an increasingly hawkish tone to central bank rhetoric, with the U.S. Federal Reserve making it clear in September 2021 that the time for a tapering of monetary
2
stimulus was imminent. With many equity indices trading around record highs, fears that tighter monetary policy, supply-chain issues and rising costs would weigh on corporate profitability, engendered some market volatility during the fall. In addition, in the closing weeks of the period, the emergence of the Omicron COVID-19 variant served as a potent reminder that the pandemic was still a live threat.
Stock Selection Determined Relative Performance
While sector and country allocations played a role in the fund’s underperformance compared to the Index, those allocations were a direct result of the fund’s bottom-up stock selection process. That process resulted in significantly underweight exposure to the strong-performing financial sector. Stock selection in financials further detracted from relative returns, as did selection in the industrials, consumer discretionary and energy sectors. Notable individual detractors from performance included Japanese automation company FANUC, Finland-based engineering firm Kone, laser and materials-processing equipment maker IPG Photonics, and Spain-based clothing company Inditex. From a geographic point of view, disappointing stock selections and underweight exposure to the strong U.S. market generated the largest drag on relative returns. Selection and allocation in the Pacific ex-Japan region further detracted, as did selection in the U.K.
Conversely, the fund’s relative returns benefited from strong stock selection in the communication services and health care sectors, led by Google parent company Alphabet, Denmark-based pharmaceutical firm Novo Nordisk and U.S.-based specialty measurement company Waters. Other top-performing holdings included enterprise software giant Microsoft, enterprise information technology company Oracle and cybersecurity specialists Fortinet, all based in the United States. Geographically, security selection among the fund’s Europe ex-U.K. positions proved most beneficial to relative performance.
Focused on Long-Term Growth Potential
We believe that, until there is greater clarity on the potential threat of the Omicron variant, some near-term volatility in global equity markets could be the order of the day. Investors will continue to monitor the progression of the variant, wary of its potential to hamper further economic recovery. The prospect of tighter monetary policy, particularly in the United States, may also weigh on global market sentiment. However, most central banks, while acknowledging that inflation may not be as transitory as they initially thought, appear to maintain the view that current supply-chain pressures will eventually diminish, and given the uncertainty over the progression of the pandemic, any alteration of interest rates is likely to be mild. We find it encouraging that many companies continue to report solid earnings growth and appear to have adapted well to the challenges presented by disrupted supply chains. Efficiency and productivity gains, in tandem with pricing power, have enabled market-leading businesses to offset cost pressures to a large degree.
Accordingly, despite the likelihood of some near-term volatility, we expect high-quality companies to continue to grow earnings over the long term, which will be the ultimate determinant of investor returns. The fund’s disciplined, bottom-up stock selection process is designed to identify just such investment opportunities. As a result of that process, as of the end of the period, the fund holds its most overweight sector exposures relative to the Index in information technology and health care, followed by industrials. The fund is finding relatively few attractive investment opportunities in the financials sector, while holding more mildly underweight exposure to communication services, energy, real estate and utilities. Geographically, the fund’s most overweight exposures are to Europe ex-U.K., emerging markets, Asia Pacific ex-
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
Japan and the U.K. The fund’s most significantly underweight regional exposure is to the United States.
December 15, 2021
1 DUE TO RECENT MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE DIFFERENT THAN THE FIGURES SHOWN. Investors should note that the fund’s short-term performance is highly unusual, in part due to unusually favorable market conditions, and is unlikely to be repeated or consistently achieved in the future. Total return includes reinvestment of dividends and any capital gains paid and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Past performance is no guarantee of future results. Share price, yield and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost.
2 Source: Lipper Inc. — The MSCI World Index is a free float-adjusted, market capitalization-weighted index that is designed to measure the equity market performance of developed markets. It reflects reinvestment of net dividends and, where applicable, capital gain distributions. Investors cannot invest directly in any index.
Equities are subject generally to market, market sector, market liquidity, issuer and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
Investing internationally involves special risks, including changes in currency exchange rates, political, economic, and social instability, a lack of comprehensive company information, differing auditing and legal standards, and less market liquidity. These risks generally are greater with emerging-market countries than with more economically and politically established foreign countries.
Small and midsized company stocks tend to be more volatile and less liquid than larger company stocks, as these companies are less established and have more volatile earnings.
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.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
4
FUND PERFORMANCE (Unaudited)
Comparison of change in value of a $10,000 investment in Class A shares, Class C shares, and Class I shares of BNY Mellon Global Stock Fund with a hypothetical investment of $10,000 in the MSCI World Index (the “Index”).
† Source: Lipper Inc.
Past performance is not predictive of future performance.
The above graph compares a hypothetical investment of $10,000 made in each of the Class A shares, Class C shares, and Class I shares of BNY Mellon Global Stock Fund on 11/30/11 to a hypothetical investment of $10,000 made in the Index on that date. All dividends and capital gain distributions are reinvested.
The fund’s performance shown in the line graph above takes into account the maximum initial sales charge on Class A shares and all other applicable fees and expenses on Class A shares, Class C shares, and Class I shares. The Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed markets. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report.
5
FUND PERFORMANCE (Unaudited) (continued)
Comparison of change in value of a $1,000,000 investment in Class Y shares of BNY Mellon Global Stock Fund with a hypothetical investment of $1,000,000 in the MSCI World Index (the “Index”).
† Source: Lipper Inc.
†† The total return figures presented for Class Y shares of the fund reflect the performance of the fund’s Class A shares for the period prior to 7/1/13 (the inception date for Class Y shares), not reflecting the applicable sales charges for Class A shares.
Past performance is not predictive of future performance.
The above graph compares a hypothetical investment of $1,000,000 made in Class Y shares of BNY Mellon Global Stock Fund on 11/30/11 to a hypothetical investment of $1,000,000 made in the Index on that date. All dividends and capital gain distributions are reinvested.
The fund’s performance shown in the line graph above takes into account all applicable fees and expenses on the fund’s Class Y shares. The Index is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed markets. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report.
6
Average Annual Total Returns as of 11/30/2021 | ||||
| Inception | 1 Year | 5 Years | 10 Years |
Class A shares | ||||
with maximum sales charge (5.75%) | 12/29/06 | 10.01% | 14.56% | 11.34% |
without sales charge | 12/29/06 | 16.72% | 15.93% | 11.99% |
Class C shares | ||||
with applicable redemption charge † | 12/29/06 | 14.83% | 15.06% | 11.14% |
without redemption | 12/29/06 | 15.83% | 15.06% | 11.14% |
Class I shares | 12/29/06 | 17.07% | 16.24% | 12.32% |
Class Y shares | 7/1/13 | 17.11% | 16.32% | 12.44%†† |
MSCI World Index | 21.78% | 14.61% | 12.22% |
† The maximum contingent deferred sales charge for Class C shares is 1% for shares redeemed within one year of the date of purchase.
†† The total return performance figures presented for Class Y shares of the fund reflect the performance of the fund’s Class A shares for the period prior to 7/1/13 (the inception date for Class Y shares), not reflecting the applicable sales charges for Class A shares.
The performance data quoted represents past performance, which is no guarantee of future results. Share price and investment return fluctuate and an investor’s shares may be worth more or less than original cost upon redemption. Current performance may be lower or higher than the performance quoted. Go to www.im.bnymellon.com for the fund’s most recent month-end returns.
The fund’s performance shown in the graphs and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. In addition to the performance of Class A shares shown with and without a maximum sales charge, the fund's performance shown in the table takes into account all other applicable fees and expenses on all classes.
7
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 Stock Fund from June 1, 2021 to November 30, 2021. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended November 30, 2021 |
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| Class A | Class C | Class I | Class Y |
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Expenses paid per $1,000† | $6.14 | $10.12 | $4.77 | $4.56 |
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Ending value (after expenses) | $1,042.60 | $1,038.70 | $1,044.00 | $1,044.40 |
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COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended November 30, 2021 |
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| Class A | Class C | Class I | Class Y |
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Expenses paid per $1,000† | $6.07 | $10.00 | $4.71 | $4.51 |
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Ending value (after expenses) | $1,019.05 | $1,015.14 | $1,020.41 | $1,020.61 |
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† | Expenses are equal to the fund’s annualized expense ratio of 1.20% for Class A, 1.98% for Class C, .93% for Class I and .89% for Class Y, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
8
STATEMENT OF INVESTMENTS
November 30, 2021
Description | Shares | Value ($) | |||||
Common Stocks - 98.5% | |||||||
Australia - 2.1% | |||||||
CSL | 141,100 | 30,499,393 | |||||
Canada - 3.4% | |||||||
Alimentation Couche-Tard, Cl. B | 829,500 | 30,389,135 | |||||
Canadian National Railway | 156,400 | 19,816,747 | |||||
50,205,882 | |||||||
Denmark - 3.2% | |||||||
Novo Nordisk, Cl. B | 436,800 | 46,772,287 | |||||
Finland - 1.2% | |||||||
Kone, Cl. B | 273,000 | 17,965,325 | |||||
France - 4.8% | |||||||
L'Oreal | 70,700 | 31,877,569 | |||||
LVMH | 49,200 | 38,191,645 | |||||
70,069,214 | |||||||
Hong Kong - 3.3% | |||||||
AIA Group | 3,262,800 | 34,330,949 | |||||
Jardine Matheson Holdings | 264,500 | 14,946,531 | |||||
49,277,480 | |||||||
Ireland - 2.0% | |||||||
Experian | 662,200 | 29,686,452 | |||||
Japan - 8.4% | |||||||
FANUC | 119,200 | 23,251,964 | |||||
Keyence | 83,228 | 51,401,551 | |||||
Shin-Etsu Chemical | 177,700 | 29,708,931 | |||||
SMC | 29,600 | 18,888,049 | |||||
123,250,495 | |||||||
Spain - 1.8% | |||||||
Industria de Diseno Textil | 865,000 | 27,252,889 | |||||
Switzerland - 6.0% | |||||||
Nestle | 215,100 | 27,651,827 | |||||
Roche Holding | 96,100 | 37,611,066 | |||||
SGS | 7,900 | 23,876,723 | |||||
89,139,616 | |||||||
Taiwan - 3.0% | |||||||
Taiwan Semiconductor Manufacturing, ADR | 376,300 | 44,083,545 | |||||
United Kingdom - 5.2% | |||||||
Compass Group | 1,470,900 | 28,524,654 | |||||
Linde | 110,400 | 35,122,656 | |||||
Prudential | 759,900 | 12,805,318 | |||||
76,452,628 |
9
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 98.5% (continued) | |||||||
United States - 54.1% | |||||||
Adobe | 71,600 | a | 47,961,260 | ||||
Alphabet, Cl. C | 15,897 | a | 45,291,189 | ||||
Amphenol, Cl. A | 497,600 | 40,096,608 | |||||
Automatic Data Processing | 168,300 | 38,858,787 | |||||
Booking Holdings | 9,710 | a | 20,408,963 | ||||
Cisco Systems | 576,000 | 31,587,840 | |||||
Cognex | 173,200 | 13,379,700 | |||||
Cognizant Technology Solutions, Cl. A | 396,100 | 30,887,878 | |||||
Colgate-Palmolive | 241,700 | 18,132,334 | |||||
Edwards Lifesciences | 350,400 | a | 37,601,424 | ||||
Fastenal | 544,600 | 32,223,982 | |||||
Fortinet | 79,400 | a | 26,369,534 | ||||
Illumina | 50,500 | a | 18,449,165 | ||||
Intuitive Surgical | 115,800 | a | 37,558,572 | ||||
IPG Photonics | 78,700 | a | 12,921,753 | ||||
Johnson & Johnson | 121,100 | 18,883,123 | |||||
Mastercard, Cl. A | 99,100 | 31,208,572 | |||||
Microsoft | 184,400 | 60,960,796 | |||||
NIKE, Cl. B | 231,000 | 39,094,440 | |||||
Oracle | 362,700 | 32,911,398 | |||||
Paychex | 148,100 | 17,653,520 | |||||
Stryker | 113,000 | 26,739,190 | |||||
Texas Instruments | 176,100 | 33,876,357 | |||||
The TJX Companies | 476,200 | 33,048,280 | |||||
The Walt Disney Company | 171,600 | a | 24,864,840 | ||||
Waters | 83,400 | a | 27,361,038 | ||||
798,330,543 | |||||||
Total Common Stocks (cost $566,090,619) | 1,452,985,749 | ||||||
1-Day | |||||||
Investment Companies - 1.3% | |||||||
Registered Investment Companies - 1.3% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 0.06 | 19,642,602 | b | 19,642,602 | |||
Total Investments (cost $585,733,221) | 99.8% | 1,472,628,351 | |||||
Cash and Receivables (Net) | .2% | 2,737,041 | |||||
Net Assets | 100.0% | 1,475,365,392 |
ADR—American Depository Receipt
a Non-income producing security.
b Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
10
Portfolio Summary (Unaudited) † | Value (%) |
Software & Services | 19.4 |
Pharmaceuticals Biotechnology & Life Sciences | 12.2 |
Technology Hardware & Equipment | 10.1 |
Capital Goods | 7.3 |
Health Care Equipment & Services | 6.9 |
Semiconductors & Semiconductor Equipment | 5.3 |
Consumer Durables & Apparel | 5.2 |
Media & Entertainment | 4.8 |
Materials | 4.4 |
Retailing | 4.1 |
Commercial & Professional Services | 3.6 |
Household & Personal Products | 3.4 |
Consumer Services | 3.3 |
Insurance | 3.2 |
Food & Staples Retailing | 2.1 |
Food, Beverage & Tobacco | 1.9 |
Transportation | 1.3 |
Investment Companies | 1.3 |
99.8 |
† Based on net assets.
See notes to financial statements.
11
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS
Investment Companies | Value | Purchases($)† | Sales($) | Value | Net | Dividends/ |
Registered Investment Companies: | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 16,828,237 | 331,914,642 | (329,100,277) | 19,642,602 | 1.3 | 13,329 |
† Includes reinvested dividends/distributions.
See notes to financial statements.
12
STATEMENT OF ASSETS AND LIABILITIES
November 30, 2021
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| Cost |
| Value |
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Assets ($): |
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Investments in securities—See Statement of Investments |
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Unaffiliated issuers | 566,090,619 |
| 1,452,985,749 |
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Affiliated issuers |
| 19,642,602 |
| 19,642,602 |
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Tax reclaim receivable—Note 1(b) |
| 2,944,911 |
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Dividends receivable |
| 859,997 |
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Receivable for shares of Common Stock subscribed |
| 735,666 |
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Prepaid expenses |
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| 44,079 |
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| 1,477,213,004 |
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Liabilities ($): |
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Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 1,126,182 |
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Payable for shares of Common Stock redeemed |
| 464,146 |
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Directors’ fees and expenses payable |
| 24,652 |
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Other accrued expenses |
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| 232,632 |
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| 1,847,612 |
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Net Assets ($) |
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| 1,475,365,392 |
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Composition of Net Assets ($): |
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Paid-in capital |
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| 455,279,869 |
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Total distributable earnings (loss) |
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| 1,020,085,523 |
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Net Assets ($) |
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| 1,475,365,392 |
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Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
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Net Assets ($) | 45,402,159 | 4,401,119 | 862,835,397 | 562,726,717 |
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Shares Outstanding | 1,597,887 | 162,352 | 29,805,995 | 19,467,887 |
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Net Asset Value Per Share ($) | 28.41 | 27.11 | 28.95 | 28.91 |
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See notes to financial statements. |
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13
STATEMENT OF OPERATIONS
Year Ended November 30, 2021
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Investment Income ($): |
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Income: |
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Cash dividends (net of $1,397,408 foreign taxes withheld at source): |
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Unaffiliated issuers |
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| 18,128,441 |
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Affiliated issuers |
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| 13,329 |
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Income from securities lending—Note 1(c) |
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| 1,436 |
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Total Income |
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| 18,143,206 |
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Expenses: |
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Management fee—Note 3(a) |
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| 12,594,852 |
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Shareholder servicing costs—Note 3(c) |
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| 671,403 |
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Professional fees |
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| 118,704 |
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Directors’ fees and expenses—Note 3(d) |
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| 110,955 |
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Registration fees |
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| 80,269 |
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Custodian fees—Note 3(c) |
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| 76,377 |
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Distribution fees—Note 3(b) |
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| 40,316 |
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Loan commitment fees—Note 2 |
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| 35,900 |
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Prospectus and shareholders’ reports |
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| 26,871 |
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Chief Compliance Officer fees—Note 3(c) |
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| 14,028 |
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Interest expense—Note 2 |
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| 749 |
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Miscellaneous |
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| 44,509 |
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Total Expenses |
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| 13,814,933 |
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Investment Income—Net |
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| 4,328,273 |
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Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
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Net realized gain (loss) on investments and foreign currency transactions | 129,622,187 |
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Net realized gain (loss) on forward foreign currency exchange contracts | (1,462) |
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Net Realized Gain (Loss) |
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| 129,620,725 |
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Net change in unrealized appreciation (depreciation) on investments | 95,827,464 |
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Net Realized and Unrealized Gain (Loss) on Investments |
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| 225,448,189 |
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Net Increase in Net Assets Resulting from Operations |
| 229,776,462 |
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See notes to financial statements. |
14
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Year Ended November 30, | |||||
|
|
|
| 2021 |
| 2020 |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 4,328,273 |
|
|
| 7,032,502 |
| |
Net realized gain (loss) on investments |
| 129,620,725 |
|
|
| 72,310,840 |
| ||
Net change in unrealized appreciation |
| 95,827,464 |
|
|
| 129,553,859 |
| ||
Net Increase (Decrease) in Net Assets | 229,776,462 |
|
|
| 208,897,201 |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (2,168,361) |
|
|
| (1,732,199) |
| |
Class C |
|
| (430,557) |
|
|
| (505,995) |
| |
Class I |
|
| (58,199,516) |
|
|
| (47,741,113) |
| |
Class Y |
|
| (19,314,782) |
|
|
| (20,130,902) |
| |
Total Distributions |
|
| (80,113,216) |
|
|
| (70,110,209) |
| |
Capital Stock Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 8,851,272 |
|
|
| 7,914,008 |
| |
Class C |
|
| 352,897 |
|
|
| 728,080 |
| |
Class I |
|
| 121,824,623 |
|
|
| 192,319,417 |
| |
Class Y |
|
| 267,649,784 |
|
|
| 51,753,770 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 1,974,862 |
|
|
| 1,567,224 |
| |
Class C |
|
| 403,712 |
|
|
| 438,484 |
| |
Class I |
|
| 54,658,318 |
|
|
| 45,792,622 |
| |
Class Y |
|
| 9,350,319 |
|
|
| 11,356,963 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (8,911,012) |
|
|
| (10,371,478) |
| |
Class C |
|
| (4,918,843) |
|
|
| (4,832,346) |
| |
Class I |
|
| (453,235,891) |
|
|
| (288,857,628) |
| |
Class Y |
|
| (84,245,826) |
|
|
| (146,256,945) |
| |
Increase (Decrease) in Net Assets | (86,245,785) |
|
|
| (138,447,829) |
| |||
Total Increase (Decrease) in Net Assets | 63,417,461 |
|
|
| 339,163 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 1,411,947,931 |
|
|
| 1,411,608,768 |
| |
End of Period |
|
| 1,475,365,392 |
|
|
| 1,411,947,931 |
|
15
STATEMENT OF CHANGES IN NET ASSETS (continued)
|
|
|
| Year Ended November 30, | |||||
|
|
|
| 2021 |
| 2020 |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class Aa,b |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 336,361 |
|
|
| 348,709 |
| |
Shares issued for distributions reinvested |
|
| 79,793 |
|
|
| 68,980 |
| |
Shares redeemed |
|
| (326,563) |
|
|
| (465,455) |
| |
Net Increase (Decrease) in Shares Outstanding | 89,591 |
|
|
| (47,766) |
| |||
Class Ca,b |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 13,892 |
|
|
| 33,765 |
| |
Shares issued for distributions reinvested |
|
| 16,970 |
|
|
| 19,949 |
| |
Shares redeemed |
|
| (196,604) |
|
|
| (231,461) |
| |
Net Increase (Decrease) in Shares Outstanding | (165,742) |
|
|
| (177,747) |
| |||
Class Ib |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 4,478,588 |
|
|
| 8,725,221 |
| |
Shares issued for distributions reinvested |
|
| 2,173,293 |
|
|
| 1,985,803 |
| |
Shares redeemed |
|
| (16,052,071) |
|
|
| (12,699,259) |
| |
Net Increase (Decrease) in Shares Outstanding | (9,400,190) |
|
|
| (1,988,235) |
| |||
Class Yb |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 9,222,646 |
|
|
| 2,423,472 |
| |
Shares issued for distributions reinvested |
|
| 372,523 |
|
|
| 493,352 |
| |
Shares redeemed |
|
| (3,048,463) |
|
|
| (7,037,762) |
| |
Net Increase (Decrease) in Shares Outstanding | 6,546,706 |
|
|
| (4,120,938) |
| |||
|
|
|
|
|
|
|
|
|
|
a | During the period ended November 30, 2021, 5,638 Class C shares representing $138,532 were automatically converted to 5,413 Class A shares and during the period ended November 30, 2020, 4,098 Class C shares representing $84,772 were automatically converted to 3,951 Class A shares. | ||||||||
b | During the period ended November 30, 2021, 235,093 Class Y shares representing $6,509,609 were exchanged for 234,700 Class I shares. During the period ended November 30, 2020, 4,073 Class A shares representing $92,020 were exchanged for 4,008 Class I shares, 436,841 Class Y shares representing $9,954,167 were exchanged for 436,147 Class I shares and 121 Class C shares representing $2,697 were exchanged for 115 Class I shares. | ||||||||
See notes to financial statements. |
16
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. These figures have been derived from the fund’s financial statements.
Year Ended November 30, | ||||||
Class A Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 25.74 | 23.07 | 21.08 | 21.53 | 17.51 | |
Investment Operations: | ||||||
Investment income—neta | .01 | .06 | .10 | .11 | .11 | |
Net realized and unrealized | 4.09 | 3.71 | 3.17 | 1.02 | 4.06 | |
Total from Investment Operations | 4.10 | 3.77 | 3.27 | 1.13 | 4.17 | |
Distributions: | ||||||
Dividends from | (.08) | (.10) | (.12) | (.15) | (.09) | |
Dividends from net realized | (1.35) | (1.00) | (1.16) | (1.43) | (.06) | |
Total Distributions | (1.43) | (1.10) | (1.28) | (1.58) | (.15) | |
Net asset value, end of period | 28.41 | 25.74 | 23.07 | 21.08 | 21.53 | |
Total Return (%)b | 16.72 | 17.00 | 17.04 | 5.61 | 24.04 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.20 | 1.23 | 1.21 | 1.20 | 1.22 | |
Ratio of net investment income | .03 | .27 | .46 | .52 | .60 | |
Portfolio Turnover Rate | 9.79 | 4.13 | 6.62 | 8.15 | 6.50 | |
Net Assets, end of period ($ x 1,000) | 45,402 | 38,828 | 35,891 | 29,369 | 25,477 |
a Based on average shares outstanding.
b Exclusive of sales charge.
See notes to financial statements.
17
FINANCIAL HIGHLIGHTS (continued)
Year Ended November 30, | ||||||
Class C Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 24.73 | 22.26 | 20.41 | 20.89 | 17.03 | |
Investment Operations: | ||||||
Investment (loss)—neta | (.19) | (.10) | (.05) | (.05) | (.02) | |
Net realized and unrealized | 3.92 | 3.57 | 3.06 | 1.00 | 3.94 | |
Total from Investment Operations | 3.73 | 3.47 | 3.01 | .95 | 3.92 | |
Distributions: | ||||||
Dividends from net realized | (1.35) | (1.00) | (1.16) | (1.43) | (.06) | |
Net asset value, end of period | 27.11 | 24.73 | 22.26 | 20.41 | 20.89 | |
Total Return (%)b | 15.83 | 16.15 | 16.12 | 4.85 | 23.11 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.97 | 1.98 | 1.96 | 1.97 | 1.99 | |
Ratio of net investment | (.77) | (.45) | (.25) | (.22) | (.10) | |
Portfolio Turnover Rate | 9.79 | 4.13 | 6.62 | 8.15 | 6.50 | |
Net Assets, end of period ($ x 1,000) | 4,401 | 8,114 | 11,260 | 11,008 | 13,132 |
a Based on average shares outstanding.
b Exclusive of sales charge.
See notes to financial statements.
18
Year Ended November 30, | ||||||
Class I Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 26.19 | 23.44 | 21.41 | 21.83 | 17.76 | |
Investment Operations: | ||||||
Investment income—neta | .09 | .12 | .15 | .17 | .18 | |
Net realized and unrealized | 4.16 | 3.78 | 3.21 | 1.04 | 4.10 | |
Total from Investment Operations | 4.25 | 3.90 | 3.36 | 1.21 | 4.28 | |
Distributions: | ||||||
Dividends from | (.14) | (.15) | (.17) | (.20) | (.15) | |
Dividends from net realized | (1.35) | (1.00) | (1.16) | (1.43) | (.06) | |
Total Distributions | (1.49) | (1.15) | (1.33) | (1.63) | (.21) | |
Net asset value, end of period | 28.95 | 26.19 | 23.44 | 21.41 | 21.83 | |
Total Return (%) | 17.07 | 17.32 | 17.32 | 5.89 | 24.40 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .93 | .96 | .97 | .94 | .98 | |
Ratio of net investment income | .31 | .53 | .71 | .78 | .92 | |
Portfolio Turnover Rate | 9.79 | 4.13 | 6.62 | 8.15 | 6.50 | |
Net Assets, end of period ($ x 1,000) | 862,835 | 1,026,985 | 965,481 | 858,817 | 901,556 |
a Based on average shares outstanding.
See notes to financial statements.
19
FINANCIAL HIGHLIGHTS (continued)
Year Ended November 30, | ||||||
Class Y Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 26.16 | 23.41 | 21.38 | 21.81 | 17.74 | |
Investment Operations: | ||||||
Investment income—neta | .08 | .14 | .17 | .18 | .19 | |
Net realized and unrealized | 4.17 | 3.78 | 3.20 | 1.04 | 4.10 | |
Total from Investment Operations | 4.25 | 3.92 | 3.37 | 1.22 | 4.29 | |
Distributions: | ||||||
Dividends from | (.15) | (.17) | (.18) | (.22) | (.16) | |
Dividends from net realized | (1.35) | (1.00) | (1.16) | (1.43) | (.06) | |
Total Distributions | (1.50) | (1.17) | (1.34) | (1.65) | (.22) | |
Net asset value, end of period | 28.91 | 26.16 | 23.41 | 21.38 | 21.81 | |
Total Return (%) | 17.11 | 17.43 | 17.36 | 5.98 | 24.47 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .89 | .89 | .89 | .89 | .90 | |
Ratio of net investment income | .29 | .62 | .80 | .85 | .99 | |
Portfolio Turnover Rate | 9.79 | 4.13 | 6.62 | 8.15 | 6.50 | |
Net Assets, end of period ($ x 1,000) | 562,727 | 338,021 | 398,977 | 358,526 | 355,729 |
a Based on average shares outstanding.
See notes to financial statements.
20
NOTES TO FINANCIAL STATEMENTS
NOTE 1—Significant Accounting Policies:
BNY Mellon Global Stock Fund (the “fund”) is a separate diversified series of BNY Mellon Strategic Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering six series, including the fund. The fund’s investment objective is to seek long-term total return. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Walter Scott & Partners Limited (the “Sub-Adviser”), a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser, serves as the fund’s sub-investment adviser.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue 600 million shares of $.001 par value Common Stock. The fund currently has authorized four classes of shares: Class A (100 million shares authorized), Class C (100 million shares authorized), Class I (250 million shares authorized) and Class Y (150 million shares authorized). Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class A shares bought without an initial sales charge as part of an investment of $1 million or more may be charged a contingent deferred sales charge (“CDSC”) of 1.00% if redeemed within one year. Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares eight years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and
21
NOTES TO FINANCIAL STATEMENTS (continued)
unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the 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 Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
22
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 Company’s Board of Directors (the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that
23
NOTES TO FINANCIAL STATEMENTS (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 November 30, 2021 in valuing the fund’s investments:
Level 1-Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | Level 3-Significant Unobservable Inputs | Total | |||
Assets ($) | ||||||
Investments In Securities:† | ||||||
Equity Securities - Common Stocks | 927,742,626 | 525,243,123 | †† | - | 1,452,985,749 | |
Investment Companies | 19,642,602 | - | - | 19,642,602 |
† 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.
Foreign taxes: The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and
24
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 November 30, 2021, if any, are disclosed in the fund’s Statement of Assets and Liabilities.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended November 30, 2021, The Bank of New York Mellon earned $175 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
25
NOTES TO FINANCIAL STATEMENTS (continued)
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 investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
26
As of and during the period ended November 30, 2021, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended November 30, 2021, the fund did not incur any interest or penalties.
Each tax year in the four-year period ended November 30, 2021 remains subject to examination by the Internal Revenue Service and state taxing authorities.
At November 30, 2021, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $5,393,971, undistributed capital gains $127,943,942 and unrealized appreciation $886,747,610.
The tax character of distributions paid to shareholders during the fiscal periods ended November 30, 2021 and November 30, 2020 were as follows: ordinary income $11,198,204 and $9,789,271, and long-term capital gains $68,915,012 and $60,320,938, respectively.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $688.5 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $135 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing.
The average amount of borrowings outstanding under the Facilities during the period ended November 30, 2021 was approximately $62,466 with a related weighted average annualized interest rate of 1.20%.
27
NOTES TO FINANCIAL STATEMENTS (continued)
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement with the Adviser, the management fee is computed at the annual rate of .85% of the value of the fund’s average daily net assets and is payable monthly.
Pursuant to a sub-investment advisory agreement between the Adviser and the Sub-Adviser, the Adviser pays the Sub-Adviser a monthly fee at an annual rate of .41% of the value of the fund’s average daily net assets.
During the period ended November 30, 2021, the Distributor retained $2,129 from commissions earned on sales of the fund’s Class A shares and $157 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 November 30, 2021, Class C shares were charged $40,316 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 November 30, 2021, Class A and Class C shares were charged $113,309 and $13,439, respectively, pursuant to the Shareholder Services Plan.
The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. For financial reporting purposes, the fund includes net earnings credits, if any, as shareholder servicing costs in the Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this
28
interest income and overdraft fees, if any, as interest income in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended November 30, 2021, the fund was charged $20,598 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended November 30, 2021, the fund was charged $76,377 pursuant to the custody agreement.
During the period ended November 30, 2021, the fund was charged $14,028 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 $1,073,317, Distribution Plan fees of $2,846, Shareholder Services Plan fees of $10,668, custodian fees of $30,171, Chief Compliance Officer fees of $5,897 and transfer agency fees of $3,283.
(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 November 30, 2021, amounted to $141,424,965 and $305,723,081, 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
29
NOTES TO FINANCIAL STATEMENTS (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 November 30, 2021 is discussed below.
Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the 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 November 30, 2021, there were no forward contracts outstanding.
The following summarizes the average market value of derivatives outstanding during the period ended November 30, 2021:
|
| Average Market Value ($) |
Forward contracts |
| 22,623 |
At November 30, 2021, the cost of investments for federal income tax purposes was $585,950,175; accordingly, accumulated net unrealized appreciation on investments was $886,678,176, consisting of $891,753,259 gross unrealized appreciation and $5,075,083 gross unrealized depreciation.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of BNY Mellon Global Stock Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of BNY Mellon Global Stock Fund (the “Fund”) (one of the funds constituting BNY Mellon Strategic Funds, Inc.), including the statements of investments and investments in affiliated issuers, as of November 30, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting BNY Mellon Strategic Funds, Inc.) at November 30, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of November 30, 2021, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the BNY Mellon Family of Funds since at least 1957, but we are unable to determine the specific year.
New York, New York
January 24, 2022
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IMPORTANT TAX INFORMATION (Unaudited)
For federal tax purposes the fund hereby reports 67.92% of the ordinary dividends paid during the fiscal year ended November 30, 2021 as qualifying for the corporate dividends received deduction. Also certain dividends paid by the fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the distributions paid during the fiscal year, $11,198,204 represents the maximum amount that may be considered qualified dividend income. Shareholders will receive notification in early 2022 of the percentage applicable to the preparation of their 2021 income tax returns. Also, the fund hereby reports $.0686 per share as a short-term capital gain distribution and $1.2786 per share as a long-term capital gain distribution paid on December 14, 2020.
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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 Directors held on November 1-2, 2021, the Board considered the renewal of the fund’s Management Agreement pursuant to which the Adviser provides the fund with investment advisory and administrative services (the “Agreement”), and the Sub-Investment Advisory Agreement (together, the “Agreements”), pursuant to which Walter Scott & Partners Limited (the “Subadviser”), provides day-to-day management of the fund’s investments. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser and the Subadviser. In considering the renewal of the Agreements, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s supervisory activities over the Subadviser. The Board also considered portfolio management’s brokerage policies and practices (including 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 group of institutional global large-cap growth funds selected by Broadridge as comparable to the fund (the “Performance Group”) and with a broader group of funds
33
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
consisting of all retail and institutional global large-cap growth funds (the “Performance Universe”), all for various periods ended September 30, 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 large-cap growth funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Performance Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser and the Subadviser the results of the comparisons and considered that the fund’s total return performance was at or above the Performance Group median for all periods, except for the one-, two- and ten-year periods when it was below the median, and was below the Performance Universe medians for all periods. The Board considered the relative proximity of the fund’s performance to the Performance Group and/or Performance Universe medians in certain periods when performance was below median. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in seven of the ten calendar years shown.
Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management and sub-advisory services provided by the Adviser and the Subadviser, respectively. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year.
The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was higher than the Expense Group median contractual management fee, the fund’s actual management fee was higher than the Expense Group median and 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 reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by the Adviser that are in the same Lipper category as the fund and (2) paid to the Adviser or the Subadviser or its affiliates for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed
34
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.
The Board considered the fee payable to the Subadviser in relation to the fee payable to the Adviser by the fund and the respective services provided by the Subadviser and the Adviser. The Board also took into consideration that the Subadviser’s fee is paid by the Adviser, out of its fee from the fund, and not the fund.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the mix of services provided by the Adviser and the Subadviser, including the nature, extent and quality of such services, supported the renewal of the Agreements and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Since the Adviser, and not the fund, pays the Subadviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Subadviser’s profitability to be relevant to its deliberations. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser and the Subadviser from acting as investment adviser and sub-investment adviser, respectively, and took into consideration 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.
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
· The Board concluded that the nature, extent and quality of the services provided by the Adviser and the Subadviser are adequate and appropriate.
· The Board generally was satisfied with the fund’s overall performance.
· The Board concluded that the fees paid to the Adviser and the Subadviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates and the Subadviser, of the Adviser and the Subadviser and the services provided to the fund by the Adviser and the Subadviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreements, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
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BOARD MEMBERS INFORMATION (Unaudited)
Independent Board Members
Joseph S. DiMartino (78)
Chairman of the Board (1995)
Principal Occupation During Past 5 Years:
· Director and Trustee of funds in the BNY Mellon Family of Funds and certain other entities (as described in the fund’s Statement of Additional Information) (1995-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ, Inc., a public company providing professional business services, products and solutions, Director (1997-Present)
No. of Portfolios for which Board Member Serves: 97
———————
Joni Evans (79)
Board Member (2006)
Principal Occupation During Past 5 Years:
· www.wowOwow.com, an online community dedicated to women’s conversations and publications, Chief Executive Officer (2007-2019)
· Joni Evans Ltd. publishing, Principal (2006-2019)
No. of Portfolios for which Board Member Serves: 18
———————
Joan Gulley (74)
Board Member (2017)
Principal Occupation During Past 5 Years:
· Nantucket Atheneum, public library, Chair (2018-June 2021) and Director (2015-June 2021)
· Orchard Island Club, golf and beach club, Governor (2016-Present)
No. of Portfolios for which Board Member Serves: 42
———————
37
BOARD MEMBERS INFORMATION (Unaudited) (continued)
Alan H. Howard (62)
Board Member (2018)
Principal Occupation During Past 5 Years:
· Heathcote Advisors LLC, a financial advisory services firm, Managing Partner (2008-Present)
· Dynatech/MPX Holdings LLC, a global supplier and service provider of military aircraft parts, President (2012-2019); and Board Member of its two operating subsidiaries, Dynatech International LLC and Military Parts Exchange LLC (2012-2019), including Chief Executive Officer of an operating subsidiary, Dynatech International LLC (2013-2019)
· Rossoff & Co., an independent investment banking firm, Senior Advisor (2013-June 2021)
Other Public Company Board Memberships During Past 5 Years:
· Movado Group, Inc., a public company that designs, sources, markets and distributes watches, Director (1997-Present)
· Diamond Offshore Drilling, Inc., a public company that provides contract drilling services, Director (March 2020-April 2021)
No. of Portfolios for which Board Member Serves: 18
———————
Robin A. Melvin (58)
Board Member (1995)
Principal Occupation During Past 5 Years:
· Westover School, a private girls’ boarding school in Middlebury, Connecticut, Trustee (2019-Present)
· Mentor Illinois, a non-profit organization dedicated to increasing the quality of mentoring services in Illinois. Co-Chair (2014–2020); Board Member, Mentor Illinois (2013-2020)
· JDRF, a non-profit juvenile diabetes research foundation, Board Member (June 2021-Present)
Other Public Company Board Memberships During Past 5 Years:
· HPS Corporate Lending Fund, a closed-end management investment company regulated as a business development company, Trustee (August 2021-Present)
No. of Portfolios for which Board Member Serves: 75
———————
Burton N. Wallack (71)
Board Member (2006)
Principal Occupation During Past 5 Years:
Wallack Management Company, a real estate management company, President and Co-owner (1987-Present)
Other Public Company Board Memberships During Past 5 Years:
Mount Sinai Hospital Urology Board Member (2017-Present)
No. of Portfolios for which Board Member Serves: 18
———————
38
Benaree Pratt Wiley (75)
Board Member (2016)
Principal Occupation During Past 5 Years:
· The Wiley Group, a firm specializing in strategy and business development. Principal (2005-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ, Inc., a public company providing professional business services, products and solutions, Director (2008-Present)
· Blue Cross Blue Shield of Massachusetts Director (2004-2020)
No. of Portfolios for which Board Member Serves: 63
———————
Gordon J. Davis (80)
Advisory Board Member (2021)
Principal Occupation During Past 5 Years:
· Venable LLP, a law firm Partner (2012-Present)
No. of Portfolios for which Advisory Board Member Serves: 41
———————
Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80. The address of the Board Members and Officers is c/o BNY Mellon Investment Adviser, Inc. 240 Greenwich Street, New York, New York 10286. Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from the Adviser free of charge by calling this toll free number: 1-800-373-9387.
William Hodding Carter III, Emeritus Board Member
Ehud Houminer, Emeritus Board Member
Hans C. Mautner, Emeritus Board Member
39
OFFICERS OF THE FUND (Unaudited)
DAVID DIPETRILLO, President since January 2021.
Vice President and Director of the Adviser since February 2021; Head of North America Product, BNY Mellon Investment Management since January 2018; Director of Product Strategy, BNY Mellon Investment Management from January 2016 to December 2017. He is an officer of 57 investment companies (comprised of 107 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 43 years old and has been an employee of BNY Mellon since 2005.
JAMES WINDELS, Treasurer since November 2001.
Vice President of the Adviser since September 2020; Director–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 63 years old and has been an employee of the Adviser since April 1985.
PETER M. SULLIVAN, Chief Legal Officer since July 2021 and Vice President and Assistant Secretary since March 2019.
Chief Legal Officer of the Adviser since July 2021; Associate General Counsel of BNY Mellon since July 2021; Senior Managing Counsel of BNY Mellon from December 2020 to July 2021; Managing Counsel of BNY Mellon from March 2009 to December 2020, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of BNY Mellon since April 2004.
JAMES BITETTO, Vice President since August 2005 and Secretary since February 2018.
Senior Managing Counsel of BNY Mellon since December 2019; Managing Counsel of BNY Mellon from April 2014 to December 2019; Secretary of the Adviser, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 55 years old and has been an employee of the Adviser since December 1996.
DEIRDRE CUNNANE, Vice President and Assistant Secretary since March 2019.
Counsel of BNY Mellon since August 2018; Senior Regulatory Specialist at BNY Mellon Investment Management Services from February 2016 to August 2018. She is an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 31 years old and has been an employee of the Adviser since August 2018.
SARAH S. KELLEHER, Vice President and Assistant Secretary since April 2014.
Vice President since February 2020 of BNY Mellon ETF Investment Adviser; LLC; Senior Managing Counsel of BNY Mellon since September 2021; Managing Counsel from December 2017 to September 2021; Senior Counsel of BNY Mellon from March 2013 to December 2017. She is an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 46 years old and has been an employee of the Adviser since March 2013.
JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.
Senior Managing Counsel of BNY Mellon, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 56 years old and has been an employee of the Adviser since October 1990.
AMANDA QUINN, Vice President and Assistant Secretary since March 2020.
Counsel of BNY Mellon since June 2019; Regulatory Administration Manager at BNY Mellon Investment Management Services from September 2018 to May 2019; Senior Regulatory Specialist at BNY Mellon Investment Management Services from April 2015 to August 2018. She is an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 36 years old and has been an employee of the Adviser since June 2019.
40
NATALYA ZELENSKY, Vice President and Assistant Secretary since March 2017.
Chief Compliance Officer since August 2021 and Vice President since February 2020 of BNY Mellon ETF Investment Adviser, LLC; Chief Compliance Officer since August 2021 and Vice President and Assistant Secretary since February 2020 of BNY Mellon ETF Trust; Managing Counsel from December 2019 to August 2021 of BNY Mellon; Counsel from May 2016 to December 2019 of BNY Mellon; Assistant Secretary of the Adviser from April 2018 to August 2021. She is an officer of 57 investment companies (comprised of 128 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 36 years old and has been an employee of BNY Mellon since May 2016.
GAVIN C. REILLY, Assistant Treasurer since December 2005.
Tax Manager–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of the Adviser since April 1991.
ROBERT SALVIOLO, Assistant Treasurer since July 2007.
Senior Accounting Manager–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 54 years old and has been an employee of the Adviser since June 1989.
ROBERT SVAGNA, Assistant Treasurer since December 2002.
Senior Accounting Manager–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 54 years old and has been an employee of the Adviser since November 1990.
JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.
Chief Compliance Officer of the BNY Mellon Family of Funds and BNY Mellon Funds Trust since 2004; Chief Compliance Officer of the Adviser from 2004 until June 2021. He is an officer of 57 investment companies (comprised of 119 portfolios) managed by the Adviser. He is 64 years old.
CARIDAD M. CAROSELLA, Anti-Money Laundering Compliance Officer since January 2016.
Anti-Money Laundering Compliance Officer of the BNY Mellon Family of Funds and BNY Mellon Funds Trust. She is an officer of 50 investment companies (comprised of 121 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 53 years old and has been an employee of the Distributor since 1997.
41
BNY Mellon Global Stock Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Walter Scott & Partners Limited
One Charlotte Square
Edinburgh, Scotland, 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: DGLAX Class C: DGLCX Class I: DGLRX Class Y: DGLYX |
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 Stock Fund
ANNUAL REPORT November 30, 2021 |
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The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
Information About the Renewal of | |
FOR MORE INFORMATION
Back Cover
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from December 1, 2020 through November 30, 2021, as provided by Charlie Macquaker, Roy Leckie and Jane Henderson, the three members of the Investment Executive at Walter Scott & Partners Limited (WS), Sub-Investment Adviser
Market and Fund Performance Overview
For the 12-month period ended November 30, 2021, the BNY Mellon International Stock Fund’s Class A shares achieved a total return of 9.58%, Class C shares returned 8.85%, Class I shares returned 10.01% and Class Y shares returned 10.02%.1 In comparison, the fund’s benchmark index, the MSCI EAFE® Index (the “Index”), achieved a return of 10.77% for the same period.2
International stocks gained ground during the period, supported by an environment of economic growth, accommodative monetary policies and strong corporate financial results. The fund trailed the Index, due primarily to allocation and stock selection effects in the financials sector, as well as stock selection in the industrials sector. From a geographic perspective, relative returns suffered most from disappointing stock selections in U.K., Japan and Pacific ex-Japan.
The Fund’s Investment Approach
The fund seeks long-term total returns. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in stocks. The fund normally invests primarily in foreign companies located in developed markets. The fund ordinarily invests in at least three countries and is not geographically limited in its investment selection but, at times, may invest a substantial portion of its assets in a single country. The fund may invest in the securities of companies of any market capitalization. Walter Scott seeks investment opportunities in companies with fundamental strengths that indicate the potential for sustainable growth. Walter Scott focuses on individual stock selection, building the fund’s portfolio from the bottom up through extensive fundamental research. The investment process begins with the screening of reported company financials. Companies that meet certain broad, absolute and trend criteria are candidates for more detailed financial analysis. The fund’s Investment Team collectively reviews and selects those stocks that meet Walter Scott’s criteria, and where the expected growth rate is combined with a reasonable valuation for the underlying equity. Geographic and sector allocations are results of, not part of, the investment process, because the Investment Team’s sole focus is on the analysis of and investment in individual companies.
Markets Gain on Accommodative Monetary Policy and Corporate Earnings Strength
International equity markets made excellent progress much of the period, continuing the strong recovery that began after the initial shockwaves of the COVID-19 pandemic in early 2020. News that several COVID-19 vaccines had been developed so soon after the discovery of the virus, a feat of genuine scientific ingenuity, gave cause for optimism in the closing stages of 2020, despite rising infection rates across much of the world. Alongside ongoing monetary and fiscal support, economic recovery and robust corporate earnings, the arrival of powerful weapons with which to fight the virus provided real impetus for international equity markets through the first half of 2021.
2
While the direction of government policy in China and the ramifications for future economic growth in the country worried investors, the market’s most pressing concerns were global supply-chain disruptions and inflationary pressures. Confidently dismissed as “transient” phenomena by central bankers for much of 2021, the persistence of both gave cause for investors to question the implications for monetary policy, economic growth, and corporate profitability. These concerns caused international equity markets to trade sideways from June through the end of period. The arrival of the Omicron COVID-19 variant added another ingredient to this cocktail of concerns during the closing weeks of the period.
Stock Selection Determined Relative Performance
The fund’s results lagged the Index, primarily due to security selection in the industrials sector, followed by allocation and selection effects in financials, and selection in energy, materials and consumer discretionary. Notable individual detractors from performance included Japanese electronic component manufacturer Murata Manufacturing, Denmark-based bioscience firm Chr. Hansen Holding, Japanese automation company FANUC, Finland-based engineering firm Kone and Japanese air conditioning manufacturer Daikin Industries. From a geographic point of view, disappointing stock selections in the U.K., Japan and Pacific ex-Japan region detracted.
Conversely, the fund’s relative returns benefited from strong stock selection in the health care sector, led by Denmark-based pharmaceutical firm Novo Nordisk and Germany-based pharmaceutical company Merck KGaA. Overweight allocation and strong selections in information technology further bolstered relative performance, led by Netherlands-based semiconductor maker ASML Holding, France-based 3D design software developer Dassault Systèmes and Taiwan Semiconductor Manufacturing. Geographically, strong selection in Europe ex-U.K. provided the strongest boost to the fund’s relative returns.
Maintaining a Long-Term Approach
In addition to concerns regarding the latest COVID-19 variant, investors worried that rising supply-chain-driven inflation could impinge on corporate margins and compel some central banks to wind back the monetary largesse helping to support equity markets. However, for many countries, support for growth has thus far proved more important than what is seen as transient inflation. Given the increasing uncertainty over the future trajectory of economic recovery, and expectations that supply-chain distortions will ultimately be resolved, we expect central banks to tread cautiously in terms of significant monetary tightening. That said, a coming together of higher borrowing costs, prices and wages poses a challenge to corporate earnings and margins at a time when many equity indices are trading close to record highs. Earnings may be hard pressed to continue to justify current equity valuations, and a period of realignment between fundamentals and valuations may be inevitable.
At the same time, we see abundant opportunities for financially strong, well-managed, resilient companies to prosper. The fund’s disciplined, bottom-up stock selection process is designed to identify just such investment opportunities. As a result of that process, as of the end of the period, the fund holds its most overweight sector exposures relative to the Index in health care and information technology, followed by industrials and materials. The fund is finding relatively few attractive investment opportunities in the financials sector, while holding more mildly underweight exposure to communication services, consumer discretionary, energy, utilities and real estate. Geographically, the fund’s most overweight
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
exposures are to Canada and emerging markets. The fund’s most significantly underweight regional exposures are to the U.K., Asia Pacific ex-Japan and Europe ex-U.K.
December 15, 2021
1 DUE TO RECENT MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE DIFFERENT THAN THE FIGURES SHOWN. Investors should note that the fund’s short-term performance is highly unusual, in part due to unusually favorable market conditions, and is unlikely to be repeated or consistently achieved in the future. Total return includes reinvestment of dividends and any capital gains paid and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost.
2 Source: Lipper Inc. — The MSCI EAFE® Index (Europe, Australasia, Far East) is a free float-adjusted, market capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. It reflects reinvestment of net dividends and, where applicable, capital gain distributions. Investors cannot invest directly in any index.
Equities are subject generally to market, market sector, market liquidity, issuer and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
Investing internationally involves special risks, including changes in currency exchange rates, political, economic, and social instability, a lack of comprehensive company information, differing auditing and legal standards, and less market liquidity.
The fund may, but is not required to, use derivative instruments. A small investment in derivatives could have a potentially large impact on the fund’s performance. The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
4
FUND PERFORMANCE (Unaudited)
Comparison of change in value of a $10,000 investment in Class A shares, Class C shares, and Class I shares of BNY Mellon International Stock Fund with a hypothetical investment of $10,000 in the MSCI EAFE® Index (the “Index”).
† Source: Lipper Inc.
Past performance is not predictive of future performance.
The above graph compares a hypothetical investment of $10,000 made in each of the Class A shares, Class C shares, and Class I shares of BNY Mellon International Stock Fund on 11/30/11 to a hypothetical investment of $10,000 made in the Index on that date. All dividends and capital gain distributions are reinvested.
The fund’s performance shown in the line graph above takes into account the maximum initial sales charge on Class A shares and all other applicable fees and expenses on all classes. The Index (Europe, Australasia, Far East) is a free float-adjusted market
capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report.
5
FUND PERFORMANCE (Unaudited) (continued)
Comparison of change in value of a $1,000,000 investment in Class Y shares of BNY Mellon International Stock Fund with a hypothetical investment of $1,000,000 in the MSCI EAFE® Index (the “Index”).
† Source: Lipper Inc.
†† The total return figures presented for Class Y shares of the fund reflect the performance of the fund’s Class A shares for the period prior to 7/1/13 (the inception date for Class Y shares), not reflecting the applicable sales charges for Class A shares.
Past performance is not predictive of future performance.
The above graph compares a hypothetical investment of $1,000,000 made in Class Y shares of BNY Mellon International Stock Fund on 11/30/11 to a hypothetical investment of $1,000,000 made in the Index on that date. All dividends and capital gain distributions are reinvested.
The fund’s performance shown in the line graph above takes into account all other applicable fees and expenses of fund’s Class Y shares. The Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report.
6
Average Annual Total Returns as of 11/30/2021 | ||||
Inception | ||||
| Date | 1 Year | 5 Years | 10 Years |
Class A shares | ||||
with maximum sales charge (5.75%) | 12/29/06 | 3.28% | 12.14% | 8.17% |
without sales charge | 12/29/06 | 9.58% | 13.47% | 8.82% |
Class C shares | ||||
with applicable redemption charge† | 12/29/06 | 7.85% | 12.65% | 8.02% |
without redemption | 12/29/06 | 8.85% | 12.65% | 8.02% |
Class I shares | 12/29/06 | 10.01% | 13.87% | 9.20% |
Class Y shares | 7/1/13 | 10.02% | 13.89% | 9.13%†† |
MSCI EAFE Index | 10.77% | 9.19% | 7.39% |
† The maximum contingent deferred sales charge for Class C shares is 1% for shares redeemed within one year of the date of purchase.
†† The total return performance figures presented for Class Y shares of the fund reflect the performance of the fund’s Class A shares for the period prior to 7/1/13 (the inception date for Class Y shares), not reflecting the applicable sales charges for Class A shares.
The performance data quoted represents past performance, which is no guarantee of future results. Share price and investment return fluctuate and an investor’s shares may be worth more or less than original cost upon redemption. Current performance may be lower or higher than the performance quoted. Go to www.im.bnymellon.com for the fund’s most recent month-end returns.
The fund’s performance shown in the graphs and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. In addition to the performance of Class A shares shown with and without a maximum sales charge, the fund’s performance shown in the table takes into account all other applicable fees and expenses on all classes.
7
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 Stock Fund from June 1, 2021 to November 30, 2021. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended November 30, 2021 |
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| Class A | Class C | Class I | Class Y |
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Expenses paid per $1,000† | $6.32 | $9.81 | $4.57 | $4.42 |
| |
Ending value (after expenses) | $999.60 | $996.00 | $1,001.60 | $1,001.60 |
|
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 November 30, 2021 |
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| Class A | Class C | Class I | Class Y |
|
Expenses paid per $1,000† | $6.38 | $9.90 | $4.61 | $4.46 |
| |
Ending value (after expenses) | $1,018.75 | $1,015.24 | $1,020.51 | $1,020.66 |
| |
† | Expenses are equal to the fund’s annualized expense ratio of 1.26% for Class A, 1.96% for Class C, .91% for Class I and .88% for Class Y, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
8
STATEMENT OF INVESTMENTS
November 30, 2021
Description | Shares | Value ($) | |||||
Common Stocks - 97.4% | |||||||
Australia - 3.1% | |||||||
Cochlear | 431,100 | 66,011,388 | |||||
CSL | 686,800 | 148,454,876 | |||||
214,466,264 | |||||||
Canada - 4.4% | |||||||
Alimentation Couche-Tard, Cl. B | 4,259,900 | 156,063,502 | |||||
Canadian National Railway | 1,218,400 | 154,378,038 | |||||
310,441,540 | |||||||
Denmark - 8.6% | |||||||
Chr. Hansen Holding | 1,592,000 | 118,454,790 | |||||
Coloplast, Cl. B | 684,800 | 112,351,400 | |||||
Novo Nordisk, Cl. B | 2,033,000 | 217,692,443 | |||||
Novozymes, Cl. B | 2,005,512 | 152,399,197 | |||||
600,897,830 | |||||||
Finland - 1.5% | |||||||
Kone, Cl. B | 1,564,500 | 102,955,133 | |||||
France - 10.9% | |||||||
Air Liquide | 782,600 | 129,433,573 | |||||
Dassault Systemes | 3,026,000 | 182,414,247 | |||||
L'Oreal | 358,000 | 161,416,828 | |||||
LVMH | 256,400 | 199,031,255 | |||||
TotalEnergies | 2,042,104 | 93,868,841 | |||||
766,164,744 | |||||||
Germany - 6.4% | |||||||
adidas | 448,300 | 130,004,317 | |||||
Merck | 748,400 | 185,744,797 | |||||
SAP | 1,047,700 | 134,491,653 | |||||
450,240,767 | |||||||
Hong Kong - 5.7% | |||||||
AIA Group | 15,578,600 | 163,916,918 | |||||
CLP Holdings | 9,862,500 | a | 96,456,443 | ||||
Hang Lung Properties | 40,583,000 | a | 80,256,428 | ||||
Jardine Matheson Holdings | 983,100 | 55,553,628 | |||||
396,183,417 | |||||||
Ireland - 2.4% | |||||||
Experian | 3,750,400 | 168,130,581 | |||||
Japan - 22.5% | |||||||
Daikin Industries | 795,100 | 161,497,070 | |||||
FANUC | 661,200 | 128,978,178 | |||||
Hoya | 1,120,900 | 177,085,422 | |||||
Keyence | 427,280 | 263,887,809 | |||||
Makita | 2,050,900 | 89,814,737 |
9
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 97.4% (continued) | |||||||
Japan - 22.5% (continued) | |||||||
MISUMI Group | 1,837,800 | 77,367,800 | |||||
Murata Manufacturing | 1,900,000 | 139,359,018 | |||||
Shin-Etsu Chemical | 1,011,600 | 169,125,237 | |||||
SMC | 314,100 | 200,430,274 | |||||
Sysmex | 1,382,900 | 171,229,355 | |||||
1,578,774,900 | |||||||
Netherlands - 3.7% | |||||||
ASML Holding | 331,990 | 260,146,644 | |||||
Spain - 2.0% | |||||||
Industria de Diseno Textil | 4,400,000 | 138,627,412 | |||||
Switzerland - 14.8% | |||||||
Givaudan | 33,400 | 163,551,056 | |||||
Kuehne + Nagel International | 667,600 | 191,520,076 | |||||
Lonza Group | 98,830 | 79,729,308 | |||||
Nestle | 1,219,000 | 156,706,540 | |||||
Novartis | 1,630,100 | 130,303,488 | |||||
Roche Holding | 482,300 | 188,759,806 | |||||
SGS | 42,000 | 126,939,539 | |||||
1,037,509,813 | |||||||
Taiwan - 3.6% | |||||||
Taiwan Semiconductor Manufacturing, ADR | 2,177,200 | 255,058,980 | |||||
United Kingdom - 7.8% | |||||||
Compass Group | 6,860,800 | 133,049,117 | |||||
Diageo | 3,553,000 | 179,068,750 | |||||
Prudential | 7,135,700 | 120,245,964 | |||||
Smith & Nephew | 6,856,300 | 110,270,804 | |||||
542,634,635 | |||||||
Total Common Stocks (cost $3,982,357,375) | 6,822,232,660 | ||||||
1-Day | |||||||
Investment Companies - 2.2% | |||||||
Registered Investment Companies - 2.2% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 0.06 | 155,670,618 | b | 155,670,618 |
10
Description | 1-Day | Shares | Value ($) | ||||
Investment of Cash Collateral for Securities Loaned - .0% | |||||||
Registered Investment Companies - .0% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares | 0.06 | 244,138 | b | 244,138 | |||
Total Investments (cost $4,138,272,131) | 99.6% | 6,978,147,416 | |||||
Cash and Receivables (Net) | .4% | 24,793,159 | |||||
Net Assets | 100.0% | 7,002,940,575 |
ADR—American Depository Receipt
a Security, or portion thereof, on loan. At November 30, 2021, the value of the fund’s securities on loan was $232,009 and the value of the collateral was $244,138. In addition, the value of collateral may include pending sales that are also on loan.
b Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
Portfolio Summary (Unaudited) † | Value (%) |
Pharmaceuticals Biotechnology & Life Sciences | 13.6 |
Capital Goods | 11.7 |
Materials | 10.5 |
Health Care Equipment & Services | 9.1 |
Semiconductors & Semiconductor Equipment | 7.3 |
Technology Hardware & Equipment | 5.8 |
Transportation | 4.9 |
Food, Beverage & Tobacco | 4.8 |
Consumer Durables & Apparel | 4.7 |
Software & Services | 4.5 |
Commercial & Professional Services | 4.2 |
Insurance | 4.1 |
Household & Personal Products | 2.3 |
Food & Staples Retailing | 2.2 |
Investment Companies | 2.2 |
Retailing | 2.0 |
Consumer Services | 1.9 |
Utilities | 1.4 |
Energy | 1.3 |
Real Estate | 1.1 |
99.6 |
† Based on net assets.
See notes to financial statements.
11
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS
Investment Companies | Value | Purchases ($)† | Sales ($) | Value | Net | Dividends/ | ||
Registered Investment Companies; | ||||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 128,302,457 | 990,504,992 | (963,136,831) | 155,670,618 | 2.2 | 103,095 | ||
Investment of Cash Collateral for Securities Loaned; | ||||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares | 605,800 | 8,378,060 | (8,739,722) | 244,138 | .0 | 10,731†† | ||
Total | 128,908,257 | 998,883,052 | (971,876,553) | 155,914,756 | 2.2 | 113,826 |
† Included reinvested dividends/distributions.
†† Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
See notes to financial statements.
12
STATEMENT OF ASSETS AND LIABILITIES
November 30, 2021
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| Cost |
| Value |
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Assets ($): |
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Investments in securities—See Statement of Investments |
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|
| |||
Unaffiliated issuers | 3,982,357,375 |
| 6,822,232,660 |
| ||
Affiliated issuers |
| 155,914,756 |
| 155,914,756 |
| |
Cash denominated in foreign currency |
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| 2,382,997 |
| 2,390,982 |
|
Tax reclaim receivable—Note 1(b) |
| 19,510,571 |
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Receivable for shares of Common Stock subscribed |
| 7,760,388 |
| |||
Dividends and securities lending income receivable |
| 4,064,138 |
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Prepaid expenses |
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| 60,999 |
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| 7,011,934,494 |
|
Liabilities ($): |
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Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 5,412,014 |
| |||
Payable for shares of Common Stock redeemed |
| 2,841,640 |
| |||
Liability for securities on loan—Note 1(c) |
| 244,138 |
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Directors’ fees and expenses payable |
| 86,595 |
| |||
Other accrued expenses |
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|
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| 409,532 |
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|
| 8,993,919 |
|
Net Assets ($) |
|
| 7,002,940,575 |
| ||
Composition of Net Assets ($): |
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|
|
| ||
Paid-in capital |
|
|
|
| 4,100,006,175 |
|
Total distributable earnings (loss) |
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|
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| 2,902,934,400 |
|
Net Assets ($) |
|
| 7,002,940,575 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 74,707,280 | 11,189,828 | 3,847,708,114 | 3,069,335,353 |
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Shares Outstanding | 2,911,572 | 446,409 | 148,699,166 | 120,046,474 |
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Net Asset Value Per Share ($) | 25.66 | 25.07 | 25.88 | 25.57 |
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See notes to financial statements. |
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13
STATEMENT OF OPERATIONS
Year Ended November 30, 2021
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Investment Income ($): |
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Income: |
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Cash dividends (net of $13,411,677 foreign taxes withheld at source): |
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Unaffiliated issuers |
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| 100,597,464 |
| ||
Affiliated issuers |
|
| 103,095 |
| ||
Income from securities lending—Note 1(c) |
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| 10,731 |
| ||
Total Income |
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| 100,711,290 |
| ||
Expenses: |
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|
|
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Management fee—Note 3(a) |
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| 58,108,851 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 1,424,512 |
| ||
Custodian fees—Note 3(c) |
|
| 849,960 |
| ||
Directors’ fees and expenses—Note 3(d) |
|
| 522,831 |
| ||
Registration fees |
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| 207,708 |
| ||
Loan commitment fees—Note 2 |
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| 161,101 |
| ||
Prospectus and shareholders’ reports |
|
| 129,936 |
| ||
Professional fees |
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| 121,316 |
| ||
Distribution fees—Note 3(b) |
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| 102,044 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 14,028 |
| ||
Miscellaneous |
|
| 190,181 |
| ||
Total Expenses |
|
| 61,832,468 |
| ||
Investment Income—Net |
|
| 38,878,822 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions | 24,285,081 |
| ||||
Net realized gain (loss) on forward foreign currency exchange contracts | (3,574) |
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Net Realized Gain (Loss) |
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| 24,281,507 |
| ||
Net change in unrealized appreciation (depreciation) on investments | 558,399,994 |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 582,681,501 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 621,560,323 |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
14
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Year Ended November 30, | |||||
|
|
|
| 2021 |
| 2020 |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 38,878,822 |
|
|
| 36,839,831 |
| |
Net realized gain (loss) on investments |
| 24,281,507 |
|
|
| 153,315,099 |
| ||
Net change in unrealized appreciation |
| 558,399,994 |
|
|
| 762,996,898 |
| ||
Net Increase (Decrease) in Net Assets | 621,560,323 |
|
|
| 953,151,828 |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (1,696,616) |
|
|
| (843,502) |
| |
Class C |
|
| (375,053) |
|
|
| (225,034) |
| |
Class I |
|
| (97,424,371) |
|
|
| (54,554,429) |
| |
Class Y |
|
| (89,046,864) |
|
|
| (59,572,962) |
| |
Total Distributions |
|
| (188,542,904) |
|
|
| (115,195,927) |
| |
Capital Stock Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 35,480,358 |
|
|
| 37,389,189 |
| |
Class C |
|
| 3,064,589 |
|
|
| 5,343,190 |
| |
Class I |
|
| 1,040,617,933 |
|
|
| 1,089,210,403 |
| |
Class Y |
|
| 430,889,367 |
|
|
| 715,078,427 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 1,518,997 |
|
|
| 744,156 |
| |
Class C |
|
| 374,478 |
|
|
| 194,398 |
| |
Class I |
|
| 89,308,231 |
|
|
| 49,284,094 |
| |
Class Y |
|
| 50,927,635 |
|
|
| 31,570,827 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (26,337,872) |
|
|
| (24,165,631) |
| |
Class C |
|
| (7,735,220) |
|
|
| (5,156,154) |
| |
Class I |
|
| (653,938,900) |
|
|
| (635,572,103) |
| |
Class Y |
|
| (429,445,723) |
|
|
| (592,454,958) |
| |
Increase (Decrease) in Net Assets | 534,723,873 |
|
|
| 671,465,838 |
| |||
Total Increase (Decrease) in Net Assets | 967,741,292 |
|
|
| 1,509,421,739 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 6,035,199,283 |
|
|
| 4,525,777,544 |
| |
End of Period |
|
| 7,002,940,575 |
|
|
| 6,035,199,283 |
|
15
STATEMENT OF CHANGES IN NET ASSETS (continued)
|
|
|
| Year Ended November 30, | |||||
|
|
|
| 2021 |
| 2020 |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class Aa,b |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 1,385,645 |
|
|
| 1,806,376 |
| |
Shares issued for distributions reinvested |
|
| 63,985 |
|
|
| 35,318 |
| |
Shares redeemed |
|
| (1,018,315) |
|
|
| (1,145,487) |
| |
Net Increase (Decrease) in Shares Outstanding | 431,315 |
|
|
| 696,207 |
| |||
Class Ca |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 124,220 |
|
|
| 259,895 |
| |
Shares issued for distributions reinvested |
|
| 16,045 |
|
|
| 9,347 |
| |
Shares redeemed |
|
| (307,896) |
|
|
| (243,994) |
| |
Net Increase (Decrease) in Shares Outstanding | (167,631) |
|
|
| 25,248 |
| |||
Class Ib |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 41,047,907 |
|
|
| 52,662,448 |
| |
Shares issued for distributions reinvested |
|
| 3,744,580 |
|
|
| 2,329,343 |
| |
Shares redeemed |
|
| (25,557,823) |
|
|
| (30,419,643) |
| |
Net Increase (Decrease) in Shares Outstanding | 19,234,664 |
|
|
| 24,572,148 |
| |||
Class Yb |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 17,225,498 |
|
|
| 34,748,854 |
| |
Shares issued for distributions reinvested |
|
| 2,161,614 |
|
|
| 1,510,738 |
| |
Shares redeemed |
|
| (16,845,441) |
|
|
| (29,359,590) |
| |
Net Increase (Decrease) in Shares Outstanding | 2,541,671 |
|
|
| 6,900,002 |
| |||
|
|
|
|
|
|
|
|
|
|
a | During the period ended November 30, 2021, 3,040 Class C shares representing $72,467 were automatically converted to 2,986 Class A shares and during the period ended November 30, 2020, 425 Class C shares representing $8,538 were automatically converted to 418 Class A shares. | ||||||||
b | During the period ended November 30, 2021, 829,473 Class I shares representing $24,242,105 were exchanged for 840,306 Class Y shares. During the period ended November 30, 2020, 1,339,701 Class Y shares representing $27,558,864 were exchanged for 1,323,989 Class I shares and 6,813 Class Y shares representing $163,273 were exchanged for 6,784 Class A shares. | ||||||||
See notes to financial statements. |
16
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. These figures have been derived from the fund’s financial statements.
Year Ended November 30, | ||||||
Class A Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, | 24.09 | 20.76 | 17.86 | 18.51 | 14.77 | |
Investment Operations: | ||||||
Investment income—neta | .05 | .08 | .15 | .15 | .10 | |
Net realized and unrealized | 2.21 | 3.72 | 2.98 | (.67) | 3.77 | |
Total from | 2.26 | 3.80 | 3.13 | (.52) | 3.87 | |
Distributions: | ||||||
Dividends from | (.08) | (.15) | (.15) | (.13) | (.13) | |
Dividends from net realized | (.61) | (.32) | (.08) | - | - | |
Total Distributions | (.69) | (.47) | (.23) | (.13) | (.13) | |
Net asset value, end of period | 25.66 | 24.09 | 20.76 | 17.86 | 18.51 | |
Total Return (%)b | 9.58 | 18.67 | 17.81 | (2.84) | 26.39 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.27 | 1.30 | 1.24 | 1.22 | 1.26 | |
Ratio of net investment income | .20 | .35 | .77 | .81 | .64 | |
Portfolio Turnover Rate | 8.72 | 7.20 | 7.38 | 7.47 | 12.49 | |
Net Assets, | 74,707 | 59,740 | 37,036 | 25,981 | 29,414 |
a Based on average shares outstanding.
b Exclusive of sales charge.
See notes to financial statements.
17
FINANCIAL HIGHLIGHTS (continued)
Year Ended November 30, | ||||||
Class C Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, | 23.63 | 20.38 | 17.53 | 18.17 | 14.49 | |
Investment Operations: | ||||||
Investment income (loss)—neta | (.12) | (.06) | .02 | .01 | .02 | |
Net realized and unrealized | 2.17 | 3.65 | 2.92 | (.65) | 3.66 | |
Total from | 2.05 | 3.59 | 2.94 | (.64) | 3.68 | |
Distributions: | ||||||
Dividends from | - | (.02) | (.01) | - | - | |
Dividends from net realized | (.61) | (.32) | (.08) | - | - | |
Total Distributions | (.61) | (.34) | (.09) | - | - | |
Net asset value, end of period | 25.07 | 23.63 | 20.38 | 17.53 | 18.17 | |
Total Return (%)b | 8.85 | 17.84 | 16.96 | (3.58) | 25.40 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.97 | 1.98 | 1.98 | 1.96 | 2.02 | |
Ratio of net investment income | (.47) | (.30) | .12 | .07 | .10 | |
Portfolio Turnover Rate | 8.72 | 7.20 | 7.38 | 7.47 | 12.49 | |
Net Assets, | 11,190 | 14,510 | 12,001 | 12,050 | 14,852 |
a Based on average shares outstanding.
b Exclusive of sales charge.
See notes to financial statements.
18
Year Ended November 30, | ||||||
Class I Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, | 24.27 | 20.90 | 17.98 | 18.64 | 14.88 | |
Investment Operations: | ||||||
Investment income—neta | .14 | .15 | .22 | .21 | .20 | |
Net realized and unrealized | 2.23 | 3.75 | 2.99 | (.67) | 3.74 | |
Total from | 2.37 | 3.90 | 3.21 | (.46) | 3.94 | |
Distributions: | ||||||
Dividends from | (.15) | (.21) | (.21) | (.20) | (.18) | |
Dividends from net realized | (.61) | (.32) | (.08) | - | - | |
Total Distributions | (.76) | (.53) | (.29) | (.20) | (.18) | |
Net asset value, end of period | 25.88 | 24.27 | 20.90 | 17.98 | 18.64 | |
Total Return (%) | 10.01 | 19.07 | 18.23 | (2.53) | 26.81 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .91 | .91 | .91 | .91 | .93 | |
Ratio of net investment income | ||||||
to average net assets | .56 | .72 | 1.13 | 1.11 | 1.20 | |
Portfolio Turnover Rate | 8.72 | 7.20 | 7.38 | 7.47 | 12.49 | |
Net Assets, | 3,847,708 | 3,142,203 | 2,191,801 | 1,953,256 | 1,968,366 |
a Based on average shares outstanding.
See notes to financial statements.
19
FINANCIAL HIGHLIGHTS (continued)
Year Ended November 30, | ||||||
Class Y Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, | 23.99 | 20.66 | 17.78 | 18.43 | 14.72 | |
Investment Operations: | ||||||
Investment income—neta | .15 | .16 | .21 | .21 | .20 | |
Net realized and unrealized | 2.19 | 3.71 | 2.97 | (.66) | 3.70 | |
Total from Investment Operations | 2.34 | 3.87 | 3.18 | (.45) | 3.90 | |
Distributions: | ||||||
Dividends from | (.15) | (.22) | (.22) | (.20) | (.19) | |
Dividends from net realized | (.61) | (.32) | (.08) | - | - | |
Total Distributions | (.76) | (.54) | (.30) | (.20) | (.19) | |
Net asset value, end of period | 25.57 | 23.99 | 20.66 | 17.78 | 18.43 | |
Total Return (%) | 10.02 | 19.12 | 18.24 | (2.48) | 26.80 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .88 | .89 | .89 | .89 | .91 | |
Ratio of net investment income | .59 | .77 | 1.12 | 1.16 | 1.22 | |
Portfolio Turnover Rate | 8.72 | 7.20 | 7.38 | 7.47 | 12.49 | |
Net Assets, | 3,069,335 | 2,818,746 | 2,284,939 | 1,801,389 | 2,083,569 |
a Based on average shares outstanding.
See notes to financial statements.
20
NOTES TO FINANCIAL STATEMENTS
NOTE 1—Significant Accounting Policies:
BNY Mellon International Stock Fund (the “fund”) is a separate diversified series of BNY Mellon Strategic Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering six series, including the fund. The fund’s investment objective is to seek long-term total return. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Walter Scott & Partners Limited (the “Sub-Adviser”), a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser, serves as the fund’s sub-investment adviser.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue 700 million shares of $.001 par value Common Stock. The fund currently has authorized four classes of shares: Class A (100 million shares authorized), Class C (100 million shares authorized), Class I (250 million shares authorized) and Class Y (250 million shares authorized). Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class A shares bought without an initial sales charge as part of an investment of $1 million or more may be charged a contingent deferred sales charge (“CDSC”) of 1.00% if redeemed within one year. Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares eight years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and
21
NOTES TO FINANCIAL STATEMENTS (continued)
unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the 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 Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
22
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 Company's Board of Directors (the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that
23
NOTES TO FINANCIAL STATEMENTS (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 November 30, 2021 in valuing the fund’s investments:
Level 1-Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | Level 3-Significant Unobservable Inputs | Total | |||
Assets ($) | ||||||
Investments In Securities:† | ||||||
Equity Securities - Common Stocks | 565,500,520 | 6,256,732,140 | †† | - | 6,822,232,660 | |
Investment Companies | 155,914,756 | - | - | 155,914,756 |
† 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.
Foreign taxes: The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and
24
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 November 30, 2021, if any, are disclosed in the fund’s Statement of Assets and Liabilities.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended November 30, 2021, The Bank of New York Mellon earned $1,374 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
25
NOTES TO FINANCIAL STATEMENTS (continued)
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 investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
26
As of and during the period ended November 30, 2021, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended November 30, 2021, the fund did not incur any interest or penalties.
Each tax year in the four-year period ended November 30, 2021 remains subject to examination by the Internal Revenue Service and state taxing authorities.
At November 30, 2021, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $38,679,393, undistributed capital gains $24,298,885 and unrealized appreciation $2,839,956,122.
The tax character of distributions paid to shareholders during the fiscal periods ended November 30, 2021 and November 30, 2020 were as follows: ordinary income $42,376,927 and $45,914,161, and long-term capital gains $146,165,977 and $69,281,766, respectively.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $688.5 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $135 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended November 30, 2021, 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, the management fee is computed at the annual rate of .85% of the value of the fund’s average daily net assets and is payable monthly.
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NOTES TO FINANCIAL STATEMENTS (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 .41% of the value of the fund’s average daily net assets.
During the period ended November 30, 2021, the Distributor retained $4,758 from commissions earned on sales of the fund’s Class A shares and $247 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 November 30, 2021, Class C shares were charged $102,044 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 November 30, 2021, Class A and Class C shares were charged $179,749 and $34,015, respectively, pursuant to the Shareholder Services Plan.
The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. For financial reporting purposes, the fund includes net earnings credits, if any, as shareholder servicing costs in the Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, for the fund. The majority of transfer agency fees are comprised of
28
amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended November 30, 2021, the fund was charged $44,320 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended November 30, 2021, the fund was charged $849,960 pursuant to the custody agreement.
During the period ended November 30, 2021, the fund was charged $14,028 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 $5,088,088, Distribution Plan fees of $7,156, Shareholder Services Plan fees of $18,327, custodian fees of $284,828, Chief Compliance Officer fees of $5,897 and transfer agency fees of $7,718.
(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 (“forward contract”) during the period ended November 30, 2021, amounted to $914,771,143 and $572,322,150, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its over-the-counter (“OTC”) derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.
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NOTES TO FINANCIAL STATEMENTS (continued)
Each type of derivative instrument that was held by the fund during the period ended November 30, 2021 is discussed below.
Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the 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 November 30, 2021, there were no forward contracts outstanding.
The following summarizes the average market value of derivatives outstanding during the period ended November 30, 2021:
|
| Average Market Value ($) |
Forward contracts |
| 256,136 |
At November 30, 2021, the cost of investments for federal income tax purposes was $4,138,382,383; accordingly, accumulated net unrealized appreciation on investments was $2,839,765,033, consisting of $2,931,162,510 gross unrealized appreciation and $91,397,477 gross unrealized depreciation.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of BNY Mellon International Stock Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of BNY Mellon International Stock Fund (the “Fund”) (one of the funds constituting BNY Mellon Strategic Funds, Inc.), including the statements of investments and investments in affiliated issuers, as of November 30, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting BNY Mellon Strategic Funds, Inc.) at November 30, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of November 30, 2021, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the BNY Mellon Family of Funds since at least 1957, but we are unable to determine the specific year.
New York, New York
January 24, 2022
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IMPORTANT TAX INFORMATION (Unaudited)
In accordance with federal tax law, the fund elects to provide each shareholder with their portion of the fund’s foreign taxes paid and the income sourced from foreign countries. Accordingly, the fund hereby reports the following information regarding its fiscal year ended November 30, 2021:
- the total amount of taxes paid to foreign countries was $12,437,271
- the total amount of income sourced from foreign countries was $113,042,415.
Where required by federal tax law rules, shareholders will receive notification of their proportionate share of foreign taxes paid and foreign sourced income for the 2021 calendar year with Form 1099-DIV which will be mailed in early 2022. For the fiscal year ended November 30, 2021, certain dividends paid by the fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the distributions paid during the fiscal year, $54,814,198 represents the maximum amount that may be considered qualified dividend income. Also, the fund hereby reports $.0215 per share as a short-term capital gain distribution and $.5856 per share as a long-term capital gain distribution paid on December 14, 2020.
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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 Directors held on November 1-2, 2021, the Board considered the renewal of the fund’s Management Agreement pursuant to which the Adviser provides the fund with investment advisory and administrative services (the “Agreement”), and the Sub-Investment Advisory Agreement (together, the “Agreements”), pursuant to which Walter Scott & Partners Limited (the “Subadviser”) 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 Subadviser. In considering the renewal of the Agreements, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s supervisory activities over the Subadviser. The Board also considered portfolio management’s brokerage policies and practices (including 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 group of institutional international large-cap growth funds selected by Broadridge as comparable to the fund (the “Performance Group”) and with a broader group of funds
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
consisting of all retail and institutional international large-cap growth funds (the “Performance Universe”), all for various periods ended September 30, 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 international large-cap growth funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Performance Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser and the Subadviser the results of the comparisons and considered that the fund’s total return performance was above the Performance Group and Performance Universe medians for all periods shown, except the one-year period when it was below the Performance Group and Performance Universe medians and the two-year period when it was below the Performance Universe median. The Board considered the relative proximity of the fund’s performance to the Performance Group and/or Performance Universe medians in certain periods when performance was below median. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in nine of the ten calendar years shown. The Board also noted that the fund had 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 and sub-advisory services provided by the Adviser and the Subadviser, respectively. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was higher than the Expense Group median contractual management fee, the fund’s actual management fee was slightly higher than the Expense Group median and higher than the Expense Universe median actual management fee and the fund’s total expenses were lower than the Expense Group median and equal to 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 Subadviser or its affiliates for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and
34
explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness of the fund’s management fee. Representatives of the Adviser noted that there were no other funds advised or administered by the Adviser that are in the same Lipper category as the fund.
The Board considered the fee payable to the Subadviser in relation to the fee payable to the Adviser by the fund and the respective services provided by the Subadviser and the Adviser. The Board also took into consideration that the Subadviser’s fee is paid by the Adviser, out of its fee from the fund, and not the fund.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the mix of services provided by the Adviser and the Subadviser, including the nature, extent and quality of such services, supported the renewal of the Agreements and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Since the Adviser, and not the fund, pays the Subadviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Subadviser’s profitability to be relevant to its deliberations. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser and the Subadviser from acting as investment adviser and sub-investment adviser, respectively, and took into consideration 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
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
renewal of the Agreements. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by the Adviser and the Subadviser are adequate and appropriate.
· The Board generally was satisfied with the fund’s performance.
· The Board concluded that the fees paid to the Adviser and the Subadviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates and the Subadviser, of the Adviser and the Subadviser and the services provided to the fund by the Adviser and the Subadviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreements, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
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BOARD MEMBERS INFORMATION (Unaudited)
Independent Board Members
Joseph S. DiMartino (78)
Chairman of the Board (1995)
Principal Occupation During Past 5 Years:
· Director and Trustee of funds in the BNY Mellon Family of Funds and certain other entities (as described in the fund’s Statement of Additional Information) (1995-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ, Inc., a public company providing professional business services, products and solutions, Director (1997-Present)
No. of Portfolios for which Board Member Serves: 97
———————
Joni Evans (79)
Board Member (2006)
Principal Occupation During Past 5 Years:
· www.wowOwow.com, an online community dedicated to women’s conversations and publications, Chief Executive Officer (2007-2019)
· Joni Evans Ltd. publishing, Principal (2006-2019)
No. of Portfolios for which Board Member Serves: 18
———————
Joan Gulley (74)
Board Member (2017)
Principal Occupation During Past 5 Years:
· Nantucket Atheneum, public library, Chair (2018-June 2021) and Director (2015-June 2021)
· Orchard Island Club, golf and beach club, Governor (2016-Present)
No. of Portfolios for which Board Member Serves: 42
———————
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BOARD MEMBERS INFORMATION (Unaudited) (continued)
Alan H. Howard (62)
Board Member (2018)
Principal Occupation During Past 5 Years:
· Heathcote Advisors LLC, a financial advisory services firm, Managing Partner (2008-Present)
· Dynatech/MPX Holdings LLC, a global supplier and service provider of military aircraft parts, President (2012-2019); and Board Member of its two operating subsidiaries, Dynatech International LLC and Military Parts Exchange LLC (2012-2019), including Chief Executive Officer of an operating subsidiary, Dynatech International LLC (2013-2019)
· Rossoff & Co., an independent investment banking firm, Senior Advisor (2013-June 2021)
Other Public Company Board Memberships During Past 5 Years:
· Movado Group, Inc., a public company that designs, sources, markets and distributes watches, Director (1997-Present)
· Diamond Offshore Drilling, Inc., a public company that provides contract drilling services, Director (March 2020-April 2021)
No. of Portfolios for which Board Member Serves: 18
———————
Robin A. Melvin (58)
Board Member (1995)
Principal Occupation During Past 5 Years:
· Westover School, a private girls’ boarding school in Middlebury, Connecticut, Trustee (2019-Present)
· Mentor Illinois, a non-profit organization dedicated to increasing the quality of mentoring services in Illinois. Co-Chair (2014–2020); Board Member, Mentor Illinois (2013-2020)
· JDRF, a non-profit juvenile diabetes research foundation, Board Member (June 2021-Present)
Other Public Company Board Memberships During Past 5 Years:
· HPS Corporate Lending Fund, a closed-end management investment company regulated as a business development company, Trustee (August 2021-Present)
No. of Portfolios for which Board Member Serves: 75
———————
Burton N. Wallack (71)
Board Member (2006)
Principal Occupation During Past 5 Years:
Wallack Management Company, a real estate management company, President and Co-owner (1987-Present)
Other Public Company Board Memberships During Past 5 Years:
Mount Sinai Hospital Urology Board Member (2017-Present)
No. of Portfolios for which Board Member Serves: 18
———————
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Benaree Pratt Wiley (75)
Board Member (2016)
Principal Occupation During Past 5 Years:
· The Wiley Group, a firm specializing in strategy and business development. Principal (2005-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ, Inc., a public company providing professional business services, products and solutions, Director (2008-Present)
· Blue Cross Blue Shield of Massachusetts Director (2004-2020)
No. of Portfolios for which Board Member Serves: 63
———————
Gordon J. Davis (80)
Advisory Board Member (2021)
Principal Occupation During Past 5 Years:
· Venable LLP, a law firm Partner (2012-Present)
No. of Portfolios for which Advisory Board Member Serves: 41
———————
Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80. The address of the Board Members and Officers is c/o BNY Mellon Investment Adviser, Inc. 240 Greenwich Street, New York, New York 10286. Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from the Adviser free of charge by calling this toll free number: 1-800-373-9387.
William Hodding Carter III, Emeritus Board Member
Ehud Houminer, Emeritus Board Member
Hans C. Mautner, Emeritus Board Member
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OFFICERS OF THE FUND (Unaudited)
DAVID DIPETRILLO, President since January 2021.
Vice President and Director of the Adviser since February 2021; Head of North America Product, BNY Mellon Investment Management since January 2018; Director of Product Strategy, BNY Mellon Investment Management from January 2016 to December 2017. He is an officer of 57 investment companies (comprised of 107 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 43 years old and has been an employee of BNY Mellon since 2005.
JAMES WINDELS, Treasurer since November 2001.
Vice President of the Adviser since September 2020; Director–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 63 years old and has been an employee of the Adviser since April 1985.
PETER M. SULLIVAN, Chief Legal Officer since July 2021 and Vice President and Assistant Secretary since March 2019.
Chief Legal Officer of the Adviser since July 2021; Associate General Counsel of BNY Mellon since July 2021; Senior Managing Counsel of BNY Mellon from December 2020 to July 2021; Managing Counsel of BNY Mellon from March 2009 to December 2020, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of BNY Mellon since April 2004.
JAMES BITETTO, Vice President since August 2005 and Secretary since February 2018.
Senior Managing Counsel of BNY Mellon since December 2019; Managing Counsel of BNY Mellon from April 2014 to December 2019; Secretary of the Adviser, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 55 years old and has been an employee of the Adviser since December 1996.
DEIRDRE CUNNANE, Vice President and Assistant Secretary since March 2019.
Counsel of BNY Mellon since August 2018; Senior Regulatory Specialist at BNY Mellon Investment Management Services from February 2016 to August 2018. She is an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 31 years old and has been an employee of the Adviser since August 2018.
SARAH S. KELLEHER, Vice President and Assistant Secretary since April 2014.
Vice President since February 2020 of BNY Mellon ETF Investment Adviser; LLC; Senior Managing Counsel of BNY Mellon since September 2021; Managing Counsel from December 2017 to September 2021; Senior Counsel of BNY Mellon from March 2013 to December 2017. She is an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 46 years old and has been an employee of the Adviser since March 2013.
JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.
Senior Managing Counsel of BNY Mellon, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 56 years old and has been an employee of the Adviser since October 1990.
AMANDA QUINN, Vice President and Assistant Secretary since March 2020.
Counsel of BNY Mellon since June 2019; Regulatory Administration Manager at BNY Mellon Investment Management Services from September 2018 to May 2019; Senior Regulatory Specialist at BNY Mellon Investment Management Services from April 2015 to August 2018. She is an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 36 years old and has been an employee of the Adviser since June 2019.
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NATALYA ZELENSKY, Vice President and Assistant Secretary since March 2017.
Chief Compliance Officer since August 2021 and Vice President since February 2020 of BNY Mellon ETF Investment Adviser, LLC; Chief Compliance Officer since August 2021 and Vice President and Assistant Secretary since February 2020 of BNY Mellon ETF Trust; Managing Counsel from December 2019 to August 2021 of BNY Mellon; Counsel from May 2016 to December 2019 of BNY Mellon; Assistant Secretary of the Adviser from April 2018 to August 2021. She is an officer of 57 investment companies (comprised of 128 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 36 years old and has been an employee of BNY Mellon since May 2016.
GAVIN C. REILLY, Assistant Treasurer since December 2005.
Tax Manager–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of the Adviser since April 1991.
ROBERT SALVIOLO, Assistant Treasurer since July 2007.
Senior Accounting Manager–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 54 years old and has been an employee of the Adviser since June 1989.
ROBERT SVAGNA, Assistant Treasurer since December 2002.
Senior Accounting Manager–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 54 years old and has been an employee of the Adviser since November 1990.
JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.
Chief Compliance Officer of the BNY Mellon Family of Funds and BNY Mellon Funds Trust since 2004; Chief Compliance Officer of the Adviser from 2004 until June 2021. He is an officer of 57 investment companies (comprised of 119 portfolios) managed by the Adviser. He is 64 years old.
CARIDAD M. CAROSELLA, Anti-Money Laundering Compliance Officer since January 2016.
Anti-Money Laundering Compliance Officer of the BNY Mellon Family of Funds and BNY Mellon Funds Trust. She is an officer of 50 investment companies (comprised of 121 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 53 years old and has been an employee of the Distributor since 1997.
41
BNY Mellon International Stock Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Walter Scott & Partners Limited
One Charlotte Square
Edinburgh, Scotland, 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: DISAX Class C: DISCX Class I: DISRX Class Y: DISYX |
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 Select Managers Small Cap Value Fund
ANNUAL REPORT November 30, 2021 |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.im.bnymellon.com and sign up for eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
Information About the Renewal of | |
FOR MORE INFORMATION
Back Cover
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from December 1, 2020 through November 30, 2021, as provided by portfolio allocation managers Stephen Kolano and Elena Goncharova
Market and Fund Performance Overview
For the 12-month period ended November 30, 2021, BNY Mellon Select Managers Small Cap Value Fund’s Class A shares, Class C shares, Class I shares and Class Y shares at NAV produced total returns of 26.55%, 25.58%, 26.95% and 26.97%, respectively.1 In comparison, the Russell 2000® Value Index (the “Index”), the fund’s benchmark, returned 33.01% for the same period.2
Small-cap value stocks produced gains over the reporting period as markets anticipated the reopening of the economy, and as investors rotated out of growth stocks in the wake of rising inflation and bond yields. The fund lagged the Index, mainly due to outperformance of lower-quality stocks, which the fund avoided.
The Fund’s Investment Approach
The fund seeks capital appreciation. To pursue its goal, the fund normally invests at least 80% of its net assets in the stocks of small-cap companies. The fund currently considers small-cap companies to be those companies with market capitalizations that fall within the range of companies in the Index, the fund’s benchmark index. The fund’s portfolio is constructed to have a value tilt.
The fund uses a “multi-manager” approach by selecting various subadvisers to manage its assets. We may hire, terminate or replace subadvisers and modify material terms and conditions of subadvisory arrangements without shareholder approval.
The fund’s assets will be allocated among six subadvisers— Channing Capital Management, LLC, Eastern Shore Capital Management, Neuberger Berman Investment Advisers LLC, Walthausen & Co. LLC, Heartland Advisors, Inc. and Rice, Hall James & Associates LLC. The target percentage of the fund’s assets to be allocated over time to the subadvisers is approximately 23% to Channing; 20% to Eastern Shore; 18% to Neuberger Berman; 22% to Walthausen; 15% to Heartland and 2% to RHJ. In addition, BNYM Investment Adviser, Inc., the fund’s investment adviser & portfolio allocation manager, is permitted to adjust those allocations by up to 20% of the fund's assets without board approval. Subject to board approval, the fund may hire, terminate or replace subadvisers and modify material terms and conditions of subadvisory arrangements without shareholder approval.
Stocks Weather Delta Variant and Supply Bottlenecks, Supported by Strong Earnings
Early in the reporting period, stocks benefited from a number of factors. With the approval of multiple COVID-19 vaccines in November 2020, investor sentiment improved, and the global economic outlook brightened. Returns were also boosted by interest rates, which remained low, and by the stimulus package approved by Congress, which provided support to consumers, small businesses and the economy generally.
Investors also began to factor the likelihood of additional stimulus and infrastructure spending into their calculations. With the end of the pandemic apparently in view and
2
continued economic rebound likely, investors began to shift away from growth-oriented stocks and into value-oriented stocks.
Government lockdowns were eased, and businesses that had been hard hit by the pandemic began to show signs of recovery. Businesses also became more confident and increased their capital spending. In addition, inventory shortages began to appear, providing another catalyst to economic growth.
With the emergence of the Delta variant of COVID-19 midway through 2021, questions about whether the economic recovery would stall caused the market to again favor growth-oriented stocks. But at times, positive news on the pandemic again brought value-oriented and cyclical stocks into favor.
On balance, markets were supported by strong corporate earnings worldwide, especially in the U.S. Mixed economic data weighed on markets later in the period, as did supply-chain concerns and signals from the Federal Reserve, which suggested that policies might not be as supportive in the future.
Fund Performance Hindered by Decision to Avoid “Meme” Stocks
The fund’s underperformance versus the Index stemmed mainly from unfavorable stock selection. At the beginning of the reporting period, certain meme stocks in the Index, such as AMC Entertainment and Gamestop, posted outsized gains. This was a driver of the Index’s performance for the entire period. Our decision to avoid these highly speculative stocks thus hindered performance versus the Index. In addition, lower-quality companies, which we avoided, also generally outperformed the Index. Other detractors included an underweight to the energy sector, which performed well. Finally, the fund tends to own larger companies than the Index because they tend to have better liquidity. But this hurt relative performance as smaller companies performed better than larger ones on average.
On a more positive note, the fund’s underweight position in the utilities sector added to performance versus the Index as this sector underperformed. In addition, the fund’s overweight position in the information technology sector was also beneficial. A position in Avis Budget Group was also advantageous. The company reported strong earnings due to a large jump in prices.
Volatility Expected
We anticipate that inflation will rise in the near term before declining and settling at a rate that has been higher than over the past few decades. While supply-chain issues are likely to improve, an increase in wages is likely to be permanent, which will affect company profitability. In the near term, labor shortages could also affect company sales. Therefore, with U.S. equities markets at all-time highs, we anticipate volatility will increase in the near
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
term. On a more positive note, we expect corporate earnings to grow in the coming year, and we continue to look for pockets of value in the market.
December 15, 2021
1 DUE TO RECENT MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE DIFFERENT THAN THE FIGURES SHOWN. Investors should note that the fund's short term performance is highly unusual, in part due to unusually favorable market conditions, and is unlikely to be repeated or consistently achieved in the future. Total return includes reinvestment of dividends and any capital gains paid and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. Return figures provided reflect the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an undertaking in effect through March 31, 2022, at which time it may be extended, terminated or modified. Had these expenses not been absorbed, the fund’s returns would have been lower.
2 Source: Lipper Inc. — The Russell 2000® Value Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies that are considered more value-oriented relative to the overall market as defined by Russell’s leading style methodology. The Russell 2000® Value Index is constructed to provide a comprehensive and unbiased barometer for the small-cap value segment. The index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set, and that the represented companies continue to reflect value characteristics. Investors cannot invest directly in any index.
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.
Multi-manager risk means each sub adviser makes investment decisions independently, and it is possible that the investment styles of the sub advisers may not complement one another. Consequently, the fund's exposure to given stock, industry or investment style could be greater or smaller than if the fund had a single adviser.
The prices of small company stocks tend to be more volatile than the prices of large company stocks, mainly because these companies have less established and more volatile earnings histories. They also tend to be less liquid than larger company stocks.
Investing in foreign denominated and/or domiciled securities involves special risks, including changes in currency exchange rates, political, economic and social instability, limited company information, differing auditing and legal standards, and less market liquidity. These risks are generally greater with emerging market countries.
References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
4
FUND PERFORMANCE (Unaudited)
Comparison of change in value of a $10,000 investment in Class A shares, Class C shares and Class I shares of BNY Mellon Select Managers Small Cap Value Fund with a hypothetical investment of $10,000 in the Russell 2000® Value Index (the “Index”).
† Source: Lipper Inc.
Past performance is not predictive of future performance. The above graph compares a hypothetical $10,000 investment made in each of the Class A shares, Class C shares and Class I shares of BNY Mellon Select Managers Small Cap Value Fund on 11/30/11 to a hypothetical investment of $10,000 made in the Index on that date. All dividends and capital gain distributions are reinvested.
The fund’s performance shown in the line graph above takes into account the maximum initial sales charge on Class A shares and all other applicable fees and expenses on Class A shares, Class C shares and Class I shares. The Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies that are considered more value-oriented relative to the overall market as defined by Russell’s leading style methodology. The Index is constructed to provide a comprehensive and unbiased barometer for the small-cap value segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set and that the represented companies continue to reflect value characteristics. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report.
5
FUND PERFORMANCE (Unaudited) (continued)
Comparison of change in value of a $1,000,000 investment in Class Y shares of BNY Mellon Select Managers Small Cap Value Fund with a hypothetical investment of $1,000,000 in the Russell 2000® Value Index (the “Index”).
† Source: Lipper Inc.
†† The total return figures presented for Class Y shares of the fund reflect the performance of the fund’s Class A shares for the period prior to 7/1/13 (the inception date for Class Y shares), not reflecting the applicable sales charges for Class A shares.
Past performance is not predictive of future performance. The above graph compares a hypothetical $1,000,000 investment made in Class Y shares of BNY Mellon Select Managers Small Cap Value Fund on 11/30/11 to a hypothetical investment of $1,000,000 made in the Index on that date. All dividends and capital gain distributions are reinvested.
The fund’s performance shown in the line graph above takes into account all other applicable fees and expenses of fund’s Class Y shares. The Index measures the performance of the small-cap value segment of the U.S. equity universe. It includes those Russell 2000 companies that are considered more value-oriented relative to the overall market as defined by Russell’s leading style methodology. The Index is constructed to provide a comprehensive and unbiased barometer for the small-cap value segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set and that the represented companies continue to reflect value characteristics. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report.
6
Average Annual Total Returns as of 11/30/2021 | ||||
| 1 Year | 5 Years | 10 Years | |
Class A shares | ||||
with maximum sales charge (5.75%) | 12/17/08 | 19.29% | 9.55% | 11.32% |
without sales charge | 12/17/08 | 26.55% | 10.86% | 11.98% |
Class C shares | ||||
with applicable redemption charge† | 12/17/08 | 24.58% | 10.04% | 11.16% |
without redemption | 12/17/08 | 25.58% | 10.04% | 11.16% |
Class I shares | 12/17/08 | 26.95% | 11.20% | 12.35% |
Class Y shares | 7/1/13 | 26.97% | 11.24% | 12.41%†† |
Russell 2000® Value Index | 33.01% | 9.08% | 11.76% |
† The maximum contingent deferred sales charge for Class C shares is 1% for shares redeemed within one year of the date of purchase.
†† The total return performance figures presented for Class Y shares of the fund reflect the performance of the fund’s Class A shares for the period prior to 7/1/13 (the inception date for Class Y shares), not reflecting the applicable sales charges for Class A shares.
The performance data quoted represents past performance, which is no guarantee of future results. Share price and investment return fluctuate and an investor’s shares may be worth more or less than original cost upon redemption. Current performance may be lower or higher than the performance quoted. Go to www.im.bnymellon.com for the fund’s most recent month-end returns.
The fund’s performance shown in the graphs and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. In addition to the performance of Class A shares shown with and without a maximum sales charge, the fund’s performance shown in the table takes into account all other applicable fees and expenses on all classes.
7
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 Select Managers Small Cap Value Fund from June 1, 2021 to November 30, 2021. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended November 30, 2021 |
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| Class A | Class C | Class I | Class Y |
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Expenses paid per $1,000† | $6.41 | $10.09 | $4.93 | $4.69 |
| |
Ending value (after expenses) | $966.60 | $962.90 | $968.30 | $968.20 |
|
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended November 30, 2021 |
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| Class A | Class C | Class I | Class Y |
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Expenses paid per $1,000† | $6.58 | $10.35 | $5.06 | $4.81 |
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Ending value (after expenses) | $1,018.55 | $1,014.79 | $1,020.05 | $1,020.31 |
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† | Expenses are equal to the fund’s annualized expense ratio of 1.30% for Class A, 2.05% for Class C, 1.00% for Class I and .95% for Class Y, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
8
STATEMENT OF INVESTMENTS
November 30, 2021
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% | |||||||
Automobiles & Components - 1.2% | |||||||
Fox Factory Holding | 7,100 | a | 1,247,967 | ||||
Gentherm | 2,691 | a | 227,255 | ||||
Harley-Davidson | 71,616 | 2,623,294 | |||||
Holley | 97,270 | a | 1,187,667 | ||||
LCI Industries | 6,760 | 1,029,345 | |||||
Thor Industries | 1,420 | 150,108 | |||||
Visteon | 7,925 | a | 839,416 | ||||
7,305,052 | |||||||
Banks - 12.9% | |||||||
Associated Banc-Corp | 101,596 | 2,224,952 | |||||
BankUnited | 60,504 | 2,398,378 | |||||
Banner | 68,677 | 3,933,819 | |||||
Brookline Bancorp | 82,360 | 1,270,815 | |||||
Cadence Bank | 126,528 | 3,697,148 | |||||
Camden National | 30,680 | 1,405,758 | |||||
Cathay General Bancorp | 4,402 | 184,488 | |||||
City Holding | 19,240 | 1,509,570 | |||||
Columbia Banking System | 66,335 | 2,179,768 | |||||
Dime Community Bancshares | 3,048 | 104,546 | |||||
Eastern Bankshares | 57,510 | 1,157,676 | |||||
Enterprise Financial Services | 3,223 | 149,451 | |||||
F.N.B. | 16,806 | 195,958 | |||||
Federal Agricultural Mortgage, Cl. C | 9,477 | 1,153,541 | |||||
First Bancorp | 35,100 | 1,559,844 | |||||
First Financial | 36,350 | 1,579,771 | |||||
First Horizon | 4,820 | 77,747 | |||||
Glacier Bancorp | 30,001 | 1,629,054 | |||||
Great Southern Bancorp | 22,220 | 1,236,099 | |||||
Great Western Bancorp | 4,763 | 159,799 | |||||
Hancock Whitney | 26,450 | 1,263,781 | |||||
Heartland Financial USA | 34,618 | 1,644,355 | |||||
Hope Bancorp | 14,879 | 213,514 | |||||
Horizon Bancorp | 70,420 | 1,366,148 | |||||
Huntington Bancshares | 132,037 | 1,959,429 | |||||
Independent Bank | 113,498 | 8,973,151 | |||||
Independent Bank Group | 17,280 | 1,199,750 | |||||
Lakeland Financial | 12,880 | 909,586 | |||||
NBT Bancorp | 42,420 | 1,531,786 | |||||
NMI Holdings, Cl. A | 41,410 | a | 811,636 | ||||
OceanFirst Financial | 65,860 | 1,357,375 | |||||
Old National Bancorp | 81,747 | 1,443,652 |
9
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Banks - 12.9% (continued) | |||||||
Pacific Premier Bancorp | 88,265 | 3,420,269 | |||||
PacWest Bancorp | 32,280 | 1,444,207 | |||||
Pinnacle Financial Partners | 6,192 | 590,779 | |||||
Seacoast Banking Corp. of Florida | 117,129 | 3,955,446 | |||||
Stock Yards Bancorp | 13,675 | 818,175 | |||||
Synovus Financial | 95,225 | 4,312,740 | |||||
Texas Capital Bancshares | 34,555 | a | 1,946,138 | ||||
TriCo Bancshares | 32,410 | 1,366,406 | |||||
Triumph Bancorp | 23,159 | a | 2,949,299 | ||||
Walker & Dunlop | 15,075 | 2,120,902 | |||||
Washington Trust Bancorp | 29,030 | 1,561,814 | |||||
Webster Financial | 23,130 | 1,246,476 | |||||
WesBanco | 38,440 | 1,251,222 | |||||
Wintrust Financial | 14,180 | 1,241,175 | |||||
WSFS Financial | 26,170 | 1,301,172 | |||||
80,008,565 | |||||||
Capital Goods - 13.9% | |||||||
AerCap Holdings | 40,099 | a | 2,247,148 | ||||
Alamo Group | 3,759 | 534,605 | |||||
Albany International, Cl. A | 18,120 | 1,466,451 | |||||
Allied Motion Technologies | 35,847 | 1,414,164 | |||||
Altra Industrial Motion | 30,835 | 1,625,313 | |||||
Ameresco, Cl. A | 9,070 | a | 819,293 | ||||
Astec Industries | 27,833 | 1,744,572 | |||||
AZZ | 23,410 | 1,214,745 | |||||
Babcock & Wilcox Enterprises | 228,921 | a | 2,083,181 | ||||
Beacon Roofing Supply | 26,340 | a | 1,314,629 | ||||
Bloom Energy, Cl. A | 29,024 | a | 797,580 | ||||
Chart Industries | 7,430 | a | 1,296,907 | ||||
Colfax | 5,694 | a,b | 264,429 | ||||
Comfort Systems USA | 22,330 | 2,118,448 | |||||
Curtiss-Wright | 1,672 | 210,371 | |||||
Douglas Dynamics | 32,103 | 1,276,094 | |||||
EMCOR Group | 8,870 | 1,058,546 | |||||
Enerpac Tool Group | 96,144 | 2,029,600 | |||||
ESCO Technologies | 1,571 | 128,414 | |||||
Franklin Electric | 12,850 | 1,131,443 | |||||
Gibraltar Industries | 29,896 | a | 2,029,938 | ||||
Global Industrial | 18,060 | 723,484 | |||||
Granite Construction | 78,012 | b | 3,033,107 | ||||
Great Lakes Dredge & Dock | 66,444 | a | 982,042 | ||||
Griffon | 60,137 | 1,582,204 | |||||
H&E Equipment Services | 36,675 | 1,544,018 |
10
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Capital Goods - 13.9% (continued) | |||||||
Hillenbrand | 68,110 | 3,037,706 | |||||
Kennametal | 123,372 | 4,363,668 | |||||
LSI Industries | 157,680 | 1,119,528 | |||||
McGrath RentCorp | 14,600 | 1,128,580 | |||||
Mercury Systems | 10,280 | a | 503,206 | ||||
Mueller Industries | 19,560 | 1,082,255 | |||||
Oshkosh | 1,413 | 152,039 | |||||
Park Aerospace | 156,365 | 2,017,108 | |||||
Powell Industries | 68,798 | 1,680,047 | |||||
RBC Bearings | 5,455 | a | 1,078,399 | ||||
Regal Rexnord | 28,187 | 4,456,365 | |||||
Resideo Technologies | 130,415 | a | 3,402,527 | ||||
Simpson Manufacturing | 9,240 | 1,065,926 | |||||
Spirit AeroSystems Holdings, Cl. A | 44,916 | 1,700,520 | |||||
SPX | 70,253 | a | 4,085,212 | ||||
SPX FLOW | 49,970 | 4,172,995 | |||||
Tennant | 19,506 | 1,534,342 | |||||
Terex | 16,955 | 718,553 | |||||
Textainer Group Holdings | 52,450 | 1,713,541 | |||||
The AZEK Company | 45,630 | a | 1,789,609 | ||||
Thermon Group Holdings | 80,030 | a | 1,381,318 | ||||
Titan Machinery | 44,460 | a | 1,477,850 | ||||
Triton International | 20,810 | 1,164,736 | |||||
Twin Disc | 20,790 | a | 249,064 | ||||
Valmont Industries | 5,000 | 1,195,150 | |||||
WillScot Mobile Mini Holdings | 34,420 | a | 1,311,058 | ||||
Zurn Water Solutions | 122,010 | 4,276,450 | |||||
86,528,478 | |||||||
Commercial & Professional Services - 5.4% | |||||||
ABM Industries | 24,360 | 1,096,200 | |||||
Alight, Cl. A | 107,990 | a,b | 1,123,096 | ||||
ASGN | 12,080 | a | 1,469,894 | ||||
Brady, Cl. A | 48,174 | 2,420,743 | |||||
CACI International, Cl. A | 648 | a | 168,111 | ||||
CBIZ | 6,162 | a | 222,017 | ||||
Clean Harbors | 11,732 | a | 1,190,094 | ||||
Deluxe | 3,831 | 129,641 | |||||
Harsco | 290,373 | a | 4,233,639 | ||||
Heritage-Crystal Clean | 55,550 | a | 1,782,599 | ||||
KAR Auction Services | 99,433 | a | 1,490,501 | ||||
KBR | 65,524 | 2,883,056 | |||||
ManTech International, Cl. A | 43,160 | 2,932,722 | |||||
MillerKnoll | 5,375 | 203,928 |
11
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Commercial & Professional Services - 5.4% (continued) | |||||||
MSA Safety | 23,951 | 3,432,657 | |||||
Resources Connection | 116,983 | 2,009,768 | |||||
Stericycle | 31,637 | a | 1,787,490 | ||||
The Brink's Company | 58,361 | 3,569,359 | |||||
Upwork | 6,925 | a | 258,026 | ||||
VSE | 25,960 | 1,421,050 | |||||
33,824,591 | |||||||
Consumer Durables & Apparel - 3.4% | |||||||
Acushnet Holdings | 29,121 | 1,583,600 | |||||
Carter's | 2,237 | 226,004 | |||||
Cavco Industries | 5,190 | a | 1,543,973 | ||||
G-III Apparel Group | 45,320 | a | 1,343,285 | ||||
Hayward Holdings | 47,970 | a,b | 1,174,306 | ||||
Helen of Troy | 805 | a | 193,603 | ||||
Installed Building Products | 8,935 | 1,153,419 | |||||
KB Home | 17,805 | 712,022 | |||||
Legacy Housing | 48,400 | a | 1,208,548 | ||||
M/I Homes | 18,990 | a | 1,061,351 | ||||
Malibu Boats, Cl. A | 9,935 | a | 690,184 | ||||
PVH | 34,269 | 3,659,244 | |||||
Skyline Champion | 22,790 | a | 1,783,317 | ||||
Tempur Sealy International | 51,542 | 2,208,059 | |||||
Vista Outdoor | 29,230 | a | 1,276,474 | ||||
Wolverine World Wide | 46,770 | 1,455,950 | |||||
21,273,339 | |||||||
Consumer Services - 2.7% | |||||||
Boyd Gaming | 63,446 | a | 3,718,570 | ||||
Frontdoor | 10,700 | a | 369,792 | ||||
Hilton Grand Vacations | 27,450 | a | 1,303,875 | ||||
International Game Technology | 120,871 | b | 3,265,934 | ||||
Jack in the Box | 13,530 | 1,117,578 | |||||
Marriott Vacations Worldwide | 21,166 | 3,230,990 | |||||
OneSpaWorld Holdings | 266,563 | a,b | 2,513,689 | ||||
Perdoceo Education | 20,840 | a | 205,274 | ||||
SeaWorld Entertainment | 18,079 | a | 1,066,480 | ||||
16,792,182 | |||||||
Diversified Financials - 2.9% | |||||||
Artisan Partners Asset Management, Cl. A | 71,481 | 3,197,345 | |||||
Cohen & Steers | 33,740 | 3,028,840 | |||||
Evercore, Cl. A | 16,284 | 2,258,590 | |||||
FirstCash | 15,612 | 996,670 | |||||
Focus Financial Partners, Cl. A | 56,515 | a | 3,477,933 |
12
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Diversified Financials - 2.9% (continued) | |||||||
Green Dot, Cl. A | 32,190 | a | 1,155,621 | ||||
PROG Holdings | 2,491 | 112,394 | |||||
Stifel Financial | 55,794 | 3,961,932 | |||||
18,189,325 | |||||||
Energy - 4.6% | |||||||
Cactus, Cl. A | 117,838 | 4,301,087 | |||||
ChampionX | 148,846 | a | 3,037,947 | ||||
Chesapeake Energy | 49,680 | 2,957,947 | |||||
CNX Resources | 53,031 | a | 723,343 | ||||
Devon Energy | 74,095 | 3,116,436 | |||||
Dril-Quip | 101,352 | a | 1,936,836 | ||||
Geopark | 7,225 | 84,027 | |||||
Green Plains | 15,890 | a,b | 614,149 | ||||
Gulfport Energy Operating | 17,940 | a | 1,309,441 | ||||
Helmerich & Payne | 31,501 | 707,197 | |||||
ION Geophysical | 17,908 | a,b | 31,160 | ||||
Northern Oil & Gas | 8,091 | 164,895 | |||||
Oasis Petroleum | 16,475 | 1,975,352 | |||||
Oceaneering International | 6,390 | a | 68,309 | ||||
Oil States International | 86,538 | a | 437,882 | ||||
Patterson-UTI Energy | 35,579 | 251,188 | |||||
PDC Energy | 80,196 | 4,044,284 | |||||
ProPetro Holding | 147,060 | a | 1,208,833 | ||||
Renewable Energy Group | 8,405 | a | 401,591 | ||||
TechnipFMC | 107,527 | a | 609,678 | ||||
TETRA Technologies | 107,113 | a | 279,565 | ||||
World Fuel Services | 5,128 | 128,149 | |||||
28,389,296 | |||||||
Food & Staples Retailing - .2% | |||||||
BJ's Wholesale Club Holdings | 22,570 | a | 1,493,006 | ||||
Food, Beverage & Tobacco - 2.5% | |||||||
Calavo Growers | 1,858 | 75,323 | |||||
Darling Ingredients | 39,794 | a | 2,686,891 | ||||
Lancaster Colony | 3,960 | 578,952 | |||||
Primo Water | 93,162 | 1,548,352 | |||||
Seaboard | 343 | 1,334,277 | |||||
The Hain Celestial Group | 90,766 | a | 3,578,903 | ||||
Tootsie Roll Industries | 39,422 | b | 1,239,822 | ||||
TreeHouse Foods | 127,700 | a | 4,686,590 | ||||
15,729,110 | |||||||
Health Care Equipment & Services - 6.8% | |||||||
Acadia Healthcare | 44,715 | a | 2,511,642 | ||||
Accuray | 205,763 | a | 989,720 |
13
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Health Care Equipment & Services - 6.8% (continued) | |||||||
AMN Healthcare Services | 2,135 | a | 243,411 | ||||
AngioDynamics | 59,180 | a | 1,523,885 | ||||
Apria | 30,080 | a | 846,150 | ||||
AtriCure | 18,658 | a | 1,182,917 | ||||
Avanos Medical | 96,549 | a | 2,912,883 | ||||
BioLife Solutions | 33,555 | a | 1,280,459 | ||||
Cardiovascular Systems | 24,953 | a | 499,060 | ||||
CONMED | 9,485 | 1,246,898 | |||||
Cross Country Healthcare | 117,457 | a | 3,072,675 | ||||
CryoPort | 18,945 | a | 1,258,706 | ||||
Cytosorbents | 49,372 | a,b | 242,910 | ||||
Encompass Health | 15,780 | 909,244 | |||||
Haemonetics | 73,806 | a | 3,782,557 | ||||
Hanger | 58,200 | a | 981,834 | ||||
Integer Holdings | 34,083 | a | 2,717,778 | ||||
LHC Group | 9,300 | a | 1,066,896 | ||||
Merit Medical Systems | 62,377 | a | 3,921,018 | ||||
Mesa Laboratories | 6,360 | b | 1,963,904 | ||||
Molina Healthcare | 8,173 | a | 2,330,776 | ||||
NuVasive | 76,897 | a | 3,695,670 | ||||
OraSure Technologies | 80,048 | a | 746,848 | ||||
Patterson Companies | 26,400 | 830,808 | |||||
The Ensign Group | 2,407 | 183,726 | |||||
TransMedics Group | 28,660 | a | 631,666 | ||||
Varex Imaging | 34,473 | a | 984,204 | ||||
42,558,245 | |||||||
Household & Personal Products - .4% | |||||||
Spectrum Brands Holdings | 22,437 | 2,245,944 | |||||
Insurance - 1.7% | |||||||
eHealth | 22,536 | a | 497,595 | ||||
First American Financial | 9,470 | 702,485 | |||||
HCI Group | 1,078 | 119,011 | |||||
Horace Mann Educators | 64,466 | 2,389,755 | |||||
Old Republic International | 41,092 | 984,564 | |||||
Primerica | 7,270 | 1,069,781 | |||||
ProAssurance | 69,842 | 1,606,366 | |||||
Selective Insurance Group | 1,094 | 82,641 | |||||
Stewart Information Services | 18,710 | 1,332,526 | |||||
The Hanover Insurance Group | 15,183 | 1,848,530 | |||||
10,633,254 | |||||||
Materials - 6.9% | |||||||
Allegheny Technologies | 242,447 | a | 3,452,445 | ||||
American Vanguard | 125,034 | 1,789,237 |
14
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Materials - 6.9% (continued) | |||||||
Avery Dennison | 17,206 | 3,528,434 | |||||
Avient | 95,055 | 5,228,976 | |||||
Balchem | 8,330 | 1,316,140 | |||||
Cleveland-Cliffs | 207,262 | a,b | 4,217,782 | ||||
Commercial Metals | 47,250 | 1,460,025 | |||||
Crown Holdings | 40,270 | 4,260,566 | |||||
Eagle Materials | 9,695 | 1,495,163 | |||||
Innospec | 1,493 | 121,232 | |||||
Materion | 47,087 | 3,986,385 | |||||
Mercer International | 126,430 | 1,352,801 | |||||
MP Materials | 23,025 | a,b | 1,011,719 | ||||
Neenah | 1,819 | 84,565 | |||||
Schnitzer Steel Industries, Cl. A | 29,212 | 1,405,097 | |||||
Schweitzer-Mauduit International | 58,228 | 1,671,143 | |||||
Summit Materials, Cl. A | 46,500 | a | 1,734,450 | ||||
TriMas | 81,750 | 2,707,560 | |||||
UFP Technologies | 6,520 | a | 435,992 | ||||
Valvoline | 39,970 | 1,361,778 | |||||
42,621,490 | |||||||
Media & Entertainment - 2.9% | |||||||
Criteo, ADR | 121,994 | a | 4,582,095 | ||||
Gray Television | 174,149 | 3,590,952 | |||||
Lions Gate Entertainment, Cl. B | 190,229 | a | 2,596,626 | ||||
Loyalty Ventures | 4,553 | a | 130,671 | ||||
Madison Square Garden Entertainment | 52,699 | a,b | 3,484,458 | ||||
PubMatic, Cl. A | 49,980 | a | 1,967,713 | ||||
TechTarget | 14,995 | a | 1,448,967 | ||||
17,801,482 | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 2.3% | |||||||
Amneal Pharmaceuticals | 135,586 | a | 566,749 | ||||
Arvinas | 15,450 | a | 1,168,175 | ||||
Axsome Therapeutics | 6,970 | a,b | 240,744 | ||||
Beam Therapeutics | 3,920 | a | 310,268 | ||||
Bicycle Therapeutics, ADR | 5,125 | a | 275,469 | ||||
Charles River Laboratories International | 7,015 | a | 2,566,578 | ||||
Cytokinetics | 14,275 | a,b | 561,579 | ||||
Emergent BioSolutions | 22,460 | a | 990,935 | ||||
Fluidigm | 157,410 | a,b | 725,660 | ||||
Intellia Therapeutics | 4,845 | a | 557,223 | ||||
Invitae | 25,600 | a,b | 435,200 | ||||
NeoGenomics | 10,775 | a,b | 369,152 | ||||
Perrigo | 61,308 | 2,250,617 |
15
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 2.3% (continued) | |||||||
Phibro Animal Health, Cl. A | 151,713 | 2,972,058 | |||||
13,990,407 | |||||||
Real Estate - 3.9% | |||||||
Americold Realty Trust | 21,582 | c | 704,436 | ||||
Apple Hospitality REIT | 7,546 | c | 113,341 | ||||
CareTrust REIT | 9,814 | c | 198,341 | ||||
Corporate Office Properties Trust | 126,972 | c | 3,258,102 | ||||
DigitalBridge Group | 67,405 | a,c | 536,544 | ||||
EPR Properties | 26,030 | c | 1,200,504 | ||||
Global Medical REIT | 82,000 | c | 1,339,880 | ||||
Hudson Pacific Properties | 71,340 | c | 1,736,416 | ||||
Industrial Logistics Properties Trust | 40,160 | c | 889,946 | ||||
Jones Lang LaSalle | 1,064 | a | 249,944 | ||||
Lamar Advertising, Cl. A | 23,038 | c | 2,517,132 | ||||
Lexington Realty Trust | 13,587 | c | 204,484 | ||||
National Health Investors | 1,910 | c | 99,778 | ||||
Newmark Group, Cl. A | 21,266 | 341,532 | |||||
Omega Healthcare Investors | 4,676 | b,c | 130,647 | ||||
Physicians Realty Trust | 163,126 | c | 2,908,537 | ||||
Piedmont Office Realty Trust, Cl. A | 11,367 | c | 197,558 | ||||
Potlatchdeltic | 37,489 | c | 2,029,654 | ||||
PS Business Parks | 4,534 | c | 794,357 | ||||
Sunstone Hotel Investors | 84,609 | a,c | 919,700 | ||||
Terreno Realty | 21,895 | c | 1,667,304 | ||||
The Macerich Company | 43,010 | b,c | 811,169 | ||||
UMH Properties | 73,150 | c | 1,688,302 | ||||
24,537,608 | |||||||
Retailing - 2.6% | |||||||
American Eagle Outfitters | 53,335 | b | 1,380,843 | ||||
Asbury Automotive Group | 24,671 | a | 4,037,163 | ||||
Caleres | 25,917 | 611,900 | |||||
Chico's FAS | 81,738 | a | 468,359 | ||||
Leslie's | 51,345 | a | 1,076,191 | ||||
Lithia Motors | 703 | b | 204,805 | ||||
Monro | 28,807 | 1,613,768 | |||||
Overstock.com | 10,630 | a | 948,834 | ||||
Signet Jewelers | 16,880 | 1,639,723 | |||||
Sonic Automotive, Cl. A | 23,316 | 1,047,122 | |||||
The Aaron's Company | 7,162 | 158,996 | |||||
The Children's Place | 12,244 | a | 1,059,473 | ||||
The ODP | 47,645 | a | 1,799,075 | ||||
16,046,252 |
16
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Semiconductors & Semiconductor Equipment - 6.2% | |||||||
Axcelis Technologies | 17,370 | a | 1,073,813 | ||||
Azenta | 14,225 | 1,608,847 | |||||
CEVA | 19,069 | a | 840,943 | ||||
CMC Materials | 19,750 | 2,622,800 | |||||
Cohu | 36,060 | a | 1,188,898 | ||||
Entegris | 7,991 | 1,167,325 | |||||
FormFactor | 93,005 | a | 3,898,770 | ||||
Impinj | 8,625 | a,b | 646,616 | ||||
Kulicke & Soffa Industries | 11,050 | 637,143 | |||||
MACOM Technology Solutions Holdings | 66,739 | a | 4,799,201 | ||||
MaxLinear | 94,404 | a | 6,356,221 | ||||
Onto Innovation | 11,330 | a | 1,066,833 | ||||
Power Integrations | 19,730 | 1,973,592 | |||||
Rambus | 104,603 | a | 2,813,821 | ||||
Semtech | 15,960 | a | 1,367,293 | ||||
Silicon Laboratories | 8,230 | a | 1,615,302 | ||||
SiTime | 910 | a | 271,617 | ||||
SunPower | 22,265 | a | 637,892 | ||||
Synaptics | 3,613 | a | 1,019,733 | ||||
Veeco Instruments | 108,622 | a,b | 2,887,173 | ||||
38,493,833 | |||||||
Software & Services - 5.5% | |||||||
Alliance Data Systems | 11,384 | 775,933 | |||||
BlackLine | 7,390 | a,b | 813,270 | ||||
Box, Cl. A | 45,892 | a | 1,074,332 | ||||
Cerence | 6,505 | a,b | 489,046 | ||||
Cognyte Software | 84,994 | a | 1,731,328 | ||||
Concentrix | 9,710 | 1,611,860 | |||||
Conduent | 416,455 | a | 2,098,933 | ||||
ExlService Holdings | 23,321 | a | 3,028,698 | ||||
LivePerson | 22,115 | a,b | 854,966 | ||||
Mandiant | 123,277 | a | 2,092,011 | ||||
MAXIMUS | 16,599 | 1,252,395 | |||||
New Relic | 13,551 | a | 1,501,857 | ||||
OneSpan | 52,978 | a | 905,394 | ||||
Perficient | 2,517 | a | 344,905 | ||||
Ping Identity Holding | 40,426 | a | 962,543 | ||||
Qualys | 5,150 | a | 670,994 | ||||
Sprout Social, Cl. A | 6,355 | a | 709,726 | ||||
Switch, Cl. A | 116,990 | 3,199,676 | |||||
The Hackett Group | 51,330 | 1,050,212 | |||||
Unisys | 136,321 | a | 2,475,589 | ||||
Varonis Systems | 14,540 | a | 753,317 |
17
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Software & Services - 5.5% (continued) | |||||||
Verint Systems | 43,147 | a | 2,053,366 | ||||
Workiva | 10,545 | a | 1,470,711 | ||||
Xperi Holding | 140,789 | 2,522,939 | |||||
34,444,001 | |||||||
Technology Hardware & Equipment - 5.5% | |||||||
Ciena | 58,455 | a | 3,520,745 | ||||
Coherent | 917 | a | 237,439 | ||||
Diebold Nixdorf | 90,776 | a | 736,193 | ||||
EMCORE | 76,149 | a | 561,218 | ||||
II-VI | 63,059 | a | 3,943,079 | ||||
Infinera | 89,472 | a,b | 727,407 | ||||
Innoviz Technologies | 56,796 | a,b | 407,795 | ||||
Itron | 26,665 | a | 1,650,830 | ||||
Kimball Electronics | 52,860 | a | 1,121,689 | ||||
Knowles | 168,571 | a | 3,661,363 | ||||
Methode Electronics | 103,554 | 4,605,047 | |||||
OSI Systems | 25,053 | a | 2,278,070 | ||||
Quantum | 266,738 | a | 1,459,057 | ||||
Radware | 21,493 | a | 622,652 | ||||
Ribbon Communications | 135,254 | a | 737,134 | ||||
Stratasys | 92,628 | a | 2,500,030 | ||||
Teledyne Technologies | 2,360 | a | 980,084 | ||||
Viasat | 37,719 | a | 1,670,575 | ||||
Viavi Solutions | 102,122 | a | 1,512,427 | ||||
Vishay Precision Group | 42,340 | a | 1,453,532 | ||||
34,386,366 | |||||||
Telecommunication Services - .5% | |||||||
ATN International | 59,913 | 2,289,276 | |||||
Bandwidth, Cl. A | 13,025 | a,b | 933,372 | ||||
3,222,648 | |||||||
Transportation - 1.7% | |||||||
Allegiant Travel | 16,542 | a | 2,865,405 | ||||
Heartland Express | 78,632 | 1,316,300 | |||||
Hub Group, Cl. A | 18,170 | a | 1,411,264 | ||||
JetBlue Airways | 49,840 | a | 668,853 | ||||
Kirby | 27,510 | a | 1,436,572 | ||||
Knight-Swift Transportation Holdings | 3,909 | 223,790 | |||||
Ryder System | 17,860 | 1,483,809 | |||||
Werner Enterprises | 26,355 | 1,188,874 | |||||
10,594,867 | |||||||
Utilities - 1.6% | |||||||
ALLETE | 1,583 | 92,811 | |||||
Avista | 3,670 | 141,332 |
18
Description | Shares | Value ($) | |||||
Common Stocks - 98.2% (continued) | |||||||
Utilities - 1.6% (continued) | |||||||
Chesapeake Utilities | 7,960 | 1,013,786 | |||||
IDACORP | 1,757 | 183,817 | |||||
Ormat Technologies | 35,019 | b | 2,643,934 | ||||
Portland General Electric | 79,110 | 3,850,284 | |||||
South Jersey Industries | 19,085 | b | 448,498 | ||||
Vistra Energy | 79,130 | 1,573,104 | |||||
9,947,566 | |||||||
Total Common Stocks (cost $476,297,386) | 611,056,907 | ||||||
Coupon | Maturity | ||||||
Convertible Bonds - .0% | |||||||
Energy - .0% | |||||||
ION Geophysical | 8.00 | 12/15/2025 | 48,000 | 43,803 | |||
Exchange-Traded Funds - .3% | |||||||
Registered Investment Companies - .3% | |||||||
iShares Russell 2000 ETF | 9,000 | b | 1,963,530 | ||||
1-Day | |||||||
Investment Companies - 1.7% | |||||||
Registered Investment Companies - 1.7% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 0.06 | 10,825,043 | d | 10,825,043 |
19
STATEMENT OF INVESTMENTS (continued)
Description | 1-Day | Shares | Value ($) | ||||
Investment of Cash Collateral for Securities Loaned - 1.3% | |||||||
Registered Investment Companies - 1.3% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares | 0.06 | 7,971,454 | d | 7,971,454 | |||
Total Investments (cost $497,122,330) | 101.5% | 631,860,737 | |||||
Liabilities, Less Cash and Receivables | (1.5%) | (9,283,589) | |||||
Net Assets | 100.0% | 622,577,148 |
ADR—American Depository Receipt
ETF—Exchange-Traded Fund
REIT—Real Estate Investment Trust
a Non-income producing security.
b Security, or portion thereof, on loan. At November 30, 2021, the value of the fund’s securities on loan was $27,959,300 and the value of the collateral was $29,135,701, consisting of cash collateral of $7,971,454 and U.S. Government & Agency securities valued at $21,164,247. In addition, the value of collateral may include pending sales that are also on loan.
c Investment in real estate investment trust within the United States.
d Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
Portfolio Summary (Unaudited) † | Value (%) |
Industrials | 21.0 |
Financials | 17.5 |
Information Technology | 17.2 |
Consumer Discretionary | 9.9 |
Health Care | 9.1 |
Materials | 6.9 |
Energy | 4.6 |
Real Estate | 3.9 |
Communication Services | 3.4 |
Investment Companies | 3.3 |
Consumer Staples | 3.1 |
Utilities | 1.6 |
101.5 |
† Based on net assets.
See notes to financial statements.
20
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS
Investment Companies | Value | Purchases ($)† | Sales ($) | Value | Net | Dividends/ | ||
Registered Investment Companies; | ||||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 6,924,724 | 275,071,078 | (271,170,759) | 10,825,043 | 1.7 | 10,405 | ||
Investment of Cash Collateral for Securities Loaned; | ||||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares | 9,625,934 | 127,807,786 | (129,462,266) | 7,971,454 | 1.3 | 145,450†† | ||
Total | 16,550,658 | 402,878,864 | (400,633,025) | 18,796,497 | 3.0 | 155,855 |
† Included reinvested dividends/distributions.
†† Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.
See notes to financial statements.
21
STATEMENT OF ASSETS AND LIABILITIES
November 30, 2021
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 478,325,833 |
| 613,064,240 |
| ||
Affiliated issuers |
| 18,796,497 |
| 18,796,497 |
| |
Cash |
|
|
|
| 42,175 |
|
Receivable for investment securities sold |
| 3,239,255 |
| |||
Dividends, interest and securities lending income receivable |
| 371,080 |
| |||
Receivable for shares of Common Stock subscribed |
| 160,196 |
| |||
Prepaid expenses |
|
|
|
| 43,295 |
|
|
|
|
|
| 635,716,738 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 519,506 |
| |||
Liability for securities on loan—Note 1(c) |
| 7,971,454 |
| |||
Payable for investment securities purchased |
| 3,216,163 |
| |||
Payable for shares of Common Stock redeemed |
| 1,346,594 |
| |||
Directors’ fees and expenses payable |
| 8,041 |
| |||
Other accrued expenses |
|
|
|
| 77,832 |
|
|
|
|
|
| 13,139,590 |
|
Net Assets ($) |
|
| 622,577,148 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 400,110,189 |
|
Total distributable earnings (loss) |
|
|
|
| 222,466,959 |
|
Net Assets ($) |
|
| 622,577,148 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 1,764,584 | 130,855 | 23,018,861 | 597,662,848 |
|
Shares Outstanding | 60,907 | 5,150 | 777,946 | 20,237,262 |
|
Net Asset Value Per Share ($) | 28.97 | 25.41 | 29.59 | 29.53 |
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
|
22
STATEMENT OF OPERATIONS
Year Ended November 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends (net of $2,763 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 6,566,824 |
| ||
Affiliated issuers |
|
| 10,405 |
| ||
Income from securities lending—Note 1(c) |
|
| 145,450 |
| ||
Interest |
|
| 569 |
| ||
Total Income |
|
| 6,723,248 |
| ||
Expenses: |
|
|
|
| ||
Management fee—Note 3(a) |
|
| 5,526,592 |
| ||
Professional fees |
|
| 110,514 |
| ||
Registration fees |
|
| 67,840 |
| ||
Directors’ fees and expenses—Note 3(d) |
|
| 46,960 |
| ||
Custodian fees—Note 3(c) |
|
| 37,648 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 28,055 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 16,631 |
| ||
Loan commitment fees—Note 2 |
|
| 13,669 |
| ||
Prospectus and shareholders’ reports |
|
| 10,361 |
| ||
Distribution fees—Note 3(b) |
|
| 977 |
| ||
Miscellaneous |
|
| 45,167 |
| ||
Total Expenses |
|
| 5,904,414 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (939) |
| ||
Net Expenses |
|
| 5,903,475 |
| ||
Investment Income—Net |
|
| 819,773 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 103,670,400 |
| ||||
Net change in unrealized appreciation (depreciation) on investments | 24,184,807 |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 127,855,207 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 128,674,980 |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
23
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Year Ended November 30, | |||||
|
|
|
| 2021 |
| 2020 |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 819,773 |
|
|
| 2,126,368 |
| |
Net realized gain (loss) on investments |
| 103,670,400 |
|
|
| 22,619,818 |
| ||
Net change in unrealized appreciation |
| 24,184,807 |
|
|
| (3,360,978) |
| ||
Net Increase (Decrease) in Net Assets | 128,674,980 |
|
|
| 21,385,208 |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (62,778) |
|
|
| (22,327) |
| |
Class C |
|
| (7,152) |
|
|
| (6,338) |
| |
Class I |
|
| (788,385) |
|
|
| (347,742) |
| |
Class Y |
|
| (27,376,311) |
|
|
| (13,642,241) |
| |
Total Distributions |
|
| (28,234,626) |
|
|
| (14,018,648) |
| |
Capital Stock Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 730,978 |
|
|
| 175,195 |
| |
Class C |
|
| 104,994 |
|
|
| - |
| |
Class I |
|
| 15,957,249 |
|
|
| 7,421,325 |
| |
Class Y |
|
| 93,421,278 |
|
|
| 67,966,466 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 62,687 |
|
|
| 22,065 |
| |
Class C |
|
| 6,605 |
|
|
| 6,160 |
| |
Class I |
|
| 608,542 |
|
|
| 279,227 |
| |
Class Y |
|
| 12,863,987 |
|
|
| 5,611,816 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (266,381) |
|
|
| (334,715) |
| |
Class C |
|
| (120,675) |
|
|
| (284,260) |
| |
Class I |
|
| (10,091,327) |
|
|
| (10,260,196) |
| |
Class Y |
|
| (73,933,219) |
|
|
| (190,954,260) |
| |
Increase (Decrease) in Net Assets | 39,344,718 |
|
|
| (120,351,177) |
| |||
Total Increase (Decrease) in Net Assets | 139,785,072 |
|
|
| (112,984,617) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 482,792,076 |
|
|
| 595,776,693 |
| |
End of Period |
|
| 622,577,148 |
|
|
| 482,792,076 |
|
24
|
|
|
| Year Ended November 30, | |||||
|
|
|
| 2021 |
| 2020 |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class Aa |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 25,427 |
|
|
| 9,139 |
| |
Shares issued for distributions reinvested |
|
| 2,448 |
|
|
| 1,033 |
| |
Shares redeemed |
|
| (9,458) |
|
|
| (18,464) |
| |
Net Increase (Decrease) in Shares Outstanding | 18,417 |
|
|
| (8,292) |
| |||
Class Ca |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 4,009 |
|
|
| - |
| |
Shares issued for distributions reinvested |
|
| 293 |
|
|
| 323 |
| |
Shares redeemed |
|
| (4,625) |
|
|
| (16,516) |
| |
Net Increase (Decrease) in Shares Outstanding | (323) |
|
|
| (16,193) |
| |||
Class Ib |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 537,477 |
|
|
| 370,345 |
| |
Shares issued for distributions reinvested |
|
| 23,392 |
|
|
| 12,980 |
| |
Shares redeemed |
|
| (345,897) |
|
|
| (525,982) |
| |
Net Increase (Decrease) in Shares Outstanding | 214,972 |
|
|
| (142,657) |
| |||
Class Yb |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 3,230,714 |
|
|
| 3,544,829 |
| |
Shares issued for distributions reinvested |
|
| 495,982 |
|
|
| 262,316 |
| |
Shares redeemed |
|
| (2,536,103) |
|
|
| (10,363,216) |
| |
Net Increase (Decrease) in Shares Outstanding | 1,190,593 |
|
|
| (6,556,071) |
| |||
|
|
|
|
|
|
|
|
|
|
a | During the period ended November 30, 2021, 3,811 Class C shares representing $100,000 were automatically converted to 3,357 Class A shares and during the period ended November 30, 2020, 43 Class C shares representing $574 were automatically converted to 38 Class A shares. | ||||||||
b | During the period ended November 30, 2021, 447,362 Class Y shares representing $13,260,930 were exchanged for 446,442 Class I shares and during the period ended November 30, 2020, 317,496 Class Y shares representing $6,477,388 were exchanged for 316,961 Class I shares. | ||||||||
See notes to financial statements. |
25
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. These figures have been derived from the fund’s financial statements.
Year Ended November 30, | ||||||
Class A Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 24.13 | 22.15 | 23.94 | 26.44 | 22.72 | |
Investment Operations: | ||||||
Investment income (loss)—neta | (.07) | .03 | .02 | (.01) | .00b | |
Net realized and unrealized | 6.28 | 2.39 | .86 | (.98) | 3.79 | |
Total from Investment Operations | 6.21 | 2.42 | .88 | (.99) | 3.79 | |
Distributions: | ||||||
Dividends from investment income—net | (.04) | (.01) | - | - | (.07) | |
Dividends from net realized | (1.33) | (.43) | (2.67) | (1.51) | - | |
Total Distributions | (1.37) | (.44) | (2.67) | (1.51) | (.07) | |
Net asset value, end of period | 28.97 | 24.13 | 22.15 | 23.94 | 26.44 | |
Total Return (%)c | 26.55 | 11.21 | 6.07 | (3.93) | 16.74 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.33 | 1.44 | 1.38 | 1.35 | 1.30 | |
Ratio of net expenses | 1.30 | 1.30 | 1.30 | 1.30 | 1.28 | |
Ratio of net investment income (loss) | (.23) | .14 | .12 | (.05) | .01 | |
Portfolio Turnover Rate | 70.67 | 86.50 | 57.74 | 58.85 | 67.90 | |
Net Assets, end of period ($ x 1,000) | 1,765 | 1,025 | 1,125 | 1,048 | 1,076 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
See notes to financial statements.
26
Year Ended November 30, | ||||||
Class C Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 21.44 | 19.86 | 21.92 | 24.51 | 21.15 | |
Investment Operations: | ||||||
Investment (loss)—neta | (.24) | (.10) | (.12) | (.19) | (.16) | |
Net realized and unrealized | 5.54 | 2.11 | .73 | (.89) | 3.52 | |
Total from Investment Operations | 5.30 | 2.01 | .61 | (1.08) | 3.36 | |
Distributions: | ||||||
Dividends from net realized | (1.33) | (.43) | (2.67) | (1.51) | - | |
Net asset value, end of period | 25.41 | 21.44 | 19.86 | 21.92 | 24.51 | |
Total Return (%)b | 25.58 | 10.42 | 5.28 | (4.65) | 15.89 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 2.43 | 2.39 | 2.12 | 2.15 | 2.31 | |
Ratio of net expenses | 2.05 | 2.05 | 2.05 | 2.05 | 2.04 | |
Ratio of net investment (loss) | (.95) | (.55) | (.61) | (.82) | (.74) | |
Portfolio Turnover Rate | 70.67 | 86.50 | 57.74 | 58.85 | 67.90 | |
Net Assets, end of period ($ x 1,000) | 131 | 117 | 430 | 553 | 179 |
a Based on average shares outstanding.
b Exclusive of sales charge.
See notes to financial statements.
27
FINANCIAL HIGHLIGHTS (continued)
Year Ended November 30, | ||||||
Class I Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 24.60 | 22.61 | 24.41 | 26.90 | 23.09 | |
Investment Operations: | ||||||
Investment income—neta | .03 | .08 | .10 | .07 | .07 | |
Net realized and unrealized | 6.39 | 2.44 | .86 | (1.00) | 3.87 | |
Total from Investment Operations | 6.42 | 2.52 | .96 | (.93) | 3.94 | |
Distributions: | ||||||
Dividends from | (.10) | (.10) | (.09) | (.05) | (.13) | |
Dividends from net realized | (1.33) | (.43) | (2.67) | (1.51) | - | |
Total Distributions | (1.43) | (.53) | (2.76) | (1.56) | (.13) | |
Net asset value, end of period | 29.59 | 24.60 | 22.61 | 24.41 | 26.90 | |
Total Return (%) | 26.95 | 11.53 | 6.40 | (3.63) | 17.14 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.00 | 1.03 | .99 | .97 | 1.00 | |
Ratio of net expenses | 1.00 | 1.03 | .99 | .97 | .98 | |
Ratio of net investment income | .09 | .41 | .45 | .27 | .29 | |
Portfolio Turnover Rate | 70.67 | 86.50 | 57.74 | 58.85 | 67.90 | |
Net Assets, end of period ($ x 1,000) | 23,019 | 13,851 | 15,955 | 24,890 | 20,566 |
a Based on average shares outstanding.
See notes to financial statements.
28
Year Ended November 30, | ||||||
Class Y Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 24.56 | 22.59 | 24.40 | 26.88 | 23.08 | |
Investment Operations: | ||||||
Investment income—neta | .04 | .10 | .10 | .08 | .08 | |
Net realized and unrealized | 6.37 | 2.42 | .86 | (.99) | 3.86 | |
Total from Investment Operations | 6.41 | 2.52 | .96 | (.91) | 3.94 | |
Distributions: | ||||||
Dividends | (.11) | (.12) | (.10) | (.06) | (.14) | |
Dividends from net realized | (1.33) | (.43) | (2.67) | (1.51) | - | |
Total Distributions | (1.44) | (.55) | (2.77) | (1.57) | (.14) | |
Net asset value, end of period | 29.53 | 24.56 | 22.59 | 24.40 | 26.88 | |
Total Return (%) | 26.97 | 11.58 | 6.41 | (3.56) | 17.15 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .96 | .98 | .95 | .94 | .94 | |
Ratio of net expenses | .96 | .98 | .95 | .94 | .93 | |
Ratio of net investment income | .14 | .46 | .48 | .31 | .35 | |
Portfolio Turnover Rate | 70.67 | 86.50 | 57.74 | 58.85 | 67.90 | |
Net Assets, end of period ($ x 1,000) | 597,663 | 467,798 | 578,267 | 777,237 | 942,613 |
a Based on average shares outstanding.
See notes to financial statements.
29
NOTES TO FINANCIAL STATEMENTS
NOTE 1—Significant Accounting Policies:
BNY Mellon Select Managers Small Cap Value Fund (the “fund”) is a separate diversified series of BNY Mellon Strategic Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering six series, including the fund. The fund’s investment objective is to seek capital appreciation. 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 and the fund’s portfolio allocation manager. Walthausen & Co., LLC (“Walthausen”), Neuberger Berman Investment Advisers LLC (“Neuberger Berman”), Channing Capital Management, LLC (“Channing”), Eastern Shore Capital Management (“Eastern Shore”), Heartland Advisors, Inc. (“Heartland”) and Rice Hall James & Associates, LLC (“RHJ”), serve as the fund’s sub-investment advisers, each managing an allocated portion of the fund’s portfolio.
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 500 million shares of $.001 par value Common Stock. The fund currently has authorized four classes of shares: Class A (100 million shares authorized), Class C (100 million shares authorized), Class I (100 million shares authorized) and Class Y (200 million shares authorized). Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class A shares bought without an initial sales charge as part of an investment of $1 million or more may be charged a contingent deferred sales charge (“CDSC”) of 1.00% if redeemed within one year. Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares eight years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services
30
Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the 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 Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
31
NOTES TO FINANCIAL STATEMENTS (continued)
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in debt securities excluding short-term investments (other than U.S. Treasury Bills), are valued each business day by one or more independent pricing services (each, a “Service”) approved by the Company’s Board of Directors (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.
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.
32
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.
Each Service and independent valuation firm is engaged under the general oversight of the Board.
Fair valuing of securities may be determined with the assistance of a Service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of November 30, 2021 in valuing the fund’s investments:
Level 1-Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | Level 3-Significant Unobservable Inputs | Total | |||
Assets ($) | ||||||
Investments In Securities:† | ||||||
Corporate Bonds | - | 43,803 | - | 43,803 | ||
Equity Securities - Common Stocks | 611,056,907 | - | - | 611,056,907 | ||
Exchange-Traded Funds | 1,963,530 | - | - | 1,963,530 |
33
NOTES TO FINANCIAL STATEMENTS (continued)
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 | 18,796,497 | - | - | 18,796,497 |
† See Statement of Investments for additional detailed categorizations, if any.
(b) Foreign taxes: The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invests. These foreign taxes, if any, are paid by the fund and are reflected in the Statement of Operations, if applicable. Foreign taxes payable or deferred or those subject to reclaims as of November 30, 2021, if any, are disclosed in the fund’s Statement of Assets and Liabilities.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended November 30, 2021, The Bank
34
of New York Mellon earned $19,518 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(e) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. 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 investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
35
NOTES TO FINANCIAL STATEMENTS (continued)
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended November 30, 2021, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended November 30, 2021, the fund did not incur any interest or penalties.
Each tax year in the four-year period ended November 30, 2021 remains subject to examination by the Internal Revenue Service and state taxing authorities.
At November 30, 2021, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $34,029,657, undistributed capital gains $62,052,179 and unrealized appreciation $126,385,123.
The tax character of distributions paid to shareholders during the fiscal periods ended November 30, 2021 and November 30, 2020 were as follows: ordinary income $2,066,443 and $2,947,411, and long-term capital gains $26,168,183 and $11,071,237, respectively.
During the period ended November 30, 2021, as a result of permanent book to tax differences, primarily due to the tax treatment for treating a portion of the proceeds from redemptions as a distribution for tax purposes, the fund decreased total distributable earnings (loss) by $6,334,324 and increased paid-in capital by the same amount. Net assets and net asset value per share were not affected by this reclassification.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $688.5 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $135 million and is available only to BNY Mellon Floating Rate Income
36
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 November 30, 2021, 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, the management fee is computed at the annual rate of .90% of the value of the fund’s average daily net assets and is payable monthly. The Adviser has contractually agreed, from December 1, 2020 through March 31, 2022, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the direct expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 1.05% of the value of the fund’s average daily net assets. On or after March 31, 2022, the Adviser may terminate this expense limitation at any time. The reduction in expenses, pursuant to the undertakings, amounted to $939 during the period ended November 30, 2021.
Pursuant to separate sub-investment advisory agreements between the Adviser and Walthausen, Neuberger Berman, Channing, Eastern Shore, Heartland and RHJ, each serves as the fund’s sub-investment adviser responsible for the day-to-day management of a portion of the fund’s portfolio. The Adviser pays each sub-investment adviser a monthly fee at an annual percentage of the value of the fund’s average daily net assets. The Adviser has obtained an exemptive order from the SEC (the “Order”), upon which the fund may rely, to use a manager of managers approach that permits the Adviser, subject to certain conditions and approval by the Board, to enter into and materially amend sub-investment advisory agreements with one or more sub-investment advisers who are either unaffiliated with the Adviser or are wholly-owned subsidiaries (as defined under the Act) of the Adviser’s ultimate parent company, BNY Mellon, without obtaining shareholder approval. The Order also allows the fund to disclose the sub-investment advisory fee paid by the Adviser to any unaffiliated sub-investment adviser in the aggregate with other unaffiliated sub-investment advisers in documents filed with the SEC and provided to shareholders. In addition, pursuant to the Order, it is not necessary to disclose the sub-investment advisory fee payable by the Adviser separately
37
NOTES TO FINANCIAL STATEMENTS (continued)
to a sub-investment adviser that is a wholly-owned subsidiary of BNY Mellon in documents filed with the SEC and provided to shareholders; such fees are to be aggregated with fees payable to the Adviser. The Adviser has ultimate responsibility (subject to oversight by the Board) to supervise any sub-investment adviser and recommend the hiring, termination, and replacement of any sub-investment adviser to the Board.
(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 November 30, 2021, Class C shares were charged $977 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 November 30, 2021, Class A and Class C shares were charged $4,091 and $326, respectively, pursuant to the Shareholder Services Plan.
The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. For financial reporting purposes, the fund includes net earnings credits, if any, as shareholder servicing costs in the Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, for the fund. The majority of transfer agency fees are comprised of
38
amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended November 30, 2021, the fund was charged $5,598 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended November 30, 2021, the fund was charged $37,648 pursuant to the custody agreement.
During the period ended November 30, 2021, the fund was charged $28,055 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 $495,077, Distribution Plan fees of $86, Shareholder Services Plan fees of $416, Custodian fees of $11,224, Chief Compliance Officer fees of $11,795 and transfer agency fees of $983, which are offset against an expense reimbursement currently in effect in the amount of $75.
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended November 30, 2021, amounted to $425,885,489 and $416,014,537, respectively.
At November 30, 2021, the cost of investments for federal income tax purposes was $505,475,614; accordingly, accumulated net unrealized appreciation on investments was $126,385,123, consisting of $159,596,405 gross unrealized appreciation and $33,211,282 gross unrealized depreciation.
39
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of BNY Mellon Select Managers Small Cap Value Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of BNY Mellon Select Managers Small Cap Value Fund (the “Fund”) (one of the funds constituting BNY Mellon Strategic Funds, Inc.), including the statements of investments and investments in affiliated issuers, as of November 30, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting BNY Mellon Strategic Funds, Inc.) at November 30, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of November 30, 2021, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the BNY Mellon Family of Funds since at least 1957, but we are unable to determine the specific year.
New York, New York
January 24, 2022
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IMPORTANT TAX INFORMATION (Unaudited)
For federal tax purposes the fund hereby reports 99.83% of the ordinary dividends paid during the fiscal year ended November 30, 2021 as qualifying for the corporate dividends received deduction. Also certain dividends paid by the fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the distributions paid during the fiscal year, $2,063,037 represents the maximum amount that may be considered qualified dividend income. Shareholders will receive notification in early 2022 of the percentage applicable to the preparation of their 2021 income tax returns. Also, the fund hereby reports $1.0741 per share as a long-term capital gain distribution paid on December 30, 2020 and $.2573 per share as a long-term capital gain distribution paid on March 29, 2021.
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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 Directors held on November 1-2, 2021, the Board considered the renewal of (a) the fund’s Management Agreement, pursuant to which the Adviser provides the fund with investment management and administrative services and is responsible for evaluating and recommending subadvisers to provide the fund with day-to-day portfolio management services, recommending the percentage of fund assets to be allocated to each subadviser, monitoring and evaluating the performance of the subadvisers, and recommending whether a subadviser should be terminated and (b) the Adviser’s separate Sub-Investment Advisory Agreements (together with the Management Agreement, the “Agreements”), with each of Channing Capital Management, LLC, Eastern Shore Capital Management, Heartland Advisors, Inc., Neuberger Berman Investment Advisers LLC, Rice Hall James & Associates, LLC and Walthausen & Co., LLC (each, a “Subadviser” and collectively, the “Subadvisers”), pursuant to which each Subadviser serves as a sub-investment adviser and provides day-to-day management of the fund’s investments with respect to the portion of the fund’s assets allocated to the Subadviser. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser and the Subadvisers. 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, evaluation and other responsibilities in respect of the Subadvisers. As part of its review, the Board considered information regarding the process by which the Adviser selected and recommended the Subadvisers
42
for Board approval. The Board considered each Subadviser’s specific responsibilities in the day-to-day management of the portion of the fund’s assets allocated to it, as well as the qualifications, experience and responsibilities of the persons serving as the portfolio managers for the segment of the fund’s assets managed by the respective Subadviser, and other key personnel at the Subadviser. The Board specifically took into account each Subadviser’s investment process and capabilities, evaluating how the Subadviser complemented each of the other Subadvisers to the fund, noting the Adviser’s favorable assessment of the nature and quality of the sub-advisory services provided to the fund by the Subadvisers. The Board also considered portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data based on classifications provided by Thomson Reuters Lipper, which included information comparing (1) the performance of the fund’s Class I shares with the performance of a group of institutional small-cap core funds selected by Broadridge as comparable to the fund (the “Performance Group”) and with a broader group of funds consisting of all retail and institutional small-cap core funds (the “Performance Universe”), all for various periods ended September 30, 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 small-cap core funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe. The Board also reviewed performance information provided by the Adviser with respect to each Subadviser for various periods ended September 30, 2021.
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, noting that the funds included in the Performance Group and Performance Universe were not limited to funds that engage multiple subadvisers like the fund, nor did they include only funds that use a value-style of investing. The Board discussed with representatives of the Adviser the results of the comparisons and considered that the fund’s total return performance was above the Performance Group and the Performance Universe medians for all periods. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in six of the ten calendar years shown. The Board also noted that the fund had a four-star rating for the three- and five-year periods and a four-star overall rating from Morningstar based on Morningstar’s risk-adjusted return measures. With respect to the performance of each Subadviser, the Board noted that,
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
depending on the period under review, some Subadvisers outperformed, while others underperformed, the fund’s benchmark index and/or the median performance of the funds in the Performance Group and Performance Universe. The Board discussed with representatives of the Adviser the portfolio management strategies of the fund’s Subadvisers, and noted that the Subadvisers’ strategies continued to complement each other and were applied consistently.
Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management and sub-advisory services provided by the Adviser and the Subadvisers, 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. It was noted that, as in the case of the funds included in the Performance Group and Performance Universe, the funds included in the Expense Group and Expense Universe were not limited to funds that engage multiple subadvisers like the fund.
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 higher than the Expense Universe median actual management fee and the fund’s total expenses were lower than the Expense Group median and slightly higher than the Expense Universe median total expenses.
Representatives of the Adviser stated that the Adviser has contractually agreed, until March 31, 2022, to waive receipt of its fees and/or assume the direct expenses of the fund so that the direct expenses of none of its classes (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 1.05% of the fund’s average daily net assets.
Representatives of the Adviser reviewed with the Board the management or investment advisory fees paid by funds advised or administered by the Adviser that are in the same Lipper category as the fund (the “Similar Funds”), and explained the nature of the Similar Funds. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Funds to evaluate the appropriateness of the fund’s management fee.
The Board considered the fees payable to the Subadvisers in relation to the fee payable to the Adviser by the fund and the respective services provided by the Subadvisers and the Adviser. The Board also took into consideration that the Subadvisers’ fees are 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
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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 Subadvisers, 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 Subadvisers pursuant to the respective Sub-Investment Advisory Agreement, the Board did not consider any Subadviser’s profitability to be relevant to its deliberations. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser and each Subadviser from acting as investment adviser and sub-investment adviser, respectively, and took into consideration the soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreements. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by the Adviser and the Subadvisers are adequate and appropriate.
· The Board generally was satisfied with the fund’s performance and the manner in which the Adviser monitors and evaluates the performance of each Subadviser.
· The Board concluded that the fees paid to the Adviser and the Subadvisers continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates and the Subadvisers, of the Adviser and the Subadvisers and the services provided to the fund by the Adviser and the Subadvisers. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreements, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board also noted that the Adviser continued to believe that the Subadvisers complemented each other’s specific style of investing and that the Adviser recommended that the Board approve each Sub-Investment Advisory Agreement. The Board determined to renew the Agreements.
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BOARD MEMBERS INFORMATION (Unaudited)
IIndependent Board Members
Joseph S. DiMartino (78)
Chairman of the Board (1995)
Principal Occupation During Past 5 Years:
· Director and Trustee of funds in the BNY Mellon Family of Funds and certain other entities (as described in the fund’s Statement of Additional Information) (1995-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ, Inc., a public company providing professional business services, products and solutions, Director (1997-Present)
No. of Portfolios for which Board Member Serves: 97
———————
Joni Evans (79)
Board Member (2006)
Principal Occupation During Past 5 Years:
· www.wowOwow.com, an online community dedicated to women’s conversations and publications, Chief Executive Officer (2007-2019)
· Joni Evans Ltd. publishing, Principal (2006-2019)
No. of Portfolios for which Board Member Serves: 18
———————
Joan Gulley (74)
Board Member (2017)
Principal Occupation During Past 5 Years:
· Nantucket Atheneum, public library, Chair (2018-June 2021) and Director (2015-June 2021)
· Orchard Island Club, golf and beach club, Governor (2016-Present)
No. of Portfolios for which Board Member Serves: 42
———————
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BOARD MEMBERS INFORMATION (Unaudited) (continued)
Alan H. Howard (62)
Board Member (2018)
Principal Occupation During Past 5 Years:
· Heathcote Advisors LLC, a financial advisory services firm, Managing Partner (2008-Present)
· Dynatech/MPX Holdings LLC, a global supplier and service provider of military aircraft parts, President (2012-2019); and Board Member of its two operating subsidiaries, Dynatech International LLC and Military Parts Exchange LLC (2012-2019), including Chief Executive Officer of an operating subsidiary, Dynatech International LLC (2013-2019)
· Rossoff & Co., an independent investment banking firm, Senior Advisor (2013-June 2021)
Other Public Company Board Memberships During Past 5 Years:
· Movado Group, Inc., a public company that designs, sources, markets and distributes watches, Director (1997-Present)
· Diamond Offshore Drilling, Inc., a public company that provides contract drilling services, Director (March 2020-April 2021)
No. of Portfolios for which Board Member Serves: 18
———————
Robin A. Melvin (58)
Board Member (1995)
Principal Occupation During Past 5 Years:
· Westover School, a private girls’ boarding school in Middlebury, Connecticut, Trustee (2019-Present)
· Mentor Illinois, a non-profit organization dedicated to increasing the quality of mentoring services in Illinois. Co-Chair (2014–2020); Board Member, Mentor Illinois (2013-2020)
· JDRF, a non-profit juvenile diabetes research foundation, Board Member (June 2021-Present)
Other Public Company Board Memberships During Past 5 Years:
· HPS Corporate Lending Fund, a closed-end management investment company regulated as a business development company, Trustee (August 2021-Present)
No. of Portfolios for which Board Member Serves: 75
———————
Burton N. Wallack (71)
Board Member (2006)
Principal Occupation During Past 5 Years:
Wallack Management Company, a real estate management company, President and Co-owner (1987-Present)
Other Public Company Board Memberships During Past 5 Years:
Mount Sinai Hospital Urology Board Member (2017-Present)
No. of Portfolios for which Board Member Serves: 18
———————
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Benaree Pratt Wiley (75)
Board Member (2016)
Principal Occupation During Past 5 Years:
· The Wiley Group, a firm specializing in strategy and business development. Principal (2005-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ, Inc., a public company providing professional business services, products and solutions, Director (2008-Present)
· Blue Cross Blue Shield of Massachusetts Director (2004-2020)
No. of Portfolios for which Board Member Serves: 63
———————
Gordon J. Davis (80)
Advisory Board Member (2021)
Principal Occupation During Past 5 Years:
· Venable LLP, a law firm Partner (2012-Present)
No. of Portfolios for which Advisory Board Member Serves: 41
———————
Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80. The address of the Board Members and Officers is c/o BNY Mellon Investment Adviser, Inc. 240 Greenwich Street, New York, New York 10286. Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from the Adviser free of charge by calling this toll free number: 1-800-373-9387.
William Hodding Carter III, Emeritus Board Member
Ehud Houminer, Emeritus Board Member
Hans C. Mautner, Emeritus Board Member
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OFFICERS OF THE FUND (Unaudited)
DAVID DIPETRILLO, President since January 2021.
Vice President and Director of the Adviser since February 2021; Head of North America Product, BNY Mellon Investment Management since January 2018; Director of Product Strategy, BNY Mellon Investment Management from January 2016 to December 2017. He is an officer of 57 investment companies (comprised of 107 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 43 years old and has been an employee of BNY Mellon since 2005.
JAMES WINDELS, Treasurer since November 2001.
Vice President of the Adviser since September 2020; Director–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 63 years old and has been an employee of the Adviser since April 1985.
PETER M. SULLIVAN, Chief Legal Officer since July 2021 and Vice President and Assistant Secretary since March 2019.
Chief Legal Officer of the Adviser since July 2021; Associate General Counsel of BNY Mellon since July 2021; Senior Managing Counsel of BNY Mellon from December 2020 to July 2021; Managing Counsel of BNY Mellon from March 2009 to December 2020, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of BNY Mellon since April 2004.
JAMES BITETTO, Vice President since August 2005 and Secretary since February 2018.
Senior Managing Counsel of BNY Mellon since December 2019; Managing Counsel of BNY Mellon from April 2014 to December 2019; Secretary of the Adviser, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 55 years old and has been an employee of the Adviser since December 1996.
DEIRDRE CUNNANE, Vice President and Assistant Secretary since March 2019.
Counsel of BNY Mellon since August 2018; Senior Regulatory Specialist at BNY Mellon Investment Management Services from February 2016 to August 2018. She is an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 31 years old and has been an employee of the Adviser since August 2018.
SARAH S. KELLEHER, Vice President and Assistant Secretary since April 2014.
Vice President since February 2020 of BNY Mellon ETF Investment Adviser; LLC; Senior Managing Counsel of BNY Mellon since September 2021; Managing Counsel from December 2017 to September 2021; Senior Counsel of BNY Mellon from March 2013 to December 2017. She is an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 46 years old and has been an employee of the Adviser since March 2013.
JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.
Senior Managing Counsel of BNY Mellon, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 56 years old and has been an employee of the Adviser since October 1990.
AMANDA QUINN, Vice President and Assistant Secretary since March 2020.
Counsel of BNY Mellon since June 2019; Regulatory Administration Manager at BNY Mellon Investment Management Services from September 2018 to May 2019; Senior Regulatory Specialist at BNY Mellon Investment Management Services from April 2015 to August 2018. She is an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 36 years old and has been an employee of the Adviser since June 2019.
50
NATALYA ZELENSKY, Vice President and Assistant Secretary since March 2017.
Chief Compliance Officer since August 2021 and Vice President since February 2020 of BNY Mellon ETF Investment Adviser, LLC; Chief Compliance Officer since August 2021 and Vice President and Assistant Secretary since February 2020 of BNY Mellon ETF Trust; Managing Counsel from December 2019 to August 2021 of BNY Mellon; Counsel from May 2016 to December 2019 of BNY Mellon; Assistant Secretary of the Adviser from April 2018 to August 2021. She is an officer of 57 investment companies (comprised of 128 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 36 years old and has been an employee of BNY Mellon since May 2016.
GAVIN C. REILLY, Assistant Treasurer since December 2005.
Tax Manager–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of the Adviser since April 1991.
ROBERT SALVIOLO, Assistant Treasurer since May 2007.
Senior Accounting Manager–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 54 years old and has been an employee of the Adviser since June 1989.
ROBERT SVAGNA, Assistant Treasurer since August 2005.
Senior Accounting Manager–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 54 years old and has been an employee of the Adviser since November 1990.
JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.
Chief Compliance Officer of the BNY Mellon Family of Funds and BNY Mellon Funds Trust since 2004; Chief Compliance Officer of the Adviser from 2004 until June 2021. He is an officer of 57 investment companies (comprised of 119 portfolios) managed by the Adviser. He is 64 years old.
CARIDAD M. CAROSELLA, Anti-Money Laundering Compliance Officer since January 2016.
Anti-Money Laundering Compliance Officer of the BNY Mellon Family of Funds and BNY Mellon Funds Trust. She is an officer of 50 investment companies (comprised of 121 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 53 years old and has been an employee of the Distributor since 1997.
51
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53
BNY Mellon Select Managers Small Cap Value Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Advisers
Walthausen & Co., LLC
9 Executive Park Drive, Suite B
Clifton Park, NY 12065
Neuberger Berman Investment Advisers, LLC
605 Third Avenue
New York, NY 10158
Channing Capital Management, LLC
10 South LaSalle Street
Suite 2401
Chicago, IL 60633
Eastern Shore Capital Management
18 Sewall Street
Marblehead, MA 01945
Heartland Advisors, Inc.
790 North Water Street, Suite 1200
Milwaukee, WI 53202
Rice Hall James & Associates
600 West Broadway, suite 1000
San Diego, CA 92101
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: DMVAX Class C: DMECX Class I: DMVIX Class Y: DMVYX |
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 U.S. Equity Fund
ANNUAL REPORT November 30, 2021 |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.im.bnymellon.com and sign up for eCommunications. It’s simple and only takes a few minutes. |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
Information About the Renewal of | |
FOR MORE INFORMATION
Back Cover
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from December 1, 2020 through November 30, 2021, as provided by Charlie Macquaker, Roy Leckie and Jane Henderson, the three members of the Investment Executive at Walter Scott & Partners Limited (WS), Sub-Investment Adviser
Market and Fund Performance Overview
For the 12-month period ended November 30, 2021, the BNY Mellon U.S. Equity Fund’s Class A shares achieved a return of 22.41%, Class C shares returned 21.42%, Class I shares returned 22.75% and Class Y shares returned 22.80%.1 In comparison, the fund’s benchmark, the MSCI USA Index (the “Index”), achieved a return of 26.66% over the same period.2
U.S. stocks rose during the reporting period, supported by an environment of economic growth and strong corporate financial results. The fund trailed the Index for the period, due primarily to stock selection in the information technology, consumer discretionary and materials sectors, as well as underweight exposure to financials.
The Fund’s Investment Approach
The fund seeks long-term total return. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities of companies located in the United States. The fund may invest in the securities of companies of any market capitalization. Walter Scott seeks investment opportunities in companies with fundamental strengths that indicate the potential for sustainable growth. Walter Scott focuses on individual stock selection, building the fund’s portfolio from the bottom up through extensive fundamental research. The investment process begins with the screening of reported company financials. Companies that meet certain broad, absolute and trend criteria are candidates for more detailed financial analysis. The fund’s Investment Team collectively reviews and selects those stocks that meet Walter Scott’s criteria, and where the expected growth rate is combined with a reasonable valuation for the underlying equity. Market capitalization and sector allocations are a residual of, not part of, the investment process, because the Investment Team’s sole focus is on the analysis of and investment in individual companies.
Markets Gain on Corporate Earnings Strength
The U.S. equity market started the period in an upswing thanks to the arrival of COVID-19 vaccines and the promise of large-scale fiscal stimulus from the incoming Biden administration. Technology companies, deemed among the long-term winners from the pandemic, continued their remarkable progress, although equity market strength was broadly based across sectors, with sector leadership shifting at times. The robust health of the corporate sector, combined with ongoing monetary support from the Federal Reserve (the “Fed) and growth in the domestic economy, sustained a positive mood among investors for much of the period.
However, supply chain and inflation concerns grew steadily more urgent over the period, challenging the prevailing narrative that these would prove only temporary. Eventually, even the Fed, which had earlier opined that inflationary pressures were transitory, was forced to admit that those pressures were proving stickier than expected. In September 2021, the Fed indicated that an imminent tapering of monetary support was likely the appropriate course of action, given inflationary and economic trends. The prospect of tighter monetary policy and the implications of inflation for corporate margins caused some turbulence in equity markets toward the end of the period, along with the emergence of the Omicron COVID-19 variant, which served to remind investors that the pandemic was still a risk to be taken seriously.
Stock Selection Determined Relative Performance
The fund’s results lagged the Index, primarily due to security selection in the information technology, consumer discretionary and materials sectors. Noteworthy detractors included laser and materials-
2
processing equipment maker IPG Photonics, discount retailer Dollar General and agricultural chemical company FMC. Underweight exposure to the strong-performing financial sector, along with weak stock selection, further detracted from relative performance.
Conversely, the fund’s health care holdings were strong, absolute and relative contributors to performance, led by pharmaceutical company Eli Lilly & Co. Communication services holdings, in particular, Google parent company Alphabet, were the fund’s strongest absolute performers and contributed positively to relative return. Consumer staples and industrials companies were the other outperforming sectors of note.
Maintaining a Long-Term Approach
We believe that lingering pandemic-related concerns—along with the not-unconnected issue of supply-chain disruptions—may continue to dampen market sentiment in the near term. With U.S. equity markets trading near all-time highs, there is likely little room for significant economic or earnings slippages. However, while the Fed is poised to embark on a gradual withdrawal of monetary stimulus, the scale of tightening may not be too disruptive to the equity environment. A modest alteration to monetary policy seems warranted, given the prevailing trends of positive economic data and rising consumer inflation. The U.S. domestic economy remains strong, while many American companies are tied into global growth themes that have shown resilience in the face of economic vagaries. Recent earnings results seem to indicate that many firms have adapted well to supply hurdles and rising costs, with many maintaining high levels of profitability.
Accordingly, despite the likelihood of some near-term volatility, we expect high-quality companies to continue to grow earnings over the long term, which will be the ultimate determinant of investor returns. The fund’s disciplined, bottom-up stock selection process is designed to identify just such investment opportunities. As a result of that process, as of the end of the period, the fund holds its most overweight exposures relative to the Index in the health care and information technology sectors, followed by materials and industrials. The fund is finding relatively few attractive investment opportunities in the financials sector, while holding more mildly underweight exposure to communication services, energy, utilities and consumer staples.
December 15, 2021
1 DUE TO RECENT MARKET VOLATILITY, CURRENT PERFORMANCE MAY BE DIFFERENT THAN THE FIGURES SHOWN. Total return includes reinvestment of dividends and any capital gains paid and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. 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 31, 2022, at which time it may be extended, modified or terminated. Had these expenses not been absorbed, returns would have been lower. Past performance is no guarantee of future results.
2 Source: Lipper Inc. — The MSCI USA Index is designed to measure the performance of the large- and mid-cap segments of the U.S. market. It reflects reinvestment of net dividends and, where applicable, capital gain distributions. Investors cannot invest directly in any index.
Equities are subject generally to market, market sector, market liquidity, issuer and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
Small and midsized company stocks tend to be more volatile and less liquid than larger company stocks as these companies are less established and have more volatile earnings histories.
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.
3
FUND PERFORMANCE (Unaudited)
Comparison of change in value of a $10,000 investment in Class A shares, Class C shares and Class I shares of BNY Mellon U.S. Equity Fund with a hypothetical investment of $10,000 in the MSCI USA Index (the “Index”).
† Source: Lipper Inc.
Past performance is not predictive of future performance.
The above graph compares a hypothetical $10,000 investment made in Class A shares, Class C shares and Class I shares of BNY Mellon U.S. Equity Fund on 11/30/11 to a hypothetical investment of $10,000 made in the Index on that date. All dividends and capital gain distributions are reinvested.
The fund’s performance shown in the line graph above takes into account the maximum initial sales charge on Class A shares and all other applicable fees and expenses on all classes. The Index is designed to measure the performance of the large- and mid-cap segments of the U.S. market. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report.
4
Comparison of change in value of a $1,000,000 investment in Class Y shares of BNY Mellon U.S. Equity Fund with a hypothetical investment of $1,000,000 in the MSCI USA Index (the “Index”).
† Source: Lipper Inc.
†† The total return figures presented for Class Y shares of the fund reflect the performance of the fund’s Class A shares for the period prior to 7/1/13 (the inception date for Class Y shares), not reflecting the applicable sales charges for Class A shares.
Past performance is not predictive of future performance.
The above graph compares a hypothetical $1,000,000 investment made in Class Y shares of BNY Mellon U.S. Equity Fund on 11/30/11 to a hypothetical investment of $1,000,000 made in the Index on that date. All dividends and capital gain distributions are reinvested.
The fund’s performance shown in the line graph above takes into account all other applicable fees and expenses of the fund’s Class Y shares. The Index is designed to measure the performance of the large- and mid-cap segments of the U.S. market. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report.
5
FUND PERFORMANCE (Unaudited) (continued)
Average Annual Total Returns as of 11/30/2021 | ||||
| Inception Date | 1 Year | 5 Years | 10 Years |
Class A shares | ||||
with maximum sales charge (5.75 %) | 5/30/08 | 15.37% | 15.49% | 12.66% |
without sales charge | 5/30/08 | 22.41% | 16.88% | 13.33% |
Class C shares | ||||
with applicable redemption charge† | 5/30/08 | 20.42% | 15.99% | 12.45% |
without redemption | 5/30/08 | 21.42% | 15.99% | 12.45% |
Class I shares | 5/30/08 | 22.75% | 17.26% | 13.72% |
Class Y shares | 7/1/13 | 22.80% | 17.28% | 13.70%†† |
MSCI USA Index | 26.66% | 17.64% | 15.62% |
† The maximum contingent deferred sales charge for Class C shares is 1% for shares redeemed within one year of the date of purchase.
†† The total return performance figures presented for Class Y shares of the fund reflect the performance of the fund’s Class A shares for the period prior to 7/1/13 (the inception date for Class Y shares), not reflecting the applicable sales charges for Class A shares.
The performance data quoted represents past performance, which is no guarantee of future results. Share price and investment return fluctuate and an investor’s shares may be worth more or less than original cost upon redemption. Current performance may be lower or higher than the performance quoted. Go to www.im.bnymellon.com for the fund’s most recent month-end returns.
The fund’s performance shown in the graphs and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. In addition to the performance of Class A shares shown with and without a maximum sales charge, the fund's performance shown in the table takes into account all other applicable fees and expenses on all classes.
6
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 U.S. Equity Fund from June 1, 2021 to November 30, 2021. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
| |||||
Assume actual returns for the six months ended November 30, 2021 |
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| Class A | Class C | Class I | Class Y |
|
Expenses paid per $1,000† | $5.99 | $9.88 | $4.22 | $4.12 |
| |
Ending value (after expenses) | $1,078.40 | $1,074.50 | $1,079.90 | $1,080.40 |
|
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended November 30, 2021 |
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| Class A | Class C | Class I | Class Y |
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Expenses paid per $1,000† | $5.82 | $9.60 | $4.10 | $4.00 |
| |
Ending value (after expenses) | $1,019.30 | $1,015.54 | $1,021.01 | $1,021.11 |
| |
† | Expenses are equal to the fund’s annualized expense ratio of 1.15% for Class A, 1.90% for Class C, .81% for Class I and .79% for Class Y, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
7
STATEMENT OF INVESTMENTS
November 30, 2021
Description | Shares | Value ($) | |||||
Common Stocks - 97.5% | |||||||
Capital Goods - 5.6% | |||||||
Fastenal | 300,400 | 17,774,668 | |||||
Hexcel | 232,200 | a | 11,930,436 | ||||
The Toro Company | 124,200 | 12,489,552 | |||||
42,194,656 | |||||||
Consumer Durables & Apparel - 2.7% | |||||||
NIKE, Cl. B | 118,200 | 20,004,168 | |||||
Consumer Services - 4.0% | |||||||
Booking Holdings | 6,800 | a | 14,292,580 | ||||
McDonald's | 64,300 | 15,727,780 | |||||
30,020,360 | |||||||
Diversified Financials - 3.5% | |||||||
Intercontinental Exchange | 136,900 | 17,895,568 | |||||
Moody's | 22,300 | 8,711,272 | |||||
26,606,840 | |||||||
Food & Staples Retailing - 1.4% | |||||||
Costco Wholesale | 19,100 | 10,302,158 | |||||
Health Care Equipment & Services - 8.9% | |||||||
Edwards Lifesciences | 149,000 | a | 15,989,190 | ||||
Intuitive Surgical | 66,300 | a | 21,503,742 | ||||
ResMed | 60,400 | 15,392,940 | |||||
Stryker | 59,500 | 14,079,485 | |||||
66,965,357 | |||||||
Household & Personal Products - 3.1% | |||||||
Colgate-Palmolive | 96,900 | 7,269,438 | |||||
The Estee Lauder Companies, Cl. A | 48,000 | 15,939,360 | |||||
23,208,798 | |||||||
Materials - 5.3% | |||||||
Ecolab | 69,600 | 15,414,312 | |||||
FMC | 86,500 | 8,666,435 | |||||
Linde | 50,500 | 16,066,070 | |||||
40,146,817 | |||||||
Media & Entertainment - 7.7% | |||||||
Alphabet, Cl. C | 11,206 | a | 31,926,342 | ||||
Take-Two Interactive Software | 92,600 | a | 15,360,488 | ||||
The Walt Disney Company | 75,800 | a | 10,983,420 | ||||
58,270,250 | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 9.3% | |||||||
Eli Lilly & Co. | 71,200 | 17,660,448 | |||||
Illumina | 23,600 | a | 8,621,788 | ||||
Johnson & Johnson | 92,500 | 14,423,525 | |||||
Mettler-Toledo International | 10,200 | a | 15,444,126 |
8
Description | Shares | Value ($) | |||||
Common Stocks - 97.5% (continued) | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 9.3% (continued) | |||||||
Waters | 41,900 | a | 13,746,133 | ||||
69,896,020 | |||||||
Retailing - 6.5% | |||||||
Dollar General | 74,300 | 16,442,590 | |||||
O'Reilly Automotive | 26,100 | a | 16,655,976 | ||||
The TJX Companies | 224,300 | 15,566,420 | |||||
48,664,986 | |||||||
Semiconductors & Semiconductor Equipment - 2.0% | |||||||
Texas Instruments | 79,200 | 15,235,704 | |||||
Software & Services - 24.2% | |||||||
Adobe | 39,400 | a | 26,392,090 | ||||
Ansys | 37,700 | a | 14,758,796 | ||||
Automatic Data Processing | 52,000 | 12,006,280 | |||||
Cognizant Technology Solutions, Cl. A | 107,000 | 8,343,860 | |||||
Fortinet | 23,300 | a | 7,738,163 | ||||
Jack Henry & Associates | 84,100 | 12,752,083 | |||||
Manhattan Associates | 93,500 | a | 14,600,960 | ||||
Mastercard, Cl. A | 58,400 | 18,391,328 | |||||
Microsoft | 103,900 | 34,348,301 | |||||
Oracle | 90,700 | 8,230,118 | |||||
Paychex | 95,800 | 11,419,360 | |||||
PayPal Holdings | 69,400 | a | 12,831,366 | ||||
181,812,705 | |||||||
Technology Hardware & Equipment - 9.6% | |||||||
Amphenol, Cl. A | 305,600 | 24,625,248 | |||||
Cisco Systems | 272,900 | 14,965,836 | |||||
Cognex | 187,100 | 14,453,475 | |||||
IPG Photonics | 63,600 | a | 10,442,484 | ||||
TE Connectivity | 50,100 | 7,711,893 | |||||
72,198,936 | |||||||
Transportation - 3.7% | |||||||
Expeditors International of Washington | 115,400 | 14,034,948 | |||||
Old Dominion Freight Line | 39,700 | 14,100,249 | |||||
28,135,197 | |||||||
Total Common Stocks (cost $294,394,036) | 733,662,952 |
9
STATEMENT OF INVESTMENTS (continued)
Description | 1-Day | Shares | Value ($) | ||||
Investment Companies - 2.5% | |||||||
Registered Investment Companies - 2.5% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 0.06 | 19,343,291 | b | 19,343,291 | |||
Total Investments (cost $313,737,327) | 100.0% | 753,006,243 | |||||
Liabilities, Less Cash and Receivables | (.0%) | (312,161) | |||||
Net Assets | 100.0% | 752,694,082 |
a Non-income producing security.
b Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
Portfolio Summary (Unaudited) † | Value (%) |
Information Technology | 35.8 |
Health Care | 18.2 |
Consumer Discretionary | 13.2 |
Industrials | 9.3 |
Communication Services | 7.7 |
Materials | 5.3 |
Consumer Staples | 4.5 |
Financials | 3.5 |
Investment Companies | 2.5 |
100.0 |
† Based on net assets.
See notes to financial statements.
10
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS
Investment Companies | Value | Purchases($)† | Sales($) | Value | Net | Dividend/ |
Registered Investment Companies: | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares | 10,968,818 | 180,164,742 | (171,790,269) | 19,343,291 | 2.5 | 6,178 |
† Includes reinvested dividends/distributions.
See notes to financial statements.
11
STATEMENT OF ASSETS AND LIABILITIES
November 30, 2021
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| Cost |
| Value |
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Assets ($): |
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Investments in securities—See Statement of Investments |
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Unaffiliated issuers | 294,394,036 |
| 733,662,952 |
| ||
Affiliated issuers |
| 19,343,291 |
| 19,343,291 |
| |
Dividends receivable |
| 554,327 |
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Receivable for shares of Common Stock subscribed |
| 126,214 |
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Prepaid expenses |
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| 25,487 |
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| 753,712,271 |
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Liabilities ($): |
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Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 494,303 |
| |||
Payable for shares of Common Stock redeemed |
| 439,384 |
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Directors’ fees and expenses payable |
| 9,812 |
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Other accrued expenses |
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| 74,690 |
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| 1,018,189 |
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Net Assets ($) |
|
| 752,694,082 |
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Composition of Net Assets ($): |
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Paid-in capital |
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| 222,427,459 |
|
Total distributable earnings (loss) |
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| 530,266,623 |
|
Net Assets ($) |
|
| 752,694,082 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 2,082,322 | 34,131 | 34,444,790 | 716,132,839 |
|
Shares Outstanding | 72,461 | 1,307.68 | 1,190,857 | 24,776,138 |
|
Net Asset Value Per Share ($) | 28.74 | 26.10 | 28.92 | 28.90 |
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See notes to financial statements. |
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12
STATEMENT OF OPERATIONS
Year Ended November 30, 2021
|
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Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends: |
| |||||
Unaffiliated issuers |
|
| 7,140,806 |
| ||
Affiliated issuers |
|
| 6,178 |
| ||
Income from securities lending—Note 1(b) |
|
| 7,623 |
| ||
Total Income |
|
| 7,154,607 |
| ||
Expenses: |
|
|
|
| ||
Management fee—Note 3(a) |
|
| 5,665,078 |
| ||
Professional fees |
|
| 102,451 |
| ||
Registration fees |
|
| 68,077 |
| ||
Directors’ fees and expenses—Note 3(d) |
|
| 56,510 |
| ||
Loan commitment fees—Note 2 |
|
| 19,158 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 15,389 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 14,028 |
| ||
Custodian fees—Note 3(c) |
|
| 12,771 |
| ||
Prospectus and shareholders’ reports |
|
| 8,322 |
| ||
Distribution fees—Note 3(b) |
|
| 305 |
| ||
Miscellaneous |
|
| 28,784 |
| ||
Total Expenses |
|
| 5,990,873 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (176) |
| ||
Net Expenses |
|
| 5,990,697 |
| ||
Investment Income—Net |
|
| 1,163,910 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
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| ||||
Net realized gain (loss) on investments | 98,997,094 |
| ||||
Net change in unrealized appreciation (depreciation) on investments | 53,493,541 |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 152,490,635 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 153,654,545 |
| |||
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|
|
|
|
|
|
See notes to financial statements. |
13
STATEMENT OF CHANGES IN NET ASSETS
|
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| Year Ended November 30, | |||||
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| 2021 |
| 2020 |
| ||
Operations ($): |
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|
|
|
| |
Investment income—net |
|
| 1,163,910 |
|
|
| 2,509,175 |
| |
Net realized gain (loss) on investments |
| 98,997,094 |
|
|
| 7,695,251 |
| ||
Net change in unrealized appreciation |
| 53,493,541 |
|
|
| 106,022,662 |
| ||
Net Increase (Decrease) in Net Assets | 153,654,545 |
|
|
| 116,227,088 |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
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|
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|
|
|
|
| |
Class A |
|
| (23,045) |
|
|
| (20,417) |
| |
Class C |
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| (1,102) |
|
|
| (989) |
| |
Class I |
|
| (342,545) |
|
|
| (372,091) |
| |
Class Y |
|
| (10,227,644) |
|
|
| (8,875,901) |
| |
Total Distributions |
|
| (10,594,336) |
|
|
| (9,269,398) |
| |
Capital Stock Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
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|
|
|
|
|
| |
Class A |
|
| 546,801 |
|
|
| 409,770 |
| |
Class C |
|
| 4,230 |
|
|
| 42 |
| |
Class I |
|
| 12,235,825 |
|
|
| 15,259,360 |
| |
Class Y |
|
| 43,529,935 |
|
|
| 204,938,534 |
| |
Distributions reinvested: |
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|
|
|
|
|
|
| |
Class A |
|
| 17,543 |
|
|
| 19,712 |
| |
Class C |
|
| 973 |
|
|
| 849 |
| |
Class I |
|
| 294,756 |
|
|
| 310,164 |
| |
Class Y |
|
| 4,006,640 |
|
|
| 3,663,746 |
| |
Cost of shares redeemed: |
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|
|
|
|
|
|
| |
Class A |
|
| (568,630) |
|
|
| (415,435) |
| |
Class C |
|
| (85,765) |
|
|
| (27,361) |
| |
Class I |
|
| (7,923,388) |
|
|
| (19,364,786) |
| |
Class Y |
|
| (194,178,207) |
|
|
| (208,050,126) |
| |
Increase (Decrease) in Net Assets | (142,119,287) |
|
|
| (3,255,531) |
| |||
Total Increase (Decrease) in Net Assets | 940,922 |
|
|
| 103,702,159 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 751,753,160 |
|
|
| 648,051,001 |
| |
End of Period |
|
| 752,694,082 |
|
|
| 751,753,160 |
|
14
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| Year Ended November 30, | |||||
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| 2021 |
| 2020 |
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Capital Share Transactions (Shares): |
| ||||||||
Class A |
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| |
Shares sold |
|
| 21,659 |
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|
| 19,732 |
| |
Shares issued for distributions reinvested |
|
| 730 |
|
|
| 934 |
| |
Shares redeemed |
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| (22,345) |
|
|
| (22,098) |
| |
Net Increase (Decrease) in Shares Outstanding | 44 |
|
|
| (1,432) |
| |||
Class C |
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|
|
|
|
|
|
| |
Shares sold |
|
| 191 |
|
|
| 2 |
| |
Shares issued for distributions reinvested |
|
| 45 |
|
|
| 44 |
| |
Shares redeemed |
|
| (3,870) |
|
|
| (1,430) |
| |
Net Increase (Decrease) in Shares Outstanding | (3,634) |
|
|
| (1,384) |
| |||
Class Ia |
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|
|
|
|
|
|
| |
Shares sold |
|
| 451,615 |
|
|
| 736,612 |
| |
Shares issued for distributions reinvested |
|
| 12,254 |
|
|
| 14,665 |
| |
Shares redeemed |
|
| (299,075) |
|
|
| (994,367) |
| |
Net Increase (Decrease) in Shares Outstanding | 164,794 |
|
|
| (243,090) |
| |||
Class Ya |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 1,652,859 |
|
|
| 10,960,229 |
| |
Shares issued for distributions reinvested |
|
| 166,721 |
|
|
| 173,309 |
| |
Shares redeemed |
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| (7,434,078) |
|
|
| (10,353,806) |
| |
Net Increase (Decrease) in Shares Outstanding | (5,614,498) |
|
|
| 779,732 |
| |||
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a | During the period ended November 30, 2021, 404,317 Class Y shares representing $10,902,873 were exchanged for 404,000 Class I shares and during the period ended November 30, 2020, 694,371 Class Y shares representing $14,409,288 were exchanged for 693,927 Class I shares. | ||||||||
See notes to financial statements. |
15
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. These figures have been derived from the fund’s financial statements.
Year Ended November 30, | ||||||
Class A Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 23.75 | 20.85 | 20.44 | 20.85 | 18.29 | |
Investment Operations: | ||||||
Investment income (loss)—neta | (.05) | .00b | .04 | .03 | .06 | |
Net realized and unrealized | 5.32 | 3.16 | 2.30 | 1.77 | 4.00 | |
Total from Investment Operations | 5.27 | 3.16 | 2.34 | 1.80 | 4.06 | |
Distributions: | ||||||
Dividends from | (.03) | (.07) | (.03) | (.04) | (.10) | |
Dividends from net realized | (.25) | (.19) | (1.90) | (2.17) | (1.40) | |
Total Distributions | (.28) | (.26) | (1.93) | (2.21) | (1.50) | |
Net asset value, end of period | 28.74 | 23.75 | 20.85 | 20.44 | 20.85 | |
Total Return (%)c | 22.41 | 15.28 | 13.77 | 9.49 | 24.07 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.15 | 1.17 | 1.20 | 1.25 | 1.20 | |
Ratio of net expenses | 1.15 | 1.15 | 1.15 | 1.15 | 1.15 | |
Ratio of net investment income (loss) | (.20) | .02 | .20 | .17 | .31 | |
Portfolio Turnover Rate | 10.70 | 11.94 | 14.11 | 17.14 | 13.28 | |
Net Assets, end of period ($ x 1,000) | 2,082 | 1,720 | 1,540 | 787 | 842 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
See notes to financial statements.
16
Year Ended November 30, | ||||||
Class C Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 21.74 | 19.18 | 19.07 | 19.70 | 17.38 | |
Investment Operations: | ||||||
Investment (loss)—neta | (.19) | (.14) | (.10) | (.11) | (.08) | |
Net realized and unrealized | 4.80 | 2.89 | 2.11 | 1.65 | 3.80 | |
Total from Investment Operations | 4.61 | 2.75 | 2.01 | 1.54 | 3.72 | |
Distributions: | ||||||
Dividends from net realized | (.25) | (.19) | (1.90) | (2.17) | (1.40) | |
Net asset value, end of period | 26.10 | 21.74 | 19.18 | 19.07 | 19.70 | |
Total Return (%)b | 21.42 | 14.44 | 12.92 | 8.69 | 23.11 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 2.34 | 2.35 | 2.40 | 2.35 | 2.16 | |
Ratio of net expenses | 1.90 | 1.90 | 1.90 | 1.90 | 1.90 | |
Ratio of net investment (loss) | (.81) | (.72) | (.56) | (.57) | (.43) | |
Portfolio Turnover Rate | 10.70 | 11.94 | 14.11 | 17.14 | 13.28 | |
Net Assets, end of period ($ x 1,000) | 34 | 107 | 121 | 86 | 138 |
a Based on average shares outstanding.
b Exclusive of sales charge.
See notes to financial statements.
17
FINANCIAL HIGHLIGHTS (continued)
Year Ended November 30, | ||||||
Class I Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 23.89 | 20.94 | 20.54 | 20.96 | 18.37 | |
Investment Operations: | ||||||
Investment income—neta | .03 | .08 | .10 | .10 | .12 | |
Net realized and unrealized | 5.34 | 3.17 | 2.31 | 1.77 | 4.02 | |
Total from Investment Operations | 5.37 | 3.25 | 2.41 | 1.87 | 4.14 | |
Distributions: | ||||||
Dividends from | (.09) | (.11) | (.11) | (.12) | (.15) | |
Dividends from net realized | (.25) | (.19) | (1.90) | (2.17) | (1.40) | |
Total Distributions | (.34) | (.30) | (2.01) | (2.29) | (1.55) | |
Net asset value, end of period | 28.92 | 23.89 | 20.94 | 20.54 | 20.96 | |
Total Return (%) | 22.75 | 15.71 | 14.17 | 9.85 | 24.46 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .81 | .82 | .82 | .82 | .83 | |
Ratio of net expenses | .81 | .82 | .82 | .82 | .83 | |
Ratio of net investment income | .12 | .36 | .53 | .51 | .61 | |
Portfolio Turnover Rate | 10.70 | 11.94 | 14.11 | 17.14 | 13.28 | |
Net Assets, end of period ($ x 1,000) | 34.445 | 24,508 | 26,577 | 22,755 | 20,963 |
a Based on average shares outstanding.
See notes to financial statements.
18
Year Ended November 30, | ||||||
Class Y Shares | 2021 | 2020 | 2019 | 2018 | 2017 | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 23.87 | 20.93 | 20.54 | 20.96 | 18.37 | |
Investment Operations: | ||||||
Investment income—neta | .04 | .08 | .11 | .11 | .12 | |
Net realized and unrealized | 5.33 | 3.17 | 2.29 | 1.77 | 4.02 | |
Total from Investment Operations | 5.37 | 3.25 | 2.40 | 1.88 | 4.14 | |
Distributions: | ||||||
Dividends from | (.09) | (.12) | (.11) | (.13) | (.15) | |
Dividends from net realized | (.25) | (.19) | (1.90) | (2.17) | (1.40) | |
Total Distributions | (.34) | (.31) | (2.01) | (2.30) | (1.55) | |
Net asset value, end of period | 28.90 | 23.87 | 20.93 | 20.54 | 20.96 | |
Total Return (%) | 22.80 | 15.69 | 14.15 | 9.88 | 24.51 | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .79 | .80 | .80 | .80 | .80 | |
Ratio of net expenses | .79 | .80 | .80 | .80 | .80 | |
Ratio of net investment income | .16 | .37 | .55 | .53 | .64 | |
Portfolio Turnover Rate | 10.70 | 11.94 | 14.11 | 17.14 | 13.28 | |
Net Assets, end of period ($ x 1,000) | 716,133 | 725,418 | 619,812 | 534,230 | 527,263 |
a Based on average shares outstanding.
See notes to financial statements.
19
NOTES TO FINANCIAL STATEMENTS
NOTE 1—Significant Accounting Policies:
BNY Mellon U.S. Equity Fund (the “fund”) is a separate diversified series of BNY Mellon Strategic Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering six series, including the fund. The fund’s investment objective is to seek long-term total return. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Walter Scott & Partners Limited (the “Sub-Adviser”), a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser, serves as the fund’s sub-investment adviser.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue 500 million shares of $.001 par value Common Stock. The fund currently has authorized four classes of shares: Class A (100 million shares authorized), Class C (100 million shares authorized), Class I (100 million shares authorized) and Class Y (200 million shares authorized). Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class A shares bought without an initial sales charge as part of an investment of $1 million or more may be charged a contingent deferred sales charge (“CDSC”) of 1.00% if redeemed within one year. Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares eight years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and
20
unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the 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 Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
21
NOTES TO FINANCIAL STATEMENTS (continued)
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 American Depository Receipts and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company's Board of Directors (the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that
22
influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of November 30, 2021 in valuing the fund’s investments:
Level 1-Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | Level 3-Significant Unobservable Inputs | Total | |||
Assets ($) | ||||||
Investments In Securities:† | ||||||
Equity Securities - Common Stocks | 733,662,952 | - | - | 733,662,952 | ||
Investment Companies | 19,343,291 | - | - | 19,343,291 |
† See Statement of Investments for additional detailed categorizations, if any.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual
23
NOTES TO FINANCIAL STATEMENTS (continued)
maturity of security lending transactions are on an overnight and continuous basis. During the period ended November 30, 2021, The Bank of New York Mellon earned $990 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(d) Risk: Certain events particular to the industries in which the fund’s investments conduct their operations, as well as general economic, political and public health conditions, may have a significant negative impact on the investee’s operations and profitability. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. 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.
(e) Dividends and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such
24
gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(f) 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 November 30, 2021, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended November 30, 2021, the fund did not incur any interest or penalties.
Each tax year in the four-year period ended November 30, 2021 remains subject to examination by the Internal Revenue Service and state taxing authorities.
At November 30, 2021, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $11,704,941, undistributed capital gains $79,517,062 and unrealized appreciation $439,044,620.
The tax character of distributions paid to shareholders during the fiscal periods ended November 30, 2021 and November 30, 2020 were as follows: ordinary income $3,177,413 and $3,562,200, and long-term capital gains $7,416,923 and $5,707,198, respectively.
During the period ended November 30, 2021, as a result of permanent book to tax differences, primarily due to the tax treatment for treating a portion of the proceeds from redemptions as a distribution for tax purposes, the fund decreased total distributable earnings (loss) by $8,155,380 and increased paid-in-capital by the same amount. Net assets and net asset value per share were not affected by this reclassification.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $688.5 million and is available to all long-term open-
25
NOTES TO FINANCIAL STATEMENTS (continued)
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 November 30, 2021, 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, the management fee is computed at the annual rate of .75% of the value of the fund’s average daily net assets and is payable monthly. The Adviser has contractually agreed, from December 1, 2020 through March 31, 2022, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the direct expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .90% of the value of the fund’s average daily net assets. On or after March 31, 2022, the Adviser may terminate this expense limitation at any time. The reduction in expenses, pursuant to the undertaking, amounted to $176 during the period ended November 30, 2021.
Pursuant to a sub-investment advisory agreement between the Adviser and the Sub-Adviser, the Adviser pays the Sub-Adviser a monthly fee at an annual rate of .36% of the value of the fund’s average daily net assets.
During the period ended November 30, 2021, the Distributor retained $24 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 November 30, 2021, Class C shares were charged $305 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
26
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 November 30, 2021, Class A and Class C shares were charged $5,111 and $102, respectively, pursuant to the Shareholder Services Plan.
The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. For financial reporting purposes, the fund includes net earnings credits, if any, as shareholder servicing costs in the Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services inclusive of earnings credits, if any, for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended November 30, 2021, the fund was charged $4,801 for transfer agency services, inclusive of earnings credit, if any. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended November 30, 2021, the fund was charged $12,771 pursuant to the custody agreement.
During the period ended November 30, 2021, the fund was charged $14,028 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 $483,096, Distribution Plan fees of $22, Shareholder Services Plan
27
NOTES TO FINANCIAL STATEMENTS (continued)
fees of $450, custodian fees of $4,025, Chief Compliance Officer fees of $5,897 and transfer agency fees of $829, which are offset against an expense reimbursement currently in effect in the amount of $16.
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended November 30, 2021, amounted to $78,988,247 and $237,768,939, respectively.
At November 30, 2021, the cost of investments for federal income tax purposes was $313,961,623; accordingly, accumulated net unrealized appreciation on investments was $439,044,620, consisting of $442,194,064 gross unrealized appreciation and $3,149,444 gross unrealized depreciation.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of BNY Mellon U.S. Equity Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of BNY Mellon U.S. Equity Fund (the “Fund”) (one of the funds constituting BNY Mellon Strategic Funds, Inc.), including the statements of investments and investments in affiliated issuers, as of November 30, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting BNY Mellon Strategic Funds, Inc.) at November 30, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of November 30, 2021, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the BNY Mellon Family of Funds since at least 1957, but we are unable to determine the specific year.
New York, New York
January 24, 2022
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IMPORTANT TAX INFORMATION (Unaudited)
For federal tax purposes the fund hereby reports 88.51% of the ordinary dividends paid during the fiscal year ended November 30, 2021 as qualifying for the corporate dividends received deduction. Also certain dividends paid by the fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the distributions paid during the fiscal year, $2,841,071 represents the maximum amount that may be considered qualified dividend income. Shareholders will receive notification in early 2022 of the percentage applicable to the preparation of their 2021 income tax returns. Also, the fund hereby reports $.0003 per share as a short-term capital gain distribution and $.2002 as a long-term capital gain distribution paid on December 14, 2020 and $.0093 per share as a short-term capital gain distribution and $.0398 as a long-term capital gain distribution paid on March 29, 2021.
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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 Directors held on November 1-2, 2021, the Board considered the renewal of the fund’s Management Agreement, pursuant to which the Adviser provides the fund with investment advisory and administrative services (the “Agreement”), and the Sub-Investment Advisory Agreement (together, the “Agreements”), pursuant to which Walter Scott & Partners Limited (the “Subadviser”) provides day-to-day management of the fund’s investments. The Board members, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser and the Subadviser. In considering the renewal of the Agreements, the Board considered several factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex, including the fund. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures, as well as the Adviser’s supervisory activities over the Subadviser. The Board also considered portfolio management’s brokerage policies and practices (including 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 group of institutional multi-cap growth funds selected by Broadridge as comparable to the fund (the “Performance Group”) and with a broader group of funds consisting of all
31
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
retail and institutional multi-cap growth funds (the “Performance Universe”), all for various periods ended September 30, 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 multi-cap growth funds, excluding outliers (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Performance Comparisons. Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds and the end date selected. The Board discussed with representatives of the Adviser and the Subadviser the results of the comparisons and considered that the fund’s total return performance was below the Performance Group and Performance Universe medians for all periods, except the one-year period when it was above the median. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in four of the ten calendar years shown.
Management Fee and Expense Ratio Comparisons. The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser in light of the nature, extent and quality of the management and sub-advisory services provided by the Adviser and the Subadviser, respectively. In addition, the Board reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year. The Board also reviewed the range of actual and contractual management fees and total expenses as a percentage of average net assets of the Expense Group and Expense Universe funds and discussed the results of the comparisons.
The Board considered that the fund’s contractual management fee was slightly higher than the Expense Group median contractual management fee, the fund’s actual management fee was higher than the Expense Group median and the Expense Universe median actual management fee and the fund’s total expenses were lower than the Expense Group median and the Expense Universe median total expenses.
Representatives of the Adviser stated that the Adviser has contractually agreed, until March 31, 2022, to waive receipt of its fees and/or assume the direct expenses of the fund so that the direct expenses of none of the fund’s classes (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 0.90% of the fund’s average daily net assets
Representatives of the Adviser noted that there were no other funds advised or administered by the Adviser that are in the same Lipper category as the fund or separate accounts and/or other types of client portfolios advised by the Adviser or the
32
Subadviser that are considered to have similar investment strategies and policies as the fund.
The Board considered the fee payable to the Subadviser in relation to the fee payable to the Adviser by the fund and the respective services provided by the Subadviser and the Adviser. The Board also took into consideration that the Subadviser’s fee is paid by the Adviser, out of its fee from the fund, and not the fund.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not excessive, given the services rendered and service levels provided by the Adviser and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding the Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreements, considered in relation to the mix of services provided by the Adviser and the Subadviser, including the nature, extent and quality of such services, supported the renewal of the Agreements and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Since the Adviser, and not the fund, pays the Subadviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Subadviser’s profitability to be relevant to its deliberations. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser and the Subadviser from acting as investment adviser and sub-investment adviser, respectively, and took into consideration that there were no soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreements. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by the Adviser and the Subadviser are adequate and appropriate.
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
· The Board generally was satisfied with the fund’s overall performance.
· The Board concluded that the fees paid to the Adviser and the Subadviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with the Adviser and its affiliates and the Subadviser, of the Adviser and the Subadviser and the services provided to the fund by the Adviser and the Subadviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreements, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for the fund had the benefit of a number of years of reviews of the Agreements for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
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BOARD MEMBERS INFORMATION (Unaudited)
IIndependent Board Members
Joseph S. DiMartino (78)
Chairman of the Board (1995)
Principal Occupation During Past 5 Years:
· Director and Trustee of funds in the BNY Mellon Family of Funds and certain other entities (as described in the fund’s Statement of Additional Information) (1995-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ, Inc., a public company providing professional business services, products and solutions, Director (1997-Present)
No. of Portfolios for which Board Member Serves: 97
———————
Joni Evans (79)
Board Member (2006)
Principal Occupation During Past 5 Years:
· www.wowOwow.com, an online community dedicated to women’s conversations and publications, Chief Executive Officer (2007-2019)
· Joni Evans Ltd. publishing, Principal (2006-2019)
No. of Portfolios for which Board Member Serves: 18
———————
Joan Gulley (74)
Board Member (2017)
Principal Occupation During Past 5 Years:
· Nantucket Atheneum, public library, Chair (2018-June 2021) and Director (2015-June 2021)
· Orchard Island Club, golf and beach club, Governor (2016-Present)
No. of Portfolios for which Board Member Serves: 42
———————
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BOARD MEMBERS INFORMATION (Unaudited) (continued)
Alan H. Howard (62)
Board Member (2018)
Principal Occupation During Past 5 Years:
· Heathcote Advisors LLC, a financial advisory services firm, Managing Partner (2008-Present)
· Dynatech/MPX Holdings LLC, a global supplier and service provider of military aircraft parts, President (2012-2019); and Board Member of its two operating subsidiaries, Dynatech International LLC and Military Parts Exchange LLC (2012-2019), including Chief Executive Officer of an operating subsidiary, Dynatech International LLC (2013-2019)
· Rossoff & Co., an independent investment banking firm, Senior Advisor (2013-June 2021)
Other Public Company Board Memberships During Past 5 Years:
· Movado Group, Inc., a public company that designs, sources, markets and distributes watches, Director (1997-Present)
· Diamond Offshore Drilling, Inc., a public company that provides contract drilling services, Director (March 2020-April 2021)
No. of Portfolios for which Board Member Serves: 18
———————
Robin A. Melvin (58)
Board Member (1995)
Principal Occupation During Past 5 Years:
· Westover School, a private girls’ boarding school in Middlebury, Connecticut, Trustee (2019-Present)
· Mentor Illinois, a non-profit organization dedicated to increasing the quality of mentoring services in Illinois. Co-Chair (2014–2020); Board Member, Mentor Illinois (2013-2020)
· JDRF, a non-profit juvenile diabetes research foundation, Board Member (June 2021-Present)
Other Public Company Board Memberships During Past 5 Years:
· HPS Corporate Lending Fund, a closed-end management investment company regulated as a business development company, Trustee (August 2021-Present)
No. of Portfolios for which Board Member Serves: 75
———————
Burton N. Wallack (71)
Board Member (2006)
Principal Occupation During Past 5 Years:
Wallack Management Company, a real estate management company, President and Co-owner (1987-Present)
Other Public Company Board Memberships During Past 5 Years:
Mount Sinai Hospital Urology Board Member (2017-Present)
No. of Portfolios for which Board Member Serves: 18
———————
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Benaree Pratt Wiley (75)
Board Member (2016)
Principal Occupation During Past 5 Years:
· The Wiley Group, a firm specializing in strategy and business development. Principal (2005-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ, Inc., a public company providing professional business services, products and solutions, Director (2008-Present)
· Blue Cross Blue Shield of Massachusetts Director (2004-2020)
No. of Portfolios for which Board Member Serves: 63
———————
Gordon J. Davis (80)
Advisory Board Member (2021)
Principal Occupation During Past 5 Years:
· Venable LLP, a law firm Partner (2012-Present)
No. of Portfolios for which Advisory Board Member Serves: 41
———————
Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80. The address of the Board Members and Officers is c/o BNY Mellon Investment Adviser, Inc. 240 Greenwich Street, New York, New York 10286. Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from the Adviser free of charge by calling this toll free number: 1-800-373-9387.
William Hodding Carter III, Emeritus Board Member
Ehud Houminer, Emeritus Board Member
Hans C, Mautner, Emeritus Board Member
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OFFICERS OF THE FUND (Unaudited)
DAVID DIPETRILLO, President since January 2021.
Vice President and Director of the Adviser since February 2021; Head of North America Product, BNY Mellon Investment Management since January 2018; Director of Product Strategy, BNY Mellon Investment Management from January 2016 to December 2017. He is an officer of 57 investment companies (comprised of 107 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 43 years old and has been an employee of BNY Mellon since 2005.
JAMES WINDELS, Treasurer since November 2001.
Vice President of the Adviser since September 2020; Director–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 63 years old and has been an employee of the Adviser since April 1985.
PETER M. SULLIVAN, Chief Legal Officer since July 2021 and Vice President and Assistant Secretary since March 2019.
Chief Legal Officer of the Adviser since July 2021; Associate General Counsel of BNY Mellon since July 2021; Senior Managing Counsel of BNY Mellon from December 2020 to July 2021; Managing Counsel of BNY Mellon from March 2009 to December 2020, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of BNY Mellon since April 2004.
JAMES BITETTO, Vice President since August 2005 and Secretary since February 2018.
Senior Managing Counsel of BNY Mellon since December 2019; Managing Counsel of BNY Mellon from April 2014 to December 2019; Secretary of the Adviser, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 55 years old and has been an employee of the Adviser since December 1996.
DEIRDRE CUNNANE, Vice President and Assistant Secretary since March 2019.
Counsel of BNY Mellon since August 2018; Senior Regulatory Specialist at BNY Mellon Investment Management Services from February 2016 to August 2018. She is an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 31 years old and has been an employee of the Adviser since August 2018.
SARAH S. KELLEHER, Vice President and Assistant Secretary since April 2014.
Vice President since February 2020 of BNY Mellon ETF Investment Adviser; LLC; Senior Managing Counsel of BNY Mellon since September 2021; Managing Counsel from December 2017 to September 2021; Senior Counsel of BNY Mellon from March 2013 to December 2017. She is an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 46 years old and has been an employee of the Adviser since March 2013.
JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.
Senior Managing Counsel of BNY Mellon, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 56 years old and has been an employee of the Adviser since October 1990.
AMANDA QUINN, Vice President and Assistant Secretary since March 2020.
Counsel of BNY Mellon since June 2019; Regulatory Administration Manager at BNY Mellon Investment Management Services from September 2018 to May 2019; Senior Regulatory Specialist at BNY Mellon Investment Management Services from April 2015 to August 2018. She is an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 36 years old and has been an employee of the Adviser since June 2019.
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NATALYA ZELENSKY, Vice President and Assistant Secretary since March 2017.
Chief Compliance Officer since August 2021 and Vice President since February 2020 of BNY Mellon ETF Investment Adviser, LLC; Chief Compliance Officer since August 2021 and Vice President and Assistant Secretary since February 2020 of BNY Mellon ETF Trust; Managing Counsel from December 2019 to August 2021 of BNY Mellon; Counsel from May 2016 to December 2019 of BNY Mellon; Assistant Secretary of the Adviser from April 2018 to August 2021. She is an officer of 57 investment companies (comprised of 128 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 36 years old and has been an employee of BNY Mellon since May 2016.
GAVIN C. REILLY, Assistant Treasurer since December 2005.
Tax Manager–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 53 years old and has been an employee of the Adviser since April 1991.
ROBERT SALVIOLO, Assistant Treasurer since July 2007.
Senior Accounting Manager–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 54 years old and has been an employee of the Adviser since June 1989.
ROBERT SVAGNA, Assistant Treasurer since September 2002.
Senior Accounting Manager–BNY Mellon Fund Administration, and an officer of 58 investment companies (comprised of 129 portfolios) managed by the Adviser or an affiliate of the Adviser. He is 54 years old and has been an employee of the Adviser since November 1990.
JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.
Chief Compliance Officer of the BNY Mellon Family of Funds and BNY Mellon Funds Trust since 2004; Chief Compliance Officer of the Adviser from 2004 until June 2021. He is an officer of 57 investment companies (comprised of 119 portfolios) managed by the Adviser. He is 64 years old.
CARIDAD M. CAROSELLA, Anti-Money Laundering Compliance Officer since January 2016.
Anti-Money Laundering Compliance Officer of the BNY Mellon Family of Funds and BNY Mellon Funds Trust. She is an officer of 50 investment companies (comprised of 121 portfolios) managed by the Adviser or an affiliate of the Adviser. She is 53 years old and has been an employee of the Distributor since 1997.
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BNY Mellon U.S. Equity Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Walter Scott & Partners Limited
One Charlotte Square
Edinburgh, Scotland, 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: DPUAX Class C: DPUCX Class I: DPUIX Class Y: DPUYX |
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
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Item 2. Code of Ethics.
The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. There have been no amendments to, or waivers in connection with, the Code of Ethics during the period covered by this Report.
Item 3. Audit Committee Financial Expert.
The Registrant's Board has determined that Alan Howard, a member of the Audit Committee of the Board, is an audit committee financial expert as defined by the Securities and Exchange Commission (the "SEC"). Mr. Howard is "independent" as defined by the SEC for purposes of audit committee financial expert determinations.
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees. The aggregate fees billed for each of the last two fiscal years (the "Reporting Periods") for professional services rendered by the Registrant's principal accountant (the "Auditor") for the audit of the Registrant's annual financial statements or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $164,706 in 2020 and $164,706 in 2021.
(b) Audit-Related Fees. The aggregate fees billed in the Reporting Periods for assurance and related services by the Auditor that are reasonably related to the performance of the audit of the Registrant's financial statements and are not reported under paragraph (a) of this Item 4 were $33,844 in 2020 and $33,724 in 2021. These services consisted of one or more of the following: (i) agreed upon procedures related to compliance with Internal Revenue Code section 817(h), (ii) security counts required by Rule 17f-2 under the Investment Company Act of 1940, as amended, (iii) advisory services as to the accounting or disclosure treatment of Registrant transactions or events and (iv) advisory services to the accounting or disclosure treatment of the actual or potential impact to the Registrant of final or proposed rules, standards or interpretations by the Securities and Exchange Commission, the Financial Accounting Standards Boards or other regulatory or standard-setting bodies.
The aggregate fees billed in the Reporting Periods for non-audit assurance and related services by the Auditor to the Registrant's investment adviser (not including any sub-investment adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant ("Service Affiliates"), that were reasonably related to the performance of the annual audit of the Service Affiliate, which required pre-approval by the Audit Committee were $0 in 2020 and $0 in 2021.
(c) Tax Fees. The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice, and tax planning ("Tax Services") were $14,909 in 2020 and $20,888 in 2021. These services consisted of: (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments; (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held, and (iv) determination of Passive Foreign Investment Companies. The aggregate fees billed in the Reporting Periods for Tax Services by the Auditor to Service Affiliates, which required pre-approval by the Audit Committee were $0 in 2020 and $26,949 in 2021.
(d) All Other Fees. The aggregate fees billed in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) of this Item, were $0 in 2020 and $2,734 in 2021. These services consisted of a review of the Registrant's anti-money laundering program.
The aggregate fees billed in the Reporting Periods for Non-Audit Services by the Auditor to Service Affiliates, other than the services reported in paragraphs (b) through (c) of this Item, which required pre-approval by the Audit Committee, were $0 in 2020 and $0 in 2021.
(e)(1) Audit Committee Pre-Approval Policies and Procedures. The Registrant's Audit Committee has established policies and procedures (the "Policy") for pre-approval (within specified fee limits) of the Auditor's engagements for non-audit services to the Registrant and Service Affiliates without specific case-by-case consideration. The pre-approved services in the Policy can include pre-approved audit services, pre-approved audit-related services, pre-approved tax services and pre-approved all other services. Pre-approval considerations include whether the proposed services are compatible with maintaining the Auditor's independence. Pre-approvals pursuant to the Policy are considered annually.
(e)(2) Note. None of the services described in paragraphs (b) through (d) of this Item 4 were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) None of the hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.
Non-Audit Fees. The aggregate non-audit fees billed by the Auditor for services rendered to the Registrant, and rendered to Service Affiliates, for the Reporting Periods $1,174,149 in 2020 and $2,747,329 in 2021.
Auditor Independence. The Registrant's Audit Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates, which were not pre-approved (not requiring pre-approval), is compatible with maintaining the Auditor's independence.
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) Code of ethics referred to in Item 2.
(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 Strategic Funds, Inc.
By: /s/ David DiPetrillo
David DiPetrillo
President (Principal Executive Officer)
Date: January 25, 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: January 25, 2022
By: /s/ James Windels
James Windels
Treasurer (Principal Financial Officer)
Date: January 25, 2022
EXHIBIT INDEX
(a)(1) Code of ethics referred to in Item 2.
(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)