N-CSR 1 lp1085-6289.htm ANNUAL REPORT

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act file number 811-03940
   
  BNY Mellon Strategic Funds, Inc.  
  (Exact name of Registrant as specified in charter)  
     
 

 

c/o BNY Mellon Investment Adviser, Inc.

240 Greenwich Street

New York, New York 10286

 
  (Address of principal executive offices)        (Zip code)  
     
 

Deirdre Cunnane, Esq.

240 Greenwich Street

New York, New York 10286

 
  (Name and address of agent for service)  
 
Registrant's telephone number, including area code:   (212) 922-6400
   

Date of fiscal year end:

 

05/31  
Date of reporting period:

05/31/23

 

 

 
             

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 Select Managers Small Cap Growth Fund

 

 

 
 

FORM N-CSR

Item 1. Reports to Stockholders.

 

 

BNY Mellon Select Managers Small Cap Growth Fund

 

ANNUAL REPORT

May 31, 2023

 

 

 

Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.im.bnymellon.com and sign up for eCommunications. It’s simple and only takes a few minutes.

 

The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds.

 

Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value

 

Contents

THE FUND

  

Discussion of Fund Performance

2

Fund Performance

5

Understanding Your Fund’s Expenses

8

Comparing Your Fund’s Expenses
With Those of Other Funds

8

Statement of Investments

9

Statement of Assets and Liabilities

21

Statement of Operations

22

Statement of Changes in Net Assets

23

Financial Highlights

25

Notes to Financial Statements

29

Report of Independent Registered
Public Accounting Firm

40

Important Tax Information

41

Liquidity Risk Management Program

42

Board Members Information

43

Officers of the Fund

46

FOR MORE INFORMATION

 

Back Cover

 

DISCUSSION OF FUND PERFORMANCE (Unaudited)

For the period from June 1, 2022, through May 31, 2023, as provided by Portfolio Allocation Manager, Elena Goncharova.

Market and Fund Performance Overview

For the 12-month period ended May 31, 2023, BNY Mellon Select Managers Small Cap Growth Fund’s (the “fund”) Class A, Class C, Class I and Class Y shares at NAV produced total returns of −4.90%, −5.68%, −4.74% and −4.64%, respectively.1 In comparison, the Russell 2000® Growth Index (the “Index”), the fund’s benchmark, returned 2.68% for the same period.2

Small-cap growth stocks gained ground over the reporting period as markets began to anticipate the end of the Federal Reserve’s (the “Fed”) rate-hiking cycle. The fund lagged the Index due to both unfavorable asset allocation and stock selection decisions.

The Fund’s Investment Approach

The fund seeks capital appreciation. To pursue its goal, the fund normally invests at least 80% of its assets in the stocks of small-cap companies. The fund’s portfolio is constructed to have a growth tilt.

The fund uses a “multi-manager” approach by selecting various sub-advisers to manage its assets. We may hire, terminate or replace sub-advisers and modify material terms and conditions of sub-advisory arrangements without shareholder approval.

The fund’s assets are currently allocated to six sub-advisers, each acting independently and using its own methodology to select portfolio investments. At the end of the reporting period, 13% of the fund’s assets were under the management of Redwood Investments, LLC, which employs a blend of quantitative and qualitative research to build growth and core equity portfolios; approximately 24% of the fund’s assets were under the management of Geneva Capital Management, LLC, which employs bottom-up fundamental analysis supplemented by top-down considerations to identify companies with a consistent, sustainable record of growth; approximately 10% of the fund’s assets were under the management of Nicholas Investment Partners, L.P., which uses a bottom-up approach to security selection, combining rigorous fundamental analysis with the discipline and objectivity of quantitative analytics; EAM Investors, LLC, which managed 19% of the fund’s assets, chooses investments through bottom-up fundamental analysis using a blend of a quantitative discovery process and a qualitative analysis process; approximately 15% of the fund’s assets were managed by Granite Investment Partners, LLC, which seeks attractively valued, small-cap companies with catalysts for growth; and 19% of the fund’s assets were managed by Rice Hall James & Associates LLC, which seeks growing companies with high earnings growth, high or improving returns on invested capital and sustainable competitive advantages. The percentages of the fund’s assets allocated to the various sub-advisers can change over time, within ranges described in the prospectus.

Market Buffeted by Countervailing Trends

The reporting period was marked by a range of factors that largely depressed returns, but some supporting trends emerged, which brought some stability to the market and benefited small-cap stocks. The dominant theme continued to be the Fed’s continued monetary tightening policies aimed at curbing inflation. Added to this was the banking crisis that emerged early in 2023. Uncertainty about the outcome of the debt ceiling standoff in the Congress also weighed on markets, while the anticipated end to the Fed’s rate hikes and the emergence of the artificial intelligence (AI) theme provided markets with some support.

2

 

The Fed reiterated its outlook that rates need to remain higher for longer, but data showed that inflation continued to slow from its peak in June 2022, and that the labor market began to soften. Though unemployment has remained relatively low, some large technology companies announced layoffs or paused hiring amid a more cautious macroeconomic outlook.

The fourth quarter 2022 and first quarter 2023 earnings seasons reflected similar themes, including a corporate spending pullback and a focus on optimization and trimming labor costs. But the banking crisis that emerged was especially disruptive. Three regional banks—Silicon Valley Bank, Signature Bank and First Republic Bank—faced mounting losses in their long-dated bond holdings as interest rates rose. Uninsured depositors were spooked by the headlines and lost confidence, choosing to move their money into larger money center banks.

In May 2023, Congress reached an apparent standoff in the debate on the federal debt ceiling. While an agreement was eventually reached, providing the market with some relief, the run-up caused some turmoil as the prospect of a default was threatened.

The market also benefited from investors’ anticipation of the end of the Fed’s tightening cycle. While rate cuts are not anticipated in the near term, a pause in rate hikes and a potential end to tightening boosted investor sentiment. The possibility that the economy could avoid recession provided some support to the market as well.

The market also was boosted by the launch of ChatGPT by Open AI, which drew investors’ attention to the promise of artificial intelligence and its likely enhancement of productivity and economic growth. While the most immediate beneficiaries of this news were large-cap growth stocks in the information technology sector, their performance provided support to the market as a whole.

Asset Allocation and Security Selection Hindered Returns

The fund’s relative underperformance versus the Index stemmed from both unfavorable asset allocation and stock selections by the fund’s underlying portfolio managers. Allocations to the industrials and consumer discretionary sectors detracted as underlying funds were slow to exit stocks that had benefited from the pandemic. Stock selections were detrimental across most sectors, especially in the health care sector. Stocks in the pharmaceutical and biotechnology industries are often considered “low quality,” and most underlying fund managers prefer “high quality” companies, such as those that are suppliers to drug and biotechnology companies. But “high quality” companies generally lagged during the period. In the energy sector, a position in Chart Industries, Inc., a manufacturer of natural gas storage and liquification equipment, was a particular detractor. As for factor performance, an overweight to momentum hampered performance, especially in the health care and energy sectors.

On a more positive note, certain stock selections, especially in the financial and health care sectors, added to performance. In the financials sector, a position in Fair Isaac Corp. also known as FICO, which offers data analytics related to consumer credit scoring, was especially advantageous. The company’s shares benefited from an agreement to share its data with several artificial intelligence platforms. While health care selections were mostly detrimental, those made by the Nicholas Investment Partners were notably beneficial. As for factor performance, being underweight size, profitability and volatility was beneficial, as was an overweight to liquidity.

Recession Still Likely

While some investors believe a recession is no longer likely in the near term, we remain cautious. A number of factors suggest that such a slowdown is still on the table. Consumer indebtedness is

3

 

DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)

increasing, and the labor market has begun to show some weakness. While some expected that wages would catch up to inflation, that does not appear to be happening. In addition, profit margins are coming under pressure, and may narrow further as companies are forced to refinance at higher interest rates. Developed markets as a whole are slowing, and earnings estimates for second quarter 2023 are not promising. Adding to this concern, despite the Fed’s progress in bringing inflation down, it still remains a factor.

June 15, 2023

1 Total return includes reinvestment of dividends and any capital gains paid and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. Return figures provided reflect the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an undertaking in effect through September 30, 2023, at which time it may be extended, terminated or modified. Had these expenses not been absorbed, the fund’s returns would have been lower.

2 Source: Lipper Inc. — The Russell 2000® Growth Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher growth earning potential as defined by Russell’s leading style methodology. The Russell 2000® Growth Index is constructed to provide a comprehensive and unbiased barometer for the small-cap growth segment. The index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set, and that the represented companies continue to reflect growth characteristics. 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.

The prices of small company stocks tend to be more volatile than the prices of large company stocks, mainly because these companies have less established and more volatile earnings histories. They also tend to be less liquid than larger company stocks.

Multi-manager risk means each sub-adviser makes investment decisions independently, and it is possible that the investment styles of the sub-advisers may not complement one another. Consequently, the fund’s exposure to a given stock, industry or investment style could be greater or smaller than if the fund had a single adviser.

Investing in foreign denominated and/or domiciled securities involves special risks, including changes in currency exchange rates, political, economic, and social instability, limited company information, differing auditing and legal standards, and less market liquidity. These risks generally are greater with emerging market countries.

References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations.

4

 

FUND PERFORMANCE (Unaudited)

Comparison of change in value of a $10,000 investment in Class A shares, Class C shares and Class I shares of BNY Mellon Select Managers Small Cap Growth Fund with a hypothetical investment of $10,000 in the Russell 2000® Growth Index (the “Index”).

 Source: Lipper Inc.

Past performance is not predictive of future performance.

The above graph compares a hypothetical $10,000 investment made in Class A shares, Class C shares and Class I shares of BNY Mellon Select Managers Small Cap Growth Fund on 5/31/13 to a hypothetical investment of $10,000 made in the Index on that date. All dividends and capital gain distributions are reinvested.

The fund’s performance shown in the line graph above takes into account the maximum initial sales charge on Class A shares and all other applicable fees and expenses on all classes. The Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher growth earning potential as defined by Russell’s leading style methodology. The Index is constructed to provide a comprehensive and unbiased barometer for the small-cap growth segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set and that the represented companies continue to reflect growth characteristics. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report.

5

 

FUND PERFORMANCE (Unaudited) (continued)

Comparison of change in value of a $1,000,000 investment in Class Y shares of BNY Mellon Select Managers Small Cap Growth Fund with a hypothetical investment of $1,000,000 in the Russell 2000® Growth Index (the “Index”).

 Source: Lipper Inc.

†† The total return figures presented for Class Y shares of the fund reflect the performance of the fund’s Class A shares for the period prior to 7/1/13 (the inception date for Class Y shares), not reflecting the applicable sales load for Class A shares.

Past performance is not predictive of future performance.

The above graph compares a hypothetical $1,000,000 investment made in Class Y shares of BNY Mellon Select Managers Small Cap Growth Fund on 5/31/13 to a hypothetical investment of $1,000,000 made in the Index on that date. All dividends and capital gain distributions are reinvested.

The fund’s performance shown in the line graph above takes into account all applicable fees and expenses of the fund’s Class Y shares. The Index measures the performance of the small-cap growth segment of the U.S. equity universe. It includes those Russell 2000 companies with higher growth earning potential as defined by Russell’s leading style methodology. The Index is constructed to provide a comprehensive and unbiased barometer for the small-cap growth segment. The Index is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set and that the represented companies continue to reflect growth characteristics. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report.

6

 

     

Average Annual Total Returns as of 5/31/2023

 

Inception Date

1 Year

5 Years

10 Years

Class A shares

    

with maximum sales charge (5.75%)

7/1/10

-10.38%

2.46%

6.78%

without sales charge

7/1/10

-4.90%

3.69%

7.41%

Class C shares

    

with applicable redemption charge

7/1/10

-6.52%

2.93%

6.61%

without redemption

7/1/10

-5.68%

2.93%

6.61%

Class I shares

7/1/10

-4.74%

3.96%

7.71%

Class Y shares

7/1/13

-4.64%

4.02%

7.84%††

Russell 2000® Growth Index

6/30/10

2.68%

2.74%

7.90%

 The maximum contingent deferred sales charge for Class C shares is 1% for shares redeemed within one year of the date of purchase.

†† The total return performance figures presented for Class Y shares of the fund reflect the performance of the fund’s Class A shares for the period prior to 7/1/13 (the inception date for Class Y shares), not reflecting the applicable sales load for Class A shares.

The performance data quoted represents past performance, which is no guarantee of future results. Share price and investment return fluctuate and an investor’s shares may be worth more or less than original cost upon redemption. Current performance may be lower or higher than the performance quoted. Go to www.im.bnymellon.com for the fund’s most recent month-end returns.

The fund’s performance shown in the graphs and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. In addition to the performance of Class A shares shown with and without a maximum sales charge, the fund's performance shown in the table takes into account all other applicable fees and expenses on all classes.

7

 

UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)

As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.

Review your fund’s expenses

The table below shows the expenses you would have paid on a $1,000 investment in BNY Mellon Select Managers Small Cap Growth Fund from December 1, 2022 to May 31, 2023. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.

       

Expenses and Value of a $1,000 Investment

 

Assume actual returns for the six months ended May 31, 2023

 

 

 

 

 

 

 

 

 

 

Class A

Class C

Class I

Class Y

 

Expenses paid per $1,000

$6.34

$9.98

$5.12

$4.78

 

Ending value (after expenses)

$956.20

$952.30

$957.10

$957.30

 

COMPARING YOUR FUND’S EXPENSES WITH THOSE OF OTHER FUNDS (Unaudited)

Using the SEC’s method to compare expenses

The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.

       

Expenses and Value of a $1,000 Investment

 

Assuming a hypothetical 5% annualized return for the six months ended May 31, 2023

 

 

 

 

 

 

 

 

 

 

Class A

Class C

Class I

Class Y

 

Expenses paid per $1,000

$6.54

$10.30

$5.29

$4.94

 

Ending value (after expenses)

$1,018.45

$1,014.71

$1,019.70

$1,020.04

 

Expenses are equal to the fund’s annualized expense ratio of 1.30% for Class A, 2.05% for Class C, 1.05% for Class I and .98% for Class Y, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half year period).

8

 

STATEMENT OF INVESTMENTS

May 31, 2023

        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 95.0%

     

Automobiles & Components - 2.2%

     

Dorman Products, Inc.

   

8,005

a 

656,810

 

Fox Factory Holding Corp.

   

19,314

a 

1,717,401

 

LCI Industries

   

9,468

b 

1,022,923

 

Modine Manufacturing Co.

   

8,554

a 

233,439

 

Visteon Corp.

   

8,085

a 

1,079,995

 
    

4,710,568

 

Banks - 1.4%

     

Axos Financial, Inc.

   

49,861

a 

1,885,742

 

Bank OZK

   

14,630

b 

505,905

 

Heritage Commerce Corp.

   

8,468

 

61,647

 

Wintrust Financial Corp.

   

7,258

 

461,391

 
    

2,914,685

 

Capital Goods - 11.6%

     

AAON, Inc.

   

17,755

 

1,537,761

 

AeroVironment, Inc.

   

7,168

a 

669,563

 

Alamo Group, Inc.

   

4,803

 

799,508

 

Albany International Corp., Cl. A

   

5,790

 

491,687

 

Applied Industrial Technologies, Inc.

   

5,411

 

665,337

 

Armstrong World Industries, Inc.

   

10,448

 

652,373

 

Barnes Group, Inc.

   

8,971

 

353,009

 

Blue Bird Corp.

   

8,453

a 

214,368

 

Chart Industries, Inc.

   

3,728

a 

409,073

 

Comfort Systems USA, Inc.

   

1,778

 

263,108

 

Construction Partners, Inc., Cl. A

   

42,742

a 

1,182,671

 

Crane Co.

   

9,472

 

688,236

 

Crane NXT Co.

   

4,184

 

220,204

 

Donaldson Co., Inc.

   

9,828

 

575,233

 

EMCOR Group, Inc.

   

2,524

 

416,056

 

Energy Recovery, Inc.

   

6,673

a 

158,884

 

EnerSys

   

2,616

 

254,458

 

EnPro Industries, Inc.

   

2,097

 

211,965

 

Esab Corp.

   

8,724

 

512,273

 

ESCO Technologies, Inc.

   

11,837

 

1,065,330

 

Federal Signal Corp.

   

3,985

 

211,165

 

Fluence Energy, Inc.

   

13,649

a,b 

338,495

 

Fluor Corp.

   

16,940

a,b 

449,926

 

FTAI Aviation Ltd.

   

9,121

 

255,844

 

Gates Industrial Corp. PLC

   

11,794

a 

138,226

 

H&E Equipment Services, Inc.

   

10,275

 

369,489

 

Hayward Holdings, Inc.

   

43,211

a,b 

469,271

 

Kratos Defense & Security Solutions, Inc.

   

37,221

a 

489,084

 

9

 

STATEMENT OF INVESTMENTS (continued)

        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 95.0% (continued)

     

Capital Goods - 11.6% (continued)

     

Masonite International Corp.

   

18,003

a 

1,585,524

 

MasTec, Inc.

   

2,225

a 

225,526

 

MSC Industrial Direct Co., Inc., Cl. A

   

2,519

 

226,508

 

MYR Group, Inc.

   

2,103

a 

268,133

 

NEXTracker, Inc., Cl. A

   

5,641

a 

215,768

 

Owens Corning

   

2,272

 

241,582

 

Parsons Corp.

   

7,246

a 

323,824

 

PGT Innovations, Inc.

   

24,725

a 

614,911

 

Powell Industries, Inc.

   

4,107

 

236,153

 

RBC Bearings, Inc.

   

7,793

a 

1,545,274

 

Regal Rexnord Corp.

   

1,739

 

225,879

 

Rush Enterprises, Inc., Cl. A

   

11,057

 

577,949

 

Simpson Manufacturing Co., Inc.

   

2,439

 

288,265

 

SiteOne Landscape Supply, Inc.

   

6,920

a 

954,199

 

Standex International Corp.

   

1,724

 

234,792

 

Sterling Infrastructure, Inc.

   

4,620

a 

212,843

 

Symbotic, Inc.

   

15,027

a,b 

495,590

 

Terex Corp.

   

5,771

 

267,601

 

The AZEK Company, Inc.

   

21,357

a 

496,550

 

Trex Co., Inc.

   

18,750

a 

962,813

 

Vertiv Holdings Co.

   

13,445

 

259,489

 

Vicor Corp.

   

3,902

a 

215,976

 
    

24,737,746

 

Commercial & Professional Services - 7.6%

     

ACV Auctions, Inc., Cl. A

   

15,031

a 

256,128

 

CACI International, Inc., Cl. A

   

2,839

a 

849,486

 

Casella Waste Systems, Inc., Cl. A

   

18,702

a 

1,686,172

 

CBIZ, Inc.

   

19,100

a 

963,022

 

Cimpress PLC

   

4,672

a 

223,228

 

Clean Harbors, Inc.

   

3,085

a 

433,134

 

ExlService Holdings, Inc.

   

11,209

a 

1,691,886

 

Exponent, Inc.

   

18,742

 

1,711,519

 

Franklin Covey Co.

   

13,187

a 

486,864

 

FTI Consulting, Inc.

   

905

a 

170,149

 

Heritage-Crystal Clean, Inc.

   

14,772

a 

489,839

 

ICF International, Inc.

   

5,068

 

567,565

 

KBR, Inc.

   

4,197

 

247,707

 

Legalzoom.com, Inc.

   

20,470

a 

229,059

 

MAXIMUS, Inc.

   

10,002

 

809,762

 

Montrose Environmental Group, Inc.

   

15,307

a 

537,123

 

MSA Safety, Inc.

   

3,850

 

529,606

 

NV5 Global, Inc.

   

6,111

a 

553,779

 

Paycor HCM, Inc.

   

18,691

a 

411,015

 

10

 

        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 95.0% (continued)

     

Commercial & Professional Services - 7.6% (continued)

     

RB Global, Inc.

   

8,756

 

456,012

 

The Brink's Company

   

11,044

 

734,757

 

Willdan Group, Inc.

   

13,221

a 

220,262

 

WNS Holdings Ltd., ADR

   

25,969

a 

2,017,791

 
    

16,275,865

 

Consumer Discretionary Distribution - .6%

     

Dick's Sporting Goods, Inc.

   

1,201

 

153,140

 

Overstock.com, Inc.

   

28,219

a 

528,542

 

Signet Jewelers Ltd.

   

6,802

b 

431,859

 

Sleep Number Corp.

   

6,627

a 

120,214

 
    

1,233,755

 

Consumer Discretionary Distribution & Retail - 1.2%

     

American Eagle Outfitters, Inc.

   

31,531

 

320,670

 

Ollie's Bargain Outlet Holdings, Inc.

   

21,282

a 

1,173,064

 

Pool Corp.

   

1,704

 

538,856

 

Urban Outfitters, Inc.

   

8,125

a 

250,413

 

Valvoline, Inc.

   

6,553

 

252,291

 
    

2,535,294

 

Consumer Durables & Apparel - 1.6%

     

Acushnet Holdings Corp.

   

3,203

b 

143,366

 

Crocs, Inc.

   

3,380

a 

379,506

 

Deckers Outdoor Corp.

   

381

a 

180,975

 

Green Brick Partners, Inc.

   

4,162

a 

199,235

 

M/I Homes, Inc.

   

3,606

a 

254,836

 

Meritage Homes Corp.

   

2,001

 

230,775

 

Skyline Champion Corp.

   

8,331

a 

484,281

 

Taylor Morrison Home Corp.

   

18,190

a 

771,802

 

Topgolf Callaway Brands Corp.

   

13,749

a 

234,695

 

Tri Pointe Homes, Inc.

   

17,300

a 

505,333

 
    

3,384,804

 

Consumer Services - 4.4%

     

Boyd Gaming Corp.

   

11,261

 

717,664

 

Bright Horizons Family Solutions, Inc.

   

8,011

a 

685,742

 

Century Casinos, Inc.

   

40,967

a 

278,166

 

Duolingo, Inc.

   

1,962

a 

293,456

 

Hilton Grand Vacations, Inc.

   

12,126

a 

518,387

 

Kura Sushi USA, Inc., Cl. A

   

5,780

a,b 

471,013

 

Life Time Group Holdings, Inc

   

12,916

a 

245,533

 

Red Robin Gourmet Burgers, Inc.

   

14,677

a 

185,958

 

Shake Shack, Inc., Cl. A

   

4,031

a 

266,731

 

Stride, Inc.

   

41,587

a 

1,680,531

 

Texas Roadhouse, Inc.

   

22,073

 

2,381,676

 

Vail Resorts, Inc.

   

3,024

 

735,437

 

11

 

STATEMENT OF INVESTMENTS (continued)

        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 95.0% (continued)

     

Consumer Services - 4.4% (continued)

     

Wingstop, Inc.

   

3,835

 

764,546

 

WW International, Inc.

   

31,183

a 

204,560

 
    

9,429,400

 

Consumer Staples Distribution - .5%

     

BJ's Wholesale Club Holdings, Inc.

   

5,991

a 

375,336

 

Grocery Outlet Holding Corp.

   

12,657

a 

363,509

 

Performance Food Group Co.

   

4,433

a 

245,101

 
    

983,946

 

Energy - 1.6%

     

Borr Drilling Ltd.

   

24,437

a 

167,393

 

Cactus, Inc., Cl. A

   

13,514

 

426,772

 

ChampionX Corp.

   

23,585

 

595,757

 

Earthstone Energy, Inc., Cl. A

   

30,602

a 

367,530

 

Helmerich & Payne, Inc.

   

13,436

 

414,904

 

Noble Corp. PLC

   

18,923

a 

714,154

 

TechnipFMC PLC

   

32,602

a 

428,390

 

Weatherford International PLC

   

4,353

a 

245,683

 
    

3,360,583

 

Equity Real Estate Investment - .5%

     

Retail Opportunity Investments Corp.

   

33,748

c 

411,726

 

Terreno Realty Corp.

   

9,333

c 

572,393

 
    

984,119

 

Financial Services - 3.1%

     

Donnelley Financial Solutions, Inc.

   

37,532

a 

1,664,544

 

Euronet Worldwide, Inc.

   

17,436

a 

1,942,370

 

Evercore, Inc., Cl. A

   

2,312

 

249,580

 

Federal Agricultural Mortgage Corp., Cl. C

   

3,688

 

493,491

 

FirstCash Holdings, Inc.

   

6,047

 

595,871

 

I3 Verticals, Inc., Cl. A

   

25,247

a 

576,894

 

MGIC Investment Corp.

   

24,578

 

371,619

 

PJT Partners, Inc., Cl. A

   

5,032

 

339,157

 

Remitly Global, Inc.

   

18,112

a,b 

332,174

 
    

6,565,700

 

Food, Beverage & Tobacco - 2.4%

     

Celsius Holdings, Inc.

   

7,161

a 

898,920

 

Freshpet, Inc.

   

19,432

a,b 

1,161,257

 

Ingredion, Inc.

   

1,868

 

195,393

 

J&J Snack Foods Corp.

   

6,957

 

1,071,030

 

John B. Sanfilippo & Son, Inc.

   

2,457

 

285,577

 

MGP Ingredients, Inc.

   

8,076

 

767,705

 

Sovos Brands, Inc.

   

13,832

a 

262,670

 

SunOpta, Inc.

   

12,636

a 

85,040

 

12

 

        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 95.0% (continued)

     

Food, Beverage & Tobacco - 2.4% (continued)

     

The Vita Coco Co., Inc.

   

13,502

a 

360,233

 
    

5,087,825

 

Health Care Equipment & Services - 9.8%

     

Addus HomeCare Corp.

   

6,530

a 

588,680

 

Alphatec Holdings, Inc.

   

11,615

a 

176,083

 

AMN Healthcare Services, Inc.

   

5,598

a 

531,586

 

AtriCure, Inc.

   

10,632

a 

478,121

 

Axonics, Inc.

   

12,107

a 

585,858

 

Certara, Inc.

   

70,255

a 

1,459,899

 

CorVel Corp.

   

1,186

a 

231,792

 

Doximity, Inc., Cl. A

   

32,663

a,b 

1,001,774

 

Establishment Labs Holdings, Inc.

   

12,014

a,b 

775,143

 

Evolent Health, Inc., Cl. A

   

18,640

a 

543,170

 

Globus Medical, Inc., Cl. A

   

19,328

a 

1,046,225

 

HealthEquity, Inc.

   

11,063

a 

606,252

 

Inari Medical, Inc.

   

5,239

a 

316,436

 

Inmode Ltd.

   

10,159

a 

320,720

 

Inspire Medical Systems, Inc.

   

2,392

a 

699,636

 

Lantheus Holdings, Inc.

   

15,676

a 

1,357,386

 

LeMaitre Vascular, Inc.

   

15,372

 

965,977

 

Masimo Corp.

   

4,138

a 

669,694

 

Merit Medical Systems, Inc.

   

11,526

a 

949,742

 

Neogen Corp.

   

50,464

a 

882,615

 

NeoGenomics, Inc.

   

12,136

a 

208,496

 

Omnicell, Inc.

   

21,018

a 

1,543,141

 

Penumbra, Inc.

   

665

a 

204,381

 

Premier, Inc., Cl. A

   

25,487

 

637,175

 

RadNet, Inc.

   

9,424

a 

272,731

 

RxSight, Inc.

   

10,453

a 

254,740

 

Schrodinger, Inc.

   

6,100

a 

204,045

 

Shockwave Medical, Inc.

   

2,159

 

593,919

 

SI-BONE, Inc.

   

10,199

a 

256,811

 

STAAR Surgical Co.

   

12,834

a 

744,629

 

The Ensign Group, Inc.

   

7,938

 

703,386

 

TransMedics Group, Inc.

   

7,058

a 

512,834

 

Treace Medical Concepts, Inc.

   

8,856

a 

235,570

 

UFP Technologies, Inc.

   

2,380

a 

368,019

 
    

20,926,666

 

Household & Personal Products - 1.3%

     

BellRing Brands, Inc.

   

17,935

a 

656,780

 

e.l.f. Beauty, Inc.

   

5,214

a 

542,360

 

Inter Parfums, Inc.

   

7,939

 

997,138

 

13

 

STATEMENT OF INVESTMENTS (continued)

        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 95.0% (continued)

     

Household & Personal Products - 1.3% (continued)

     

WD-40 Co.

   

2,963

b 

561,933

 
    

2,758,211

 

Insurance - 2.2%

     

BRP Group, Inc., Cl. A

   

19,283

a 

386,817

 

Kinsale Capital Group, Inc.

   

9,964

 

3,018,893

 

Palomar Holdings, Inc.

   

15,668

a 

856,413

 

Stewart Information Services Corp.

   

10,345

 

463,870

 
    

4,725,993

 

Materials - 2.5%

     

Aspen Aerogels, Inc.

   

35,071

a 

230,416

 

Balchem Corp.

   

10,155

 

1,255,463

 

Carpenter Technology Corp.

   

19,378

 

883,830

 

Eagle Materials, Inc.

   

1,527

 

248,794

 

Ecovyst, Inc.

   

30,814

a 

309,373

 

Ingevity Corp.

   

14,180

a 

669,154

 

Livent Corp.

   

42,079

a,b 

969,921

 

Methanex Corp.

   

13,700

b 

559,919

 

O-I Glass, Inc.

   

14,330

a 

296,918

 
    

5,423,788

 

Media & Entertainment - 2.6%

     

Bumble Inc., CI. A

   

25,615

a 

391,910

 

Eventbrite, Inc., Cl. A

   

31,823

 

231,035

 

Integral Ad Science Holding Corp.

   

17,755

a 

335,747

 

Liberty Media Corp-Liberty Braves, Cl. A

   

2,241

a 

83,746

 

Liberty Media Corp-Liberty Braves, Cl. C

   

4,626

a 

169,682

 

Shutterstock, Inc.

   

12,796

 

636,857

 

TechTarget, Inc.

   

12,625

a 

438,593

 

World Wrestling Entertainment, Inc., Cl. A

   

20,114

 

2,037,951

 

Ziff Davis, Inc.

   

18,992

a 

1,121,288

 
    

5,446,809

 

Pharmaceuticals, Biotechnology & Life Sciences - 12.9%

     

89bio, Inc.

   

12,313

a 

224,466

 

ACADIA Pharmaceuticals, Inc.

   

34,588

a 

812,818

 

ADMA Biologics, Inc.

   

50,574

a 

205,836

 

Akero Therapeutics, Inc.

   

4,943

a 

220,359

 

Amicus Therapeutics, Inc.

   

39,115

a 

440,435

 

Amphastar Pharmaceuticals, Inc.

   

14,933

a 

662,577

 

Apellis Pharmaceuticals, Inc.

   

7,817

a 

671,090

 

Arcellx, Inc.

   

7,001

a 

309,094

 

argenx SE, ADR

   

898

a 

349,053

 

Ascendis Pharma A/S, ADR

   

7,361

a,b 

640,186

 

Assertio Holdings, Inc.

   

33,659

a 

213,061

 

14

 

        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 95.0% (continued)

     

Pharmaceuticals, Biotechnology & Life Sciences - 12.9% (continued)

     

Avid Bioservices, Inc.

   

59,761

a,b 

923,308

 

Axsome Therapeutics, Inc.

   

3,045

a,b 

224,660

 

Azenta, Inc.

   

10,300

a 

445,475

 

BioCryst Pharmaceuticals, Inc.

   

32,888

a 

271,984

 

BioLife Solutions, Inc.

   

21,161

a,b 

494,109

 

Biomea Fusion, Inc.

   

8,366

a 

284,109

 

Bio-Techne Corp.

   

13,789

 

1,127,802

 

Bridgebio Pharma, Inc.

   

15,126

a 

207,529

 

Chinook Therapeutics, Inc.

   

10,880

a 

263,187

 

Corcept Therapeutics, Inc.

   

22,642

a 

531,861

 

CryoPort, Inc.

   

40,550

a 

746,526

 

CymaBay Therapeutics, Inc.

   

19,648

a 

176,439

 

Cytokinetics, Inc.

   

1,448

a 

54,575

 

Day One Biopharmaceuticals, Inc.

   

9,450

a 

125,685

 

DICE Therapeutics, Inc.

   

5,140

a 

162,475

 

Halozyme Therapeutics, Inc.

   

35,185

a 

1,141,049

 

Harrow Health, Inc.

   

8,421

a 

158,820

 

ImmunoGen, Inc.

   

29,124

a 

397,251

 

Insmed, Inc.

   

8,218

a 

156,389

 

Intra-Cellular Therapies, Inc.

   

8,183

a 

485,906

 

Iovance Biotherapeutics, Inc.

   

58,201

a 

508,677

 

IVERIC bio, Inc.

   

2,444

a 

92,261

 

Karuna Therapeutics, Inc.

   

2,360

a,b 

534,658

 

Kiniksa Pharmaceuticals Ltd., CI. A

   

21,107

a 

292,543

 

Krystal Biotech, Inc.

   

6,894

a 

812,458

 

Legend Biotech Corp., ADR

   

3,543

a 

227,354

 

Ligand Pharmaceuticals, Inc.

   

9,218

a 

645,997

 

Madrigal Pharmaceuticals, Inc.

   

1,843

a 

513,110

 

Medpace Holdings, Inc.

   

7,638

a 

1,580,837

 

Mesa Laboratories, Inc.

   

2,663

b 

344,832

 

Mirum Pharmaceuticals, Inc.

   

10,034

a 

263,192

 

Morphic Holding, Inc.

   

4,144

a 

238,280

 

Neurocrine Biosciences, Inc.

   

5,726

a 

512,649

 

OmniAb, Inc.

   

87,744

a 

379,054

 

Optinose, Inc.

   

20,603

a 

25,754

 

Pacira Biosciences, Inc.

   

27,838

a 

1,058,679

 

Prestige Consumer Healthcare, Inc.

   

26,494

a 

1,516,252

 

Prometheus Biosciences, Inc.

   

3,030

a 

602,061

 

Protagonist Therapeutics, Inc.

   

10,001

a 

260,726

 

Prothena Corp. PLC

   

4,395

a 

291,960

 

PTC Therapeutics, Inc.

   

10,983

a 

460,957

 

Puma Biotechnology, Inc.

   

8,670

a 

29,045

 

15

 

STATEMENT OF INVESTMENTS (continued)

        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 95.0% (continued)

     

Pharmaceuticals, Biotechnology & Life Sciences - 12.9% (continued)

     

Quanterix Corp.

   

9,527

a 

186,824

 

Revance Therapeutics, Inc.

   

26,323

a 

804,431

 

Roivant Sciences Ltd.

   

11,594

a 

105,389

 

Supernus Pharmaceuticals, Inc.

   

15,783

a 

523,049

 

TG Therapeutics, Inc.

   

8,557

a 

227,873

 

Vaxcyte, Inc.

   

10,590

a 

524,417

 

Verona Pharma PLC, ADR

   

2,705

a 

58,212

 

Viking Therapeutics, Inc.

   

18,122

a 

397,959

 

Voyager Therapeutics, Inc.

   

18,186

a 

207,139

 

Xenon Pharmaceuticals, Inc.

   

4,127

a 

159,013

 
    

27,513,756

 

Semiconductors & Semiconductor Equipment - 3.7%

     

Aehr Test Systems

   

5,373

a,b 

177,417

 

Allegro MicroSystems, Inc.

   

14,538

a 

571,780

 

Axcelis Technologies, Inc.

   

4,607

a 

725,832

 

CEVA, Inc.

   

17,487

a 

437,525

 

Impinj, Inc.

   

2,633

a 

269,461

 

Lattice Semiconductor Corp.

   

8,514

a 

692,273

 

Monolithic Power Systems, Inc.

   

1,350

 

661,379

 

Onto Innovation, Inc.

   

25,278

a 

2,713,593

 

Rambus, Inc.

   

6,303

a 

403,140

 

Semtech Corp.

   

8,133

a 

176,811

 

Silicon Motion Technology Corp., ADR

   

1,795

 

109,926

 

SiTime Corp.

   

1,766

a,b 

175,134

 

SMART Global Holdings, Inc.

   

10,095

a 

227,945

 

Universal Display Corp.

   

1,648

 

242,800

 

Veeco Instruments, Inc.

   

10,288

a 

251,130

 
    

7,836,146

 

Software & Services - 12.1%

     

ACI Worldwide, Inc.

   

63,913

a 

1,457,856

 

Agilysys, Inc.

   

12,780

a 

950,064

 

Alarm.com Holdings, Inc.

   

17,470

a 

877,343

 

Altair Engineering, Inc., Cl. A

   

4,483

a 

328,738

 

Applied Digital Corp.

   

36,807

a 

308,075

 

AppLovin Corp., Cl. A

   

8,080

a,b 

202,081

 

Blackbaud, Inc.

   

14,753

a 

1,082,280

 

BlackLine, Inc.

   

11,551

a 

601,461

 

Box, Inc., Cl. A

   

5,314

a 

149,695

 

C3.ai, Inc., Cl. A

   

8,055

a,b 

322,281

 

CCC Intelligent Solutions Holdings, Inc.

   

23,217

a 

253,994

 

Confluent, Inc., Cl. A

   

15,081

a 

478,671

 

Consensus Cloud Solutions, Inc.

   

6,670

a 

243,122

 

16

 

        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 95.0% (continued)

     

Software & Services - 12.1% (continued)

     

Couchbase, Inc.

   

11,516

a 

236,308

 

Digital Turbine, Inc.

   

63,837

a 

583,470

 

DoubleVerify Holdings, Inc.

   

56,087

a 

1,955,753

 

Elastic NV

   

1,868

a 

136,028

 

Envestnet, Inc.

   

14,703

a 

769,408

 

Fair Isaac Corp.

   

3,328

a 

2,621,366

 

Five9, Inc.

   

8,438

a 

557,836

 

HashiCorp, Inc., Cl. A

   

4,397

a 

150,993

 

Intapp, Inc.

   

4,382

a 

185,227

 

InterDigital, Inc.

   

3,105

 

257,839

 

N-Able, Inc.

   

15,795

a 

224,289

 

nCino, Inc.

   

16,747

a,b 

460,375

 

Nutanix, Inc., Cl. A

   

27,182

a 

805,131

 

Perficient, Inc.

   

13,041

a 

997,245

 

Qualys, Inc.

   

4,256

a 

537,363

 

SentinelOne, Inc., Cl. A

   

10,272

a 

219,615

 

Smartsheet, Inc., Cl. A

   

4,577

a 

226,928

 

SolarWinds Corp.

   

5,573

a 

51,829

 

Sprout Social, Inc., Cl. A

   

21,177

a 

917,176

 

SPS Commerce, Inc.

   

8,767

a 

1,365,898

 

Teradata Corp.

   

5,350

a 

250,701

 

The Descartes Systems Group, Inc.

   

33,169

a 

2,564,959

 

Tyler Technologies, Inc.

   

1,905

a 

756,209

 

UiPath, Inc., Cl. A

   

13,318

a 

238,259

 

Vertex, Inc., Cl. A

   

12,082

a 

265,562

 

Wix.com Ltd.

   

5,883

a 

448,402

 

Workiva, Inc.

   

8,521

a 

825,344

 
    

25,865,174

 

Technology Hardware & Equipment - 5.7%

     

Arlo Technologies, Inc.

   

143,102

a 

1,383,796

 

Badger Meter, Inc.

   

2,725

 

375,696

 

Bel Fuse, Inc., Cl. B

   

4,396

 

216,239

 

Belden, Inc.

   

11,415

 

998,699

 

Calix, Inc.

   

18,915

a 

881,628

 

Cambium Networks Corp.

   

21,444

a 

336,242

 

Digi International, Inc.

   

12,993

a 

467,098

 

ePlus, Inc.

   

21,021

a 

1,038,227

 

Evolv Technologies Holdings, Inc.

   

41,828

a 

249,295

 

Extreme Networks, Inc.

   

21,016

a 

432,930

 

Harmonic, Inc.

   

15,610

a 

274,892

 

IonQ, Inc.

   

25,308

a 

273,073

 

Itron, Inc.

   

3,919

a 

265,434

 

Ituran Location & Control Ltd.

   

4,037

 

92,205

 

17

 

STATEMENT OF INVESTMENTS (continued)

        
 

Description

   

Shares

 

Value ($)

 

Common Stocks - 95.0% (continued)

     

Technology Hardware & Equipment - 5.7% (continued)

     

Napco Security Technologies, Inc.

   

38,575

 

1,434,604

 

Novanta, Inc.

   

8,909

a 

1,475,330

 

OSI Systems, Inc.

   

2,012

a 

239,448

 

Radware Ltd.

   

29,450

a 

578,987

 

Super Micro Computer, Inc.

   

4,031

a 

902,742

 

Vishay Intertechnology, Inc.

   

9,683

 

249,628

 
    

12,166,193

 

Telecommunication Services - .5%

     

Iridium Communications, Inc.

   

17,050

 

 1,023,682

 

Transportation - 2.5%

     

Allegiant Travel Co.

   

5,000

a 

487,450

 

ArcBest Corp.

   

4,571

 

382,958

 

Copa Holdings SA, Cl. A

   

1,960

b 

205,918

 

GXO Logistics, Inc.

   

9,161

a 

512,283

 

Marten Transport Ltd.

   

70,228

 

1,485,322

 

RXO, Inc.

   

13,093

a 

273,251

 

Saia, Inc.

   

2,804

a 

796,785

 

TFI International, Inc.

   

6,031

 

634,944

 

XPO, Inc.

   

13,200

a 

619,476

 
    

5,398,387

 

Utilities - .5%

     

California Water Service Group

   

8,752

 

498,076

 

Portland General Electric Co.

   

9,625

 

469,026

 
    

967,102

 

Total Common Stocks (cost $154,551,644)

   

202,256,197

 
    

Number of Rights

   

Rights - .0%

     

Pharmaceuticals, Biotechnology & Life Sciences - .0%

     

OmniAb, Inc. - 12.50 Earnout

   

4,894

d 

0

 

OmniAb, Inc. - 15.00 Earnout

   

4,894

d 

0

 

Total Rights (cost $6,958)

     

0

 
  

1-Day
Yield (%)

 

Shares

   

Investment Companies - 5.5%

     

Registered Investment Companies - 5.5%

     

Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares
(cost $11,656,685)

 

5.19

 

11,656,685

e 

 11,656,685

 

18

 

        
 

Description

 

1-Day
Yield (%)

 

Shares

 

Value ($)

 

Investment of Cash Collateral for Securities Loaned - 1.5%

     

Registered Investment Companies - 1.5%

     

Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares
(cost $3,192,349)

 

5.19

 

3,192,349

e 

 3,192,349

 

Total Investments (cost $169,407,636)

 

102.0%

 

217,105,231

 

Liabilities, Less Cash and Receivables

 

(2.0%)

 

(4,222,815)

 

Net Assets

 

100.0%

 

212,882,416

 

ADR—American Depositary Receipt

a Non-income producing security.

b Security, or portion thereof, on loan. At May 31, 2023, the value of the fund’s securities on loan was $10,234,960 and the value of the collateral was $10,715,245, consisting of cash collateral of $3,192,349 and U.S. Government & Agency securities valued at $7,522,896. In addition, the value of collateral may include pending sales that are also on loan.

c Investment in real estate investment trust within the United States.

d The fund held Level 3 securities at May 31, 2023. These securities were valued at $0 or .0% of net assets.

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 (%)

Health Care

22.8

Industrials

21.8

Information Technology

21.5

Consumer Discretionary

10.0

Investment Companies

7.0

Financials

6.7

Consumer Staples

4.1

Communication Services

3.0

Materials

2.5

Energy

1.6

Real Estate

.5

Utilities

.5

 

102.0

 Based on net assets.

See notes to financial statements.

19

 

STATEMENT OF INVESTMENTS (continued)

       

Affiliated Issuers

   

Description

Value ($) 5/31/2022

Purchases ($)

Sales ($)

Value ($) 5/31/2023

Dividends/
Distributions ($)

 

Registered Investment Companies - 5.5%

  

Dreyfus Institutional Preferred Government Plus Money Market Fund, Institutional Shares - 5.5%

14,691,745

277,718,261

(280,753,321)

11,656,685

392,526

 

Investment of Cash Collateral for Securities Loaned - 1.5%

  

Dreyfus Institutional Preferred Government Plus Money Market Fund, SL Shares - 1.5%

8,481,909

66,388,963

(71,678,523)

3,192,349

124,630

†† 

Total - 7.0%

23,173,654

344,107,224

(352,431,844)

14,849,034

517,156

 

 Includes reinvested dividends/distributions.

†† Represents securities lending income earned from the reinvestment of cash collateral from loaned securities, net of fees and collateral investment expenses, and other payments to and from borrowers of securities.

See notes to financial statements.

20

 

STATEMENT OF ASSETS AND LIABILITIES

May 31, 2023

       

 

 

 

 

 

 

 

 

 

 

Cost

 

Value

 

Assets ($):

 

 

 

 

Investments in securities—See Statement of Investments
(including securities on loan, valued at $10,234,960)—Note 1(c):

 

 

 

Unaffiliated issuers

154,558,602

 

202,256,197

 

Affiliated issuers

 

14,849,034

 

14,849,034

 

Receivable for investment securities sold

 

1,379,562

 

Dividends and securities lending income receivable

 

107,800

 

Receivable for shares of Common Stock subscribed

 

67,569

 

Tax reclaim receivable—Note 1(b)

 

4,524

 

Prepaid expenses

 

 

 

 

57,399

 

 

 

 

 

 

218,722,085

 

Liabilities ($):

 

 

 

 

Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c)

 

195,336

 

Liability for securities on loan—Note 1(c)

 

3,192,349

 

Payable for investment securities purchased

 

2,095,470

 

Payable for shares of Common Stock redeemed

 

270,644

 

Directors’ fees and expenses payable

 

4,776

 

Other accrued expenses

 

 

 

 

81,094

 

 

 

 

 

 

5,839,669

 

Net Assets ($)

 

 

212,882,416

 

Composition of Net Assets ($):

 

 

 

 

Paid-in capital

 

 

 

 

167,600,934

 

Total distributable earnings (loss)

 

 

 

 

45,281,482

 

Net Assets ($)

 

 

212,882,416

 

      

Net Asset Value Per Share

Class A

Class C

Class I

Class Y

 

Net Assets ($)

1,136,767

165,540

8,451,136

203,128,973

 

Shares Outstanding

59,348

10,390

412,019

9,864,438

 

Net Asset Value Per Share ($)

19.15

15.93

20.51

20.59

 

 

 

 

 

 

 

See notes to financial statements.

 

 

 

 

 

21

 

STATEMENT OF OPERATIONS

Year Ended May 31, 2023

       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Income ($):

 

 

 

 

Income:

 

 

 

 

Cash dividends (net of $3,925 foreign taxes withheld at source):

 

Unaffiliated issuers

 

 

1,548,109

 

Affiliated issuers

 

 

392,526

 

Income from securities lending—Note 1(c)

 

 

124,630

 

Total Income

 

 

2,065,265

 

Expenses:

 

 

 

 

Management fee—Note 3(a)

 

 

2,674,845

 

Custodian fees—Note 3(c)

 

 

86,219

 

Professional fees

 

 

80,298

 

Registration fees

 

 

64,877

 

Chief Compliance Officer fees—Note 3(c)

 

 

49,273

 

Directors’ fees and expenses—Note 3(d)

 

 

29,039

 

Shareholder servicing costs—Note 3(c)

 

 

15,174

 

Prospectus and shareholders’ reports

 

 

15,124

 

Loan commitment fees—Note 2

 

 

5,794

 

Interest expense—Note 2

 

 

1,696

 

Distribution fees—Note 3(b)

 

 

1,532

 

Miscellaneous

 

 

36,980

 

Total Expenses

 

 

3,060,851

 

Less—reduction in expenses due to undertaking—Note 3(a)

 

 

(125,890)

 

Less—reduction in fees due to earnings credits—Note 3(c)

 

 

(1,151)

 

Net Expenses

 

 

2,933,810

 

Net Investment (Loss)

 

 

(868,545)

 

Realized and Unrealized Gain (Loss) on Investments—Note 4 ($):

 

 

Net realized gain (loss) on investments

6,176,750

 

Net change in unrealized appreciation (depreciation) on investments

(22,853,685)

 

Net Realized and Unrealized Gain (Loss) on Investments

 

 

(16,676,935)

 

Net (Decrease) in Net Assets Resulting from Operations

 

(17,545,480)

 

 

 

 

 

 

 

 

See notes to financial statements.

     

22

 

STATEMENT OF CHANGES IN NET ASSETS

          

 

 

 

 

Year Ended May 31,

 

 

 

 

2023

 

2022

 

Operations ($):

 

 

 

 

 

 

 

 

Net investment (loss)

 

 

(868,545)

 

 

 

(2,579,715)

 

Net realized gain (loss) on investments

 

6,176,750

 

 

 

40,696,884

 

Net change in unrealized appreciation
(depreciation) on investments

 

(22,853,685)

 

 

 

(162,171,451)

 

Net Increase (Decrease) in Net Assets
Resulting from Operations

(17,545,480)

 

 

 

(124,054,282)

 

Distributions ($):

 

Distributions to shareholders:

 

 

 

 

 

 

 

 

Class A

 

 

(137,671)

 

 

 

(332,673)

 

Class C

 

 

(20,335)

 

 

 

(70,262)

 

Class I

 

 

(895,234)

 

 

 

(3,161,020)

 

Class Y

 

 

(21,108,847)

 

 

 

(112,382,784)

 

Total Distributions

 

 

(22,162,087)

 

 

 

(115,946,739)

 

Capital Stock Transactions ($):

 

Net proceeds from shares sold:

 

 

 

 

 

 

 

 

Class A

 

 

392,051

 

 

 

314,626

 

Class C

 

 

-

 

 

 

100,100

 

Class I

 

 

5,981,378

 

 

 

14,107,360

 

Class Y

 

 

31,756,247

 

 

 

54,228,948

 

Distributions reinvested:

 

 

 

 

 

 

 

 

Class A

 

 

137,671

 

 

 

332,673

 

Class C

 

 

19,717

 

 

 

68,374

 

Class I

 

 

733,965

 

 

 

2,456,946

 

Class Y

 

 

9,762,677

 

 

 

50,024,995

 

Cost of shares redeemed:

 

 

 

 

 

 

 

 

Class A

 

 

(766,021)

 

 

 

(331,163)

 

Class C

 

 

(54,923)

 

 

 

(78,344)

 

Class I

 

 

(10,311,895)

 

 

 

(14,099,945)

 

Class Y

 

 

(206,647,629)

 

 

 

(193,744,784)

 

Increase (Decrease) in Net Assets
from Capital Stock Transactions

(168,996,762)

 

 

 

(86,620,214)

 

Total Increase (Decrease) in Net Assets

(208,704,329)

 

 

 

(326,621,235)

 

Net Assets ($):

 

Beginning of Period

 

 

421,586,745

 

 

 

748,207,980

 

End of Period

 

 

212,882,416

 

 

 

421,586,745

 

23

 

STATEMENT OF CHANGES IN NET ASSETS (continued)

          

 

 

 

 

Year Ended May 31,

 

 

 

 

2023

 

2022

 

Capital Share Transactions (Shares):

 

Class Aa,b

 

 

 

 

 

 

 

 

Shares sold

 

 

18,552

 

 

 

11,465

 

Shares issued for distributions reinvested

 

 

7,261

 

 

 

12,132

 

Shares redeemed

 

 

(38,071)

 

 

 

(12,041)

 

Net Increase (Decrease) in Shares Outstanding

(12,258)

 

 

 

11,556

 

Class Cb

 

 

 

 

 

 

 

 

Shares sold

 

 

-

 

 

 

3,072

 

Shares issued for distributions reinvested

 

 

1,245

 

 

 

2,915

 

Shares redeemed

 

 

(3,207)

 

 

 

(3,628)

 

Net Increase (Decrease) in Shares Outstanding

(1,962)

 

 

 

2,359

 

Class Ia

 

 

 

 

 

 

 

 

Shares sold

 

 

272,819

 

 

 

445,197

 

Shares issued for distributions reinvested

 

 

36,174

 

 

 

84,460

 

Shares redeemed

 

 

(475,509)

 

 

 

(469,657)

 

Net Increase (Decrease) in Shares Outstanding

(166,516)

 

 

 

60,000

 

Class Ya

 

 

 

 

 

 

 

 

Shares sold

 

 

1,473,044

 

 

 

1,735,389

 

Shares issued for distributions reinvested

 

 

479,503

 

 

 

1,715,534

 

Shares redeemed

 

 

(9,364,076)

 

 

 

(6,994,218)

 

Net Increase (Decrease) in Shares Outstanding

(7,411,529)

 

 

 

(3,543,295)

 

 

 

 

 

 

 

 

 

 

 

a

During the period ended May 31, 2023, 256,997 Class Y shares representing $5,658,249 were exchanged for 257,852 Class I shares. During the period ended May 31, 2022, 414,308 Class Y shares representing $13,133,764 were exchanged for 415,311 Class I shares, 1,331 Class A shares representing $28,076 were exchanged for 1,253 Class I shares and 1,696 Class Y shares representing $48,480 were exchanged for 1,804 Class A shares.

 

b

During the period ended May 31, 2022, 194 Class C shares representing $5,247 were automatically converted to 169 Class A shares.

 

See notes to financial statements.

        

24

 

FINANCIAL HIGHLIGHTS

The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Net asset value total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period, and redemption at net asset value on the last day of the period. Net asset value total return includes adjustments in accordance with accounting principles generally accepted in the United States of America and as such, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset value and returns for shareholder transactions. These figures have been derived from the fund’s financial statements.

       
  
 

Year Ended May 31,

Class A Shares

 

2023

2022

2021

2020

2019

Per Share Data ($):

      

Net asset value, beginning of period

 

22.07

33.26

23.63

23.18

28.94

Investment Operations:

      

Net investment (loss)a

 

(.13)

(.21)

(.25)

(.16)

(.18)

Net realized and unrealized
gain (loss) on investments

 

(.98)

(5.45)

12.38

1.87

(1.28)

Total from Investment Operations

 

(1.11)

(5.66)

12.13

1.71

(1.46)

Distributions:

      

Dividends from net realized
gain on investments

 

(1.81)

(5.53)

(2.50)

(1.26)

(4.30)

Net asset value, end of period

 

19.15

22.07

33.26

23.63

23.18

Total Return (%)b

 

(4.90)

(20.28)

52.22

7.19

(3.11)

Ratios/Supplemental Data (%):

      

Ratio of total expenses
to average net assets

 

1.45

1.35

1.37

1.39

1.40

Ratio of net expenses
to average net assets

 

1.30

1.30

1.30

1.30

1.30

Ratio of net investment (loss)
to average net assets

 

(.61)

(.72)

(.82)

(.68)

(.68)

Portfolio Turnover Rate

 

90.57

98.16

112.92

105.26

101.14

Net Assets, end of period ($ x 1,000)

 

1,137

1,581

1,998

1,326

1,630

a Based on average shares outstanding.

b Exclusive of sales charge.

See notes to financial statements.

25

 

FINANCIAL HIGHLIGHTS (continued)

       
  
 

Year Ended May 31,

Class C Shares

 

2023

2022

2021

2020

2019

Per Share Data ($):

      

Net asset value, beginning of period

 

18.82

29.38

21.24

21.10

26.95

Investment Operations:

      

Net investment (loss)a

 

(.23)

(.37)

(.40)

(.31)

(.35)

Net realized and unrealized
gain (loss) on investments

 

(.85)

(4.66)

11.04

1.71

(1.20)

Total from Investment Operations

 

(1.08)

(5.03)

10.64

1.40

(1.55)

Distributions:

      

Dividends from net realized
gain on investments

 

(1.81)

(5.53)

(2.50)

(1.26)

(4.30)

Net asset value, end of period

 

15.93

18.82

29.38

21.24

21.10

Total Return (%)b

 

(5.68)

(20.84)

50.99

6.41

(3.71)

Ratios/Supplemental Data (%):

      

Ratio of total expenses
to average net assets

 

2.34

2.22

2.31

2.16

2.33

Ratio of net expenses
to average net assets

 

2.05

2.05

2.05

2.05

2.05

Ratio of net investment (loss)
to average net assets

 

(1.36)

(1.47)

(1.56)

(1.43)

(1.43)

Portfolio Turnover Rate

 

90.57

98.16

112.92

105.26

101.14

Net Assets, end of period ($ x 1,000)

 

166

232

294

460

479

a Based on average shares outstanding.

b Exclusive of sales charge.

See notes to financial statements.

26

 

       
  
 

Year Ended May 31,

Class I Shares

 

2023

2022

2021

2020

2019

Per Share Data ($):

      

Net asset value, beginning of period

 

23.45

34.89

24.63

24.05

29.76

Investment Operations:

      

Net investment (loss)a

 

(.08)

(.13)

(.16)

(.09)

(.10)

Net realized and unrealized
gain (loss) on investments

 

(1.05)

(5.78)

12.92

1.93

(1.31)

Total from Investment Operations

 

(1.13)

(5.91)

12.76

1.84

(1.41)

Distributions:

      

Dividends from net realized
gain on investments

 

(1.81)

(5.53)

(2.50)

(1.26)

(4.30)

Net asset value, end of period

 

20.51

23.45

34.89

24.63

24.05

Total Return (%)

 

(4.74)

(20.01)

52.63

7.52

(2.88)

Ratios/Supplemental Data (%):

      

Ratio of total expenses
to average net assets

 

1.09

.99

1.00

1.01

.98

Ratio of net expenses
to average net assets

 

1.05

.99

1.00

1.01

.98

Ratio of net investment (loss)
to average net assets

 

(.36)

(.41)

(.52)

(.37)

(.35)

Portfolio Turnover Rate

 

90.57

98.16

112.92

105.26

101.14

Net Assets, end of period ($ x 1,000)

 

8,451

13,564

18,091

8,826

12,949

a Based on average shares outstanding.

See notes to financial statements.

27

 

FINANCIAL HIGHLIGHTS (continued)

       
  
 

Year Ended May 31,

Class Y Shares

 

2023

2022

2021

2020

2019

Per Share Data ($):

      

Net asset value, beginning of period

 

23.51

34.96

24.66

24.07

29.77

Investment Operations:

      

Net investment (loss)a

 

(.06)

(.12)

(.15)

(.08)

(.09)

Net realized and unrealized
gain (loss) on investments

 

(1.05)

(5.80)

12.95

1.93

(1.31)

Total from Investment Operations

 

(1.11)

(5.92)

12.80

1.85

(1.40)

Distributions:

      

Dividends from net realized
gain on investments

 

(1.81)

(5.53)

(2.50)

(1.26)

(4.30)

Net asset value, end of period

 

20.59

23.51

34.96

24.66

24.07

Total Return (%)

 

(4.64)

(20.00)

52.73

7.56

(2.84)

Ratios/Supplemental Data (%):

      

Ratio of total expenses
to average net assets

 

1.02

.96

.96

.97

.95

Ratio of net expenses
to average net assets

 

.98

.96

.96

.97

.95

Ratio of net investment (loss)
to average net assets

 

(.29)

(.38)

(.48)

(.34)

(.34)

Portfolio Turnover Rate

 

90.57

98.16

112.92

105.26

101.14

Net Assets, end of period ($ x 1,000)

 

203,129

406,209

727,826

462,795

519,312

a Based on average shares outstanding.

See notes to financial statements.

28

 

NOTES TO FINANCIAL STATEMENTS

NOTE 1—Significant Accounting Policies:

BNY Mellon Select Managers Small Cap Growth Fund (the “fund”) is a separate diversified series of BNY Mellon Strategic Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering six series, including the fund. The fund’s investment objective is to seek capital appreciation. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser and the fund’s portfolio allocation manager. EAM Investors, LLC (“EAM”), Geneva Capital Management, LLC (“Geneva”), Granite Investment Partners, LLC (“Granite”), Nicholas Investment Partners, L.P. (“Nicholas”), Redwood Investments, LLC (“Redwood”) and Rice Hall James & Associates, LLC (“Rice Hall”), serve as the fund’s sub-advisers (collectively the “Sub-Advisers”), each managing an allocated portion of the fund’s portfolio.

BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue 425 million shares of $.001 par value Common Stock. The fund currently has authorized four classes of shares: Class A (75 million shares authorized), Class C (75 million shares authorized), Class I (75 million shares authorized) and Class Y (200 million shares authorized). Class A and Class C shares are sold primarily to retail investors through financial intermediaries and bear Distribution and/or Shareholder Services Plan fees. Class A shares generally are subject to a sales charge imposed at the time of purchase. Class A shares bought without an initial sales charge as part of an investment of $1 million or more may be charged a contingent deferred sales charge (“CDSC”) of 1.00% if redeemed within one year. Class C shares are subject to a CDSC imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares eight years after the date of purchase, without the imposition of a sales charge. Class I shares are sold primarily to bank trust departments and other financial service providers (including BNY Mellon and its affiliates), acting on behalf of customers having a qualified trust or an investment account or relationship at such institution, and bear no Distribution or Shareholder Services Plan fees. Class Y shares are sold at net asset value per share generally to institutional investors, and bear no Distribution or Shareholder Services Plan fees. Class I and Class Y shares are offered without a front-end sales charge or CDSC. Other differences between the classes include the services offered to and

29

 

NOTES TO FINANCIAL STATEMENTS (continued)

the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.

The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.

The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.

The Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.

(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.

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:

30

 

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:

The Company’s Board of Directors (the “Board”) has designated the Adviser as the fund’s valuation designee, effective September 8, 2022, to make all fair value determinations with respect to the fund’s portfolio investments, subject to the Board’s oversight and pursuant to Rule 2a-5 under the Act.

Investments in equity securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.

Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.

Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.

When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the

31

 

NOTES TO FINANCIAL STATEMENTS (continued)

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, but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.

For securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.

The following is a summary of the inputs used as of May 31, 2023 in valuing the fund’s investments:

       
 

Level 1-Unadjusted Quoted Prices

Level 2- Other Significant Observable Inputs

 

Level 3-Significant Unobservable Inputs

Total

 

Assets ($) 

  

Investments in Securities:

  

Equity Securities - Common Stocks

202,256,197

-

 

-

202,256,197

 

Investment Companies

14,849,034

-

 

-

14,849,034

 

Rights

-

-

 

0

0

 

 See Statement of Investments for additional detailed categorizations, if any.

32

 

The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:

  

 

Rights ($)

Balance as of 5/31/2022

-

Purchases/Issuances

0

Sales/Dispositions

-

Net realized gain (loss)

-

Change in unrealized appreciation (depreciation)

-

Transfers into Level 3

-

Transfers out of Level 3

-

Balance as of 5/31/2023

0

The amount of total net realized gain (loss) for the period included in earnings attributable to the net change in unrealized appreciation (depreciation) relating to investments still held at 5/31/2023

-

 Securities deemed as Level 3 due to the lack of significant observable inputs by management assessment.

(b) Foreign taxes: The fund may be subject to foreign taxes (a portion of which may be reclaimable) on income, stock dividends, realized and unrealized capital gains on investments or certain foreign currency transactions. Foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the fund invests. These foreign taxes, if any, are paid by the fund and are reflected in the Statement of Operations, if applicable. Foreign taxes payable or deferred or those subject to reclaims as of May 31, 2023, if any, are disclosed in the fund’s Statement of Assets and Liabilities.

(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.

Pursuant to a securities lending agreement with BNY Mellon, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely

33

 

NOTES TO FINANCIAL STATEMENTS (continued)

manner, BNY Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended May 31, 2023, BNY Mellon earned $16,983 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.

(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.

(e) Market Risk: The value of the securities in which the fund invests may be affected by political, regulatory, economic and social developments, and developments that impact specific economic sectors, industries or segments of the market. The value of a security may also decline due to general market conditions that are not specifically related to a particular company or industry, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates, changes to inflation, adverse changes to credit markets or adverse investor sentiment generally. 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.

Multi-Manager Risk: Each sub-adviser makes investment decisions independently, and it is possible that the investment styles of the sub-advisers may not complement one another. As a result, the fund’s exposure to a given stock, industry or investment style could unintentionally be greater or smaller than it would have been if the fund had a single adviser. In addition, if one sub-adviser buys a security during a time frame when another sub-adviser sells it, the fund will incur transaction costs and the fund’s net position in the security may be approximately the same as it would have been with a single adviser and no such sale and purchase.

34

 

Allocation Risk: The ability of the fund to achieve its investment goal depends, in part, on the ability of the Adviser to allocate effectively the fund’s assets among the sub-advisers. There can be no assurance that the actual allocations will be effective in achieving the fund’s investment goal.

(f) Dividends and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from net investment income 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.

As of and during the period ended May 31, 2023, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Statement of Operations. During the period ended May 31, 2023, the fund did not incur any interest or penalties.

Each tax year for the four-year period ended May 31, 2023 remains subject to examination by the Internal Revenue Service and state taxing authorities.

At May 31, 2023, the components of accumulated earnings on a tax basis were as follows: undistributed capital gains $4,521,642 and unrealized appreciation $40,759,840.

The tax character of distributions paid to shareholders during the fiscal years ended May 31, 2023 and May 31, 2022 were as follows: ordinary income $0 and $50,342,193, and long-term capital gains $22,162,087 and $65,604,546, respectively.

During the period ended May 31, 2023, as a result of permanent book to tax differences, primarily due to the tax treatment for net operating losses, the fund increased total distributable earnings (loss) by $866,709 and

35

 

NOTES TO FINANCIAL STATEMENTS (continued)

decreased paid-in capital by the same amount. Net assets and net asset value per share were not affected by this reclassification.

NOTE 2—Bank Lines of Credit:

The fund participates with other long-term open-end funds managed by the Adviser in a $823.5 million unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by BNY Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an amount equal to $688.5 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is an amount equal to $135 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing.

The average amount of borrowings outstanding under the Facilities during the period ended May 31, 2023 was approximately $32,877 with a related weighted average annualized interest rate of 5.16%.

NOTE 3—Management Fee, Sub-Advisory Fee and Other Transactions with Affiliates:

(a) Pursuant to a management agreement with the Adviser, the management fee is computed at the annual rate of .90% of the value of the fund’s average daily net assets and is payable monthly. The Adviser has contractually agreed, from June 1, 2022 through September 30, 2023, to waive receipt of its fees and/or assume the direct expenses of the fund so that the direct expenses of Class A, C, I and Y shares (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed 1.05%, 1.05%, 1.05% and .98% of the value of the respective class’ average daily net assets. On or after September 30, 2023, the Adviser may terminate these expense limitations at any time. The reduction in expenses, pursuant to the undertaking, amounted to $125,890 during the period ended May 31, 2023.

Pursuant to separate sub-investment advisory agreements between the Adviser and the Sub-Advisers, each serves as the fund’s sub-adviser responsible for the day-to-day management of a portion of the fund’s portfolio. The Adviser pays each sub-adviser a monthly fee at an annual

36

 

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-advisers who are either unaffiliated with the Adviser or are wholly-owned subsidiaries (as defined under the Act) of the Adviser’s ultimate parent company, BNY Mellon, without obtaining shareholder approval. The Order also allows the fund to disclose the sub-advisory fee paid by the Adviser to any unaffiliated sub-adviser in the aggregate with other unaffiliated sub-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-advisory fee payable by the Adviser separately to a sub-adviser that is a wholly-owned subsidiary of BNY Mellon in documents filed with the SEC and provided to shareholders; such fees are to be aggregated with fees payable to the Adviser. The Adviser has ultimate responsibility (subject to oversight by the Board) to supervise any sub-adviser and recommend the hiring, termination, and replacement of any sub-adviser to the Board.

During the period ended May 31, 2023, the Distributor retained $33 from commissions earned on sales of the fund’s Class A shares and $150 from CDSC fees on redemptions of the fund’s Class A shares.

(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. The Distributor may pay one or more Service Agents in respect of advertising, marketing and other distribution services, and determines the amounts, if any, to be paid to Service Agents and the basis on which such payments are made. During the period ended May 31, 2023, Class C shares were charged $1,532 pursuant to the Distribution Plan.

(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended May 31, 2023, Class A and Class C shares were charged $3,840 and $511, respectively, pursuant to the Shareholder Services Plan.

37

 

NOTES TO FINANCIAL STATEMENTS (continued)

The fund has an arrangement with BNY Mellon Transfer, Inc., (the “Transfer Agent”), a subsidiary of BNY Mellon and an affiliate of the Adviser, whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset Transfer Agent fees. For financial reporting purposes, the fund includes transfer agent net earnings credits, if any, as an expense offset in the Statement of Operations.

The fund has an arrangement with The Bank of New York Mellon (the “Custodian”), a subsidiary of BNY Mellon and an affiliate of the Adviser, whereby the fund will receive interest income or be charged overdraft fees when cash balances are maintained. For financial reporting purposes, the fund includes this interest income and overdraft fees, if any, as interest income in the Statement of Operations.

The fund compensates the Transfer Agent, under a transfer agency agreement, for providing transfer agency and cash management services for the fund. The majority of Transfer Agent fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended May 31, 2023, the fund was charged $5,804 for transfer agency services. These fees are included in Shareholder servicing costs in the Statement of Operations. These fees were partially offset by earnings credits of $1,151.

The fund compensates the Custodian, under a custody agreement, for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended May 31, 2023, the fund was charged $86,219 pursuant to the custody agreement.

During the period ended May 31, 2023, the fund was charged $49,273 for services performed by the fund’s 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 fee of $165,138, Distribution Plan fees of $109, Shareholder Services Plan fees of $311, Custodian fees of $36,000, Chief Compliance Officer fees of $13,866 and Transfer Agent fees of $1,154, which are offset against an expense reimbursement currently in effect in the amount of $21,242.

(d) Each board member also serves as a board member of other funds in the BNY Mellon Family of Funds complex.