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 | 811-07123 | |||||
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| BNY Mellon Advantage Funds, Inc. |
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| (Exact name of Registrant as specified in charter) |
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c/o BNY Mellon Investment Adviser, Inc. 240 Greenwich Street New York, New York 10286 |
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| Bennett A. MacDougall, Esq. 240 Greenwich Street New York, New York 10286 |
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| (Name and address of agent for service) |
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Registrant's telephone number, including area code: | (212) 922-6400 | |||||
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Date of fiscal year end:
| 10/31 |
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Date of reporting period: | 04/30/2020
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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 Dynamic Total Return Fund
BNY Mellon Global Dynamic Bond Income Fund
BNY Mellon Global Real Return Fund
BNY Mellon Sustainable Balanced Fund
FORM N-CSR
Item 1. Reports to Stockholders.
BNY Mellon Dynamic Total Return Fund
SEMIANNUAL REPORT April 30, 2020 |
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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
BNY Mellon Investment Adviser, Inc. | |
With Those of Other Funds | |
in Affiliated Issuers | |
Options Written | |
Foreign Currency Exchange Contracts | |
Assets and Liabilities | |
Changes in Net Assets | |
Financial Statements | |
of the Fund’s Management and | |
Sub-Investment Advisory Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.
Dear Shareholder:
We are pleased to present this semiannual report for BNY Mellon Dynamic Total Return Fund, covering the six-month period from November 1, 2019 through April 30, 2020. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
Stock markets performed well over the last several months of 2019. Accommodative policies from the U.S. Federal Reserve (the “Fed”), paired with healthy U.S. consumer spending, helped support valuations. Despite periodic investor concern regarding trade relations with China and global growth rates, the rally continued through the end of the calendar year, supported in part by a December announcement that the first phase of a trade deal with China was in process. U.S. equity markets reached new highs during the final months of 2019. However, the euphoria was short-lived, as concerns over the spread of COVID-19 and widespread quarantine roiled markets during the first several months of 2020; stocks posted historic losses in March 2020 but regained some ground in April.
In fixed-income markets, interest rates were heavily influenced by changes in Fed policy and investor concern over COVID-19. As stocks rallied in November and December 2019, Treasury bond prices declined, and rates across much of the yield curve rose until early in 2020, when the threat posed by COVID-19 began to emerge. A flight to quality ensued, and rates fell significantly. March 2020 brought high volatility and risk-asset spread widened. The Fed cut rates twice in March, and the government launched a large stimulus package. In April 2020, bond prices began to recover some of their prior losses.
The near-term outlook for the U.S. will be challenging, as the country continues to face COVID-19. However, we believe that once the economic effects have been mitigated, the economy will rebound. As always, we will monitor relevant data for signs of change. We encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
May 15, 2020
2
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from November 1, 2019 through April 30, 2020, as provided by portfolio managers Vassilis Dagioglu, James Stavena and Torrey Zaches, of Mellon Investments Corporation, Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended April 30, 2020, the BNY Mellon Dynamic Total Return Fund’s Class A shares produced a total return of -5.30%, Class C shares returned -5.74%, Class I shares returned -5.22% and Class Y shares returned -5.22%.1 In comparison, the FTSE Three-Month U.S. Treasury Bill Index, the MSCI World Index, and an index comprised of 60% MSCI World Index and 40% FTSE World Government Bond Index (the “Hybrid Index”) returned 0.76%, -7.29% and -3.11%, respectively.2,3,4,5
The fund lagged the Hybrid Index over the reporting period. The allocation to global equities was the largest detractor, as risk assets declined, particularly in March 2020.
The Fund’s Investment Approach
The fund seeks total return. To pursue its goal, the fund normally invests in instruments that provide investment exposure to global equity, bond, currency and commodity markets, and in fixed-income securities. The fund may invest in instruments that provide economic exposure to developed and, to a limited extent, emerging-market issuers.
The fund will seek to achieve investment exposure to global equity, bond, currency and commodity markets primarily through long and short positions in futures, options, forward contracts, swap agreements or exchange-traded funds (ETFs), and normally will use economic leverage as part of its investment strategy. The fund also may invest in fixed-income securities, such as bonds, notes (including structured notes) and money market instruments and including foreign government obligations and securities of supranational entities, to provide exposure to bond markets and for liquidity and income, as well as hold cash.
The fund’s portfolio managers apply a systematic, analytical investment approach designed to identify and exploit relative misvaluation opportunities across and within global capital markets. The portfolio managers update, monitor and follow buy or sell recommendations using proprietary investment models. Among equity markets, the portfolio managers employ a bottom-up valuation approach using proprietary models to derive market-level expected returns. For bond markets, the portfolio managers use proprietary models to identify temporary mispricing among global bond markets. For currency markets, the portfolio managers evaluate currencies on a relative valuation basis and overweight exposure to currencies that are undervalued. For commodities, the portfolio managers seek to identify opportunities in commodity markets by measuring and evaluating inventory and term structure, hedging and speculative activity, as well as momentum. The investment process combines fundamental and momentum signals in a quantitative framework.
Global Markets Roiled by COVID-19
During the first portion of the reporting period, risk assets generally experienced positive returns, but volatility rose in the final months, when the World Health Organization declared the spread of the COVID-19 virus a global pandemic. In an effort to contain the virus,
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DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
developed economies entered voluntary shutdowns in March 2020, bringing the global economy to a standstill and generating negative returns in many asset classes.
When the reporting period began, fears about a slowdown in the global economy faded, as concerns about U.S.-China trade tensions and the risk of a no-deal Brexit waned. A “Phase One” trade deal was announced between the U.S. and China, the UK election result brought greater clarity to a near-term Brexit outcome, and economic data pointed to stability in the global economy. Markets remained buoyant into year-end, as the stance of the Federal Reserve (the “Fed”) and other central banks remained accommodative.
However, in early 2020, fears about the global spread of COVID-19 reverberated through financial markets from late February and into March. As a result of widespread anxiety and the economic consequences of the ongoing crisis, equity markets experienced increased volatility, credit markets suffered, and defaults began to rise.
As a result, central banks and government authorities initiated various programs to ease liquidity concerns in certain markets and provide relief to small businesses and employees. At the end of the reporting period, markets began to rebound as these programs took effect, and investors began to anticipate the end of government shutdowns designed to slow the spread of the virus.
Equity Market Turmoil Hinders Returns
The fund lagged the Hybrid Index during the reporting period, as risk aversion and volatility rose sharply in March and April 2020, in response to the COVID-19 virus. Although the fund de-risked rapidly through a reduction in equities, the equity allocation was the largest drag on returns over the period. Long positions in UK, Japanese and Eurozone stocks were the most significant negative contributors. In fixed income, the fund’s long position in Japanese bonds position also detracted from performance, as did underperformance in the commodity strategy.
On a more positive note, positions in both equity and fixed-income markets were advantageous. Short positions in Australian stocks were beneficial, and in fixed-income markets, the fund’s long positions were additive, as investors sought safe haven assets. In particular, the fund’s long position in U.S. Treasuries contributed positively, as did the more tactical positioning in Australian and Canadian government bonds. Lastly, active currency positions were net positive contributors, primarily due to short positions in commodity-oriented currencies.
The fund incorporates risk hedging and volatility management activities to mitigate drawdowns during significant market corrections. During the reporting period, the fund purchased downside protection via put options and reduced risk-taking when volatility increased. These measures helped to swiftly reduce risk as volatility rose in March 2020.
Positioned for a Slow Recovery
While investors initially anticipated a rapid rebound from the economic downturn resulting from COVID-19, the current expectation is that recovery will be slow but steady. We continue to monitor how the recovery progresses, and to respond accordingly.
In equity markets, U.S. earnings were down approximately 20% in the first quarter of 2020, and analysts are continuing to cut forecasts. Nevertheless, opportunities are available, and we
4
are cautiously adding risk where relative valuations look attractive, primarily among growth-oriented stocks.
In fixed-income markets, the term premium is relatively low, but the credit premium has increased and has remained attractive through the lockdown. The fund has therefore added more credit exposure to capture this premium, both in investment-grade credit as well as among “fallen angels” (e.g., BBB to BB rated credits) in the high-yield market.
In other markets, the fund has significantly decreased its allocation to commodities, given the emergence of disinflation, and continues to take advantage of opportunities in currencies, favoring safe-haven currencies over commodity-oriented currencies. The fund also seeks opportunities in volatility, seeking to capitalize on a decrease in equity volatility.
We believe it is too early to determine how lasting the effect of COVID-19 will be on the global economy. Nevertheless, we are of the opinion that the direct and immediate response of both monetary and fiscal stimulus has mitigated the economic damage.
May 15, 2020
1 Total return includes reinvestment of dividends and any capital gains paid and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Share price, yield and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. Past performance is no guarantee of future results. The fund’s returns reflect the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through February 28, 2021, at which time it may be extended, terminated, or modified.
2 Source: Lipper Inc. — Reflects reinvestment of net dividends and, where applicable, capital gain distributions. 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. Investors cannot invest directly in any index.
3 Source: Lipper Inc. — The FTSE Three-Month U.S. Treasury Bill Index consists of the last three-month Treasury bill month-end rates. The FTSE Three-Month U.S. Treasury Bill Index measures return equivalents of yield averages. The instruments are not marked to market. Investors cannot invest directly in any index.
4 Source: Lipper Inc. — The FTSE World Government Bond Index (the “WGB Index”) measures the performance of fixed-rate, local-currency, investment-grade sovereign bonds. The WGB Index is a widely used benchmark that currently comprises sovereign debt from over 20 countries, denominated in a variety of currencies, and has more than 25 years of history available. The WGB Index provides a broad benchmark for the global sovereign fixed-income market. Investors cannot invest directly in any index.
5 Source: FactSet —The Hybrid Index is an unmanaged hybrid index composed of 60% MSCI World Index and 40% WGB Index. 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.
Bonds are subject generally to interest-rate, credit, liquidity, call, sector and market risks, 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.
Emerging markets tend to be more volatile than the markets of more mature economies and generally have less diverse and less mature economic structures and less stable political systems than those of developed countries. The securities of companies located in emerging markets are often subject to rapid and large changes in price. An investment in this fund should be considered only as a supplement to a complete investment program for those investors willing to accept the greater risks associated with investing in emerging-market countries.
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.
5
UNDERSTANDING YOUR FUND’S EXPENSES(Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in BNY Mellon Dynamic Total Return Fund from November 1, 2019 to April 30, 2020. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended April 30, 2020 |
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| Class A | Class C | Class I | Class Y |
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Expense paid per $1,000† | $6.97 | $10.58 | $5.76 | $5.62 |
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Ending value (after expenses) | $947.00 | $942.60 | $947.80 | $947.80 |
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COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS(Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended April 30, 2020 |
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| Class A | Class C | Class I | Class Y |
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Expense paid per $1,000† | $7.22 | $10.97 | $5.97 | $5.82 |
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Ending value (after expenses) | $1,017.70 | $1,013.97 | $1,018.95 | $1,019.10 |
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†Expenses are equal to the fund’s annualized expense ratio of 1.44% for Class A, 2.19% for Class C, 1.19% for Class I and 1.16% for Class Y, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
6
CONSOLIDATED STATEMENT OF INVESTMENTS
April 30, 2020 (Unaudited)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 10.1% | |||||||||
Aerospace & Defense - .2% | |||||||||
Howmet Aerospace, Sr. Unscd. Notes | 5.87 | 2/23/2022 | 160,000 | 163,289 | |||||
Howmet Aerospace, Sr. Unscd. Notes | 5.95 | 2/1/2037 | 250,000 | 233,097 | |||||
Spirit Aerosystems, Gtd. Notes | 3.85 | 6/15/2026 | 160,000 | 146,600 | |||||
Spirit Aerosystems, Gtd. Notes | 3.95 | 6/15/2023 | 430,000 | 373,562 | |||||
Spirit Aerosystems, Gtd. Notes | 4.60 | 6/15/2028 | 340,000 | 270,300 | |||||
1,186,848 | |||||||||
Airlines - .5% | |||||||||
Delta Air Lines, Sr. Unscd. Notes | 2.90 | 10/28/2024 | 1,000,000 | 792,980 | |||||
Delta Air Lines, Sr. Unscd. Notes | 3.63 | 3/15/2022 | 1,100,000 | 987,943 | |||||
Delta Air Lines, Sr. Unscd. Notes | 3.75 | 10/28/2029 | 700,000 | 494,641 | |||||
Delta Air Lines, Sr. Unscd. Notes | 3.80 | 4/19/2023 | 600,000 | 511,878 | |||||
Delta Air Lines, Sr. Unscd. Notes | 4.38 | 4/19/2028 | 600,000 | 445,992 | |||||
UAL Pass Through Trust, Ser. 2007-1, Cl. 071A | 6.64 | 7/2/2022 | 77,792 | 68,196 | |||||
3,301,630 | |||||||||
Automobiles & Components - .8% | |||||||||
Ford Motor, Sr. Unscd. Bonds | 6.63 | 10/1/2028 | 250,000 | 209,780 | |||||
Ford Motor, Sr. Unscd. Notes | 4.35 | 12/8/2026 | 200,000 | 160,000 | |||||
Ford Motor, Sr. Unscd. Notes | 4.75 | 1/15/2043 | 360,000 | 232,200 | |||||
Ford Motor, Sr. Unscd. Notes | 5.29 | 12/8/2046 | 250,000 | 169,375 | |||||
Ford Motor, Sr. Unscd. Notes | 6.38 | 2/1/2029 | 200,000 | 167,940 | |||||
Ford Motor, Sr. Unscd. Notes | 7.45 | 7/16/2031 | 300,000 | 252,750 | |||||
Ford Motor Credit, Sr. Unscd. Notes | 3.09 | 1/9/2023 | 200,000 | 179,750 | |||||
Ford Motor Credit, Sr. Unscd. Notes | 3.10 | 5/4/2023 | 350,000 | 310,625 | |||||
Ford Motor Credit, Sr. Unscd. Notes | 3.34 | 3/28/2022 | 200,000 | 186,022 | |||||
Ford Motor Credit, Sr. Unscd. Notes | 3.35 | 11/1/2022 | 400,000 | 365,120 | |||||
Ford Motor Credit, Sr. Unscd. Notes | 3.81 | 10/12/2021 | 400,000 | 378,500 | |||||
Ford Motor Credit, Sr. Unscd. Notes | 4.06 | 11/1/2024 | 450,000 | 397,125 | |||||
Ford Motor Credit, Sr. Unscd. Notes | 4.25 | 9/20/2022 | 350,000 | 328,275 | |||||
Ford Motor Credit, Sr. Unscd. Notes | 4.27 | 1/9/2027 | 200,000 | 171,000 | |||||
Ford Motor Credit, Sr. Unscd. Notes | 4.54 | 8/1/2026 | 110,000 | 95,013 | |||||
Ford Motor Credit, Sr. Unscd. Notes | 5.58 | 3/18/2024 | 400,000 | 379,000 | |||||
Ford Motor Credit, Sr. Unscd. Notes | 5.60 | 1/7/2022 | 200,000 | 196,000 | |||||
Ford Motor Credit, Sr. Unscd. Notes | 5.88 | 8/2/2021 | 200,000 | 199,000 | |||||
ZF North America Capital, Gtd. Notes | 4.50 | 4/29/2022 | 320,000 | a | 320,368 | ||||
ZF North America Capital, Gtd. Notes | 4.75 | 4/29/2025 | 820,000 | a | 766,331 | ||||
5,464,174 | |||||||||
Banks - .6% | |||||||||
Commerzbank, Sub. Notes | 8.13 | 9/19/2023 | 700,000 | 775,782 | |||||
Deutsche Bank, Sub. Notes | 4.30 | 5/24/2028 | 340,000 | 306,447 |
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CONSOLIDATED STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 10.1% (continued) | |||||||||
Banks - .6% (continued) | |||||||||
Deutsche Bank, Sub. Notes | 4.50 | 4/1/2025 | 200,000 | 189,675 | |||||
Dresdner Funding Trust I, Jr. Sub. Notes | 8.15 | 6/30/2031 | 310,000 | a | 393,700 | ||||
Intesa Sanpaolo, Sub. Notes | 5.02 | 6/26/2024 | 400,000 | a | 400,510 | ||||
RBS Capital Trust II, Gtd. Bonds | 6.43 | 1/3/2034 | 120,000 | 164,652 | |||||
Royal Bank of Scotland Group, Jr. Sub. Bonds | 7.65 | 9/30/2031 | 170,000 | 235,118 | |||||
Standard Chartered, Jr. Sub. Bonds | 7.01 | 7/30/2037 | 200,000 | a | 211,273 | ||||
UniCredit, Sub. Notes | 5.86 | 6/19/2032 | 600,000 | 597,744 | |||||
UniCredit, Sub. Notes | 7.30 | 4/2/2034 | 830,000 | a | 891,663 | ||||
4,166,564 | |||||||||
Chemicals - .3% | |||||||||
CF Industries, Gtd. Notes | 3.45 | 6/1/2023 | 210,000 | 213,938 | |||||
CF Industries, Gtd. Notes | 4.95 | 6/1/2043 | 235,000 | 241,667 | |||||
CF Industries, Gtd. Notes | 5.15 | 3/15/2034 | 110,000 | 114,912 | |||||
CF Industries, Gtd. Notes | 5.38 | 3/15/2044 | 235,000 | 244,752 | |||||
H.B. Fuller, Sr. Unscd. Notes | 4.00 | 2/15/2027 | 230,000 | 214,889 | |||||
Methanex, Sr. Unscd. Notes | 4.25 | 12/1/2024 | 250,000 | 225,567 | |||||
Methanex, Sr. Unscd. Notes | 5.25 | 12/15/2029 | 300,000 | 254,400 | |||||
Methanex, Sr. Unscd. Notes | 5.65 | 12/1/2044 | 300,000 | 206,700 | |||||
1,716,825 | |||||||||
Commercial & Professional Services - .1% | |||||||||
Adani Abbot Point Terminal, Sr. Scd. Notes | 4.45 | 12/15/2022 | 360,000 | a | 286,730 | ||||
The ADT Security, Sr. Scd. Notes | 3.50 | 7/15/2022 | 100,000 | 98,125 | |||||
The ADT Security , Sr. Scd. Notes | 4.13 | 6/15/2023 | 60,000 | 60,012 | |||||
444,867 | |||||||||
Consumer Discretionary - .4% | |||||||||
Mattel, Sr. Unscd. Notes | 3.15 | 3/15/2023 | 65,000 | 60,356 | |||||
Mattel, Sr. Unscd. Notes | 5.45 | 11/1/2041 | 95,000 | 75,867 | |||||
Mattel, Sr. Unscd. Notes | 6.20 | 10/1/2040 | 120,000 | 103,182 | |||||
MDC Holdings, Gtd. Notes | 5.50 | 1/15/2024 | 60,000 | 61,263 | |||||
MDC Holdings, Gtd. Notes | 6.00 | 1/15/2043 | 155,000 | 150,265 | |||||
PulteGroup, Gtd. Notes | 6.00 | 2/15/2035 | 30,000 | 31,878 | |||||
PulteGroup, Gtd. Notes | 6.38 | 5/15/2033 | 60,000 | 64,092 | |||||
PulteGroup, Gtd. Notes | 7.88 | 6/15/2032 | 30,000 | 34,742 | |||||
Royal Caribbean Cruises, Sr. Unscd. Debs. | 7.50 | 10/15/2027 | 250,000 | 197,513 | |||||
Royal Caribbean Cruises, Sr. Unscd. Notes | 3.70 | 3/15/2028 | 350,000 | 230,548 | |||||
Royal Caribbean Cruises, Sr. Unscd. Notes | 5.25 | 11/15/2022 | 800,000 | 584,232 | |||||
Wyndham Destinations, Sr. Scd. Notes | 3.90 | 3/1/2023 | 195,000 | 171,054 |
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Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 10.1% (continued) | |||||||||
Consumer Discretionary - .4% (continued) | |||||||||
Wyndham Destinations, Sr. Scd. Notes | 4.25 | 3/1/2022 | 325,000 | 309,156 | |||||
Wyndham Destinations, Sr. Scd. Notes | 5.40 | 4/1/2024 | 155,000 | 136,757 | |||||
Wyndham Destinations, Sr. Scd. Notes | 5.75 | 4/1/2027 | 250,000 | 220,525 | |||||
Wyndham Destinations, Sr. Scd. Notes | 6.35 | 10/1/2025 | 90,000 | 80,307 | |||||
2,511,737 | |||||||||
Consumer Durables & Apparel - .1% | |||||||||
Michael Kors USA, Gtd. Notes | 4.25 | 11/1/2024 | 450,000 | a | 352,138 | ||||
Under Armour, Sr. Unscd. Notes | 3.25 | 6/15/2026 | 30,000 | 27,064 | |||||
379,202 | |||||||||
Consumer Staples - .5% | |||||||||
Avon Products, Sr. Unscd. Notes | 7.00 | 3/15/2023 | 100,000 | 95,826 | |||||
Avon Products, Sr. Unscd. Notes | 8.95 | 3/15/2043 | 25,000 | 24,440 | |||||
Edgewell Personal Care, Gtd. Notes | 4.70 | 5/24/2022 | 140,000 | 142,925 | |||||
Newell Brands, Sr. Unscd. Notes | 4.00 | 6/15/2022 | 150,000 | 151,917 | |||||
Newell Brands, Sr. Unscd. Notes | 4.00 | 12/1/2024 | 340,000 | 341,700 | |||||
Newell Brands, Sr. Unscd. Notes | 4.35 | 4/1/2023 | 1,310,000 | 1,342,907 | |||||
Newell Brands, Sr. Unscd. Notes | 4.70 | 4/1/2026 | 900,000 | 915,187 | |||||
Newell Brands, Sr. Unscd. Notes | 5.88 | 4/1/2036 | 70,000 | 73,675 | |||||
Newell Brands, Sr. Unscd. Notes | 6.00 | 4/1/2046 | 545,000 | 563,394 | |||||
Tupperware Brands, Gtd. Notes | 4.75 | 6/1/2021 | 150,000 | 60,750 | |||||
3,712,721 | |||||||||
Diversified Financials - .1% | |||||||||
Navient, Sr. Unscd. Notes | 5.50 | 1/25/2023 | 195,000 | 182,081 | |||||
Navient, Sr. Unscd. Notes | 5.63 | 8/1/2033 | 190,000 | 144,552 | |||||
Navient, Sr. Unscd. Notes | 7.25 | 1/25/2022 | 75,000 | 73,834 | |||||
400,467 | |||||||||
Electronic Components - .0% | |||||||||
Ingram Micro, Sr. Unscd. Notes | 5.00 | 8/10/2022 | 55,000 | 51,527 | |||||
Ingram Micro, Sr. Unscd. Notes | 5.45 | 12/15/2024 | 105,000 | 100,545 | |||||
152,072 | |||||||||
Energy - 3.4% | |||||||||
Buckeye Partners, Sr. Unscd. Notes | 3.95 | 12/1/2026 | 540,000 | 492,075 | |||||
Buckeye Partners, Sr. Unscd. Notes | 4.13 | 12/1/2027 | 320,000 | 287,600 | |||||
Buckeye Partners, Sr. Unscd. Notes | 4.15 | 7/1/2023 | 490,000 | 461,212 | |||||
Buckeye Partners, Sr. Unscd. Notes | 4.35 | 10/15/2024 | 235,000 | 217,669 | |||||
Buckeye Partners, Sr. Unscd. Notes | 5.60 | 10/15/2044 | 230,000 | 164,738 | |||||
Buckeye Partners, Sr. Unscd. Notes | 5.85 | 11/15/2043 | 280,000 | 206,150 | |||||
Cenovus Energy, Sr. Unscd. Notes | 3.80 | 9/15/2023 | 450,000 | 376,394 | |||||
Cenovus Energy, Sr. Unscd. Notes | 4.25 | 4/15/2027 | 700,000 | 550,990 |
9
CONSOLIDATED STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 10.1% (continued) | |||||||||
Energy - 3.4% (continued) | |||||||||
Cenovus Energy, Sr. Unscd. Notes | 5.25 | 6/15/2037 | 470,000 | 318,223 | |||||
Cenovus Energy, Sr. Unscd. Notes | 5.40 | 6/15/2047 | 970,000 | 655,639 | |||||
Cenovus Energy, Sr. Unscd. Notes | 6.75 | 11/15/2039 | 1,360,000 | 973,111 | |||||
Chesapeake Energy, Gtd. Notes | 8.00 | 3/15/2026 | 65,000 | 1,950 | |||||
Continental Resources, Gtd. Notes | 3.80 | 6/1/2024 | 470,000 | 388,925 | |||||
Continental Resources, Gtd. Notes | 4.38 | 1/15/2028 | 600,000 | 464,310 | |||||
Continental Resources, Gtd. Notes | 4.50 | 4/15/2023 | 590,000 | 527,681 | |||||
Continental Resources, Gtd. Notes | 4.90 | 6/1/2044 | 750,000 | 523,882 | |||||
Continental Resources, Gtd. Notes | 5.00 | 9/15/2022 | 700,000 | 665,000 | |||||
DCP Midstream Operating, Gtd. Notes | 3.88 | 3/15/2023 | 80,000 | 66,896 | |||||
DCP Midstream Operating, Gtd. Notes | 4.75 | 9/30/2021 | 130,000 | a | 123,585 | ||||
DCP Midstream Operating, Gtd. Notes | 4.95 | 4/1/2022 | 50,000 | 45,853 | |||||
DCP Midstream Operating, Gtd. Notes | 5.60 | 4/1/2044 | 160,000 | 84,576 | |||||
DCP Midstream Operating, Gtd. Notes | 6.75 | 9/15/2037 | 50,000 | a | 30,430 | ||||
EnLink Midstream Partners, Sr. Unscd. Notes | 4.15 | 6/1/2025 | 90,000 | 56,268 | |||||
EnLink Midstream Partners, Sr. Unscd. Notes | 4.85 | 7/15/2026 | 195,000 | 120,081 | |||||
EnLink Midstream Partners, Sr. Unscd. Notes | 5.05 | 4/1/2045 | 175,000 | 72,380 | |||||
EnLink Midstream Partners, Sr. Unscd. Notes | 5.45 | 6/1/2047 | 195,000 | 80,486 | |||||
EnLink Midstream Partners, Sr. Unscd. Notes | 5.60 | 4/1/2044 | 15,000 | 6,129 | |||||
EQM Midstream Partners, Sr. Unscd. Notes | 4.00 | 8/1/2024 | 90,000 | 81,509 | |||||
EQM Midstream Partners, Sr. Unscd. Notes | 4.13 | 12/1/2026 | 300,000 | 258,195 | |||||
EQM Midstream Partners, Sr. Unscd. Notes | 4.75 | 7/15/2023 | 680,000 | 641,342 | |||||
EQM Midstream Partners, Sr. Unscd. Notes | 5.50 | 7/15/2028 | 390,000 | 351,987 | |||||
EQM Midstream Partners, Sr. Unscd. Notes | 6.50 | 7/15/2048 | 590,000 | 476,808 | |||||
EQT, Sr. Unscd. Notes | 3.00 | 10/1/2022 | 810,000 | 768,487 | |||||
EQT, Sr. Unscd. Notes | 3.90 | 10/1/2027 | 1,350,000 | 1,142,437 | |||||
EQT, Sr. Unscd. Notes | 4.88 | 11/15/2021 | 300,000 | 292,875 | |||||
EQT, Sr. Unscd. Notes | 6.13 | 2/1/2025 | 1,190,000 | 1,140,912 | |||||
EQT, Sr. Unscd. Notes | 7.00 | 2/1/2030 | 890,000 | 846,612 | |||||
Murphy Oil, Sr. Unscd. Notes | 4.00 | 6/1/2022 | 30,000 | 24,188 |
10
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 10.1% (continued) | |||||||||
Energy - 3.4% (continued) | |||||||||
Murphy Oil, Sr. Unscd. Notes | 4.45 | 12/1/2022 | 45,000 | 36,397 | |||||
Murphy Oil, Sr. Unscd. Notes | 5.88 | 12/1/2042 | 145,000 | 85,347 | |||||
Murphy Oil, Sr. Unscd. Notes | 7.05 | 5/1/2029 | 40,000 | 25,884 | |||||
Nabors Industries, Gtd. Notes | 4.63 | 9/15/2021 | 30,000 | 19,181 | |||||
Noble Holding International, Gtd. Bonds | 6.20 | 8/1/2040 | 30,000 | 446 | |||||
Noble Holding International, Gtd. Notes | 5.25 | 3/15/2042 | 20,000 | 288 | |||||
Noble Holding International, Gtd. Notes | 6.05 | 3/1/2041 | 100,000 | 1,125 | |||||
Noble Holding International, Gtd. Notes | 7.95 | 4/1/2025 | 90,000 | 1,220 | |||||
Noble Holding International, Gtd. Notes | 8.95 | 4/1/2045 | 40,000 | 450 | |||||
NuStar Logistics, Gtd. Notes | 4.75 | 2/1/2022 | 25,000 | 23,426 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 2.70 | 8/15/2022 | 230,000 | 201,250 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 2.70 | 2/15/2023 | 230,000 | 198,720 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 2.90 | 8/15/2024 | 540,000 | 412,938 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 3.00 | 2/15/2027 | 110,000 | 78,650 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 3.13 | 2/15/2022 | 120,000 | 109,824 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 3.20 | 8/15/2026 | 190,000 | 137,750 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 3.40 | 4/15/2026 | 250,000 | 180,000 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 3.50 | 8/15/2029 | 300,000 | 211,560 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 4.10 | 2/15/2047 | 110,000 | 66,550 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 4.20 | 3/15/2048 | 250,000 | 151,838 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 4.30 | 8/15/2039 | 60,000 | 37,950 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 4.40 | 8/15/2049 | 230,000 | 140,013 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 4.40 | 4/15/2046 | 90,000 | 56,925 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 5.55 | 3/15/2026 | 190,000 | 147,934 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 6.20 | 3/15/2040 | 110,000 | 79,200 |
11
CONSOLIDATED STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 10.1% (continued) | |||||||||
Energy - 3.4% (continued) | |||||||||
Occidental Petroleum, Sr. Unscd. Notes | 6.45 | 9/15/2036 | 310,000 | 227,850 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 6.60 | 3/15/2046 | 230,000 | 171,350 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 7.50 | 5/1/2031 | 220,000 | 169,400 | |||||
Occidental Petroleum, Sr. Unscd. Notes | 7.88 | 9/15/2031 | 120,000 | 91,800 | |||||
Oceaneering International, Sr. Unscd. Notes | 4.65 | 11/15/2024 | 80,000 | 41,900 | |||||
Patterson-UTI Energy, Sr. Unscd. Notes | 3.95 | 2/1/2028 | 300,000 | 199,907 | |||||
Patterson-UTI Energy, Sr. Unscd. Notes | 5.15 | 11/15/2029 | 490,000 | 324,886 | |||||
Pride International, Gtd. Notes | 7.88 | 8/15/2040 | 45,000 | 3,938 | |||||
Rockies Express Pipeline, Sr. Unscd. Notes | 3.60 | 5/15/2025 | 350,000 | 317,982 | |||||
Rockies Express Pipeline, Sr. Unscd. Notes | 4.80 | 5/15/2030 | 250,000 | 215,182 | |||||
Rockies Express Pipeline, Sr. Unscd. Notes | 4.95 | 7/15/2029 | 450,000 | 400,900 | |||||
Rockies Express Pipeline, Sr. Unscd. Notes | 6.88 | 4/15/2040 | 400,000 | 353,748 | |||||
Rockies Express Pipeline, Sr. Unscd. Notes | 7.50 | 7/15/2038 | 150,000 | 132,504 | |||||
Ruby Pipeline, Sr. Unscd. Notes | 6.50 | 4/1/2022 | 549,545 | a | 511,234 | ||||
Southwestern Energy, Gtd. Notes | 6.20 | 1/23/2025 | 90,000 | 80,208 | |||||
Suncor Energy Ventures, Gtd. Notes | 4.50 | 4/1/2022 | 100,000 | a | 100,209 | ||||
Topaz Solar Farms, Sr. Scd. Notes | 5.75 | 9/30/2039 | 352,925 | 391,807 | |||||
Transocean, Gtd. Notes | 5.80 | 10/15/2022 | 210,000 | 61,950 | |||||
Transocean, Gtd. Notes | 6.80 | 3/15/2038 | 205,000 | 46,638 | |||||
Transocean, Gtd. Notes | 7.50 | 4/15/2031 | 75,000 | 19,031 | |||||
Transocean, Gtd. Notes | 8.38 | 12/15/2021 | 260,000 | 94,640 | |||||
Transocean Phoenix 2, Sr. Scd. Notes | 7.75 | 10/15/2024 | 48,750 | a | 43,631 | ||||
Transocean Poseidon, Sr. Scd. Notes | 6.88 | 2/1/2027 | 50,000 | a | 40,000 | ||||
Valaris, Sr. Unscd. Notes | 5.20 | 3/15/2025 | 70,000 | 5,950 | |||||
Valaris, Sr. Unscd. Notes | 5.75 | 10/1/2044 | 45,000 | 3,987 | |||||
Western Midstream Operating, Sr. Unscd. Notes | 3.10 | 2/1/2025 | 440,000 | 403,700 | |||||
Western Midstream Operating, Sr. Unscd. Notes | 3.95 | 6/1/2025 | 230,000 | 205,275 | |||||
Western Midstream Operating, Sr. Unscd. Notes | 4.00 | 7/1/2022 | 450,000 | 437,625 | |||||
Western Midstream Operating, Sr. Unscd. Notes | 4.05 | 2/1/2030 | 530,000 | 486,275 |
12
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 10.1% (continued) | |||||||||
Energy - 3.4% (continued) | |||||||||
Western Midstream Operating, Sr. Unscd. Notes | 4.50 | 3/1/2028 | 180,000 | 159,525 | |||||
Western Midstream Operating, Sr. Unscd. Notes | 4.65 | 7/1/2026 | 340,000 | 302,600 | |||||
Western Midstream Operating, Sr. Unscd. Notes | 4.75 | 8/15/2028 | 210,000 | 186,050 | |||||
Western Midstream Operating, Sr. Unscd. Notes | 5.25 | 2/1/2050 | 480,000 | 380,400 | |||||
Western Midstream Operating, Sr. Unscd. Notes | 5.30 | 3/1/2048 | 310,000 | 234,825 | |||||
Western Midstream Operating, Sr. Unscd. Notes | 5.45 | 4/1/2044 | 280,000 | 212,800 | |||||
Western Midstream Operating, Sr. Unscd. Notes | 5.50 | 8/15/2048 | 160,000 | 118,600 | |||||
23,570,758 | |||||||||
Food Products - .3% | |||||||||
Kraft Heinz Foods, Gtd. Notes | 3.00 | 6/1/2026 | 180,000 | 178,905 | |||||
Kraft Heinz Foods, Gtd. Notes | 3.50 | 6/6/2022 | 120,000 | 123,379 | |||||
Kraft Heinz Foods, Gtd. Notes | 3.50 | 7/15/2022 | 80,000 | 81,842 | |||||
Kraft Heinz Foods, Gtd. Notes | 3.95 | 7/15/2025 | 80,000 | 83,818 | |||||
Kraft Heinz Foods, Gtd. Notes | 4.00 | 6/15/2023 | 120,000 | 124,829 | |||||
Kraft Heinz Foods, Gtd. Notes | 4.38 | 6/1/2046 | 300,000 | 286,240 | |||||
Kraft Heinz Foods, Gtd. Notes | 4.63 | 1/30/2029 | 190,000 | 200,319 | |||||
Kraft Heinz Foods, Gtd. Notes | 4.63 | 10/1/2039 | 40,000 | a | 39,467 | ||||
Kraft Heinz Foods, Gtd. Notes | 4.88 | 10/1/2049 | 290,000 | a | 289,210 | ||||
Kraft Heinz Foods, Gtd. Notes | 5.00 | 7/15/2035 | 80,000 | 85,945 | |||||
Kraft Heinz Foods, Gtd. Notes | 5.00 | 6/4/2042 | 250,000 | 254,448 | |||||
Kraft Heinz Foods, Gtd. Notes | 5.20 | 7/15/2045 | 200,000 | 205,514 | |||||
Kraft Heinz Foods, Gtd. Notes | 6.50 | 2/9/2040 | 70,000 | 81,816 | |||||
Kraft Heinz Foods, Gtd. Notes | 6.88 | 1/26/2039 | 170,000 | 204,666 | |||||
Safeway, Sr. Unscd. Debs. | 7.25 | 2/1/2031 | 50,000 | 52,605 | |||||
2,293,003 | |||||||||
Forest Products & Other - .0% | |||||||||
Smurfit Kappa Treasury Funding, Gtd. Notes | 7.50 | 11/20/2025 | 60,000 | 71,100 | |||||
Health Care - .1% | |||||||||
HCA, Gtd. Bonds | 7.05 | 12/1/2027 | 140,000 | 164,241 | |||||
HCA, Gtd. Bonds | 8.36 | 4/15/2024 | 115,000 | 133,400 | |||||
HCA, Gtd. Notes | 7.50 | 11/15/2095 | 100,000 | 110,296 | |||||
HCA, Gtd. Notes | 7.69 | 6/15/2025 | 100,000 | 114,730 | |||||
Magellan Health, Sr. Unscd. Notes | 4.90 | 9/22/2024 | 275,000 | 269,789 | |||||
Owens & Minor, Sr. Scd. Notes | 3.88 | 9/15/2021 | 40,000 | 38,094 | |||||
Owens & Minor, Sr. Scd. Notes | 4.38 | 12/15/2024 | 180,000 | 147,114 | |||||
977,664 |
13
CONSOLIDATED STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 10.1% (continued) | |||||||||
Industrial - .3% | |||||||||
AECOM Global II, Gtd. Notes | 5.00 | 4/1/2022 | 240,000 | 241,800 | |||||
Hillenbrand, Gtd. Notes | 4.50 | 9/15/2026 | 300,000 | 275,140 | |||||
Pitney Bowes, Sr. Unscd. Notes | 4.63 | 10/1/2021 | 60,000 | 54,189 | |||||
Pitney Bowes, Sr. Unscd. Notes | 4.63 | 5/15/2022 | 40,000 | 34,732 | |||||
Pitney Bowes, Sr. Unscd. Notes | 4.63 | 3/15/2024 | 150,000 | 113,580 | |||||
Pitney Bowes, Sr. Unscd. Notes | 5.70 | 4/1/2023 | 90,000 | 74,120 | |||||
Trinity Industries, Gtd. Notes | 4.55 | 10/1/2024 | 375,000 | 345,609 | |||||
Xerox, Sr. Unscd. Notes | 3.80 | 5/15/2024 | 290,000 | 283,417 | |||||
Xerox, Sr. Unscd. Notes | 4.13 | 3/15/2023 | 480,000 | 480,576 | |||||
Xerox, Sr. Unscd. Notes | 4.80 | 3/1/2035 | 170,000 | 146,387 | |||||
Xerox, Sr. Unscd. Notes | 6.75 | 12/15/2039 | 320,000 | 311,552 | |||||
2,361,102 | |||||||||
Information Technology - .0% | |||||||||
CDK Global, Sr. Unscd. Notes | 5.00 | 10/15/2024 | 225,000 | 234,270 | |||||
Insurance - .0% | |||||||||
Genworth Holdings, Gtd. Notes | 7.63 | 9/24/2021 | 200,000 | 190,880 | |||||
Internet Software & Services - .0% | |||||||||
NortonLifeLock, Sr. Unscd. Notes | 3.95 | 6/15/2022 | 250,000 | 256,025 | |||||
Zayo Group, Gtd. Notes | 5.75 | 1/15/2027 | 55,000 | a | 52,091 | ||||
Zayo Group, Gtd. Notes | 6.38 | 5/15/2025 | 25,000 | 24,630 | |||||
332,746 | |||||||||
Materials - .1% | |||||||||
Crown Cork & Seal, Gtd. Debs. | 7.38 | 12/15/2026 | 245,000 | 270,014 | |||||
Foresight Energy, Scd. Notes | 11.50 | 4/1/2023 | 15,000 | a,b | 75 | ||||
Pactiv, Sr. Unscd. Debs. | 8.38 | 4/15/2027 | 50,000 | 52,355 | |||||
Pactiv, Sr. Unscd. Notes | 7.95 | 12/15/2025 | 40,000 | 42,392 | |||||
Sealed Air, Gtd. Notes | 6.88 | 7/15/2033 | 30,000 | a | 33,363 | ||||
398,199 | |||||||||
Media - .0% | |||||||||
Belo, Gtd. Debs. | 7.25 | 9/15/2027 | 60,000 | 60,426 | |||||
Belo, Gtd. Debs. | 7.75 | 6/1/2027 | 30,000 | 31,742 | |||||
Liberty Interactive, Sr. Unscd. Debs. | 8.25 | 2/1/2030 | 110,000 | 98,549 | |||||
Liberty Interactive, Sr. Unscd. Debs. | 8.50 | 7/15/2029 | 70,000 | 60,697 | |||||
251,414 | |||||||||
Metals & Mining - .1% | |||||||||
Allegheny Ludlum, Gtd. Bonds | 6.95 | 12/15/2025 | 30,000 | 27,219 | |||||
Allegheny Technologies, Sr. Unscd. Notes | 7.88 | 8/15/2023 | 135,000 | 124,482 | |||||
Carpenter Technology, Sr. Unscd. Notes | 4.45 | 3/1/2023 | 80,000 | 78,428 | |||||
Freeport-McMoRan, Gtd. Notes | 3.55 | 3/1/2022 | 10,000 | 10,122 | |||||
Freeport-McMoRan, Gtd. Notes | 3.88 | 3/15/2023 | 210,000 | 210,567 | |||||
Freeport-McMoRan, Gtd. Notes | 4.55 | 11/14/2024 | 60,000 | 60,387 |
14
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 10.1% (continued) | |||||||||
Metals & Mining - .1% (continued) | |||||||||
Freeport-McMoRan, Gtd. Notes | 5.40 | 11/14/2034 | 75,000 | 70,935 | |||||
Freeport-McMoRan, Gtd. Notes | 5.45 | 3/15/2043 | 165,000 | 152,930 | |||||
United States Steel, Sr. Unscd. Bonds | 6.65 | 6/1/2037 | 50,000 | 31,505 | |||||
766,575 | |||||||||
Real Estate - .2% | |||||||||
CBL & Associates, Gtd. Notes | 4.60 | 10/15/2024 | 60,000 | 16,488 | |||||
CBL & Associates, Gtd. Notes | 5.95 | 12/15/2026 | 130,000 | 35,204 | |||||
Diversified Healthcare Trust, Sr. Unscd. Notes | 4.75 | 5/1/2024 | 190,000 | 157,820 | |||||
Diversified Healthcare Trust, Sr. Unscd. Notes | 4.75 | 2/15/2028 | 480,000 | 412,344 | |||||
Diversified Healthcare Trust, Sr. Unscd. Notes | 6.75 | 12/15/2021 | 320,000 | 306,363 | |||||
Mack-Cali Realty, Sr. Unscd. Notes | 3.15 | 5/15/2023 | 160,000 | 131,757 | |||||
Mack-Cali Realty, Sr. Unscd. Notes | 4.50 | 4/18/2022 | 210,000 | 178,519 | |||||
Washington Prime Group, Sr. Unscd. Notes | 6.45 | 8/15/2024 | 250,000 | 140,363 | |||||
1,378,858 | |||||||||
Retailing - .9% | |||||||||
Bed Bath & Beyond, Sr. Unscd. Notes | 3.75 | 8/1/2024 | 180,000 | 112,500 | |||||
Bed Bath & Beyond, Sr. Unscd. Notes | 5.17 | 8/1/2044 | 620,000 | 286,750 | |||||
Brinker International, Gtd. Notes | 5.00 | 10/1/2024 | 50,000 | a | 41,928 | ||||
Brinker International, Sr. Unscd. Notes | 3.88 | 5/15/2023 | 70,000 | 53,113 | |||||
J.C Penney, Gtd. Debs. | 7.40 | 4/1/2037 | 70,000 | 4,200 | |||||
J.C Penney, Gtd. Debs. | 7.63 | 3/1/2097 | 120,000 | 4,800 | |||||
J.C Penney, Gtd. Notes | 6.38 | 10/15/2036 | 90,000 | 5,400 | |||||
L Brands, Sr. Unscd. Notes | 7.60 | 7/15/2037 | 130,000 | 77,818 | |||||
Macy's Retail Holdings, Gtd. Notes | 2.88 | 2/15/2023 | 901,000 | 650,972 | |||||
Macy's Retail Holdings, Gtd. Notes | 3.63 | 6/1/2024 | 850,000 | 605,094 | |||||
Macy's Retail Holdings, Gtd. Notes | 3.88 | 1/15/2022 | 100,000 | 82,812 | |||||
Macy's Retail Holdings, Gtd. Notes | 4.30 | 2/15/2043 | 200,000 | 116,638 | |||||
Macy's Retail Holdings, Gtd. Notes | 4.50 | 12/15/2034 | 590,000 | 339,987 | |||||
Macy's Retail Holdings, Gtd. Notes | 5.13 | 1/15/2042 | 200,000 | 118,142 | |||||
Macy's Retail Holdings, Gtd. Notes | 6.38 | 3/15/2037 | 100,000 | 64,500 | |||||
Marks & Spencer, Sr. Unscd. Notes | 7.13 | 12/1/2037 | 250,000 | 225,217 | |||||
QVC, Sr. Scd. Notes | 4.38 | 3/15/2023 | 550,000 | 532,768 | |||||
QVC, Sr. Scd. Notes | 4.45 | 2/15/2025 | 450,000 | 414,571 | |||||
QVC, Sr. Scd. Notes | 4.75 | 2/15/2027 | 450,000 | 414,000 | |||||
QVC, Sr. Scd. Notes | 4.85 | 4/1/2024 | 450,000 | 430,830 | |||||
QVC, Sr. Scd. Notes | 5.13 | 7/2/2022 | 300,000 | 295,761 | |||||
QVC, Sr. Scd. Notes | 5.45 | 8/15/2034 | 300,000 | 237,168 | |||||
QVC, Sr. Scd. Notes | 5.95 | 3/15/2043 | 150,000 | 116,870 |
15
CONSOLIDATED STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 10.1% (continued) | |||||||||
Retailing - .9% (continued) | |||||||||
Rite Aid, Sr. Unscd. Debs. | 7.70 | 2/15/2027 | 150,000 | 110,445 | |||||
The Gap, Sr. Unscd. Bonds | 5.95 | 4/12/2021 | 75,000 | 77,438 | |||||
Yum! Brands, Sr. Unscd. Bonds | 6.88 | 11/15/2037 | 240,000 | 245,664 | |||||
Yum! Brands, Sr. Unscd. Notes | 3.75 | 11/1/2021 | 95,000 | 95,926 | |||||
Yum! Brands, Sr. Unscd. Notes | 3.88 | 11/1/2023 | 190,000 | 194,180 | |||||
Yum! Brands, Sr. Unscd. Notes | 5.35 | 11/1/2043 | 120,000 | 115,200 | |||||
6,070,692 | |||||||||
Technology Hardware & Equipment - .1% | |||||||||
Dell, Sr. Unscd. Debs. | 7.10 | 4/15/2028 | 180,000 | 200,178 | |||||
Dell, Sr. Unscd. Notes | 5.40 | 9/10/2040 | 10,000 | 9,536 | |||||
Dell, Sr. Unscd. Notes | 6.50 | 4/15/2038 | 375,000 | 388,031 | |||||
EMC, Sr. Unscd. Notes | 3.38 | 6/1/2023 | 355,000 | 355,444 | |||||
Vericast, Sr. Scd. Notes | 12.50 | 5/1/2024 | 398 | a | 406 | ||||
953,595 | |||||||||
Telecommunication Services - .8% | |||||||||
CenturyLink, Sr. Unscd. Bonds, Ser. P | 7.60 | 9/15/2039 | 40,000 | 41,021 | |||||
CenturyLink, Sr. Unscd. Debs., Ser. G | 6.88 | 1/15/2028 | 50,000 | 52,105 | |||||
CenturyLink, Sr. Unscd. Notes, Ser. T | 5.80 | 3/15/2022 | 70,000 | 71,987 | |||||
CenturyLink, Sr. Unscd. Notes, Ser. U | 7.65 | 3/15/2042 | 25,000 | 25,215 | |||||
Embarq, Sr. Unscd. Notes | 8.00 | 6/1/2036 | 40,000 | 41,378 | |||||
Ericsson, Sr. Unscd. Notes | 4.13 | 5/15/2022 | 210,000 | 218,925 | |||||
Frontier North, Sr. Unscd. Debs., Ser. G | 6.73 | 2/15/2028 | 25,000 | b | 23,920 | ||||
Nokia, Sr. Unscd. Notes | 6.63 | 5/15/2039 | 415,000 | 442,015 | |||||
Nokia of America, Sr. Unscd. Notes | 6.45 | 3/15/2029 | 30,000 | 30,150 | |||||
Qwest, Sr. Unscd. Debs. | 7.25 | 9/15/2025 | 50,000 | 53,665 | |||||
Sprint Capital, Gtd. Notes | 6.88 | 11/15/2028 | 450,000 | 544,050 | |||||
Sprint Capital, Gtd. Notes | 8.75 | 3/15/2032 | 325,000 | 458,136 | |||||
Telecom Italia Capital, Gtd. Notes | 6.00 | 9/30/2034 | 180,000 | 187,506 | |||||
Telecom Italia Capital, Gtd. Notes | 6.38 | 11/15/2033 | 140,000 | 151,515 | |||||
Telecom Italia Capital, Gtd. Notes | 7.20 | 7/18/2036 | 180,000 | 203,184 | |||||
Telecom Italia Capital, Gtd. Notes | 7.72 | 6/4/2038 | 115,000 | 134,148 | |||||
U.S. Cellular, Sr. Unscd. Notes | 6.70 | 12/15/2033 | 100,000 | 106,080 | |||||
Vodafone Group, Jr. Sub. Notes | 7.00 | 4/4/2079 | 2,120,000 | 2,429,276 | |||||
5,214,276 | |||||||||
Transportation - .0% | |||||||||
XPO CNW, Sr. Unscd. Debs. | 6.70 | 5/1/2034 | 100,000 | 94,805 | |||||
Utilities - .2% | |||||||||
DPL, Sr. Unscd. Notes | 4.35 | 4/15/2029 | 250,000 | 243,820 | |||||
DPL, Sr. Unscd. Notes | 7.25 | 10/15/2021 | 300,000 | 304,200 | |||||
Midland Cogeneration Venture, Sr. Scd. Notes | 6.00 | 3/15/2025 | 170,936 | a | 175,473 | ||||
TransAlta, Sr. Unscd. Bonds | 6.50 | 3/15/2040 | 255,000 | 223,444 |
16
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 10.1% (continued) | |||||||||
Utilities - .2% (continued) | |||||||||
TransAlta, Sr. Unscd. Notes | 4.50 | 11/15/2022 | 305,000 | 298,519 | |||||
1,245,456 | |||||||||
TotalBonds and Notes | 69,842,500 | ||||||||
Shares | |||||||||
Common Stocks - .0% | |||||||||
Energy - .0% | |||||||||
Battalion Oil | 109 | c | 534 | ||||||
Exchange-Traded Funds - 9.0% | |||||||||
Registered Investment Companies - 9.0% | |||||||||
iShares Intermediate-Term Corporate Bond ETF | 489,907 | 28,370,514 | |||||||
SPDR Portfolio Intermediate Term Corporate Bond ETF | 953,207 | 33,724,464 | |||||||
TotalExchange-Traded Funds | 62,094,978 | ||||||||
Description /Number of Contracts | Exercise | Expiration Date | Notional Amount ($) | ||||||
Options Purchased - .6% | |||||||||
Put Options - .6% | |||||||||
Standard & Poor's 500 E-mini 3rd Week June Future, Contracts 774 | 3,000 | 5/15/2020 | 116,100,000 | 4,632,390 | |||||
Description | Annualized | Maturity Date | Principal Amount ($) | ||||||
Short-Term Investments - 71.0% | |||||||||
U.S. Government Securities | |||||||||
U.S. Treasury Bills | 0.09 | 7/2/2020 | 107,092,100 | d | 107,075,731 | ||||
U.S. Treasury Bills | 0.13 | 2/25/2021 | 32,094,000 | d | 32,054,551 | ||||
U.S. Treasury Bills | 0.31 | 6/18/2020 | 23,407,000 | d | 23,404,737 | ||||
U.S. Treasury Bills | 0.09 | 9/17/2020 | 161,347,500 | d | 161,274,299 | ||||
U.S. Treasury Bills | 1.57 | 5/21/2020 | 166,976,400 | d | 166,968,283 | ||||
TotalShort-Term Investments | 490,777,601 |
17
CONSOLIDATED STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | 1-Day | Shares | Value ($) | ||||||
Investment Companies - 10.9% | |||||||||
Registered Investment Companies - 10.9% | |||||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 0.33 | 75,216,076 | e | 75,216,076 | |||||
Total Investments(cost $695,361,375) | 101.6% | 702,564,079 | |||||||
Liabilities, Less Cash and Receivables | (1.6%) | (11,167,168) | |||||||
Net Assets | 100.0% | 691,396,911 |
ETF—Exchange-Traded Fund
a Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2020, these securities were valued at $5,103,815 or .74% of net assets.
b Non-income producing—security in default.
c Non-income producing security.
d Security is a discount security. Income is recognized through the accretion of discount.
e Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
Portfolio Summary (Unaudited)† | Value (%) |
Government | 71.0 |
Investment Companies | 19.9 |
Energy | 3.4 |
Consumer, Cyclical | 3.0 |
Financial | .9 |
Communications | .8 |
Options Purchased | .7 |
Consumer, Non-cyclical | .5 |
Industrial | .4 |
Technology | .4 |
Basic Materials | .4 |
Utilities | .2 |
101.6 |
† Based on net assets.
See notes to consolidated financial statements.
18
CONSOLIDATED STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS(Unaudited)
Investment Companies | Value | Purchases ($) | Sales ($) | Value | Net | Dividends/ |
Registered Investment Companies; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 54,011,533 | 528,565,814 | (507,361,271) | 75,216,076 | 10.9 | 361,693 |
See notes to consolidated financial statements.
19
CONSOLIDATED STATEMENT OF FUTURES
April 30, 2020 (Unaudited)
Description | Number of | Expiration | Notional | Value ($) | Unrealized Appreciation (Depreciation) ($) | |
Futures Long | ||||||
Amsterdam Exchange Index | 14 | 5/15/2020 | 1,569,710a | 1,569,476 | (234) | |
ASX SPI 200 | 95 | 6/18/2020 | 8,106,162a | 8,574,085 | 467,923 | |
Australian 10 Year Bond | 1,624 | 6/15/2020 | 157,647,746a | 157,523,532 | (124,214) | |
CAC 40 10 Euro | 163 | 5/15/2020 | 8,048,084a | 8,119,333 | 71,249 | |
Canadian 10 Year Bond | 921 | 6/19/2020 | 98,109,794a | 98,845,641 | 735,847 | |
Chicago SRW Wheat | 48 | 9/14/2020 | 1,309,683b | 1,267,200 | (42,483) | |
Cocoa | 83 | 9/15/2020 | 1,918,392b | 1,987,850 | 69,458 | |
Coffee "C" | 33 | 9/18/2020 | 1,347,433b | 1,330,313 | (17,120) | |
Copper | 15 | 7/29/2020 | 819,345b | 879,000 | 59,655 | |
Crude Oil | 1 | 11/20/2020 | 36,734b | 29,620 | (7,114) | |
Crude Soybean Oil | 13 | 12/14/2020 | 205,197b | 213,720 | 8,523 | |
DAX | 21 | 6/19/2020 | 5,486,242a | 6,242,811 | 756,569 | |
FTSE/MIB Index | 10 | 6/19/2020 | 958,767a | 962,211 | 3,444 | |
Gasoline | 9 | 8/31/2020 | 338,159b | 316,197 | (21,962) | |
Gold 100 oz | 11 | 8/27/2020 | 1,861,923b | 1,871,100 | 9,177 | |
Hang Seng | 149 | 5/28/2020 | 22,778,832a | 23,545,940 | 767,108 | |
Hard Red Winter Wheat | 5 | 9/14/2020 | 121,854b | 123,688 | 1,834 | |
IBEX 35 Index | 22 | 5/15/2020 | 1,719,871a | 1,667,599 | (52,272) | |
Japanese 10 Year Bond | 110 | 6/15/2020 | 156,034,168a | 156,612,775 | 578,607 | |
Live Cattle | 3 | 8/31/2020 | 99,636b | 110,520 | 10,884 | |
LME Primary Aluminum | 10 | 12/16/2020 | 387,342b | 383,375 | (3,967) | |
LME Primary Nickel | 1 | 12/16/2020 | 72,816b | 73,716 | 900 | |
LME Refined Pig Lead | 1 | 12/16/2020 | 42,003b | 41,325 | (678) | |
LME Zinc | 2 | 12/16/2020 | 96,400b | 97,700 | 1,300 | |
Mini MSCI Emerging Markets Index | 321 | 6/19/2020 | 12,817,149 | 14,539,695 | 1,722,546 | |
NYMEX Palladium | 2 | 9/28/2020 | 372,494b | 390,360 | 17,866 | |
S&P/Toronto Stock Exchange 60 Index | 96 | 6/18/2020 | 10,959,762a | 12,251,475 | 1,291,713 | |
Soybean | 141 | 11/13/2020 | 5,897,971b | 6,047,138 | 149,167 | |
Standard & Poor's 500 E-mini | 2,120 | 6/19/2020 | 273,895,016 | 307,654,400 | 33,759,384 | |
Swiss Market Index | 97 | 6/19/2020 | 9,861,747a | 9,670,355 | (191,392) | |
Topix | 271 | 6/11/2020 | 35,005,793a | 36,717,514 | 1,711,721 | |
U.S. Treasury 10 Year Notes | 532 | 6/19/2020 | 74,006,501 | 73,981,250 | (25,251) | |
U.S. Treasury Long Bond | 18 | 6/19/2020 | 3,201,050 | 3,258,563 | 57,513 |
20
Description | Number of | Expiration | Notional | Value ($) | Unrealized Appreciation (Depreciation) ($) | |
Futures Short | ||||||
Brent Crude | 14 | 10/30/2020 | 526,657b | 461,300 | 65,357 | |
Corn No.2 Yellow | 170 | 12/14/2020 | 2,796,046b | 2,866,625 | (70,579) | |
Cotton No.2 | 29 | 12/8/2020 | 792,325b | 854,340 | (62,015) | |
Euro-Bond | 833 | 6/8/2020 | 158,058,597a | 159,227,213 | (1,168,616) | |
FTSE 100 | 227 | 6/19/2020 | 17,417,786a | 16,825,598 | 592,188 | |
Lean Hog | 3 | 8/14/2020 | 68,723b | 75,360 | (6,637) | |
Long Gilt | 924 | 6/26/2020 | 158,832,651a | 160,252,231 | (1,419,580) | |
Low Sulphur Gas Oil | 15 | 12/10/2020 | 496,542b | 456,750 | 39,792 | |
Natural Gas | 48 | 9/28/2020 | 970,769b | 1,163,520 | (192,751) | |
NY Harbor ULSD | 17 | 11/30/2020 | 1,084,445b | 745,630 | 338,815 | |
Platinum | 1 | 7/29/2020 | 40,189b | 40,650 | (461) | |
Soybean Meal | 37 | 12/14/2020 | 1,092,612b | 1,102,230 | (9,618) | |
Sugar No.11 | 56 | 9/30/2020 | 647,815b | 666,714 | (18,899) | |
U.S. Treasury 5 Year Notes | 7 | 6/30/2020 | 877,836 | 878,391 | (555) | |
U.S. Treasury Ultra Long Bond | 2 | 6/19/2020 | 431,676 | 449,563 | (17,887) | |
Ultra 10 Year U.S. Treasury Notes | 17 | 6/19/2020 | 2,663,811 | 2,669,531 | (5,720) | |
Gross Unrealized Appreciation | 43,288,540 | |||||
Gross Unrealized Depreciation | (3,460,005) |
a Notional amounts in foreign currency have been converted to USD using relevant foreign exchange rates.
b These securities are wholly-owned by the Subsidiary referenced in Note 1.
See notes to consolidated financial statements.
21
CONSOLIDATED STATEMENT OF OPTIONS WRITTEN
April 30, 2020 (Unaudited)
Description/ Contracts/ Counterparties | Exercise Price | Expiration Date | Notional Amount | Value ($) | ||
Call Options: | ||||||
Standard & Poor's 500 E-mini 2nd Week June Future, | 2,800 | 5/8/2020 | 24,080,000 | (1,058,660) | ||
Standard & Poor's 500 E-mini 2nd Week June Future, | 2,900 | 5/8/2020 | 23,780,000 | (414,920) | ||
Standard & Poor's 500 E-mini 3rd Week June Future, | 2,680 | 5/15/2020 | 45,024,000 | (4,077,360) | ||
Standard & Poor's 500 E-mini 3rd Week June Future, | 2,940 | 5/15/2020 | 46,158,000 | (734,760) | ||
Standard & Poor's 500 E-mini 4th Week June Future, | 3,030 | 5/22/2020 | 46,207,500 | (346,175) | ||
Standard & Poor's 500 E-mini End of Month Options June Future, | 3,050 | 5/29/2020 | 46,665,000 | (367,200) | ||
Put Options: | ||||||
Standard & Poor's 500 E-mini 4th Week June Future, | 2,650 | 5/22/2020 | 40,412,500 | (404,125) | ||
Standard & Poor's 500 E-mini End of Month Options June Future, | 2,670 | 5/29/2020 | 40,851,000 | (566,100) | ||
Total Options Written | (7,969,300) |
See notes to consolidated financial statements.
22
CONSOLIDATED STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTSApril 30, 2020 (Unaudited)
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation)($) |
Bank of Montreal | |||||
United States Dollar | 39,422,407 | Swiss Franc | 36,594,441 | 6/17/2020 | 1,458,218 |
United States Dollar | 74,895,144 | Canadian Dollar | 103,202,513 | 6/17/2020 | 745,855 |
Norwegian Krone | 333,263,218 | United States Dollar | 34,650,581 | 6/17/2020 | (2,112,497) |
Citigroup | |||||
Euro | 34,703,000 | United States Dollar | 38,209,734 | 6/17/2020 | (143,347) |
United States Dollar | 135,630,500 | Euro | 124,613,000 | 6/17/2020 | (1,059,894) |
British Pound | 73,053,651 | United States Dollar | 91,602,853 | 6/17/2020 | 427,043 |
United States Dollar | 11,603,751 | British Pound | 9,357,000 | 6/17/2020 | (183,801) |
Australian Dollar | 95,089,000 | United States Dollar | 59,312,740 | 6/17/2020 | 2,660,818 |
United States Dollar | 133,825,364 | Australian Dollar | 209,338,874 | 6/17/2020 | (2,609,712) |
Canadian Dollar | 25,341,000 | United States Dollar | 17,863,396 | 6/17/2020 | 343,691 |
United States Dollar | 18,474,375 | Canadian Dollar | 25,978,000 | 6/17/2020 | (190,386) |
New Zealand Dollar | 94,273,000 | United States Dollar | 56,001,759 | 6/17/2020 | 1,812,289 |
United States Dollar | 32,718,582 | New Zealand Dollar | 54,775,000 | 6/17/2020 | (872,844) |
Swedish Krona | 182,366,000 | United States Dollar | 18,342,147 | 6/17/2020 | 359,747 |
United States Dollar | 12,193,598 | Swedish Krona | 120,051,000 | 6/17/2020 | (117,804) |
Norwegian Krone | 169,571,000 | United States Dollar | 15,330,909 | 6/17/2020 | 1,225,120 |
United States Dollar | 64,576,637 | Norwegian Krone | 681,075,000 | 6/17/2020 | (1,919,976) |
Swiss Franc | 96,936,000 | United States Dollar | 100,393,920 | 6/17/2020 | 170,442 |
United States Dollar | 30,507,749 | Swiss Franc | 29,213,000 | 6/17/2020 | 201,292 |
Japanese Yen | 10,457,274,000 | United States Dollar | 97,565,184 | 6/17/2020 | (50,439) |
United States Dollar | 76,921,276 | Japanese Yen | 8,364,273,000 | 6/17/2020 | (1,076,101) |
Goldman Sachs | |||||
Australian Dollar | 52,767,000 | United States Dollar | 32,728,137 | 6/17/2020 | 1,662,368 |
23
CONSOLIDATED STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (Unaudited) (continued)
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation)($) |
Goldman Sachs (continued) | |||||
United States Dollar | 4,730,194 | Australian Dollar | 7,858,000 | 6/17/2020 | (391,200) |
Swiss Franc | 31,651,000 | United States Dollar | 32,662,322 | 6/17/2020 | 173,391 |
United States Dollar | 23,697,898 | Swiss Franc | 22,404,000 | 6/17/2020 | 455,305 |
Swedish Krona | 401,916,085 | United States Dollar | 41,921,678 | 6/17/2020 | (704,608) |
New Zealand Dollar | 46,223,000 | United States Dollar | 27,981,970 | 6/17/2020 | 364,839 |
United States Dollar | 26,938,972 | New Zealand Dollar | 44,509,183 | 6/17/2020 | (356,818) |
Euro | 58,864,635 | United States Dollar | 66,540,606 | 6/17/2020 | (1,970,857) |
United States Dollar | 106,303,725 | Euro | 95,775,000 | 6/17/2020 | 1,246,288 |
Japanese Yen | 9,850,396,015 | United States Dollar | 93,126,656 | 6/17/2020 | (1,271,087) |
United States Dollar | 4,214,721 | Japanese Yen | 442,421,000 | 6/17/2020 | 89,117 |
British Pound | 14,161,000 | United States Dollar | 16,938,035 | 6/17/2020 | 901,393 |
United States Dollar | 9,171,857 | British Pound | 7,457,000 | 6/17/2020 | (222,156) |
Norwegian Krone | 64,800,000 | United States Dollar | 6,317,836 | 6/17/2020 | 8,898 |
United States Dollar | 23,222,244 | Norwegian Krone | 247,482,000 | 6/17/2020 | (940,608) |
Canadian Dollar | 39,376,000 | United States Dollar | 27,904,496 | 6/17/2020 | 386,505 |
Gross Unrealized Appreciation | 14,692,619 | ||||
Gross Unrealized Depreciation | (16,194,135) |
See notes to consolidated financial statements.
24
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
April 30, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 620,145,299 |
| 627,348,003 |
| ||
Affiliated issuers |
| 75,216,076 |
| 75,216,076 |
| |
Cash |
|
|
|
| 14,122,467 |
|
Cash denominated in foreign currency |
|
| 444,709 |
| 444,926 |
|
Receivable for investment securities sold |
| 21,366,059 |
| |||
Unrealized appreciation on forward foreign |
| 14,692,619 |
| |||
Receivable for shares of Common Stock subscribed |
| 1,550,285 |
| |||
Dividends and interest receivable |
| 974,503 |
| |||
Cash collateral held by broker—Note 4 |
| 764,106 |
| |||
Prepaid expenses |
|
|
|
| 59,798 |
|
|
|
|
|
| 756,538,842 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 646,848 |
| |||
Payable for investment securities purchased |
| 31,055,189 |
| |||
Unrealized depreciation on forward foreign |
| 16,194,135 |
| |||
Outstanding options written, at value |
| 7,969,300 |
| |||
Payable for futures variation margin—Note 4 |
| 6,224,213 |
| |||
Payable for shares of Common Stock redeemed |
| 2,929,569 |
| |||
Directors’ fees and expenses payable |
| 22,492 |
| |||
Other accrued expenses |
|
|
|
| 100,185 |
|
|
|
|
|
| 65,141,931 |
|
Net Assets ($) |
|
| 691,396,911 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 736,670,094 |
|
Total distributable earnings (loss) |
|
|
|
| (45,273,183) |
|
Net Assets ($) |
|
| 691,396,911 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 34,599,733 | 27,185,637 | 171,202,486 | 458,409,055 |
|
Shares Outstanding | 2,317,494 | 1,961,905 | 11,166,021 | 29,953,916 |
|
Net Asset Value Per Share ($) | 14.93 | 13.86 | 15.33 | 15.30 |
|
|
|
|
|
|
|
See notes to consolidated financial statements. |
|
|
|
|
|
25
CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended April 30, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Interest |
|
| 6,884,562 |
| ||
Dividends: |
| |||||
Unaffiliated issuers |
|
| 73,885 |
| ||
Affiliated issuers |
|
| 361,693 |
| ||
Total Income |
|
| 7,320,140 |
| ||
Expenses: |
|
|
|
| ||
Management fee—Note 3(a) |
|
| 4,752,377 |
| ||
Subsidiary management fee—Note 3(a) |
|
| 282,643 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 232,762 |
| ||
Distribution fees—Note 3(b) |
|
| 111,668 |
| ||
Professional fees |
|
| 66,819 |
| ||
Directors’ fees and expenses—Note 3(d) |
|
| 44,999 |
| ||
Registration fees |
|
| 41,441 |
| ||
Prospectus and shareholders’ reports |
|
| 19,366 |
| ||
Custodian fees—Note 3(c) |
|
| 8,975 |
| ||
Loan commitment fees—Note 2 |
|
| 8,582 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 6,707 |
| ||
Miscellaneous |
|
| 62,487 |
| ||
Total Expenses |
|
| 5,638,826 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (376,979) |
| ||
Net Expenses |
|
| 5,261,847 |
| ||
Investment Income—Net |
|
| 2,058,293 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions | (2,677,585) |
| ||||
Net realized gain (loss) on options transactions | (14,156,461) |
| ||||
Net realized gain (loss) on futures | (67,052,727) |
| ||||
Net realized gain (loss) on swap agreements | (65,243) |
| ||||
Net realized gain (loss) on forward foreign currency exchange contracts | 1,162,171 |
| ||||
Net Realized Gain (Loss) |
|
| (82,789,845) |
| ||
Net change in unrealized appreciation (depreciation) on investments | 2,917,040 |
| ||||
Net change in unrealized appreciation (depreciation) on | 1,329,861 |
| ||||
Net change in unrealized appreciation (depreciation) on futures | 31,076,208 |
| ||||
Net change in unrealized appreciation (depreciation) on swap agreements | (5,341) |
| ||||
Net change in unrealized appreciation (depreciation) on | 4,404,283 |
| ||||
Net Change in Unrealized Appreciation (Depreciation) |
|
| 39,722,051 |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (43,067,794) |
| ||
Net (Decrease) in Net Assets Resulting from Operations |
| (41,009,501) |
| |||
|
|
|
|
|
|
|
See notes to consolidated financial statements. |
26
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 2,058,293 |
|
|
| 12,714,872 |
| |
Net realized gain (loss) on investments |
| (82,789,845) |
|
|
| 17,190,700 |
| ||
Net change in unrealized appreciation |
| 39,722,051 |
|
|
| 57,434,901 |
| ||
Net Increase (Decrease) in Net Assets | (41,009,501) |
|
|
| 87,340,473 |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (1,173,298) |
|
|
| (389,197) |
| |
Class C |
|
| (764,108) |
|
|
| (51,213) |
| |
Class I |
|
| (10,458,201) |
|
|
| (5,263,447) |
| |
Class Y |
|
| (18,608,979) |
|
|
| (10,345,880) |
| |
Total Distributions |
|
| (31,004,586) |
|
|
| (16,049,737) |
| |
Capital Stock Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 3,951,993 |
|
|
| 5,503,075 |
| |
Class C |
|
| 617,735 |
|
|
| 795,552 |
| |
Class I |
|
| 30,640,574 |
|
|
| 77,960,434 |
| |
Class Y |
|
| 26,585,739 |
|
|
| 133,085,345 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 1,034,500 |
|
|
| 340,199 |
| |
Class C |
|
| 639,905 |
|
|
| 43,093 |
| |
Class I |
|
| 9,177,640 |
|
|
| 4,729,808 |
| |
Class Y |
|
| 7,468,482 |
|
|
| 3,057,854 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (5,441,878) |
|
|
| (18,108,427) |
| |
Class C |
|
| (3,387,337) |
|
|
| (18,535,150) |
| |
Class I |
|
| (174,477,339) |
|
|
| (255,192,514) |
| |
Class Y |
|
| (93,001,702) |
|
|
| (345,640,713) |
| |
Increase (Decrease) in Net Assets | (196,191,688) |
|
|
| (411,961,444) |
| |||
Total Increase (Decrease) in Net Assets | (268,205,775) |
|
|
| (340,670,708) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 959,602,686 |
|
|
| 1,300,273,394 |
| |
End of Period |
|
| 691,396,911 |
|
|
| 959,602,686 |
|
27
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class Aa |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 258,377 |
|
|
| 354,311 |
| |
Shares issued for distributions reinvested |
|
| 64,295 |
|
|
| 23,527 |
| |
Shares redeemed |
|
| (347,911) |
|
|
| (1,169,750) |
| |
Net Increase (Decrease) in Shares Outstanding | (25,239) |
|
|
| (791,912) |
| |||
Class Ca |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 41,906 |
|
|
| 54,807 |
| |
Shares issued for distributions reinvested |
|
| 42,746 |
|
|
| 3,199 |
| |
Shares redeemed |
|
| (232,988) |
|
|
| (1,292,189) |
| |
Net Increase (Decrease) in Shares Outstanding | (148,336) |
|
|
| (1,234,183) |
| |||
Class Ia |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 1,887,789 |
|
|
| 4,916,538 |
| |
Shares issued for distributions reinvested |
|
| 555,884 |
|
|
| 319,166 |
| |
Shares redeemed |
| �� | (10,717,870) |
|
|
| (16,279,153) |
| |
Net Increase (Decrease) in Shares Outstanding | (8,274,197) |
|
|
| (11,043,449) |
| |||
Class Ya |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 1,639,367 |
|
|
| 8,463,341 |
| |
Shares issued for distributions reinvested |
|
| 453,460 |
|
|
| 206,751 |
| |
Shares redeemed |
|
| (5,989,470) |
|
|
| (22,048,505) |
| |
Net Increase (Decrease) in Shares Outstanding | (3,896,643) |
|
|
| (13,378,413) |
| |||
|
|
|
|
|
|
|
|
|
|
aDuring the period endedApril 30, 2020, 565,465 Class Y shares representing $9,109,013 were exchanged for 564,495 Class I share. During the period ended October 31, 2019, 930 Class A shares representing $14,894 were exchanged for 906 Class I shares, 807 Class C shares representing $11,287 were automatically converted to 747 Class A shares and 785,918 Class Y shares representing $12,530,699 were exchanged for 785,383 Class I share. | |||||||||
See notes to consolidated financial statements. |
28
CONSOLIDATED FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||
April 30, 2020 | Year Ended October 31, | |||||
Class A Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 |
Per Share Data ($): | ||||||
Net asset value, | 16.26 | 15.08 | 16.63 | 15.73 | 15.63 | 15.36 |
Investment Operations: | ||||||
Investment income (loss)—neta | .02 | .15 | .08 | (.09) | (.17) | (.22) |
Net realized and unrealized | (.85) | 1.16 | (.81) | 1.02 | .27 | .49b |
Total from | (.83) | 1.31 | (.73) | .93 | .10 | .27 |
Distributions: | ||||||
Dividends from | (.17) | (.13) | – | – | – | – |
Dividends from | (.33) | – | (.82) | (.03) | – | – |
Total Distributions | (.50) | (.13) | (.82) | (.03) | – | – |
Net asset value, end of period | 14.93 | 16.26 | 15.08 | 16.63 | 15.73 | 15.63 |
Total Return (%)c | (5.30)d | 8.82 | (4.63) | 5.92 | .70 | 1.69 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.57e | 1.55 | 1.59 | 1.55 | 1.51 | 1.49 |
Ratio of net expenses | 1.44e | 1.44 | 1.44 | 1.47 | 1.50 | 1.49 |
Ratio of net investment income (loss) to average net assets | .24e | .96 | .48 | (.56) | (1.13) | (1.41) |
Portfolio Turnover Rate | 95.28d | 26.17 | 17.55 | 69.80 | 10.66 | 165.55 |
Net Assets, | 34,600 | 38,100 | 47,280 | 73,458 | 205,832 | 268,600 |
a Based on average shares outstanding.
b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
See notes to consolidated financial statements.
29
CONSOLIDATED FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||
April 30, 2020 | Year Ended October 31, | |||||
Class C Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 |
Per Share Data ($): | ||||||
Net asset value, | 15.06 | 13.96 | 15.56 | 14.83 | 14.85 | 14.70 |
Investment Operations: | ||||||
Investment income (loss)—neta | (.04) | .03 | (.04) | (.19) | (.27) | (.33) |
Net realized and unrealized | (.79) | 1.09 | (.74) | .95 | .25 | .48b |
Total from | (.83) | 1.12 | (.78) | .76 | (.02) | .15 |
Distributions: | ||||||
Dividends from | (.04) | (.02) | – | – | – | – |
Dividends from | (.33) | – | (.82) | (.03) | – | – |
Total Distributions | (.37) | (.02) | (.82) | (.03) | – | – |
Net asset value, end of period | 13.86 | 15.06 | 13.96 | 15.56 | 14.83 | 14.85 |
Total Return (%)c | (5.74)d | 8.01 | (5.30) | 5.14 | (.07) | .95 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 2.32e | 2.29 | 2.31 | 2.32 | 2.26 | 2.24 |
Ratio of net expenses | 2.19e | 2.19 | 2.19 | 2.23 | 2.25 | 2.24 |
Ratio of net investment income (loss) to average net assets | (.51)e | .22 | (.27) | (1.26) | (1.82) | (2.16) |
Portfolio Turnover Rate | 95.28d | 26.17 | 17.55 | 69.80 | 10.66 | 165.55 |
Net Assets, | 27,186 | 31,771 | 46,681 | 80,834 | 131,341 | 141,904 |
a Based on average shares outstanding.
b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
See notes to consolidated financial statements.
30
Six Months Ended | ||||||
April 30, 2020 | Year Ended October 31, | |||||
Class I Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 |
Per Share Data ($): | ||||||
Net asset value, | 16.71 | 15.51 | 17.04 | 16.08 | 15.93 | 15.61 |
Investment Operations: | ||||||
Investment income (loss)—neta | .04 | .19 | .12 | (.03) | (.13) | (.19) |
Net realized and unrealized | (.87) | 1.20 | (.83) | 1.02 | .28 | .51b |
Total from | (.83) | 1.39 | (.71) | .99 | .15 | .32 |
Distributions: | ||||||
Dividends from | (.22) | (.19) | – | – | – | – |
Dividends from | (.33) | – | (.82) | (.03) | – | – |
Total Distributions | (.55) | (.19) | (.82) | (.03) | – | – |
Net asset value, end of period | 15.33 | 16.71 | 15.51 | 17.04 | 16.08 | 15.93 |
Total Return (%) | (5.22)c | 9.04 | (4.33) | 6.17 | 1.01 | 1.92 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.31d | 1.29 | 1.31 | 1.30 | 1.25 | 1.22 |
Ratio of net expenses | 1.19d | 1.19 | 1.19 | 1.21 | 1.24 | 1.22 |
Ratio of net investment income (loss) to average net assets | .50d | 1.20 | .73 | (.17) | (.86) | (1.15) |
Portfolio Turnover Rate | 95.28c | 26.17 | 17.55 | 69.80 | 10.66 | 165.55 |
Net Assets, | 171,202 | 324,848 | 472,940 | 653,752 | 446,643 | 489,361 |
a Based on average shares outstanding.
b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.
c Not annualized.
d Annualized.
See notes to consolidated financial statements.
31
CONSOLIDATED FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||
April 30, 2020 | Year Ended October 31, | |||||
Class Y Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 |
Per Share Data ($): | ||||||
Net asset value, | 16.69 | 15.53 | 17.04 | 16.07 | 15.91 | 15.59 |
Investment Operations: | ||||||
Investment income (loss)—neta | .04 | .20 | .13 | (.02) | (.11) | (.15) |
Net realized and unrealized | (.87) | 1.19 | (.82) | 1.02 | .27 | .47b |
Total from | (.83) | 1.39 | (.69) | 1.00 | .16 | .32 |
Distributions: | ||||||
Dividends from | (.23) | (.23) | – | – | – | – |
Dividends from | (.33) | – | (.82) | (.03) | – | – |
Total Distributions | (.56) | (.23) | (.82) | (.03) | – | – |
Net asset value, end of period | 15.30 | 16.69 | 15.53 | 17.04 | 16.07 | 15.91 |
Total Return (%) | (5.22)c | 9.13 | (4.27) | 6.23 | 1.01 | 2.05 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.23d | 1.22 | 1.21 | 1.21 | 1.18 | 1.14 |
Ratio of net expenses | 1.16d | 1.15 | 1.14 | 1.15 | 1.16 | 1.14 |
Ratio of net investment income (loss) to average net assets | .54d | 1.25 | .78 | (.14) | (.68) | (.96) |
Portfolio Turnover Rate | 95.28c | 26.17 | 17.55 | 69.80 | 10.66 | 165.55 |
Net Assets, | 458,409 | 564,884 | 733,373 | 787,909 | 655,662 | 483,043 |
a Based on average shares outstanding.
b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.
c Not annualized.
d Annualized.
See notes to consolidated financial statements.
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Dynamic Total Return Fund (the “fund”) is a separate non-diversified series of BNY Mellon Advantage Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering nine series, including the fund. The fund’s investment objective is to seek 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. Mellon Investments Corporation, a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser, serves as the fund’s sub-investment adviser.
The Company’s Board of Directors (the “Board”) approved, effective December 31, 2019 (the “Effective Date”), the termination of the fund’s authorized Class T shares. Prior to the Effective Date, the fund did not offer such Class T shares for purchase. The authorized Class T shares were reallocated to authorized Class I and Class Y shares, increasing authorized Class I shares from 100 million to 150 million and increasing authorized Class Y shares from 100 million to 150 million.
The fund may invest in certain commodities through its investment in DTR Commodity Fund Ltd., (the “Subsidiary”), a wholly-owned and controlled subsidiary of the fund organized under the laws of the Cayman Islands. The Subsidiary has the ability to invest in commodities and securities consistent with the investment objective of the fund. The Adviser serves as investment adviser for the Subsidiary, the Sub-Adviser serves as the Subsidiary’s sub-investment advisor and Citibank N.A. serves as the Subsidiary’s custodian. The financial statements have been consolidated and include the accounts of the fund and the Subsidiary. Accordingly, all inter-company transactions and balances have been eliminated. A subscription agreement was entered into between the fund and the Subsidiary, comprising the entire issued share capital of the Subsidiary, with the intent that the fund will remain the sole shareholder and retain all rights. Under the Amended and Restated Memorandum and Articles of Association, shares issued by the Subsidiary confer upon a shareholder the right to receive notice of, to attend and to vote at general meetings of the Subsidiary and shall confer upon the shareholder rights in a winding-up or repayment of capital and the right to participate in the profits or assets of the Subsidiary. The following summarizes the structure and relationship of the Subsidiary at April 30, 2020:
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
Subsidiary Activity | |||
Consolidated fund Net Assets ($) | 691,396,911 | ||
Subsidiary Percentage of fund Net Assets | 2.97% | ||
Subsidiary Financial Statement Information ($) | |||
Total assets | 20,623,205 | ||
Total liabilities | 64,165 | ||
Net assets | 20,559,040 | ||
Total income | 350,943 | ||
Investment income—net | 46,164 | ||
Net realized gain (loss) | (5,289,569) | ||
Net change in unrealized appreciation (depreciation) | 1,173,750 | ||
Net increase (decrease) in net assets resulting from operations | (4,069,655) |
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 (200 million shares authorized), Class C (100 million shares authorized), Class I (150 million shares authorized) and Class Y (150 million shares authorized). Class A shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares ten years after the date of purchase, without the imposition of a sales charge. Class I and Class Y shares are sold at net asset value per share generally to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund 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
34
estimates and assumptions. Actual results could differ from those estimates.
The Companyenters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in debt securities excluding short-term investments (other than U.S. Treasury Bills), futures, options and forward foreign currency exchange contracts (“forward contracts”) are valued each business day by one or more independent pricing services (each, a “Service”) approved by
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
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 the Service are valued at the mean between the quoted bid prices (as obtained by the 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.
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. U.S. Treasury Bills are valued at the mean price between quoted bid prices and asked prices by the Service approved by the Board. 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 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 Board.
36
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.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Futures and options, which are traded on an exchange, are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day and are generally categorized within Level 1 of the fair value hierarchy. Options traded over-the-counter (“OTC”) are valued at the mean between the bid and asked price and are generally categorized within Level 2 of the fair value hierarchy. Forward contracts are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of April 30, 2020in valuing the fund’s investments:
Level 1 - Unadjusted Quoted Prices | Level 2 - | Level 3 - | Total | |
Assets ($) | ||||
Investments in Securities:† | ||||
Corporate Bonds | – | 69,842,500 | – | 69,842,500 |
Equity Securities-Common Stocks | 534 | – | – | 534 |
Exchange-Traded Funds | 62,094,978 | – | 62,094,978 | |
Investment Companies | 75,216,076 | – | – | 75,216,076 |
U.S. Treasury Securities | – | 490,777,601 | – | 490,777,601 |
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
Level 1 - Unadjusted Quoted Prices | Level 2 - | Level 3 - | Total | ||
Assets ($) | |||||
Other Financial Instruments: | |||||
Forward Foreign Currency Exchange Contracts†† | – | 14,692,619 | – | 14,692,619 | |
Futures†† | 43,288,540 | – | – | 43,288,540 | |
Options Purchased | 4,632,390 | – | – | 4,632,390 | |
Liabilities ($) | |||||
Other Financial Instruments: | |||||
Forward Foreign Currency Exchange Contracts†† | – | (16,194,135) | – | (16,194,135) | |
Futures†† | (3,460,005) | – | – | (3,460,005) | |
Options Written | (7,969,300) | – | – | (7,969,300) |
† See Consolidated Statement of Investments for additional detailed categorizations, if any.
†† Amount shown represents unrealized appreciation (depreciation) at period end, but only variation margin on exchanged traded and centrally cleared derivatives, if any, are reported in the Statement of Assets and Liabilities.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
(c)Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest
38
income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political, economic developments and public health conditions. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
The fund’s investments in commodity-linked financial derivatives instruments may subject the fund to greater market price volatility than investments in traditional securities. The value of commodity-linked financial derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments.
(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
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
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.
The Subsidiary is classified as a controlled foreign corporation under Subchapter N of the Code. Therefore, the fund is required to increase its taxable income by its share of the Subsidiary’s income. Net investment losses of the Subsidiary cannot be deducted by the fund in the current period nor carried forward to offset taxable income in future periods.
As of and during the period ended April 30, 2020, 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 Consolidated Statement of Operations. During the period ended April 30, 2020, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended October 31, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2019 was as follows: ordinary income $16,049,737. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $927 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”), a subsidiary of BNY Mellon and an affiliate of the Adviser, 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 $747
40
million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $180 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. Prior to March 11, 2020, the Citibank Credit Facility was $1.030 billion with Tranche A available in an amount equal to $830 million and Tranche B available in an amount equal to $200 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended April 30, 2020, the fund did not borrow under the Facilities.
NOTE 3— Management Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates:
(a)The Adviser has entered into separate management agreements with the fund and the Subsidiary pursuant to which the Adviser receives a management fee computed at the annual rate of 1.10% of the value of the average daily net assets of each of the fund and the Subsidiary which is payable monthly. In addition, the Adviser has contractually agreed for as long as the fund invests in the Subsidiary, to waive the management fee it receives from the fund in an amount equal to the management fee paid to the Adviser by the Subsidiary. The reduction in expenses, pursuant to the undertaking, amounted to $282,643 during the period ended April 30, 2020.
In addition, the Adviser has contractually agreed, from November 1, 2019 through February 28, 2021, 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 1.19% of the value of the fund’s average daily net assets. On or after February 28, 2021, the Adviser may terminate this expense limitation at any time. The reduction in expenses, pursuant to the undertaking, amounted to $94,336 during the period ended April 30, 2020.
Pursuant to separate sub-investment advisory agreements between the Adviser and the Sub-Adviser with respect to the fund and the Subsidiary, the Adviser pays the Sub-Adviser an annual fee of .65% of the value of the average daily net assets of each of the fund and the Subsidiary which is payable monthly.
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
During the period ended April 30, 2020, the Distributor retained $1,497 from commissions earned on sales of the fund’s Class A shares and $49 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. During the period ended April 30, 2020, Class C shares were charged $111,668 pursuant to the Distribution Plan.
(c)Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2020, Class A and Class C shares were charged $45,885and $37,223, 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 an expense offset in the Consolidated Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an 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 Consolidated Statements 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 for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended April 30, 2020, the fund was charged $5,926 for transfer agency services. These fees are included in Shareholder servicing costs in the Consolidated 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
42
determined based on net assets, geographic region and transaction activity. During the period ended April 30, 2020, the fund was charged $8,975 pursuant to the custody agreement.
During the period ended April 30, 2020, the fund was charged $6,707 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 Consolidated Statement of Assets and Liabilities consist of: management fees of $643,923, Distribution Plan fees of $16,595, Shareholder Services Plan fees of $12,543, custodian fees of $6,140, Chief Compliance Officer fees of $4,438 and transfer agency fees of $2,030, which are offset against an expense reimbursement currently in effect in the amount of $38,821.
(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, futures, options transactions, forward contracts and swap agreements, during the period ended April 30, 2020, amounted to $137,125,647 and $106,606,634, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.
Each type of derivative instrument that was held by the fund during the period ended April 30, 2020 is discussed below.
Futures:In the normal course of pursuing its investment objective, the fund is exposed to market risk, including equity price risk, interest rate risk and commodity risk,as a result of changes in value of underlying financial instruments. The fund invests in futures in order to manage its exposure to
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
or protect against changes in the market. A futures contract represents a commitment for the future purchase or a sale of an asset at a specified date. Upon entering into such contracts, these investments require initial margin deposits with a counterparty, which consist of cash or cash equivalents. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses which are recorded in the Consolidated Statement of Operations. When the contracts are closed, the fund recognizes a realized gain or loss which is reflected in the Consolidated Statement of Operations. There is minimal counterparty credit risk to the fund with futures since they are exchange traded, and the exchange guarantees the futures against default. Futures open at April 30, 2020 are set forth in the Consolidated Statement of Futures.
Options Transactions: The fund purchases and writes (sells) put and call options to hedge against changes in the values of equities or as a substitute for an investment. The fund is subject to market risk in the course of pursuing its investment objectives through its investments in options contracts. A call option gives the purchaser of the option the right (but not the obligation) to buy, and obligates the writer to sell, the underlying financial instrument at the exercise price at any time during the option period, or at a specified date. Conversely, a put option gives the purchaser of the option the right (but not the obligation) to sell, and obligates the writer to buy the underlying financial instrument at the exercise price at any time during the option period, or at a specified date.
As a writer of call options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument decreases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument increases between those dates.The maximum payout for those contracts is limited to the number of call option contracts written and the related strike prices, respectively.
As a writer of put options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument increases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument decreases between those dates. The
44
maximum payout for those contracts is limited to the number of put option contracts written and the related strike prices, respectively.
As a writer of an option, the fund has no control over whether the underlying financial instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the financial instrument underlying the written option. There is a risk of loss from a change in value of such options which may exceed the related premiums received. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. The Consolidated Statement of Operations reflects any unrealized gains or losses which occurred during the period as well as any realized gains or losses which occurred upon the expiration or closing of the option transaction.Options written open at April 30, 2020 are set forth in Consolidated Statement of Options Written.
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 Consolidated Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. Forward contracts open at April 30, 2020 are set forth in the Consolidated Statement of Forward Foreign Currency Exchange Contracts.
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
Swap Agreements:The fund enters into swap agreements to exchange the interest rate on, or return generated by, one nominal instrument for the return generated by another nominal instrument. Swap agreements are privately negotiated in the OTC market or centrally cleared. The fund enters into these agreements to hedge certain market or interest rate risks, to manage the interest rate sensitivity (sometimes called duration) of fixed income securities, to provide a substitute for purchasing or selling particular securities or to increase potential returns.
For OTC swaps, the fund accrues for interim payments on a daily basis, with the net amount recorded within unrealized appreciation (depreciation) on swap agreements in the Consolidated Statement of Assets and Liabilities. Once the interim payments are settled in cash, the net amount is recorded as a realized gain (loss) on swaps, in addition to realized gain (loss) recorded upon the termination of swap agreements in the Consolidated Statement of Operations. Upfront payments made and/or received by the fund, are recorded as an asset and/or liability in the Consolidated Statement of Assets and Liabilities and are recorded as a realized gain or loss ratably over the agreement’s term/event with the exception of forward starting interest rate swaps which are recorded as realized gains or losses on the termination date.
Upon entering into centrally cleared swap agreements, an initial margin deposit is required with a counterparty, which consists of cash or cash equivalents. The amount of these deposits is determined by the exchange on which the agreement is traded and is subject to change. The change in valuation of centrally cleared swaps is recorded as a receivable or payable for variation margin in the Consolidated Statement of Assets and Liabilities. Payments received from (paid to) the counterparty, including upon termination, are recorded as realized gain (loss) in the Consolidated Statement of Operations.
Fluctuations in the value of swap agreements are recorded for financial statement purposes as unrealized appreciation or depreciation on swap agreements.
Credit Default Swaps: Credit default swaps involve commitments to pay a fixed interest rate in exchange for payment if a credit event affecting a third party (the referenced obligation or index) occurs. Credit events may include a failure to pay interest or principal, bankruptcy, or restructuring. The fund enters into these agreements to manage its exposure to the market or certain sectors of the market, to reduce its risk exposure to defaults of corporate and sovereign issuers, or to create exposure to corporate or sovereign issuers to which it is not otherwise exposed. For those credit default swaps in which the fund is paying a fixed rate, the fund
46
is buying credit protection on the instrument. In the event of a credit event, the fund would receive the full notional amount for the reference obligation. For those credit default swaps in which the fund is receiving a fixed rate, the fund is selling credit protection on the underlying instrument. The maximum payouts for these agreements are limited to the notional amount of each swap. Credit default swaps may involve greater risks than if the fund had invested in the reference obligation directly and are subject to general market risk, liquidity risk, counterparty risk and credit risk. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. At April 30, 2020, there were no credit default swap agreements outstanding.
The following tables show the fund’s exposure to different types of market risk as it relates to the Consolidated Statement of Assets and Liabilities and the Consolidated Statement of Operations, respectively.
Fair value of derivative instruments as of April 30, 2020 is shown below:
|
| Derivative |
|
|
| Derivative |
|
Interest rate risk | 6,004,357 | 1,2 | Interest rate risk | (10,731,123) | 1,3 | ||
Equity risk | 41,143,845 | 1 | Equity risk | (243,898) | 1 | ||
Foreign exchange risk | 14,692,619 | 4 | Foreign exchange risk | (16,194,135) | 4 | ||
Commodity risk | 772,728 | 1 | Commodity risk | (454,284) | 1 | ||
Gross fair value of | 62,613,549 |
|
|
| (27,623,440) |
| |
|
|
|
|
|
|
| |
Consolidated Statement of Assets and Liabilities location: |
| ||||||
1Includes cumulative appreciation (depreciation) on futures as reported in the Consolidated Statement of Futures, but only the unpaid variation margin is reported in the Consolidated Statement of Assets and Liabilities. | |||||||
2Options purchased are included in Investments in securities—Unaffiliated issuers, at value. | |||||||
3Outstanding options written, at value. | |||||||
4Unrealized appreciation (depreciation) on forward foreign currency exchange contracts. |
47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
The effect of derivative instruments in the Consolidated Statement of Operations during the period ended April 30, 2020 is shown below:
Amount of realized gain (loss) on derivatives recognized in income ($) |
| ||||||||||
Underlying | Futures | 1 | Options | 2 | Forward | 3 | Swap | 4 | Total |
| |
Interest rate | 19,884,269 |
| - |
| - |
| - |
| 19,884,269 |
| |
Equity | (81,642,104) |
| (14,156,461) |
| - |
| - |
| (95,798,565) |
| |
Foreign | - |
| - |
| 1,162,171 |
| - |
| 1,162,171 |
| |
Credit | - |
| - |
| - |
| (65,243) |
| (65,243) |
| |
Commodity | (5,294,892) |
| - |
| - |
| - |
| (5,294,892) |
| |
Total | (67,052,727) |
| (14,156,461) |
| 1,162,171 |
| (65,243) |
| (80,112,260) |
| |
|
|
|
|
|
|
|
|
|
|
| |
Net change in unrealized appreciation (depreciation) |
| ||||||||||
Underlying | Futures | 5 | Options | 6 | Forward | 7 | Swap | 8 | Total |
| |
Interest rate | (6,551,653) |
| 1,037,946 |
| - |
| - |
| (5,513,707) |
| |
Equity | 36,421,290 |
| 291,915 |
| - |
| - |
| 36,713,205 |
| |
Foreign | - |
| - |
| 4,404,283 |
| - |
| 4,404,283 |
| |
Credit | - |
| - |
| - |
| (5,341) |
| (5,341) |
| |
Commodity | 1,206,571 |
| - |
| - |
| - |
| 1,206,571 |
| |
Total | 31,076,208 |
| 1,329,861 |
| 4,404,283 |
| (5,341) |
| 36,805,011 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Consolidated Statement of Operations location: |
| |||||||||
1 | Net realized gain (loss) on futures. | ||||||||||
2 | Net realized gain (loss) on options transactions. | ||||||||||
3 | Net realized gain (loss) on forward foreign currency exchange contracts. | ||||||||||
4 | Net realized gain (loss) on swap agreements. | ||||||||||
5 | Net change in unrealized appreciation (depreciation) on futures. | ||||||||||
6 | Net change in unrealized appreciation (depreciation) on options transactions. | ||||||||||
7 | Net change in unrealized appreciation (depreciation) on forward foreign currency exchange contracts. | ||||||||||
8 | Net change in unrealized appreciation (depreciation) on swap agreements. |
The provisions of ASC Topic 210 “Disclosures about Offsetting Assets and Liabilities” require disclosure on the offsetting of financial assets and liabilities. These disclosures are required for certain investments, including derivative financial instruments subject to Master Agreements which are eligible for offsetting in the Consolidated Statement of Assets and Liabilities and require the fund to disclose both gross and net information with respect to such investments. For financial reporting purposes, the fund does not offset derivative assets and derivative liabilities that are subject to Master Agreements in the Consolidated Statement of Assets and Liabilities.
48
At April 30, 2020, derivative assets and liabilities (by type) on a gross basis are as follows:
Derivative Financial Instruments: |
| Assets ($) |
| Liabilities ($) |
|
Futures |
| 43,288,540 |
| (3,460,005) |
|
Options |
| 4,632,390 |
| (7,969,300) |
|
Forward contracts |
| 14,692,619 |
| (16,194,135) |
|
Total gross amount of derivative |
|
|
|
|
|
assets and liabilities in the |
|
|
|
|
|
Consolidated Statement of |
| 62,613,549 |
| (27,623,440) |
|
Derivatives not subject to |
|
|
|
|
|
Master Agreements |
| (47,920,930) |
| 11,429,305 |
|
Total gross amount of assets |
|
|
|
|
|
and liabilities subject to |
|
|
|
|
|
Master Agreements |
| 14,692,619 |
| (16,194,135) |
|
The following tables present derivative assets and liabilities net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of April 30, 2020:†
|
|
| Financial |
|
|
|
|
|
| Instruments |
|
|
|
|
|
| and Derivatives |
|
|
|
| Gross Amount of |
| Available | Collateral |
| Net Amount of |
Counterparty | Assets ($) | 1 | for Offset ($) | Received ($) | 2 | Assets ($) |
Bank of Montreal | 2,204,073 |
| (2,112,497) | (91,576) |
| - |
Citigroup | 7,200,442 |
| (7,200,442) | - |
| - |
Goldman Sachs | 5,288,104 |
| (5,288,104) | - |
| - |
Total | 14,692,619 |
| (14,601,043) | (91,576) |
| - |
|
|
|
|
|
|
|
|
|
| Financial |
|
|
|
|
|
| Instruments |
|
|
|
|
|
| and Derivatives |
|
|
|
| Gross Amount of |
| Available | Collateral |
| Net Amount of |
Counterparty | Liabilities ($) | 1 | for Offset ($) | Pledged ($) | 2 | Liabilities ($) |
Bank of Montreal | (2,112,497) |
| 2,112,497 | - |
| - |
Citigroup | (8,224,304) |
| 7,200,442 | 1,023,862 |
| - |
Goldman Sachs | (5,857,334) |
| 5,288,104 | 569,230 |
| - |
Total | (16,194,135) |
| 14,601,043 | 1,593,092 |
| - |
|
|
|
|
|
|
|
1 Absent a default event or early termination, OTC derivative assets and liabilities are presented at gross amounts and are not offset in the Consolidated Statement of Assets and Liabilities. | ||||||
2 In some instances, the actual collateral received and/or pledged may be more than the amount shown due to over collateralization. |
49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
The following summarizes the average market value of derivatives outstanding duringthe period ended April 30, 2020:
|
| Average Market Value ($) |
Equity futures |
| 510,787,107 |
Equity options contracts |
| 10,199,145 |
Interest rate futures |
| 1,130,448,757 |
Forward contracts |
| 1,370,240,464 |
Commodity futures |
| 79,746,647 |
|
|
|
The following summarizes the average notional value of swap agreements outstanding during the period ended April 30, 2020:
|
| Average Notional Value ($) |
Credit default swap agreements |
| 2,011,786 |
|
|
|
At April 30, 2020, accumulated net unrealized appreciation on investments inclusive of derivative contracts was $42,121,925, consisting of $68,985,169 gross unrealized appreciation and $26,863,244 gross unrealized depreciation.
At April 30, 2020, the cost of investments inclusive of derivative contracts for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Consolidated Statement of Investments).
50
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 February 10-11, 2020, the Board considered the renewalof 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 Mellon Investments Corporation (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 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, which included information comparing (1) the fund’s performance with the performance of a group of institutional alternative global macro funds (the “Performance Group”) and with a broader group of retail and institutional alternative global macro funds (the
51
INFORMATION ABOUT THE RENEWAL OF THE FUND'S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
“Performance Universe”), all for various periods ended December 31, 2019, 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 institutional alternative global macro 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.
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. They also considered that performance generally should be considered over longer periods of time, although it is possible that long-term performance can be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect disproportionately long-term performance. The Board discussed with representatives of the Adviser and/or the Subadviser the results of the comparisons and considered that the fund’s total return performance was at or below the Performance Group median for all periods except the two-year period when it was above the median, and above the Performance Universe median in the one-, two- and ten-year periods and below the median in the three-, four- and five-year periods. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index.
The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser over the fund’s last fiscal year in light of the nature, extent and quality of the management services provided by the Adviser. In addition, the Board also reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year which included reductions for a fee waiver arrangement in place that reduced the investment advisory fee paid to the Adviser. 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 and Expense Universe median actual management fee and the fund’s total expenses were higher than the Expense Group and Expense Universe median total expenses.
Representatives of the Adviser stated that the Adviser has contractually agreed, until February 28, 2021, 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 1.19% of the fund’s average daily net assets.
52
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 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 to the Subadviser in relation to the fee paid 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 considered the expense limitation arrangement and its effect on the profitability of 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 stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect
53
INFORMATION ABOUT THE RENEWAL OF THE FUND'S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
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 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 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.
54
NOTES
55
NOTES
56
NOTES
57
BNY Mellon Dynamic Total Return Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Mellon Investments Corporation
One Boston Place
Boston, MA 02108-4408
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: AVGAX Class C: AVGCX Class I: AVGRX Class Y: AVGYX |
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-mailSend your request toinfo@bnymellon.com
InternetInformation can be viewed online or downloaded atwww.bnymellonim.com/us
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 atwww.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 atwww.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2020 BNY Mellon Securities Corporation |
BNY Mellon Global Dynamic Bond Income Fund
SEMIANNUAL REPORT April 30, 2020 |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.bnymellonim.com/us 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
BNY Mellon Investment Adviser, Inc. | |
With Those of Other Funds | |
in Affiliated Issuers | |
Currency Exchange Contracts | |
of the Fund’s Management and | |
Sub-Investment Advisory Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.
Dear Shareholder:
We are pleased to present this semiannual report for BNY Mellon Global Dynamic Bond Income Fund, covering the six-month period from November 1, 2019 through April 30, 2020. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
Stock markets performed well over the last several months of 2019. Accommodative policies from the U.S. Federal Reserve (the “Fed”), paired with healthy U.S. consumer spending, helped support valuations. Despite periodic investor concern regarding trade relations with China and global growth rates, the rally continued through the end of the calendar year, supported in part by a December announcement that the first phase of a trade deal with China was in process. U.S. equity markets reached new highs during the final months of 2019. However, the euphoria was short-lived, as concerns over the spread of COVID-19 and widespread quarantine roiled markets during the first several months of 2020; stocks posted historic losses in March 2020 but regained some ground in April.
In fixed-income markets, interest rates were heavily influenced by changes in Fed policy and investor concern over COVID-19. As stocks rallied in November and December 2019, Treasury bond prices declined, and rates across much of the yield curve rose until early in 2020, when the threat posed by COVID-19 began to emerge. A flight to quality ensued, and rates fell significantly. March 2020 brought high volatility and risk-asset spread widened. The Fed cut rates twice in March, and the government launched a large stimulus package. In April 2020, bond prices began to recover some of their prior losses.
The near-term outlook for the U.S. will be challenging, as the country continues to face COVID-19. However, we believe that once the economic effects have been mitigated, the economy will rebound. As always, we will monitor relevant data for signs of change. We encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
May 15, 2020
2
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from November 1, 2019 through April 30, 2020, as provided by portfolio managers Paul Brain, Howard Cunningham and Parmeshwar Chadha, of Newton Investment Management Limited (Newton), Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended April 30, 2020, the BNY Mellon Global Dynamic Bond Income Fund Class A shares produced a total return of -2.26%, Class C shares returned
-2.64%, Class I shares returned -2.17%, and Class Y shares returned -2.17%.1 In comparison, the fund’s benchmark, the FTSE One-Month U.S. Treasury Bill Index (the “Index”), produced a total return of 0.66% for the same period.2
Global bond markets posted mixed results during the period, with high-quality developed sovereign debt gaining ground and lower-quality corporate and sovereign debt suffering losses. This was due, in part, to the spread of COVID-19 and resulting economic uncertainty. The fund underperformed the Index, largely due to positions in high-yield corporate and emerging-market sovereign debt, which lost value during the period.
The Fund’s Investment Approach
The fund seeks total return (consisting of income and capital appreciation). To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in bonds and other instruments that provide investment exposure to global bond markets. The fund normally invests opportunistically in bonds and derivatives and other instruments that provide investment exposure to global bond and currency markets, in seeking to produce absolute or real returns across economic cycles. The fund’s investments will be focused globally among the developed- and emerging-capital markets of the world. The fund ordinarily invests in at least three countries, and, at times, may invest a substantial portion of its assets in a single country.
The fund’s portfolio managers employ a dynamic, unconstrained approach in allocating the fund’s assets globally, principally among government bonds, emerging-market sovereign debt, investment-grade and high-yield corporate instruments, and currencies. The fund’s portfolio managers combine a top-down approach, emphasizing economic trends and current investment themes on a global basis, with bottom-up security selection based on fundamental research to allocate the fund’s investments among and within asset classes. In choosing investments, the portfolio managers consider: key trends in global economic variables, such as gross domestic product, inflation, and interest rates; investment themes, such as changing demographics, the impact of new technologies, and the globalization of industries and brands; relative valuations of equity securities, bonds and cash; long-term trends in currency movements; and company fundamentals.
Disease Drives Markets
It was an extraordinary six months for fixed income markets. The period started out with an optimistic tone, with clarity around Brexit and a possible resolution to the U.S./China trade disagreement on the horizon. Investors were looking forward to a new calendar year filled with higher economic growth rates and continued expansion. However, the tone changed as
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
COVID-19 wreaked havoc globally, causing a dramatic decline in economic activity and consequent increase in corporate and emerging-market bond spreads.
Consequently, only the highest quality government bonds ended up delivering positive returns for the six months. The adverse impact was compounded by an oil price collapse as a result of disagreement between OPEC members Saudi Arabia and Russia. There was a partial recovery in riskier bonds in April 2020 as massive monetary and fiscal responses were unleashed by governments and central banks. Nonetheless, overall losses from high yield and emerging markets were significant for the period. High-quality, developed-market sovereign debt outperformed the broader market, while investment-grade corporate debt generally lagged its like-duration sovereign debt counterparts.
High Yield Corporate and Sovereign Debt Constrains Performance
The portfolio’s exposure to high-yield bonds, along with emerging-market sovereign debt, was the biggest source of loss during the period. Although the fund has minimal exposure to the beleaguered energy sector, and very modest commodity exposure, the sell-off has been fairly indiscriminate within the high-yield sector, affecting the valuations of our positions. The fund’s shorter duration positioning and higher rating bias than a typical high-yield index offered only limited protection during the sell-off. Emerging-market government bonds have also been hit hard. Latin American exposures suffered most given their greater reliance on commodities. Specific positions which detracted during the period included local currency debt issued by Colombia, as well as U.S. dollar-denominated debt issued by the countries of Bolivia, Ecuador, Dominican Republic and Paraguay.
Conversely, investment-grade bonds have fared slightly better during the volatility, though they were not completely immune. Spread widening was supported by lower government bond yields, leading to flat performance for the asset class during the period. The only positive contributor to performance during the six months were our holdings in government bonds. Of that, U.S. Treasuries bolstered performance most throughout the period. While the portfolio’s exposure to Australasian bond markets and inflation-linked securities did not work so well in at the height of the sell-off in March 2020, Australasian bond markets did recover strongly in April 2020 as central bank actions helped to placate financial markets.
Anticipating a Challenging Environment
We believe there is currently a tug-of-war between fundamental deterioration of government and corporate balance sheets coupled with massive issuance of new debt on the one hand, and massive central bank buying and investors’ desire to generate yield on the other. We would expect these forces to remain fairly equal over the weeks ahead, resulting in more normal returns, though clearly the pandemic and the policy response to it could engender yet more volatility.
Currently the fund has just over one quarter of its assets invested in high yield securities and nearly one fifth invested in emerging-market sovereigns. Our exposure in high yield is biased towards larger capital structures as well as shorter duration, which we feel will better withstand an economic downturn. In emerging-market debt, we have been selectively adding new issues at an attractive spread in countries with a sound balance sheet. Investment-grade debt is the asset class in which we have been most active and we have been increasing exposure, mainly through new issues, as the asset class was offering a very attractive spread
4
and was underpinned by supportive central bank actions. We plan to continue to maintain our government bond duration in the two-to-three-year range as a downside protection in case the economic recovery is not as swift as expected, and risk assets start to retest the lows set in March 2020.
May 15, 2020
1 Total return includes reinvestment of dividends and any capital gains paid and does not take into consideration the maximum initial sales charge in the case of Class A shares or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Class I and Class Y shares are not subject to any initial or deferred sales charge. The fund’s return reflects the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through February 28, 2021, 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 FTSE One-Month U.S. Treasury Bill Index consists of the last, one-month, Treasury bill month-end rates. The FTSE One-Month U.S. Treasury Bill Index measures return equivalents of yield averages. The instruments are not marked to market. Investors cannot invest directly in any index.
Bonds are subject generally to interest-rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund's exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
High yield bonds are subject to increased credit risk and are considered speculative in terms of the issuer’s perceived ability to continue making interest payments on a timely basis and to repay principal upon maturity.
Foreign bonds are subject to special risks, including exposure to currency fluctuations, changing political and economic conditions, and potentially less liquidity.
Investments in foreign currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedged positions, that the U.S. dollar will decline relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time. A decline in the value of foreign currencies relative to the U.S. dollar will reduce the value of securities held by the fund and denominated in those currencies. The use of leverage may magnify the fund’s gains or losses. For derivatives with a leveraging component, adverse changes in the value or level of the underlying asset can result in a loss that is much greater than the original investment in the derivative.
The fund is non-diversified, which means that the fund may invest a relatively high percentage of its assets in a limited number of issuers. Therefore, the fund’s performance may be more vulnerable to changes in the market value of a single issuer or a group of issuers and more susceptible to risks associated with a single economic, political or regulatory occurrence than a diversified fund.
The fund may at times invest a substantial portion of its assets in a single country.
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.
5
UNDERSTANDING YOUR FUND’S EXPENSES(Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in BNY Mellon Global Dynamic Bond Income Fund from November 1, 2019 to April 30, 2020. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended April 30, 2020 |
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| Class A | Class C | Class I | Class Y |
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Expense paid per $1,000† | $4.38 | $8.39 | $3.20 | $2.85 |
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Ending value (after expenses) | $977.40 | $973.60 | $978.30 | $978.30 |
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COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS(Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended April 30, 2020 |
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| Class A | Class C | Class I | Class Y |
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Expense paid per $1,000† | $4.47 | $8.57 | $3.27 | $2.92 |
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Ending value (after expenses) | $1,020.44 | $1,016.36 | $1,021.63 | $1,021.98 |
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†Expenses are equal to the fund’s annualized expense ratio of .89% for Class A, 1.71% for Class C, .65% for Class I and .58% for Class Y, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS
April 30, 2020 (Unaudited)
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 87.7% | |||||||||
Argentina - .1% | |||||||||
Argentina, Sr. Unscd. Bonds | 6.88 | 4/22/2021 | 610,000 | 177,205 | |||||
Australia - 5.2% | |||||||||
Australia, Sr. Unscd. Bonds, Ser. 144 | AUD | 3.75 | 4/21/2037 | 150,000 | 133,281 | ||||
Australia, Sr. Unscd. Bonds, Ser. 150 | AUD | 3.00 | 3/21/2047 | 3,660,000 | 3,081,782 | ||||
Australia, Sr. Unscd. Bonds, Ser. 25CI | AUD | 3.00 | 9/20/2025 | 1,120,000 | b | 1,053,328 | |||
Commonwealth Bank of Australia, Covered Bonds | 2.13 | 7/22/2020 | 250,000 | 250,818 | |||||
New South Wales Treasury, Govt. Gtd. Notes | AUD | 3.00 | 3/20/2028 | 1,670,000 | 1,232,536 | ||||
Treasury Corp. of Victoria, Govt. Gtd. Notes | AUD | 2.25 | 11/20/2034 | 1,660,000 | 1,125,951 | ||||
6,877,696 | |||||||||
Austria - 1.0% | |||||||||
Austria, Sr. Unscd. Notes | EUR | 3.15 | 6/20/2044 | 160,000 | c | 300,022 | |||
CA Immobilien Anlagen, Sr. Unscd. Notes | EUR | 0.88 | 2/5/2027 | 400,000 | 406,477 | ||||
JBS Investments, Gtd. Notes | 6.25 | 2/5/2023 | 630,000 | 629,093 | |||||
1,335,592 | |||||||||
Azerbaijan - .9% | |||||||||
Azerbaijan, Sr. Unscd. Bonds | 5.13 | 9/1/2029 | 693,000 | 685,754 | |||||
Azerbaijan, Sr. Unscd. Notes | 4.75 | 3/18/2024 | 470,000 | 475,428 | |||||
1,161,182 | |||||||||
Belgium - .2% | |||||||||
Lonza Finance International, Gtd. Notes | EUR | 1.63 | 4/21/2027 | 191,000 | 218,760 | ||||
Bermuda - .2% | |||||||||
Hiscox, Sr. Unscd. Bonds | GBP | 2.00 | 12/14/2022 | 265,000 | 330,232 | ||||
Bolivia - .3% | |||||||||
Bolivian, Sr. Unscd. Notes | 4.50 | 3/20/2028 | 500,000 | 413,555 | |||||
Brazil - .1% | |||||||||
Light Servicos de Eletricidade, Gtd. Notes | 7.25 | 5/3/2023 | 162,000 | 150,022 | |||||
Canada - 3.0% | |||||||||
Bank of Montreal, Covered Bonds | 2.10 | 6/15/2022 | 530,000 | 543,771 | |||||
Bombardier, Sr. Unscd. Notes | 6.13 | 1/15/2023 | 360,000 | c | 259,272 | ||||
British Columbia, Sr. Unscd. Bonds | 2.25 | 6/2/2026 | 676,000 | 724,975 | |||||
British Columbia, Sr. Unscd. Notes | EUR | 0.88 | 10/8/2025 | 328,000 | 378,724 | ||||
Canada Housing Trust, Govt. Gtd. Bonds | CAD | 2.10 | 9/15/2029 | 2,550,000 | c | 2,012,296 | |||
3,919,038 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 87.7% (continued) | |||||||||
Cayman Islands - 1.5% | |||||||||
Agile Group Holdings, Sr. Scd. Bonds | 9.00 | 5/21/2020 | 640,000 | 640,975 | |||||
Country Garden Holdings, Sr. Scd. Bonds | 7.25 | 4/4/2021 | 439,000 | 445,004 | |||||
CSN Islands XI, Gtd. Notes | 6.75 | 1/28/2028 | 329,000 | 216,729 | |||||
Sable International Finance, Sr. Scd. Notes | 5.75 | 9/7/2027 | 476,000 | c | 480,570 | ||||
Trip.com Group, Sr. Unscd. Bonds | 1.00 | 7/1/2020 | 194,000 | 191,788 | |||||
1,975,066 | |||||||||
Colombia - 1.1% | |||||||||
Colombia, Bonds | COP | 6.00 | 4/28/2028 | 4,018,500,000 | 969,168 | ||||
Colombia, Bonds | COP | 7.50 | 8/26/2026 | 1,834,200,000 | 495,742 | ||||
1,464,910 | |||||||||
Costa Rica - .4% | |||||||||
Costa Rica, Sr. Unscd. Notes | 4.25 | 1/26/2023 | 520,000 | 465,296 | |||||
Denmark - .9% | |||||||||
Jyske Realkredit, Covered Bonds, Ser. 321E | DKK | 1.00 | 4/1/2021 | 3,600,000 | 535,115 | ||||
Orsted, Sr. Unscd. Notes | GBP | 4.88 | 1/12/2032 | 390,000 | 656,549 | ||||
1,191,664 | |||||||||
Dominican Republic - .7% | |||||||||
Dominican Republic, Sr. Unscd. Bonds | 7.45 | 4/30/2044 | 420,000 | 384,300 | |||||
Dominican Republic, Sr. Unscd. Bonds | 7.50 | 5/6/2021 | 603,333 | 601,831 | |||||
986,131 | |||||||||
Ecuador - .2% | |||||||||
Ecuador, Sr. Unscd. Notes | 8.88 | 10/23/2027 | 990,000 | 287,110 | |||||
Ethiopia - .4% | |||||||||
Ethiopia, Sr. Unscd. Notes | 6.63 | 12/11/2024 | 600,000 | 523,728 | |||||
Finland - .4% | |||||||||
CRH Finland Services, Gtd. Notes | EUR | 0.88 | 11/5/2023 | 519,000 | 569,599 | ||||
France - 2.2% | |||||||||
Altice France, Sr. Scd. Notes | EUR | 3.38 | 1/15/2028 | 143,000 | 147,697 | ||||
Altice France, Sr. Scd. Notes | 7.38 | 5/1/2026 | 290,000 | c | 304,398 | ||||
Banijay Entertainment, Sr. Scd. Bonds | EUR | 3.50 | 3/1/2025 | 294,000 | 306,157 | ||||
BNP Paribas, Jr. Sub. Notes | 7.38 | 2/19/2169 | 550,000 | 571,695 | |||||
Electricite de France, Jr. Sub. Notes | GBP | 6.00 | 7/29/2168 | 100,000 | 130,237 | ||||
JCDecaux, Sr. Unscd. Notes | EUR | 2.00 | 10/24/2024 | 600,000 | 659,426 | ||||
Loxam, Sr. Scd. Notes | EUR | 2.88 | 4/15/2026 | 580,000 | 573,009 | ||||
Societe Generale, Jr. Sub. Notes | EUR | 6.75 | 4/7/2021 | 243,000 | 267,517 | ||||
2,960,136 |
8
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 87.7% (continued) | |||||||||
Germany - .9% | |||||||||
FMS Wertmanagement, Govt. Gtd. Notes | EUR | 0.38 | 4/29/2030 | 200,000 | 229,937 | ||||
Hella GmbH & Co., Sr. Unscd. Notes | EUR | 1.00 | 5/17/2024 | 388,000 | 422,732 | ||||
Infineon Technologies, Jr. Sub. Bonds | EUR | 3.63 | 4/1/2169 | 200,000 | 202,258 | ||||
Infineon Technologies, Jr. Sub. Notes | EUR | 2.88 | 4/1/2169 | 300,000 | 307,590 | ||||
1,162,517 | |||||||||
Hungary - 1.4% | |||||||||
Hungary, Bonds, Ser. 24/C | HUF | 2.50 | 10/24/2024 | 549,590,000 | 1,794,849 | ||||
India - .8% | |||||||||
GMR Hyderabad International Airport, Sr. Scd. Notes | 4.25 | 10/27/2027 | 401,000 | 323,801 | |||||
Housing Development Finance, Sr. Unscd. Notes | INR | 8.22 | 3/28/2022 | 30,000,000 | 409,375 | ||||
National Highways Authority of India, Sr. Unscd. Bonds | INR | 7.30 | 5/18/2022 | 20,000,000 | 273,212 | ||||
1,006,388 | |||||||||
Indonesia - .9% | |||||||||
Indonesia, Sr. Unscd. Notes | 5.88 | 1/15/2024 | 1,050,000 | 1,157,557 | |||||
Ireland - 1.0% | |||||||||
Allied Irish Banks, Sub. Notes | EUR | 4.13 | 11/26/2025 | 281,000 | 306,342 | ||||
Bank of Ireland Group, Sub. Notes | GBP | 3.13 | 9/19/2027 | 100,000 | 124,029 | ||||
Silverback Finance, Sr. Scd. Bonds | EUR | 3.13 | 2/25/2037 | 300,579 | 349,113 | ||||
Virgin Media Receivables Financing, Sr. Scd. Bonds | GBP | 5.50 | 9/15/2024 | 388,000 | 488,613 | ||||
1,268,097 | |||||||||
Italy - 2.3% | |||||||||
Intesa Sanpaolo, Gtd. Notes | 7.70 | 3/17/2169 | 325,000 | c | 302,476 | ||||
Italy Buoni Poliennali Del Tesoro, Bonds | EUR | 6.50 | 11/1/2027 | 585,333 | 862,887 | ||||
Italy Buoni Poliennali Del Tesoro, Sr. Unscd. Bonds | EUR | 1.85 | 7/1/2025 | 600,000 | c | 676,568 | |||
Telecom Italia, Sr. Unscd. Notes | 5.30 | 5/30/2024 | 200,000 | c | 209,248 | ||||
UniCredit, Jr. Sub. Bonds | 8.00 | 6/3/2168 | 560,000 | 510,893 | |||||
UniCredit, Jr. Sub. Notes | EUR | 3.88 | 6/3/2168 | 600,000 | 474,259 | ||||
3,036,331 | |||||||||
Japan - .8% | |||||||||
Japan, Bonds, Ser. 23 | JPY | 0.10 | 3/10/2028 | 110,105,600 | b | 1,020,361 | |||
Jersey - .4% | |||||||||
CPUK Finance, Scd. Bonds | GBP | 4.25 | 8/28/2022 | 420,000 | 473,111 | ||||
Luxembourg - 3.0% | |||||||||
4Finance, Gtd. Notes | 10.75 | 5/1/2022 | 200,000 | 137,026 | |||||
Altice Financing, Sr. Scd. Bonds | EUR | 3.00 | 1/15/2028 | 340,000 | 343,005 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 87.7% (continued) | |||||||||
Luxembourg - 3.0% (continued) | |||||||||
AnaCap Financial Europe, Sr. Scd. Notes, 3 Month EURIBOR +5.00% @ Floor | EUR | 5.00 | 8/1/2024 | 400,000 | d | 325,569 | |||
B&M European Value Retail, Sr. Scd. Notes | GBP | 4.13 | 2/1/2022 | 460,000 | 558,019 | ||||
Cirsa Finance International, Sr. Scd. Bonds | EUR | 4.75 | 5/22/2025 | 332,000 | 289,249 | ||||
DH Europe Finance II, Gtd. Bonds | EUR | 0.45 | 3/18/2028 | 193,000 | 205,487 | ||||
DH Europe Finance II, Gtd. Notes | 2.20 | 11/15/2024 | 111,000 | 114,137 | |||||
Matterhorn Telecom, Sr. Scd. Notes | EUR | 3.13 | 9/15/2026 | 339,000 | 365,159 | ||||
Millicom International Cellular, Sr. Unscd. Notes | 6.63 | 10/15/2026 | 220,000 | 224,026 | |||||
SELP Finance, Gtd. Bonds | EUR | 1.25 | 10/25/2023 | 535,000 | 583,424 | ||||
Summer BC Holdco B, Sr. Scd. Bonds | EUR | 5.75 | 10/31/2026 | 536,000 | 524,027 | ||||
Whirlpool EMEA Finance, Gtd. Notes | EUR | 0.50 | 2/20/2028 | 270,000 | 273,559 | ||||
3,942,687 | |||||||||
Malaysia - 1.0% | |||||||||
Malaysia, Bonds, Ser. 119 | MYR | 3.91 | 7/15/2026 | 5,073,000 | 1,257,621 | ||||
Mexico - 2.5% | |||||||||
Fomento Economico Mexicano, Sr. Unscd. Bonds | EUR | 1.75 | 3/20/2023 | 250,000 | 273,349 | ||||
Mexican Bonos, Bonds, Ser. M20 | MXN | 7.50 | 6/3/2027 | 16,430,000 | 732,345 | ||||
Mexican Bonos, Sr. Unscd. Bonds, Ser. M20 | MXN | 8.50 | 5/31/2029 | 20,950,000 | 982,175 | ||||
Mexico, Sr. Unscd. Notes | 3.90 | 4/27/2025 | 963,000 | 975,037 | |||||
Sigma Alimentos, Gtd. Bonds | EUR | 2.63 | 2/7/2024 | 276,000 | 301,435 | ||||
3,264,341 | |||||||||
Netherlands - 3.2% | |||||||||
IHS Netherlands Holdco, Gtd. Notes | 7.13 | 3/18/2025 | 202,000 | 185,840 | |||||
ING Bank, Covered Notes | EUR | 0.75 | 2/18/2029 | 600,000 | 698,411 | ||||
ING Groep, Jr. Sub. Bonds | 6.75 | 4/16/2169 | 570,000 | 561,667 | |||||
Petrobras Global Finance, Gtd. Notes | 6.90 | 3/19/2049 | 315,000 | 307,912 | |||||
Shell International Finance, Gtd. Notes | EUR | 1.13 | 4/7/2024 | 420,000 | 471,516 | ||||
Shell International Finance, Gtd. Notes, 3 Month LIBOR +.45% | 2.18 | 5/11/2020 | 287,000 | d | 287,009 | ||||
Sigma Finance Netherlands, Gtd. Notes | 4.88 | 3/27/2028 | 400,000 | 406,844 | |||||
Telefonica Europe, Gtd. Notes | EUR | 4.38 | 12/14/2024 | 400,000 | 447,251 | ||||
United Group, Sr. Scd. Notes | EUR | 4.88 | 7/1/2024 | 137,000 | 148,069 | ||||
United Group, Sr. Scd. Notes, 3 Month EURIBOR +4.13% @ Floor | EUR | 4.13 | 5/15/2025 | 190,000 | d | 198,826 | |||
Vonovia Finance, Gtd. Notes, Ser. DIP | EUR | 1.50 | 3/31/2025 | 400,000 | 456,350 | ||||
4,169,695 |
10
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 87.7% (continued) | |||||||||
New Zealand - 3.1% | |||||||||
New Zealand, Govt. Gtd. Bonds | NZD | 3.50 | 4/14/2033 | 1,400,000 | 1,019,659 | ||||
New Zealand, Sr. Unscd. Bonds, Ser. 930 | NZD | 3.00 | 9/20/2030 | 1,130,000 | b | 972,332 | |||
New Zealand Local Government Funding Agency Bond, Govt. Gtd. Bonds | NZD | 4.50 | 4/15/2027 | 2,790,000 | 2,104,375 | ||||
4,096,366 | |||||||||
Norway - 2.9% | |||||||||
DNB Boligkreditt, Covered Bonds | 2.50 | 3/28/2022 | 255,000 | 263,524 | |||||
Norway, Bonds, Ser. 479 | NOK | 1.75 | 2/17/2027 | 33,855,000 | c | 3,588,362 | |||
3,851,886 | |||||||||
Panama - .5% | |||||||||
Carnival, Sr. Scd. Notes | 11.50 | 4/1/2023 | 640,000 | c | 670,199 | ||||
Paraguay - .9% | |||||||||
Paraguay, Sr. Unscd. Bonds | 5.00 | 4/15/2026 | 1,110,000 | 1,154,411 | |||||
Peru - .8% | |||||||||
Peruvian, Sr. Unscd. Bonds | 2.39 | 1/23/2026 | 1,000,000 | 1,017,000 | |||||
Philippines - 1.4% | |||||||||
Philippine, Sr. Unscd. Notes | 2.46 | 5/5/2030 | 600,000 | 613,351 | |||||
Philippine, Sr. Unscd. Notes | PHP | 4.95 | 1/15/2021 | 60,000,000 | 1,189,024 | ||||
1,802,375 | |||||||||
Qatar - .8% | |||||||||
Qatar, Sr. Unscd. Notes | 3.40 | 4/16/2025 | 1,042,000 | 1,110,423 | |||||
Singapore - .1% | |||||||||
Mulhacen, Sr. Scd. Bonds | EUR | 6.50 | 8/1/2023 | 380,000 | 171,814 | ||||
Spain - 1.5% | |||||||||
Banco Bilbao Vizcaya Argentaria, Jr. Sub. Bonds | EUR | 5.88 | 5/24/2022 | 600,000 | 621,592 | ||||
Banco Santander, Jr. Sub. Bonds | EUR | 5.25 | 12/29/2167 | 600,000 | 611,603 | ||||
Spain, Bonds | EUR | 5.15 | 10/31/2028 | 470,000 | c | 708,642 | |||
1,941,837 | |||||||||
Supranational - 2.9% | |||||||||
European Bank for Reconstruction & Development, Sr. Unscd. Notes | IDR | 6.45 | 12/13/2022 | 20,100,000,000 | 1,324,506 | ||||
European Bank for Reconstruction & Development, Sr. Unscd. Notes | IDR | 8.30 | 10/2/2020 | 5,800,000,000 | 386,290 | ||||
Gems Menasa Cayman, Sr. Scd. Notes | 7.13 | 7/31/2026 | 203,000 | c | 194,880 | ||||
Inter-American Development Bank, Sr. Unscd. Notes | 3.88 | 10/28/2041 | 720,000 | 1,015,315 | |||||
International Bank for Reconstruction & Development, Sr. Unscd. Notes | GBP | 4.88 | 12/7/2028 | 500,000 | 852,528 | ||||
3,773,519 |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 87.7% (continued) | |||||||||
Sweden - 1.6% | |||||||||
Akelius Residential Property, Sub. Notes | EUR | 2.25 | 5/17/2081 | 140,000 | 138,206 | ||||
Stadshypotek, Covered Bonds | 2.50 | 4/5/2022 | 307,000 | 316,563 | |||||
Stadshypotek, Covered Notes, Ser. 1588 | SEK | 1.50 | 3/1/2024 | 6,000,000 | 644,490 | ||||
Swedbank Hypotek, Covered Notes, Ser. 191 | SEK | 1.00 | 6/15/2022 | 10,100,000 | 1,055,507 | ||||
2,154,766 | |||||||||
Switzerland - 1.3% | |||||||||
Credit Suisse Group, Jr. Sub. Notes | 7.25 | 9/12/2025 | 570,000 | 568,971 | |||||
UBS, Sr. Unscd. Notes | GBP | 1.25 | 12/10/2020 | 200,000 | 252,059 | ||||
UBS, Sub. Notes | EUR | 4.75 | 2/12/2026 | 235,000 | 262,010 | ||||
UBS Group, Jr. Sub. Bonds | 5.00 | 1/31/2023 | 630,000 | 579,618 | |||||
1,662,658 | |||||||||
United Arab Emirates - 1.0% | |||||||||
Abu Dhabi, Sr. Unscd. Notes | 2.50 | 4/16/2025 | 1,281,000 | 1,323,104 | |||||
United Kingdom - 11.5% | |||||||||
Anglian Water Services Financing, Sr. Scd. Notes | GBP | 1.63 | 8/10/2025 | 215,000 | 272,196 | ||||
BUPA Finance, Gtd. Bonds | GBP | 6.13 | 9/16/2020 | 130,000 | 160,256 | ||||
Close Brothers Finance, Gtd. Notes | GBP | 2.75 | 10/19/2026 | 321,000 | 410,196 | ||||
Close Brothers Finance, Gtd. Notes | GBP | 3.88 | 6/27/2021 | 200,000 | 256,811 | ||||
Coca-Cola European Partners, Gtd. Notes | EUR | 1.13 | 5/26/2024 | 160,000 | 179,727 | ||||
Coventry Building Society, Sr. Unscd. Notes | EUR | 2.50 | 11/18/2020 | 400,000 | 443,453 | ||||
Drax Finco, Sr. Scd. Bonds | GBP | 4.25 | 5/1/2022 | 274,000 | 332,561 | ||||
eG Global Finance, Sr. Scd. Notes | EUR | 4.38 | 2/7/2025 | 341,000 | 322,888 | ||||
HSBC Bank, Sub. Notes | GBP | 5.38 | 11/4/2030 | 310,000 | 450,752 | ||||
Iceland Bondco, Sr. Scd. Notes | GBP | 4.63 | 3/15/2025 | 350,000 | 384,265 | ||||
Informa, Gtd. Notes | EUR | 1.50 | 7/5/2023 | 254,000 | 267,680 | ||||
Investec, Jr. Sub. Notes | GBP | 6.75 | 12/5/2024 | 400,000 | 401,608 | ||||
Iron Mountain UK, Gtd. Notes | GBP | 3.88 | 11/15/2025 | 210,000 | 249,183 | ||||
Jaguar Land Rover Automotive, Gtd. Notes | GBP | 2.75 | 1/24/2021 | 490,000 | 590,256 | ||||
Jerrold Finco, Sr. Scd. Bonds | GBP | 4.88 | 1/15/2026 | 165,000 | 188,012 | ||||
Jerrold Finco, Sr. Scd. Bonds | GBP | 6.13 | 1/15/2024 | 208,000 | 243,808 | ||||
Lloyds Banking Group, Jr. Sub. Bonds | EUR | 6.38 | 6/27/2168 | 550,000 | 587,420 | ||||
Lloyds Banking Group, Jr. Sub. Notes | GBP | 5.13 | 12/27/2024 | 560,000 | 637,403 | ||||
London & Quadrant Housing Trust, Sr. Scd. Bonds | GBP | 2.63 | 5/5/2026 | 142,000 | 187,008 | ||||
Mitchells & Butlers Finance, Scd. Bonds, Ser. B2 | GBP | 6.01 | 12/15/2028 | 343,179 | 483,582 |
12
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 87.7% (continued) | |||||||||
United Kingdom - 11.5% (continued) | |||||||||
Motability Operations Group, Gtd. Notes | EUR | 1.63 | 6/9/2023 | 200,000 | 228,094 | ||||
National Express Group, Gtd. Notes | GBP | 2.38 | 11/20/2028 | 334,000 | 387,346 | ||||
Nationwide Building Society, Jr. Sub. Bonds | GBP | 5.88 | 12/20/2024 | 450,000 | 557,589 | ||||
Pinewood Finance, Sr. Scd. Bonds | GBP | 3.25 | 9/30/2025 | 109,000 | 136,963 | ||||
Prudential, Sr. Unscd. Bonds | GBP | 5.88 | 5/11/2029 | 205,000 | 339,584 | ||||
Royal Bank of Scotland Group, Jr. Sub. Bonds | 7.50 | 8/10/2020 | 600,000 | 575,298 | |||||
Saga, Gtd. Bonds | GBP | 3.38 | 5/12/2024 | 228,000 | 211,085 | ||||
TESCO, Sr. Unscd. Notes | GBP | 3.32 | 11/5/2025 | 100,000 | b | 248,015 | |||
Tesco Property Finance 3, Sr. Scd. Bonds | GBP | 5.74 | 4/13/2040 | 144,567 | 237,604 | ||||
UNITE USAF II, Mortgage Backed Notes | GBP | 3.37 | 6/30/2023 | 300,000 | 394,020 | ||||
United Kingdom, Bonds | GBP | 0.13 | 3/22/2026 | 1,628,237 | b | 2,394,161 | |||
Vedanta Resources Finance II, Gtd. Bonds | 9.25 | 4/23/2026 | 490,000 | e | 203,350 | ||||
Virgin Media Secured Finance, Sr. Scd. Notes | GBP | 5.25 | 5/15/2029 | 140,000 | 177,212 | ||||
Virgin Media Secured Finance, Sr. Scd. Notes | GBP | 6.25 | 3/28/2029 | 240,300 | 317,716 | ||||
Virgin Money UK, Sr. Unscd. Notes | GBP | 3.13 | 6/22/2025 | 580,000 | 696,102 | ||||
Vodafone Group, Jr. Sub. Bonds | GBP | 4.88 | 10/3/2078 | 194,000 | 249,427 | ||||
Vodafone Group, Jr. Sub. Notes | 7.00 | 4/4/2079 | 200,000 | 229,177 | |||||
Wagamama Finance, Sr. Scd. Notes | GBP | 4.13 | 7/1/2022 | 100,000 | 110,449 | ||||
Yorkshire Building Society, Covered Bonds, 3 Month SONIO +.60% | GBP | 1.31 | 11/19/2023 | 260,000 | d | 327,585 | |||
15,069,842 | |||||||||
United States - 20.4% | |||||||||
Air Products & Chemicals, Sr. Unscd. Notes | EUR | 0.50 | 5/5/2028 | 184,000 | 200,880 | ||||
Air Products & Chemicals, Sr. Unscd. Notes | 1.50 | 10/15/2025 | 34,000 | 34,308 | |||||
Best Buy, Sr. Unscd. Bonds | 5.50 | 3/15/2021 | 210,000 | 212,999 | |||||
Best Buy, Sr. Unscd. Notes | 4.45 | 10/1/2028 | 248,000 | 261,888 | |||||
CCO Holdings, Sr. Unscd. Notes | 4.75 | 3/1/2030 | 281,000 | c | 287,927 | ||||
CEMEX Finance, Sr. Scd. Notes | 6.00 | 4/1/2024 | 227,000 | 211,519 | |||||
Citigroup, Sub. Notes | 5.50 | 9/13/2025 | 450,000 | 516,170 | |||||
Cleveland-Cliffs, Gtd. Notes | 5.88 | 6/1/2027 | 520,000 | 327,418 | |||||
Comcast, Gtd. Notes | GBP | 1.50 | 2/20/2029 | 245,000 | 309,585 | ||||
Comcast, Gtd. Notes | 3.30 | 4/1/2027 | 86,000 | 94,418 | |||||
Comcast, Gtd. Notes, 3 Month LIBOR +0.33% | 1.76 | 10/1/2020 | 116,000 | d | 116,073 | ||||
CommScope, Sr. Scd. Notes | 5.50 | 3/1/2024 | 121,000 | c | 121,629 |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 87.7% (continued) | |||||||||
United States - 20.4% (continued) | |||||||||
CSC Holdings, Gtd. Notes | 5.38 | 7/15/2023 | 750,000 | c | 762,337 | ||||
Dell International, Gtd. Notes | 7.13 | 6/15/2024 | 602,000 | c | 625,689 | ||||
Diamond Sports Group, Sr. Scd. Notes | 5.38 | 8/15/2026 | 620,000 | c | 474,114 | ||||
Digital Euro Finco, Gtd. Notes | EUR | 1.13 | 4/9/2028 | 439,000 | 460,543 | ||||
Dollar General, Sr. Unscd. Notes | 4.15 | 11/1/2025 | 346,000 | 385,204 | |||||
EMC, Sr. Unscd. Notes | 2.65 | 6/1/2020 | 30,000 | 29,944 | |||||
Fidelity National Information Services, Sr. Unscd. Notes | EUR | 0.63 | 12/3/2025 | 201,000 | 218,379 | ||||
Fiserv, Sr. Unscd. Notes | 3.50 | 7/1/2029 | 240,000 | 263,599 | |||||
General Electric, Sr. Unscd. Notes | GBP | 6.44 | 11/15/2022 | 12,833 | 16,919 | ||||
Hewlett Packard Enterprise, Sr. Unscd. Notes | 4.45 | 10/2/2023 | 233,000 | 245,628 | |||||
JPMorgan Chase & Co., Sr. Unscd. Notes | 2.08 | 4/22/2026 | 1,000,000 | 1,014,668 | |||||
JPMorgan Chase & Co., Sr. Unscd. Notes, 3 Month LIBOR +1.21% | 2.05 | 10/29/2020 | 323,000 | d | 323,881 | ||||
Laureate Education, Gtd. Notes | 8.25 | 5/1/2025 | 265,000 | c | 272,354 | ||||
Lennar, Gtd. Notes | 4.75 | 11/29/2027 | 36,000 | 37,093 | |||||
Level 3 Financing, Gtd. Notes | 5.38 | 8/15/2022 | 643,000 | 644,736 | |||||
Microsoft, Sr. Unscd. Bonds | 2.00 | 8/8/2023 | 250,000 | 261,380 | |||||
Netflix, Sr. Unscd. Notes | EUR | 3.63 | 6/15/2030 | 325,000 | 360,649 | ||||
New York Life Global Funding, Scd. Notes | 1.70 | 9/14/2021 | 270,000 | 272,337 | |||||
NextEra Energy Capital Holdings, Gtd. Notes | 3.25 | 4/1/2026 | 101,000 | 109,290 | |||||
Pepsico, Sr. Unscd. Notes | EUR | 0.25 | 5/6/2024 | 266,000 | 291,103 | ||||
Refinitiv US Holdings, Sr. Unscd. Notes | EUR | 6.88 | 11/15/2026 | 150,000 | 175,547 | ||||
Silgan Holdings, Sr. Unscd. Notes | 4.13 | 2/1/2028 | 44,000 | c | 43,505 | ||||
Sprint, Gtd. Notes | 7.88 | 9/15/2023 | 260,000 | 293,800 | |||||
Sprint Capital, Gtd. Notes | 8.75 | 3/15/2032 | 228,000 | 321,400 | |||||
T-Mobile USA, Gtd. Notes | 6.00 | 3/1/2023 | 693,000 | 703,291 | |||||
T-Mobile USA, Sr. Scd. Notes | 3.88 | 4/15/2030 | 300,000 | c | 329,655 | ||||
U.S. Bank, Sr. Unscd. Notes, 3 Month LIBOR +.32% | 1.31 | 4/26/2021 | 250,000 | d | 249,476 | ||||
U.S. Treasury Bonds | 2.88 | 5/15/2043 | 1,628,700 | 2,159,618 | |||||
U.S. Treasury Bonds | 3.00 | 11/15/2045 | 2,325,700 | 3,205,469 | |||||
U.S. Treasury Inflation Indexed Bonds, US CPI Urban Consumers Not Seasonally Adjusted | 1.00 | 2/15/2046 | 873,376 | b | 1,125,648 | ||||
U.S. Treasury Inflation Indexed Bonds, US CPI Urban Consumers Not Seasonally Adjusted | 2.38 | 1/15/2025 | 2,264,328 | b | 2,549,094 | ||||
U.S. Treasury Notes | 1.50 | 8/15/2026 | 748,900 | 795,473 |
14
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 87.7% (continued) | |||||||||
United States - 20.4% (continued) | |||||||||
U.S. Treasury Notes | 2.25 | 11/15/2027 | 415,000 | 467,167 | |||||
U.S. Treasury Notes | 2.38 | 5/15/2029 | 1,640,000 | 1,893,175 | |||||
U.S. Treasury Separate Trading of Registered Interest and Principal Securities, Bonds | 0.00 | 5/15/2043 | 2,192,300 | f | 1,616,452 | ||||
Verizon Communications, Sr. Unscd. Notes | AUD | 2.65 | 5/6/2030 | 790,000 | 485,510 | ||||
Zayo Group Holdings, Sr. Scd. Notes | 4.00 | 3/1/2027 | 660,000 | c | 643,190 | ||||
26,822,131 | |||||||||
TotalBonds and Notes | 115,182,808 | ||||||||
Shares | |||||||||
Exchange-Traded Funds - 9.4% | |||||||||
United States - 9.4% | |||||||||
iShares 0-5 Year Investment Grade Corporate Bond ETF | 22,648 | 1,162,748 | |||||||
iShares iBoxx High Yield Corporate Bond ETF | 36,838 | e | 2,962,880 | ||||||
iShares iBoxx Investment Grade Corporate Bond ETF | 19,750 | 2,551,107 | |||||||
iShares JP Morgan USD Emerging Markets Bond Fund ETF | 36,845 | 3,702,922 | |||||||
SPDR Bloomberg Barclays Emerging Markets Local Bond ETF | 76,039 | 1,916,943 | |||||||
TotalExchange-Traded Funds | 12,296,600 | ||||||||
1-Day | |||||||||
Investment Companies - 1.0% | |||||||||
Registered Investment Companies - 1.0% | |||||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 0.33 | 1,349,689 | g | 1,349,689 |
15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | 1-Day | Shares | Value ($) | ||||||
Investment of Cash Collateral for Securities Loaned - 2.7% | |||||||||
Registered Investment Companies - 2.7% | |||||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 0.33 | 3,626,796 | g | 3,626,796 | |||||
Total Investments(cost $136,762,641) | 100.8% | 132,455,893 | |||||||
Liabilities, Less Cash and Receivables | (0.8%) | (1,115,037) | |||||||
Net Assets | 100.0% | 131,340,856 |
ETF—Exchange-Traded Fund
EURIBOR—Euro Interbank Offered Rate
LIBOR—London Interbank Offered Rate
SONIO—Sterling Overnight Index Average
AUD—Australian Dollar
CAD—Canadian Dollar
COP—Colombian Peso
DKK—Danish Krone
EUR—Euro
GBP—British Pound
HUF—Hungarian Forint
IDR—Indonesian Rupiah
INR—Indian Rupee
JPY—Japanese Yen
MXN—Mexican Peso
MYR—Malaysian Ringgit
NOK—Norwegian Krone
NZD—New Zealand Dollar
PHP—Philippine Peso
SEK—Swedish Krona
a Amount stated in U.S. Dollars unless otherwise noted above.
b Principal amount for accrual purposes is periodically adjusted based on changes in the Consumer Price Index.
c Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2020, these securities were valued at $13,267,333 or 10.1% of net assets.
d Variable rate security—rate shown is the interest rate in effect at period end.
e Security, or portion thereof, on loan. At April 30, 2020, the value of the fund’s securities on loan was $3,128,880 and the value of the collateral was $3,626,796.
f Zero coupon until a specified date at which time the stated coupon rate becomes effective until maturity.
g Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
16
Portfolio Summary (Unaudited)† | Value (%) |
Foreign Governmental | 32.3 |
Investment Companies | 13.1 |
Banks | 13.1 |
U.S. Treasury Securities | 10.5 |
Telecommunication Services | 4.7 |
Supranational Bank | 2.9 |
Real Estate | 2.9 |
Media | 2.8 |
Diversified Financials | 2.1 |
Retailing | 1.8 |
Consumer Discretionary | 1.6 |
Utilities | 1.2 |
Commercial & Professional Services | 1.1 |
Food Products | 1.0 |
Advertising | .9 |
Energy | .8 |
Building Materials | .8 |
Automobiles & Components | .8 |
Insurance | .7 |
Technology Hardware & Equipment | .7 |
Internet Software & Services | .7 |
Metals & Mining | .6 |
Beverage Products | .6 |
Information Technology | .6 |
Health Care | .5 |
Agriculture | .5 |
Industrial | .4 |
Semiconductors & Semiconductor Equipment | .4 |
Transportation | .3 |
Aerospace & Defense | .2 |
Chemicals | .2 |
Materials | .0 |
100.8 |
† Based on net assets.
See notes to financial statements.
17
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS(Unaudited)
Investment Companies | Value | Purchases($) | Sales ($) | Value | Net | Dividends/ |
Registered | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1,308,257 | 44,305,468 | (44,264,036) | 1,349,689 | 1.0 | 16,923 |
Investment | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | - | 19,289,430 | (15,662,634) | 3,626,796 | 2.8 | - |
Total | 1,308,257 | 63,594,898 | (59,926,670) | 4,976,485 | 3.8 | 16,923 |
See notes to financial statements.
18
STATEMENT OF FUTURES
April 30, 2020 (Unaudited)
Description | Number of | Expiration | Notional | Value ($) | Unrealized (Depreciation) ($) | |
Futures Short | ||||||
Australian 10 Year Bond | 34 | 6/15/2020 | 3,294,409a | 3,297,906 | (3,497) | |
Euro-Bond | 32 | 6/8/2020 | 5,929,842a | 6,116,772 | (186,930) | |
Long Gilt | 18 | 6/26/2020 | 3,019,131a | 3,121,797 | (102,666) | |
Gross Unrealized Depreciation | (293,093) |
a Notional amounts in foreign currency have been converted to USD using relevant foreign exchange rates.
See notes to financial statements.
19
STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTSApril 30, 2020 (Unaudited)
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation)($) |
CIBC World Markets Corp. | |||||
British Pound | 245,547 | United States Dollar | 294,866 | 5/15/2020 | 14,416 |
United States Dollar | 2,019,523 | British Pound | 1,573,592 | 5/15/2020 | 37,485 |
Swedish Krona | 19,508,000 | United States Dollar | 1,931,612 | 5/15/2020 | 68,309 |
United States Dollar | 40,008 | Canadian Dollar | 53,028 | 5/15/2020 | 1,912 |
Euro | 1,894,386 | United States Dollar | 2,055,532 | 5/15/2020 | 21,006 |
United States Dollar | 474,507 | Euro | 437,521 | 5/15/2020 | (5,083) |
Singapore Dollar | 1,105,506 | United States Dollar | 785,433 | 5/15/2020 | (1,437) |
Japanese Yen | 251,504,082 | United States Dollar | 2,359,177 | 5/15/2020 | (15,111) |
Citigroup | |||||
Euro | 1,722,000 | United States Dollar | 1,874,690 | 5/15/2020 | 12,886 |
United States Dollar | 458,226 | Euro | 421,269 | 5/15/2020 | (3,549) |
United States Dollar | 7,338,793 | Australian Dollar | 10,977,029 | 5/15/2020 | 185,283 |
Polish Zloty | 7,517,000 | United States Dollar | 1,774,983 | 5/15/2020 | 36,560 |
Norwegian Krone | 990,000 | United States Dollar | 105,747 | 5/15/2020 | (9,107) |
United States Dollar | 1,970,669 | Norwegian Krone | 18,084,494 | 5/15/2020 | 205,337 |
Czech Koruna | 29,474,170 | United States Dollar | 1,295,866 | 5/15/2020 | (103,595) |
United States Dollar | 1,272,369 | Czech Koruna | 29,474,170 | 5/15/2020 | 80,098 |
British Pound | 78,000 | United States Dollar | 101,450 | 5/15/2020 | (3,204) |
United States Dollar | 1,444,390 | British Pound | 1,113,487 | 5/15/2020 | 41,882 |
United States Dollar | 1,979,307 | Swedish Krona | 19,226,000 | 5/15/2020 | 8,296 |
HSBC | |||||
United States Dollar | 284,984 | British Pound | 217,506 | 5/15/2020 | 11,021 |
United States Dollar | 846,010 | Mexican Peso | 16,468,000 | 5/15/2020 | 164,443 |
Hungarian Forint | 225,780,584 | United States Dollar | 701,524 | 5/15/2020 | 212 |
20
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation)($) |
HSBC (continued) | |||||
United States Dollar | 2,696,040 | Hungarian Forint | 819,516,676 | 5/15/2020 | 148,946 |
Singapore Dollar | 312,427 | United States Dollar | 214,929 | 5/15/2020 | 6,637 |
United States Dollar | 138,863 | Euro | 127,356 | 5/15/2020 | (739) |
Norwegian Krone | 592,463 | United States Dollar | 63,998 | 5/15/2020 | (6,164) |
J.P. Morgan Securities | |||||
United States Dollar | 184,618 | New Zealand Dollar | 306,000 | 5/15/2020 | (3,079) |
Singapore Dollar | 767,387 | United States Dollar | 546,195 | 5/15/2020 | (1,984) |
Euro | 595,468 | United States Dollar | 657,942 | 5/15/2020 | (5,218) |
United States Dollar | 1,173,971 | Euro | 1,080,624 | 5/15/2020 | (10,559) |
United States Dollar | 553,789 | Danish Krone | 3,729,408 | 5/15/2020 | 5,954 |
British Pound | 238,389 | United States Dollar | 302,099 | 5/15/2020 | (1,833) |
United States Dollar | 1,992,957 | British Pound | 1,616,601 | 5/15/2020 | (43,254) |
Japanese Yen | 132,685,935 | United States Dollar | 1,234,777 | 5/15/2020 | 1,881 |
United States Dollar | 1,899,306 | Japanese Yen | 204,723,488 | 5/15/2020 | (8,756) |
United States Dollar | 1,766,892 | Swedish Krona | 16,845,687 | 5/15/2020 | 39,906 |
RBS Securities | |||||
British Pound | 473,439 | United States Dollar | 607,359 | 5/15/2020 | (11,032) |
United States Dollar | 871,512 | Mexican Peso | 16,456,490 | 5/15/2020 | 190,421 |
Euro | 585,943 | United States Dollar | 649,486 | 5/15/2020 | (7,203) |
United States Dollar | 176,577 | Euro | 161,415 | 5/15/2020 | (359) |
United States Dollar | 734,616 | Indian Rupee | 52,846,000 | 5/15/2020 | 31,993 |
South Korean Won | 2,178,436,000 | United States Dollar | 1,845,741 | 5/15/2020 | (57,622) |
Canadian Dollar | 2,057,715 | United States Dollar | 1,547,343 | 5/15/2020 | (69,036) |
State Street Bank and Trust Company | |||||
Polish Zloty | 5,107,000 | United States Dollar | 1,293,076 | 5/15/2020 | (62,325) |
21
STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (Unaudited) (continued)
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation)($) |
State Street Bank and Trust Company (continued) | |||||
United States Dollar | 3,122,669 | Polish Zloty | 12,624,000 | 5/15/2020 | 80,375 |
United States Dollar | 1,829,411 | South Korean Won | 2,178,436,000 | 5/15/2020 | 41,292 |
United States Dollar | 186,151 | Australian Dollar | 298,765 | 5/15/2020 | (8,548) |
Hungarian Forint | 401,881,000 | United States Dollar | 1,299,199 | 5/15/2020 | (50,135) |
United States Dollar | 1,270,823 | Hungarian Forint | 391,787,000 | 5/15/2020 | 53,132 |
Mexican Peso | 16,456,490 | United States Dollar | 872,108 | 5/15/2020 | (191,017) |
Euro | 1,185,103 | United States Dollar | 1,356,825 | 5/15/2020 | (57,770) |
United States Dollar | 21,609,837 | Euro | 19,545,119 | 5/15/2020 | 185,391 |
British Pound | 720 | United States Dollar | 901 | 5/1/2020 | 6 |
United States Dollar | 1,346,992 | Singapore Dollar | 1,863,858 | 5/15/2020 | 25,191 |
United States Dollar | 1,723,142 | Colombian Peso | 6,427,891,000 | 5/15/2020 | 101,855 |
Philippine Peso | 70,534,000 | United States Dollar | 1,391,505 | 5/15/2020 | 7,248 |
United States Dollar | 2,520,659 | Philippine Peso | 128,801,000 | 5/15/2020 | (33,582) |
United States Dollar | 1,914,895 | Indonesian Rupiah | 26,900,448,000 | 5/15/2020 | 110,021 |
New Zealand Dollar | 3,441,000 | United States Dollar | 2,000,081 | 5/15/2020 | 110,594 |
United States Dollar | 1,898,401 | New Zealand Dollar | 3,160,000 | 5/15/2020 | (39,911) |
Malaysian Ringgit | 832,000 | United States Dollar | 198,024 | 5/15/2020 | (4,695) |
United States Dollar | 1,512,243 | Malaysian Ringgit | 6,238,000 | 5/15/2020 | 62,736 |
United States Dollar | 1,957,121 | Norwegian Krone | 19,882,000 | 5/15/2020 | 16,324 |
British Pound | 6,112,457 | United States Dollar | 7,725,203 | 5/15/2020 | (26,177) |
United States Dollar | 20,784,835 | British Pound | 15,923,707 | 5/15/2020 | 727,918 |
United States Dollar | 5,419,915 | Canadian Dollar | 7,368,000 | 5/15/2020 | 126,583 |
Japanese Yen | 317,540,000 | United States Dollar | 3,051,983 | 5/15/2020 | (92,449) |
United States Dollar | 3,109,466 | Japanese Yen | 336,110,021 | 5/15/2020 | (23,144) |
22
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation)($) |
UBS Securities | |||||
United States Dollar | 4,259,929 | New Zealand Dollar | 6,557,339 | 5/15/2020 | 237,723 |
Singapore Dollar | 1,050,920 | United States Dollar | 733,951 | 5/15/2020 | 11,334 |
United States Dollar | 924,760 | Singapore Dollar | 1,275,800 | 5/15/2020 | 19,995 |
United States Dollar | 174,255 | Australian Dollar | 263,000 | 5/15/2020 | 2,863 |
Canadian Dollar | 2,703,000 | United States Dollar | 1,942,176 | 5/15/2020 | (282) |
United States Dollar | 485,815 | Euro | 431,608 | 5/15/2020 | 12,706 |
Gross Unrealized Appreciation | 3,248,171 | ||||
Gross Unrealized Depreciation | (957,959) |
See notes to financial statements.
23
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 131,786,156 |
| 127,479,408 |
| ||
Affiliated issuers |
| 4,976,485 |
| 4,976,485 |
| |
Cash denominated in foreign currency |
|
| 18,861 |
| 18,827 |
|
Unrealized appreciation on forward foreign |
| 3,248,171 |
| |||
Dividends, interest and securities lending income receivable |
| 1,131,535 |
| |||
Receivable for investment securities sold |
| 750,265 |
| |||
Cash collateral held by broker—Note 4 |
| 317,671 |
| |||
Receivable for shares of Common Stock subscribed |
| 222,985 |
| |||
Tax reclaim receivable |
| 7,757 |
| |||
Prepaid expenses |
|
|
|
| 46,160 |
|
|
|
|
|
| 138,199,264 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 66,557 |
| |||
Liability for securities on loan—Note 1(c) |
| 3,626,796 |
| |||
Payable for investment securities purchased |
| 1,657,466 |
| |||
Unrealized depreciation on forward foreign |
| 957,959 |
| |||
Payable for shares of Common Stock redeemed |
| 449,401 |
| |||
Payable for futures variation margin—Note 4 |
| 69,656 |
| |||
Directors’ fees and expenses payable |
| 2,057 |
| |||
Other accrued expenses |
|
|
|
| 28,516 |
|
|
|
|
|
| 6,858,408 |
|
Net Assets ($) |
|
| 131,340,856 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 134,153,914 |
|
Total distributable earnings (loss) |
|
|
|
| (2,813,058) |
|
Net Assets ($) |
|
| 131,340,856 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 5,583,603 | 265,326 | 10,646,316 | 114,845,611 |
|
Shares Outstanding | 469,209 | 22,632 | 891,066 | 9,608,295 |
|
Net Asset Value Per Share ($) | 11.90 | 11.72 | 11.95 | 11.95 |
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
|
24
STATEMENT OF OPERATIONS
Six Months Ended April 30, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Interest (net of $2,285 foreign taxes withheld at source) |
|
| 1,771,799 |
| ||
Dividends: |
| |||||
Unaffiliated issuers |
|
| 250,182 |
| ||
Affiliated issuers |
|
| 16,923 |
| ||
Income from securities lending—Note 1(c) |
|
| 3,422 |
| ||
Total Income |
|
| 2,042,326 |
| ||
Expenses: |
|
|
|
| ||
Management fee—Note 3(a) |
|
| 251,677 |
| ||
Professional fees |
|
| 52,725 |
| ||
Registration fees |
|
| 35,225 |
| ||
Custodian fees—Note 3(c) |
|
| 12,599 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 12,526 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 6,707 |
| ||
Directors’ fees and expenses—Note 3(d) |
|
| 6,087 |
| ||
Prospectus and shareholders’ reports |
|
| 2,986 |
| ||
Loan commitment fees—Note 2 |
|
| 1,077 |
| ||
Distribution fees—Note 3(b) |
|
| 1,074 |
| ||
Miscellaneous |
|
| 22,910 |
| ||
Total Expenses |
|
| 405,593 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (29,606) |
| ||
Net Expenses |
|
| 375,987 |
| ||
Investment Income—Net |
|
| 1,666,339 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions | (288,505) |
| ||||
Net realized gain (loss) on options transactions | (197,942) |
| ||||
Net realized gain (loss) on futures | (178,268) |
| ||||
Net realized gain (loss) on forward foreign currency exchange contracts | 279,546 |
| ||||
Net Realized Gain (Loss) |
|
| (385,169) |
| ||
Net change in unrealized appreciation (depreciation) on investments | (6,333,537) |
| ||||
Net change in unrealized appreciation (depreciation) on | 89,319 |
| ||||
Net change in unrealized appreciation (depreciation) on futures | (328,467) |
| ||||
Net change in unrealized appreciation (depreciation) on | 2,541,056 |
| ||||
Net Change in Unrealized Appreciation (Depreciation) |
|
| (4,031,629) |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (4,416,798) |
| ||
Net (Decrease) in Net Assets Resulting from Operations |
| (2,750,459) |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
25
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 1,666,339 |
|
|
| 2,894,004 |
| |
Net realized gain (loss) on investments |
| (385,169) |
|
|
| 2,282,153 |
| ||
Net change in unrealized appreciation |
| (4,031,629) |
|
|
| 3,061,646 |
| ||
Net Increase (Decrease) in Net Assets | (2,750,459) |
|
|
| 8,237,803 |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (52,276) |
|
|
| (41,102) |
| |
Class C |
|
| (6,268) |
|
|
| (13,122) |
| |
Class I |
|
| (272,541) |
|
|
| (175,885) |
| |
Class Y |
|
| (2,827,029) |
|
|
| (3,966,193) |
| |
Total Distributions |
|
| (3,158,114) |
|
|
| (4,196,302) |
| |
Capital Stock Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 4,452,851 |
|
|
| 1,388,532 |
| |
Class C |
|
| - |
|
|
| 99,468 |
| |
Class I |
|
| 8,530,398 |
|
|
| 8,878,107 |
| |
Class Y |
|
| 28,311,709 |
|
|
| 49,852,582 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 49,893 |
|
|
| 31,487 |
| |
Class C |
|
| 4,427 |
|
|
| 9,870 |
| |
Class I |
|
| 186,483 |
|
|
| 142,615 |
| |
Class Y |
|
| 1,483,293 |
|
|
| 2,400,191 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (663,829) |
|
|
| (416,637) |
| |
Class C |
|
| (38,856) |
|
|
| (235,826) |
| |
Class I |
|
| (7,295,034) |
|
|
| (1,961,338) |
| |
Class Y |
|
| (16,460,484) |
|
|
| (13,534,260) |
| |
Increase (Decrease) in Net Assets | 18,560,851 |
|
|
| 46,654,791 |
| |||
Total Increase (Decrease) in Net Assets | 12,652,278 |
|
|
| 50,696,292 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 118,688,578 |
|
|
| 67,992,286 |
| |
End of Period |
|
| 131,340,856 |
|
|
| 118,688,578 |
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class A |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 367,414 |
|
|
| 112,438 |
| |
Shares issued for distributions reinvested |
|
| 4,059 |
|
|
| 2,631 |
| |
Shares redeemed |
|
| (54,433) |
|
|
| (34,128) |
| |
Net Increase (Decrease) in Shares Outstanding | 317,040 |
|
|
| 80,941 |
| |||
Class C |
|
|
|
|
|
|
|
| |
Shares sold |
|
| - |
|
|
| 8,380 |
| |
Shares issued for distributions reinvested |
|
| 364 |
|
|
| 841 |
| |
Shares redeemed |
|
| (3,181) |
|
|
| (19,871) |
| |
Net Increase (Decrease) in Shares Outstanding | (2,817) |
|
|
| (10,650) |
| |||
Class Ia |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 696,183 |
|
|
| 719,427 |
| |
Shares issued for distributions reinvested |
|
| 15,115 |
|
|
| 11,865 |
| |
Shares redeemed |
|
| (604,387) |
|
|
| (158,496) |
| |
Net Increase (Decrease) in Shares Outstanding | 106,911 |
|
|
| 572,796 |
| |||
Class Ya |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 2,358,010 |
|
|
| 4,116,981 |
| |
Shares issued for distributions reinvested |
|
| 120,237 |
|
|
| 200,463 |
| |
Shares redeemed |
|
| (1,379,661) |
|
|
| (1,113,097) |
| |
Net Increase (Decrease) in Shares Outstanding | 1,098,586 |
|
|
| 3,204,347 |
| |||
|
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aDuring the period ended April 30, 2020, 16,963 Class Y shares representing $210,284 were exchanged for 16,968 Class I shares and during the period ended October 31, 2019, 37,410 Class Y shares representing $465,556 were exchanged for 37,424 Class I shares, | |||||||||
See notes to financial statements. |
27
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||||
Class A Shares | April 30, 2020 | Year Ended October 31, | ||||||||||
(Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||
Per Share Data ($): | ||||||||||||
Net asset value, beginning of period | 12.48 | 12.04 | 12.23 | 12.30 | 12.13 | 12.70 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .11 | .29 | .32 | .19 | .13 | .16 | ||||||
Net realized and unrealized | (.38) | .70 | (.31) | .10 | .25 | (.18) | ||||||
Total from Investment Operations | (.27) | .99 | .01 | .29 | .38 | (.02) | ||||||
Distributions: | ||||||||||||
Dividends from | (.31) | (.55) | (.20) | (.36) | (.19) | (.49) | ||||||
Dividends from net realized | - | - | - | (.00)b | (.02) | (.06) | ||||||
Total Distributions | (.31) | (.55) | (.20) | (.36) | (.21) | (.55) | ||||||
Net asset value, end of period | 11.90 | 12.48 | 12.04 | 12.23 | 12.30 | 12.13 | ||||||
Total Return (%)c | (2.26)d | 8.54 | .08 | 2.45 | 3.20 | (.15) | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | 1.01e | 1.07 | 1.39 | 1.37 | 1.64 | 1.99 | ||||||
Ratio of net expenses | .89e | .75 | .75 | .89 | .95 | .95 | ||||||
Ratio of net investment income | 1.75e | 2.42 | 2.60 | 1.65 | 1.10 | 1.29 | ||||||
Portfolio Turnover Rate | 48.82d | 83.73 | 114.73 | 145.88 | 141.08 | 134.49 | ||||||
Net Assets, end of period ($ x 1,000) | 5,584 | 1,900 | 858 | 682 | 1,818 | 1,407 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
See notes to financial statements.
28
Six Months Ended | ||||||||||||
Class C Shares | April 30, 2020 | Year Ended October 31, | ||||||||||
(Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||
Per Share Data ($): | ||||||||||||
Net asset value, beginning of period | 12.30 | 11.86 | 12.06 | 12.18 | 12.05 | 12.62 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .10 | .25 | .24 | .11 | .04 | .07 | ||||||
Net realized and unrealized | (.43) | .64 | (.33) | .08 | .25 | (.19) | ||||||
Total from Investment Operations | (.33) | .89 | (.09) | .19 | .29 | (.12) | ||||||
Distributions: | ||||||||||||
Dividends from | (.25) | (.45) | (.11) | (.31) | (.14) | (.39) | ||||||
Dividends from net realized | - | - | - | (.00)b | (.02) | (.06) | ||||||
Total Distributions | (.25) | (.45) | (.11) | (.31) | (.16) | (.45) | ||||||
Net asset value, end of period | 11.72 | 12.30 | 11.86 | 12.06 | 12.18 | 12.05 | ||||||
Total Return (%)c | (2.64)d | 7.70 | (.64) | 1.59 | 2.47 | (.94) | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | 1.82e | 1.85 | 2.07 | 2.09 | 2.39 | 2.74 | ||||||
Ratio of net expenses | 1.71e | 1.50 | 1.50 | 1.64 | 1.70 | 1.70 | ||||||
Ratio of net investment income | 1.63e | 2.11 | 2.00 | .90 | .35 | .54 | ||||||
Portfolio Turnover Rate | 48.82d | 83.73 | 114.73 | 145.88 | 141.08 | 134.49 | ||||||
Net Assets, end of period ($ x 1,000) | 265 | 313 | 428 | 702 | 671 | 788 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
See notes to financial statements.
29
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||||
Class I Shares | April 30, 2020 | Year Ended October 31, | ||||||||||
(Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||
Per Share Data ($): | ||||||||||||
Net asset value, beginning of period | 12.53 | 12.09 | 12.27 | 12.33 | 12.14 | 12.71 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .16 | .32 | .37 | .23 | .15 | .19 | ||||||
Net realized and unrealized | (.42) | .71 | (.33) | .08 | .27 | (.18) | ||||||
Total from Investment Operations | (.26) | 1.03 | .04 | .31 | .42 | .01 | ||||||
Distributions: | ||||||||||||
Dividends from | (.32) | (.59) | (.22) | (.37) | (.21) | (.52) | ||||||
Dividends from net realized | - | - | - | (.00)b | (.02) | (.06) | ||||||
Total Distributions | (.32) | (.59) | (.22) | (.37) | (.23) | (.58) | ||||||
Net asset value, end of period | 11.95 | 12.53 | 12.09 | 12.27 | 12.33 | 12.14 | ||||||
Total Return (%) | (2.17)c | 8.79 | .38 | 2.57 | 3.52 | .07 | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | .73d | .78 | 1.10 | 1.14 | 1.39 | 1.70 | ||||||
Ratio of net expenses | .65d | .50 | .50 | .65 | .70 | .70 | ||||||
Ratio of net investment income | 2.68d | 2.63 | 3.03 | 1.91 | 1.35 | 1.54 | ||||||
Portfolio Turnover Rate | 48.82c | 83.73 | 114.73 | 145.88 | 141.08 | 134.49 | ||||||
Net Assets, end of period ($ x 1,000) | 10,646 | 9,827 | 2,555 | 3,815 | 1,244 | 5,472 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Not annualized.
d Annualized.
See notes to financial statements.
30
Six Months Ended | ||||||||||
Class Y Shares | April 30, 2020 | Year Ended October 31, | ||||||||
(Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 12.53 | 12.09 | 12.27 | 12.33 | 12.14 | 12.71 | ||||
Investment Operations: | ||||||||||
Investment income—neta | .16 | .37 | .33 | .23 | .16 | .19 | ||||
Net realized and unrealized | (.42) | .66 | (.29) | .08 | .27 | (.18) | ||||
Total from Investment Operations | (.26) | 1.03 | .04 | .31 | .43 | .01 | ||||
Distributions: | ||||||||||
Dividends from | (.32) | (.59) | (.22) | (.37) | (.22) | (.52) | ||||
Dividends from net realized | - | - | - | (.00)b | (.02) | (.06) | ||||
Total Distributions | (.32) | (.59) | (.22) | (.37) | (.24) | (.58) | ||||
Net asset value, end of period | 11.95 | 12.53 | 12.09 | 12.27 | 12.33 | 12.14 | ||||
Total Return (%) | (2.17)c | 8.81 | .30 | 2.67 | 3.54 | .09 | ||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | .62d | .68 | .96 | .98 | 1.23 | 1.31 | ||||
Ratio of net expenses | .58d | .50 | .50 | .64 | .70 | .70 | ||||
Ratio of net investment income | 2.67d | 3.00 | 2.70 | 1.90 | 1.35 | 1.54 | ||||
Portfolio Turnover Rate | 48.82c | 83.73 | 114.73 | 145.88 | 141.08 | 134.49 | ||||
Net Assets, end of period ($ x 1,000) | 114,846 | 106,649 | 64,151 | 40,741 | 34,952 | 14,611 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c Not annualized.
d Annualized.
See notes to financial statements.
31
NOTES TO FINANCIAL STATEMENTS(Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Global Dynamic Bond Income Fund (the “fund”) is a separate non-diversified series of BNY Mellon Advantage Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering nine series, including the fund. The fund’s investment objective is to seek total return (consisting of income and 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. Effective December 31, 2019, Newton Investment Management (North America) Limited (“NIMNA”) reorganized into Newton Investment Management Limited (“NIM” or the “Sub-Adviser”), a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser. Consequently, the sub-investment advisory agreement between the Adviser and NIMNA was terminated and NIM now serves as the fund’s sub-adviser pursuant to a sub-investment advisory agreement between the Adviser and NIM. There was no change to the fund’s investment objective, polices or strategies as a result of the reorganization of NIMNA into Sub-Adviser.
The Company’s Board of Directors (the “Board”) approved, effective December 31, 2019 (the “Effective Date”), the termination of the fund’s authorized Class T shares. Prior to the Effective Date, the fund did not offer such Class T shares for purchase. The authorized Class T shares were reallocated to authorized Class I shares and Class Y shares, increasing authorized Class I shares from 100 million to 150 million and increasing authorized Class Y shares from 100 million to 150 million.
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 (150 million shares authorized) and Class Y (150 million shares authorized). Class A shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares ten years after the date of purchase, without the imposition of a sales charge. Class I and Class Y shares are sold at net asset value per share
32
generally to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
As of April 30, 2020, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held 7,267 Class C shares of the fund.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund 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 Companyenters 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.
33
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Registered investment companies that are not traded on an exchange are valued at their net asset value and are generally categorized within Level 1 of the fair value hierarchy.
Investments in debt securities, excluding short-term investments (other than U.S. Treasury Bills), futures and forward foreign currency exchange contracts (“forward contracts”) are valued each business day by one or more independent pricing services (each, a “Service”) approved by the 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 the Service from dealers in such securities) and asked prices (as calculated by a Service based upon its evaluation of the market for such securities). Securities are valued as determined by a Service, based on methods which include consideration of the following: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. These securities are generally categorized within Level 2 of the fair value hierarchy.
Each Service and independent valuation firm is engaged under the general oversight of the Board.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the
34
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.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Futures, which are traded on an exchange, are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day and are generally categorized within Level 1 of the fair value hierarchy. Forward contracts are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of April 30, 2020in valuing the fund’s investments:
35
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
| Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total | |
Assets ($) |
|
|
|
| |
Investments in Securities:† |
|
|
|
| |
Corporate Bonds | - | 58,921,244 | - | 58,921,244 | |
Exchange-Traded Funds | 12,296,600 | - | - | 12,296,600 | |
Foreign Governmental | - | 42,449,468 | - | 42,449,468 | |
Investment Companies | 4,976,485 | - | - | 4,976,485 | |
U.S. Treasury Securities | - | 13,812,096 | - | 13,812,096 | |
Other Financial Instruments: |
| ||||
Forward Foreign Currency Exchange Contracts†† | - | 3,248,171 | - | 3,248,171 | |
Liabilities ($) |
|
|
| ||
Other Financial Instruments: |
|
| |||
Futures†† | (293,093) | - | - | (293,093) | |
Forward Foreign Currency Exchange Contracts†† | - | (957,959) | - | (957,959) |
† See Statement of Investments for additional detailed categorizations, if any.
†† Amount shown represents unrealized appreciation (depreciation) at period end, but only variation margin on exchanged traded and centrally cleared derivatives, if any, are reported in the Statement of Assets and Liabilities.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
Foreign Taxes:The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the fund
36
understanding of the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invest. These foreign taxes, if any, are paid by the fund and are reflected in the Statements of Operations. Foreign taxes payable or deferred as of April 30, 2020, if any, are disclosed in the fund’s Statements 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. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when issued or delayed delivery basis may be settled a month or more after the trade date.
Pursuant to a securities lending agreement with The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by 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 April 30, 2020, The Bank of New York Mellon earned $672 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.
Certain affiliated investment companies may also invest in the fund. At April 30, 2020, BNY Mellon Yield Enhancement Strategy Fund, an affiliate of the fund, held 2,967,771 Class Y shares representing approximately 27.0% of the fund’s net assets.
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. These
37
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political, economic developments and public health conditions. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. 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 are normally declared and paid quarterly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
38
As of and during the period ended April 30, 2020, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended April 30, 2020, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended October 31, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
The fund has an unused capital loss carryover of $704,671 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to October 31, 2019. The fund has $173,271 of short-term capital losses and $531,400 of long-term capital losses which can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2019 was as follows: ordinary income $4,196,302. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $927 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”), a subsidiary of BNY Mellon and an affiliate of the Adviser, 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 $747 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $180 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. Prior to March 11, 2020, the Citibank Credit Facility was $1.030 billion with Tranche A available in an amount equal to $830 million and Tranche B available in an amount equal to $200 million. 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
39
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
borrowing. During the period ended April 30, 2020, 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 .40% of the value of the fund’s average daily net assets and is payable monthly. The Adviser had contractually agreed, from November 1, 2019 through February 29, 2020, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .50% of the value of the fund’s average daily net assets. The Adviser has also contractually agreed, from March 1, 2020 through February 28, 2021, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the expenses of none of the classes (excluding certain expenses as described above) exceed .80% of the value of the fund’s average daily net assets. On or after February 28, 2021, the Adviser may terminate this expense limitation agreement at any time. The reduction in expenses, pursuant to the undertaking, amounted to $29,606 during the period ended April 30, 2020.
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 .19% of the value of the fund’s average daily net assets.
During the period ended April 30, 2020, the Distributor retained $229 from commissions earned on sales of the fund’s Class A shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended April 30, 2020, Class C shares were charged $1,074 pursuant to the Distribution Plan.
(c)Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines
40
the amounts to be paid to Service Agents. During the period ended April 30, 2020, Class A and Class C shares were charged $3,789and $358, 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 an expense offset in the Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an 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 Statements 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 for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended April 30, 2020, the fund was charged $1,475 for transfer agency services. 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 April 30, 2020, the fund was charged $12,599 pursuant to the custody agreement.
During the period ended April 30, 2020, the fund was charged $6,707 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 $52,690, Distribution Plan fees of $162, Shareholder Services Plan fees of $1,187, custodian fees of $7,557, Chief Compliance Officer fees of $4,438 and transfer agency fees of $523.
(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.
41
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, futures, options transactions and forward contracts, during the period ended April 30, 2020, amounted to $78,357,087 and $58,302,179, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.
Each type of derivative instrument that was held by the fund during the period ended April 30, 2020 is discussed below.
Futures:In the normal course of pursuing its investment objective, the fund is exposed to market risk, including interest rate risk,as a result of changes in value of underlying financial instruments. The fund invests in futures in order to manage its exposure to or protect against changes in the market. A futures contract represents a commitment for the future purchase or a sale of an asset at a specified date. Upon entering into such contracts, these investments require initial margin deposits with a counterparty, which consist of cash or cash equivalents. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses which are recorded in the Statement of Operations. When the contracts are closed, the fund recognizes a realized gain or loss which is reflected in the Statement of Operations. There is minimal counterparty credit risk to the fund with futures since they are exchange traded, and the exchange guarantees the futures against default. Futures open at April 30, 2020 are set forth in the Statement of Futures.
Options Transactions: The fund purchases and writes (sells) put and call options to hedge against changes in the values of interest rates, or as a substitute for an investment. The fund is subject to market risk and interest rate risk in the course of pursuing its investment objectives through its investments in options contracts. A call option gives the purchaser of the
42
option the right (but not the obligation) to buy, and obligates the writer to sell, the underlying financial instrument at the exercise price at any time during the option period, or at a specified date. Conversely, a put option gives the purchaser of the option the right (but not the obligation) to sell, and obligates the writer to buy the underlying financial instrument at the exercise price at any time during the option period, or at a specified date.
As a writer of call options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument decreases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument increases between those dates.The maximum payout for those contracts is limited to the number of call option contracts written and the related strike prices, respectively.
As a writer of put options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument increases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument decreases between those dates. The maximum payout for those contracts is limited to the number of put option contracts written and the related strike prices, respectively.
As a writer of an option, the fund has no control over whether the underlying financial instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the financial instrument underlying the written option. There is a risk of loss from a change in value of such options which may exceed the related premiums received. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. The Statement of Operations reflects any unrealized gains or losses which occurred during the period as well as any realized gains or losses which occurred upon the expiration or closing of the option transaction.At April 30, 2020, there were no options written outstanding.
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
43
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. Forward contracts open at April 30, 2020 are set forth in the Statement of Forward Foreign Currency Exchange Contracts.
The following tables show the fund’s exposure to different types of market risk as it relates to the Statement of Assets and Liabilities and the Statement of Operations, respectively.
Fair value of derivative instruments as of April 30, 2020 is shown below:
|
| Derivative |
|
|
| Derivative |
|
Interest rate risk | - |
| Interest rate risk | (293,093) | 1 | ||
Foreign exchange risk | 3,248,171 | 2 | Foreign exchange risk | (957,959) | 2 | ||
Gross fair value of | 3,248,171 |
|
|
| (1,251,052) |
| |
|
|
|
|
|
|
| |
Statement of Assets and Liabilities location: |
| ||||||
1Includes cumulative appreciation (depreciation) on futures as reported in the Statement of Futures, but only the unpaid variation margin is reported in the Statement of Assets and Liabilities. | |||||||
2Unrealized appreciation (depreciation) on forward foreign currency exchange contracts. |
The effect of derivative instruments in the Statement of Operations during the period ended April 30, 2020 is shown below:
Amount of realized gain (loss) on derivatives recognized in income ($) |
| ||||||||
Underlying | Futures | 1 | Options | 2 | Forward | 3 | Total |
|
|
Interest rate | (178,268) |
| (197,942) |
| - |
| (376,210) |
|
|
Foreign | - |
| - |
| 279,546 |
| 279,546 |
|
|
Total | (178,268) |
| (197,942) |
| 279,546 |
| (96,664) |
|
|
44
|
|
|
|
|
|
|
|
|
| |
Net change in unrealized appreciation (depreciation) |
| |||||||||
Underlying | Futures | 4 | Options | 5 | Forward | 6 | Total |
|
| |
Interest rate | (328,467) |
| 89,319 |
| - |
| (239,148) |
|
| |
Foreign | - |
| - |
| 2,541,056 |
| 2,541,056 |
|
| |
Total | (328,467) |
| 89,319 |
| 2,541,056 |
| 2,301,908 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| Statement of Operations location: |
| ||||||||
1 | Net realized gain (loss) on futures. | |||||||||
2 | Net realized gain (loss) on options transactions. | |||||||||
3 | Net realized gain (loss) on forward foreign currency exchange contracts. | |||||||||
4 | Net change in unrealized appreciation (depreciation) on futures. | |||||||||
5 | Net change in unrealized appreciation (depreciation) on options transactions. | |||||||||
6 | Net change in unrealized appreciation (depreciation) on forward foreign currency exchange contracts. |
The provisions of ASC Topic 210 “Disclosures about Offsetting Assets and Liabilities” require disclosure on the offsetting of financial assets and liabilities. These disclosures are required for certain investments, including derivative financial instruments subject to Master Agreements which are eligible for offsetting in the Statement of Assets and Liabilities and require the fund to disclose both gross and net information with respect to such investments. For financial reporting purposes, the fund does not offset derivative assets and derivative liabilities that are subject to Master Agreements in the Statement of Assets and Liabilities.
At April 30, 2020, derivative assets and liabilities (by type) on a gross basis are as follows:
Derivative Financial Instruments: |
| Assets ($) |
| Liabilities ($) |
|
Futures |
| - |
| (293,093) |
|
Forward contracts |
| 3,248,171 |
| (957,959) |
|
Total gross amount of derivative |
|
|
|
|
|
assets and liabilities in the |
|
|
|
|
|
Statement of Assets and Liabilities |
| 3,248,171 |
| (1,251,052) |
|
Derivatives not subject to |
|
|
|
|
|
Master Agreements |
| - |
| 293,093 |
|
Total gross amount of assets |
|
|
|
|
|
and liabilities subject to |
|
|
|
|
|
Master Agreements |
| 3,248,171 |
| (957,959) |
|
The following tables present derivative assets and liabilities net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of April 30, 2020:
45
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
|
|
| Financial |
|
|
|
|
|
| Instruments |
|
|
|
|
|
| and Derivatives |
|
|
|
| Gross Amount of |
| Available | Collateral |
| Net Amount of |
Counterparty | Assets ($) | 1 | for Offset ($) | Received ($) | 2 | Assets ($) |
CIBC World Markets | 143,128 |
| (21,631) | (121,497) |
| - |
Citigroup | 570,342 |
| (119,455) | (450,887) |
| - |
HSBC | 331,259 |
| (6,903) | (324,356) |
| - |
J.P. Morgan Securities | 47,741 |
| (47,741) | - |
| - |
RBS Securities | 222,414 |
| (145,252) | - |
| 77,162 |
State Street Bank | 1,648,666 |
| (589,753) | (1,058,913) |
| - |
UBS Securities | 284,621 |
| (282) | (284,339) |
| - |
Total | 3,248,171 |
| (931,017) | (2,239,992) |
| 77,162 |
|
|
|
|
|
|
|
|
|
| Financial |
|
|
|
|
|
| Instruments |
|
|
|
|
|
| and Derivatives |
|
|
|
| Gross Amount of |
| Available | Collateral |
| Net Amount of |
Counterparty | Liabilities ($) | 1 | for Offset ($) | Pledged ($) | 2 | Liabilities ($) |
CIBC World Markets | (21,631) |
| 21,631 | - |
| - |
Citigroup | (119,455) |
| 119,455 | - |
| - |
HSBC | (6,903) |
| 6,903 | - |
| - |
J.P. Morgan Securities | (74,683) |
| 47,741 | - |
| (26,942) |
RBS Securities | (145,252) |
| 145,252 | - |
| - |
State Street Bank | (589,753) |
| 589,753 | - |
| - |
UBS Securities | (282) |
| 282 | - |
| - |
Total | (957,959) |
| 931,017 | - |
| (26,942) |
|
|
|
|
|
|
|
1Absent a default event or early termination, OTC derivative assets and liabilities are presented at gross amounts and are not offset in the Statement of Assets and Liabilities. | ||||||
2In some instances, the actual collateral received and/or pledged may be more than the amount shown due to over collateralization. |
The following summarizes the average market value of derivatives outstanding duringthe period ended April 30, 2020:
|
| Average Market Value ($) |
Interest rate futures |
| 7,595,056 |
Interest rate options contracts |
| 45,368 |
Forward contracts |
| 94,379,622 |
|
|
|
At April 30, 2020, accumulated net unrealized depreciation on investments inclusive of derivative contracts was $2,309,629, consisting of $7,314,779 gross unrealized appreciation and $9,624,408 gross unrealized depreciation.
46
At April 30, 2020, the cost of investments inclusive of derivative contracts for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
47
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 (the “Board”) held on November 6, 2019 (the “Meeting”), the Board discussed with representatives of the Adviser (a) plans to wind down the operations of and dissolve the fund’s then-current sub-investment adviser, Newton Investment Management (North America) Limited (“NIMNA”); and (b) a proposal that Newton Investment Management Limited (“NIM”), an affiliate of NIMNA and the Adviser, assume the investment advisory responsibilities of NIMNA, pursuant to a sub-investment advisory agreement between the Adviser and NIM (the “New Sub-Advisory Agreement”), to be effective December 31, 2019 (the “Effective Date”).
At the Meeting, the Adviser recommended the approval of the New Sub-Advisory Agreement, pursuant to which NIM would serve as sub-adviser to the fund. The recommendation for the approval of the New Sub-Advisory Agreement was based on the following considerations, among others: (i) the transfer of the provision of sub-investment advisory services from NIMNA to NIM was not expected to have a material impact on the fund’s day-to-day operations, or the nature, extent or quality of the sub-investment advisory services currently provided to the fund; (ii) the personnel who have been principally responsible for managing the fund’s investment portfolio would continue to serve in that capacity following the Effective Date; and (iii) the substantive terms of the New Sub-Advisory Agreement were substantially similar to those of the current sub-investment advisory agreement between the Adviser and NIMNA (the “Current Agreement”). The Board also considered the fact that the Adviser expressed confidence in NIM and its investment management capabilities.
At the Meeting, the Board, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of the fund (the “Independent Directors”), considered and approved the New Sub-Advisory Agreement. In determining whether to approve the New Sub-Advisory Agreement, the Board considered the materials prepared by the Adviser received in advance of the Meeting and other information presented at the Meeting, which included: (i) a form of the New Sub-Advisory Agreement; (ii) information regarding the transition of sub-investment advisory services from NIMNA to NIM; (iii) information regarding investment due diligence of NIM performed by the Adviser; (iv) information regarding NIM’s compliance program; and (v) an opinion of counsel that replacing NIMNA with NIM as the sub-investment adviser to the fund would not result in a “change of control” or an “assignment” of an advisory contract within the meaning of the 1940 Act, and, therefore, does not require the approval of fund shareholders. The Board also considered the substance of discussions with representatives of the Adviser at the Meeting and at a Board meeting on March 12-13, 2019 (the “March Meeting”) at which the Board re-approved the Current Agreement for the ensuing year until March 30, 2020.
Nature, Extent and Quality of Services to be Provided by NIM. In examining the nature, extent and quality of the services that had been furnished by NIMNA to the
48
fund under the Current Agreement, and were expected to be provided by NIM to the fund under the New Sub-Advisory Agreement, the Board considered: (i) NIM’s organization, qualification and background, as well as the qualifications of its personnel; (ii) the expertise of the personnel providing portfolio management services, which would remain the same after the Effective Date; (iii) the investment strategy for the fund, which would remain the same after the Effective Date; and (iv) NIM’s compliance program. The Board also considered the review process undertaken by the Adviser and the Adviser’s favorable assessment of the nature and quality of the sub-investment advisory services provided by NIMNA and expected to be provided to the fund by NIM after the Effective Date. Based on their consideration and review of the foregoing information, the Board concluded that the nature, extent and quality of the sub-investment advisory services to be provided by NIM under the New Sub-Advisory Agreement, as well as NIM’s ability to render such services based on its resources and the experience of the investment team, which will remain the same, were adequate and appropriate for the fund in light of the fund’s investment objective, and supported a decision to approve the New Sub-Advisory Agreement.
Investment Performance of NIM. The Board had considered NIMNA’s investment performance in managing the fund’s portfolio at the March Meeting (including comparative data provided by Broadridge Financial Solutions, Inc.). The Board considered the performance and that the same investment professionals would continue to manage the fund’s assets after the Effective Date, as factors in evaluating the services to be provided by NIM under the New Sub-Advisory Agreement after the Effective Date, and determined that these factors, when viewed together with the other factors considered by the Board, supported a decision to approve the New Sub-Advisory Agreement.
Costs of Services to be Provided and Profitability. The Board considered the proposed fee payable under the New Sub-Advisory Agreement (which was the same as that payable under the Current Agreement and had been considered at the March Meeting), noting that the proposed fee would be paid by the Adviser and, thus, would not impact the fees paid by the fund or the Adviser’s profitability. The Board recognized that, because NIM’s fee would be paid by the Adviser, and not the fund, an analysis of profitability was more appropriate in the context of the Board’s consideration of the fund’s Management Agreement, pursuant to which the Adviser provides the fund with investment management and administrative services (the “Management Agreement”), and, therefore, the Board had received and considered a profitability analysis of the Adviser and its affiliates, including NIMNA, at the March Meeting. The Board concluded that the proposed fee payable to NIM by the Adviser was appropriate and the Adviser’s profitability was not excessive in light of the nature, extent and quality of the services to be provided to the fund by the Adviser and NIM under the New Sub-Advisory Agreement.
Economies of Scale to be Realized. The Board recognized that, because NIM’s fee would continue to be paid by the Adviser, and not the fund, an analysis of economies of
49
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB–INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
scale was more appropriate in the context of the Board’s consideration of the Management Agreement, which had been done at the March Meeting.
The Board also considered whether there were any ancillary benefits that would accrue to NIM as a result of NIM’s relationship with the fund, noting that there are no soft dollar arrangements in place for the fund.
In considering the materials and information described above, the Independent Directors received assistance from, and met separately with, their independent legal counsel, and were provided with a written description of their statutory responsibilities and the legal standards that are applicable to the approval of investment advisory and sub-investment advisory agreements.
After full consideration of the factors discussed above, with no single factor identified as being of paramount importance, the Board, all of whom are Independent Directors, with the assistance of independent legal counsel, approved the New Sub-Advisory Agreement for the fund effective as of the Effective Date.
************
At a meeting of the fund’s Board of Directors held on February 10-11, 2020, 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 Newton Investment Management 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.
50
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.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of institutional alternative credit focus funds (the “Performance Group”) and with a broader group of retail and institutional alternative credit focus funds (the “Performance Universe”), all for various periods ended December 31, 2019, 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 institutional alternative credit focus 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.
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. The Board discussed with representatives of the Adviser and/or the Subadviser the results of the comparisons and considered that the fund’s total return performance was at or above the Performance Group and Performance Universe medians for all periods (best performance in the Performance Group for the two-year period), except for the four-year period when it was below the Performance Group and Performance Universe medians. The Board also considered that the fund’s yield performance was at or above the Performance Group median for four of the eight one-year periods ended December 31st and above the Performance Universe medians for five of the eight one-year periods ended December 31st. 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 eight calendar years shown.
The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser over the fund’s last fiscal year in light of the nature, extent and quality of the management services provided by the Adviser. In addition, the Board also reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year which included reductions for a fee waiver arrangement in place that reduced the investment advisory fee paid to the Adviser. 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
51
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB–INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
the results of the comparisons. The Board considered that the fund’s contractual management fee was lower than the Expense Group median contractual management fee (lowest in the Expense Group), the fund’s actual management fee was lower than the Expense Group and Expense Universe median actual management fee (lowest in the Expense Group and Expense Universe) and the fund’s total expenses were lower than the Expense Group and Expense Universe median total expenses (lowest in the Expense Group).
Representatives of the Adviser stated that the Adviser has contractually agreed, until February 28, 2021, 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 0.80% of the fund’s average daily net assets.
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 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 to the Subadviser in relation to the fee paid 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 considered the expense limitation arrangement and its effect on the profitability of 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
52
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 stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser and the 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.
· The Board 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
53
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB–INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
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.
54
NOTES
55
NOTES
56
NOTES
57
BNY Mellon Global Dynamic Bond Income Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Newton Investment Management Limited
160 Queen Victoria Street
London, EC4V, 4LA, UK
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class A: DGDAX Class C: DGDCX Class I: DGDIX Class Y: DGDYX |
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-mailSend your request toinfo@bnymellon.com
InternetInformation can be viewed online or downloaded atwww.bnymellonim.com/us
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 atwww.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 atwww.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2020 BNY Mellon Securities Corporation |
BNY Mellon Global Real Return Fund
SEMIANNUAL REPORT April 30, 2020 |
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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
BNY Mellon Investment Adviser, Inc. | |
With Those of Other Funds | |
in Affiliated Issuers | |
Options Written | |
Foreign Currency Exchange Contracts | |
Assets and Liabilities | |
Changes in Net Assets | |
Financial Statements | |
the Fund’s Management and | |
Sub-Investment Advisory Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.
Dear Shareholder:
We are pleased to present this semiannual report for BNY Mellon Global Real Return Fund, covering the six-month period from November 1, 2019 through April 30, 2020. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
Stock markets performed well over the last several months of 2019. Accommodative policies from the U.S. Federal Reserve (the “Fed”), paired with healthy U.S. consumer spending, helped support valuations. Despite periodic investor concern regarding trade relations with China and global growth rates, the rally continued through the end of the calendar year, supported in part by a December announcement that the first phase of a trade deal with China was in process. U.S. equity markets reached new highs during the final months of 2019. However, the euphoria was short-lived, as concerns over the spread of COVID-19 and widespread quarantine roiled markets during the first several months of 2020; stocks posted historic losses in March 2020 but regained some ground in April.
In fixed-income markets, interest rates were heavily influenced by changes in Fed policy and investor concern over COVID-19. As stocks rallied in November and December 2019, Treasury bond prices declined, and rates across much of the yield curve rose until early in 2020, when the threat posed by COVID-19 began to emerge. A flight to quality ensued, and rates fell significantly. March 2020 brought high volatility and risk-asset spread widened. The Fed cut rates twice in March, and the government launched a large stimulus package. In April 2020, bond prices began to recover some of their prior losses.
The near-term outlook for the U.S. will be challenging, as the country continues to face COVID-19. However, we believe that once the economic effects have been mitigated, the economy will rebound. As always, we will monitor relevant data for signs of change. We encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
May 15, 2020
2
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from November 1, 2019 through April 30, 2020, as provided by portfolio managers Suzanne Hutchins, Aron Pataki and Andrew Warwick, of Newton Investment Management Limited (Newton), Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended April 30, 2020, the BNY Mellon Global Real Return Fund Class A shares produced a total return of -3.96%, Class C shares returned -4.38%, Class I shares returned -3.85% and Class Y shares returned -3.83%.1 In comparison, the FTSE One-Month U.S. Treasury Bill Index, and the fund’s performance baseline benchmark, the USD One-Month LIBOR, produced total returns of 0.66% and 0.83%, respectively, for the same period.2,3
Global markets encountered volatility during the reporting period, due in part to the COVID-19 outbreak and resulting economic uncertainty. The fund lagged its benchmark, largely due to its equity positions within the fund’s return-seeking core.
The Fund’s Investment Approach
The fund seeks total return (consisting of capital appreciation and income). To pursue its goal, the fund uses an actively managed, multi-asset strategy to produce absolute or real returns with less volatility than major equity markets over a complete market cycle, typically a period of five years. Rather than trying to track a benchmark index, the fund seeks to provide returns that are largely independent of market moves.
The fund allocates its investments among global equities, bonds and cash, and, generally to a lesser extent, other asset classes, including real estate, commodities, currencies, and alternative or non-traditional asset classes and strategies, primarily those accessed through derivative instruments.
The fund’s portfolio managers combine a top-down approach, emphasizing economic trends and current investment themes on a global basis, with bottom-up security selection, based on fundamental research, to allocate the fund’s investments among and within asset classes. In choosing investments, the portfolio managers consider key trends in global economic variables, such as gross domestic product (GDP), inflation and interest rates; investment themes, such as changing demographics, the impact of new technologies, and the globalization of industries and brands; relative valuations of equity securities, bonds, and cash; long-term trends in currency movements; and company fundamentals.
A Tale of Two Markets
The reporting period was one of sharply contrasting market conditions, although the dominant theme was that of the COVID-19 pandemic. Risk assets advanced sharply throughout the fourth quarter of 2019, culminating in a record new high for equity markets in February. This was initially driven by optimism around improving leading indicators, signs of a U.S./China trade truce with the signing of a “Phase One” trade deal and a continuing accommodative stance from central banks. Government bond yields moved higher, ceding some of the gains generated earlier in 2019.
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
However, change occurred in the middle of January 2020, when increasingly worrying developments around the spread of COVID-19 began to surface, causing turbulence in risk assets. The fears gathered pace, and equity markets experienced double-digit declines in February. The negative momentum further accelerated the following month, given further impetus by an oil price shock, evaporating liquidity and soaring volatility. Following the market’s bottom toward the end of March and helped by unprecedented levels of central bank and government intervention, risk assets rebounded sharply in April, and the focus shifted to the shape of a potential recovery.
Return-Seeking Core Constrains Fund Performance
The return-seeking core was the main detractor from performance. The equity positions within the return-seeking core were the primary culprit, particularly our holdings in the financials, consumer goods and oil and gas sectors. Individual stocks included Informa, a media and entertainment company, which suffered from the cancellation of exhibitions and trade fairs representing a significant portion of the company’s revenues. Royal Dutch Shell, an energy company, was impacted by the force of the oil price shock. Technology companyCisco was subject to a number of sector-specific headwinds. The fund’s synthetic exposure, largely through written put options on equity indices, designed to gain further upside exposure to markets, was also adversely affected by the sudden, sharp fall in the markets. Finally, the fund’s holdings in corporate bonds, emerging-market bonds and alternatives accounted for the balance of the negative contribution within the return-seeking core.
The main positive contributor to returns was the stabilizing layer, in particular the derivative positions and gold. Our decision to maintain some direct equity protection, primarily through short futures on equity market indices, served the portfolio well during the sharp fall in risk assets. Gold served as an effective indirect hedge over the period as a whole, reflecting the likely resurgence of longer-term inflation expectations following the waves of unprecedented central bank and government stimulus packages. It was not, however, immune to the liquidity squeeze witnessed at the end of the first quarter, recovering its poise as conditions became less volatile during the last month of the period.
Positioned for a Challenging Environment
We believe the pace of the April equity market rally reflects increasing optimism that a relatively rapid economic recovery will ensue. However, this is by no means a given. It is our opinion that much of the recent damage reflects pre-existing weaknesses in the post-global, financial-crisis, global economy. Moreover, we think that political efforts to support economic growth will not favor all companies equally, and it will be important to be highly selective when making capital-allocation decisions. In the near term, it is possible that strong businesses may get stronger, with the weak getting punished and even wiped out.
The portfolio is carefully balanced with a gross return-seeking core of approximately 63% and a stabilizing layer of about 37%. In this environment, we continue to emphasize resilient corporate exposures at the core of the portfolio, typically characterized by low levels of leverage and relatively dependable cash flows. The core is well diversified and draws on a range of return sources, including corporate bonds, emerging-market debt and alternatives. This is complemented by an array of actively managed direct and indirect hedges, not the least of which is gold, which we see as offering upside in a range of potential scenarios. More recently, we have been adding to our government bond exposure, hence our belief that
4
deflationary pressures may be a dominant force in the near term, as a result of the COVID-19 induced economic crisis, coupled with an oil price shock.
May 15, 2020
1 Total return includes reinvestment of dividends and any capital gains paid, and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. The fund’s return reflects the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through February 28, 2021, 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: FactSet — The London Interbank Offered Rate (LIBOR) is the average interest rate at which leading banks borrow funds of a sizable amount from other banks in the London market. LIBOR is the most widely used “benchmark” or reference rate for short-term interest rates. Investors cannot invest directly in any index.
3 Source: Lipper, Inc. — The FTSE One-Month U.S. Treasury Bill Index consists of the last one-month Treasury bill month-end rates. The FTSE One-Month U.S. Treasury Bill Index measures return equivalents of yield averages. The instruments are not marked to market. 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.
Bonds are subject generally to interest-rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
The fund’s performance will be influenced by political, social and economic factors affecting investments in foreign companies. Special risks associated with such companies include exposure to currency fluctuations, less liquidity, less developed or less efficient trading markets, lack of comprehensive company information, political instability, and differing auditing and legal standards.
Because the fund seeks to provide exposure to alternative or non-traditional (i.e., satellite) asset categories or investment strategies, the fund’s performance will be linked to the performance of these highly volatile asset categories and strategies. Accordingly, investors should consider purchasing shares of the fund only as part of an overall diversified portfolio and should be willing to assume the risks of potentially significant fluctuations in the value of fund shares.
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.
5
UNDERSTANDING YOUR FUND’S EXPENSES(Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in BNY Mellon Global Real Return Fund from November 1, 2019 to April 30, 2020. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended April 30, 2020 |
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| Class A | Class C | Class I | Class Y |
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Expense paid per $1,000† | $5.46 | $9.19 | $4.39 | $3.90 |
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Ending value (after expenses) | $960.40 | $956.20 | $961.50 | $961.70 |
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COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS(Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended April 30, 2020 |
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| Class A | Class C | Class I | Class Y |
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Expense paid per $1,000† | $5.62 | $9.47 | $4.52 | $4.02 |
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Ending value (after expenses) | $1,019.29 | $1,015.47 | $1,020.39 | $1,020.89 |
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†Expenses are equal to the fund’s annualized expense ratio of 1.12% for Class A, 1.89% for Class C, .90% for Class I and .80% for Class Y, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
6
CONSOLIDATED STATEMENT OF INVESTMENTS
April 30, 2020 (Unaudited)
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 24.4% | |||||||||
Argentina - .2% | |||||||||
Argentina, Sr. Unscd. Bonds | 6.88 | 4/22/2021 | 15,767,000 | 4,580,313 | |||||
Australia - 2.9% | |||||||||
Australia, Sr. Unscd. Bonds, Ser. 144 | AUD | 3.75 | 4/21/2037 | 7,778,000 | 6,911,062 | ||||
Australia, Sr. Unscd. Bonds, Ser. 147 | AUD | 3.25 | 6/21/2039 | 27,531,000 | 23,230,268 | ||||
Australia, Sr. Unscd. Bonds, Ser. 150 | AUD | 3.00 | 3/21/2047 | 47,449,000 | 39,952,865 | ||||
New South Wales, Govt. Gtd. Notes | AUD | 3.52 | 11/20/2025 | 6,226,300 | 6,035,619 | ||||
Treasury Corp. of Victoria, Govt. Gtd. Notes | AUD | 4.25 | 12/20/2032 | 4,474,000 | 3,762,017 | ||||
Treasury Corp. of Victoria, Govt. Gtd. Notes | AUD | 5.50 | 11/17/2026 | 2,943,000 | 2,475,453 | ||||
82,367,284 | |||||||||
Canada - 1.6% | |||||||||
Canada Housing Trust No. 1, Govt. Gtd. Bonds | CAD | 2.35 | 6/15/2027 | 57,565,000 | b | 45,401,889 | |||
Colombia - .6% | |||||||||
Colombia, Bonds | COP | 7.50 | 8/26/2026 | 66,043,400,000 | 17,850,001 | ||||
France - 2.0% | |||||||||
Altice France, Sr. Scd. Notes | 7.38 | 5/1/2026 | 10,108,000 | b | 10,609,862 | ||||
Banijay Entertainment, Sr. Scd. Notes | 5.38 | 3/1/2025 | 500,000 | b | 468,125 | ||||
BNP Paribas, Jr. Sub. Bonds | EUR | 6.13 | 6/17/2022 | 3,045,000 | 3,412,383 | ||||
BNP Paribas, Jr. Sub. Notes | 7.38 | 8/19/2025 | 10,352,000 | 10,760,335 | |||||
Electricite de France, Jr. Sub. Notes | GBP | 6.00 | 1/29/2026 | 800,000 | 1,041,899 | ||||
JCDecaux, Sr. Unscd. Notes | EUR | 2.00 | 10/24/2024 | 13,100,000 | 14,397,476 | ||||
Societe Generale, Jr. Sub. Bonds | 7.88 | 12/18/2023 | 10,538,000 | 10,341,097 | |||||
Societe Generale, Jr. Sub. Notes | 8.00 | 9/29/2025 | 6,932,000 | b,c | 7,040,798 | ||||
58,071,975 | |||||||||
Germany - .4% | |||||||||
Infineon Technologies, Jr. Sub. Bonds | EUR | 3.63 | 1/1/2028 | 6,500,000 | 6,573,377 | ||||
Infineon Technologies, Jr. Sub. Notes | EUR | 2.88 | 1/1/2025 | 5,300,000 | 5,434,086 | ||||
12,007,463 | |||||||||
Hungary - 2.3% | |||||||||
Hungary, Bonds | HUF | 3.00 | 8/21/2030 | 8,249,650,000 | 28,216,887 | ||||
Hungary, Bonds, Ser. 25/B | HUF | 5.50 | 6/24/2025 | 10,285,300,000 | 38,332,839 | ||||
66,549,726 | |||||||||
India - .1% | |||||||||
National Highways Authority of India, Sr. Unscd. Bonds | INR | 7.30 | 5/18/2022 | 160,000,000 | 2,185,694 | ||||
Indonesia - .9% | |||||||||
Indonesia, Bonds, Ser. FR72 | IDR | 8.25 | 5/15/2036 | 374,161,000,000 | 25,405,217 |
7
CONSOLIDATED STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 24.4% (continued) | |||||||||
Italy - .7% | |||||||||
Intesa Sanpaolo, Gtd. Notes | 7.70 | 9/17/2025 | 9,506,000 | b | 8,847,187 | ||||
UniCredit, Jr. Sub. Bonds | 8.00 | 6/3/2024 | 5,625,000 | 5,131,738 | |||||
UniCredit, Jr. Sub. Notes | EUR | 3.88 | 6/3/2027 | 8,882,000 | 7,020,609 | ||||
20,999,534 | |||||||||
Jersey - .3% | |||||||||
CPUK Finance, Scd. Bonds | GBP | 4.25 | 8/28/2022 | 7,387,000 | 8,321,118 | ||||
Luxembourg - .2% | |||||||||
Summer BC Holdco B, Sr. Scd. Bonds | EUR | 5.75 | 10/31/2026 | 6,583,000 | 6,435,953 | ||||
Mexico - 2.3% | |||||||||
Mexican Bonos, Bonds, Ser. M | MXN | 7.75 | 5/29/2031 | 624,995,400 | 27,555,189 | ||||
Mexican Bonos, Bonds, Ser. M20 | MXN | 7.50 | 6/3/2027 | 239,736,700 | 10,685,944 | ||||
Mexican Bonos, Bonds, Ser. M20 | MXN | 10.00 | 12/5/2024 | 278,480,500 | 13,630,535 | ||||
Mexico, Sr. Unscd. Bonds | 8.30 | 8/15/2031 | 59,000 | 78,470 | |||||
Sigma Alimentos SA de CV, Gtd. Notes | 4.13 | 5/2/2026 | 13,823,000 | 14,052,462 | |||||
66,002,600 | |||||||||
Mongolia - .2% | |||||||||
Mongolia, Sr. Unscd. Notes | 10.88 | 4/6/2021 | 4,887,000 | 4,825,912 | |||||
Netherlands - .9% | |||||||||
ING Groep | 4.88 | 5/16/2029 | 7,891,000 | c | 6,919,902 | ||||
ING Groep, Jr. Sub. Bonds | 6.75 | 4/16/2024 | 3,661,000 | 3,607,476 | |||||
Telefonica Europe, Gtd. Bonds, Ser. NC5 | EUR | 3.00 | 9/4/2023 | 9,700,000 | 10,343,528 | ||||
Ziggo, Sr. Scd. Bonds | EUR | 2.88 | 1/15/2030 | 3,571,000 | 3,721,530 | ||||
24,592,436 | |||||||||
New Zealand - 1.6% | |||||||||
New Zealand, Sr. Unscd. Bonds | NZD | 2.54 | 9/20/2040 | 14,000,000 | 12,277,962 | ||||
New Zealand, Sr. Unscd. Bonds, Ser. 427 | NZD | 4.50 | 4/15/2027 | 30,404,000 | 23,720,988 | ||||
New Zealand, Sr. Unscd. Bonds, Ser. 437 | NZD | 2.75 | 4/15/2037 | 14,508,000 | 11,112,327 | ||||
47,111,277 | |||||||||
Norway - .3% | |||||||||
DNB Bank, Jr. Sub. Bonds | 4.88 | 11/12/2024 | 9,274,000 | 8,757,243 | |||||
Philippines - .2% | |||||||||
Philippine, Sr. Unscd. Notes | 2.46 | 5/5/2030 | 7,101,000 | 7,259,005 | |||||
Qatar - .3% | |||||||||
Qatar, Sr. Unscd. Notes | 3.40 | 4/16/2025 | 7,406,000 | 7,892,315 | |||||
Spain - .9% | |||||||||
Banco Bilbao Vizcaya Argentaria, Jr. Sub. Bonds | EUR | 5.88 | 9/24/2023 | 6,000,000 | 6,160,763 | ||||
Banco Bilbao Vizcaya Argentaria, Jr. Sub. Notes | EUR | 6.00 | 3/29/2024 | 7,200,000 | 7,403,852 | ||||
Banco Santander, Jr. Sub. Bonds | EUR | 4.75 | 3/19/2025 | 7,800,000 | 7,330,191 |
8
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 24.4% (continued) | |||||||||
Spain - .9% (continued) | |||||||||
Banco Santander, Jr. Sub. Bonds | EUR | 5.25 | 9/29/2023 | 5,200,000 | 5,300,556 | ||||
26,195,362 | |||||||||
Sweden - .1% | |||||||||
Akelius Residential Property, Sub. Notes | EUR | 2.25 | 5/17/2081 | 3,521,000 | 3,475,876 | ||||
United Arab Emirates - .3% | |||||||||
Abu Dhabi, Sr. Unscd. Notes | 2.50 | 4/16/2025 | 8,306,000 | 8,579,002 | |||||
United Kingdom - 2.1% | |||||||||
Anglian Water Services Financing, Sr. Scd. Notes, Ser. A8 | GBP | 3.67 | 7/30/2024 | 151,000 | d | 374,777 | |||
British Telecommunications, Sr. Unscd. Notes | GBP | 3.50 | 4/25/2025 | 1,526,000 | d | 3,936,452 | |||
Dwr Cymru Financing, Scd. Notes | GBP | 1.86 | 3/31/2048 | 201,006 | d | 451,913 | |||
High Speed Rail Finance 1, Sr. Scd. Notes | GBP | 1.57 | 11/1/2038 | 317,910 | d | 563,709 | |||
Iron Mountain UK, Gtd. Notes | GBP | 3.88 | 11/15/2025 | 8,530,000 | 10,121,581 | ||||
Lloyds Banking Group, Jr. Sub. Bonds | EUR | 6.38 | 6/27/2025 | 8,562,000 | c | 9,144,526 | |||
Network Rail Infrastructure Finance, Govt. Gtd. Notes, Ser. RPI | GBP | 1.75 | 11/22/2027 | 1,230,696 | d | 2,084,523 | |||
Scotland Gas Networks, Insured Notes, Ser. A2S | GBP | 2.13 | 10/21/2022 | 300,000 | d | 617,584 | |||
TESCO, Sr. Unscd. Notes | GBP | 3.32 | 11/5/2025 | 3,960,000 | d | 9,821,397 | |||
TESCO, Sr. Unscd. Notes | GBP | 6.13 | 2/24/2022 | 74,000 | 100,542 | ||||
Tesco Property Finance 3, Sr. Scd. Bonds | GBP | 5.74 | 4/13/2040 | 3,255,647 | 5,350,841 | ||||
Vodafone Group, Jr. Sub. Bonds | GBP | 4.88 | 10/3/2078 | 1,808,000 | 2,324,555 | ||||
Vodafone Group, Jr. Sub. Notes | 7.00 | 4/4/2079 | 14,303,000 | 16,389,595 | |||||
61,281,995 | |||||||||
United States - 3.0% | |||||||||
CCO Holdings, Sr. Unscd. Notes | 5.50 | 5/1/2026 | 6,249,000 | b | 6,535,892 | ||||
CEMEX Finance, Sr. Scd. Notes | 6.00 | 4/1/2024 | 2,982,000 | c | 2,778,628 | ||||
CommScope, Sr. Scd. Notes | 5.50 | 3/1/2024 | 4,157,000 | b | 4,178,616 | ||||
JPMorgan Chase & Co., Sr. Unscd. Notes | 2.08 | 4/22/2026 | 28,114,000 | 28,526,374 | |||||
Laureate Education, Gtd. Notes | 8.25 | 5/1/2025 | 8,049,000 | b | 8,272,360 | ||||
Refinitiv US Holdings, Sr. Unscd. Notes | EUR | 6.88 | 11/15/2026 | 1,526,000 | 1,785,898 | ||||
Sprint, Gtd. Notes | 7.13 | 6/15/2024 | 3,786,000 | 4,269,472 | |||||
Sprint Capital, Gtd. Notes | 8.75 | 3/15/2032 | 4,597,000 | 6,480,161 | |||||
T-Mobile USA, Gtd. Notes | 6.00 | 3/1/2023 | 8,151,000 | 8,272,042 | |||||
T-Mobile USA, Gtd. Notes | 6.00 | 4/15/2024 | 6,524,000 | 6,692,645 |
9
CONSOLIDATED STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 24.4% (continued) | |||||||||
United States - 3.0% (continued) | |||||||||
T-Mobile USA, Sr. Scd. Notes | 3.88 | 4/15/2030 | 6,377,000 | b | 7,007,366 | ||||
84,799,454 | |||||||||
TotalBonds and Notes | 700,948,644 | ||||||||
Description | Shares | Value ($) | |||||||
Common Stocks - 40.1% | |||||||||
Australia - .6% | |||||||||
Newcrest Mining | 485,599 | e | 8,875,910 | ||||||
The Star Entertainment Group | 5,075,926 | 9,851,331 | |||||||
18,727,241 | |||||||||
Canada - 1.2% | |||||||||
Barrick Gold | 590,944 | c | 15,199,080 | ||||||
Intact Financial | 190,010 | 18,082,995 | |||||||
33,282,075 | |||||||||
China - 1.8% | |||||||||
Alibaba Group Holding, ADR | 72,799 | f | 14,754,173 | ||||||
New Oriental Education & Technology Group, ADR | 98,250 | f | 12,542,595 | ||||||
Ping An Insurance Group Company of China, Cl. H | 841,000 | 8,527,532 | |||||||
Tencent Holdings | 251,517 | 13,343,758 | |||||||
Tencent Music Entertainment Group, ADR | 250,869 | f | 2,862,415 | ||||||
52,030,473 | |||||||||
Denmark - .8% | |||||||||
Orsted | 233,717 | b | 23,664,159 | ||||||
France - 3.2% | |||||||||
L'Oreal | 47,920 | f | 13,945,930 | ||||||
LVMH Moet Hennessy Louis Vuitton | 29,493 | 11,407,588 | |||||||
Sanofi | 84,649 | 8,281,522 | |||||||
Thales | 202,899 | 15,386,991 | |||||||
Total | 378,110 | 13,633,645 | |||||||
Vivendi | 1,300,436 | 28,107,905 | |||||||
90,763,581 | |||||||||
Germany - 4.6% | |||||||||
Bayer | 507,667 | 33,596,314 | |||||||
Continental | 95,913 | f | 8,102,860 | ||||||
Deutsche Wohnen | 720,786 | 29,246,911 | |||||||
LEG Immobilien | 234,374 | f | 26,952,151 | ||||||
SAP | 288,395 | 34,396,228 | |||||||
132,294,464 | |||||||||
Guernsey - .1% | |||||||||
Amedeo Air Four Plus | 4,006,781 | 1,614,773 |
10
Description | Shares | Value ($) | |||||||
Common Stocks - 40.1%(continued) | |||||||||
Hong Kong - 2.0% | |||||||||
AIA Group | 3,769,400 | 34,310,784 | |||||||
Link REIT | 2,755,000 | 24,435,509 | |||||||
58,746,293 | |||||||||
India - .4% | |||||||||
Housing Development Finance | 414,470 | f | 10,445,442 | ||||||
Ireland - 1.4% | |||||||||
Accenture, Cl. A | 152,195 | 28,184,992 | |||||||
Medtronic | 131,659 | 12,853,868 | |||||||
41,038,860 | |||||||||
Japan - .4% | |||||||||
Suzuki Motor | 345,800 | 11,098,053 | |||||||
Netherlands - .9% | |||||||||
ASML Holding | 40,947 | 12,163,259 | |||||||
Royal Dutch Shell, Cl. B | 864,033 | 14,024,931 | |||||||
26,188,190 | |||||||||
South Korea - 1.2% | |||||||||
Macquarie Korea Infrastructure Fund | 1,461,298 | 13,761,076 | |||||||
Samsung SDI | 88,798 | 21,327,204 | |||||||
35,088,280 | |||||||||
Switzerland - 3.2% | |||||||||
Alcon | 367,764 | f | 19,429,823 | ||||||
Lonza Group | 29,116 | 12,725,369 | |||||||
Novartis | 310,481 | 26,485,914 | |||||||
Roche Holding | 23,004 | 8,001,448 | |||||||
Zurich Insurance Group | 78,988 | 25,179,607 | |||||||
91,822,161 | |||||||||
Thailand - .1% | |||||||||
Bangkok Bank | 385,745 | 1,230,533 | |||||||
Kasikornbank | 181,240 | 478,869 | |||||||
1,709,402 | |||||||||
United Kingdom - 7.9% | |||||||||
Anglo American | 520,335 | 9,290,523 | |||||||
Associated British Foods | 505,438 | 12,059,880 | |||||||
BAE Systems | 1,471,623 | f | 9,433,927 | ||||||
Diageo | 900,552 | 31,217,103 | |||||||
Ferguson | 175,465 | 12,690,843 | |||||||
Informa | 2,060,786 | 11,366,275 | |||||||
Linde | 168,032 | 30,916,208 | |||||||
Octopus Renewables Infrastructure Trust | 11,367,934 | c,f | 14,780,327 | ||||||
Persimmon | 315,996 | 8,787,461 | |||||||
Prudential | 2,076,899 | 29,581,110 | |||||||
RELX | 1,165,499 | 26,453,503 |
11
CONSOLIDATED STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||||
Common Stocks - 40.1%(continued) | |||||||||
United Kingdom - 7.9% (continued) | |||||||||
Travis Perkins | 512,506 | 6,717,427 | |||||||
Unilever | 472,379 | 23,613,236 | |||||||
226,907,823 | |||||||||
United States - 10.3% | |||||||||
Abbott Laboratories | 197,628 | 18,199,563 | |||||||
Alphabet, Cl. A | 6,871 | f | 9,253,176 | ||||||
Amazon.com | 4,779 | f | 11,823,246 | ||||||
Apple | 51,200 | 15,042,560 | |||||||
Brixmor Property Group | 1,424,553 | g | 16,311,132 | ||||||
CMS Energy | 237,982 | 13,586,392 | |||||||
Ecolab | 88,332 | 17,092,242 | |||||||
Eversource Energy | 399,604 | 32,248,043 | |||||||
Fidelity National Information Services | 82,737 | 10,912,183 | |||||||
General Electric | 1,066,936 | 7,255,165 | |||||||
Lennar, Cl. A | 196,779 | 9,852,725 | |||||||
Mastercard, Cl. A | 91,948 | 25,282,942 | |||||||
Microsoft | 187,918 | 33,676,785 | |||||||
Newmont | 132,681 | 7,891,866 | |||||||
NIKE, Cl. B | 136,530 | 11,902,685 | |||||||
PepsiCo | 166,223 | 21,989,641 | |||||||
The Goldman Sachs Group | 139,434 | 25,574,984 | |||||||
The Sherwin-Williams Company | 13,963 | 7,489,334 | |||||||
295,384,664 | |||||||||
TotalCommon Stocks | 1,150,805,934 | ||||||||
Description /Number of Contracts | Exercise | Expiration Date | Notional Amount ($) | ||||||
Options Purchased - 2.1% | |||||||||
Call Options - 1.3% | |||||||||
iShares MSCI Emerging Markets, Contracts 32,504 | 47.73 | 6/19/2020 | 1,551,416 | 130,016 | |||||
S&P 500 Index, Contracts 1,876 | 3,000 | 12/18/2020 | 112,800,000 | 37,606,296 | |||||
Standard & Poor's 500 E-mini June Future, Contracts 1,885 | 3,450 | 6/19/2020 | 325,162,500 | 122,525 | |||||
37,858,837 | |||||||||
Put Options - .8% | |||||||||
S&P 500 Index, Contracts 1,200 | 2,650 | 12/18/2020 | 318,000,000 | 22,362,000 | |||||
U.S Treasury Bond Future, Contracts 1,173 | 154.00 | 5/22/2020 | 99,800,000 | 36,655 | |||||
22,398,655 | |||||||||
TotalOptions Purchased | 60,257,492 |
12
Description | Preferred Dividend | Shares | Value ($) | ||||||
Preferred Stocks - .8% | |||||||||
South Korea - .8% | |||||||||
Samsung Electronics | 3.49 | 678,698 | 23,636,810 | ||||||
Exchange-Traded Funds - 16.3% | |||||||||
United States - 16.3% | |||||||||
Graniteshares Gold Trust | 3,071,743 | f,h,i | 51,543,848 | ||||||
iShares Gold Trust | 8,129,838 | f,h | 130,971,690 | ||||||
iShares iBoxx Investment Grade Corporate Bond ETF | 436,182 | 56,341,629 | |||||||
SPDR Gold MiniShares Trust | 5,809,146 | f,h | 97,826,019 | ||||||
SPDR Gold Shares | 825,747 | f,h | 131,128,624 | ||||||
TotalExchange-Traded Funds | 467,811,810 | ||||||||
Description | 1-Day | ||||||||
Investment Companies - 5.1% | |||||||||
Closed-end Investment Companies - 3.1% | |||||||||
Foresight Solar Fund | 8,288,519 | 11,489,817 | |||||||
Greencoat UK Wind | 15,232,044 | 25,944,305 | |||||||
Hipgnosis Songs Fund | 4,354,473 | 5,643,496 | |||||||
JLEN Environmental Assets Group | 4,341,058 | c | 6,153,271 | ||||||
Riverstone Credit Opportunities Income | 3,871,998 | 1,984,399 | |||||||
The Aquila European Renewables Income Fund | 9,220,792 | 10,180,593 | |||||||
The Gresham House Energy Storage Fund | 1,000,000 | 1,253,179 | |||||||
The Renewables Infrastructure Group | 9,357,751 | 14,526,762 | |||||||
US Solar Fund | 12,016,238 | c,i | 11,445,467 | ||||||
88,621,289 | |||||||||
Registered Investment Companies - 2.0% | |||||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 0.33 | 57,837,005 | j | 57,837,005 | |||||
TotalInvestment Companies | 146,458,294 |
13
CONSOLIDATED STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | 1-Day | Shares | Value ($) | ||||||
Investment of Cash Collateral for Securities Loaned - .7% | |||||||||
Registered Investment Companies - .7% | |||||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 0.33 | 18,891,290 | j | 18,891,290 | |||||
Total Investments(cost $2,508,296,294) | 89.5% | 2,568,810,274 | |||||||
Cash and Receivables (Net) | 10.5% | 300,236,281 | |||||||
Net Assets | 100.0% | 2,869,046,555 |
ADR—American Depository Receipt
ETF—Exchange-Traded Fund
REIT—Real Estate Investment Trust
AUD—Australian Dollar
CAD—Canadian Dollar
COP—Colombian Peso
EUR—Euro
GBP—British Pound
HUF—Hungarian Forint
IDR—Indonesian Rupiah
INR—Indian Rupee
MXN—Mexican Peso
NZD—New Zealand Dollar
THB—Thai Baht
a Amount stated in U.S. Dollars unless otherwise noted above.
b Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2020, these securities were valued at $122,026,254 or 4.25% of net assets.
c Security, or portion thereof, on loan. At April 30, 2020, the value of the fund’s securities on loan was $21,663,846 and the value of the collateral was $22,451,252, consisting of cash collateral of $18,891,290 and U.S. Government & Agency securities valued at $3,559,962.
d Principal amount for accrual purposes is periodically adjusted based on changes in the Consumer Price Index.
e The valuation of this security has been determined in good faith by management under the direction of the Board of Directors. At April 30, 2020, the value of this security amounted to $8,875,910 or .31% of net assets.
f Non-income producing security.
g Investment in real estate investment trust within the United States.
h These securities are wholly-owned by the Subsidiary referenced in Note 1.
i Investment in non-controlled affiliates (cost $61,609,053).
j Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
14
Portfolio Summary (Unaudited)† | Value (%) |
Investment Companies | 19.0 |
Foreign Governmental | 13.0 |
Banks | 5.1 |
Health Care | 4.9 |
Information Technology | 4.1 |
Real Estate | 4.0 |
Insurance | 3.7 |
Telecommunication Services | 3.5 |
Closed-End Investment Companies | 3.1 |
Utilities | 2.5 |
Options Purchased | 2.1 |
Consumer Discretionary | 2.0 |
Chemicals | 1.9 |
Beverage Products | 1.8 |
Diversified Financials | 1.8 |
Media | 1.7 |
Commercial & Professional Services | 1.7 |
Semiconductors & Semiconductor Equipment | 1.7 |
Technology Hardware & Equipment | 1.5 |
Metals & Mining | 1.4 |
Internet Software & Services | 1.3 |
Consumer Staples | 1.3 |
Food Products | 1.3 |
Energy | 1.0 |
Aerospace & Defense | .9 |
Consumer Durables & Apparel | .8 |
Advertising | .7 |
Automobiles & Components | .7 |
Financials | .5 |
Industrial | .3 |
Building Materials | .1 |
Transportation | .1 |
89.5 |
† Based on net assets.
See notes to consolidated financial statements.
15
CONSOLIDATED STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS(Unaudited)
Investment Companies | Value | Purchases($) | Sales($) | Value | Net | Dividends/ |
Registered Investment Companies; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 132,939,152 | 1,632,730,825 | (1,707,832,972) | 57,837,005 | 2.0 | 907,431 |
Investment of Cash Collateral for Securities Loaned; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1,032,500 | 328,542,666 | (310,683,876) | 18,891,290 | .7 | - |
Total | 133,971,652 | 1,962,305,991 | (2,018,516,848) | 76,728,295 | 2.7 | 907,431 |
See notes to consolidated financial statements.
In addition, an affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Investments in affiliated companies during the period ended April 30, 2020 were as follows:
Investment | Value | Purchases($) | Sales($) | Net Realized |
Graniteshares | 41,998,932 | 7,580,791 | - | - |
The Aquila European Renewables Income Fund | 11,062,901 | 43,999 | - | - |
US Solar Fund | 11,798,607 | 7,970 | - | - |
Total | 22,861,508 | 51,969 | - | - |
Investment | Change in Net Unrealized Appreciation | Value | Net | Dividends/ |
Graniteshares | 1,964,125 | 51,543,848 | 1.8 | - |
The Aquila European Renewables Income Fund | (926,307) | 10,180,593 | .4 | 150,474 |
US Solar Fund | (361,110) | 11,445,467 | .4 | 120,162 |
Total | (1,287,417) | 73,169,908 | 2.6 | 270,636 |
† For Graniteshares Gold Trust the value represents market value at March 31, 2020 of which the fund has ownership of at least 5%.
†† For The Aquila European Renewables Income Fund as of March 31, 2020 the fund no longer has ownership of at least 5%.
See notes to consolidated financial statements.
16
CONSOLIDATED STATEMENT OF FUTURES
April 30, 2020 (Unaudited)
Description | Number of | Expiration | Notional | Value ($) | Unrealized Appreciation (Depreciation) ($) | |
Futures Long | ||||||
U.S. Treasury 10 Year Notes | 1,832 | 6/19/2020 | 243,246,804 | 254,762,500 | 11,515,696 | |
U.S. Treasury Long Bond | 2,297 | 6/19/2020 | 416,972,750 | 415,828,781 | (1,143,969) | |
Futures Short | ||||||
DJ Euro Stoxx 50 | 4,379 | 6/19/2020 | 128,212,451a | 138,539,253 | (10,326,802) | |
Mini MSCI Emerging Markets Index | 416 | 6/19/2020 | 18,307,944 | 18,842,720 | (534,776) | |
Standard & Poor's 500 E-mini | 1,230 | 6/19/2020 | 168,957,981 | 178,497,600 | (9,539,619) | |
Gross Unrealized Appreciation | 11,515,696 | |||||
Gross Unrealized Depreciation | (21,545,166) |
a Notional amounts in foreign currency have been converted to USD using relevant foreign exchange rates.
See notes to consolidated financial statements.
17
CONSOLIDATED STATEMENT OF OPTIONS WRITTEN
April 30, 2020 (Unaudited)
Description/ Contracts | Exercise Price | Expiration Date | Notional Amount | a | Value ($) | |
Call Options: | ||||||
S&P 500 Index, | 3,300 | 12/18/2020 | 619,080,000 | (12,535,432) | ||
Put Options: | ||||||
Apple Inc, | 285 | 5/15/2020 | 14,022,000 | (327,180) | ||
Euro Stoxx 50 Price EUR, | 3,575 | 5/15/2020 | 42,792,750 | EUR | (8,826,647) | |
Euro Stoxx 50 Price EUR, | 3,625 | 6/19/2020 | 58,652,500 | EUR | (13,103,100) | |
S&P500 Emini Fut Jun20, | 2,650 | 6/19/2020 | 140,715,000 | (3,000,750) | ||
Total Options Written | (37,793,109) |
a Notional amount stated in U.S. Dollars unless otherwise indicated.
EUR—Euro
See notes to consolidated financial statements.
18
CONSOLIDATED STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTSApril 30, 2020 (Unaudited)
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation)($) |
Barclays Capital | |||||
United States Dollar | 1,392,996 | British Pound | 1,116,510 | 7/15/2020 | (13,693) |
British Pound | 1,116,510 | United States Dollar | 1,392,542 | 5/1/2020 | 13,706 |
Hong Kong Dollar | 8,005,094 | United States Dollar | 1,032,660 | 5/15/2020 | (280) |
United States Dollar | 1,032,817 | Hong Kong Dollar | 8,005,094 | 5/4/2020 | 284 |
CIBC World Markets Corp. | |||||
United States Dollar | 1,195,657 | Euro | 1,099,751 | 7/15/2020 | (11,416) |
Hungarian Forint | 2,980,394,076 | United States Dollar | 9,290,170 | 7/15/2020 | (34,221) |
Swiss Franc | 415,396 | United States Dollar | 444,600 | 5/15/2020 | (14,071) |
United States Dollar | 6,926,740 | Swiss Franc | 6,702,210 | 5/15/2020 | (19,635) |
Canadian Dollar | 31,287,000 | United States Dollar | 22,297,314 | 5/15/2020 | 179,948 |
United States Dollar | 17,395,204 | British Pound | 14,138,755 | 7/15/2020 | (418,186) |
Australian Dollar | 9,469,169 | United States Dollar | 5,761,432 | 6/17/2020 | 410,030 |
United States Dollar | 7,302,213 | Hong Kong Dollar | 56,724,797 | 5/15/2020 | (13,324) |
Citigroup | |||||
Hong Kong Dollar | 52,504,000 | United States Dollar | 6,764,283 | 5/15/2020 | 6,917 |
Swiss Franc | 492,125 | United States Dollar | 507,049 | 5/15/2020 | 3,004 |
United States Dollar | 1,912,160 | British Pound | 1,537,409 | 7/15/2020 | (24,819) |
J.P. Morgan Securities | |||||
Australian Dollar | 5,594,356 | United States Dollar | 3,386,431 | 6/17/2020 | 259,650 |
United States Dollar | 3,207,886 | Australian Dollar | 5,184,156 | 6/17/2020 | (170,850) |
Euro | 852,470 | United States Dollar | 923,110 | 7/15/2020 | 12,552 |
United States Dollar | 452,385,995 | Euro | 417,053,510 | 7/15/2020 | (5,367,045) |
United States Dollar | 2,654,889 | Swiss Franc | 2,562,808 | 5/15/2020 | (1,284) |
Swedish Krona | 81,304,733 | United States Dollar | 8,099,430 | 7/15/2020 | 240,733 |
United States Dollar | 10,187,614 | Swedish Krona | 103,183,466 | 7/15/2020 | (396,849) |
19
CONSOLIDATED STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS (Unaudited) (continued)
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation)($) |
J.P. Morgan Securities (continued) | |||||
British Pound | 132,371 | United States Dollar | 166,260 | 7/15/2020 | 513 |
United States Dollar | 11,603,887 | British Pound | 9,367,540 | 7/15/2020 | (198,259) |
RBS Securities | |||||
British Pound | 768,840 | United States Dollar | 961,592 | 5/1/2020 | 6,764 |
United States Dollar | 28,982,191 | Mexican Peso | 645,245,000 | 6/17/2020 | 2,415,878 |
United States Dollar | 961,896 | British Pound | 768,840 | 7/15/2020 | (6,764) |
United States Dollar | 1,489,931 | Swiss Franc | 1,446,403 | 5/15/2020 | (9,165) |
Canadian Dollar | 2,354,282 | United States Dollar | 1,774,388 | 5/15/2020 | (83,020) |
United States Dollar | 8,959,276 | Indian Rupee | 702,676,000 | 6/17/2020 | (350,959) |
State Street Bank and Trust Company | |||||
Hungarian Forint | 504,527,006 | United States Dollar | 1,568,812 | 7/15/2020 | (1,947) |
United States Dollar | 89,710,735 | Hungarian Forint | 30,290,470,973 | 7/15/2020 | (4,359,726) |
Australian Dollar | 21,824,000 | United States Dollar | 14,259,038 | 6/17/2020 | (35,406) |
United States Dollar | 120,355,371 | Australian Dollar | 186,339,545 | 6/17/2020 | (1,090,061) |
United States Dollar | 20,014,525 | Danish Krone | 133,795,454 | 6/17/2020 | 346,304 |
United States Dollar | 248,859,703 | British Pound | 202,517,320 | 7/15/2020 | (6,291,475) |
Euro | 6,920,038 | United States Dollar | 7,520,428 | 5/4/2020 | 63,409 |
United States Dollar | 34,807,630 | Indonesian Rupiah | 531,216,641,000 | 6/17/2020 | (679,127) |
Hong Kong Dollar | 16,170,783 | United States Dollar | 2,085,859 | 5/15/2020 | (387) |
United States Dollar | 83,414,381 | Hong Kong Dollar | 648,455,647 | 5/15/2020 | (213,973) |
New Zealand Dollar | 883,575 | United States Dollar | 526,660 | 5/15/2020 | 15,316 |
United States Dollar | 52,173,184 | New Zealand Dollar | 81,869,119 | 5/15/2020 | 1,955,486 |
South Korean Won | 3,475,807,000 | United States Dollar | 2,878,277 | 6/17/2020 | (23,264) |
United States Dollar | 61,565,500 | South Korean Won | 74,353,269,000 | 6/17/2020 | 492,043 |
Swiss Franc | 5,261,000 | United States Dollar | 5,394,780 | 5/15/2020 | 57,881 |
20
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation)($) |
State Street Bank and Trust Company (continued) | |||||
United States Dollar | 84,811,729 | Swiss Franc | 81,708,581 | 5/15/2020 | 126,461 |
United States Dollar | 23,919,793 | Euro | 21,991,798 | 7/15/2020 | (218,146) |
Canadian Dollar | 5,525,891 | United States Dollar | 4,168,616 | 5/15/2020 | (198,696) |
United States Dollar | 116,039,568 | Canadian Dollar | 154,064,812 | 5/15/2020 | 5,356,053 |
UBS Securities | |||||
Mexican Peso | 645,245,000 | United States Dollar | 27,225,123 | 6/17/2020 | (658,810) |
Canadian Dollar | 11,106,059 | United States Dollar | 8,116,589 | 5/15/2020 | (137,755) |
Swiss Franc | 409,018 | United States Dollar | 436,517 | 5/15/2020 | (12,599) |
Hong Kong Dollar | 51,255,000 | United States Dollar | 6,605,699 | 5/15/2020 | 4,424 |
Gross Unrealized Appreciation | 11,967,356 | ||||
Gross Unrealized Depreciation | (21,055,212) |
See notes to consolidated financial statements.
21
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
April 30, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 2,369,958,946 |
| 2,429,092,664 |
| ||
Affiliated issuers |
| 138,337,348 |
| 139,717,610 |
| |
Cash |
|
|
|
| 10,758,297 |
|
Cash denominated in foreign currency |
|
| 39,800,359 |
| 40,163,967 |
|
Cash collateral held by broker—Note 4 |
| 288,605,239 |
| |||
Receivable for investment securities sold |
| 23,598,462 |
| |||
Dividends, interest and securities lending income receivable |
| 14,655,410 |
| |||
Receivable for shares of Common Stock subscribed |
| 13,069,907 |
| |||
Unrealized appreciation on forward foreign |
| 11,967,356 |
| |||
Receivable for futures variation margin—Note 4 |
| 7,772,331 |
| |||
Tax reclaim receivable |
| 2,126,808 |
| |||
Prepaid expenses |
|
|
|
| 190,671 |
|
|
|
|
|
| 2,981,718,722 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
| 1,830,780 |
| |||
Outstanding options written, at value |
| 37,793,109 |
| |||
Payable for investment securities purchased |
| 27,861,553 |
| |||
Unrealized depreciation on forward foreign |
| 21,055,212 |
| |||
Liability for securities on loan—Note 1(c) |
| 18,891,290 |
| |||
Payable for shares of Common Stock redeemed |
| 4,897,119 |
| |||
Directors’ fees and expenses payable |
| 42,469 |
| |||
Other accrued expenses |
|
|
|
| 300,635 |
|
|
|
|
|
| 112,672,167 |
|
Net Assets ($) |
|
| 2,869,046,555 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 2,933,073,431 |
|
Total distributable earnings (loss) |
|
|
|
| (64,026,876) |
|
Net Assets ($) |
|
| 2,869,046,555 |
|
Net Asset Value Per Share | Class A | Class C | Class I | Class Y |
|
Net Assets ($) | 37,218,938 | 26,564,247 | 1,719,890,658 | 1,085,372,712 |
|
Shares Outstanding | 2,575,528 | 1,891,725 | 118,707,378 | 74,806,786 |
|
Net Asset Value Per Share ($) | 14.45 | 14.04 | 14.49 | 14.51 |
|
|
|
|
|
|
|
See notes to consolidated financial statements. |
|
|
|
|
|
22
CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended April 30, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Interest (net of $41,660 foreign taxes withheld at source) |
|
| 20,841,017 |
| ||
Dividends (net of $1,320,682 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 14,048,666 |
| ||
Affiliated issuers |
|
| 1,178,067 |
| ||
Income from securities lending—Note 1(c) |
|
| 37,574 |
| ||
Total Income |
|
| 36,105,324 |
| ||
Expenses: |
|
|
|
| ||
Management fee—Note 3(a) |
|
| 11,151,025 |
| ||
Shareholder servicing costs—Note 3(c) |
|
| 1,017,224 |
| ||
Subsidiary management fee—Note 3(a) |
|
| 914,965 |
| ||
Custodian fees—Note 3(c) |
|
| 203,658 |
| ||
Directors’ fees and expenses—Note 3(d) |
|
| 139,584 |
| ||
Registration fees |
|
| 134,687 |
| ||
Professional fees |
|
| 118,394 |
| ||
Distribution fees—Note 3(b) |
|
| 105,697 |
| ||
Prospectus and shareholders’ reports |
|
| 89,402 |
| ||
Loan commitment fees—Note 2 |
|
| 30,877 |
| ||
Chief Compliance Officer fees—Note 3(c) |
|
| 6,707 |
| ||
Miscellaneous |
|
| 93,295 |
| ||
Total Expenses |
|
| 14,005,515 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (1,012,229) |
| ||
Net Expenses |
|
| 12,993,286 |
| ||
Investment Income—Net |
|
| 23,112,038 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions | (1,932,238) |
| ||||
Net realized gain (loss) on options transactions | (69,672,342) |
| ||||
Net realized gain (loss) on futures | 55,309,956 |
| ||||
Net realized gain (loss) on forward foreign currency exchange contracts | 34,954,259 |
| ||||
Net Realized Gain (Loss) |
|
| 18,659,635 |
| ||
Net change in unrealized appreciation (depreciation) on investments | (166,716,685) |
| ||||
Net change in unrealized appreciation (depreciation) on | (14,040,814) |
| ||||
Net change in unrealized appreciation (depreciation) on futures | (2,475,771) |
| ||||
Net change in unrealized appreciation (depreciation) on | 7,215,246 |
| ||||
Net Change in Unrealized Appreciation (Depreciation) |
|
| (176,018,024) |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (157,358,389) |
| ||
Net (Decrease) in Net Assets Resulting from Operations |
| (134,246,351) |
| |||
|
|
|
|
|
|
|
See notes to consolidated financial statements. |
23
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 23,112,038 |
|
|
| 42,113,399 |
| |
Net realized gain (loss) on investments |
| 18,659,635 |
|
|
| 66,375,978 |
| ||
Net change in unrealized appreciation |
| (176,018,024) |
|
|
| 128,798,735 |
| ||
Net Increase (Decrease) in Net Assets | (134,246,351) |
|
|
| 237,288,112 |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class A |
|
| (827,874) |
|
|
| (809,690) |
| |
Class C |
|
| (399,635) |
|
|
| (698,524) |
| |
Class I |
|
| (38,698,098) |
|
|
| (25,605,203) |
| |
Class Y |
|
| (30,081,580) |
|
|
| (29,691,512) |
| |
Total Distributions |
|
| (70,007,187) |
|
|
| (56,804,929) |
| |
Capital Stock Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class A |
|
| 11,011,845 |
|
|
| 19,399,745 |
| |
Class C |
|
| 4,811,733 |
|
|
| 8,715,536 |
| |
Class I |
|
| 664,896,662 |
|
|
| 1,133,561,275 |
| |
Class Y |
|
| 81,269,227 |
|
|
| 631,591,327 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class A |
|
| 744,385 |
|
|
| 794,942 |
| |
Class C |
|
| 331,035 |
|
|
| 664,217 |
| |
Class I |
|
| 36,636,497 |
|
|
| 23,820,861 |
| |
Class Y |
|
| 17,674,049 |
|
|
| 15,050,436 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class A |
|
| (7,796,921) |
|
|
| (12,922,400) |
| |
Class C |
|
| (4,605,660) |
|
|
| (11,263,083) |
| |
Class I |
|
| (417,108,335) |
|
|
| (380,696,411) |
| |
Class Y |
|
| (198,473,508) |
|
|
| (271,469,040) |
| |
Increase (Decrease) in Net Assets | 189,391,009 |
|
|
| 1,157,247,405 |
| |||
Total Increase (Decrease) in Net Assets | (14,862,529) |
|
|
| 1,337,730,588 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 2,883,909,084 |
|
|
| 1,546,178,496 |
| |
End of Period |
|
| 2,869,046,555 |
|
|
| 2,883,909,084 |
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Capital Share Transactions (Shares): |
| ||||||||
Class Aa,b |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 723,350 |
|
|
| 1,300,891 |
| |
Shares issued for distributions reinvested |
|
| 48,716 |
|
|
| 56,904 |
| |
Shares redeemed |
|
| (527,912) |
|
|
| (869,063) |
| |
Net Increase (Decrease) in Shares Outstanding | 244,154 |
|
|
| 488,732 |
| |||
Class Cb |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 324,483 |
|
|
| 604,229 |
| |
Shares issued for distributions reinvested |
|
| 22,232 |
|
|
| 48,768 |
| |
Shares redeemed |
|
| (323,416) |
|
|
| (784,607) |
| |
Net Increase (Decrease) in Shares Outstanding | 23,299 |
|
|
| (131,610) |
| |||
Class Ia,b |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 44,048,730 |
|
|
| 77,305,657 |
| |
Shares issued for distributions reinvested |
|
| 2,392,979 |
|
|
| 1,702,706 |
| |
Shares redeemed |
|
| (28,932,104) |
|
|
| (25,731,141) |
| |
Net Increase (Decrease) in Shares Outstanding | 17,509,605 |
|
|
| 53,277,222 |
| |||
Class Ya,b |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 5,325,580 |
|
|
| 42,884,929 |
| |
Shares issued for distributions reinvested |
|
| 1,153,658 |
|
|
| 1,075,031 |
| |
Shares redeemed |
|
| (13,191,333) |
|
|
| (18,302,919) |
| |
Net Increase (Decrease) in Shares Outstanding | (6,712,095) |
|
|
| 25,657,041 |
| |||
|
|
|
|
|
|
|
|
|
|
aDuring the period ended April 30, 2020, 67,249 Class A shares representing $1,027,572 were exchanged for 66,899 Class Y shares and 693,126 Class Y shares representing $10,512,981 were exchanged for 694,069 Class I shares. | |||||||||
bDuring the period ended October 31, 2019, 642 Class A shares representing $9,269 were exchanged for 640 Class I shares, 577,850 Class I shares representing $9,118,377 were exchanged for 577,140 Class Y shares and Class C shares representing $5,378 were automatically converted to 351 Class A shares. | |||||||||
See notes to consolidated financial statements. |
25
CONSOLIDATED FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||
April 30, 2020 | Year Ended October 31, | |||||
Class A Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 15.37 | 14.32 | 14.39 | 14.72 | 14.61 | 15.11 |
Investment Operations: | ||||||
Investment income—neta | .10 | .23 | .22 | .15 | .17 | .17 |
Net realized and unrealized | (.69) | 1.29 | (.23) | (.09) | .51 | .01b |
Total from Investment Operations | (.59) | 1.52 | (.01) | .06 | .68 | .18 |
Distributions: | ||||||
Dividends from | (.33) | (.47) | (.06) | (.39) | (.57) | (.68) |
Dividends from net realized | - | - | - | - | - | - |
Total Distributions | (.33) | (.47) | (.06) | (.39) | (.57) | (.68) |
Net asset value, end of period | 14.45 | 15.37 | 14.32 | 14.39 | 14.72 | 14.61 |
Total Return (%)c | (3.96)d | 10.97 | (.05) | .47 | 4.87 | 1.22 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.18e | 1.12 | 1.13 | 1.17 | 1.16 | 1.15 |
Ratio of net expenses to | 1.12e | 1.11 | 1.13 | 1.15 | 1.15 | 1.15 |
Ratio of net investment income | 1.31e | 1.59 | 1.55 | 1.09 | 1.15 | 1.16 |
Portfolio Turnover Rate | 52.66d | 99.45 | 85.64 | 79.00 | 57.17 | 68.92 |
Net Assets, end of period ($ x 1,000) | 37,219 | 35,843 | 26,380 | 41,008 | 157,624 | 49,672 |
a Based on average shares outstanding.
b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
See notes to consolidated financial statements.
26
Six Months Ended | ||||||
April 30, 2020 | Year Ended October 31, | |||||
Class C Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 14.89 | 13.87 | 13.99 | 14.34 | 14.26 | 14.79 |
Investment Operations: | ||||||
Investment income—neta | .04 | .12 | .11 | .08 | .06 | .06 |
Net realized and unrealized | (.68) | 1.26 | (.23) | (.12) | .50 | .02b |
Total from Investment Operations | (.64) | 1.38 | (.12) | (.04) | .56 | .08 |
Distributions: | ||||||
Dividends from | (.21) | (.36) | - | (.31) | (.48) | (.61) |
Dividends from net realized | - | - | - | - | - | - |
Total Distributions | (.21) | (.36) | - | (.31) | (.48) | (.61) |
Net asset value, end of period | 14.04 | 14.89 | 13.87 | 13.99 | 14.34 | 14.26 |
Total Return (%)c | (4.38)d | 10.17 | (.86) | (.23) | 4.12 | .49 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.95e | 1.91 | 1.90 | 1.92 | 1.90 | 1.91 |
Ratio of net expenses | 1.89e | 1.90 | 1.89 | 1.90 | 1.90 | 1.90 |
Ratio of net investment income | .54e | .84 | .82 | .58 | .44 | .39 |
Portfolio Turnover Rate | 52.66d | 99.45 | 85.64 | 79.00 | 57.17 | 68.92 |
Net Assets, end of period ($ x 1,000) | 26,564 | 27,817 | 27,739 | 34,240 | 35,861 | 16,470 |
a Based on average shares outstanding.
b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.
c Exclusive of sales charge.
d Not annualized.
e Annualized.
See notes to consolidated financial statements.
27
CONSOLIDATED FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||
April 30, 2020 | Year Ended October 31, | |||||
Class I Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 15.42 | 14.36 | 14.47 | 14.78 | 14.68 | 15.18 |
Investment Operations: | ||||||
Investment income—neta | .12 | .27 | .26 | .23 | .20 | .21 |
Net realized and unrealized | (.69) | 1.30 | (.24) | (.13) | .52 | .01b |
Total from Investment Operations | (.57) | 1.57 | .02 | .10 | .72 | .22 |
Distributions: | ||||||
Dividends from | (.36) | (.51) | (.13) | (.41) | (.62) | (.72) |
Dividends from net realized | - | - | - | - | - | - |
Total Distributions | (.36) | (.51) | (.13) | (.41) | (.62) | (.72) |
Net asset value, end of period | 14.49 | 15.42 | 14.36 | 14.47 | 14.78 | 14.68 |
Total Return (%) | (3.85)c | 11.28 | .11 | .82 | 5.16 | 1.49 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .98d | .92 | .90 | .90 | .88 | .86 |
Ratio of net expenses | .90d | .90 | .90 | .90 | .88 | .86 |
Ratio of net investment income | 1.53d | 1.82 | 1.81 | 1.61 | 1.36 | 1.40 |
Portfolio Turnover Rate | 52.66c | 99.45 | 85.64 | 79.00 | 57.17 | 68.92 |
Net Assets, end of period ($ x 1,000) | 1,719,891 | 1,560,814 | 688,369 | 701,598 | 509,712 | 104,057 |
a Based on average shares outstanding.
b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.
c Not annualized.
d Annualized.
See notes to consolidated financial statements.
28
Six Months Ended | ||||||
April 30, 2020 | Year Ended October 31, | |||||
Class Y Shares | (Unaudited) | 2019 | 2018 | 2017 | 2016 | 2015 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 15.45 | 14.39 | 14.49 | 14.79 | 14.69 | 15.18 |
Investment Operations: | ||||||
Investment income—neta | .12 | .29 | .28 | .24 | .22 | .22 |
Net realized and unrealized | (.69) | 1.29 | (.25) | (.12) | .51 | .02b |
Total from Investment Operations | (.57) | 1.58 | .03 | .12 | .73 | .24 |
Distributions: | ||||||
Dividends from | (.37) | (.52) | (.13) | (.42) | (.63) | (.73) |
Dividends from net realized | - | - | - | - | - | - |
Total Distributions | (.37) | (.52) | (.13) | (.42) | (.63) | (.73) |
Net asset value, end of period | 14.51 | 15.45 | 14.39 | 14.49 | 14.79 | 14.69 |
Total Return (%) | (3.83)c | 11.36 | .24 | .92 | 5.18 | 1.57 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .86d | .81 | .80 | .82 | .81 | .83 |
Ratio of net expenses | .80d | .80 | .80 | .82 | .81 | .83 |
Ratio of net investment income | 1.62d | 1.92 | 1.92 | 1.67 | 1.53 | 1.45 |
Portfolio Turnover Rate | 52.66c | 99.45 | 85.64 | 79.00 | 57.17 | 68.92 |
Net Assets, end of period ($ x 1,000) | 1,085,373 | 1,259,436 | 803,690 | 789,983 | 707,727 | 407,642 |
a Based on average shares outstanding.
b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.
c Not annualized.
d Annualized.
See notes to consolidated financial statements.
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Global Real Return Fund (the “fund”) is a separate diversified series of BNY Mellon Advantage Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering nine series, including the fund. The fund’s investment objective is to seek total return (consisting of capital appreciation and income). BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Effective December 31, 2019, Newton Investment Management (North America) Limited (“NIMNA”) reorganized into Newton Investment Management Limited (“NIM” or the “Sub-Adviser”), a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser. Consequently, the sub-investment advisory agreement between the Adviser and NIMNA was terminated and NIM now serves as the fund’s sub-adviser pursuant to a sub-investment advisory agreement between the Adviser and NIM. There was no change to the fund’s investment objective, polices or strategies as a result of the reorganization of NIMNA into Sub-Adviser.
The Company’s Board of Directors (the “Board”) approved, effective December 31, 2019 (the “Effective Date”), the termination of the fund’s authorized Class T shares. Prior to the Effective Date, the fund did not offer such Class T shares for purchase. The authorized Class T shares were reallocated to authorized Class I shares and Class Y shares, increasing authorized Class I shares from 200 million to 205 million and increasing authorized Class Y shares from 200 million to 205 million.
The fund may invest in certain commodities through its investment in GRR Commodity Fund Ltd., (the “Subsidiary”), a wholly-owned and controlled subsidiary of the fund organized under the laws of the Cayman Islands. The Subsidiary has the ability to invest in commodities and securities consistent with the investment objective of the fund. The Adviser serves as investment adviser for the Subsidiary, the Sub-Adviser serves as the Subsidiary’s sub-investment advisor and Citibank N.A. serves as the Subsidiary’s custodian. The financial statements have been consolidated and include the accounts of the fund and the Subsidiary. Accordingly, all inter-company transactions and balances have been eliminated. A subscription agreement was entered into between the fund and the Subsidiary, comprising the entire issued share capital of the Subsidiary, with the intent that the fund will remain the sole shareholder and retain all rights. Under the Amended and Restated Memorandum and
30
Articles of Association, shares issued by the Subsidiary confer upon a shareholder the right to receive notice of, to attend and to vote at general meetings of the Subsidiary and shall confer upon the shareholder rights in a winding-up or repayment of capital and the right to participate in the profits or assets of the Subsidiary. The following summarizes the structure and relationship of the Subsidiary at April 30, 2020:
Subsidiary Activity | |||
Consolidated fund Net Assets ($) | 2,869,046,555 | ||
Subsidiary Percentage of fund Net Assets | 14.63% | ||
Subsidiary Financial Statement Information ($) | |||
Total assets | 419,941,187 | ||
Total liabilities | 285,444 | ||
Net assets | 419,655,743 | ||
Total income | - | ||
Investment (loss)—net | (931,350) | ||
Net realized gain (loss) | 25,503,708 | ||
Net change in unrealized appreciation (depreciation) | 26,093,089 | ||
Net increase (decrease) in net assets resulting from operations | 24,572,358 |
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 five classes of shares: Class A (45 million shares authorized), Class C (45 million shares authorized), Class I (205 million shares authorized) and Class Y (205 million shares authorized). Class A shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares ten years after the date of purchase, without the imposition of a sales charge. Class I and Class Y shares are sold at net asset value per share generally to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund 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 Companyenters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
32
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), futures, options and forward foreign currency exchange contracts (“forward contracts”), are valued each business day by one or more independent pricing services (each, a “Service”) approved by the Board. Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the 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.
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. U.S. Treasury Bills are valued at the mean price between quoted bid prices and asked prices by the Service approved by the Board. 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 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.
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
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.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Futures and options, which are traded on an exchange, are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day and are generally categorized within Level 1 of the fair value hierarchy. Options traded over-the-counter (“OTC”) are valued at the mean between the bid and asked price and are generally categorized within Level 2 of the fair value hierarchy. Forward contracts are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of April 30, 2020in valuing the fund’s investments:
34
Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total | |
Assets ($) | ||||
Investments in Securities: † | ||||
Corporate Bonds† | - | 328,990,871 | - | 328,990,871 |
Equity Securities – | 432,395,763 | 718,410,171†† | - | 1,150,805,934 |
Equity Securities – | - | 23,636,810†† | - | 23,636,810 |
Exchange –Traded Fund | 467,811,810 | - | - | 467,811,810 |
Foreign Governmental | - | 371,957,773 | - | 371,957,773 |
Investment Companies | 133,533,226 | 31,816,358†† | - | 165,349,584 |
Other Financial Instruments: | ||||
Forward Foreign Currency | - | 11,967,356 | - | 11,967,356 |
Futures††† | 11,515,696 | - | - | 11,515,696 |
Options Purchased | 60,257,492 | - | - | 60,257,492 |
Options Written | (37,793,109) | - | - | (37,793,109) |
Liabilities ($) | ||||
Other Financial Instruments: | ||||
Forward Foreign Currency | - | (21,055,212) | - | (21,055,212) |
Futures††† | (21,545,166) | - | - | (21,545,166) |
† See Consolidated Statement of Investment for additional detailed categorizations, if any.
†† Securities classified within Level 2 at period fair valuation procedures.
††† Amount shown represents unrealized appreciation (depreciation) at period end, but only variation margin on exchanged traded and centrally cleared derivatives, if any, are reported in the Consolidated Statement of Assets and Liabilities.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
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
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
Foreign Taxes:The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the fund understanding of the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invest. These foreign taxes, if any, are paid by the fund and are reflected in the Statements of Operations. Foreign taxes payable or deferred as of April 30, 2020, if any, are disclosed in the fund’s Statements 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, a subsidiary of BNY Mellon and an affiliate of the Adviser, 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 April 30, 2020, The Bank of New York Mellon earned $8,166 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.
36
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political, economic developments and public health conditions. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies world-wide. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken world-wide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. 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.
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
The Subsidiary is classified as a controlled foreign corporation under Subchapter N of the Code. Therefore, the fund is required to increase its taxable income by its share of the Subsidiary’s income. Net investment losses of the Subsidiary cannot be deducted by the fund in the current period nor carried forward to offset taxable income in future periods.
As of and during the period ended April 30, 2020, 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 Consolidated Statement of Operations. During the period ended April 30, 2020, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended October 31, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
The fund has an unused capital loss carryover of $128,941,133 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to October 31, 2019. If not applied, the fund has $50,669,896 of short-term capital losses and $78,271,237 of long-term capital losses which can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2019 was as follows: ordinary income $56,804,929. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $927 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”), a subsidiary of BNY Mellon and an affiliate of the Adviser, 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 $747 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $180 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. Prior to March 11, 2020, the Citibank Credit Facility was $1.030 billion with Tranche A available in an amount equal to
38
$830 million and Tranche B available in an amount equal to $200 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended April 30, 2020, the fund did not borrow under the Facilities.
NOTE 3—Management Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates:
(a)The Adviser has entered into separate management agreements with the fund and the Subsidiary pursuant to which the Adviser receives a management fee computed at the annual rate of .75% of the value of the average daily net assets of each of the fund and the Subsidiary which is payable monthly. In addition, the Adviser has contractually agreed for as long as the fund invests in the Subsidiary, to waive the management fee it receives from the fund in an amount equal to the management fee paid to the Adviser by the Subsidiary. The reduction in expenses, pursuant to the undertaking amounted to $914,965 during the period ended April 30, 2020.
The Adviser has contractually agreed, from November 1, 2019through February 28, 2021, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .90% of the value of the fund’s average daily net assets. On or after February 28, 2021, the Adviser may terminate this expense limitation at any time. The reduction in expenses, pursuant to the undertaking, amounted to $97,264 during the period ended April 30, 2020.
Pursuant to a sub-investment advisory agreement between the Adviser and Sub-Adviser, the Adviser pays Sub-Adviser a monthly fee at an annual rate of .36% of the value of the fund’s average daily net assets.
During the period ended April 30, 2020, the Distributor retained $8,537 from commissions earned on sales of the fund’s Class A shares and $17,510 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. During the period ended April 30, 2020, Class C shares were charged $105,697 pursuant to the Distribution Plan.
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
(c)Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2020, Class A and Class C shares were charged $47,674and $35,233, 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 an expense offset in the Consolidated Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an 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 Consolidated Statements 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 for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended April 30, 2020, the fund was charged $12,139 for transfer agency services. These fees are included in Shareholder servicing costs in the Consolidated 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 April 30, 2020, the fund was charged $203,658 pursuant to the custody agreement.
During the period ended April 30, 2020, the fund was charged $6,707 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.
40
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Consolidated Statement of Assets and Liabilities consist of: management fees of $1,987,775, Distribution Plan fees of $16,155, Shareholder Services Plan fees of $12,835, custodian fees of $127,951, Chief Compliance Officer fees of $4,438 and transfer agency fees of $3,928, which are offset against an expense reimbursement currently in effect in the amount of $322,302.
(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, futures, options transactions and forward contracts, during the period ended April 30, 2020, amounted to $1,884,201,250 and $1,360,321,213, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.
Each type of derivative instrument that was held by the fund during the period ended April 30, 2020 is discussed below.
Futures:In the normal course of pursuing its investment objective, the fund is exposed to market risk, including equity risk and interest risk,as a result of changes in value of underlying financial instruments. The fund invests in futures in order to manage its exposure to or protect against changes in the market. A futures contract represents a commitment for the future purchase or a sale of an asset at a specified date. Upon entering into such contracts, these investments require initial margin deposits with a counterparty, which consist of cash or cash equivalents. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses which are recorded in the Consolidated Statement of Operations.
41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
When the contracts are closed, the fund recognizes a realized gain or loss which is reflected in the Consolidated Statement of Operations. There is minimal counterparty credit risk to the fund with futures since they are exchange traded, and the exchange guarantees the futures against default. Futures open at April 30, 2020 are set forth in the Statement of Futures.
Options Transactions: The fund purchases and writes (sells) put and call options to hedge against changes in the values of equities and interest risk or as a substitute for an investment. The fund is subject to market risk and interest risk in the course of pursuing its investment objectives through its investments in options contracts. A call option gives the purchaser of the option the right (but not the obligation) to buy, and obligates the writer to sell, the underlying financial instrument at the exercise price at any time during the option period, or at a specified date. Conversely, a put option gives the purchaser of the option the right (but not the obligation) to sell, and obligates the writer to buy the underlying financial instrument at the exercise price at any time during the option period, or at a specified date.
As a writer of call options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument decreases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument increases between those dates.The maximum payout for those contracts is limited to the number of call option contracts written and the related strike prices, respectively.
As a writer of put options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument increases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument decreases between those dates. The maximum payout for those contracts is limited to the number of put option contracts written and the related strike prices, respectively.
As a writer of an option, the fund has no control over whether the underlying financial instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the financial instrument underlying the written option. There is a risk of loss from a change in value of such options which may exceed the related premiums received. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if
42
any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. The Consolidated Statement of Operations reflects any unrealized gains or losses which occurred during the period as well as any realized gains or losses which occurred upon the expiration or closing of the option transaction.Options written open at April 30, 2020 are set forth in Statement of Options Written.
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 Consolidated Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. Forward contracts open at April 30, 2020 are set forth in the Statement of Forward Foreign Currency Exchange Contracts.
The following tables show the fund’s exposure to different types of market risk as it relates to the Consolidated Statement of Assets and Liabilities and the Consolidated Statement of Operations, respectively.
43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
Fair value of derivative instruments as of April 30, 2020 is shown below:
|
| Derivative |
|
|
| Derivative |
|
Interest rate risk | 11,674,876 | 1,2 | Interest rate risk | (4,144,719) | 1,3 | ||
Equity risk | 60,098,312 | 2 | Equity risk | (55,193,556) | 1,3 | ||
Foreign exchange risk | 11,967,356 | 4 | Foreign exchange risk | (21,055,212) | 4 | ||
Gross fair value of | 83,740,544 |
|
|
| (80,393,487) |
| |
|
|
|
|
|
|
| |
Consolidated Statement of Assets and Liabilities location: |
| ||||||
1Includes cumulative appreciation (depreciation) on futures as reported in the Consolidated Statement of Futures, but only the unpaid variation margin is reported in the Consolidated Statement of Assets and Liabilities. | |||||||
2Options purchased are included in Investments in securities—Unaffiliated issuers, at value. | |||||||
3Outstanding options written, at value. | |||||||
4Unrealized appreciation (depreciation) on forward foreign currency exchange contracts. |
The effect of derivative instruments in the Consolidated Statement of Operations during the period ended April 30, 2020 is shown below:
Amount of realized gain (loss) on derivatives recognized in income ($) |
| |||||||||
Underlying | Futures | 1 | Options | 2 | Forward | 3 | Total |
|
| |
Interest rate | 11,586,149 |
| (2,286,204) |
| - |
| 9,299,945 |
|
| |
Equity | 43,723,807 |
| (67,386,138) |
| - |
| (23,662,331) |
|
| |
Foreign | - |
| - |
| 34,954,259 |
| 34,954,259 |
|
| |
Total | 55,309,956 |
| (69,672,342) |
| 34,954,259 |
| 20,591,873 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Net change in unrealized appreciation (depreciation) |
| |||||||||
Underlying | Futures | 4 | Options | 5 | Forward | 6 | Total |
|
| |
Interest rate | 10,147,342 |
| (8,133,643) |
| - |
| 2,013,699 |
|
| |
Equity | (12,623,113) |
| (5,907,171) |
| - |
| (18,530,284) |
|
| |
Foreign | - |
| - |
| 7,215,246 |
| 7,215,246 |
|
| |
Total | (2,475,771) |
| (14,040,814) |
| 7,215,246 |
| (9,301,339) |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Consolidated Statement of Operations location: |
| |||||||||
1Net realized gain (loss) on futures. | ||||||||||
2Net realized gain (loss) on options transactions. | ||||||||||
3Net realized gain (loss) on forward foreign currency exchange contracts. | ||||||||||
4Net change in unrealized appreciation (depreciation) on futures. | ||||||||||
5Net change in unrealized appreciation (depreciation) on options transactions. | ||||||||||
6Net change in unrealized appreciation (depreciation) on forward foreign currency exchange contracts. |
The provisions of ASC Topic 210 “Disclosures about Offsetting Assets and Liabilities” require disclosure on the offsetting of financial assets and liabilities. These disclosures are required for certain investments, including derivative financial instruments subject to Master Agreements which are eligible for offsetting in the Consolidated Statement of Assets and
44
Liabilities and require the fund to disclose both gross and net information with respect to such investments. For financial reporting purposes, the fund does not offset derivative assets and derivative liabilities that are subject to Master Agreements in the Consolidated Statement of Assets and Liabilities.
At April 30, 2020, derivative assets and liabilities (by type) on a gross basis are as follows:
Derivative Financial Instruments: |
| Assets ($) |
| Liabilities ($) |
|
Futures |
| 11,515,696 |
| (21,545,166) |
|
Options |
| 60,257,492 |
| (37,793,109) |
|
Forward contracts |
| 11,967,356 |
| (21,055,212) |
|
Total gross amount of derivative |
|
|
|
|
|
assets and liabilities in the |
|
|
|
|
|
Consolidated Statement of |
| 83,740,544 |
| (80,393,487) |
|
Derivatives not subject to |
|
|
|
|
|
Master Agreements |
| (71,773,188) |
| 59,338,275 |
|
Total gross amount of assets |
|
|
|
|
|
and liabilities subject to |
|
|
|
|
|
Master Agreements |
| 11,967,356 |
| (21,055,212) |
|
The following tables present derivative assets and liabilities net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of April 30, 2020:
|
|
| Financial |
|
|
|
|
|
| Instruments |
|
|
|
|
|
| and Derivatives |
|
|
|
| Gross Amount of |
| Available | Collateral |
| Net Amount of |
Counterparty | Assets ($) | 1 | for Offset ($) | Received ($) | 2 | Assets ($) |
Barclays Capital | 13,990 |
| (13,973) | - |
| 17 |
CIBC World Markets | 589,978 |
| (510,853) | - |
| 79,125 |
Citigroup | 9,921 |
| (9,921) | - |
| - |
J.P. Morgan Securities | 513,448 |
| (513,448) | - |
| - |
RBS Securities | 2,422,642 |
| (449,908) | (1,972,734) |
| - |
State Street Bank | 8,412,953 |
| (8,412,953) | - |
| - |
UBS Securities | 4,424 |
| (4,424) | - |
| - |
Total | 11,967,356 |
| (9,915,480) | (1,972,734) |
| 79,142 |
|
|
|
|
|
|
|
45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(continued)
|
|
| Financial |
|
|
|
|
|
| Instruments |
|
|
|
|
|
| and Derivatives |
|
|
|
| Gross Amount of |
| Available | Collateral |
| Net Amount of |
Counterparty | Liabilities ($) | 1 | for Offset ($) | Pledged ($) | 2 | Liabilities ($) |
Barclays Capital | (13,973) |
| 13,973 | - |
| - |
CIBC World Markets | (510,853) |
| 510,853 | - |
| - |
Citigroup | (24,819) |
| 9,921 | - |
| (14,898) |
J.P. Morgan Securities | (6,134,287) |
| 513,448 | 1,880,000 |
| (3,740,839) |
RBS Securities | (449,908) |
| 449,908 | - |
| - |
State Street Bank | (13,112,208) |
| 8,412,953 | 4,340,000 |
| (359,255) |
UBS Securities | (809,164) |
| 4,424 | 750,000 |
| (54,740) |
Total | (21,055,212) |
| 9,915,480 | 6,970,000 |
| (4,169,732) |
|
|
|
|
|
|
|
1 Absent a default event or early termination, OTC derivative assets and liabilities are presented at gross amounts and are not offset in the Consolidated Statement of Assets and Liabilities. | ||||||
2 In some instances, the actual collateral received and/or pledged may be more than the amount shown due to over collateralization. |
The following summarizes the average market value of derivatives outstanding duringthe period ended April 30, 2020:
|
| Average Market Value ($) |
Equity futures |
| 309,905,662 |
Equity options contracts |
| 587,259 |
Interest rate futures |
| 229,643,247 |
Interest rate options contracts |
| 55,286,150 |
Forward contracts |
| 1,605,540,164 |
|
|
|
At April 30, 2020, accumulated net unrealized appreciation on investments inclusive of derivative contracts was $28,222,884, consisting of $237,597,912 gross unrealized appreciation and $209,375,028 gross unrealized depreciation.
At April 30, 2020, the cost of investments inclusive of derivative contracts for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Consolidated Statement of Investments).
46
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 (the “Board”) held on November 6, 2019 (the “Meeting”), the Board discussed with representatives of the Adviser (a) plans to wind down the operations of and dissolve the fund’s then-current sub-investment adviser, Newton Investment Management (North America) Limited (“NIMNA”); and (b) a proposal that Newton Investment Management Limited (“NIM”), an affiliate of NIMNA and the Adviser, assume the investment advisory responsibilities of NIMNA, pursuant to a sub-investment advisory agreement between the Adviser and NIM (the “New Sub-Advisory Agreement”), to be effective December 31, 2019 (the “Effective Date”).
At the Meeting, the Adviser recommended the approval of the New Sub-Advisory Agreement, pursuant to which NIM would serve as sub-adviser to the fund. The recommendation for the approval of the New Sub-Advisory Agreement was based on the following considerations, among others: (i) the transfer of the provision of sub-investment advisory services from NIMNA to NIM was not expected to have a material impact on the fund’s day-to-day operations, or the nature, extent or quality of the sub-investment advisory services currently provided to the fund; (ii) the personnel who have been principally responsible for managing the fund’s investment portfolio would continue to serve in that capacity following the Effective Date; and (iii) the substantive terms of the New Sub-Advisory Agreement were substantially similar to those of the current sub-investment advisory agreement between the Adviser and NIMNA (the “Current Agreement”). The Board also considered the fact that the Adviser expressed confidence in NIM and its investment management capabilities.
At the Meeting, the Board, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of the fund (the “Independent Directors”), considered and approved the New Sub-Advisory Agreement. In determining whether to approve the New Sub-Advisory Agreement, the Board considered the materials prepared by the Adviser received in advance of the Meeting and other information presented at the Meeting, which included: (i) a form of the New Sub-Advisory Agreement; (ii) information regarding the transition of sub-investment advisory services from NIMNA to NIM; (iii) information regarding investment due diligence of NIM performed by the Adviser; (iv) information regarding NIM’s compliance program; and (v) an opinion of counsel that replacing NIMNA with NIM as the sub-investment adviser to the fund would not result in a “change of control” or an “assignment” of an advisory contract within the meaning of the 1940 Act, and, therefore, does not require the approval of fund shareholders. The Board also considered the substance of discussions with representatives of the Adviser at the Meeting and at a Board meeting on March 12-13, 2019 (the “March Meeting”) at which the Board re-approved the Current Agreement for the ensuing year until March 30, 2020.
Nature, Extent and Quality of Services to be Provided by NIM. In examining the nature, extent and quality of the services that had been furnished by NIMNA to the
47
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
fund under the Current Agreement, and were expected to be provided by NIM to the fund under the New Sub-Advisory Agreement, the Board considered: (i) NIM’s organization, qualification and background, as well as the qualifications of its personnel; (ii) the expertise of the personnel providing portfolio management services, which would remain the same after the Effective Date; (iii) the investment strategy for the fund, which would remain the same after the Effective Date; and (iv) NIM’s compliance program. The Board also considered the review process undertaken by the Adviser and the Adviser’s favorable assessment of the nature and quality of the sub-investment advisory services provided by NIMNA and expected to be provided to the fund by NIM after the Effective Date. Based on their consideration and review of the foregoing information, the Board concluded that the nature, extent and quality of the sub-investment advisory services to be provided by NIM under the New Sub-Advisory Agreement, as well as NIM’s ability to render such services based on its resources and the experience of the investment team, which will remain the same, were adequate and appropriate for the fund in light of the fund’s investment objective, and supported a decision to approve the New Sub-Advisory Agreement.
Investment Performance of NIM. The Board had considered NIMNA’s investment performance in managing the fund’s portfolio at the March Meeting (including comparative data provided by Broadridge Financial Solutions, Inc.). The Board considered the performance and that the same investment professionals would continue to manage the fund’s assets after the Effective Date, as factors in evaluating the services to be provided by NIM under the New Sub-Advisory Agreement after the Effective Date, and determined that these factors, when viewed together with the other factors considered by the Board, supported a decision to approve the New Sub-Advisory Agreement.
Costs of Services to be Provided and Profitability. The Board considered the proposed fee payable under the New Sub-Advisory Agreement (which was the same as that payable under the Current Agreement and had been considered at the March Meeting), noting that the proposed fee would be paid by the Adviser and, thus, would not impact the fees paid by the fund or the Adviser’s profitability. The Board recognized that, because NIM’s fee would be paid by the Adviser, and not the fund, an analysis of profitability was more appropriate in the context of the Board’s consideration of the fund’s Management Agreement, pursuant to which the Adviser provides the fund with investment management and administrative services (the “Management Agreement”), and, therefore, the Board had received and considered a profitability analysis of the Adviser and its affiliates, including NIMNA, at the March Meeting. The Board concluded that the proposed fee payable to NIM by the Adviser was appropriate and the Adviser’s profitability was not excessive in light of the nature, extent and quality of the services to be provided to the fund by the Adviser and NIM under the New Sub-Advisory Agreement.
Economies of Scale to be Realized. The Board recognized that, because NIM’s fee would continue to be paid by the Adviser, and not the fund, an analysis of economies of
48
scale was more appropriate in the context of the Board’s consideration of the Management Agreement, which had been done at the March Meeting.
The Board also considered whether there were any ancillary benefits that would accrue to NIM as a result of NIM’s relationship with the fund, noting that there are no soft dollar arrangements in place for the fund.
In considering the materials and information described above, the Independent Directors received assistance from, and met separately with, their independent legal counsel, and were provided with a written description of their statutory responsibilities and the legal standards that are applicable to the approval of investment advisory and sub-investment advisory agreements.
After full consideration of the factors discussed above, with no single factor identified as being of paramount importance, the Board, all of whom are Independent Directors, with the assistance of independent legal counsel, approved the New Sub-Advisory Agreement for the fund effective as of the Effective Date.
************
At a meeting of the fund’s Board of Directors held on February 10-11, 2020, 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 Newton Investment Management 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.
49
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
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, which included information comparing (1) the fund’s performance with the performance of a group of institutional absolute-return funds (the “Performance Group”) and with a broader group of retail and institutional absolute-return funds (the “Performance Universe”), all for various periods ended December 31, 2019, 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 institutional absolute-return 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.
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. The Board discussed with representatives of the Adviser and/or 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 (ranking in the first quartile of the Performance Group and Performance Universe for all periods except the Performance Group ranking for the four-year period). The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was noted that the fund’s returns were above the returns of the index in six of the nine calendar years shown.
The Board reviewed and considered the contractual management fee rate paid by the fund to the Adviser over the fund’s last fiscal year in light of the nature, extent and quality of the management services provided by the Adviser. 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 and Expense Universe median actual management fee and the fund’s total expenses
50
were higher than the Expense Group median and lower than the Expense Universe median total expenses.
Representatives of the Adviser stated that the Adviser has contractually agreed, until February 28, 2021, 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 .90% of the fund’s average daily net assets.
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 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 to the Subadviser in relation to the fee paid 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
51
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
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.
· The Board 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
52
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.
53
BNY Mellon Global Real Return Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Adviser
Newton Investment Management Limited
160 Queen Victoria Street
London, EC4V, 4LA, UK
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
Ticker Symbols: | Class A: DRRAX Class C: DRRCX Class I: DRRIX Class Y: DRRYX |
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-mailSend your request toinfo@bnymellon.com
InternetInformation can be viewed online or downloaded atwww.bnymellonim.com/us
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 atwww.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 atwww.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2020 BNY Mellon Securities Corporation |
BNY Mellon Sustainable Balanced Fund
SEMIANNUAL REPORT April 30, 2020 |
Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.bnymellonim.com/us 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
BNY Mellon Investment Adviser, Inc. | |
With Those of Other Funds | |
in Affiliated Issuers | |
the Fund’s Management and | |
Sub-Investment Advisory Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.
Dear Shareholder:
We are pleased to present this semiannual report for BNY Mellon Sustainable Balanced Fund, covering the six-month period from November 1, 2019 through April 30, 2020. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.
Stock markets performed well over the last several months of 2019. Accommodative policies from the U.S. Federal Reserve (the “Fed”), paired with healthy U.S. consumer spending, helped support valuations. Despite periodic investor concern regarding trade relations with China and global growth rates, the rally continued through the end of the calendar year, supported in part by a December announcement that the first phase of a trade deal with China was in process. U.S. equity markets reached new highs during the final months of 2019. However, the euphoria was short-lived, as concerns over the spread of COVID-19 and widespread quarantine roiled markets during the first several months of 2020; stocks posted historic losses in March 2020 but regained some ground in April.
In fixed-income markets, interest rates were heavily influenced by changes in Fed policy and investor concern over COVID-19. As stocks rallied in November and December 2019, Treasury bond prices declined, and rates across much of the yield curve rose until early in 2020, when the threat posed by COVID-19 began to emerge. A flight to quality ensued, and rates fell significantly. March 2020 brought high volatility and risk-asset spread widened. The Fed cut rates twice in March, and the government launched a large stimulus package. In April 2020, bond prices began to recover some of their prior losses.
The near-term outlook for the U.S. will be challenging, as the country continues to face COVID-19. However, we believe that once the economic effects have been mitigated, the economy will rebound. As always, we will monitor relevant data for signs of change. We encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
May 15, 2020
2
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from November 1, 2019 through April 30, 2020, as provided by equity portfolio managers Yuko Takano and Rob Stewart of Newton Investment Management Limited (Newton), Sub-Investment Adviser, and fixed-income portfolio managers Nancy G. Rogers, CFA, Paul Benson, CFA and Karen Wong of Mellon Investments Corporation (Mellon), Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended April 30, 2020, BNY Mellon Sustainable Balanced Fund’s Class K shares produced a total return of 0.14% and Service shares returned -0.08.1In comparison the fund’s benchmark, the MSCI All Country World Index (NDR), the fund’s Customized Blended Index, a blend of 60% MSCI All Country World Index (NDR)/40% Bloomberg Barclays MSCI US Aggregate ESG Select Index and Bloomberg Barclays MSCI US Aggregate ESG Select Index, produced total retuns of -7.68%, -2.08% and 5.60%, respectively, for the same period.2,3
Equities lost ground during the reporting period, due in part to volatility and uncertainty brought on by COVID-19. Bond prices were supported by falling interest rates and supportive central bank activities. The fund outperformed the Customized Blended Index during the period. In equities, the outperformance was primarily due to stock selections within the consumer discretionary, health care and information technology sectors, as well as a lack of exposure to energy. In fixed income, the difference in returns between the fund and the Index was primarily the result of a lack of exposure to the energy sector, which underperformed the broader market.
The Fund’s Investment Approach
The fund seeks long-term capital appreciation. To pursue its goal, the fund uses a global, multi-asset strategy. The fund normally invests 80% of its net assets, plus any borrowings for investment purposes, in the equity securities of issuers that demonstrate attractive attributes and sustainable business practices and have no material, unresolvable, environmental, social or governance (ESG) issues and in debt securities included in the Bloomberg Barclays MSCI US Aggregate ESG Select Index. Under normal market conditions, generally 60% of the fund’s net assets will be allocated to equity and equity-related investments and 40% of the fund’s net assets will be allocated to debt and debt-related securities.
The fund’s assets allocated to equity and equity-related investments are actively managed by Newton. Newton invests its allocated portion of the fund’s assets in companies it considers to be engaged in “sustainable business practices”. When determining whether a company engages in “sustainable business practices”, Newton considers whether the company (i) engages in business practices that are, in Newton’s view, sustainable in an economic sense (i.e., the company’s strategy, operations and finances are stable and durable) and (ii) takes appropriate measures to manage any material consequences or impact of its policies and operations in relation to ESG matters (e.g., the company’s environmental footprint, labor standards, board structure, etc.), as determined through Newton’s ESG quality review. Newton also may invest in companies where it believes it can promote sustainable business practices through ongoing company engagement and active proxy voting, such as by encouraging the company’s management to improve the company’s environmental footprint or voting the shares it holds of a company to improve the company’s governance structure.
The fund’s assets allocated to debt and debt-related investments are managed by Mellon, using an indexed approach. For the portion of the fund’s assets allocated to debt and debt-related investments, Mellon seeks to track the investment results, before fees and expenses, of the Bloomberg Barclays MSCI US Aggregate ESG Select Index. Mellon selects investments for its allocated portion of the fund’s assets by a “sampling” process, which is a statistical process used to select debt securities so that this portion of the fund’s assets has investment characteristics that closely approximate those of the index (e.g., duration, liquidity, quality, sector, industry, yield and market beta). Specifically, Mellon selects those securities that it determines best correspond to the index’s aggregate risk metrics of
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
duration, yield/spread, sector and quality, while seeking to mitigate such risks by investing in a diversified number of securities and issuers.
COVID-19 and Central Bank Activity Drives Markets
Global equities gained over the end of 2019, as sentiment was bolstered by encouraging economic data releases, greater certainty as to the timing and nature of Brexit, and a U.S./China potential “Phase One” trade deal. However, markets rapidly gave way to extreme risk aversion, as the global scope of the COVID-19 pandemic, and its alarming humanitarian and economic implications, became apparent. Financial markets also had to contend with a second major exogenous shock in the form of an oil-price conflict between Saudi Arabia and Russia. Aggressive responses to the crisis from central banks and governments in the month of March 2020 provided support for equities and comfort for investors. Indices rallied towards the end of March. Subsequent reports of slowing COVID-19 infection rates and plans to ease lockdown measures buoyed investor optimism in April, when equity markets continued to make up some of their losses.
Fixed-income markets also benefited from supportive action taken by the U.S. Federal Reserve (the “Fed”) in light of the pandemic. In addition to large stimulus measures enacted by the government, the Fed began an asset buying program aimed at stabilizing prices of securitized products and corporate bonds. They also cut rates aggressively. The rate cut, combined with a flight to quality that began early in 2020, pushed Treasuries to outperform the broader market. Securitized products underperformed like-duration Treasuries, but outperformed corporate credit.
Equity Returns Driven by Security Results
With a stand-off between Saudi Arabia and Russia hurting the price of oil, a void in energy proved beneficial. Stock selection was strong in the majority of sectors, particularly consumer discretionary, health care and information technology. Shares of Microsoft, a software company, continued on an upward trajectory, benefiting from its strong balance sheet, as investors’ focus quickly turned to solvency assessments in light of the COVID-19 crisis. Increased demand for the company’s cloud software, particularly the Teams app within Office 365, aided shares, with people starting to work from home en masse. Elsewhere,drug company Gilead Sciencesperformed well over the second half of the review period on hopes that its drug Remdesivir could be effective in treating COVID-19. With revenues deemed less likely to be disrupted, Roche Holding, Eli Lilly & Co and Lonza Group were other health care companies that aided relative returns.
Conversely, stock picking in financials was a primary headwind to portfolio performance. Worries around COVID-19 and its impact on economic growth permeated the financial sector, weighing on Citigroup, in particular, as U.S. Treasury yields fell. In an increasingly strained operating environment, shares declined, as the market began to price in the prospect of zero rates and a reasonable increase in credit losses. Financial companies DNB, Kasikornbank and Westpac Banking also featured highly on the portfolio’s list of top detractors. Johnson Matthey, a supplier of car exhaust catalysts, was also hit by a shutdown to large parts of the automotive industry due to the virus. Having been on track to deliver in-line results for the fiscal year, the company warned of a negative impact on operating profit owing to reduced demand in its Clean Air division and delayed shipments, on account of logistical difficulties, across other businesses.
Within fixed income, it was a positive period for bonds. Nearly all sectors of the Index performed well and had positive nominal returns. A prevailing theme during the period was a flight to quality, which benefited Treasuries, causing them to outperform spread sectors. Securitized instruments underperformed like-duration Treasuries, but outperformed corporate bonds. Nearly all segments of the U.S. Aggregate Index benefited from the Fed’s monetary and fiscal stimulus efforts, which began in March. In addition, the fixed-income sleeve’s ESG focus means it lacks exposure to the energy sector when compared to the Index, which benefited relative performance. Energy was the worst performing area of the Index during the period.
4
Finding Opportunity in a Challenging Environment
Despite the bounceback in global equities witnessed in April, we believe volatility will continue. We think markets will continue to oscillate between the reassurance that governments and central banks will be standing by to support them and the uncertainty of both the duration and depth of COVID-19’s economic impact. Furthermore, it is our opinion that the longer-term implications in terms of social behavior and consumption trends will be potentially material; and fiscal expansion will have its own implications in terms of funding costs over the coming years. We believe that opportunities currently exist to purchase excellent companies at attractive valuations.
Newton continues to draw on its long-term thematic framework to guide its stock selection and focuses intensely on company fundamentals as it assesses attractive opportunities. As ever, embedding a focus on the sustainability of our investments into our analysis acts as a valuable guide to positioning the portfolio effectively for the long term.
In fixed income, as an index fund, we attempt to match closely the returns of the Index by approximating its composition and credit quality.
May 15, 2020
1 Total return includes reinvestment of dividends and any capital gains paid. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. The fund’s return reflects the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through February 28, 2021, at which time it may be extended, modified or terminated. Had these expenses not been absorbed, returns would have been lower. Had these expenses not been absorbed, returns would have been lower.
2 Source: Lipper Inc. — The MSCI ACWI Index captures large- and mid-cap representation across Developed Market (DM) countries and Emerging-Market (EM) countries. It reflects reinvestment of net dividends and, where applicable, capital gain distributions. Investors cannot invest directly in index.
3 Source: FactSet — The Bloomberg Barclays MSCI US Aggregate ESG Select Index is a fixed-rate, investment grade bond benchmark that follows the rules of the Bloomberg Barclays US Aggregate Index and applies additional sector and ESG criteria for security eligibility. In addition treasury, securitized, and class 2 government-related (agency, local authority, sovereign, supranational) and corporate (industrial, utility, and financial) sectors are weighted to match the individual sector exposures of the Bloomberg Barclays US Aggregate Index. 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.
Bonds are subject generally to interest-rate, credit, liquidity and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
Recent market risks include pandemic risks related to COVID-19. The effects of COVID-19 have contributed to increased volatility in global markets and will likely affect certain countries, companies, industries and market sectors more dramatically than others. To the extent the fund may overweight its investments in certain countries, companies, industries or market sectors, such positions will increase the fund’s exposure to risk of loss from adverse developments affecting those countries, companies, industries or sectors.
Indexing does not attempt to manage market volatility, use defensive strategies, or reduce the effects of any long-term periods of poor index performance. The correlation between fund and index performance may be affected by the fund’s expenses and use of sampling techniques, changes in securities markets, changes in the composition of the index, and the timing of purchases and redemptions of fund shares.
The fund’s performance will be influenced by political, social and economic factors affecting investments in foreign companies. Special risks associated with such companies include exposure to currency fluctuations, less liquidity, less developed or less efficient trading markets, lack of comprehensive company information, political instability, and differing auditing and legal standards.
Emerging markets tend to be more volatile than the markets of more mature economies and generally have less diverse and less mature economic structures and less stable political systems than those of developed countries. The securities of companies located in emerging markets are often subject to rapid and large changes in price.
Environmental, social and governance (ESG) managers may take into consideration factors beyond traditional financial information to select securities, which could result in relative investment performance deviating from other strategies or broad market benchmarks, depending on whether such sectors or investments are in or out of favor in the market. Further, ESG strategies may rely on certain values-based criteria to eliminate exposures found in similar strategies or broad market benchmarks, which could also result in relative investment performance deviating.
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.
5
UNDERSTANDING YOUR FUND’S EXPENSES(Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in BNY Mellon Sustainable Balanced Fund from November 1, 2019 to April 30, 2020. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended April 30, 2020 |
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| Class K | Service Shares |
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Expense paid per $1,000† | $.75 | $1.99 |
| |
Ending value (after expenses) | $1,001.40 | $999.20 |
|
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS(Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
| |||
Assuming a hypothetical 5% annualized return for the six months ended April 30, 2020 |
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| Class K | Service Shares |
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Expense paid per $1,000† | $.75 | $2.01 |
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Ending value (after expenses) | $1,024.12 | $1,022.87 |
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†Expenses are equal to the fund’s annualized expense ratio of .15% for Class K and .40% for Service Shares, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS
April 30, 2020 (Unaudited)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 41.3% | |||||||||
Canada - 1.2% | |||||||||
Bank of Montreal, Sub. Notes | 4.34 | 10/5/2028 | 25,000 | 26,213 | |||||
Canadian Imperial Bank of Commerce, Sr. Unscd. Notes | 3.10 | 4/2/2024 | 10,000 | 10,406 | |||||
Province of Alberta, Sr. Unscd. Notes | 2.20 | 7/26/2022 | 20,000 | 20,636 | |||||
Province of Ontario, Sr. Unscd. Bonds | 2.50 | 4/27/2026 | 25,000 | 27,233 | |||||
Province of Quebec, Sr. Unscd. Notes | 2.38 | 1/31/2022 | 20,000 | 20,646 | |||||
Rogers Communications, Gtd. Notes | 2.90 | 11/15/2026 | 15,000 | 15,993 | |||||
Royal Bank of Canada, Sr. Unscd. Notes | 2.75 | 2/1/2022 | 10,000 | 10,298 | |||||
The Bank of Nova Scotia, Sr. Unscd. Notes | 2.70 | 3/7/2022 | 15,000 | 15,447 | |||||
The Toronto-Dominion Bank, Sr. Unscd. Notes | 3.25 | 3/11/2024 | 5,000 | 5,304 | |||||
152,176 | |||||||||
Colombia - .1% | |||||||||
Colombia, Sr. Unscd. Bonds | 8.13 | 5/21/2024 | 10,000 | 11,588 | |||||
Germany - .5% | |||||||||
KFW, Govt. Gtd. Bonds | 0.00 | 4/18/2036 | 15,000 | a | 12,122 | ||||
KFW, Govt. Gtd. Notes | 2.63 | 2/28/2024 | 25,000 | 27,088 | |||||
Landwirtschaftliche Rentenbank, Govt. Gtd. Bonds | 2.25 | 10/1/2021 | 25,000 | 25,636 | |||||
64,846 | |||||||||
Japan - .3% | |||||||||
Mitsubishi UFJ Financial Group, Sr. Unscd. Notes | 3.78 | 3/2/2025 | 25,000 | 27,027 | |||||
Sumitomo Mitsui Financial Group, Sr. Unscd. Notes | 2.85 | 1/11/2022 | 10,000 | 10,164 | |||||
37,191 | |||||||||
Panama - .1% | |||||||||
Panama, Sr. Unscd. Bonds | 9.38 | 4/1/2029 | 10,000 | 14,084 | |||||
Poland - .2% | |||||||||
Poland, Sr. Unscd. Notes | 3.25 | 4/6/2026 | 15,000 | 16,359 | |||||
Supranational - .5% | |||||||||
European Investment Bank, Sr. Unscd. Notes | 1.88 | 2/10/2025 | 10,000 | 10,628 | |||||
Inter-American Development Bank, Sr. Unscd. Notes | 2.50 | 1/18/2023 | 15,000 | 15,838 | |||||
International Bank for Reconstruction & Development, Sr. Unscd. Notes | 1.38 | 9/20/2021 | 35,000 | 35,467 | |||||
61,933 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 41.3% (continued) | |||||||||
United Kingdom - .8% | |||||||||
GlaxoSmithKline Capital, Gtd. Notes | 2.85 | 5/8/2022 | 20,000 | 20,769 | |||||
HSBC Holdings, Sr. Unscd. Notes | 4.88 | 1/14/2022 | 25,000 | 26,242 | |||||
Royal Bank of Scotland Group, Sub. Notes | 6.00 | 12/19/2023 | 25,000 | 27,272 | |||||
Vodafone Group, Sr. Unscd. Notes | 4.38 | 5/30/2028 | 15,000 | 17,219 | |||||
Vodafone Group, Sr. Unscd. Notes | 5.25 | 5/30/2048 | 10,000 | 12,554 | |||||
104,056 | |||||||||
United States - 37.5% | |||||||||
3M, Sr. Unscd. Bonds | 2.88 | 10/15/2027 | 15,000 | 16,345 | |||||
AbbVie, Sr. Unscd. Notes | 2.90 | 11/6/2022 | 20,000 | 20,829 | |||||
AbbVie, Sr. Unscd. Notes | 3.20 | 11/21/2029 | 20,000 | b | 21,241 | ||||
AbbVie, Sr. Unscd. Notes | 3.38 | 11/14/2021 | 15,000 | 15,505 | |||||
AbbVie, Sr. Unscd. Notes | 4.88 | 11/14/2048 | 10,000 | 12,644 | |||||
American Express, Sr. Unscd. Notes | 3.40 | 2/22/2024 | 25,000 | 26,517 | |||||
American Tower, Sr. Unscd. Notes | 3.50 | 1/31/2023 | 25,000 | 26,443 | |||||
American Water Capital, Sr. Unscd. Bonds | 6.59 | 10/15/2037 | 10,000 | 14,804 | |||||
American Water Capital, Sr. Unscd. Notes | 2.80 | 5/1/2030 | 15,000 | 16,044 | |||||
American Water Capital, Sr. Unscd. Notes | 3.75 | 9/1/2028 | 10,000 | 11,355 | |||||
American Water Capital, Sr. Unscd. Notes | 4.15 | 6/1/2049 | 15,000 | 18,746 | |||||
American Water Capital, Sr. Unscd. Notes | 4.20 | 9/1/2048 | 10,000 | 12,620 | |||||
Amgen, Sr. Unscd. Notes | 4.56 | 6/15/2048 | 20,000 | 25,474 | |||||
Apple, Sr. Unscd. Notes | 2.15 | 2/9/2022 | 15,000 | 15,402 | |||||
Apple, Sr. Unscd. Notes | 3.25 | 2/23/2026 | 15,000 | 16,686 | |||||
Apple, Sr. Unscd. Notes | 3.75 | 11/13/2047 | 10,000 | 12,139 | |||||
Boston Properties, Sr. Unscd. Notes | 4.50 | 12/1/2028 | 15,000 | 17,002 | |||||
Cigna, Gtd. Notes | 4.13 | 11/15/2025 | 15,000 | 16,844 | |||||
Cisco Systems, Sr. Unscd. Notes | 5.50 | 1/15/2040 | 20,000 | 28,857 | |||||
Citigroup, Sr. Unscd. Notes | 3.98 | 3/20/2030 | 10,000 | 11,067 | |||||
Citigroup, Sr. Unscd. Notes | 4.41 | 3/31/2031 | 15,000 | 17,259 | |||||
Citigroup, Sub. Notes | 4.75 | 5/18/2046 | 10,000 | 12,180 | |||||
Conagra Brands, Sr. Unscd. Notes | 5.30 | 11/1/2038 | 15,000 | 18,747 | |||||
CSX, Sr. Unscd. Notes | 3.35 | 11/1/2025 | 5,000 | 5,474 | |||||
CVS Health, Sr. Unscd. Notes | 5.05 | 3/25/2048 | 20,000 | 25,252 | |||||
Deere & Co., Sr. Unscd. Notes | 3.90 | 6/9/2042 | 10,000 | 12,219 | |||||
Dell International, Sr. Scd. Notes | 4.90 | 10/1/2026 | 15,000 | b | 15,548 | ||||
Dupont De Nemours, Sr. Unscd. Notes | 4.49 | 11/15/2025 | 10,000 | 11,022 | |||||
Essential Utilities, Sr. Unscd. Notes | 3.35 | 4/15/2050 | 15,000 | 15,890 | |||||
Federal Home Loan Banks, Bonds | 2.50 | 2/13/2024 | 25,000 | 26,930 |
8
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 41.3% (continued) | |||||||||
United States - 37.5% (continued) | |||||||||
Federal Home Loan Mortgage Corp. Multifamily Structured Pass Through Certificates, Ser. K077, Cl. A2 | 3.85 | 5/25/2028 | 30,000 | c | 35,545 | ||||
Federal National Mortgage Association, Notes | 2.25 | 4/12/2022 | 20,000 | c | 20,778 | ||||
General Mills, Sr. Unscd. Notes | 4.20 | 4/17/2028 | 15,000 | 17,413 | |||||
Gilead Sciences, Sr. Unscd. Notes | 3.50 | 2/1/2025 | 15,000 | 16,515 | |||||
HCA, Sr. Scd. Notes | 5.25 | 6/15/2049 | 10,000 | 11,792 | |||||
Hewlett Packard Enterprise, Sr. Unscd. Notes | 3.50 | 10/5/2021 | 10,000 | 10,246 | |||||
Intel, Sr. Unscd. Notes | 3.15 | 5/11/2027 | 10,000 | 11,035 | |||||
Intercontinental Exchange, Gtd. Notes | 3.75 | 12/1/2025 | 15,000 | 16,655 | |||||
International Business Machines, Sr. Unscd. Debs. | 5.88 | 11/29/2032 | 10,000 | 13,691 | |||||
International Business Machines, Sr. Unscd. Notes | 4.00 | 6/20/2042 | 5,000 | 6,037 | |||||
International Paper, Sr. Unscd. Notes | 4.40 | 8/15/2047 | 10,000 | 11,317 | |||||
ITC Holdings, Sr. Unscd. Notes | 3.35 | 11/15/2027 | 15,000 | 15,998 | |||||
Johnson & Johnson, Sr. Unscd. Notes | 2.63 | 1/15/2025 | 15,000 | 16,245 | |||||
Laboratory Corporation of America Holdings, Sr. Unscd. Notes | 3.20 | 2/1/2022 | 10,000 | 10,355 | |||||
Marsh & McLennan Companies, Sr. Unscd. Notes | 4.75 | 3/15/2039 | 15,000 | 18,743 | |||||
Merck & Co., Sr. Unscd. Notes | 3.90 | 3/7/2039 | 15,000 | 18,480 | |||||
Microsoft, Sr. Unscd. Notes | 2.88 | 2/6/2024 | 25,000 | 26,934 | |||||
Microsoft, Sr. Unscd. Notes | 4.25 | 2/6/2047 | 10,000 | 13,364 | |||||
Morgan Stanley, Sr. Unscd. Notes | 4.38 | 1/22/2047 | 10,000 | 12,462 | |||||
Morgan Stanley, Sr. Unscd. Notes | 4.43 | 1/23/2030 | 20,000 | 23,051 | |||||
Nordstrom, Sr. Unscd. Notes | 5.00 | 1/15/2044 | 20,000 | 14,221 | |||||
Northern Trust, Sr. Unscd. Notes | 3.15 | 5/3/2029 | 20,000 | 22,050 | |||||
Oracle, Sr. Unscd. Notes | 4.00 | 11/15/2047 | 10,000 | 11,927 | |||||
Parker-Hannifin, Sr. Unscd. Notes | 3.25 | 6/14/2029 | 15,000 | 15,893 | |||||
PepsiCo, Sr. Unscd. Notes | 2.75 | 4/30/2025 | 15,000 | 16,198 | |||||
Prudential Financial, Sr. Unscd. Notes | 4.35 | 2/25/2050 | 5,000 | 5,729 | |||||
Simon Property Group, Sr. Unscd. Notes | 4.75 | 3/15/2042 | 10,000 | 10,331 | |||||
State Street, Sr. Unscd. Notes | 2.65 | 5/15/2023 | 25,000 | 25,643 | |||||
Target, Sr. Unscd. Notes | 2.50 | 4/15/2026 | 15,000 | 16,274 | |||||
The Coca-Cola Company, Sr. Unscd. Notes | 2.20 | 5/25/2022 | �� | 20,000 | 20,651 | ||||
The Goldman Sachs Group, Sr. Unscd. Notes | 3.85 | 1/26/2027 | 20,000 | 21,608 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 41.3% (continued) | |||||||||
United States - 37.5% (continued) | |||||||||
The Home Depot, Sr. Unscd. Notes | 3.50 | 9/15/2056 | 10,000 | 11,310 | |||||
The Home Depot, Sr. Unscd. Notes | 3.90 | 12/6/2028 | 20,000 | 23,233 | |||||
The Mosaic Company, Sr. Unscd. Notes | 4.25 | 11/15/2023 | 10,000 | 10,178 | |||||
The PNC Financial Services Group, Sr. Unscd. Notes | 3.45 | 4/23/2029 | 10,000 | 11,008 | |||||
Toyota Motor Credit, Sr. Unscd. Notes | 2.60 | 1/11/2022 | 15,000 | 15,341 | |||||
Truist Financial, Sr. Unscd. Notes | 3.75 | 12/6/2023 | 10,000 | 10,762 | |||||
TWDC Enterprises 18, Gtd. Notes | 4.13 | 6/1/2044 | 10,000 | 12,078 | |||||
U.S. Treasury Bonds | 2.00 | 2/15/2050 | 5,000 | 5,876 | |||||
U.S. Treasury Bonds | 2.25 | 8/15/2049 | 9,000 | 11,104 | |||||
U.S. Treasury Bonds | 2.38 | 11/15/2049 | 10,000 | 12,655 | |||||
U.S. Treasury Bonds | 2.75 | 8/15/2047 | 40,000 | 53,461 | |||||
U.S. Treasury Bonds | 2.88 | 5/15/2049 | 13,000 | 18,007 | |||||
U.S. Treasury Bonds | 3.00 | 2/15/2048 | 30,000 | 42,004 | |||||
U.S. Treasury Bonds | 3.00 | 2/15/2049 | 35,000 | 49,453 | |||||
U.S. Treasury Bonds | 3.13 | 5/15/2048 | 42,000 | 60,214 | |||||
U.S. Treasury Bonds | 3.13 | 11/15/2041 | 18,000 | 24,675 | |||||
U.S. Treasury Bonds | 3.13 | 2/15/2042 | 40,000 | 55,002 | |||||
U.S. Treasury Bonds | 3.88 | 8/15/2040 | 14,000 | 21,054 | |||||
U.S. Treasury Bonds | 4.38 | 11/15/2039 | 7,000 | 11,133 | |||||
U.S. Treasury Bonds | 4.38 | 5/15/2040 | 28,000 | 44,650 | |||||
U.S. Treasury Bonds | 4.50 | 2/15/2036 | 5,000 | 7,715 | |||||
U.S. Treasury Bonds | 6.25 | 5/15/2030 | 22,000 | 34,072 | |||||
U.S. Treasury Notes | 0.50 | 3/15/2023 | 25,000 | 25,185 | |||||
U.S. Treasury Notes | 1.13 | 8/31/2021 | 85,000 | 86,071 | |||||
U.S. Treasury Notes | 1.25 | 10/31/2021 | 110,000 | 111,766 | |||||
U.S. Treasury Notes | 1.38 | 2/15/2023 | 15,000 | 15,477 | |||||
U.S. Treasury Notes | 1.38 | 10/15/2022 | 25,000 | 25,703 | |||||
U.S. Treasury Notes | 1.38 | 1/31/2025 | 25,000 | 26,201 | |||||
U.S. Treasury Notes | 1.50 | 3/31/2023 | 25,000 | 25,919 | |||||
U.S. Treasury Notes | 1.50 | 10/31/2021 | 75,000 | 76,481 | |||||
U.S. Treasury Notes | 1.50 | 1/31/2022 | 20,000 | 20,455 | |||||
U.S. Treasury Notes | 1.50 | 11/30/2024 | 20,000 | 21,057 | |||||
U.S. Treasury Notes | 1.50 | 1/15/2023 | 15,000 | 15,511 | |||||
U.S. Treasury Notes | 1.63 | 2/15/2026 | 35,000 | 37,331 | |||||
U.S. Treasury Notes | 1.63 | 11/15/2022 | 15,000 | 15,528 | |||||
U.S. Treasury Notes | 1.63 | 12/15/2022 | 15,000 | 15,547 | |||||
U.S. Treasury Notes | 1.75 | 7/15/2022 | 40,000 | 41,360 | |||||
U.S. Treasury Notes | 1.75 | 6/15/2022 | 35,000 | 36,157 | |||||
U.S. Treasury Notes | 1.75 | 12/31/2024 | 15,000 | 15,971 | |||||
U.S. Treasury Notes | 1.75 | 6/30/2022 | 20,000 | 20,670 |
10
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 41.3% (continued) | |||||||||
United States - 37.5% (continued) | |||||||||
U.S. Treasury Notes | 1.88 | 1/31/2022 | 45,000 | 46,318 | |||||
U.S. Treasury Notes | 1.88 | 7/31/2022 | 15,000 | 15,562 | |||||
U.S. Treasury Notes | 1.88 | 8/31/2024 | 55,000 | 58,637 | |||||
U.S. Treasury Notes | 2.00 | 6/30/2024 | 65,000 | 69,484 | |||||
U.S. Treasury Notes | 2.00 | 5/31/2024 | 65,000 | 69,423 | |||||
U.S. Treasury Notes | 2.00 | 2/15/2025 | 30,000 | 32,336 | |||||
U.S. Treasury Notes | 2.00 | 8/15/2025 | 25,000 | 27,090 | |||||
U.S. Treasury Notes | 2.00 | 4/30/2024 | 100,000 | 106,691 | |||||
U.S. Treasury Notes | 2.13 | 9/30/2024 | 18,000 | 19,405 | |||||
U.S. Treasury Notes | 2.13 | 11/30/2024 | 30,000 | 32,425 | |||||
U.S. Treasury Notes | 2.13 | 8/15/2021 | 25,000 | 25,628 | |||||
U.S. Treasury Notes | 2.13 | 7/31/2024 | 50,000 | 53,772 | |||||
U.S. Treasury Notes | 2.25 | 12/31/2024 | 25,000 | 27,197 | |||||
U.S. Treasury Notes | 2.25 | 8/15/2027 | 39,000 | 43,785 | |||||
U.S. Treasury Notes | 2.25 | 10/31/2024 | 30,000 | 32,545 | |||||
U.S. Treasury Notes | 2.25 | 11/15/2024 | 45,000 | 48,848 | |||||
U.S. Treasury Notes | 2.38 | 5/15/2029 | 38,000 | 43,866 | |||||
U.S. Treasury Notes | 2.63 | 2/15/2029 | 45,000 | 52,771 | |||||
U.S. Treasury Notes | 2.75 | 2/15/2028 | 35,000 | 40,820 | |||||
U.S. Treasury Notes | 2.88 | 5/15/2028 | 40,000 | 47,205 | |||||
U.S. Treasury Notes | 3.13 | 11/15/2028 | 10,000 | 12,102 | |||||
Union Pacific, Sr. Unscd. Notes | 4.10 | 9/15/2067 | 5,000 | 5,694 | |||||
United Parcel Service, Sr. Unscd. Notes | 3.05 | 11/15/2027 | 15,000 | 16,407 | |||||
Verizon Communications, Sr. Unscd. Notes | 5.01 | 8/21/2054 | 10,000 | 14,578 | |||||
Verizon Communications, Sr. Unscd. Notes | 5.25 | 3/16/2037 | 15,000 | 19,983 | |||||
Visa, Sr. Unscd. Notes | 3.15 | 12/14/2025 | 15,000 | 16,622 | |||||
Zoetis, Sr. Unscd. Notes | 3.90 | 8/20/2028 | 15,000 | 17,287 | |||||
Federal Home Loan Mortgage Corp.: | |||||||||
3.50%, 11/1/2047-7/1/2049 | 61,608 | c | 65,335 | ||||||
Federal National Mortgage Association: | |||||||||
3.50% | 75,000 | c,d | 78,558 | ||||||
2.50% | 50,000 | c,d | 52,175 | ||||||
2.50%, 11/1/2031 | 22,236 | c | 23,306 | ||||||
3.00%, 6/1/2034-8/1/2049 | 225,535 | c | 238,854 | ||||||
3.00% | 100,000 | c,d | 105,542 | ||||||
3.50%, 9/1/2037-11/1/2049 | 171,271 | c | 182,102 | ||||||
3.50% | 50,000 | c,d | 52,823 | ||||||
4.00%, 1/1/2048-8/1/2049 | 149,316 | c | 159,876 | ||||||
4.00% | 25,000 | c,d | 26,634 | ||||||
4.50% | 50,000 | c,d | 53,930 |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | Value ($) | |||||
Bonds and Notes - 41.3% (continued) | |||||||||
United States - 37.5% (continued) | |||||||||
4.50%, 8/1/2047 | 21,807 | c | 23,525 | ||||||
5.00% | 25,000 | c,d | 27,185 | ||||||
5.50% | 25,000 | c,d | 27,438 | ||||||
Government National Mortgage Association II: | |||||||||
3.00% | 25,000 | d | 26,562 | ||||||
3.00% | 25,000 | d | 26,607 | ||||||
3.00%, 11/20/2045-1/20/2048 | 66,833 | 71,403 | |||||||
3.50% | 25,000 | d | 26,525 | ||||||
3.50%, 11/20/2046-6/20/2049 | 92,938 | 99,036 | |||||||
4.00%, 4/20/2049-7/20/2049 | 57,127 | 60,798 | |||||||
4.00% | 25,000 | d | 26,609 | ||||||
4.50%, 2/20/2049-6/20/2049 | 33,688 | 36,112 | |||||||
5.00%, 6/20/2049 | 20,141 | 21,760 | |||||||
4,710,817 | |||||||||
Uruguay - .1% | |||||||||
Uruguay, Sr. Unscd. Bonds | 4.98 | 4/20/2055 | 10,000 | 11,361 | |||||
TotalBonds and Notes | 5,184,411 | ||||||||
Description | Shares | Value ($) | |||||||
Common Stocks - 57.4% | |||||||||
Australia - 1.6% | |||||||||
Australia & New Zealand Banking Group | 3,065 | 32,953 | |||||||
CSL | 137 | 27,156 | |||||||
Dexus | 9,656 | e | 56,768 | ||||||
Insurance Australia Group | 5,298 | 19,634 | |||||||
National Australia Bank | 3,110 | 33,629 | |||||||
Westpac Banking | 3,230 | 33,533 | |||||||
203,673 | |||||||||
Bermuda - .1% | |||||||||
Hiscox | 1,353 | 11,984 | |||||||
Canada - .6% | |||||||||
Intact Financial | 441 | 41,969 | |||||||
The Toronto-Dominion Bank | 968 | 40,446 | |||||||
82,415 | |||||||||
China - 2.5% | |||||||||
3SBio | 27,000 | b,f | 27,330 | ||||||
Alibaba Group Holding, ADR | 382 | f | 77,420 | ||||||
Ping An Insurance Group Company of China, Cl. H | 8,000 | 81,118 | |||||||
Tencent Holdings | 2,353 | 124,834 | |||||||
310,702 |
12
Description | Shares | Value ($) | |||||||
Common Stocks - 57.4%(continued) | |||||||||
Denmark - .5% | |||||||||
Chr. Hansen Holding | 253 | 21,827 | |||||||
Novo Nordisk, Cl. B | 240 | 15,325 | |||||||
Orsted | 206 | b | 20,858 | ||||||
58,010 | |||||||||
France - 2.8% | |||||||||
BNP Paribas | 1,130 | 35,567 | |||||||
Bureau Veritas | 3,434 | 71,354 | |||||||
Danone | 479 | f | 33,230 | ||||||
Kering | 53 | 26,766 | |||||||
L'Oreal | 278 | f | 80,905 | ||||||
Sanofi | 521 | 50,971 | |||||||
Valeo | 2,300 | c | 53,436 | ||||||
352,229 | |||||||||
Germany - 2.8% | |||||||||
Allianz | 119 | 22,045 | |||||||
Brenntag | 1,749 | 79,071 | |||||||
Continental | 461 | f | 38,946 | ||||||
Deutsche Post | 2,244 | f | 66,849 | ||||||
Deutsche Wohnen | 376 | 15,257 | |||||||
Fresenius Medical Care & Co. | 406 | f | 31,817 | ||||||
HELLA GmbH & Co. | 972 | f | 36,050 | ||||||
Infineon Technologies | 1,890 | 35,118 | |||||||
SAP | 250 | 29,817 | |||||||
354,970 | |||||||||
Hong Kong - 1.1% | |||||||||
AIA Group | 5,200 | 47,333 | |||||||
Link REIT | 3,500 | 31,043 | |||||||
Techtronic Industries | 7,577 | 56,286 | |||||||
134,662 | |||||||||
Ireland - 1.2% | |||||||||
Accenture, Cl. A | 496 | 91,854 | |||||||
Medtronic | 674 | 65,803 | |||||||
157,657 | |||||||||
Japan - 4.8% | |||||||||
Ebara | 3,400 | 75,306 | |||||||
Fast Retailing | 100 | 47,561 | |||||||
Honda Motor | 1,600 | 38,630 | |||||||
KDDI | 1,200 | 34,579 | |||||||
Keyence | 100 | 35,926 | |||||||
M3 | 400 | 14,386 | |||||||
Mitsubishi UFJ Financial Group | 9,400 | 37,773 | |||||||
Nippon Telegraph & Telephone | 700 | 15,948 | |||||||
NTT Docomo | 900 | 26,417 |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||||
Common Stocks - 57.4%(continued) | |||||||||
Japan - 4.8% (continued) | |||||||||
Recruit Holdings | 1,300 | 38,137 | |||||||
Seven & i Holdings | 400 | 13,179 | |||||||
Sony | 500 | 32,078 | |||||||
Sugi Holdings | 300 | 18,007 | |||||||
Sumitomo Mitsui Financial Group | 1,300 | 34,237 | |||||||
Suntory Beverage & Food | 1,700 | 63,873 | |||||||
Takeda Pharmaceutical | 1,100 | 39,499 | |||||||
Toyota Motor | 600 | 37,031 | |||||||
602,567 | |||||||||
Mexico - .5% | |||||||||
Fomento Economico Mexicano | 10,752 | 69,377 | |||||||
Netherlands - .6% | |||||||||
ASML Holding | 142 | 42,181 | |||||||
Prosus | 238 | f | 18,066 | ||||||
Wolters Kluwer | 218 | 16,051 | |||||||
76,298 | |||||||||
New Zealand - .1% | |||||||||
Fisher & Paykel Healthcare | 864 | 14,396 | |||||||
Norway - .7% | |||||||||
DNB | 4,422 | f | 53,734 | ||||||
Mowi | 2,217 | 38,052 | |||||||
91,786 | |||||||||
South Africa - .3% | |||||||||
Naspers, Cl. N | 149 | f | 23,305 | ||||||
Old Mutual | 21,164 | 15,341 | |||||||
38,646 | |||||||||
South Korea - .3% | |||||||||
Samsung SDI | 136 | 32,664 | |||||||
Spain - .6% | |||||||||
Banco Santander | 14,815 | 33,125 | |||||||
Iberdrola | 3,891 | 39,006 | |||||||
72,131 | |||||||||
Switzerland - 1.4% | |||||||||
Lonza Group | 35 | 15,297 | |||||||
Nestle | 613 | 64,755 | |||||||
Roche Holding | 245 | 85,218 | |||||||
Zurich Insurance Group | 39 | 12,432 | |||||||
177,702 | |||||||||
Taiwan - .8% | |||||||||
Taiwan Semiconductor Manufacturing | 10,000 | 100,495 | |||||||
Thailand - .3% | |||||||||
Kasikornbank | 12,500 | 33,027 |
14
Description | Shares | Value ($) | |||||||
Common Stocks - 57.4%(continued) | |||||||||
United Kingdom - 4.6% | |||||||||
Ascential | 10,197 | b | 32,516 | ||||||
AstraZeneca | 257 | 26,960 | |||||||
Aviva | 6,454 | 19,683 | |||||||
Barclays | 38,994 | 52,095 | |||||||
Ferguson | 802 | 58,006 | |||||||
GlaxoSmithKline | 1,162 | 24,328 | |||||||
HSBC Holdings | 2,667 | 13,773 | |||||||
Informa | 8,158 | 44,996 | |||||||
Johnson Matthey | 2,395 | 60,180 | |||||||
Legal & General Group | 5,518 | 14,245 | |||||||
Linde | 468 | 86,107 | |||||||
M&G | 7,808 | 13,021 | |||||||
Prudential | 1,237 | 17,618 | |||||||
RELX | 2,121 | 48,036 | |||||||
Royal Bank of Scotland Group | 11,405 | 15,902 | |||||||
Travis Perkins | 2,349 | 30,788 | |||||||
Unilever | 407 | 21,043 | |||||||
579,297 | |||||||||
United States - 29.2% | |||||||||
3M | 272 | 41,322 | |||||||
Abbott Laboratories | 653 | 60,135 | |||||||
Adobe | 158 | f | 55,875 | ||||||
Albemarle | 677 | 41,588 | |||||||
Alphabet, Cl. C | 97 | f | 130,820 | ||||||
Amazon.com | 44 | f | 108,856 | ||||||
American Express | 373 | 34,036 | |||||||
American Tower | 127 | e | 30,226 | ||||||
Amgen | 215 | 51,432 | |||||||
Apple | 918 | 269,708 | |||||||
Applied Materials | 1,478 | 73,427 | |||||||
AT&T | 2,122 | 64,657 | |||||||
Automatic Data Processing | 265 | 38,873 | |||||||
Becton Dickinson & Co. | 144 | 36,364 | |||||||
Biogen | 93 | f | 27,605 | ||||||
BlackRock | 31 | 15,563 | |||||||
Booking Holdings | 10 | f | 14,806 | ||||||
Bristol-Myers Squibb | 825 | 50,168 | |||||||
Brixmor Property Group | 4,722 | e | 54,067 | ||||||
Cerner | 498 | 34,556 | |||||||
Cigna | 218 | 42,680 | |||||||
Citigroup | 1,913 | 92,895 | |||||||
CMS Energy | 1,176 | 67,138 | |||||||
Colgate-Palmolive | 511 | 35,908 |
15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||||
Common Stocks - 57.4%(continued) | |||||||||
United States - 29.2% (continued) | |||||||||
Costco Wholesale | 149 | 45,147 | |||||||
Dollar General | 81 | 14,199 | |||||||
Ecolab | 429 | 83,012 | |||||||
Eli Lilly & Co. | 299 | 46,237 | |||||||
Eversource Energy | 817 | 65,932 | |||||||
Fidelity National Information Services | 615 | 81,112 | |||||||
Gilead Sciences | 508 | 42,672 | |||||||
Intel | 1,125 | 67,478 | |||||||
International Flavors & Fragrances | 540 | 70,756 | |||||||
Intuit | 140 | 37,773 | |||||||
Laureate Education, Cl. A | 1,924 | f | 18,220 | ||||||
Lowe's | 394 | 41,272 | |||||||
Mastercard, Cl. A | 401 | 110,263 | |||||||
Merck & Co. | 1,240 | 98,382 | |||||||
Microsoft | 1,501 | 268,994 | |||||||
Morgan Stanley | 824 | 32,490 | |||||||
NextEra Energy | 209 | 48,304 | |||||||
NIKE, Cl. B | 513 | 44,723 | |||||||
PayPal Holdings | 425 | f | 52,275 | ||||||
PepsiCo | 415 | 54,900 | |||||||
Prologis | 449 | e | 40,064 | ||||||
S&P Global | 52 | 15,230 | |||||||
salesforce.com | 295 | f | 47,775 | ||||||
Starbucks | 548 | 42,048 | |||||||
Texas Instruments | 407 | 47,241 | |||||||
The Estee Lauder Companies, Cl. A | 195 | 34,398 | |||||||
The Goldman Sachs Group | 367 | 67,315 | |||||||
The Home Depot | 324 | 71,225 | |||||||
The PNC Financial Services Group | 361 | 38,508 | |||||||
The Procter & Gamble Company | 481 | 56,695 | |||||||
The TJX Companies | 725 | 35,561 | |||||||
The Walt Disney Company | 555 | 60,023 | |||||||
Thermo Fisher Scientific | 145 | 48,529 | |||||||
Union Pacific | 298 | 47,617 | |||||||
United Parcel Service, Cl. B | 383 | 36,255 | |||||||
Verizon Communications | 1,766 | 101,457 | |||||||
Visa, Cl. A | 440 | 78,637 | |||||||
3,665,424 | |||||||||
TotalCommon Stocks | 7,220,112 |
16
Description | Principal | Value ($) | |||||||
Rights - .0% | |||||||||
United States - .0% | |||||||||
Bristol-Myers Squibb, CVR | 326 | 1,470 | |||||||
1-Day | Shares | ||||||||
Investment Companies - 4.7% | |||||||||
Registered Investment Companies - 4.7% | |||||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 0.33 | 589,012 | g | 589,012 | |||||
Total Investments(cost $12,630,348) | 103.4% | 12,995,005 | |||||||
Liabilities, Less Cash and Receivables | (3.4%) | (424,861) | |||||||
Net Assets | 100.0% | 12,570,144 |
ADR—American Depository Receipt
CVR—Contingent Value Right
REIT—Real Estate Investment Trust
a Security issued with a zero coupon. Income is recognized through the accretion of discount.
b Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At April 30, 2020, these securities were valued at $117,493 or .93% of net assets.
c The Federal Housing Finance Agency (“FHFA”) placed the Federal Home Loan Mortgage Corporation and Federal National Mortgage Association into conservatorship with FHFA as the conservator. As such, the FHFA oversees the continuing affairs of these companies.
d Purchased on a forward commitment basis.
e Investment in real estate investment trust within the United States.
f Non-income producing security.
g Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
17
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Portfolio Summary (Unaudited)† | Value (%) |
U.S. Treasury Securities | 15.8 |
U.S. Government Agencies Mortgage-Backed | 12.0 |
Health Care | 9.4 |
Information Technology | 8.5 |
Banks | 8.4 |
Investment Companies | 4.7 |
Chemicals | 3.7 |
Technology Hardware & Equipment | 3.6 |
Internet Software & Services | 3.1 |
Telecommunication Services | 3.1 |
Utilities | 2.7 |
Retailing | 2.3 |
Real Estate | 2.2 |
Semiconductors & Semiconductor Equipment | 2.2 |
Industrial | 2.0 |
Insurance | 1.9 |
Commercial & Professional Services | 1.8 |
Beverage Products | 1.8 |
Diversified Financials | 1.8 |
Automobiles & Components | 1.7 |
Consumer Staples | 1.5 |
Food Products | 1.5 |
Transportation | 1.4 |
Consumer Discretionary | 1.3 |
Media | 1.1 |
Foreign Governmental | 1.0 |
Consumer Durables & Apparel | .6 |
Supranational Bank | .5 |
U.S. Government Agencies | .4 |
Food & Staples Retailing | .4 |
Collateralized Municipal-Backed Securities | .3 |
Household & Personal Products | .3 |
Advertising | .3 |
Forest Products & Other | .1 |
103.4 |
† Based on net assets.
See notes to financial statements.
18
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS(Unaudited)
Investment Companies | Value | Purchases($) | Sales($) | Value | Net | Dividends/ |
Registered Investment Companies; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1,167,698 | 2,034,144 | (2,612,830) | 589,012 | 4.7 | 4,832 |
See notes to financial statements.
19
STATEMENT OF ASSETS AND LIABILITIES
April 30, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 12,041,336 |
| 12,405,993 |
| ||
Affiliated issuers |
| 589,012 |
| 589,012 |
| |
Cash |
|
|
|
| 25,250 |
|
Cash denominated in foreign currency |
|
| 7,159 |
| 7,227 |
|
Receivable for investment securities sold |
| 232,585 |
| |||
Dividends and interest receivable |
| 43,433 |
| |||
Tax reclaim receivable |
| 14,799 |
| |||
Receivable for shares of Common Stock subscribed |
| 281 |
| |||
Due from BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(b) |
| 5,293 |
| |||
Prepaid expenses |
|
|
|
| 821 |
|
|
|
|
|
| 13,324,694 |
|
Liabilities ($): |
|
|
|
| ||
Payable for investment securities purchased |
| 702,087 |
| |||
Directors’ fees and expenses payable |
| 167 |
| |||
Other accrued expenses |
|
|
|
| 52,296 |
|
|
|
|
|
| 754,550 |
|
Net Assets ($) |
|
| 12,570,144 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 12,995,976 |
|
Total distributable earnings (loss) |
|
|
|
| (425,832) |
|
Net Assets ($) |
|
| 12,570,144 |
|
Net Asset Value Per Share | Class K | Service Shares |
|
Net Assets ($) | 11,581,774 | 988,370 |
|
Shares Outstanding | 936,053 | 80,000 |
|
Net Asset Value Per Share ($) | 12.37 | 12.35 |
|
|
|
|
|
See notes to financial statements. |
|
|
|
20
STATEMENT OF OPERATIONS
Six Months Ended April 30, 2020 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Dividends (net of $3,087 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 71,776 |
| ||
Affiliated issuers |
|
| 4,832 |
| ||
Interest |
|
| 51,635 |
| ||
Total Income |
|
| 128,243 |
| ||
Expenses: |
|
|
|
| ||
Management fee—Note 3(a) |
|
| 6,954 |
| ||
Professional fees |
|
| 52,738 |
| ||
Chief Compliance Officer fees—Note 3(b) |
|
| 6,707 |
| ||
Custodian fees—Note 3(b) |
|
| 4,913 |
| ||
Pricing fees |
|
| 4,908 |
| ||
Registration fees |
|
| 4,616 |
| ||
Prospectus and shareholders’ reports |
|
| 4,314 |
| ||
Shareholder servicing costs—Note 3(b) |
|
| 1,274 |
| ||
Directors’ fees and expenses—Note 3(c) |
|
| 560 |
| ||
Loan commitment fees—Note 2 |
|
| 121 |
| ||
Miscellaneous |
|
| 4,487 |
| ||
Total Expenses |
|
| 91,592 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (80,742) |
| ||
Net Expenses |
|
| 10,850 |
| ||
Investment Income—Net |
|
| 117,393 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions | 157,271 |
| ||||
Net realized gain (loss) on forward foreign currency exchange contracts | 640 |
| ||||
Net Realized Gain (Loss) |
|
| 157,911 |
| ||
Net change in unrealized appreciation (depreciation) on investments | (253,875) |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (95,964) |
| ||
Net Increase in Net Assets Resulting from Operations |
| 21,429 |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
21
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 117,393 |
|
|
| 258,022 |
| |
Net realized gain (loss) on investments |
| 157,911 |
|
|
| (779,100) |
| ||
Net change in unrealized appreciation |
| (253,875) |
|
|
| 1,769,655 |
| ||
Net Increase (Decrease) in Net Assets | 21,429 |
|
|
| 1,248,577 |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Class K |
|
| (200,188) |
|
|
| (222,034) |
| |
Service Shares |
|
| (14,896) |
|
|
| (18,216) |
| |
Total Distributions |
|
| (215,084) |
|
|
| (240,250) |
| |
Capital Stock Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Class K |
|
| 8,742 |
|
|
| - |
| |
Net assets received in connection |
| - |
|
|
| 864 |
| ||
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Class K |
|
| 31 |
|
|
| - |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Class K |
|
| (462) |
|
|
| - |
| |
Increase (Decrease) in Net Assets | 8,311 |
|
|
| 864 |
| |||
Total Increase (Decrease) in Net Assets | (185,344) |
|
|
| 1,009,191 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 12,755,488 |
|
|
| 11,746,297 |
| |
End of Period |
|
| 12,570,144 |
|
|
| 12,755,488 |
| |
Capital Share Transactions (Shares): |
| ||||||||
Class K |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 705 |
|
|
| - |
| |
Shares issued in connection | - |
|
|
| (202) |
| |||
Shares issued for distributions reinvested |
|
| 2 |
|
|
| - |
| |
Shares redeemed |
|
| (39) |
|
|
| - |
| |
Net Increase (Decrease) in Shares Outstanding | 669 |
|
|
| (202) |
| |||
|
|
|
|
|
|
|
|
|
|
aEffective April 1, 2019, Class A shares were redesignated into Service Shares and Class Y shares wre redesignated into Class K shares. Class C and Class I shares were exchanged for Class K shares and are no longer active. During the period ended October 31, 2019, 387,793 Class I shares representing $4,544,937 were exchanged for 387,793 Class K shares and 80,000 Class C shares representing $934,400 were exchanged for 79,727 Class K shares. | |||||||||
See notes to financial statements. |
22
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||
April 30, 2020 | Year Ended October 31, | |||||||
Class K Shares | (Unaudited) | 2019a | 2018b | |||||
Per Share Data ($): | ||||||||
Net asset value, beginning of period | 12.56 | 11.57 | 12.50 | |||||
Investment Operations: | ||||||||
Investment income—netc | .12 | .26 | .37 | |||||
Net realized and unrealized | (.10) | .97 | (1.05) | |||||
Total from Investment Operations | .02 | 1.23 | (.68) | |||||
Distributions: | ||||||||
Dividends from | (.21) | (.24) | (.25) | |||||
Net asset value, end of period | 12.37 | 12.56 | 11.57 | |||||
Total Return (%) | .14d | 11.03 | (5.64)d | |||||
Ratios/Supplemental Data (%): | ||||||||
Ratio of total expenses | 1.43e | 2.11 | 2.19e | |||||
Ratio of net expenses | .15e | .40 | .71e | |||||
Ratio of net investment income | 1.88e | 2.16 | 3.10e | |||||
Portfolio Turnover Rate | 35.42d | 220.33 | 81.07d | |||||
Net Assets, end of period ($ x 1,000) | 11,582 | 11,753 | 5,412 |
a Effective April 1, 2019, Class Y shares were redesignated as Class K Shares.
b From November 30, 2017 (commencement of operations) to October 31, 2018.
c Based on average shares outstanding.
d Not annualized.
e Annualized.
See notes to financial statements.
23
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||
April 30, 2020 | Year Ended October 31, | |||||||||
Service Shares | (Unaudited) | 2019a | 2018b | |||||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 12.53 | 11.56 | 12.50 | |||||||
Investment Operations: | ||||||||||
Investment income—netc | .10 | .23 | .32 | |||||||
Net realized and unrealized | (.09) | .97 | (1.03) | |||||||
Total from Investment Operations | .01 | 1.20 | (.71) | |||||||
Distributions: | ||||||||||
Dividends from | (.19) | (.23) | (.23) | |||||||
Net asset value, end of period | 12.35 | 12.53 | 11.56 | |||||||
Total Return (%) | (.08)d | 10.73 | (5.79)d | |||||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | 1.68e | 2.34 | 2.56e | |||||||
Ratio of net expenses | .40e | .62 | .96e | |||||||
Ratio of net investment income | 1.63e | 1.95 | 2.78e | |||||||
Portfolio Turnover Rate | 35.42d | 220.33 | 81.07d | |||||||
Net Assets, end of period ($ x 1,000) | 988 | 1,003 | 925 |
a Effective April 1, 2019, Class A shares were redesignated as Service Shares.
b From November 30, 2017 (commencement of operations) to October 31, 2018.
c Based on average shares outstanding.
d Not annualized.
e Annualized.
See notes to financial statements.
24
NOTES TO FINANCIAL STATEMENTS(Unaudited)
NOTE 1—Significant Accounting Policies:
BNY Mellon Sustainable Balanced Fund (the “fund”) is a separate diversified series of BNY Mellon Advantage Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering nine series, including the fund. The fund’s investment objective is to seek long-term 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. Each of Newton Investment Management Limited (“Newton”) and Mellon Investments Corporation (“Mellon”), each a wholly-owned subsidiary of BNY Mellon and an affiliate of the Adviser, serve as the fund’s sub-investment advisers (the “Sub-Advisers”). Effective December 31, 2019, Newton Investment Management (North America) Limited (“NIMNA”) reorganized into Newton Investment Management Limited. Consequently, the sub-investment advisory agreement between the Adviser and NIMNA was terminated and NIM now serves as one of fund’s sub-adviser pursuant to a sub-investment advisory agreement between the Adviser and NIM. There was no change to the fund’s investment objective, polices or strategies as a result of the reorganization of NIMNA into Sub-Adviser.
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue 400 million shares of $.001 par value Common Stock. The fund currently has authorized two classes of shares: Class K shares (300 million shares authorized) and Service shares (100 million shares authorized). Class K shares are generally only offered to state-sponsored retirement plans. Service Class shares aregenerally offered only to holders of Class K who terminate their relationship with state-sponsored retirement plans. Each class of shares has identical rights and privileges, except with respect to the Shareholder Services Plan and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
As of April 30, 2020, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held all 93,534 of Class K shares and all of the outstanding Service Shares of the fund.
25
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund 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 Companyenters 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.
26
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 the Service are valued at the mean between the quoted bid prices (as obtained by the 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.
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. U.S. Treasury Bills are valued at the mean price between quoted bid prices and asked prices by the Service approved by the Board. These securities are generally categorized within Level 2 of the fair value hierarchy.
27
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
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 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 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.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
The following is a summary of the inputs used as of April 30, 2020in valuing the fund’s investments:
28
Assets ($) | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total | |
Investments in Securities:† | |||||
Collateralized Municipal-Backed Mortgage-Backed | - | 35,545 | - | 35,545 | |
Corporate Bonds | - | 1,477,181 | - | 1,477,181 | |
Equity Securities – | 4,138,400 | 3,081,712†† | - | 7,220,112 | |
Foreign Governmental | - | 121,907 | - | 121,907 | |
Investment Companies | 589,012 | - | - | 589,012 | |
Rights | 1,470 | - | - | 1,470 | |
U.S. Government Agencies | - | 47,708 | - | 47,708 | |
U.S. Government Agencies | - | 1,512,695 | - | 1,512,695 | |
U.S. Treasury Securities | - | 1,989,375 | - | 1,989,375 |
† 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 unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the fund understanding of the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invest. These foreign taxes, if any, are paid by the fund and are reflected in the Statements of Operations.
29
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
Foreign taxes payable or deferred as of April 30, 2020, if any, are disclosed in the fund’s Statements 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.
(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political, economic developments and public health conditions. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S. In addition, turbulence in financial markets and reduced liquidity in equity, credit and/or fixed income markets may negatively affect many issuers, which could adversely affect the fund. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. These risks may be magnified if certain events or developments adversely interrupt the global supply chain; in these and other circumstances, such risks might affect companies worldwide. 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. 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 are normally declared and paid on a monthly basis. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent
30
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.
As of and during the period ended April 30, 2020, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended April 30, 2020, the fund did not incur any interest or penalties.
Each tax year in the two years period ended October 31, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
The fund has an unused capital loss carryover of $995,493 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to October 31, 2019. The fund has $305,935 of short-term capital losses and $689,558 of long-term capital losses which can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended October 31, 2019 was as follows: ordinary income $240,250. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $927 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”), a subsidiary of BNY Mellon and an affiliate of the Adviser, each to be utilized primarily for temporary or emergency purposes, including the
31
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $747 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $180 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. Prior to March 11, 2020, the Citibank Credit Facility was $1.030 billion with Tranche A available in an amount equal to $830 million and Tranche B available in an amount equal to $200 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended April 30, 2020, 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 .11% of the value of the fund’s average daily net assets and is payable monthly. The Adviser has contractually agreed, from November 1, 2019 through February 28, 2021, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the direct expenses of neither class (excluding Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .15% of the value of the fund’s average daily net assets. On or after February 28, 2021, the Adviser may terminate this expense limitation at any time. The reduction in expenses, pursuant to the undertaking, amounted to $80,742 during the period ended April 30, 2020.
Pursuant to a sub-investment advisory agreements between the Adviser and the respective Sub-Advisers, Newton and Mellon each serve 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 of Newton and Mellon 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
32
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 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 Shareholder Services Plan, Service 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. Pursuant to the Plan, the Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended April 30, 2020,the fund was charged $1,243 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 an expense offset in the Statement of Operations.
The fund has an arrangement with the custodian whereby the fund will receive interest income or be charged an 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 Statements 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 for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended April 30, 2020, the fund was charged $29 for transfer agency services. These fees are included in Shareholder servicing costs in the Statement of Operations.
33
NOTES TO FINANCIAL STATEMENTS (Unaudited)(continued)
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended April 30, 2020, the fund was charged $4,913 pursuant to the custody agreement.
During the period ended April 30, 2020, the fund was charged $6,707 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 from BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: management fees of $1,098, Shareholder Services Plan fees of $196, custodian fees of $2,400, Chief Compliance Officer fees of $4,438 and transfer agency fees of $10, which are offset against an expense reimbursement currently in effect in the amount of $13,435.
(c) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of investment securities, excluding short-term securities and foreign currency exchange contracts (“forward contracts”), during the period ended April 30, 2020, amounted to $4,435,348 and $4,481,327, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.
Each type of derivative instrument that was held by the fund during the period ended April 30, 2020 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
34
currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. At April 30, 2020, there were no forward contracts outstanding.
The following summarizes the average market value of derivatives outstanding duringthe period ended April 30, 2020:
|
| Average Market Value ($) |
Forward contracts |
| 199 |
|
|
|
At April 30, 2020, accumulated net unrealized appreciation on investments was $364,657, consisting of $945,098 gross unrealized appreciation and $580,441 gross unrealized depreciation.
At April 30, 2020, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
35
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 (the “Board”) held on November 6, 2019 (the “Meeting”), the Board discussed with representatives of the Adviser (a) plans to wind down the operations of and dissolve the fund’s then-current sub-investment adviser, Newton Investment Management (North America) Limited (“NIMNA”); and (b) a proposal that Newton Investment Management Limited (“NIM”), an affiliate of NIMNA and the Adviser, assume the investment advisory responsibilities of NIMNA, pursuant to a sub-investment advisory agreement between the Adviser and NIM (the “New Sub-Advisory Agreement”), to be effective December 31, 2019 (the “Effective Date”).
At the Meeting, the Adviser recommended the approval of the New Sub-Advisory Agreement, pursuant to which NIM would serve as sub-adviser to the fund. The recommendation for the approval of the New Sub-Advisory Agreement was based on the following considerations, among others: (i) the transfer of the provision of sub-investment advisory services from NIMNA to NIM was not expected to have a material impact on the fund’s day-to-day operations, or the nature, extent or quality of the sub-investment advisory services currently provided to the fund; (ii) the personnel who have been principally responsible for managing the fund’s investment portfolio would continue to serve in that capacity following the Effective Date; and (iii) the substantive terms of the New Sub-Advisory Agreement were substantially similar to those of the current sub-investment advisory agreement between the Adviser and NIMNA (the “Current Agreement”). The Board also considered the fact that the Adviser expressed confidence in NIM and its investment management capabilities.
At the Meeting, the Board, none of whom are “interested persons” (as defined in the Investment Company Act of 1940, as amended (the “1940 Act”)) of the fund (the “Independent Directors”), considered and approved the New Sub-Advisory Agreement. In determining whether to approve the New Sub-Advisory Agreement, the Board considered the materials prepared by the Adviser received in advance of the Meeting and other information presented at the Meeting, which included: (i) a form of the New Sub-Advisory Agreement; (ii) information regarding the transition of sub-investment advisory services from NIMNA to NIM; (iii) information regarding investment due diligence of NIM performed by the Adviser; (iv) information regarding NIM’s compliance program; and (v) an opinion of counsel that replacing NIMNA with NIM as the sub-investment adviser to the fund would not result in a “change of control” or an “assignment” of an advisory contract within the meaning of the 1940 Act, and, therefore, does not require the approval of fund shareholders. The Board also considered the substance of discussions with representatives of the Adviser at the Meeting and at a Board meeting on March 12-13, 2019 (the “March Meeting”) at which the Board re-approved the Current Agreement for the ensuing year until March 30, 2020.
Nature, Extent and Quality of Services to be Provided by NIM. In examining the nature, extent and quality of the services that had been furnished by NIMNA to the
36
fund under the Current Agreement, and were expected to be provided by NIM to the fund under the New Sub-Advisory Agreement, the Board considered: (i) NIM’s organization, qualification and background, as well as the qualifications of its personnel; (ii) the expertise of the personnel providing portfolio management services, which would remain the same after the Effective Date; (iii) the investment strategy for the fund, which would remain the same after the Effective Date; and (iv) NIM’s compliance program. The Board also considered the review process undertaken by the Adviser and the Adviser’s favorable assessment of the nature and quality of the sub-investment advisory services provided by NIMNA and expected to be provided to the fund by NIM after the Effective Date. Based on their consideration and review of the foregoing information, the Board concluded that the nature, extent and quality of the sub-investment advisory services to be provided by NIM under the New Sub-Advisory Agreement, as well as NIM’s ability to render such services based on its resources and the experience of the investment team, which will remain the same, were adequate and appropriate for the fund in light of the fund’s investment objective, and supported a decision to approve the New Sub-Advisory Agreement.
Investment Performance of NIM. The Board had considered NIMNA’s investment performance in managing the fund’s portfolio at the March Meeting (including comparative data provided by Broadridge Financial Solutions, Inc.). The Board considered the performance and that the same investment professionals would continue to manage the fund’s assets after the Effective Date, as factors in evaluating the services to be provided by NIM under the New Sub-Advisory Agreement after the Effective Date, and determined that these factors, when viewed together with the other factors considered by the Board, supported a decision to approve the New Sub-Advisory Agreement.
Costs of Services to be Provided and Profitability. The Board considered the proposed fee payable under the New Sub-Advisory Agreement (which was the same as that payable under the Current Agreement and had been considered at the March Meeting), noting that the proposed fee would be paid by the Adviser and, thus, would not impact the fees paid by the fund or the Adviser’s profitability. The Board recognized that, because NIM’s fee would be paid by the Adviser, and not the fund, an analysis of profitability was more appropriate in the context of the Board’s consideration of the fund’s Management Agreement, pursuant to which the Adviser provides the fund with investment management and administrative services (the “Management Agreement”), and, therefore, the Board had received and considered a profitability analysis of the Adviser and its affiliates, including NIMNA, at the March Meeting. The Board concluded that the proposed fee payable to NIM by the Adviser was appropriate and the Adviser’s profitability was not excessive in light of the nature, extent and quality of the services to be provided to the fund by the Adviser and NIM under the New Sub-Advisory Agreement.
Economies of Scale to be Realized. The Board recognized that, because NIM’s fee would continue to be paid by the Adviser, and not the fund, an analysis of economies of
37
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
scale was more appropriate in the context of the Board’s consideration of the Management Agreement, which had been done at the March Meeting.
The Board also considered whether there were any ancillary benefits that would accrue to NIM as a result of NIM’s relationship with the fund. The Board concluded that NIM may direct fund brokerage transactions to certain brokers to obtain research and other services, but noted that NIMNA currently paid, and that, after the Effective Date, NIM would pay, for such research and other services, not the fund by way of brokerage commission costs.
In considering the materials and information described above, the Independent Directors received assistance from, and met separately with, their independent legal counsel, and were provided with a written description of their statutory responsibilities and the legal standards that are applicable to the approval of investment advisory and sub-investment advisory agreements.
After full consideration of the factors discussed above, with no single factor identified as being of paramount importance, the Board, all of whom are Independent Directors, with the assistance of independent legal counsel, approved the New Sub-Advisory Agreement for the fund effective as of the Effective Date.
************
At a meeting of the fund’s Board of Directors held on February 10-11, 2020, the Board considered the renewalof the fund’s Management Agreement, pursuant to which the Adviser provides the fund with investment advisory and administrative services (the “Agreement”), the Sub-Investment Advisory Agreement pursuant to which Newton Investment Management Limited (“Newton”) provides asset allocation for the fund and manages the portion of the fund’s assets allocated to equity and equity-related investments (the “Newton Agreement”) and the Sub-Investment Advisory Agreement pursuant to which Mellon Investments Corporation (together with Newton, the “Subadviser”) provides day-to-day management of the fund’s assets allocated to debt and debt-related investments (together with the Newton Agreement and the Agreement, the “Agreements”). 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
38
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, which included information comparing (1) the fund’s performance with the performance of a group of institutional flexible portfolio funds (the “Performance Group”) and with a broader group of retail and institutional flexible portfolio funds (the “Performance Universe”), all for various periods ended December 31, 2019, 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 institutional flexible portfolio 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.
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. The Board discussed with representatives of the Adviser and/or 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 the one-year period and below the Performance Group and Performance Universe medians for the two-year period. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index.
The Board reviewed and considered the contractual management fee rate payable by the fund to the Adviser over the fund’s last fiscal year in light of the nature, extent and quality of the management services provided by the Adviser. In addition, the Board also reviewed and considered the actual management fee rate paid by the fund over the fund’s last fiscal year which included reductions for a fee waiver arrangement in place
39
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
that reduced the investment advisory fee paid to the Adviser. 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 the lowest in the Expense Group, the fund’s actual management fee (which was zero) was the lowest in the Expense Group and Expense Universe and the fund’s total expenses were below the Expense Group and Expense Universe medians.
Representatives of the Adviser stated that the Adviser has contractually agreed, until February 28, 2021, 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 .15% 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 Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness of the fund’s management fee.
The Board considered the fee to the Subadviser in relation to the fee paid 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 considered the expense limitation arrangement and its effect on the profitability of 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
40
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 stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser and the 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.
· 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
41
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
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 Agreement.
42
NOTES
43
NOTES
44
NOTES
45
BNY Mellon Sustainable Balanced Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Sub-Advisers
Newton Investment Management Limited
160 Queen Victoria Street
London, EC4V, 4LA, UK
Mellon Investment Corporation
BNY Mellon Center
One Boston Place
Boston, MA 02108
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 K: DRAKX Service: DRASX |
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-mailSend your request toinfo@bnymellon.com
InternetInformation can be viewed online or downloaded atwww.bnymellonim.com/us
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 atwww.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 atwww.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2020 BNY Mellon Securities Corporation |
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures applicable to Item 10.
Item 11. Controls and Procedures.
(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes to the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
(a)(1) Not applicable.
(a)(3) Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
BNY Mellon Advantage Funds, Inc.
By: /s/ Renee LaRoche-Morris
Renee LaRoche-Morris
President (Principal Executive Officer)
Date: June 25, 2020
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/ Renee LaRoche-Morris
Renee LaRoche-Morris
President (Principal Executive Officer)
Date: June 25, 2020
By: /s/ James Windels
James Windels
Treasurer (Principal Financial Officer)
Date: June 25, 2020
EXHIBIT INDEX
(a)(2) Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940. (EX-99.CERT)
(b) Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940. (EX-99.906CERT)