DISCUSSION OF FUND PERFORMANCE
For the period of June 1, 2013, through November 30, 2013, as provided by D. Kirk Henry, Portfolio Manager
Fund and Market Performance Overview
For the six-month period ended November 30, 2013, Dreyfus Emerging Markets Fund’s Class A shares produced a total return of 2.90%, Class C shares returned 2.55%, and Class I shares returned 3.09%.
1
In comparison, the fund’s benchmark, the Morgan Stanley Capital International Emerging Markets Index (“MSCI EM Index”), achieved a 2.33% total return for the same period.
2
The fund’s Class Y shares produced a total return of 10.73% for the period since their inception of July 1, 2013, through November 30, 2013.
Emerging-markets equities eked out modest gains, on average, as market rallies over the reporting period’s second half offset earlier weakness stemming from economic and liquidity concerns. The fund produced higher returns than its benchmark, mainly due to overweighted exposure to and successful stock selections in China and South Korea.
The Fund’s Investment Approach
The fund seeks long-term capital growth. In seeking this objective, the fund invests at least 80% of its assets in the stocks of companies organized, or with a majority of assets or business, in emerging market countries generally represented in the MSCI EM Index. Normally, the fund will not invest more than 25% of its total assets in any single emerging market country. We identify potential investments through quantitative and fundamental research, using a value-oriented, research-driven approach that emphasizes individual stock selection over economic and industry trends.We assess how a stock is valued relative to its intrinsic worth, the company’s efficiency and profitability, and the presence of a catalyst that could trigger an increase in the stock’s price in the near- or mid-term.
Emerging Markets Lagged Developed Nations
The reporting period began in the midst of pronounced weakness in emerging equity markets. Investors reacted negatively to remarks by U.S. monetary policymakers that the Federal Reserve Board (the “Fed”) would begin backing away from its massive
The Fund
3
DISCUSSION OF FUND PERFORMANCE
(continued)
quantitative easing program sooner than expected. The Fed’s hawkish comments sparked shifts in investment capital from the emerging markets to more developed nations, causing emerging-markets stock prices to fall and currency exchange rates to decline sharply against the U.S. dollar. In addition, concerns intensified regarding economic slowdowns in some of the larger emerging markets, including China, India, and Brazil. Widening current account deficits and budget deficits in countries such as Indonesia,Turkey, and South Africa also weighed on investor sentiment.
The emerging markets generally stabilized in July and rallied from August through October when the Fed refrained from tapering its quantitative easing program and some countries considered financial reforms to shore up their economies and attract investment capital.What’s more, equity valuations had become more attractive after the downturn. Improved investor sentiment enabled the MSCI EM Index to erase its previous losses, and a downdraft in November was not severe enough to prevent the benchmark from ending the reporting period in positive territory.
Country Allocations and Stock Selections Buoyed Results
In this changing market environment, the fund’s country allocation strategy generally proved supportive of relative performance. Underweighted exposure to Indonesia helped cushion the brunt of local stock market declines, and mildly overweighted positions in China and South Korea helped the fund participate more fully in those markets’ gains.
Successful stock selections in China during the reporting period included logistics service provider Sinotrans, which benefited from national economic stabilization and proposed structural reforms. Construction materials producer Anhui Conch Cement, Cl. H saw input costs decline and revenues increase. Beijing Capital International Airport, Cl. H advanced due to regulatory changes designed to increase competition among airlines.The fund also benefited from gains posted by insurers PICC Property & Casualty, Cl. H and China Life Insurance, Cl. H.Winners in South Korea included utility Korea Electric Power Corp., which gained value after regulators announced a higher-than-expected tariff increase. Diversified financial institution KB Financial Group and Samsung Fire & Marine Insurance also fared well.
On a more negative note, India represented the reporting period’s greatest detractor from relative performance as a weak rupee took its toll in the financials and industrials sectors. In addition, construction firm Bharat Heavy Electricals was hurt by
4
reduced government spending on infrastructure development. Disappointments in Russia included drug company
Pharmstandard OSJC
, which lost value due to corporate governance issues surrounding a recent acquisition. Finally, in Brazil, energy producer Petroleo Brasileiro,ADR was hurt by rising production costs and government price controls on imported oil.
Finding Opportunities Among Attractively Valued Stocks
Although we expect market volatility to persist over the near term, we are optimistic regarding the longer term prospects for emerging-markets equities. A recovering global economy appears likely to boost demand for exports from developing nations, which could in turn support higher levels of domestic economic activity. We have found a number of opportunities meeting our value-oriented investment criteria in China, South Korea, India, and Brazil. From an industry group perspective, the fund ended the reporting period with overweighted exposure to the industrials, energy, and financials sectors.
December 16, 2013
Please note, the position in any security highlighted with italicized typeface was sold during the reporting period.
Equity funds are subject generally to market, market sector, market liquidity, issuer and investment style risks, among
other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
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.
Investing internationally involves special risks, including changes in currency exchange rates, political, economic and
social instability, a lack of comprehensive company information, differing auditing and legal standards and less market
liquidity.These risks generally are greater with emerging market countries than with more economically and politically
established foreign countries.
1
Total return includes reinvestment of dividends and any capital gains paid and does not take into consideration the
maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed
on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Past
performance is no guarantee of future results. Share price, yield and investment return fluctuate such that upon
redemption, fund shares may be worth more or less than their original cost. Return figures for the fund provided reflect
the absorption of certain fund expenses by The Dreyfus Corporation pursuant to an undertaking in effect through
October 1, 2014, at which time it may be extended, terminated or modified. Had these expenses not been absorbed,
the fund’s returns would have been lower.
2
SOURCE: LIPPER INC. — Reflects reinvestment of net dividends and, where applicable, capital gain distributions.
The Morgan Stanley Capital International Emerging Markets (MSCI EM) Index is a market capitalization-weighted
index composed of companies representative of the market structure of select designated emerging market countries in
Europe, Latin America and the Pacific Basin. Investors cannot invest directly in any index.
TheFund
5
UNDERSTANDING YOUR FUND’S EXPENSES
(Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds.You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Emerging Markets Fund from June 1, 2013 to November 30, 2013. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended November 30, 2013
†
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
Class C
|
|
Class I
|
|
Class Y
|
|
Expenses paid per $1,000
††
|
$
|
8.60
|
$
|
12.59
|
$
|
7.23
|
$
|
5.09
|
|
Ending value (after expenses)
|
$
|
1,029.00
|
$
|
1,025.50
|
$
|
1,030.90
|
$
|
1,107.30
|
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS
(Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds.All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment
assuming a hypothetical 5% annualized return for the six months ended November 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A
|
|
Class C
|
|
Class I
|
|
Class Y
|
|
Expenses paid per $1,000
††††
|
$
|
8.54
|
$
|
12.51
|
$
|
7.18
|
$
|
5.87
|
|
Ending value (after expenses)
|
$
|
1,016.60
|
$
|
1,012.63
|
$
|
1,017.95
|
$
|
1,019.25
|
|
|
|
|
†
|
From July 1, 2013 (commencement of initial offering) to November 30, 2013 for ClassY shares.
|
|
††
|
Expenses are equal to the fund’s annualized expense ratio of 1.69% for Class A, 2.48% for Class C and
|
|
|
1.42% for Class I, multiplied by the average account value over the period, multiplied by 183/365 (to reflect the
|
|
|
one-half year period). Expenses are equal to the fund’s annualized expense ratio of 1.16% for ClassY, multiplied
|
|
|
by the average account value over the period, multiplied by 152/365 (to reflect the actual days in the period).
|
|
†††
|
Please note that while ClassY shares commenced operations on July 1, 2013, the hypothetical expenses paid during
|
|
|
the period reflect projected activity for the full six month period for purposes of comparability.This projection
|
|
|
assumes that annualized expense ratios were in effect during the period June 1, 2013 to November 30, 2013.
|
|
††††
|
Expenses are equal to the fund’s annualized expense ratio of 1.69% for Class A, 2.48% for Class C, 1.42% for
|
|
|
Class I and 1.16% for ClassY, multiplied by the average account value over the period, multiplied by 183/365
|
|
|
(to reflect the one-half year period).
|
6
STATEMENT OF ASSETS AND LIABILITIES
November 30, 2013 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
Value
|
|
|
Assets ($):
|
|
|
|
|
|
|
|
Investments in securities—See Statement of Investments:
|
|
|
|
|
|
|
Unaffiliated issuers
|
|
766,751,639
|
762,714,294
|
|
|
Affiliated issuers
|
|
4,205,000
|
4,205,000
|
|
|
Cash denominated in foreign currencies
|
|
5,713,165
|
5,664,964
|
|
|
Receivable for investment securities sold
|
|
|
2,878,890
|
|
|
Dividends receivable
|
|
|
|
1,249,564
|
|
|
Receivable for shares of Common Stock subscribed
|
|
|
|
382,189
|
|
|
Unrealized appreciation on forward foreign
|
|
|
|
|
|
|
currency exchange contracts—Note 4
|
|
|
|
|
5
|
|
|
Prepaid expenses
|
|
|
|
|
91,214
|
|
|
|
|
|
|
777,186,120
|
|
|
Liabilities ($):
|
|
|
|
|
|
|
|
Due to The Dreyfus Corporation and affiliates—Note 3(c)
|
|
|
1,162,546
|
|
|
Cash overdraft due to Custodian
|
|
|
|
|
711,362
|
|
|
Payable for investment securities purchased
|
|
|
4,008,367
|
|
|
Payable for shares of Common Stock redeemed
|
|
|
1,296,297
|
|
|
Interest payable—Note 2
|
|
|
|
|
1,063
|
|
|
Accrued expenses
|
|
|
|
|
441,347
|
|
|
|
|
|
|
7,620,982
|
|
|
Net Assets ($)
|
|
|
|
769,565,138
|
|
|
Composition of Net Assets ($):
|
|
|
|
|
|
|
|
Paid-in capital
|
|
|
|
962,943,051
|
|
|
Accumulated undistributed investment income—net
|
|
|
6,183,905
|
|
|
Accumulated net realized gain (loss) on investments
|
|
|
(195,474,297
|
)
|
|
Accumulated net unrealized appreciation (depreciation)
|
|
|
|
|
|
|
on investments and foreign currency transactions
|
|
|
(4,087,521
|
)
a
|
|
Net Assets ($)
|
|
|
|
769,565,138
|
|
|
|
|
|
|
Net Asset Value Per Share
|
|
|
|
|
|
|
|
|
Class A
|
Class C
|
|
Class I
|
Class Y
|
|
|
Net Assets ($)
|
192,380,466
|
18,241,065
|
558,942,500
|
1,107
|
|
|
Shares Outstanding
|
19,372,210
|
1,885,893
|
55,904,644
|
110.62
|
|
|
Net Asset Value Per Share ($)
|
9.93
|
9.67
|
|
10.00
|
10.01
|
|
|
|
|
a Net of $152,278 deferred foreign capital gains tax.
|
|
|
|
|
|
|
See notes to financial statements.
|
|
|
|
|
|
|
The Fund
13
|
|
|
|
|
STATEMENT OF OPERATIONS
|
|
|
|
Six Months Ended November 30, 2013 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($):
|
|
|
|
Income:
|
|
|
|
Cash dividends (net of $1,031,455 foreign taxes withheld at source):
|
|
|
|
Unaffiliated issuers
|
9,705,251
|
|
|
Affiliated issuers
|
4,844
|
|
|
Total Income
|
9,710,095
|
|
|
Expenses:
|
|
|
|
Management fee—Note 3(a)
|
4,731,341
|
|
|
Shareholder servicing costs—Note 3(c)
|
904,009
|
|
|
Custodian fees—Note 3(c)
|
423,330
|
|
|
Prospectus and shareholders’ reports
|
108,064
|
|
|
Professional fees
|
79,602
|
|
|
Distribution fees—Note 3(b)
|
69,047
|
|
|
Directors’ fees and expenses—Note 3(d)
|
44,584
|
|
|
Registration fees
|
39,581
|
|
|
Loan commitment fees—Note 2
|
4,968
|
|
|
Interest expense—Note 2
|
2,859
|
|
|
Miscellaneous
|
43,197
|
|
|
Total Expenses
|
6,450,582
|
|
|
Less—reduction in expenses due to undertaking—Note 3(a)
|
(694,074
|
)
|
|
Less—reduction in fees due to earnings credits—Note 3(c)
|
(77
|
)
|
|
Net Expenses
|
5,756,431
|
|
|
Investment Income—Net
|
3,953,664
|
|
|
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($):
|
|
|
|
Net realized gain (loss) on investments and foreign currency transactions
|
(57,000,384
|
)
|
|
Net realized gain (loss) on forward foreign currency exchange contracts
|
(260,801
|
)
|
|
Net Realized Gain (Loss)
|
(57,261,185
|
)
|
|
Net unrealized appreciation (depreciation) on
|
|
|
|
investments and foreign currency transactions
|
73,913,955
|
|
|
Net unrealized appreciation (depreciation) on
|
|
|
|
forward foreign currency exchange contracts
|
1,201
|
|
|
Net Unrealized Appreciation (Depreciation)
|
73,915,156
|
|
|
Net Realized and Unrealized Gain (Loss) on Investments
|
16,653,971
|
|
|
Net Increase in Net Assets Resulting from Operations
|
20,607,635
|
|
|
|
|
See notes to financial statements.
|
|
|
14
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
November 30, 2013
|
|
Year Ended
|
|
|
|
(Unaudited)
a
|
|
May 31, 2013
|
|
|
Operations ($):
|
|
|
|
|
|
Investment income—net
|
3,953,664
|
|
8,690,475
|
|
|
Net realized gain (loss) on investments
|
(57,261,185
|
)
|
(85,110,119
|
)
|
|
Net unrealized appreciation
|
|
|
|
|
|
(depreciation) on investments
|
73,915,156
|
|
167,214,351
|
|
|
Net Increase (Decrease) in Net Assets
|
|
|
|
|
|
Resulting from Operations
|
20,607,635
|
|
90,794,707
|
|
|
Dividends to Shareholders from ($):
|
|
|
|
|
|
Investment income—net:
|
|
|
|
|
|
Class A
|
—
|
|
(2,411,350
|
)
|
|
Class C
|
—
|
|
(7,308
|
)
|
|
Class I
|
—
|
|
(7,587,534
|
)
|
|
Total Dividends
|
—
|
|
(10,006,192
|
)
|
|
Capital Stock Transactions ($):
|
|
|
|
|
|
Net proceeds from shares sold:
|
|
|
|
|
|
Class A
|
27,611,559
|
|
33,800,787
|
|
|
Class C
|
1,130,195
|
|
2,759,240
|
|
|
Class I
|
101,768,630
|
|
272,702,538
|
|
|
Class Y
|
1,000
|
|
—
|
|
|
Dividends reinvested:
|
|
|
|
|
|
Class A
|
—
|
|
2,250,707
|
|
|
Class C
|
—
|
|
5,993
|
|
|
Class I
|
—
|
|
6,737,594
|
|
|
Cost of shares redeemed:
|
|
|
|
|
|
Class A
|
(62,409,761
|
)
|
(175,295,852
|
)
|
|
Class C
|
(3,421,746
|
)
|
(10,142,934
|
)
|
|
Class I
|
(175,619,560
|
)
|
(344,694,506
|
)
|
|
Increase (Decrease) in Net Assets
|
|
|
|
|
|
from Capital Stock Transactions
|
(110,939,683
|
)
|
(211,876,433
|
)
|
|
Total Increase (Decrease) in Net Assets
|
(90,332,048
|
)
|
(131,087,918
|
)
|
|
Net Assets ($):
|
|
|
|
|
|
Beginning of Period
|
859,897,186
|
|
990,985,104
|
|
|
End of Period
|
769,565,138
|
|
859,897,186
|
|
|
Undistributed investment income—net
|
6,183,905
|
|
2,230,241
|
|
The Fund
15
STATEMENT OF CHANGES IN NET ASSETS
(continued)
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
November 30, 2013
|
|
Year Ended
|
|
|
|
(Unaudited)
a
|
|
May 31, 2013
|
|
|
Capital Share Transactions:
|
|
|
|
|
|
Class A
b
|
|
|
|
|
|
Shares sold
|
2,885,050
|
|
3,433,934
|
|
|
Shares issued for dividends reinvested
|
—
|
|
220,226
|
|
|
Shares redeemed
|
(6,610,343
|
)
|
(17,894,278
|
)
|
|
Net Increase (Decrease) in Shares Outstanding
|
(3,725,293
|
)
|
(14,240,118
|
)
|
|
Class C
b
|
|
|
|
|
|
Shares sold
|
124,498
|
|
286,078
|
|
|
Shares issued for dividends reinvested
|
—
|
|
598
|
|
|
Shares redeemed
|
(375,967
|
)
|
(1,062,238
|
)
|
|
Net Increase (Decrease) in Shares Outstanding
|
(251,469
|
)
|
(775,562
|
)
|
|
Class I
|
|
|
|
|
|
Shares sold
|
10,814,905
|
|
27,261,377
|
|
|
Shares issued for dividends reinvested
|
—
|
|
656,686
|
|
|
Shares redeemed
|
(18,519,249
|
)
|
(35,279,849
|
)
|
|
Net Increase (Decrease) in Shares Outstanding
|
(7,704,344
|
)
|
(7,361,786
|
)
|
|
Class Y
|
|
|
|
|
|
Shares sold
|
110.62
|
|
—
|
|
a
Effective July 1, 2013, the fund commenced offering ClassY shares.
b
During the period ended May 31, 2013, 24,476 Class C shares representing $241,093, were exchanged for
23,942 Class A shares.
See notes to financial statements.
16
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated.All information (except portfolio turnover rate) reflects financial results for a single fund share.Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions.These figures have been derived from the fund’s financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2013
|
|
|
|
Year Ended May 31,
|
|
|
|
|
Class A Shares
|
(Unaudited)
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
|
Per Share Data ($):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
beginning of period
|
9.65
|
|
8.88
|
|
13.36
|
|
10.89
|
|
9.16
|
|
19.45
|
|
|
Investment Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income—net
a
|
.04
|
|
.07
|
|
.10
|
|
.08
|
|
.09
|
|
.13
|
|
|
Net realized and unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
gain (loss) on investments
|
.24
|
|
.79
|
|
(3.39
|
)
|
2.44
|
|
1.76
|
|
(6.63
|
)
|
|
Total from Investment Operations
|
.28
|
|
.86
|
|
(3.29
|
)
|
2.52
|
|
1.85
|
|
(6.50
|
)
|
|
Distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment income—net
|
—
|
|
(.09
|
)
|
(.12
|
)
|
(.05
|
)
|
(.12
|
)
|
(.34
|
)
|
|
Dividends from net realized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
gain on investments
|
—
|
|
—
|
|
(1.07
|
)
|
—
|
|
—
|
|
(3.45
|
)
|
|
Total Distributions
|
—
|
|
(.09
|
)
|
(1.19
|
)
|
(.05
|
)
|
(.12
|
)
|
(3.79
|
)
|
|
Net asset value, end of period
|
9.93
|
|
9.65
|
|
8.88
|
|
13.36
|
|
10.89
|
|
9.16
|
|
|
Total Return (%)
b
|
2.90
|
c
|
9.59
|
|
(24.70
|
)
|
24.54
|
|
20.14
|
|
(26.58
|
)
|
|
Ratios/Supplemental Data (%):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of total expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to average net assets
|
1.87
|
d
|
1.82
|
|
1.78
|
|
1.78
|
|
1.77
|
|
2.01
|
|
|
Ratio of net expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to average net assets
|
1.69
|
d
|
1.75
|
|
1.78
|
|
1.78
|
|
1.76
|
|
2.00
|
|
|
Ratio of net investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to average net assets
|
.91
|
d
|
.75
|
|
.92
|
|
.63
|
|
.79
|
|
1.28
|
|
|
Portfolio Turnover Rate
|
24.49
|
c
|
42.43
|
|
45.73
|
|
68.19
|
|
70.17
|
|
58.57
|
|
|
Net Assets, end of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ x 1,000)
|
192,380
|
|
222,808
|
|
331,575
|
|
586,912
|
|
508,118
|
|
492,958
|
|
a
Based on average shares outstanding at each month end.
b
Exclusive of sales charge.
c
Not annualized.
d
Annualized.
See notes to financial statements.
The Fund
17
FINANCIAL HIGHLIGHTS
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2013
|
|
|
|
Year Ended May 31,
|
|
|
|
|
Class C Shares
|
(Unaudited)
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
|
Per Share Data ($):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
beginning of period
|
9.43
|
|
8.68
|
|
13.07
|
|
10.70
|
|
9.06
|
|
18.80
|
|
|
Investment Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income (loss)—net
a
|
.00
|
b
|
(.00
|
)
b
|
.01
|
|
(.02
|
)
|
.01
|
|
.06
|
|
|
Net realized and unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
gain (loss) on investments
|
.24
|
|
.75
|
|
(3.31
|
)
|
2.39
|
|
1.74
|
|
(6.35
|
)
|
|
Total from Investment Operations
|
.24
|
|
.75
|
|
(3.30
|
)
|
2.37
|
|
1.75
|
|
(6.29
|
)
|
|
Distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment income—net
|
—
|
|
(.00
|
)
b
|
(.02
|
)
|
—
|
|
(.11
|
)
|
(.00
|
)
b
|
|
Dividends from net realized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
gain on investments
|
—
|
|
—
|
|
(1.07
|
)
|
—
|
|
—
|
|
(3.45
|
)
|
|
Total Distributions
|
—
|
|
(.00
|
)
b
|
(1.09
|
)
|
—
|
|
(.11
|
)
|
(3.45
|
)
|
|
Net asset value, end of period
|
9.67
|
|
9.43
|
|
8.68
|
|
13.07
|
|
10.70
|
|
9.06
|
|
|
Total Return (%)
c
|
2.55
|
d
|
8.67
|
|
(25.30
|
)
|
23.54
|
|
19.25
|
|
(27.07
|
)
|
|
Ratios/Supplemental Data (%):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of total expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to average net assets
|
2.67
|
e
|
2.62
|
|
2.57
|
|
2.56
|
|
2.56
|
|
2.73
|
|
|
Ratio of net expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to average net assets
|
2.48
|
e
|
2.55
|
|
2.57
|
|
2.56
|
|
2.56
|
|
2.72
|
|
|
Ratio of net investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(loss) to average net assets
|
.10
|
e
|
(.04
|
)
|
.14
|
|
(.12
|
)
|
.09
|
|
.59
|
|
|
Portfolio Turnover Rate
|
24.49
|
d
|
42.43
|
|
45.73
|
|
68.19
|
|
70.17
|
|
58.57
|
|
|
Net Assets, end of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ x 1,000)
|
18,241
|
|
20,161
|
|
25,292
|
|
38,507
|
|
20,054
|
|
4,063
|
|
a
Based on average shares outstanding at each month end.
b
Amount represents less than $.01 per share.
c
Exclusive of sales charge.
d
Not annualized.
e
Annualized.
See notes to financial statements.
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
November 30, 2013
|
|
|
|
Year Ended May 31,
|
|
|
|
|
Class I Shares
|
(Unaudited)
|
|
2013
|
|
2012
|
|
2011
|
|
2010
|
|
2009
|
|
|
Per Share Data ($):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
beginning of period
|
9.70
|
|
8.93
|
|
13.45
|
|
10.97
|
|
9.23
|
|
19.49
|
|
|
Investment Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment income—net
a
|
.05
|
|
.10
|
|
.12
|
|
.11
|
|
.13
|
|
.18
|
|
|
Net realized and unrealized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
gain (loss) on investments
|
.25
|
|
.79
|
|
(3.42
|
)
|
2.46
|
|
1.75
|
|
(6.67
|
)
|
|
Total from Investment Operations
|
.30
|
|
.89
|
|
(3.30
|
)
|
2.57
|
|
1.88
|
|
(6.49
|
)
|
|
Distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
investment income—net
|
—
|
|
(.12
|
)
|
(.15
|
)
|
(.09
|
)
|
(.14
|
)
|
(.32
|
)
|
|
Dividends from net realized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
gain on investments
|
—
|
|
—
|
|
(1.07
|
)
|
—
|
|
—
|
|
(3.45
|
)
|
|
Total Distributions
|
—
|
|
(.12
|
)
|
(1.22
|
)
|
(.09
|
)
|
(.14
|
)
|
(3.77
|
)
|
|
Net asset value, end of period
|
10.00
|
|
9.70
|
|
8.93
|
|
13.45
|
|
10.97
|
|
9.23
|
|
|
Total Return (%)
|
3.09
|
b
|
9.89
|
|
(24.59
|
)
|
24.90
|
|
20.30
|
|
(26.40
|
)
|
|
Ratios/Supplemental Data (%):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of total expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to average net assets
|
1.61
|
c
|
1.57
|
|
1.56
|
|
1.57
|
|
1.61
|
|
1.80
|
|
|
Ratio of net expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to average net assets
|
1.42
|
c
|
1.50
|
|
1.56
|
|
1.57
|
|
1.61
|
|
1.79
|
|
|
Ratio of net investment income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
to average net assets
|
1.13
|
c
|
.99
|
|
1.15
|
|
.83
|
|
1.12
|
|
1.58
|
|
|
Portfolio Turnover Rate
|
24.49
|
b
|
42.43
|
|
45.73
|
|
68.19
|
|
70.17
|
|
58.57
|
|
|
Net Assets, end of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ x 1,000)
|
558,943
|
|
616,929
|
|
634,118
|
|
758,093
|
|
318,028
|
|
140,884
|
|
a
Based on average shares outstanding at each month end.
b
Not annualized.
c
Annualized.
See notes to financial statements.
The Fund
19
FINANCIAL HIGHLIGHTS
(continued)
|
|
|
|
|
|
Period Ended
|
|
|
Class Y Shares
|
November 30, 2013
a
|
|
|
Per Share Data ($):
|
|
|
|
Net asset value, beginning of period
|
9.04
|
|
|
Investment Operations:
|
|
|
|
Investment income—net
b
|
.03
|
|
|
Net realized and unrealized
|
|
|
|
gain (loss) on investments
|
.94
|
|
|
Total from Investment Operations
|
.97
|
|
|
Net asset value, end of period
|
10.01
|
|
|
Total Return (%)
|
10.73
|
c
|
|
Ratios/Supplemental Data (%):
|
|
|
|
Ratio of total expenses to average net assets
|
1.36
|
d
|
|
Ratio of net expenses to average net assets
|
1.16
|
d
|
|
Ratio of net investment income
|
|
|
|
(loss) to average net assets
|
.85
|
d
|
|
Portfolio Turnover Rate
|
24.49
|
c
|
|
Net Assets, end of period ($ x 1,000)
|
1
|
|
a
From July 1, 2013 (commencement of initial offering) to November 30, 2013.
b
Based on average shares outstanding at each month end.
c
Not annualized.
d
Annualized.
See notes to financial statements.
20
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—Significant Accounting Policies:
Dreyfus Emerging Markets Fund (the “fund”) is a separate non-diversified series of Dreyfus International 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 two series, including the fund. The fund’s investment objective is to seek long-term capital growth. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Manager, 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 offers four classes of shares: Class A (100 million shares authorized), Class C (100 million shares authorized), Class I (100 million shares authorized) and Class Y (100 million shares authorized). Class A shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class I and ClassY shares are offered at net asset value 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 November 30, 2013, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held all of the outstanding Class Y shares of the fund.
The Fund
21
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 is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions.Actual results could differ from those estimates.
The Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation:
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
22
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:
Level 1
—unadjusted quoted prices in active markets for identical investments.
Level 2
—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3
—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices, except for open short positions, where the asked price is used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are categorized within Level 1 of the fair value hierarchy.
The Fund
23
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and financial futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Directors ( the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward foreign currency exchange contracts (“forward contracts”) are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
24
The following is a summary of the inputs used as of November 30, 2013 in valuing the fund’s investments:
|
|
|
|
|
|
|
|
|
Level 2—Other
|
Level 3—
|
|
|
|
Level 1—
|
Significant
|
Significant
|
|
|
|
Unadjusted
|
Observable
|
Unobservable
|
|
|
|
Quoted Prices
|
Inputs
|
Inputs
|
Total
|
|
Assets ($)
|
|
|
|
|
|
Investments in Securities:
|
|
|
|
|
Equity Securities—
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
Common Stocks
†
|
753,486,511
|
—
|
—
|
753,486,511
|
|
Equity Securities—
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
Preferred Stocks
†
|
1,725,356
|
—
|
—
|
1,725,356
|
|
Exchange-Traded
|
|
|
|
|
|
Funds
|
7,499,687
|
—
|
—
|
7,499,687
|
|
Mutual Funds
|
4,205,000
|
—
|
—
|
4,205,000
|
|
Rights
†
|
2,740
|
—
|
—
|
2,740
|
|
Other Financial
|
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|
|
|
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Instruments:
|
|
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|
|
|
Forward Foreign
|
|
|
|
|
|
Currency Exchange
|
|
|
|
|
|
Contracts
††
|
—
|
5
|
—
|
5
|
†
See Statement of Investments for additional detailed categorizations.
†
†
Amount shown represents unrealized appreciation at period end.
At May 31, 2013, $659,670,724 of exchange traded foreign equity securities were classified within Level 2 of the fair value hierarchy 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.
The Fund
25
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
(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 Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended November 30, 2013 were as follows:
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|
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Affiliated
|
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|
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Investment
|
Value
|
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Value
|
Net
|
|
Company
|
5/31/2013
|
($)
|
Purchases ($) Sales ($) 11/30/2013 ($)
|
Assets (%)
|
|
Dreyfus
|
|
|
|
|
|
Institutional
|
|
|
|
|
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Preferred
|
|
|
|
|
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Plus Money
|
|
|
|
|
|
Market
|
|
|
|
|
|
Fund
|
13,600,000
|
|
113,400,000 122,795,000 4,205,000
|
.5
|
(e) Risk:
Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S.These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and
26
delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S.
The fund follows an investment policy of investing primarily in emerging market countries. Because the fund’s investments are concentrated in emerging market countries, the fund’s performance is expected to be closely tied to social, political and economic conditions within such countries and to be more volatile than the performance of more geographically diversified funds.
(f) Dividends to shareholders:
Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”).To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Federal income taxes:
It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended November 30, 2013, the fund did not have any liabilities for any uncertain tax positions.The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended November 30, 2013, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended May 31, 2013 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The Fund
27
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
Under the Regulated Investment Company Modernization Act of 2010 (the “2010 Act”), the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 (“post-enactment losses”) for an unlimited period. Furthermore, post-enactment capital loss carryovers retain their character as either short-term or long-term capital losses rather than short-term as they were under previous statute.
The fund has an unused capital loss carryover of $114,461,630 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to May 31, 2013.These post-enactment long-term capital losses can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended May 31, 2013 was as follows: ordinary income $10,006,192. The tax character of current year distributions, if any, will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $265 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. Prior to October 9, 2013, the unsecured credit facility with Citibank, N.A. was $210 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing.
The average amount of borrowings outstanding under the Facilities during the period ended November 30, 2013 was approximately $509,800 with a related weighted average annualized interest rate of 1.12%.
28
NOTE 3—Management Fee and Other Transactions With Affiliates:
(a)
Pursuant to a management agreement with the Manager, the management fee is computed at the annual rate of 1.25% of the value of the fund’s average daily net assets and is payable monthly.The Manager had agreed from June 1, 2013 through June 30, 2013, to waive receipt of a portion of the fund’s management fee in the amount of .10% of the value of the fund’s average daily net assets.The Manager has also agreed, from July 1, 2013 through October 1, 2014, to waive receipt of a portion of the fund’s management fee in the amount of .20% of the value of the fund’s average daily net assets.The reduction in expenses, pursuant to the undertaking, amounted to $694,074 during the period ended November 30, 2013.
During the period ended November 30, 2013, the Distributor retained $6,210 from commissions earned on sales of the fund’s Class A shares and $878 from CDSCs on redemptions of the fund’s Class C shares.
(b)
Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended November 30, 2013, Class C shares were charged $69,047 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
The Fund
29
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
be paid to Service Agents. During the period ended November 30, 2013, Class A and Class C shares were charged $251,119 and $23,016, respectively, pursuant to the Shareholder Services Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates DreyfusTransfer, Inc., a wholly-owned subsidiary of the Manager, 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 November 30, 2013, the fund was charged $47,563 for transfer agency services and $1,305 for cash management services.These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $77.
The fund compensates The Bank of NewYork Mellon under a custody agreement for providing custodial services for the fund.These fees are determined based on net assets, geographic region and transaction activity. During the period ended November 30, 2013, the fund was charged $423,330 pursuant to the custody agreement.
The fund compensated The Bank of New York Mellon under a cash management agreement that was in effect until September 30, 2013 for performing certain cash management services related to fund subscriptions and redemptions. During the period ended November 30, 2013, the fund was charged $330 pursuant to the cash management agreement, which is included in Shareholder servicing costs in the Statement of Operations.
30
During the period ended November 30, 2013, the fund was charged $4,571 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: management fees $790,116, Distribution Plan fees $11,353, Shareholder Services Plan fees $43,846, custodian fees $385,707, Chief Compliance Officer fees $3,833 and transfer agency fees $56,050, which are offset against an expense reimbursement currently in effect in the amount of $128,359.
(d)
Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
(e)
A 2% redemption fee is charged and retained by the fund on certain shares redeemed within sixty days following the date of issuance subject to certain exceptions, including redemptions made through the use of the fund’s exchange privilege. During the period ended November 30, 2013, redemption fees charged and retained by the fund amounted to $2,628.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward contracts, during the period ended November 30, 2013, amounted to $181,639,906 and $267,351,244, respectively.
Derivatives:
A derivative is a financial instrument whose performance is derived from the performance of another asset. Each type of derivative instrument that was held by the fund during the period ended November 30, 2013 is discussed below.
The Fund
31
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
Forward Foreign Currency Exchange Contracts:
The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy.When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future.With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates.With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed.The fund realizes a gain if the value of the contract increases between those dates.Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations.The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments.The fund is also exposed to credit risk associated with counterparty nonper-formance on these forward contracts, which is generally limited to the unrealized gain on each open contract.The following summarizes open forward contracts at November 30, 2013:
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|
|
|
|
|
|
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Foreign
|
|
|
|
|
Forward Foreign Currency
|
Currency
|
|
|
Unrealized
|
|
Exchange Contracts
|
Amounts
|
Cost ($)
|
Value ($)
|
Appreciation ($)
|
|
Purchases:
|
|
|
|
|
|
Hong Kong Dollar,
|
|
|
|
|
|
Expiring 12/2/2013
a
|
4,281,748
|
552,297
|
552,302
|
5
|
|
|
|
Counterparty:
|
|
|
|
|
|
a Citigroup
|
|
|
|
|
In December 2011, with clarification in January 2013, FASB issued guidance that expands disclosure requirements with respect to the offsetting of certain assets and liabilities.The fund adopted these disclosure provisions during the current reporting period. These disclosures are required for certain investments, including derivative financial instru-
32
ments subject to master netting arrangements (“MNA”) or similar 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 MNA in the Statement of Assets and Liabilities.
At November 30, 2013, derivative assets and liabilities (by type) on a gross basis are as follows:
|
|
|
|
Derivative Financial Instruments:
|
Assets ($)
|
|
Forward contracts
|
5
|
|
Total gross amount of derivative assets and
|
|
|
liabilities in the Statement of Assets and Liabilities
|
5
|
|
Derivatives not subject to MNA or similar agreements
|
5
|
|
Total gross amount of assets and liabilities
|
|
|
subject to MNA or similar agreements
|
—
|
The following tables present derivative assets and liabilities net of amounts available for offsetting under MNA and net of related collateral received or pledged, if any, as of November 30, 2013:
Gross Amounts Not Offset in the Statement of Assets and Liabilities and Subject to MNA
|
|
|
|
|
|
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|
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Gross Amount of
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Financial
|
|
|
|
|
|
|
Assets Presented
|
Instruments
|
|
|
|
|
|
|
in the Statement
|
and
|
|
|
|
|
|
|
of Assets and
|
Derivatives
|
Net
|
Securities
|
Cash
|
|
|
|
Liabilities by the
|
Available
|
Amount of
|
Collateral
|
Collateral
|
Net Credit
|
|
Counterparty
|
Counterparty ($)
1
|
for Offset ($)
|
Assets ($) Received ($)
2
|
Received ($)
2
Exposure ($)
|
|
|
|
Citigroup
|
5
|
—
|
5
|
—
|
—
|
5
|
1
Absent a default event or early termination, over-the-counter derivative assets and liabilities are
presented at gross amounts and are not offset in the Statement of Assets and Liabilities.
2
In some instances, the actual collateral received and/or pledged may be more than the amount
shown due to overcollateralization.
The following summarizes the average market value of derivatives outstanding during the period ended November 30, 2013:
|
|
|
|
|
Average Market Value ($)
|
|
Forward contracts
|
1,629,333
|
The Fund
33
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(continued)
At November 30, 2013, accumulated net unrealized depreciation on investments was $4,037,345, consisting of $90,479,002 gross unrealized appreciation and $94,516,347 gross unrealized depreciation.
At November 30, 2013, 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).
34
For More Information
Telephone
Call your financial representative or 1-800-DREYFUS
Mail
The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-DREYFUS.
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© 2014 MBSC Securities Corporation
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