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Form N-CSR Advantage Funds, Inc. For: Oct 31

January 5, 2017 4:46 PM EST
 

 

 

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

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES

Investment Company Act file number

811-07123

 

 

 

Advantage Funds, Inc.

 

 

(Exact name of Registrant as specified in charter)

 

 

 

 

 

 

c/o The Dreyfus Corporation

200 Park Avenue

New York, New York  10166

 

 

(Address of principal executive offices)        (Zip code)

 

 

 

 

 

Bennett A. MacDougall, Esq.

200 Park Avenue

New York, New York  10166

 

 

(Name and address of agent for service)

 

 

Registrant's telephone number, including area code: 

(212) 922-6400

 

 

Date of fiscal year end:

 

10/31

 

Date of reporting period:

10/31/16

 

 

 

 

             

 

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.

 

Dreyfus Global Dynamic Bond Fund

Dreyfus Global Real Return Fund

Dreyfus Total Emerging Markets Fund

Dynamic Total Return Fund

 

 


 
 

FORM N-CSR

Item 1.                         Reports to Stockholders.

 


 

Dreyfus Global Dynamic Bond Fund

     

 

ANNUAL REPORT

October 31, 2016

   
 

 

 

Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus 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 Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.

 

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

 

Contents

T H E    F U N D

F O R    M O R E    I N F O R M AT I O N

 

Back Cover

 

       
 


Dreyfus Global Dynamic Bond Fund

 

The Fund

A LETTER FROM THE CHIEF EXECUTIVE OFFICER

Dear Shareholder:

We are pleased to present this annual report for Dreyfus Global Dynamic Bond Fund, covering the 12-month period from November 1, 2015 through October 31, 2016. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.

Stocks and bonds generally advanced over the reporting period in the midst of heightened market volatility stemming from various global economic developments. Toward the end of 2015, investor sentiment deteriorated amid sluggish global economic growth, falling commodity prices, and the first increase in short-term U.S. interest rates in nearly a decade. These worries sparked sharp stock market declines in January 2016, but equities began to rally in February when U.S. monetary policymakers refrained from additional rate hikes, other central banks eased their monetary policies further, and commodity prices began to rebound. Stocks generally continued to climb through the summer, driving several broad measures of U.S. stock market performance to record highs in July and August before moderating as a result of uncertainty regarding U.S. elections and potential rate hikes. In the bond market, yields of high-quality sovereign bonds generally moved lower and their prices increased in response to robust investor demand for current income in a low interest rate environment.

The outcome of the U.S. presidential election and ongoing global economic headwinds suggest that uncertainty will persist in the financial markets over the foreseeable future. Some asset classes and industry groups may benefit from a changing economic and political landscape, while others probably will face challenges. Consequently, selectivity could become a more important determinant of investment success. As always, we encourage you to discuss the implications of our observations with your financial advisor.

Thank you for your continued confidence and support.

Sincerely,

Mark D. Santero
Chief Executive Officer
The Dreyfus Corporation
November 15, 2016

2

 

DISCUSSION OF FUND PERFORMANCE

For the period from November 1, 2015 through October 31, 2016, as provided by Paul Brain, Howard Cunningham, and Jonathan Day, Portfolio Managers of Newton Investment Management (North America) Limited, Sub-Investment Adviser

Fund and Market Performance Overview

For the 12-month period ended October 31, 2016, Dreyfus Global Dynamic Bond Fund’s Class A shares produced a total return of 3.20%, Class C shares returned 2.47%, Class I shares returned 3.52%, and Class Y shares returned 3.54%.1 In comparison, the fund’s benchmark, the Citi 1-Month Treasury Bill Index (the “Index”), produced a total return of 0.18% for the same period.2

Higher-quality bonds generally benefited during the reporting period from falling long-term interest rates, and lower-quality securities erased previous losses during a rally over the spring and summer of 2016. The fund outperformed its benchmark, mainly due to our sector allocation and currency strategies.

The Fund’s Investment Approach

The fund seeks total return (consisting of income and capital appreciation). To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in bonds and other instruments that provide investment exposure to global bond markets, including developed and emerging capital markets. We employ a dynamic, benchmark unconstrained approach in allocating the fund’s assets globally, among government bonds, emerging market sovereign debt, investment grade and high yield corporate instruments, and currencies. We combine a top-down approach, emphasizing global economic trends and current investment themes, with bottom-up security selection based on fundamental research to allocate the fund’s investments. In choosing investments, we consider key trends in global economic variables, investment themes, relative valuations of debt securities and cash, long-term trends in currency movements, and company fundamentals.

Robust Investor Demand Supported Global Bond Prices

Global economic concerns sparked heightened bond market turbulence over the final months of 2015. Sluggish growth in Europe and Japan and falling commodity prices caused investors to flock to traditional safe havens, hurting riskier emerging market and corporate bonds while sending prices of high-quality sovereign bonds higher. Investors also anticipated that U.S. monetary policymakers would raise short-term interest rates, as indeed they did in December 2015, a move that many worried could weigh on the U.S. and global economies.

Investor sentiment changed dramatically in mid-February 2016 when U.S. policymakers indicated that they would delay additional rate hikes, commodity prices began to rebound, several central banks announced new stimulus measures, and foreign currencies gained value against the U.S. dollar. The Bank of Japan and European Central Bank adopted negative short-term interest rates, a move that drove international fixed-income investors to higher-yielding market sectors such as corporate-backed securities, emerging market bonds, and U.S. government securities.

In June and early July, concerns surrounding a referendum in the United Kingdom to leave the European Union produced renewed market volatility. Yet, higher-yielding bond market sectors quickly rebounded amid robust demand from international investors seeking more competitive yields than were available from sovereign bonds in overseas markets. Bonds gave back some of the previous gains in October as uncertainty intensified in advance of U.S. elections.

3

 

DISCUSSION OF FUND PERFORMANCE (continued)

Currencies and Riskier Market Sectors Buoyed Fund Results

A bias towards high-quality government and corporate bonds helped cushion the impact of declining markets early in the reporting period. However, higher short-term U.S. interest rates initially hurt long-dated U.S. Treasuries and other government bonds. The resulting weakness was partly offset at the time by selective exposure to short-dated emerging market sovereign bonds and investment-grade credits.

When investor sentiment began to improve in February, the fund benefited from a more favorable backdrop by modestly increasing its exposure to riskier assets, including emerging-market bonds. Meanwhile, a more constructive duration posture helped the fund benefit from falling long-term interest rates. In addition, a modest increase in exposure to high yield bonds helped the fund participate more fully in their rally.

The fund’s net currency strategies also added value over the reporting period. Short Australian dollar/Asian currency positions against a long Japanese yen position enabled the fund to profit from related volatility in the Chinese renminbi. Short and long positions in various emerging-markets currencies and a bias to the U.S. dollar over European currencies also fared relatively well.

Finally, short positions in ten-year U.S. Treasury futures contracts increased exposure to Treasury Inflation Protected Securities, and the sale of longer-term sovereign bonds helped mitigate rising inflation expectations towards the end of the reporting period.

A More Cautious Investment Posture

With economic growth weak and inflation subdued, we expect most of the world’s major central banks to maintain accommodative monetary policies. Expectations of renewed U.S. infrastructure spending and the fading effects of previous energy price declines could make high-quality sovereign bonds vulnerable to higher inflation expectations. Therefore, we currently intend to limit the fund’s duration exposure while maintaining positions in inflation-linked securities. In currency markets, expectations of U.S. economic growth may favor the U.S. dollar, while European and emerging market currencies seem vulnerable to economic and political uncertainty.

November 15, 2016

Bonds are subject generally to interest-rate, credit, liquidity, and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.

High yield bonds are subject to increased credit risk and are considered speculative in terms of the issuer’s perceived ability to continue making interest payments on a timely basis and to repay principal upon maturity.

Foreign bonds are subject to special risks including exposure to currency fluctuations, changing political and economic conditions, and potentially less liquidity.

Investments in foreign currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedged positions, that the U.S. dollar will decline relative to the currency being hedged. Currency rates in foreign countries may fluctuate significantly over short periods of time. A decline in the value of foreign currencies relative to the U.S. dollar will reduce the value of securities held by the fund and denominated in those currencies. The use of leverage may magnify the fund’s gains or losses. For derivatives with a leveraging component, adverse changes in the value or level of the underlying asset can result in a loss that is much greater than the original investment in the derivative.

1 Total return includes reinvestment of dividends and any capital gains paid and does not take into consideration the maximum initial sales charge in the case of Class A shares or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Class I and Class Y shares are not subject to any initial or deferred sales charge. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. Return figures reflect the absorption of certain fund expenses by The Dreyfus Corporation pursuant to an agreement in effect through March 1, 2017, at which time it may be extended, terminated, or modified. Had these expenses not been absorbed, the returns would have been lower.

2 Source: Lipper Inc. — Reflects reinvestment of dividends and, where applicable, capital gain distributions. The Citi 1-Month Treasury Bill Index is a market value-weighted index of public obligations of the U.S. Treasury with maturities of 30 days. Investors cannot invest directly in any index.

4

 

FUND PERFORMANCE

Comparison of change in value of $10,000 investment in Dreyfus Global Dynamic Bond Fund Class A shares, Class C shares, Class I shares and Class Y shares and the Citi 1-Month Treasury Bill Index

 Source: Lipper Inc.

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

Past performance is not predictive of future performance.

The above graph compares a $10,000 investment made in each of the Class A, Class C, Class I and Class Y shares of Dreyfus Global Dynamic Bond Fund on 3/25/11 (inception date) to a $10,000 investment made in the Citi 1-Month Treasury Bill Index (the “Index”) on that date. All dividends and capital gain distributions are reinvested.

The fund’s performance shown in the line graph above takes into account the maximum initial sales charge on Class A shares and all other applicable fees and expenses on all classes. The Index is a market value-weighted index of public obligations of the U.S. Treasury with maturities of 30 days. 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 (continued)

           

Average Annual Total Returns as of 10/31/16

 

Inception
Date

1 Year

5 Years

From
Inception

 

Class A shares

         

with maximum sales charge (4.5%)

3/25/11

-1.43%

2.21%

2.13%

 

without sales charge

3/25/11

3.20%

3.15%

2.97%

 

Class C shares

         

with applicable redemption charge

3/25/11

1.47%

2.39%

2.20%

 

without redemption

3/25/11

2.47%

2.39%

2.20%

 

Class I shares

3/25/11

3.52%

3.40%

3.22%

 

Class Y shares

7/1/13

3.54%

3.35%††

3.15%††

 

Citi 1- Month Treasury Bill Index

3/31/11

0.18%

0.06%

0.06%†††

 

Past performance is not predictive of future performance. The fund’s performance shown in the graph 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.

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

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

††† For comparative purposes, the value of the Index as of 3/31/11 is used as the beginning value on 3/25/11.

6

 

UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)

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

Review your fund’s expenses

The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Global Dynamic Bond Fund from May 1, 2016 to October 31, 2016. 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 October 31, 2016

 

 

 

 

Class A

Class C

Class I

Class Y

Expenses paid per $1,000

$4.83

$8.63

$3.56

$3.56

Ending value (after expenses)

$1,022.00

$1,018.50

$1,024.50

$1,024.50

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 October 31, 2016

 

 

 

 

Class A

Class C

Class I

Class Y

Expenses paid per $1,000

$4.82

$8.62

$3.56

$3.56

Ending value (after expenses)

$1,020.36

$1,016.59

$1,021.62

$1,021.62

 Expenses are equal to the fund’s annualized expense ratio of .95% for Class A, 1.70% for Class C, .70% for Class I and .70% for Class Y, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

7

 

STATEMENT OF INVESTMENTS

October 31, 2016

                     
 

Bonds and Notes - 91.2%

Coupon
Rate (%)

 

Maturity
Date

 

Principal
Amount ($)

a

Value ($)

 

Consumer Discretionary - 7.4%

         

Bertelsmann SE & Co.,
Jr. Sub. Notes

EUR

3.50

 

4/23/75

 

200,000

b

214,922

 

CPUK Finance,
Scd. Notes

GBP

7.00

 

2/28/42

 

100,000

 

129,952

 

CPUK Finance,
Sr. Scd. Notes

GBP

2.67

 

2/28/42

 

200,000

 

252,673

 

Daimler Finance North America,
Gtd. Notes

 

1.88

 

1/11/18

 

300,000

 

301,538

 

DISH DBS,
Gtd. Notes

 

4.63

 

7/15/17

 

140,000

 

142,975

 

Enterprise Inns,
First Mortgage Bonds

GBP

6.50

 

12/6/18

 

98,000

 

131,660

 

Fiat Chrysler Finance Europe,
Gtd. Notes

EUR

7.00

 

3/23/17

 

100,000

 

112,625

 

InterContinental Hotels Group,
Gtd. Notes

GBP

6.00

 

12/9/16

 

200,000

 

245,991

 

John Lewis,
Sr. Unscd. Notes

GBP

8.38

 

4/8/19

 

175,000

 

248,494

 

Mitchells & Butlers Finance,
Asset-Backed Bonds, Ser. B2

GBP

6.01

 

12/15/30

 

181,059

 

257,693

 

Motability Operations Group,
Gtd. Notes

EUR

1.63

 

6/9/23

 

100,000

 

117,209

 

New Look Secured Issuer,
Sr. Scd. Bonds

GBP

6.50

 

7/1/22

 

100,000

 

110,261

 

Norcell Sweden Holding 3,
Sr. Scd. Notes

SEK

5.25

 

11/4/19

 

1,000,000

 

114,037

 

Unitymedia Hessen,
Sr. Scd. Bonds

EUR

4.00

 

1/15/25

 

115,000

 

130,818

 

Unitymedia Hessen,
Sr. Scd. Bonds

EUR

6.25

 

1/15/29

 

100,000

 

122,291

 

Virgin Media Finance,
Gtd. Notes

EUR

4.50

 

1/15/25

 

100,000

 

109,309

 

Virgin Media Secured Finance,
Sr. Scd. Notes

GBP

6.25

 

3/28/29

 

100,000

 

128,726

 
 

2,871,174

 

Consumer Staples - 4.2%

         

Agrokor dd,
Gtd. Notes

EUR

9.13

 

2/1/20

 

100,000

 

114,441

 

Anheuser-Busch InBev,
Gtd. Notes

GBP

6.50

 

6/23/17

 

110,000

 

139,419

 

Anheuser-Busch InBev,
Gtd. Notes

EUR

0.88

 

3/17/22

 

110,000

 

124,325

 

Anheuser-Busch InBev Finance,
Gtd. Notes

 

1.90

 

2/1/19

 

130,000

 

130,930

 

Barry Callebaut Services,
Gtd. Bonds

EUR

2.38

 

5/24/24

 

100,000

 

115,131

 

Coca-Cola European Partners,
Gtd. Bonds

EUR

0.75

 

2/24/22

 

210,000

 

233,817

 

Constellation Brands,
Gtd. Notes

 

7.25

 

5/15/17

 

130,000

 

134,387

 

DS Services of America,
Scd. Notes

 

10.00

 

9/1/21

 

78,000

c

86,970

 

8

 

                     
 

Bonds and Notes - 91.2% (continued)

Coupon
Rate (%)

 

Maturity
Date

 

Principal
Amount ($)

a

Value ($)

 

Consumer Staples - 4.2% (continued)

         

Fomento Economico Mexicano,
Sr. Unscd. Bonds

EUR

1.75

 

3/20/23

 

207,000

 

240,790

 

PepsiCo,
Sr. Unscd. Notes

 

1.13

 

7/17/17

 

218,000

b

218,309

 

Smithfield Foods,
Sr. Unscd. Notes

 

7.75

 

7/1/17

 

70,000

 

72,712

 
 

1,611,231

 

Energy - 2.2%

         

BG Energy Capital,
Gtd. Notes

GBP

6.50

 

11/30/72

 

155,000

b

199,743

 

BP Capital Markets,
Gtd. Notes

GBP

4.33

 

12/10/18

 

100,000

 

131,070

 

Petrobras Global Finance,
Gtd. Notes

 

7.88

 

3/15/19

 

95,000

 

102,362

 

Petrobras Global Finance,
Gtd. Notes

 

6.75

 

1/27/41

 

130,000

 

115,823

 

Shell International Finance,
Gtd. Notes

 

1.27

 

5/11/20

 

287,000

b

287,465

 

Statoil,
Gtd. Notes

 

1.80

 

11/23/16

 

35,000

 

35,017

 
 

871,480

 

Financials - 20.2%

         

Abbey National Treasury Services,
Covered Notes

GBP

0.70

 

1/20/17

 

100,000

b

122,452

 

Allied Irish Banks,
Sr. Unscd. Notes

EUR

2.75

 

4/16/19

 

100,000

 

115,919

 

Aquarius & Investments,
Jr. Sub. Notes

 

8.25

 

9/29/49

 

200,000

b

215,354

 

Arsenal Securities,
Sr. Scd. Bonds, Ser. A1

GBP

5.14

 

9/1/29

 

33,511

 

46,475

 

Banca Carige,
Govt. Gtd. Bonds

EUR

6.75

 

3/20/17

 

200,000

 

225,428

 

Banca Monte dei Paschi di Siena,
Govt. Gtd. Bonds

EUR

3.50

 

3/20/17

 

200,000

 

222,352

 

Bank of England Euro Note,
Sr. Unscd. Notes

 

1.25

 

3/14/19

 

260,000

 

260,565

 

Barclays Bank,
Sub. Notes

EUR

6.00

 

1/23/18

 

90,000

 

105,748

 

BNG Bank,
Sr. Unscd. Notes

 

1.10

 

5/15/18

 

200,000

b

200,656

 

Citigroup,
Sub. Notes

 

5.50

 

9/13/25

 

160,000

 

180,600

 

Close Brothers Finance,
Gtd. Notes

GBP

3.88

 

6/27/21

 

200,000

 

265,825

 

Close Brothers Finance,
Gtd. Notes

GBP

2.75

 

10/19/26

 

141,000

 

169,675

 

Commonwealth Bank of Australia,
Covered Bonds

 

2.13

 

7/22/20

 

250,000

 

253,479

 

Cooperatieve Rabobank,
Sr. Unscd. Notes

AUD

7.25

 

4/20/18

 

250,000

 

203,153

 

Coventry Building Society,
Covered Bonds

GBP

0.68

 

3/17/20

 

100,000

b

122,279

 

Coventry Building Society,
Sr. Unscd. Notes

EUR

2.50

 

11/18/20

 

200,000

 

236,173

 

Danske Bank,
Sub. Notes

GBP

5.38

 

9/29/21

 

90,000

b

116,987

 

9

 

STATEMENT OF INVESTMENTS (continued)

                     
 

Bonds and Notes - 91.2% (continued)

Coupon
Rate (%)

 

Maturity
Date

 

Principal
Amount ($)

a

Value ($)

 

Financials - 20.2% (continued)

         

Dexia Credit Local,
Govt. Gtd. Notes

 

2.25

 

1/30/19

 

250,000

 

253,405

 

DNB Bank,
Sub. Notes

EUR

4.75

 

3/8/22

 

200,000

b

223,243

 

HSBC Bank,
Sub. Notes

GBP

5.38

 

11/4/30

 

45,000

b

60,935

 

HSBC Holdings,
Sub. Notes

GBP

6.38

 

10/18/22

 

150,000

b

191,081

 

JPMorgan Chase & Co,
Sr. Unscd. Notes

 

2.09

 

10/29/20

 

163,000

b

165,302

 

Landwirtschaftliche Rentenbank,
Govt. Gtd. Notes

NZD

4.00

 

1/30/20

 

250,000

 

185,651

 

Lloyds Bank,
Jr. Sub. Notes

EUR

13.00

 

1/29/49

 

66,000

 

105,055

 

Lloyds Bank,
Sub. Notes

 

9.88

 

12/16/21

 

185,000

b

187,412

 

Lloyds Bank,
Sub. Notes

AUD

13.00

 

12/19/21

 

65,000

b

50,027

 

Nationwide Building Society,
Covered Bonds

GBP

0.60

 

7/17/17

 

100,000

b

122,473

 

Nationwide Building Society,
Jr. Sub. Notes

GBP

6.88

 

12/29/49

 

100,000

b

120,871

 

New Red Finance,
Scd. Notes

 

6.00

 

4/1/22

 

180,000

c

188,730

 

New York Life Global Funding,
Scd. Notes

 

1.70

 

9/14/21

 

280,000

 

277,421

 

Royal Bank of Canada,
Covered Bonds

 

2.00

 

10/1/18

 

125,000

 

126,461

 

Royal Bank of Canada,
Covered Bonds

 

1.88

 

2/5/20

 

280,000

 

282,175

 

Royal Bank of Scotland,
Sub. Notes

 

9.50

 

3/16/22

 

250,000

b

256,684

 

Royal Bank of Scotland,
Sub. Notes

EUR

10.50

 

3/16/22

 

100,000

b

113,806

 

RSA Insurance Group,
Gtd. Notes

GBP

9.38

 

5/20/39

 

140,000

b

199,313

 

Santander UK,
Sub. Notes

GBP

9.63

 

10/30/23

 

50,000

b

69,656

 

Silverback Finance,
Sr. Scd. Bonds

EUR

3.13

 

2/25/37

 

210,381

 

230,189

 

SLM Student Loan Trust, Ser. 2003-10,
Asset-Backed Notes

GBP

0.93

 

12/15/39

 

100,000

b

104,499

 

Societe Generale,
Jr. Sub. Notes

EUR

6.75

 

4/7/49

 

200,000

b

223,630

 

UBS,
Sub. Notes

EUR

4.75

 

2/12/26

 

135,000

b

158,745

 

UNITE USAF II,
Sr. Scd. Notes

GBP

3.37

 

6/30/28

 

100,000

 

132,146

 

US Bancorp,
Sr. Unscd. Notes

 

1.31

 

11/15/18

 

100,000

b

100,241

 

US Bank,
Sr. Unscd. Notes

 

1.29

 

4/26/19

 

280,000

b

280,839

 

Westpac Banking,
Covered Notes

 

1.38

 

5/30/18

 

330,000

 

329,755

 
 

7,802,865

 

10

 

                     
 

Bonds and Notes - 91.2% (continued)

Coupon
Rate (%)

 

Maturity
Date

 

Principal
Amount ($)

a

Value ($)

 

Foreign/Governmental - 27.4%

         

Abu Dhabi Government,
Sr. Unscd. Notes

 

2.13

 

5/3/21

 

400,000

 

402,000

 

Asian Development Bank,
Sr. Unscd. Notes

 

0.89

 

7/10/19

 

165,000

b

164,773

 

Belarusian Government,
Sr. Unscd. Notes

 

8.95

 

1/26/18

 

130,000

 

137,421

 

Caisse des Depots et Consignations,
Sr. Unscd. Notes

 

1.25

 

5/17/19

 

200,000

 

199,546

 

Costa Rican Government,
Sr. Unscd. Notes

 

4.25

 

1/26/23

 

200,000

 

194,500

 

Council of Europe Development Bank,
Sr. Unscd. Notes

 

1.13

 

5/31/18

 

280,000

 

280,178

 

Dominican Republic Government,
Sr. Unscd. Bonds

 

7.50

 

5/6/21

 

150,000

 

165,388

 

Export-Import Bank of Korea,
Sr. Unscd. Notes

 

1.34

 

10/21/19

 

401,000

b

401,027

 

FADE,
Govt. Gtd. Bonds

EUR

0.85

 

9/17/19

 

300,000

 

336,735

 

FMS Wertmanagement,
Govt. Gtd. Notes

 

0.63

 

1/30/17

 

210,000

 

209,889

 

FMS Wertmanagement AoeR,
Gtd. Bonds

 

0.75

 

11/27/19

 

600,000

b

599,590

 

Hungarian Government,
Bonds

HUF

2.50

 

10/27/21

 

149,520,000

 

549,440

 

Icelandic Government,
Unscd. Notes

 

5.88

 

5/11/22

 

280,000

 

328,591

 

Instituto de Credito Oficial,
Govt. Gtd. Notes

 

1.63

 

9/14/18

 

390,000

 

391,174

 

International Bank for Reconstruction & Development,
Sr. Unscd. Bonds

 

1.10

 

2/11/21

 

250,000

b

251,406

 

International Bank for Reconstruction & Development,
Sr. Unscd. Notes

 

0.88

 

4/17/17

 

280,000

 

280,240

 

International Bank for Reconstruction & Development,
Sr. Unscd. Notes

NZD

4.63

 

2/26/19

 

350,000

 

261,967

 

KFW,
Govt. Gtd. Notes

NZD

3.75

 

6/14/18

 

100,000

 

72,720

 

Kommunalbanken,
Sr. Unscd. Notes

 

1.01

 

5/2/19

 

190,000

b

189,936

 

Kommunekredit,
Sr. Unscd. Notes

 

1.63

 

6/1/21

 

250,000

 

250,173

 

Mexican Government,
Bonds, Ser. M

MXN

6.50

 

6/10/21

 

13,160,000

 

712,308

 

Moroccan Government,
Sr. Unscd. Bonds

EUR

3.50

 

6/19/24

 

300,000

 

356,425

 

Netherlands Development Finance Company,
Sr. Unscd. Notes

 

1.02

 

10/21/19

 

192,000

b

191,048

 

New Zealand Government,
Unscd. Bonds

NZD

5.00

 

3/15/19

 

1,290,000

 

974,941

 

Nordic Investment Bank,
Sr. Unscd. Notes

NZD

4.13

 

3/16/17

 

150,000

 

107,956

 

Peruvian Government,
Sr. Unscd. Notes

PEN

8.20

 

8/12/26

 

550,000

 

194,290

 

11

 

STATEMENT OF INVESTMENTS (continued)

                     
 

Bonds and Notes - 91.2% (continued)

Coupon
Rate (%)

 

Maturity
Date

 

Principal
Amount ($)

a

Value ($)

 

Foreign/Governmental - 27.4% (continued)

         

Peruvian Government,
Sr. Unscd. Notes

PEN

6.95

 

8/12/31

 

500,000

 

161,955

 

Portuguese Government,
Sr. Unscd. Bonds

EUR

5.65

 

2/15/24

 

167,860

c

214,801

 

Province of British Columbia Canada,
Sr. Unscd. Notes

EUR

0.88

 

10/8/25

 

328,000

 

375,506

 

Queensland Treasury Corp,
Govt. Gtd. Bonds

AUD

3.50

 

9/21/17

 

640,000

c

494,411

 

Romanian Government,
Sr. Unscd. Notes

EUR

2.75

 

10/29/25

 

230,000

 

270,764

 

Saudi Arabian Government,
Sr. Unscd. Notes

 

2.38

 

10/26/21

 

200,000

 

199,565

 

Swedish Export Credit,
Sub. Notes

 

2.88

 

11/14/23

 

200,000

b,c

200,942

 

United Kingdom Government,
Unscd. Bonds

CNY

2.70

 

10/21/17

 

1,000,000

 

147,139

 

Vietnamese Government,
Sr. Unscd. Bonds

 

6.75

 

1/29/20

 

300,000

 

334,885

 
 

10,603,630

 

Health Care - 1.3%

         

BUPA Finance,
Gtd. Bonds

GBP

6.13

 

12/29/49

 

130,000

b

173,839

 

Roche Holdings,
Gtd. Notes

 

0.94

 

9/29/17

 

200,000

b

199,975

 

Teva Pharmaceutical Finance Netherlands II,
Gtd. Notes

EUR

1.88

 

3/31/27

 

100,000

 

112,942

 
 

486,756

 

Industrials - 2.4%

         

AA Bond,
Scd. Notes

GBP

5.50

 

7/31/43

 

100,000

 

122,312

 

AA Bond,
Sr. Scd. Notes

GBP

4.25

 

7/31/43

 

100,000

 

130,697

 

Firstgroup,
Gtd. Bonds

GBP

8.13

 

9/19/18

 

160,000

 

219,335

 

General Electric Capital,
Sr. Unscd. Bonds

 

5.63

 

9/15/17

 

250,000

 

259,746

 

General Electric Capital,
Sr. Unscd. Notes

GBP

6.44

 

11/15/22

 

39,140

 

53,878

 

RAC,
Sr. Scd. Notes

GBP

4.57

 

5/6/23

 

110,000

 

146,546

 
 

932,514

 

Information Technology - 1.1%

         

Diamond 1 Finance,
Sr. Scd. Notes

 

6.02

 

6/15/26

 

100,000

c

109,159

 

Microsoft,
Sr. Unscd. Bonds

 

2.00

 

8/8/23

 

250,000

 

247,272

 

Western Digital,
Gtd. Notes

 

10.50

 

4/1/24

 

60,000

c

69,525

 
 

425,956

 

Materials - .8%

         

Cemex,
Sr. Scd. Notes

 

7.25

 

1/15/21

 

200,000

 

215,440

 

12

 

                     
 

Bonds and Notes - 91.2% (continued)

Coupon
Rate (%)

 

Maturity
Date

 

Principal
Amount ($)

a

Value ($)

 

Materials - .8% (continued)

         

SIG Combibloc Holdings,
Scd. Notes

EUR

7.75

 

2/15/23

 

100,000

 

116,431

 
 

331,871

 

Real Estate - .7%

         

Tesco Property Finance 3,
Mortgage Backed Bonds

GBP

5.74

 

4/13/40

 

97,945

 

119,038

 

Vonovia Finance,
Gtd. Notes

EUR

1.50

 

3/31/25

 

134,000

 

153,544

 
 

272,582

 

Telecommunication Services - 4.0%

         

British Telecommunications,
Sr. Unscd. Bonds

GBP

5.75

 

12/7/28

 

120,000

 

197,610

 

British Telecommunications,
Sr. Unscd. Notes

GBP

8.50

 

12/7/16

 

130,000

 

160,397

 

Matterhorn Telecom,
Sr. Scd. Bonds

CHF

3.63

 

5/1/22

 

150,000

 

151,751

 

Orange,
Jr. Sub. Notes

EUR

4.00

 

10/29/49

 

100,000

b

117,297

 

Sprint Communications,
Sr. Unscd. Debs.

 

9.25

 

4/15/22

 

80,000

 

89,200

 

Sprint Communications,
Sr. Unscd. Notes

 

6.00

 

12/1/16

 

63,000

 

63,158

 

Telefonica Europe,
Gtd. Bonds

EUR

4.20

 

12/29/49

 

100,000

b

112,522

 

Verizon Communications,
Sr. Unscd. Notes

 

2.63

 

8/15/26

 

250,000

 

240,363

 

Vodafone Group,
Sr. Unscd. Notes

 

1.63

 

3/20/17

 

225,000

 

225,332

 

Wind Acquisition Finance,
Scd. Notes

EUR

7.00

 

4/23/21

 

160,000

 

183,365

 
 

1,540,995

 

U.S. Government Securities - 16.7%

         

U.S. Treasury Inflation Protected Securities,
Bonds

 

2.38

 

1/15/25

 

2,108,238

d

2,498,032

 

U.S. Treasury Inflation Protected Securities,
Bonds

 

2.13

 

2/15/41

 

318,942

d

420,782

 

U.S. Treasury Inflation Protected Securities,
Notes

 

0.13

 

4/15/20

 

781,630

d

796,778

 

U.S. Treasury Notes

 

0.88

 

2/28/17

 

880,000

 

881,617

 

U.S. Treasury Notes

 

3.50

 

5/15/20

 

1,350,000

 

1,460,927

 

U.S. Treasury Notes

 

2.00

 

2/15/25

 

380,000

 

387,533

 
 

6,445,669

 

Utilities - 2.8%

         

E.ON International Finance,
Gtd. Notes

GBP

6.00

 

10/30/19

 

50,000

 

69,904

 

Electricite de France,
Sr. Unscd. Notes

EUR

2.75

 

3/10/23

 

100,000

 

124,528

 

National Grid Gas Finance,
Gtd. Notes

GBP

1.13

 

9/22/21

 

264,000

 

319,072

 

NET4GAS,
Sr. Unscd. Notes

EUR

2.50

 

7/28/21

 

100,000

 

118,054

 

13

 

STATEMENT OF INVESTMENTS (continued)

                     
 

Bonds and Notes - 91.2% (continued)

Coupon
Rate (%)

 

Maturity
Date

 

Principal
Amount ($)

a

Value ($)

 

Utilities - 2.8% (continued)

         

Severn Trent Utilities Finance,
Gtd. Notes

GBP

6.00

 

1/22/18

 

150,000

 

195,036

 

Southern Gas Networks,
Sr. Unscd. Notes

GBP

5.13

 

11/2/18

 

100,000

 

132,613

 

SPP Infrastructure Financing,
Gtd. Bonds

EUR

2.63

 

2/12/25

 

100,000

 

120,057

 
 

1,079,264

 

Total Bonds and Notes
(cost $36,134,691)

 

35,275,987

 

Common Stocks - 3.9%

       

Shares

 

Value ($)

 

Exchange-Traded Funds - 3.9%

         

iShares JP Morgan USD Emerging Markets Bond Fund

         

5,975

 

685,273

 

SPDR Bloomberg Barclays Emerging Markets Local Bond ETF

         

29,548

e

825,867

 

Total Common Stocks
(cost $1,506,807)

 

1,511,140

 

Options Purchased - .1%

       

Face Amount Covered by Contracts

 

Value ($)

 

Put Options - .1%

         

U.S. Treasury 10 Year Note Futures,
December 2016 @ $130
(cost $49,775)

         

62,000

 

51,344

 

14

 

                     
 

Other Investment - 2.4%

       

Shares

 

Value ($)

 

Registered Investment Company;

         

Dreyfus Institutional Preferred Government Plus Money Market Fund
(cost $926,577)

         

926,577

f

926,577

 

Total Investments (cost $38,617,850)

 

97.6%

37,765,048

 

Cash and Receivables (Net)

 

2.4%

920,140

 

Net Assets

 

100.0%

38,685,188

 

ETF—Exchange-Traded Fund

SPDR—Standard & Poor's Depository Receipt

a Principal amount stated in U.S. Dollars unless otherwise noted.

AUD—Australian Dollar

CHF—Swiss Franc

CNY—Chinese Yuan Renminbi

EUR—Euro

GBP—British Pound

HUF—Hungarian Forint

MXN—Mexican Peso

NZD—New Zealand Dollar

PEN—Peruvian Nuevo Sol

SEK—Swedish Krona

 

b Variable rate security—rate shown is the interest rate in effect at period end.

c Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At October 31, 2016, these securities were valued at $1,364,538 or 3.53% of net assets.

d Principal amount for accrual purposes is periodically adjusted based on changes in the Consumer Price Index.

e Non-income producing security.

f Investment in affiliated money market mutual fund.

   

Portfolio Summary (Unaudited)

Value (%)

Corporate Bonds

47.1

Foreign/Governmental

27.4

U.S. Government Securities

16.7

Exchange-Traded Funds

3.9

Money Market Investment

2.4

Options Purchased

.1

 

97.6

 Based on net assets.

See notes to financial statements.

15

 

STATEMENT OF ASSETS AND LIABILITIES

October 31, 2016

             

 

 

 

 

 

 

 

 

 

 

Cost

 

Value

 

Assets ($):

 

 

 

 

Investments in securities—See Statement of Investments:

 

 

 

 

Unaffiliated issuers

 

37,691,273

 

36,838,471

 

Affiliated issuers

 

926,577

 

926,577

 

Cash

 

 

 

 

21,815

 

Cash denominated in foreign currency

 

 

29,109

 

29,238

 

Unrealized appreciation on forward foreign
currency exchange contracts—Note 4

 

 

 

 

633,691

 

Interest receivable

 

 

 

 

405,836

 

Receivable for investment securities sold

 

 

 

 

285,192

 

Prepaid expenses

 

 

 

 

19,455

 

 

 

 

 

 

39,160,275

 

Liabilities ($):

 

 

 

 

Due to The Dreyfus Corporation and affiliates—Note 3(c)

 

 

 

 

15,173

 

Payable for investment securities purchased

 

 

 

 

284,353

 

Unrealized depreciation on forward foreign
currency exchange contracts—Note 4

 

 

 

 

97,893

 

Payable for shares of Common Stock redeemed

 

 

 

 

20,131

 

Accrued expenses

 

 

 

 

57,537

 

 

 

 

 

 

475,087

 

Net Assets ($)

 

 

38,685,188

 

Composition of Net Assets ($):

 

 

 

 

Paid-in capital

 

 

 

 

38,796,527

 

Accumulated undistributed investment income—net

 

 

 

 

521,046

 

Accumulated net realized gain (loss) on investments

 

 

 

 

(302,695)

 

Accumulated net unrealized appreciation (depreciation)
on investments, options transactions and foreign currency
transactions

 

 

 

(329,690)

 

Net Assets ($)

 

 

38,685,188

 

 

           

Net Asset Value Per Share

Class A

Class C

Class I

Class Y

 

Net Assets ($)

1,818,480

670,906

1,244,252

34,951,550

 

Shares Outstanding

147,797

55,084

100,942

2,835,017

 

Net Asset Value Per Share ($)

12.30

12.18

12.33

12.33

 

           

See notes to financial statements.

         

16

 

STATEMENT OF OPERATIONS

Year Ended October 31, 2016

             

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Income ($):

 

 

 

 

Income:

 

 

 

 

Interest (net of $1,833 foreign taxes withheld at source)

 

 

508,458

 

Dividends:

 

 

 

 

Unaffiliated issuers

 

 

11,565

 

Affiliated issuers

 

 

3,884

 

Total Income

 

 

523,907

 

Expenses:

 

 

 

 

Management fee—Note 3(a)

 

 

115,196

 

Professional fees

 

 

58,606

 

Registration fees

 

 

54,482

 

Custodian fees—Note 3(c)

 

 

17,037

 

Prospectus and shareholders’ reports

 

 

11,616

 

Shareholder servicing costs—Note 3(c)

 

 

10,215

 

Distribution fees—Note 3(b)

 

 

5,647

 

Directors’ fees and expenses—Note 3(d)

 

 

2,175

 

Loan commitment fees—Note 2

 

 

477

 

Miscellaneous

 

 

57,136

 

Total Expenses

 

 

332,587

 

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

 

 

(141,956)

 

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

 

 

(22)

 

Net Expenses

 

 

190,609

 

Investment Income—Net

 

 

333,298

 

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

 

 

Net realized gain (loss) on investments and foreign currency transactions

(440,669)

 

Net realized gain (loss) on options transactions

(7,339)

 

Net realized gain (loss) on financial futures

(43,243)

 

Net realized gain (loss) on forward foreign currency exchange contracts

851,518

 

Net Realized Gain (Loss)

 

 

360,267

 

Net unrealized appreciation (depreciation) on investments
and foreign currency transactions

 

 

(309,718)

 

Net unrealized appreciation (depreciation) on options transactions

 

 

1,569

 

Net unrealized appreciation (depreciation) on
forward foreign currency exchange contracts

 

 

429,396

 

Net Unrealized Appreciation (Depreciation)

 

 

121,247

 

Net Realized and Unrealized Gain (Loss) on Investments

 

 

481,514

 

Net Increase in Net Assets Resulting from Operations

 

814,812

 

             

See notes to financial statements.

         

17

 

STATEMENT OF CHANGES IN NET ASSETS

                   

 

 

 

 

Year Ended October 31,

 

 

 

 

2016

 

 

 

2015

 

Operations ($):

 

 

 

 

 

 

 

 

Investment income—net

 

 

333,298

 

 

 

233,640

 

Net realized gain (loss) on investments

 

360,267

 

 

 

448,976

 

Net unrealized appreciation (depreciation)
on investments

 

121,247

 

 

 

(712,171)

 

Net Increase (Decrease) in Net Assets
Resulting from Operations

814,812

 

 

 

(29,555)

 

Dividends to Shareholders from ($):

 

 

 

 

 

 

 

 

Investment income—net:

 

 

 

 

 

 

 

 

Class A

 

 

(23,340)

 

 

 

(57,838)

 

Class C

 

 

(9,412)

 

 

 

(33,290)

 

Class I

 

 

(42,083)

 

 

 

(404,897)

 

Class Y

 

 

(328,169)

 

 

 

(59,526)

 

Net realized gain on investments:

 

 

 

 

 

 

 

 

Class A

 

 

(2,110)

 

 

 

(7,353)

 

Class C

 

 

(1,205)

 

 

 

(5,245)

 

Class I

 

 

(2,610)

 

 

 

(51,344)

 

Class Y

 

 

(22,568)

 

 

 

(5)

 

Total Dividends

 

 

(431,497)

 

 

 

(619,498)

 

Capital Stock Transactions ($):

 

 

 

 

 

 

 

 

Net proceeds from shares sold:

 

 

 

 

 

 

 

 

Class A

 

 

866,305

 

 

 

680,797

 

Class C

 

 

79,202

 

 

 

198,369

 

Class I

 

 

825,349

 

 

 

858,080

 

Class Y

 

 

20,507,649

 

 

 

15,890,580

 

Dividends reinvested:

 

 

 

 

 

 

 

 

Class A

 

 

23,867

 

 

 

44,528

 

Class C

 

 

9,430

 

 

 

20,845

 

Class I

 

 

44,693

 

 

 

245,543

 

Class Y

 

 

307,758

 

 

 

52,705

 

Cost of shares redeemed:

 

 

 

 

 

 

 

 

Class A

 

 

(502,446)

 

 

 

(716,498)

 

Class C

 

 

(213,406)

 

 

 

(436,299)

 

Class I

 

 

(5,065,739)

 

 

 

(5,521,093)

 

Class Y

 

 

(859,355)

 

 

 

(1,200,173)

 

Increase (Decrease) in Net Assets
from Capital Stock Transactions

16,023,307

 

 

 

10,117,384

 

Total Increase (Decrease) in Net Assets

16,406,622

 

 

 

9,468,331

 

Net Assets ($):

 

 

 

 

 

 

 

 

Beginning of Period

 

 

22,278,566

 

 

 

12,810,235

 

End of Period

 

 

38,685,188

 

 

 

22,278,566

 

Undistributed investment income—net

521,046

 

 

 

119,039

 

18

 

                   

 

 

 

 

Year Ended October 31,

 

 

 

 

2016

 

 

 

2015

 

Capital Share Transactions (Shares):

 

 

 

 

 

 

 

 

Class A

 

 

 

 

 

 

 

 

Shares sold

 

 

71,290

 

 

 

55,214

 

Shares issued for dividends reinvested

 

 

1,982

 

 

 

3,601

 

Shares redeemed

 

 

(41,496)

 

 

 

(58,237)

 

Net Increase (Decrease) in Shares Outstanding

31,776

 

 

 

578

 

Class C

 

 

 

 

 

 

 

 

Shares sold

 

 

6,591

 

 

 

16,068

 

Shares issued for dividends reinvested

 

 

791

 

 

 

1,694

 

Shares redeemed

 

 

(17,686)

 

 

 

(35,692)

 

Net Increase (Decrease) in Shares Outstanding

(10,304)

 

 

 

(17,930)

 

Class I

 

 

 

 

 

 

 

 

Shares sold

 

 

67,292

 

 

 

69,171

 

Shares issued for dividends reinvested

 

 

3,711

 

 

 

19,841

 

Shares redeemed

 

 

(420,719)

 

 

 

(447,883)

 

Net Increase (Decrease) in Shares Outstanding

(349,716)

 

 

 

(358,871)

 

Class Y

 

 

 

 

 

 

 

 

Shares sold

 

 

1,676,600

 

 

 

1,297,727

 

Shares issued for dividends reinvested

 

 

25,465

 

 

 

4,327

 

Shares redeemed

 

 

(70,464)

 

 

 

(98,718)

 

Net Increase (Decrease) in Shares Outstanding

1,631,601

 

 

 

1,203,336

 

                   

See notes to financial statements.

               

19

 

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.

                   
         
       

Class A Shares

   

Year Ended October 31,

   

2016

2015

2014

2013

2012

 

Per Share Data ($):

               

Net asset value, beginning of period

   

12.13

12.70

12.59

13.03

12.58

 

Investment Operations:

               

Investment income—neta

   

.13

.16

.26

.32

.41

 

Net realized and unrealized
gain (loss) on investments

   

.25

(.18)

(.00)

b

(.04)

.64

 

Total from Investment Operations

   

.38

(.02)

.26

.28

1.05

 

Distributions:

               

Dividends from
investment income—net

   

(.19)

(.49)

(.15)

(.51)

(.59)

 

Dividends from net realized
gain on investments

   

(.02)

(.06)

(.21)

(.01)

 

Total Distributions

   

(.21)

(.55)

(.15)

(.72)

(.60)

 

Net asset value, end of period

   

12.30

12.13

12.70

12.59

13.03

 

Total Return (%)c

   

3.20

(.15)

2.08

2.12

8.74

 

Ratios/Supplemental Data (%):

               

Ratio of total expenses
to average net assets

   

1.64

1.99

2.22

2.31

2.67

 

Ratio of net expenses
to average net assets

   

.95

.95

1.02

1.10

1.10

 

Ratio of net investment income
to average net assets

   

1.10

1.29

2.04

2.49

3.21

 

Portfolio Turnover Rate

   

141.08

134.49

157.23

138.46

132.40

 

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

   

1,818

1,407

1,466

1,912

1,132

 

a Based on average shares outstanding.

b Amount represents less than $.01 per share.

c Exclusive of sales charge.

See notes to financial statements.

20

 

                       
           
       

Class C Shares

   

Year Ended October 31,

   

2016

2015

2014

2013

2012

 

Per Share Data ($):

               

Net asset value, beginning of period

   

12.05

12.62

12.54

12.98

12.54

 

Investment Operations:

               

Investment income—neta

   

.04

.07

.17

.23

.31

 

Net realized and unrealized
gain (loss) on investments

   

.25

(.19)

(.00)

b

(.06)

.65

 

Total from Investment Operations

   

.29

(.12)

.17

.17

.96

 

Distributions:

               

Dividends from
investment income—net

   

(.14)

(.39)

(.09)

(.40)

(.51)

 

Dividends from net realized
gain on investments

   

(.02)

(.06)

(.21)

(.01)

 

Total Distributions

   

(.16)

(.45)

(.09)

(.61)

(.52)

 

Net asset value, end of period

   

12.18

12.05

12.62

12.54

12.98

 

Total Return (%)c

   

2.47

(.94)

1.30

1.41

7.94

 

Ratios/Supplemental Data (%):

               

Ratio of total expenses
to average net assets

   

2.39

2.74

2.95

3.03

3.32

 

Ratio of net expenses
to average net assets

   

1.70

1.70

1.76

1.85

1.85

 

Ratio of net investment income
to average net assets

   

.35

.54

1.31

1.83

2.46

 

Portfolio Turnover Rate

   

141.08

134.49

157.23

138.46

132.40

 

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

   

671

788

1,051

819

587

 

a Based on average shares outstanding.

b Amount represents less than $.01 per share.

c Exclusive of sales charge.

See notes to financial statements.

21

 

FINANCIAL HIGHLIGHTS (continued)

                       
           
       

Class I Shares

   

Year Ended October 31,

   

2016

2015

2014

2013

2012

 

Per Share Data ($):

               

Net asset value, beginning of period

   

12.14

12.71

12.60

13.04

12.59

 

Investment Operations:

               

Investment income—neta

   

.15

.19

.29

.36

.44

 

Net realized and unrealized
gain (loss) on investments

   

.27

(.18)

(.00)

b

(.06)

.64

 

Total from Investment Operations

   

.42

.01

.29

.30

1.08

 

Distributions:

               

Dividends from
investment income—net

   

(.21)

(.52)

(.18)

(.53)

(.62)

 

Dividends from net realized
gain on investments

   

(.02)

(.06)

(.21)

(.01)

 

Total Distributions

   

(.23)

(.58)

(.18)

(.74)

(.63)

 

Net asset value, end of period

   

12.33

12.14

12.71

12.60

13.04

 

Total Return (%)

   

3.52

.07

2.30

2.33

8.98

 

Ratios/Supplemental Data (%):

               

Ratio of total expenses
to average net assets

   

1.39

1.70

1.88

1.96

2.31

 

Ratio of net expenses
to average net assets

   

.70

.70

.77

.85

.85

 

Ratio of net investment income
to average net assets

   

1.35

1.54

2.29

2.86

3.45

 

Portfolio Turnover Rate

   

141.08

134.49

157.23

138.46

132.40

 

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

   

1,244

5,472

10,292

9,391

9,476

 

a Based on average shares outstanding.

b Amount represents less than $.01 per share.

See notes to financial statements.

22

 

                   
         
       

Class Y Shares

 

Year Ended October 31,

 

2016

2015

2014

2013

a

Per Share Data ($):

           

Net asset value, beginning of period

 

12.14

12.71

12.60

12.50

 

Investment Operations:

           

Investment income—netb

 

.16

.19

.29

.10

 

Net realized and unrealized
gain (loss) on investments

 

.27

(.18)

(.00)

c

.11

 

Total from Investment Operations

 

.43

.01

.29

.21

 

Distributions:

           

Dividends from
investment income—net

 

(.22)

(.52)

(.18)

(.11)

 

Dividends from net realized
gain on investments

 

(.02)

(.06)

 

Total Distributions

 

(.24)

(.58)

(.18)

(.11)

 

Net asset value, end of period

 

12.33

12.14

12.71

12.60

 

Total Return (%)

 

3.54

.09

2.34

1.29

d

Ratios/Supplemental Data (%):

           

Ratio of total expenses
to average net assets

 

1.23

1.31

1.88

2.09

e

Ratio of net expenses
to average net assets

 

.70

.70

.75

.85

e

Ratio of net investment income
to average net assets

 

1.35

1.54

2.30

2.36

e

Portfolio Turnover Rate

 

141.08

134.49

157.23

138.46

 

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

 

34,952

14,611

1

1

 

a From July 1, 2013 (commencement of initial offering) to October 31, 2013.

b Based on average shares outstanding.

c Amount represents less than $.01 per share.

d Not annualized.

e Annualized.

See notes to financial statements.

23

 

NOTES TO FINANCIAL STATEMENTS

NOTE 1—Significant Accounting Policies:

Dreyfus Global Dynamic Bond Fund (the “fund”) is a separate non-diversified series of Advantage Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering ten series, including the fund. The fund’s investment objective is to seek total return (consisting of income and capital appreciation). 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. Newton Investment Management (North America) Limited (“Newton”), formerly, Newton Capital Management Limited, a wholly-owned subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser.

MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 100 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class C, Class I and Class Y. 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 Class Y shares are sold at net asset value per share generally to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.

As of October 31, 2016, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held 7,453 Class A and 7,267 Class C shares of the fund.

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

The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive

24

 

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.

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:

25

 

NOTES TO FINANCIAL STATEMENTS (continued)

Investments in debt securities, excluding short-term investments (other than U.S. Treasury Bills), financial futures, options and forward foreign currency exchange contracts (“forward contracts”) are valued each business day by an independent pricing service (the “Service”) approved by the Company’s Board of Directors (the “Board”). Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments are valued as determined by the Service, based on methods which include consideration of the following: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. These securities are generally categorized within Level 2 of the fair value hierarchy.

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

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

The Service is engaged under the general supervision of the Board.

Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant American Depository Receipts and 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

26

 

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

Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.

Financial futures and options, which are traded on an exchange, are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day and are generally categorized within Level 1 of the fair value hierarchy. Options traded over-the-counter (“OTC”) are valued at the mean between the bid and asked price and are generally categorized within Level 2 of the fair value hierarchy. Forward foreign currency exchange contracts (“forward contracts”) are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.

The following is a summary of the inputs used as of October 31, 2016 in valuing the fund’s investments:

         

 

Level 1 - Unadjusted Quoted Prices

Level 2 - Other Significant Observable Inputs

Level 3 -Significant Unobservable Inputs

Total

Assets ($)

 

 

 

 

Investments in Securities:

 

 

 

 

Corporate Bonds

-

18,226,688

-

18,226,688

Exchange-Traded Funds

1,511,140

-

-

1,511,140

Foreign Government

-

10,603,630

-

10,603,630

Mutual Funds

926,577

-

-

926,577

U.S. Treasury

-

6,445,669

-

6,445,669

Other Financial Instruments:

 

 

 

 

Forward Foreign Currency Exchange Contracts††

-

633,691

-

633,691

Options Purchased

51,344

-

-

51,344

27

 

NOTES TO FINANCIAL STATEMENTS (continued)

         

 

Level 1 - Unadjusted Quoted Prices

Level 2 - Other Significant Observable Inputs

Level 3 -Significant Unobservable Inputs

Total

Liabilities ($)

 

 

 

 

Other Financial Instruments:

 

 

 

 

Forward Foreign Currency Exchange Contracts††

-

(97,893)

-

(97,893)

 See Statement of Investments for additional detailed categorizations.

†† Amount shown represents unrealized appreciation (depreciation) at period end.

At October 31, 2016, there were no transfers between levels of the fair value hierarchy.

(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.

(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and recognized on the accrual basis. Securities purchased or sold on a when issued or delayed delivery basis may be settled a month or more after the trade date.

(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 October 31, 2016 were as follows:

28

 

           

Affiliated Investment Company

Value 10/31/2015 ($)

Purchases ($)

Sales ($)

Value 10/31/2016 ($)

Net Assets (%)

Dreyfus Institutional Preferred Government Plus Money Market Fund

766,142

34,266,813

34,106,378

926,577

2.4

Formerly Dreyfus Institutional Preferred Plus Money Market Fund.

Certain affiliated investment companies may also invest in the fund. At October 31, 2016, Dreyfus Yield Enhancement Strategy Fund, an affiliate of the fund, held 1,974,098 Class Y shares representing approximately 63% of the fund’s net assets.

(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S. These 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 delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S.

(f) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net are normally declared and paid quarterly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.

On October 31, 2016, the Board declared a cash dividend of $.054, $.031, $.062 and $.062 per share from undistributed investment income-net for Class A, Class C, Class I and Class Y shares, respectively, payable on November 1, 2016 (ex-dividend date), to shareholders of record as of the close of business on October 31, 2016.

(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.

29

 

NOTES TO FINANCIAL STATEMENTS (continued)

As of and during the period ended October 31, 2016, 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 October 31, 2016, the fund did not incur any interest or penalties.

Each tax year in the four-year period ended October 31, 2016 remains subject to examination by the Internal Revenue Service and state taxing authorities.

At October 31, 2016, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $1,003,580, accumulated other losses $3,061 and unrealized depreciation $1,111,858.

The tax character of distributions paid to shareholders during the fiscal periods ended October 31, 2016 and October 31, 2015 were as follows: ordinary income $404,465 and $575,242, and long-term capital gains $27,032 and $44,256, respectively.

During the period ended October 31, 2016, as a result of permanent book to tax differences, primarily due to the tax treatment for amortization of premiums, foreign currency gains and losses and consent fees, the fund increased accumulated undistributed investment income-net by $471,713 and decreased accumulated net realized gain (loss) on investments 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 Dreyfus-managed funds in a $810 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 5, 2016, the unsecured credit facility with Citibank, N.A. was $555 million and prior to January 11, 2016, the unsecured credit facility with Citibank, N.A. was $480 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. During the period ended October 31, 2016, the fund did not borrow under the Facilities.

30

 

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

(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .45% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus has contractually agreed, from November 1, 2015 through March 1, 2017, to waive receipt of its fees and/or assume the direct expenses of the fund so that the expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .70% of the value of the fund’s average daily net assets. The reduction in expenses, pursuant to the undertaking, amounted to $141,956 during the period ended October 31, 2016.

Pursuant to a sub-investment advisory agreement between Dreyfus and Newton, Dreyfus pays Newton a monthly fee at an annual rate of .22% of the value of the fund’s average daily net assets.

(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 October 31, 2016, Class C shares were charged $5,647 pursuant to the Distribution Plan.

(c) Under the Shareholder Services Plan, Class A and Class C shares pay the Distributor at an annual rate of .25% of the value of their average daily net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended October 31, 2016, Class A and Class C shares were charged $3,856 and $1,882, 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 Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer

31

 

NOTES TO FINANCIAL STATEMENTS (continued)

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 October 31, 2016, the fund was charged $1,567 for transfer agency services and $54 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 $22.

The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended October 31, 2016, the fund was charged $17,037 pursuant to the custody agreement.

During the period ended October 31, 2016, the fund was charged $9,804 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 $14,562, Distribution Plan fees $431, Shareholder Services Plan fees $528, custodian fees $6,000, Chief Compliance Officer fees $5,688 and transfer agency fees $225, which are offset against an expense reimbursement currently in effect in the amount of $12,261.

(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.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, forward contracts, financial futures and options transactions, during the period ended October 31, 2016, amounted to $51,505,402 and $34,015,961, respectively.

Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its over–the–counter (“OTC”) derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or

32

 

posted and create one single net payment in the event of default or termination.

Each type of derivative instrument that was held by the fund during the period ended October 31, 2016 is discussed below.

Financial Futures: In the normal course of pursuing its investment objective, the fund is exposed to market risk, including interest rate risk, as a result of changes in value of underlying financial instruments. The fund invests in financial futures in order to manage its exposure to or protect against changes in the market. A financial futures contract represents a commitment for the future purchase or a sale of an asset at a specified date. Upon entering into such contracts, these investments require initial margin deposits with a counterparty, which consist of cash or cash equivalents. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses which are recorded in the Statement of Operations. When the contracts are closed, the fund recognizes a realized gain or loss which is reflected in the Statement of Operations. There is minimal counterparty credit risk to the fund with financial futures since they are exchange traded, and the exchange guarantees the financial futures against default. At October 31, 2016, there were no financial futures outstanding.

Options Transactions: The fund purchases and writes (sells) put and call options to hedge against changes in interest rates, or as a substitute for an investment. The fund is subject to market risk and interest risk in the course of pursuing its investment objectives through its investments in options contracts. A call option gives the purchaser of the option the right (but not the obligation) to buy, and obligates the writer to sell, the underlying financial instrument at the exercise price at any time during the option period, or at a specified date. Conversely, a put option gives the purchaser of the option the right (but not the obligation) to sell, and obligates the writer to buy the underlying financial instrument at the exercise price at any time during the option period, or at a specified date.

As a writer of call options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument decreases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument increases between those dates.

33

 

NOTES TO FINANCIAL STATEMENTS (continued)

As a writer of put options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument increases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument decreases between those dates. The maximum payout for these contracts is limited to the number of put option contracts written and the related strike prices, respectively.

As a writer of an option, the fund has no control over whether the underlying financial instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the financial instrument underlying the written option. There is a risk of loss from a change in value of such options which may exceed the related premiums received. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. The Statement of Operations reflects any unrealized gains or losses which occurred during the period as well as any realized gains or losses which occurred upon the expiration or closing of the option transaction. At October 31, 2016, there were no options written outstanding.

Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. This risk may be mitigated by Master Agreements,

34

 

if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. The following summarizes open forward contracts at October 31, 2016:

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Purchases:

     

Barclays Bank

     

Danish Krone,

       

Expiring

       

11/18/2016

1,732,296

259,957

255,856

(4,101)

Indian Rupee,

       

Expiring

       

11/18/2016

30,517,000

450,336

455,688

5,352

Polish Zloty,

       

Expiring

       

11/18/2016

376,996

97,660

96,049

(1,611)

JP Morgan Chase Bank

     

Danish Krone,

       

Expiring

       

11/18/2016

336,000

50,489

49,627

(862)

Royal Bank of Scotland

     

New Zealand Dollar,

       

Expiring

       

11/18/2016

139,866

99,590

99,944

354

Swedish Krona,

       

Expiring

       

11/18/2016

3,732,773

439,106

413,609

(25,497)

State Street Bank & Trust Co.

     

Canadian Dollar,

       

Expiring

       

11/18/2016

205,000

154,465

152,854

(1,611)

Danish Krone,

       

Expiring

       

11/18/2016

347,271

51,994

51,291

(703)

UBS

     

Indian Rupee,

       

Expiring

       

11/18/2016

5,632,000

83,142

84,099

957

Japanese Yen,

       

Expiring

       

11/18/2016

56,840,363

560,992

542,326

(18,666)

35

 

NOTES TO FINANCIAL STATEMENTS (continued)

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Sales:

     

Barclays Bank

     

Chinese Yuan Renminbi,

       

Expiring

       

11/18/2016

1,078,000

160,895

159,083

1,812

Euro,

       

Expiring

       

11/18/2016

320,524

357,618

352,106

5,512

Hungarian Forint,

       

Expiring

       

11/18/2016

34,204,069

123,209

121,615

1,594

Mexican New Peso,

       

Expiring

       

11/18/2016

2,240,000

120,310

118,261

2,049

JP Morgan Chase Bank

     

Australian Dollar,

       

Expiring

       

11/18/2016

299,000

228,285

227,341

944

British Pound,

       

Expiring

       

11/18/2016

89,742

117,697

109,881

7,816

Euro,

       

Expiring

       

11/18/2016

312,706

350,312

343,519

6,793

New Zealand Dollar,

       

Expiring

       

11/18/2016

229,012

163,911

163,645

266

South African Rand,

       

Expiring

       

11/18/2016

3,913,000

265,485

289,168

(23,683)

Turkish Lira,

       

Expiring

       

11/18/2016

219,000

72,915

70,507

2,408

Royal Bank of Scotland

     

Australian Dollar,

       

Expiring

       

11/18/2016

380,342

284,268

289,189

(4,921)

British Pound,

       

Expiring

       

11/18/2016

993,660

1,318,376

1,216,658

101,718

36

 

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Sales: (continued)

Royal Bank of Scotland (continued)

Canadian Dollar,

       

Expiring

       

11/18/2016

431,000

327,660

321,366

6,294

Euro,

       

Expiring

       

11/18/2016

6,002,139

6,686,232

6,593,560

92,672

Hungarian Forint,

       

Expiring

       

11/18/2016

92,456,968

330,054

328,736

1,318

Indian Rupee,

       

Expiring

       

11/18/2016

10,834,000

161,316

161,776

(460)

New Zealand Dollar,

       

Expiring

       

11/18/2016

424,017

306,468

302,989

3,479

Norwegian Krone,

       

Expiring

       

11/18/2016

24,123

2,845

2,920

(75)

Polish Zloty,

       

Expiring

       

11/18/2016

386,692

100,555

98,520

2,035

South African Rand,

       

Expiring

       

11/18/2016

2,834,000

198,844

209,431

(10,587)

South Korean Won,

       

Expiring

       

11/18/2016

645,127,000

570,283

563,761

6,522

Turkish Lira,

       

Expiring

       

11/18/2016

961,000

314,950

309,394

5,556

State Street Bank & Trust Co.

     

Australian Dollar,

       

Expiring

       

11/18/2016

317,499

241,672

241,407

265

British Pound,

       

Expiring

       

11/2/2016

7,813

9,504

9,563

(59)

11/18/2016

700,565

912,922

857,786

55,136

Canadian Dollar,

       

Expiring

       

11/18/2016

523,000

401,131

389,964

11,167

37

 

NOTES TO FINANCIAL STATEMENTS (continued)

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Sales: (continued)

State Street Bank & Trust Co. (continued)

Euro,

       

Expiring

       

11/2/2016

6,325

6,920

6,943

(23)

11/18/2016

430,105

479,932

472,485

7,447

Hungarian Forint,

       

Expiring

       

11/18/2016

15,627,953

56,861

55,566

1,295

Mexican New Peso,

       

Expiring

       

11/18/2016

2,552,327

129,716

134,750

(5,034)

New Zealand Dollar,

       

Expiring

       

11/18/2016

1,740,077

1,253,725

1,243,404

10,321

UBS

     

British Pound,

       

Expiring

       

11/18/2016

3,601,148

4,694,474

4,409,318

285,156

Euro,

       

Expiring

       

11/18/2016

108,072

122,239

118,721

3,518

Hungarian Forint,

       

Expiring

       

11/18/2016

12,140,706

43,929

43,167

762

Swiss Franc,

       

Expiring

       

11/18/2016

149,547

154,438

151,265

3,173

Gross Unrealized Appreciation

   

633,691

Gross Unrealized Depreciation

   

(97,893)

The following tables show the fund’s exposure to different types of market risk as it relates to the Statement of Assets and Liabilities and the Statement of Operations, respectively.

38

 

Fair value of derivative instruments as of October 31, 2016 is shown below:

               

 

 

Derivative
Assets ($)

 

 

 

Derivative
Liabilities ($)

 

Interest rate risk

51,344

1

Interest rate risk

 

-

 

Foreign exchange risk

633,691

2

Foreign exchange risk

 

(97,893)

2

Gross fair value of
derivative contracts

685,035

     

(97,893)

 
             
 

Statement of Assets and Liabilities location:

 

1

Options purchased are included in Investments in securities—Unaffiliated issuers, at value.

2

Unrealized appreciation (depreciation) on forward foreign currency exchange contracts.

The effect of derivative instruments in the Statement of Operations during the period ended October 31, 2016 is shown below:

                     

Amount of realized gain (loss) on derivatives recognized in income ($)

 

Underlying
risk

Financial
Futures

1

Options
Transactions

2

Forward
Contracts

3

Total

 

 

Interest
rate

(43,243)

 

(7,339)

 

-

 

(50,582)

   

Foreign
exchange

-

 

-

 

851,518

 

851,518

   

Total

(43,243)

 

(7,339)

 

851,518

 

800,936

   
                   

Change in unrealized appreciation (depreciation) on derivatives recognized in income ($)

 

Underlying
risk

Options
Transactions

4

Forward
Contracts

5

Total

 

 

 

Interest
rate

1,569

 

-

 

1,569

       

Foreign
exchange

-

 

429,396

 

429,396

       

Total

1,569

 

429,396

 

430,965

       
                     
 

Statement of Operations location:

           

1

Net realized gain (loss) on financial futures.

 

2

Net realized gain (loss) on options transactions.

3

Net realized gain (loss) on forward foreign currency exchange contracts.

 

4

Net unrealized appreciation (depreciation) on options transactions.

 

5

Net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.

The provisions of ASC Topic 210 “Disclosures about Offsetting Assets and Liabilities” require disclosure on the offsetting of financial assets and liabilities. These disclosures are required for certain investments, including derivative financial instruments subject to Master Agreements which are eligible for offsetting in the Statement of Assets and Liabilities and require the fund to disclose both gross and net information with respect to such investments. For financial reporting purposes, the fund does not offset

39

 

NOTES TO FINANCIAL STATEMENTS (continued)

derivative assets and derivative liabilities that are subject to Master Agreements in the Statement of Assets and Liabilities.

At October 31, 2016, derivative assets and liabilities (by type) on a gross basis are as follows:

           

Derivative Financial Instruments:

 

Assets ($)

 

Liabilities ($)

 

Options

 

51,344

 

-

 

Forward contracts

 

633,691

 

(97,893)

 

Total gross amount of derivative

         

assets and liabilities in the

         

Statement of Assets and Liabilities

 

685,035

 

(97,893)

 

Derivatives not subject to

         

Master Agreements

 

(51,344)

 

-

 

Total gross amount of assets

         

and liabilities subject to

         

Master Agreements

 

633,691

 

(97,893)

 

The following tables present derivative assets and liabilities net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of October 31, 2016:

             
     

Financial

     
     

Instruments

     
     

and Derivatives

     
 

Gross Amount of

 

Available

Collateral

 

Net Amount of

Counterparty

Assets ($)

1

for Offset ($)

Received ($)

 

Assets ($)

Barclays Bank

16,319

 

(5,712)

-

 

10,607

JP Morgan
Chase Bank

18,227

 

(18,227)

-

 

-

Royal Bank
of Scotland

219,948

 

(41,540)

-

 

178,408

State Street
Bank and Trust Co.

85,631

 

(7,430)

-

 

78,201

UBS

293,566

 

(18,666)

-

 

274,900

Total

633,691

 

(91,575)

-

 

542,116

             
     

Financial

     
     

Instruments

     
     

and Derivatives

     
 

Gross Amount of

 

Available

Collateral

 

Net Amount of

Counterparty

Liabilities ($)

1

for Offset ($)

Pledged ($)

 

Liabilities ($)

Barclays Bank

(5,712)

 

5,712

-

 

-

JP Morgan
Chase Bank

(24,545)

 

18,227

-

 

(6,318)

Royal Bank
of Scotland

(41,540)

 

41,540

-

 

-

State Street
Bank and Trust Co.

(7,430)

 

7,430

-

 

-

UBS

(18,666)

 

18,666

-

 

-

Total

(97,893)

 

91,575

-

 

(6,318)

             

1 Absent a default event or early termination, OTC derivative assets and liabilities are presented at gross amounts and are
not offset in the Statement of Assets and Liabilities.

40

 

The following summarizes the average market value of derivatives outstanding during the period ended October 31, 2016:

     

 

 

Average Market Value ($)

Interest rate financial futures

 

734,090

Interest rate options contracts

 

9,173

Forward contracts

 

15,559,227

     

At October 31, 2016, the cost of investments for federal income tax purposes was $38,858,531; accordingly, accumulated net unrealized depreciation on investments was $1,093,483, consisting of $218,169 gross unrealized appreciation and $1,311,652 gross unrealized depreciation.

41

 

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors
Dreyfus Global Dynamic Bond Fund

We have audited the accompanying statement of assets and liabilities, including the statement of investments, of Dreyfus Global Dynamic Bond Fund (one of the series comprising Advantage Funds, Inc.) as of October 31, 2016, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for the each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2016 by correspondence with the custodian and others. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Global Dynamic Bond Fund at October 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with U.S. generally accepted accounting principles.

New York, New York
December 29, 2016

42

 

IMPORTANT TAX INFORMATION (Unaudited)

For federal tax purposes, the fund hereby reports $.0184 per share as a long-term capital gain distribution paid on December 30, 2015.

43

 

BOARD MEMBERS INFORMATION (Unaudited)

INDEPENDENT BOARD MEMBERS

Joseph S. DiMartino (73)

Chairman of the Board (1995)

Principal Occupation During Past 5 Years:

· Corporate Director and Trustee (1995-present)

Other Public Company Board Memberships During Past 5 Years:

· CBIZ (formerly, Century Business Services, Inc.), a provider of outsourcing functions for small and medium size companies, Director (1997-present)

No. of Portfolios for which Board Member Serves: 135

———————

Peggy C. Davis (73)

Board Member (2006)

Principal Occupation During Past 5 Years:

· Shad Professor of Law, New York University School of Law (1983-present)

No. of Portfolios for which Board Member Serves: 49

———————

David P. Feldman (76)

Board Member (1996)

Principal Occupation During Past 5 Years:

· Corporate Director and Trustee (1985-present)

Other Public Company Board Memberships During Past 5 Years:

· BBH Mutual Funds Group (5 registered mutual funds), Director (1992-2014)

No. of Portfolios for which Board Member Serves: 35

———————

Ehud Houminer (76)

Board Member (1993)

Principal Occupation During Past 5 Years:

· Executive-in-Residence at the Columbia Business School, Columbia

University (1992-present)

Other Public Company Board Memberships During Past 5 Years:

· Avnet, Inc., an electronics distributor, Director (1993-2012)

No. of Portfolios for which Board Member Serves: 59

———————

44

 

Lynn Martin (76)

Board Member (2012)

Principal Occupation During Past 5 Years:

· President of The Martin Hall Group LLC, a human resources consulting firm (2005-2012)

Other Public Company Board Memberships During Past 5 Years:

· AT&T, Inc., a telecommunications company, Director (1999-2012)

· Ryder System, Inc., a supply chain and transportation management company, Director (1993-2012)

No. of Portfolios for which Board Member Serves: 35

———————

Robin A. Melvin (53)

Board Member (2012)

Principal Occupation During Past 5 Years:

· Co-chairman, Illinois Mentoring Partnership, non-profit organization dedicated to increasing the quantity and quality of mentoring services in Illinois; (2014-present; served as a board member since 2013)

· Director, Boisi Family Foundation, a private family foundation that supports youth-serving organizations that promote the self sufficiency of youth from disadvantaged circumstances (1995-2012)

No. of Portfolios for which Board Member Serves: 107

———————

Dr. Martin Peretz (77)

Board Member (2006)

Principal Occupation During Past 5 Years:

· Editor-in-Chief Emeritus of The New Republic Magazine (2011-2012) (previously,

Editor-in-Chief, 1974-2011)

· Director of TheStreet.com, a financial information service on the web (1996-2010)

· Lecturer at Harvard University (1969-2012)

No. of Portfolios for which Board Member Serves: 35

———————

Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80. The address of the Board Members and Officers is c/o The Dreyfus Corporation, 200 Park Avenue, New York, New York 10166. Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from Dreyfus free of charge by calling this toll free number: 1-800-DREYFUS.

James F. Henry, Emeritus Board Member
Dr. Paul A. Marks, Emeritus Board Member
Philip L. Toia, Emeritus Board Member

45

 

OFFICERS OF THE FUND (Unaudited)

BRADLEY J. SKAPYAK, President since January 2010.

Chief Operating Officer and a director of the Manager since June 2009, Chairman of Dreyfus Transfer, Inc., an affiliate of the Manager and the transfer agent of the funds, since May 2011 and Executive Vice President of the Distributor since June 2007. From April 2003 to June 2009, Mr. Skapyak was the head of the Investment Accounting and Support Department of the Manager. He is an officer of 64 investment companies (comprised of 135 portfolios) managed by the Manager. He is 57 years old and has been an employee of the Manager since February 1988.

BENNETT A. MACDOUGALL, Chief Legal Officer since October 2015.

Chief Legal Officer of the Manager since June 2015; from June 2005 to June 2015, he served in various capacities with Deutsche Bank – Asset & Wealth Management Division, including as Director and Associate General Counsel, and Chief Legal Officer of Deutsche Investment Management Americas Inc. from June 2012 to May 2015. He is an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 45 years old and has been an employee of the Manager since June 2015.

JANETTE E. FARRAGHER, Vice President and Secretary since December 2011.

Assistant General Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. She is 53 years old and has been an employee of the Manager since February 1984.

JAMES BITETTO, Vice President and Assistant Secretary since August 2005.

Managing Counsel of BNY Mellon and Secretary of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 50 years old and has been an employee of the Manager since December 1996.

JONI LACKS CHARATAN, Vice President and Assistant Secretary since August 2005.

Managing Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. She is 60 years old and has been an employee of the Manager since October 1988.

JOSEPH M. CHIOFFI, Vice President and Assistant Secretary since August 2005.

Managing Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 54 years old and has been an employee of the Manager since June 2000.

MAUREEN E. KANE, Vice President and Assistant Secretary since April 2015.

Managing Counsel of BNY Mellon since July 2014; from October 2004 until July 2014, General Counsel, and from May 2009 until July 2014, Chief Compliance Officer of Century Capital Management. She is an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. She is 54 years old and has been an employee of the Manager since July 2014.

SARAH S. KELLEHER, Vice President and Assistant Secretary since April 2014.

Senior Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager; from August 2005 to March 2013, Associate General Counsel of Third Avenue Management. She is 41 years old and has been an employee of the Manager since March 2013.

JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.

Senior Managing Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 51 years old and has been an employee of the Manager since October 1990.

JAMES WINDELS, Treasurer since November 2001.

Director – Mutual Fund Accounting of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 58 years old and has been an employee of the Manager since April 1985.

RICHARD CASSARO, Assistant Treasurer since January 2008.

Senior Accounting Manager – Money Market, Municipal Bond and Equity Funds of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 57 years old and has been an employee of the Manager since September 1982.

46

 

GAVIN C. REILLY, Assistant Treasurer since December 2005.

Tax Manager of the Investment Accounting and Support Department of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 48 years old and has been an employee of the Manager since April 1991.

ROBERT S. ROBOL, Assistant Treasurer since December 2002.

Senior Accounting Manager of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 52 years old and has been an employee of the Manager since October 1988.

ROBERT SALVIOLO, Assistant Treasurer since July 2007.

Senior Accounting Manager – Equity Funds of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since June 1989.

ROBERT SVAGNA, Assistant Treasurer since December 2002.

Senior Accounting Manager – Fixed Income and Equity Funds of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since November 1990.

JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.

Chief Compliance Officer of the Manager and The Dreyfus Family of Funds (65 investment companies, comprised of 160 portfolios). He is 59 years old and has served in various capacities with the Manager since 1980, including manager of the firm’s Fund Accounting Department from 1997 through October 2001.

CARIDAD M. CAROSELLA, Anti-Money Laundering Compliance Officer since January 2016

Anti-Money Laundering Compliance Officer of the Dreyfus Family of Funds and BNY Mellon Funds Trust since January 2016; from May 2015 to December 2015, Interim Anti-Money Laundering Compliance Officer of the Dreyfus Family of Funds and BNY Mellon Funds Trust and the Distributor; from January 2012 to May 2015, AML Surveillance Officer of the Distributor and from 2007 to December 2011, Financial Processing Manager of the Distributor. She is an officer of 60 investment companies (comprised of 155 portfolios) managed by the Manager. She is 48 years old and has been an employee of the Distributor since 1997.

47

 

NOTES

48

 

NOTES

49

 

For More Information

Dreyfus Global Dynamic Bond Fund

200 Park Avenue
New York, NY 10166

Manager

The Dreyfus Corporation
200 Park Avenue
New York, NY 10166

Sub-Investment Adviser

Newton Investment Management
(North America) Limited
160 Queen Victoria Street
London, EC4V, 4LA, UK

Custodian

The Bank of New York Mellon
225 Liberty Street
New York, NY 10286

Transfer Agent &
Dividend Disbursing Agent

Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166

Distributor

MBSC Securities Corporation
200 Park Avenue
New York, NY 10166

   

Ticker Symbols:

Class A: DGDAX      Class C: DGDCX      Class I: DGDIX      Class Y: DGDYX

Telephone Call your financial representative or 1-800-DREYFUS

Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144

E-mail Send your request to [email protected]

Internet Information can be viewed online or downloaded at www.dreyfus.com

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. (phone 1-800-SEC-0330 for information).

A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.dreyfus.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.

   

© 2016 MBSC Securities Corporation
6298AR1016A

 


 

Dreyfus Global Real Return Fund

     

 

ANNUAL REPORT

October 31, 2016

   
 

 

 

Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus 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 Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.

 

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

 

Contents

T H E    F U N D

F O R    M O R E    I N F O R M AT I O N

 

Back Cover

 

       
 


Dreyfus Global Real Return Fund

 

The Fund

A LETTER FROM THE CHIEF EXECUTIVE OFFICER

Dear Shareholder:

We are pleased to present this annual report for Dreyfus Global Real Return Fund, covering the 12-month period from November 1, 2015 through October 31, 2016. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.

Stocks and bonds generally advanced over the reporting period in the midst of heightened market volatility stemming from various global economic developments. Toward the end of 2015, investor sentiment deteriorated amid sluggish global economic growth, falling commodity prices, and the first increase in short-term U.S. interest rates in nearly a decade. These worries sparked sharp stock market declines in January 2016, but equities began to rally in February when U.S. monetary policymakers refrained from additional rate hikes, other central banks eased their monetary policies further, and commodity prices began to rebound. Stocks generally continued to climb through the summer, driving several broad measures of U.S. stock market performance to record highs in July and August before moderating as a result of uncertainty regarding U.S. elections and potential rate hikes. In the bond market, yields of high-quality sovereign bonds generally moved lower and their prices increased in response to robust investor demand for current income in a low interest rate environment.

The outcome of the U.S. presidential election and ongoing global economic headwinds suggest that uncertainty will persist in the financial markets over the foreseeable future. Some asset classes and industry groups may benefit from a changing economic and political landscape, while others probably will face challenges. Consequently, selectivity could become a more important determinant of investment success. As always, we encourage you to discuss the implications of our observations with your financial advisor.

Thank you for your continued confidence and support.

Sincerely,

Mark D. Santero
Chief Executive Officer
The Dreyfus Corporation
November 15, 2016

2

 

DISCUSSION OF FUND PERFORMANCE

For the period from November 1, 2015 through October 31, 2016, as provided by Suzanne Hutchins (Lead) and Aron Pataki, Portfolio Managers of Newton Investment Management (North America) Limited, Sub-Investment Adviser

Market and Fund Performance Overview

For the 12-month period ended October 31, 2016, Dreyfus Global Real Return Fund’s Class A shares produced a total return of 4.87%, Class C shares returned 4.12%, Class I shares returned 5.16%, and Class Y shares returned 5.18%.1 In comparison, the fund’s benchmark, the Citi 1-Month Treasury Bill Index, and the fund’s performance baseline benchmark, the U.S.$ 1-Month London Interbank Offered Rate (LIBOR) Index, produced total returns of 0.18% and 0.43%, respectively, for the same period.2,3

Bonds gained value as interest rates declined, and stocks generally advanced when investor sentiment improved during the spring and summer of 2016. The fund delivered higher returns than its benchmark during the period.

The Fund’s Investment Approach

The fund seeks total return (consisting of capital appreciation and income). To pursue its goal, the fund uses an actively managed multi-asset strategy to produce positive absolute or real returns exhibiting less volatility than major equity markets over a complete market cycle, typically a period of five years. The fund is not managed relative to an index, but rather seeks to provide returns that are largely independent of market moves.

The fund invests in a core of return-seeking assets, including global equities, convertible bonds, and global high yield corporate bonds to meet its total return objective. To complement this core and to provide capital protection as well as to reduce volatility, the fund is invested in other asset types where we find value, including commodity-related investments, currencies, select government bonds, and index-linked securities and derivatives. The fund must invest at least 10% of the value of its total assets in equity securities and at least 10% of the value of its total assets in fixed income securities.

To allocate the fund’s assets, we combine a top-down approach emphasizing economic trends and current investment themes on a global basis, with bottom-up security selection based on fundamental research. In choosing investments, we consider economic trends as emphasized by our global investment themes, security valuation, and company fundamentals. Within markets and sectors, we seek attractively priced companies possessing sustainable competitive advantages, and we may invest in such companies anywhere across their capital structure and where we find the best risk/reward tradeoff. Identifying the right security characteristics for the prevailing investment environment is key to our approach, which currently emphasizes income generation.

Financial Markets Advanced Despite Headwinds

Global equity investors grew increasingly averse to risks over the final months of 2015 amid sluggish growth in Europe, Japan, and China, and stocks and corporate bonds suffered particularly severe declines in January 2016 due to plunging commodity prices and worries about higher short-term U.S. interest rates. The markets reversed course in mid-February after reports of better-than-expected economic data and corporate earnings. The rally continued through the spring when U.S. monetary policymakers refrained from additional rate hikes, other major central banks eased their monetary policies further, commodity prices rebounded, and foreign currencies strengthened against the U.S. dollar. Although a referendum in the United Kingdom to leave the European Union introduced renewed market turmoil in late June, riskier assets bounced back quickly over the summer.

Among traditional safe havens, robust investor demand sent yields of high-quality sovereign bonds lower and gold prices higher. Indeed, international investors seeking higher levels of current income than were available in international markets drove yields of U.S. Treasury securities to historical lows in July.

3

 

DISCUSSION OF FUND PERFORMANCE (continued)

Bonds, Gold, and Currencies Supported Results

In the fund’s return-seeking core, equities weighed on relative results over the reporting period due to our emphasis on more defensive market sectors. The equity portfolio was also hurt by a strengthening U.S. dollar. In contrast, a modest exposure to corporate bonds, where the fund maintains a handful of opportunistic holdings, provided a positive contribution to relative performance.

In the offsetting layer, government bonds and gold contributed positively. Returns from cash and currency positions also proved constructive, as our currency hedges gained value when the U.S. dollar appreciated. On the other hand, direct equity index protection detracted from relative performance over the reporting period.

A More Cautious Investment Posture

In light of ongoing global economic headwinds and recently elevated political uncertainties, we believe that market volatility is likely to increase. Therefore, we have maintained the fund’s relatively cautious positioning, with an emphasis on capital preservation over the pursuit of short-term gains. We have attempted to reduce risks in the fund’s return-seeking core through additional equity index protection and by eliminating exposure to convertible bonds. We also increased indirect protection by reallocating assets from cash to U.S. Treasury bonds, and we raised the fund’s exposure to gold. In our view, these strategies position the fund to provide a positive absolute return with an acceptable level of volatility.

November 15, 2016

Equities are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.

Bonds are subject generally to interest-rate, credit, liquidity, and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.

The fund’s performance will be influenced by political, social, and economic factors affecting investments in foreign companies. Special risks associated with such companies include exposure to currency fluctuations, less liquidity, less developed or less efficient trading markets, lack of comprehensive company information, political instability, and differing auditing and legal standards.

Because the fund seeks to provide exposure to alternative or non-traditional (i.e., satellite) asset categories or investment strategies, the fund’s performance will be linked to the performance of these highly volatile asset categories and strategies. Accordingly, investors should consider purchasing shares of the fund only as part of an overall diversified portfolio and should be willing to assume the risks of potentially significant fluctuations in the value of fund shares.

The fund may, but is not required to, use derivative instruments, such as options, futures, options on futures, forward contracts, and other credit derivatives. A small investment in derivatives could have a potentially large impact on the fund’s performance. The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets.

1 Total return includes reinvestment of dividends and any capital gains paid, and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. Return figures provided reflect the absorption of certain fund expenses by The Dreyfus Corporation pursuant to an agreement in effect through March 1, 2017, at which time it may be extended, modified, or terminated. Had these expenses not been absorbed, the fund’s returns would have been lower. Past performance is no guarantee of future results.

2 Source: Bloomberg — The London Interbank Offered Rate (LIBOR). The rate of interest at which banks borrow funds, in marketable size, from other banks in the London interbank market. LIBOR is the most widely used benchmark or reference rate for short-term interest rates, and is an international rate. The London Interbank Offered Rate is fixed each morning at 11 a.m. London time by the British Bankers’ Association (BBA). The rate is an average derived from 16 quotations provided by banks determined by the BBA; the four highest and lowest are then eliminated, and an average of the remaining eight is calculated to arrive at the fix. Eurodollar Libor is calculated on an ACT/360-day count basis, and settlement is for two days hence.

3 Source: Lipper, Inc. — Reflects reinvestment of dividends and, where applicable, capital gain distributions. The Citi 1-Month Treasury Bill Index is a market value-weighted index of public obligations of the U.S. Treasury with maturities of 30 days. Investors cannot invest directly in any index.

4

 

FUND PERFORMANCE

Comparison of change in value of $10,000 investment in Dreyfus Global Real Return Fund Class A shares, Class C shares, Class I shares, and Class Y shares with the U.S. $1-Month London Interbank Offered Rate (LIBOR) Index and the Citi 1-Month Treasury Bill Index

 Source: Bloomberg L.P.

†† Source: Lipper Inc.

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

Past performance is not predictive of future performance.

The above graph compares a $10,000 investment made in each of the Class A, Class C, Class I and Class Y shares of Dreyfus Global Real Return Fund on 5/12/10 (inception date) to a $10,000 investment made in the Citi 1-Month Treasury Bill Index and the U.S.$ 1-Month London Interbank Offered Rate (LIBOR) 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 Citi 1-Month Treasury Bill Index is a market value-weighted index of public obligations of the U.S. Treasury with maturities of 30 days. LIBOR is the rate of interest at which banks borrow funds, in marketable size, from other banks in the London interbank market. LIBOR is the most widely used benchmark or reference rate for short term interest rates, and is an international rate. LIBOR is fixed each morning at 11 a.m. London time by the British Bankers’ Association (BBA). The rate is an average derived from 16 quotations provided by banks determined by the British Bankers’ Association; the four highest and lowest are then eliminated and an average of the remaining eight is calculated to arrive at the fix. Eurodollar LIBOR is calculated on an ACT/360 day count basis and settlement is for two days hence. Unlike a mutual fund, the indices are 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.

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 (continued)

         

Average Annual Total Returns as of 10/31/16

 

Inception
Date

1 Year

5 Years

From
Inception

Class A shares

       

with maximum sales charge (5.75%)

5/12/10

-1.15%

2.83%

3.41%

without sales charge

5/12/10

4.87%

4.05%

4.36%

Class C shares

       

with applicable redemption charge

5/12/10

3.12%

3.28%

3.60%

without redemption

5/12/10

4.12%

3.28%

3.60%

Class I shares

5/12/10

5.16%

4.34%

4.65%

Class Y shares

7/1/13

5.18%

4.32%††

4.57%††

U.S.$ 1-Month London Interbank
Offered Rate (LIBOR) Index

4/30/10

0.43%

0.25%

0.25%†††

Citi 1-Month Treasury Bill Index

4/30/10

0.18%

0.06%

0.07%†††

Past performance is not predictive of future performance. The fund’s performance shown in the graph 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.

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

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

††† For comparative purposes, the value of each Index as of 4/30/10 is used as the beginning value on 5/12/10.

6

 

UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)

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

Review your fund’s expenses

The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Global Real Return Fund from May 1, 2016 to October 31, 2016. 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 October 31, 2016

         
 

Class A

Class C

Class I

Class Y

Expenses paid per $1,000

$5.84

$9.63

$4.52

$4.11

Ending value (after expenses)

$1,018.70

$1,015.60

$1,020.00

$1,020.70

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 October 31, 2016

         
 

Class A

Class C

Class I

Class Y

Expenses paid per $1,000

$5.84

$9.63

$4.52

$4.12

Ending value (after expenses)

$1,019.36

$1,015.58

$1,020.66

$1,021.06

 Expenses are equal to the fund’s annualized expense ratio of 1.15% for Class A, 1.90% for Class C, .89% for Class I and .81% for Class Y, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

7

 

STATEMENT OF INVESTMENTS

October 31, 2016

                     
 

Bonds and Notes - 34.0%

         

Principal
Amount ($)

a

Value ($)

 

Australia - 5.5%

         

Australian Government, Sr. Unscd. Bonds, Ser. 144, 3.75%, 4/21/37

     

AUD

 

6,404,000

 

5,484,204

 

Australian Government, Sr. Unscd. Bonds, Ser. 147, 3.25%, 6/21/39

     

AUD

 

33,131,000

 

26,131,623

 

Australian Government, Sr. Unscd. Bonds, Ser. 150, 3.00%, 3/21/47

     

AUD

 

22,738,000

 

16,415,387

 

New South Wales Treasury, Govt. Gtd. Notes, Ser. CIB1, 2.75%, 11/20/25

     

AUD

 

6,226,300

b

6,955,673

 

Treasury Corp. of Victoria, Govt. Gtd. Notes, 5.50%, 11/17/26

     

AUD

 

24,250,000

 

23,335,123

 
 

78,322,010

 

France - .3%

         

SFR Group, Sr. Scd. Bonds, 5.63%, 5/15/24

     

EUR

 

3,218,000

 

3,715,828

 

Germany - .2%

         

SIG Combibloc Holdings, Sr. Scd. Notes, 7.75%, 2/15/23

     

EUR

 

2,584,000

 

3,008,568

 

New Zealand - 2.5%

         

New Zealand Government, Sr. Unscd. Bonds, Ser. 0427, 4.50%, 4/15/27

     

NZD

 

15,491,000

 

12,877,045

 

New Zealand Government, Sr. Unscd. Bonds, Ser. 0437, 2.75%, 4/15/37

     

NZD

 

11,722,000

 

7,706,464

 

New Zealand Government, Sr. Unscd. Bonds, Ser. 0521, 6.00%, 5/15/21

     

NZD

 

14,366,000

 

11,956,774

 

New Zealand Government, Sr. Unscd. Bonds, Ser. 0925, 2.00%, 9/20/25

     

NZD

 

4,185,000

c

3,220,308

 
 

35,760,591

 

United Kingdom - 1.4%

         

Anglian Water Services Financing, Sr. Scd. Notes, Ser. A8, 3.67%, 7/30/24

     

GBP

 

151,000

d

373,194

 

Arqiva Broadcast Finance, Sr. Scd. Notes, 9.50%, 3/31/20

     

GBP

 

3,545,000

 

4,698,159

 

British Telecommunications, Sr. Unscd. Notes, 3.50%, 4/25/25

     

GBP

 

287,000

d

748,112

 

Centrica, Jr. Sub. Bonds, 5.25%, 4/10/75

     

GBP

 

982,000

e

1,244,302

 

Centrica, Jr. Sub. Bonds, 3.00%, 4/10/76

     

EUR

 

1,353,000

e

1,459,271

 

CPUK Finance, Scd. Notes, 7.00%, 2/28/42

     

GBP

 

212,000

 

275,498

 

Dwr Cymru Financing, Asset Backed Notes, 1.86%, 3/31/48

     

GBP

 

150,000

d

389,686

 

High Speed Rail Finance 1, Sr. Scd. Notes, 1.57%, 11/1/38

     

GBP

 

268,000

d

516,926

 

National Grid Electricity Transmission, Insured Bonds, 2.98%, 7/8/18

     

GBP

 

667,000

d

1,318,349

 

Network Rail Infrastructure Finance, Govt. Gtd. Notes, Ser. RPI, 1.75%, 11/22/27

     

GBP

 

865,000

d

1,924,622

 

Scotland Gas Networks, Insured Notes, Ser. A2S, 2.13%, 10/21/22

     

GBP

 

300,000

d

603,367

 

TESCO, Sr. Unscd. Notes, 6.13%, 2/24/22

     

GBP

 

672,000

 

929,913

 

TESCO, Sr. Unscd. Notes, 3.32%, 11/5/25

     

GBP

 

245,000

d

527,628

 

Tesco Property Finance 3, Mortgage Backed Bonds, 5.74%, 4/13/40

     

GBP

 

3,393,788

 

4,124,657

 
 

19,133,684

 

8

 

                     
 

Bonds and Notes - 34.0% (continued)

         

Principal
Amount ($)

a

Value ($)

 

United States - 24.1%

         

Sprint, Gtd. Notes, 7.88%, 9/15/23

         

5,758,000

 

5,700,420

 

Sprint, Gtd. Notes, 7.13%, 6/15/24

         

3,548,000

 

3,388,340

 

Sprint Capital, Gtd. Notes, 8.75%, 3/15/32

         

6,347,000

 

6,519,562

 

Sprint Communications, Sr. Unscd. Debs., 9.25%, 4/15/22

         

404,000

 

450,460

 

Sprint Communications, Sr. Unscd. Notes, 6.00%, 12/1/16

         

4,066,000

 

4,076,165

 

Sprint Spectrum, Sr. Scd. Notes, 3.36%, 3/20/23

         

472,000

f

475,540

 

U.S. Treasury Bonds, 3.00%, 5/15/45

         

64,040,000

 

69,626,017

 

U.S. Treasury Bonds, 3.00%, 11/15/45

         

45,929,400

 

49,937,475

 

U.S. Treasury Notes, 1.00%, 12/31/17

         

17,219,100

 

17,272,910

 

U.S. Treasury Notes, 1.50%, 8/31/18

         

50,549,700

 

51,146,035

 

U.S. Treasury Notes, 0.88%, 4/15/19

         

16,784,000

 

16,759,411

 

U.S. Treasury Notes, 1.75%, 12/31/20

         

66,993,300

 

68,385,488

 

U.S. Treasury Notes, 2.00%, 2/15/25

         

41,398,400

 

42,219,082

 

Western Digital, Gtd. Notes, 10.50%, 4/1/24

         

3,339,000

f

3,869,066

 
 

339,825,971

 

Total Bonds and Notes
(cost $478,584,692)

 

479,766,652

 

Common Stocks - 53.5%

         

Shares

 

Value ($)

 

Australia - 1.6%

         

Dexus Property Group

         

1,456,156

 

9,902,809

 

Newcrest Mining

         

729,322

 

12,516,168

 
 

22,418,977

 

Canada - 5.1%

         

Agnico Eagle Mines

         

79,174

 

4,020,974

 

Alacer Gold

         

1,444,980

g

2,919,478

 

Alamos Gold

         

425,250

 

3,335,294

 

Barrick Gold

         

642,479

 

11,301,206

 

Centerra Gold

         

606,097

 

3,063,698

 

Detour Gold

         

244,297

g

4,657,179

 

Eldorado Gold

         

1,085,218

g

3,422,405

 

IAMGOLD

         

1,556,672

g

6,232,259

 

Kinross Gold

         

1,075,501

g

4,177,559

 

New Gold

         

1,485,682

g

5,859,433

 

OceanaGold

         

1,190,142

 

3,637,950

 

Primero Mining

         

1,340,835

g

1,809,373

 

Silver Wheaton

         

738,466

 

17,794,096

 
 

72,230,904

 

Denmark - .1%

         

DONG Energy

         

41,087

f

1,629,339

 

France - 1.8%

         

Vivendi

         

1,272,344

 

25,727,621

 

Germany - 3.1%

         

Bayer

         

135,025

 

13,383,179

 

Brenntag

         

73,302

 

3,918,372

 

Infineon Technologies

         

317,294

 

5,696,628

 

LEG Immobilien

         

36,093

g

3,044,499

 

SAP

         

75,233

 

6,626,814

 

Telefonica Deutschland Holding

         

2,807,407

 

10,881,996

 
 

43,551,488

 

9

 

STATEMENT OF INVESTMENTS (continued)

                     
 

Common Stocks - 53.5% (continued)

         

Shares

 

Value ($)

 

Ireland - .6%

         

CRH

         

273,105

 

8,838,414

 

Israel - 1.2%

         

Teva Pharmaceutical Industries, ADR

         

405,529

 

17,332,309

 

Japan - 3.2%

         

Japan Tobacco

         

779,100

 

29,672,217

 

Skylark

         

520,600

 

7,332,185

 

Suntory Beverage & Food

         

83,800

 

3,671,794

 

Topcon

         

271,700

 

4,070,189

 
 

44,746,385

 

Mexico - .3%

         

Fresnillo

         

210,020

 

4,215,875

 

Netherlands - 3.4%

         

RELX

         

1,029,898

 

17,382,603

 

Wolters Kluwer

         

781,983

 

30,263,802

 
 

47,646,405

 

New Zealand - .5%

         

Spark New Zealand

         

2,990,959

 

7,828,112

 

South Africa - .3%

         

Gold Fields

         

896,998

 

3,646,201

 

South Korea - .5%

         

Samsung SDI

         

78,960

 

6,507,256

 

Switzerland - 3.8%

         

Adecco Group

         

41,270

 

2,454,388

 

Novartis

         

422,101

 

30,029,721

 

Roche Holding

         

90,503

 

20,806,864

 
 

53,290,973

 

United Kingdom - 10.0%

         

BAE Systems

         

941,594

 

6,252,399

 

British American Tobacco

         

112,583

 

6,464,989

 

Centrica

         

7,831,864

 

20,533,731

 

Cobham

         

4,693,300

 

8,209,067

 

Diageo

         

261,563

 

6,977,767

 

Dixons Carphone

         

1,519,949

 

5,854,759

 

GlaxoSmithKline

         

1,001,276

 

19,835,802

 

National Grid

         

1,476,886

 

19,252,177

 

Randgold Resources

         

37,803

 

3,350,025

 

United Utilities Group

         

1,683,459

 

19,369,288

 

Vodafone Group

         

5,109,528

 

14,059,192

 

Wolseley

         

216,637

 

11,272,156

 
 

141,431,352

 

United States - 18.0%

         

Abbott Laboratories

         

370,573

 

14,541,285

 

Accenture, Cl. A

         

217,283

 

25,256,976

 

CA

         

480,892

 

14,782,620

 

CMS Energy

         

798,842

 

33,671,190

 

Cognizant Technology Solutions, Cl. A

         

83,747

g

4,300,408

 

Dollar General

         

86,227

 

5,957,424

 

Dun & Bradstreet

         

40,909

 

5,107,489

 

Eversource Energy

         

676,843

 

37,266,976

 

Maxim Integrated Products

         

84,756

 

3,358,880

 

Merck & Co.

         

148,806

 

8,737,888

 

Microsoft

         

576,286

 

34,531,057

 

10

 

                     
 

Common Stocks - 53.5% (continued)

         

Shares

 

Value ($)

 

United States - 18.0% (continued)

         

PowerShares DB Gold Fund

         

543,408

g,h

22,442,750

 

Procter & Gamble

         

124,028

 

10,765,630

 

Reynolds American

         

291,358

 

16,047,999

 

Sysco

         

145,661

 

7,009,207

 

Trimble Navigation

         

106,791

g

2,951,703

 

Walgreens Boots Alliance

         

85,827

 

7,100,468

 
 

253,829,950

 

Total Common Stocks
(cost $742,564,563)

 

754,871,561

 

Short-Term Investments - 4.4%

         

Principal

Amount ($)

 

Value ($)

 

U.S. Government Securities

         

U.S. Treasury Bills, 0.33%, 12/8/16
(cost $62,615,618)

         

62,636,600

 

62,626,077

 

Other Investment - 5.5%

         

Shares

 

Value ($)

 

Registered Investment Company;

         

Dreyfus Institutional Preferred Government Plus Money Market Fund
(cost $77,404,811)

         

77,404,811

i

77,404,811

 

Total Investments (cost $1,361,169,684)

 

97.4%

1,374,669,101

 

Cash and Receivables (Net)

 

2.6%

36,254,584

 

Net Assets

 

100.0%

1,410,923,685

 

ADR—American Depository Receipt

a Principal amount stated in U.S. Dollars unless otherwise noted.

AUD—Australian Dollar

EUR—Euro

GBP—British Pound

NZD—New Zealand Dollar

 

b Interest accruals are adjusted based on changes in the Australian Consumer Price Index.

c Interest accruals are adjusted based on changes in the New Zealand Consumer Price Index.

d Interest accruals are adjusted based on changes in the British Consumer Price Index.

e Variable rate security—rate shown is the interest rate in effect at period end.

f Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At October 31, 2016, these securities were valued at $5,973,945 or .42% of net assets.

g Non-income producing security.

h Investment in non-controlled affiliate (cost $23,555,235).

i Investment in affiliated money market mutual fund.

11

 

STATEMENT OF INVESTMENTS (continued)

   

Portfolio Summary (Unaudited)

Value (%)

U.S. Government Securities

22.3

Short-Term/Money Market Investments

9.9

Utilities

9.4

Health Care

8.2

Foreign/Governmental

8.1

Basic Materials

8.0

Consumer Services

7.9

Consumer Goods

5.2

Industrials

5.1

Technology

4.9

Corporate Bonds

3.6

Telecommunication

2.3

Exchange-Traded Funds

1.6

Financials

.9

 

97.4

 Based on net assets.

See notes to financial statements.

12

 

STATEMENT OF FINANCIAL FUTURES

October 31, 2016

           
 

Contracts

Market Value Covered by Contracts ($)

Expiration

Unrealized Appreciation (Depreciation) ($)

 
           

Financial Futures Short

         

FTSE 100

393

(33,330,848)

December 2016

(593,176)

 

Standard & Poor's 500

677

(358,826,925)

December 2016

8,203,034

 

Gross Unrealized Appreciation

     

8,203,034

 

Gross Unrealized Depreciation

     

(593,176)

 

See notes to financial statements.

13

 

STATEMENT OF ASSETS AND LIABILITIES

October 31, 2016

             

 

 

 

 

 

 

 

 

 

 

Cost

 

Value

 

Assets ($):

 

 

 

 

Investments in securities—See Statement of Investments:

 

 

 

 

Unaffiliated issuers

 

1,260,209,638

 

1,274,821,540

 

Affiliated issuers

 

100,960,046

 

99,847,561

 

Cash

 

 

 

 

2,114,307

 

Cash denominated in foreign currency

 

 

337,463

 

338,354

 

Cash collateral held by broker—Note 4

 

 

 

 

17,155,000

 

Unrealized appreciation on forward foreign
currency exchange contracts—Note 4

 

 

 

 

14,547,920

 

Dividends and interest receivable

 

 

 

 

5,929,932

 

Receivable for shares of Common Stock subscribed

 

 

 

 

4,906,236

 

Receivable for investment securities sold

 

 

 

 

1,090,858

 

Receivable for futures variation margin—Note 4

 

 

 

 

758,509

 

Prepaid expenses

 

 

 

 

61,170

 

 

 

 

 

 

1,421,571,387

 

Liabilities ($):

 

 

 

 

Due to The Dreyfus Corporation and affiliates—Note 3(c)

 

 

 

 

1,034,390

 

Payable for investment securities purchased

 

 

 

 

5,738,340

 

Unrealized depreciation on forward foreign
currency exchange contracts—Note 4

 

 

 

 

2,977,580

 

Payable for shares of Common Stock redeemed

 

 

 

 

676,325

 

Accrued expenses

 

 

 

 

221,067

 

 

 

 

 

 

10,647,702

 

Net Assets ($)

 

 

1,410,923,685

 

Composition of Net Assets ($):

 

 

 

 

Paid-in capital

 

 

 

 

1,409,316,889

 

Accumulated undistributed investment income—net

 

 

 

 

24,651,403

 

Accumulated net realized gain (loss) on investments

 

 

 

 

(55,698,491)

 

Accumulated net unrealized appreciation (depreciation)
on investments and foreign currency transactions
(including $7,609,858 net unrealized appreciation
on financial futures)

 

 

 

32,653,884

 

Net Assets ($)

 

 

1,410,923,685

 

 

           

Net Asset Value Per Share

Class A

Class C

Class I

Class Y

 

Net Assets ($)

157,624,145

35,860,863

509,711,864

707,726,813

 

Shares Outstanding

10,706,050

2,501,381

34,476,317

47,837,264

 

Net Asset Value Per Share ($)

14.72

14.34

14.78

14.79

 

           

See notes to financial statements.

         

14

 

STATEMENT OF OPERATIONS

Year Ended October 31, 2016

             

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Income ($):

 

 

 

 

Income:

 

 

 

 

Dividends (net of $663,715 foreign taxes withheld at source):

 

 

 

 

Unaffiliated issuers

 

 

12,274,821

 

Affiliated issuers

 

 

141,199

 

Interest

 

 

7,247,524

 

Total Income

 

 

19,663,544

 

Expenses:

 

 

 

 

Management fee—Note 3(a)

 

 

6,391,147

 

Shareholder servicing costs—Note 3(c)

 

 

526,328

 

Registration fees

 

 

183,753

 

Distribution fees—Note 3(b)

 

 

177,921

 

Custodian fees—Note 3(c)

 

 

133,404

 

Professional fees

 

 

83,372

 

Directors’ fees and expenses—Note 3(d)

 

 

64,906

 

Prospectus and shareholders’ reports

 

 

36,386

 

Loan commitment fees—Note 2

 

 

14,958

 

Interest expense—Note 2

 

 

1,107

 

Miscellaneous

 

 

47,289

 

Total Expenses

 

 

7,660,571

 

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

 

 

(9,641)

 

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

 

 

(182)

 

Net Expenses

 

 

7,650,748

 

Investment Income—Net

 

 

12,012,796

 

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

 

 

Net realized gain (loss) on investments and foreign currency transactions

(8,047,061)

 

Net realized gain (loss) on options transactions

(1,087,566)

 

Net realized gain (loss) on financial futures

(25,122,089)

 

Net realized gain (loss) on forward foreign currency exchange contracts

13,320,467

 

Capital gain distributions on unaffiliated issuers

148,033

 

Net Realized Gain (Loss)

 

 

(20,788,216)

 

Net unrealized appreciation (depreciation) on investments
and foreign currency transactions:

 

 

 

 

Unaffiliated issuers

 

 

 

7,721,244

 

Affiliated issuers

 

 

 

1,256,788

 

Net unrealized appreciation (depreciation) on options transactions

 

 

122,393

 

Net unrealized appreciation (depreciation) on financial futures

 

 

13,406,904

 

Net unrealized appreciation (depreciation) on
forward foreign currency exchange contracts

 

 

12,875,018

 

Net Unrealized Appreciation (Depreciation)

 

 

35,382,347

 

Net Realized and Unrealized Gain (Loss) on Investments

 

 

14,594,131

 

Net Increase in Net Assets Resulting from Operations

 

26,606,927

 

             

See notes to financial statements.

         

15

 

STATEMENT OF CHANGES IN NET ASSETS

                   

 

 

 

 

Year Ended October 31,

 

 

 

 

2016

 

 

 

2015

 

Operations ($):

 

 

 

 

 

 

 

 

Investment income—net

 

 

12,012,796

 

 

 

6,715,992

 

Net realized gain (loss) on investments

 

(20,788,216)

 

 

 

7,957,599

 

Net unrealized appreciation (depreciation)
on investments

 

35,382,347

 

 

 

(10,791,176)

 

Net Increase (Decrease) in Net Assets
Resulting from Operations

26,606,927

 

 

 

3,882,415

 

Dividends to Shareholders from ($):

 

 

 

 

 

 

 

 

Investment income—net:

 

 

 

 

 

 

 

 

Class A

 

 

(1,985,751)

 

 

 

(2,671,161)

 

Class C

 

 

(565,274)

 

 

 

(519,065)

 

Class I

 

 

(4,536,404)

 

 

 

(3,560,081)

 

Class Y

 

 

(17,423,097)

 

 

 

(12,071,963)

 

Total Dividends

 

 

(24,510,526)

 

 

 

(18,822,270)

 

Capital Stock Transactions ($):

 

 

 

 

 

 

 

 

Net proceeds from shares sold:

 

 

 

 

 

 

 

 

Class A

 

 

135,924,150

 

 

 

22,416,838

 

Class C

 

 

22,230,757

 

 

 

6,252,076

 

Class I

 

 

468,457,613

 

 

 

52,781,238

 

Class Y

 

 

393,078,796

 

 

 

210,309,244

 

Dividends reinvested:

 

 

 

 

 

 

 

 

Class A

 

 

1,985,751

 

 

 

2,671,161

 

Class C

 

 

565,274

 

 

 

519,065

 

Class I

 

 

4,412,721

 

 

 

3,424,219

 

Class Y

 

 

10,077,228

 

 

 

8,084,258

 

Cost of shares redeemed:

 

 

 

 

 

 

 

 

Class A

 

 

(30,295,189)

 

 

 

(29,553,397)

 

Class C

 

 

(3,502,241)

 

 

 

(1,749,030)

 

Class I

 

 

(67,046,742)

 

 

 

(24,372,003)

 

Class Y

 

 

(104,900,705)

 

 

 

(44,162,813)

 

Increase (Decrease) in Net Assets
from Capital Stock Transactions

830,987,413

 

 

 

206,620,856

 

Total Increase (Decrease) in Net Assets

833,083,814

 

 

 

191,681,001

 

Net Assets ($):

 

 

 

 

 

 

 

 

Beginning of Period

 

 

577,839,871

 

 

 

386,158,870

 

End of Period

 

 

1,410,923,685

 

 

 

577,839,871

 

Undistributed investment income—net

24,651,403

 

 

 

24,541,256

 

16

 

                   

 

 

 

 

Year Ended October 31,

 

 

 

 

2016

 

 

 

2015

 

Capital Share Transactions (Shares):

 

 

 

 

 

 

 

 

Class Aa

 

 

 

 

 

 

 

 

Shares sold

 

 

9,236,847

 

 

 

1,516,866

 

Shares issued for dividends reinvested

 

 

142,245

 

 

 

183,207

 

Shares redeemed

 

 

(2,072,271)

 

 

 

(2,039,778)

 

Net Increase (Decrease) in Shares Outstanding

7,306,821

 

 

 

(339,705)

 

Class C

 

 

 

 

 

 

 

 

Shares sold

 

 

1,550,131

 

 

 

430,720

 

Shares issued for dividends reinvested

 

 

41,321

 

 

 

36,247

 

Shares redeemed

 

 

(244,973)

 

 

 

(121,038)

 

Net Increase (Decrease) in Shares Outstanding

1,346,479

 

 

 

345,929

 

Class Ia

 

 

 

 

 

 

 

 

Shares sold

 

 

31,624,601

 

 

 

3,595,479

 

Shares issued for dividends reinvested

 

 

315,645

 

 

 

234,215

 

Shares redeemed

 

 

(4,550,565)

 

 

 

(1,646,567)

 

Net Increase (Decrease) in Shares Outstanding

27,389,681

 

 

 

2,183,127

 

Class Ya

 

 

 

 

 

 

 

 

Shares sold

 

 

26,614,889

 

 

 

14,191,557

 

Shares issued for dividends reinvested

 

 

720,317

 

 

 

552,959

 

Shares redeemed

 

 

(7,250,679)

 

 

 

(3,013,167)

 

Net Increase (Decrease) in Shares Outstanding

20,084,527

 

 

 

11,731,349

 

                   

aDuring the period ending October 31, 2016, 498 Class A shares representing $7,336 were exchanged for 496 Class I shares and 167,112 Class Y shares representing $2,457,452 were exchanged for 167,167 Class I shares.

 

See notes to financial statements.

               

17

 

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.

             
     
   

Year Ended October 31,

Class A Shares

 

2016

2015

2014

2013

2012

Per Share Data ($):

           

Net asset value, beginning of period

 

14.61

15.11

14.75

14.07

13.51

Investment Operations:

           

Investment income—neta

 

.17

.17

.36

.21

.17

Net realized and unrealized
gain (loss) on investments

 

.51

.01b

.17

.54

.53

Total from Investment Operations

 

.68

.18

.53

.75

.70

Distributions:

           

Dividends from
investment income—net

 

(.57)

(.68)

(.04)

(.07)

(.07)

Dividends from net realized
gain on investments

 

-

-

(.13)

-

(.07)

Total Distributions

 

(.57)

(.68)

(.17)

(.07)

(.14)

Net asset value, end of period

 

14.72

14.61

15.11

14.75

14.07

Total Return (%)c

 

4.87

1.22

3.63

5.42

5.16

Ratios/Supplemental Data (%):

           

Ratio of total expenses
to average net assets

 

1.16

1.15

1.20

1.49

1.72

Ratio of net expenses to
average net assets

 

1.15

1.15

1.15

1.47

1.50

Ratio of net investment income
to average net assets

 

1.15

1.16

2.38

1.48

1.26

Portfolio Turnover Rate

 

57.17

68.92

47.01

44.96

53.24

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

 

157,624

49,672

56,501

35,478

17,088

a Based on average shares outstanding.

b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.

c Exclusive of sales charge.

See notes to financial statements.

18

 

             
     
   

Year Ended October 31,

Class C Shares

 

2016

2015

2014

2013

2012

Per Share Data ($):

           

Net asset value, beginning of period

 

14.26

14.79

14.51

13.89

13.37

Investment Operations:

           

Investment income—neta

 

.06

.06

.21

.08

.06

Net realized and unrealized
gain (loss) on investments

 

.50

.02b

.20

.55

.53

Total from Investment Operations

 

.56

.08

.41

.63

.59

Distributions:

           

Dividends from
investment income—net

 

(.48)

(.61)

-

(.01)

-

Dividends from net realized
gain on investments

 

-

-

(.13)

-

(.07)

Total Distributions

 

(.48)

(.61)

(.13)

(.01)

(.07)

Net asset value, end of period

 

14.34

14.26

14.79

14.51

13.89

Total Return (%)c

 

4.12

.49

2.87

4.58

4.39

Ratios/Supplemental Data (%):

           

Ratio of total expenses
to average net assets

 

1.90

1.91

1.96

2.21

2.56

Ratio of net expenses
to average net assets

 

1.90

1.90

1.90

2.18

2.25

Ratio of net investment income
to average net assets

 

.44

.39

1.41

.58

.51

Portfolio Turnover Rate

 

57.17

68.92

47.01

44.96

53.24

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

 

35,861

16,470

11,969

5,671

944

a Based on average shares outstanding.

b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.

c Exclusive of sales charge.

See notes to financial statements.

19

 

FINANCIAL HIGHLIGHTS (continued)

             
     
   

Year Ended October 31,

Class I Shares

 

2016

2015

2014

2013

2012

Per Share Data ($):

           

Net asset value, beginning of period

 

14.68

15.18

14.81

14.10

13.56

Investment Operations:

           

Investment income—neta

 

.20

.21

.38

.26

.21

Net realized and unrealized
gain (loss) on investments

 

.52

.01b

.19

.54

.53

Total from Investment Operations

 

.72

.22

.57

.80

.74

Distributions:

           

Dividends from
investment income—net

 

(.62)

(.72)

(.07)

(.09)

(.13)

Dividends from net realized
gain on investments

 

-

-

(.13)

-

(.07)

Total Distributions

 

(.62)

(.72)

(.20)

(.09)

(.20)

Net asset value, end of period

 

14.78

14.68

15.18

14.81

14.10

Total Return (%)

 

5.16

1.49

3.89

5.79

5.45

Ratios/Supplemental Data (%):

           

Ratio of total expenses
to average net assets

 

.88

.86

.90

1.11

1.35

Ratio of net expenses
to average net assets

 

.88

.86

.90

1.11

1.25

Ratio of net investment income
to average net assets

 

1.36

1.40

2.51

1.84

1.55

Portfolio Turnover Rate

 

57.17

68.92

47.01

44.96

53.24

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

 

509,712

104,057

74,438

60,482

52,410

a Based on average shares outstanding.

b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.

See notes to financial statements.

20

 

           
     
   

Year Ended October 31,

Class Y Shares

 

2016

2015

2014

2013a

Per Share Data ($):

         

Net asset value, beginning of period

 

14.69

15.18

14.81

14.16

Investment Operations:

         

Investment income—netb

 

.22

.22

.26

.05

Net realized and unrealized
gain (loss) on investments

 

.51

.02c

.31

.60

Total from Investment Operations

 

.73

.24

.57

.65

Distributions:

         

Dividends from
investment income—net

 

(.63)

(.73)

(.07)

-

Dividends from net realized
gain on investments

 

-

-

(.13)

-

Total Distributions

 

(.63)

(.73)

(.20)

-

Net asset value, end of period

 

14.79

14.69

15.18

14.81

Total Return (%)

 

5.18

1.57

3.89

4.59d

Ratios/Supplemental Data (%):

         

Ratio of total expenses
to average net assets

 

.81

.83

.88

1.09e

Ratio of net expenses
to average net assets

 

.81

.83

.88

1.09e

Ratio of net investment income
to average net assets

 

1.53

1.45

1.77

1.10e

Portfolio Turnover Rate

 

57.17

68.92

47.01

44.96

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

 

707,727

407,642

243,251

41,381

a From July 1, 2013 (commencement of initial offering) to October 31, 2013.

b Based on average shares outstanding.

c In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.

d Not annualized.

e Annualized.

See notes to financial statements.

21

 

NOTES TO FINANCIAL STATEMENTS

NOTE 1—Significant Accounting Policies:

Dreyfus Global Real Return Fund (the “fund”) is a separate diversified series of Advantage Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering ten series, including the fund. The fund’s investment objective is to seek total return (consisting of capital appreciation and income). 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. Newton Investment Management (North America) Limited (“Newton”), formerly, Newton Capital Management Limited, a wholly-owned subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser.

MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 100 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class C, Class I and Class Y. 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 Class Y shares are sold at net asset value per share generally to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.

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

The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with

22

 

GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.

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

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

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

Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:

Level 1—unadjusted quoted prices in active markets for identical investments.

Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).

Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:

Investments in debt securities, excluding short-term investments (other than U.S. Treasury Bills), financial futures, options and forward foreign currency exchange contracts (“forward contracts”), are valued each business day by an independent pricing service (the “Service”) approved by

23

 

NOTES TO FINANCIAL STATEMENTS (continued)

the Company’s Board of Directors (the “Board”). Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments are valued as determined by the Service, based on methods which include consideration of the following: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. These securities are generally categorized within Level 2 of the fair value hierarchy.

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

Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. U.S. Treasury Bills are valued at the mean price between quoted bid prices and asked prices by an independent pricing service (the“Service”) approved by the Board. These securities are generally categorized within Level 2 of the fair value hierarchy.

The Service is engaged under the general supervision of the Board.

Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and 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 Board.

24

 

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 generally categorized within Level 3 of the fair value hierarchy.

Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.

Financial futures and options, which are traded on an exchange, are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day and are generally categorized within Level 1 of the fair value hierarchy. Options traded over-the-counter (“OTC”) are valued at the mean between the bid and asked price and are generally categorized within Level 2 of the fair value hierarchy. Forward contracts are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.

The following is a summary of the inputs used as of October 31, 2016 in valuing the fund’s investments:

         
 

Level 1 - Unadjusted Quoted Prices

Level 2 - Other Significant Observable Inputs

Level 3 -Significant Unobservable Inputs

Total

Assets ($)

     

Investments in Securities:

     

Corporate Bonds

-

50,337,633

-

50,337,633

Equity Securities –Domestic
Common Stocks

231,387,200

-

-

231,387,200

Equity Securities –Foreign
Common Stocks

501,041,611

-

-

501,041,611

Exchange –Traded Funds

22,442,750

-

-

22,442,750

Foreign Government

-

114,082,601

-

114,082,601

Mutual Funds

77,404,811

-

-

77,404,811

U.S. Treasury

-

377,972,495

-

377,972,495

Other Financial Instruments:

     

Financial Futures††

8,203,034

-

-

8,203,034

Forward Foreign Currency
Exchange Contracts††

-

14,547,920

-

14,547,920

25

 

NOTES TO FINANCIAL STATEMENTS (continued)

         
 

Level 1 - Unadjusted Quoted Prices

Level 2 - Other Significant Observable Inputs

Level 3 -Significant Unobservable Inputs

Total

Liabilities ($)

       

Other Financial Instruments:

     

Financial Futures††

(593,176)

-

-

(593,176)

Forward Foreign Currency
Exchange Contracts††

-

(2,977,580)

-

(2,977,580)

 See Statement of Investments for additional detailed categorizations.

†† Amount shown represents unrealized appreciation (depreciation) at period end.

At October 31, 2016, there were no transfers between levels of the fair value hierarchy.

(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.

(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest 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 October 31, 2016 were as follows:

26

 

           

Affiliated Investment Company

Value
10/31/2015 ($)

Purchases ($)

Sales ($)

Value
10/31/2016 ($)

Net
Assets (%)

Dreyfus Institutional Preferred Government Plus Money Market Fund

15,598,919

724,894,435

663,088,543

77,404,811

5.5

 Formerly Dreyfus Institutional Preferred Plus Money Market Fund. 

In addition, an affiliated company is a company in which the fund has ownership of at least 5% of the voting securities. Investments in affiliated companies during the period ended October 31, 2016 were as follows:

         

Affiliated
Company

Value
10/31/2015 ($)

Purchases ($)

Sales ($)

Net Realized
Gain (Loss) ($)

PowerShares DB
Gold Fund

13,555,443

7,630,519

-

-

         

Affiliated
Company

Change in Net Unrealized Appreciation
(Depreciation) ($)

Value
10/31/2016 ($)

Net
Assets (%)

Dividends/
Distributions ($)

PowerShares DB
Gold Fund

1,256,788

22,442,750

1.6

-

(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 delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S.

(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

27

 

NOTES TO FINANCIAL STATEMENTS (continued)

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 October 31, 2016, 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 October 31, 2016, the fund did not incur any interest or penalties.

Each tax year in the four-year period ended October 31, 2016 remains subject to examination by the Internal Revenue Service and state taxing authorities.

At October 31, 2016, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $38,217,454, accumulated capital and other losses $43,167,163 and unrealized appreciation $6,556,505.

Under the Regulated Investment Company Modernization Act of 2010, the fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.

The accumulated capital loss carryover is available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to October 31, 2016. If not applied, the fund has $13,001,271 of short-term capital losses and $29,376,366 of long-term capital losses which can be carried forward for an unlimited period.

The tax character of distributions paid to shareholders during the fiscal periods ended October 31, 2016 and October 31, 2015 were as follows: ordinary income $24,510,526 and $18,822,270, respectively.

During the period ended October 31, 2016, as a result of permanent book to tax differences, primarily due to the tax treatment for foreign currency gains and losses, limited partnerships and passive foreign investment companies, the fund increased accumulated undistributed investment income-net by $12,607,877 and decreased accumulated net realized gain (loss) on investments 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 Dreyfus-managed funds in a $810 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”),

28

 

each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. Prior to October 5, 2016, the unsecured credit facility with Citibank, N.A. was $555 million and prior to January 11, 2016, the unsecured credit facility with Citibank, N.A. was $480 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 October 31, 2016, was approximately $80,900 with a related weighted average annualized interest rate of 1.37%.

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

(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of .75% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus has contractually agreed, from November 1, 2015 through March 1, 2017, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .90% of the value of the fund’s average daily net assets. The reduction in expenses, pursuant to the undertaking, amounted to $9,641 during the period ended October 31, 2016.

Pursuant to a sub-investment advisory agreement between Dreyfus and Newton, Dreyfus pays Newton an annual fee of .36% of the value of the fund’s average daily net assets.

During the period ended October 31, 2016, the Distributor retained $76,186 from commissions earned on sales of the fund’s Class A shares and $1,854 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 October 31, 2016, Class C shares were charged $177,921 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

29

 

NOTES TO FINANCIAL STATEMENTS (continued)

answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended October 31, 2016, Class A and Class C shares were charged $223,360 and $59,307, 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 Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, 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 October 31, 2016, the fund was charged $7,214 for transfer agency services and $418 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 $182.

The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended October 31, 2016, the fund was charged $133,404 pursuant to the custody agreement.

During the period ended October 31, 2016, the fund was charged $9,804 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 $868,454, Distribution Plan fees $22,127, Shareholder Services Plan fees $39,781, custodian fees $92,708, Chief Compliance Officer fees $5,688 and transfer agency fees $7,293, which are offset against an expense reimbursement currently in effect in the amount of $1,661.

(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.

30

 

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, financial futures, options transactions and forward contracts, during the period ended October 31, 2016, amounted to $1,234,343,172 and $426,608,022, respectively.

Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.

Each type of derivative instrument that was held by the fund during the period ended October 31, 2016 is discussed below.

Financial Futures: In the normal course of pursuing its investment objective, the fund is exposed to market risk, including equity risk and interest risk, as a result of changes in value of underlying financial instruments. The fund invests in financial futures in order to manage its exposure to or protect against changes in the market. A financial futures contract represents a commitment for the future purchase or a sale of an asset at a specified date. Upon entering into such contracts, these investments require initial margin deposits with a counterparty, which consist of cash or cash equivalents. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses which are recorded in the Statement of Operations. When the contracts are closed, the fund recognizes a realized gain or loss which is reflected in the Statement of Operations. There is minimal counterparty credit risk to the fund with financial futures since they are exchange traded, and the exchange guarantees the financial futures against default. Financial futures open at October 31, 2016 are set forth in the Statement of Financial Futures.

Options Transactions: The fund purchases and writes (sells) put and call options to hedge against changes in the values of equities, interest rates, foreign currencies or as a substitute for an investment. The fund is subject

31

 

NOTES TO FINANCIAL STATEMENTS (continued)

to market risk, interest rate risk and currency risk in the course of pursuing its investment objectives through its investments in options contracts. A call option gives the purchaser of the option the right (but not the obligation) to buy, and obligates the writer to sell, the underlying financial instrument at the exercise price at any time during the option period, or at a specified date. Conversely, a put option gives the purchaser of the option the right (but not the obligation) to sell, and obligates the writer to buy the underlying financial instrument at the exercise price at any time during the option period, or at a specified date.

As a writer of call options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument decreases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument increases between those dates.

As a writer of put options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument increases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument decreases between those dates.

As a writer of an option, the fund has no control over whether the underlying financial instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the financial instrument underlying the written option. There is a risk of loss from a change in value of such options which may exceed the related premiums received. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. The Statement of Operations reflects any unrealized gains or losses which occurred during the period as well as any realized gains or losses which occurred upon the expiration or closing of the option transaction.

The following summarizes the fund’s call/put options written during the period ended October 31, 2016:

32

 

         
     

Options Terminated

 

Number of

Premiums

 

Net Realized

Options Written:

Contracts

Received ($)

Cost ($)

Gain ($)

Contracts outstanding
October 31, 2015

-

-

   

Contracts written

1,099

630,563

   

Contracts terminated:

       

Contracts closed

1,099

630,563

242,876

387,687

Contracts outstanding
October 31, 2016

-

-

   

Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. The following summarizes open forward contracts at October 31, 2016:

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Purchases:

     

JP Morgan Chase Bank

     

Japanese Yen,

       

Expiring

       

12/15/2016

267,737,700

2,558,691

2,557,808

(883)

33

 

NOTES TO FINANCIAL STATEMENTS (continued)

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Purchases: (continued)

Royal Bank of Scotland

     

British Pound,

       

Expiring

       

11/1/2016

45,195

54,982

55,319

337

State Street Bank and Trust Co.

     

Japanese Yen,

       

Expiring

       

12/15/2016

39,596,497

389,089

378,282

(10,807)

UBS

     

Australian Dollar,

       

Expiring

       

12/15/2016

11,067,510

8,412,458

8,409,324

(3,134)

Japanese Yen,

       

Expiring

       

12/15/2016

115,446,549

1,139,798

1,102,908

(36,890)

Sales:

     

Barclays Bank

     

Canadian Dollar,

       

Expiring

       

11/16/2016

3,539,771

2,766,038

2,639,324

126,714

New Zealand Dollar,

       

Expiring

       

11/16/2016

2,336,192

1,690,869

1,669,505

21,364

JP Morgan Chase Bank

     

Australian Dollar,

       

Expiring

       

12/15/2016

13,081,129

9,982,909

9,939,314

43,595

British Pound,

       

Expiring

       

1/17/2017

2,319,295

2,831,616

2,844,281

(12,665)

Canadian Dollar,

       

Expiring

       

11/16/2016

16,050,180

12,137,623

11,967,336

170,287

Euro,

       

Expiring

       

1/17/2017

3,092,811

3,424,183

3,407,900

16,283

Japanese Yen,

       

Expiring

       

12/15/2016

359,154,595

3,521,715

3,431,152

90,563

New Zealand Dollar,

       

Expiring

       

11/16/2016

24,593,083

17,868,481

17,574,870

293,611

34

 

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Sales: (continued)

JP Morgan Chase Bank (continued)

South African Rand,

       

Expiring

       

1/17/2017

51,174,603

3,634,573

3,734,754

(100,181)

Royal Bank of Scotland

     

Australian Dollar,

       

Expiring

       

12/15/2016

181,792,074

136,053,188

138,129,399

(2,076,211)

British Pound,

       

Expiring

       

1/17/2017

184,222,674

234,174,919

225,922,573

8,252,346

Canadian Dollar,

       

Expiring

       

11/16/2016

79,557,592

60,486,685

59,319,736

1,166,949

Euro,

       

Expiring

       

1/17/2017

7,180,501

7,834,215

7,912,035

(77,820)

Japanese Yen,

       

Expiring

       

11/1/2016

8,942,411

85,467

85,271

196

11/4/2016

26,287,403

250,447

250,667

(220)

New Zealand Dollar,

       

Expiring

       

11/16/2016

946,229

679,853

676,200

3,653

South Korean Won,

       

Expiring

       

11/16/2016

5,006,678,057

4,499,416

4,375,263

124,153

State Street Bank and Trust Co.

     

Australian Dollar,

       

Expiring

       

12/15/2016

15,856,237

12,059,577

12,047,899

11,678

British Pound,

       

Expiring

       

1/17/2017

8,162,131

9,975,864

10,009,677

(33,813)

Canadian Dollar,

       

Expiring

       

11/16/2016

19,253,902

14,690,905

14,356,095

334,810

Euro,

       

Expiring

       

1/17/2017

1,873,657

2,070,049

2,064,541

5,508

35

 

NOTES TO FINANCIAL STATEMENTS (continued)

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Sales: (continued)

State Street Bank and Trust Co. (continued)

Japanese Yen,

       

Expiring

       

11/2/2016

9,036,351

85,829

86,167

(338)

12/15/2016

2,501,589,527

24,568,158

23,898,714

669,444

New Zealand Dollar,

       

Expiring

       

11/16/2016

19,303,837

13,931,416

13,795,034

136,382

UBS

     

British Pound,

       

Expiring

       

1/17/2017

4,781,481

5,853,985

5,863,798

(9,813)

Euro,

       

Expiring

       

1/17/2017

148,051,486

166,200,170

163,134,654

3,065,516

New Zealand Dollar,

       

Expiring

       

11/16/2016

131,550,259

93,394,502

94,009,307

(614,805)

South Korean Won,

       

Expiring

       

11/16/2016

680,028,693

608,798

594,267

14,531

Gross Unrealized Appreciation

   

14,547,920

Gross Unrealized Depreciation

   

(2,977,580)

The following tables show the fund’s exposure to different types of market risk as it relates to the Statement of Assets and Liabilities and the Statement of Operations, respectively.

Fair value of derivative instruments as of October 31, 2016 is shown below:

               

 

 

Derivative
Assets ($)

 

 

 

Derivative
Liabilities ($)

 

Equity risk

8,203,034

1

Equity risk

 

(593,176)

1

Foreign exchange risk

14,547,920

2

Foreign exchange risk

 

(2,977,580)

2

Gross fair value of
derivative contracts

22,750,954

     

(3,570,756)

 
             
 

Statement of Assets and Liabilities location:

 

1

Includes cumulative appreciation (depreciation) on financial futures as reported in the Statement of Financial
Futures, but only the unpaid variation margin is reported in the Statement of Assets and Liabilities.

2

Unrealized appreciation (depreciation) on forward foreign currency exchange contracts.

36

 

The effect of derivative instruments in the Statement of Operations during the period ended October 31, 2016 is shown below:

                     

Amount of realized gain (loss) on derivatives recognized in income ($)

 

Underlying
risk

Financial
Futures

1

Options
Transactions

2

Forward
Contracts

3

Total

 

 

Interest
rate

(529,805)

 

(805,234)

 

-

 

(1,335,039)

   

Equity

(24,765,808)

 

(389,638)

 

-

 

(25,155,446)

   

Foreign
exchange

173,524

 

107,306

 

13,320,467

 

13,601,297

   

Total

(25,122,089)

 

(1,087,566)

 

13,320,467

 

(12,889,188)

   
                   

Change in unrealized appreciation (depreciation) on derivatives recognized in income ($)

 

Underlying
risk

Financial
Futures

4

Options
Transactions

5

Forward
Contracts

6

Total

 

 

Equity

13,406,904

 

-

 

-

 

13,406,904

   

Foreign
exchange

-

 

122,393

 

12,875,018

 

12,997,411

   

Total

13,406,904

 

122,393

 

12,875,018

 

26,404,315

   
                     
 

Statement of Operations location:

           

1

Net realized gain (loss) on financial futures.

 

2

Net realized gain (loss) on options transactions.

3

Net realized gain (loss) on forward foreign currency exchange contracts.

 

4

Net unrealized appreciation (depreciation) on financial futures.

 

5

Net unrealized appreciation (depreciation) on options transactions.

 

6

Net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.

The provisions of ASC Topic 210 “Disclosures about Offsetting Assets and Liabilities” require disclosure on the offsetting of financial assets and liabilities. These disclosures are required for certain investments, including derivative financial instruments subject to Master Agreements which are eligible for offsetting in the Statement of Assets and Liabilities and require the fund to disclose both gross and net information with respect to such investments. For financial reporting purposes, the fund does not offset derivative assets and derivative liabilities that are subject to Master Agreements in the Statement of Assets and Liabilities.

37

 

NOTES TO FINANCIAL STATEMENTS (continued)

At October 31, 2016, derivative assets and liabilities (by type) on a gross basis are as follows:

           

Derivative Financial Instruments:

 

Assets ($)

 

Liabilities ($)

 

Financial futures

 

8,203,034

 

(593,176)

 

Forward contracts

 

14,547,920

 

(2,977,580)

 

Total gross amount of derivative

         

assets and liabilities in the

         

Statement of Assets and Liabilities

 

22,750,954

 

(3,570,756)

 

Derivatives not subject to

         

Master Agreements

 

(8,203,034)

 

593,176

 

Total gross amount of assets

         

and liabilities subject to

         

Master Agreements

 

14,547,920

 

(2,977,580)

 

The following tables present derivative assets and liabilities net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of October 31, 2016:

             
     

Financial

     
     

Instruments

     
     

and Derivatives

     
 

Gross Amount of

 

Available

Collateral

 

Net Amount of

Counterparty

Assets ($)

1

for Offset ($)

Received ($)

 

Assets ($)

Barclays Bank

148,078

 

-

-

 

148,078

JP Morgan
Chase Bank

614,339

 

(113,729)

-

 

500,610

Royal Bank
of Scotland

9,547,634

 

(2,154,251)

-

 

7,393,383

State Street
Bank and Trust Co.

1,157,822

 

(44,958)

-

 

1,112,864

UBS

3,080,047

 

(664,642)

-

 

2,415,405

Total

14,547,920

 

(2,977,580)

-

 

11,570,340

             
     

Financial

     
     

Instruments

     
     

and Derivatives

     
 

Gross Amount of

 

Available

Collateral

 

Net Amount of

Counterparty

Liabilities ($)

1

for Offset ($)

Pledged ($)

 

Liabilities ($)

JP Morgan
Chase Bank

(113,729)

 

113,729

-

 

-

Royal Bank
of Scotland

(2,154,251)

 

2,154,251

-

 

-

State Street
Bank and Trust Co.

(44,958)

 

44,958

-

 

-

UBS

(664,642)

 

664,642

-

 

-

Total

(2,977,580)

 

2,977,580

-

 

-

             

1 Absent a default event or early termination, OTC derivative assets and liabilities are presented at gross amounts
and are not offset in the Statement of Assets and Liabilities.

 

38

 

The following summarizes the average market value of derivatives outstanding during the period ended October 31, 2016:

     

 

 

Average Market Value ($)

Equity financial futures

 

205,453,914

Equity options contracts

 

32,800

Interest rate financial futures

 

5,808

Interest rate options contracts

 

93,647

Foreign currency options contracts

 

16,391

Forward contracts

 

438,304,873

     

At October 31, 2016, the cost of investments for federal income tax purposes was $1,368,086,619; accordingly, accumulated net unrealized appreciation on investments was $6,582,482, consisting of $53,343,536 gross unrealized appreciation and $46,761,054 gross unrealized depreciation.

39

 

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors
Dreyfus Global Real Return Fund

We have audited the accompanying statement of assets and liabilities, including the statements of investments and financial futures, of Dreyfus Global Real Return Fund (one of the series comprising Advantage Funds, Inc.) as of October 31, 2016, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2016 by correspondence with the custodian and others. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Global Real Return Fund at October 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with U.S. generally accepted accounting principles.

New York, New York
December 29, 2016

40

 

IMPORTANT TAX INFORMATION (Unaudited)

In accordance with federal tax law, the fund elects to provide each shareholder with their portion of the fund’s foreign taxes paid and the income sourced from foreign countries. Accordingly, the fund hereby reports the following information regarding its fiscal year ended October 31, 2016:

 - the total amount of taxes paid to foreign countries was $589,274.

 - the total amount of income sourced from foreign countries was $12,952,161.

Where required by federal tax law rules, shareholders will receive notification of their proportionate share of foreign taxes paid and foreign sourced income for the 2016 calendar year with Form 1099-DIV which will be mailed in early 2017. For the fiscal year ended October 31, 2016, certain dividends paid by the fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the distributions paid during the fiscal year, $8,846,858 represents the maximum amount that may be considered qualified dividend income.

41

 

BOARD MEMBERS INFORMATION (Unaudited)

INDEPENDENT BOARD MEMBERS

Joseph S. DiMartino (73)

Chairman of the Board (1995)

Principal Occupation During Past 5 Years:

· Corporate Director and Trustee (1995-present)

Other Public Company Board Memberships During Past 5 Years:

· CBIZ (formerly, Century Business Services, Inc.), a provider of outsourcing functions for small and medium size companies, Director (1997-present)

No. of Portfolios for which Board Member Serves: 135

———————

Peggy C. Davis (73)

Board Member (2006)

Principal Occupation During Past 5 Years:

· Shad Professor of Law, New York University School of Law (1983-present)

No. of Portfolios for which Board Member Serves: 49

———————

David P. Feldman (76)

Board Member (1996)

Principal Occupation During Past 5 Years:

· Corporate Director and Trustee (1985-present)

Other Public Company Board Memberships During Past 5 Years:

· BBH Mutual Funds Group (5 registered mutual funds), Director (1992-2014)

No. of Portfolios for which Board Member Serves: 35

———————

Ehud Houminer (76)

Board Member (1993)

Principal Occupation During Past 5 Years:

· Executive-in-Residence at the Columbia Business School, Columbia

University (1992-present)

Other Public Company Board Memberships During Past 5 Years:

· Avnet, Inc., an electronics distributor, Director (1993-2012)

No. of Portfolios for which Board Member Serves: 59

———————

42

 

Lynn Martin (76)

Board Member (2012)

Principal Occupation During Past 5 Years:

· President of The Martin Hall Group LLC, a human resources consulting firm (2005-2012)

Other Public Company Board Memberships During Past 5 Years:

· AT&T, Inc., a telecommunications company, Director (1999-2012)

· Ryder System, Inc., a supply chain and transportation management company, Director (1993-2012)

No. of Portfolios for which Board Member Serves: 35

———————

Robin A. Melvin (53)

Board Member (2012)

Principal Occupation During Past 5 Years:

· Co-chairman, Illinois Mentoring Partnership, non-profit organization dedicated to increasing the quantity and quality of mentoring services in Illinois; (2014-present; served as a board member since 2013)

· Director, Boisi Family Foundation, a private family foundation that supports youth-serving organizations that promote the self sufficiency of youth from disadvantaged circumstances (1995-2012)

No. of Portfolios for which Board Member Serves: 107

———————

Dr. Martin Peretz (77)

Board Member (2006)

Principal Occupation During Past 5 Years:

· Editor-in-Chief Emeritus of The New Republic Magazine (2011-2012) (previously,

Editor-in-Chief, 1974-2011)

· Director of TheStreet.com, a financial information service on the web (1996-2010)

· Lecturer at Harvard University (1969-2012)

No. of Portfolios for which Board Member Serves: 35

———————

Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80. The address of the Board Members and Officers is c/o The Dreyfus Corporation, 200 Park Avenue, New York, New York 10166. Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from Dreyfus free of charge by calling this toll free number: 1-800-DREYFUS.

James F. Henry, Emeritus Board Member
Dr. Paul A. Marks, Emeritus Board Member
Philip L. Toia, Emeritus Board Member

43

 

OFFICERS OF THE FUND (Unaudited)

BRADLEY J. SKAPYAK, President since January 2010.

Chief Operating Officer and a director of the Manager since June 2009, Chairman of Dreyfus Transfer, Inc., an affiliate of the Manager and the transfer agent of the funds, since May 2011 and Executive Vice President of the Distributor since June 2007. From April 2003 to June 2009, Mr. Skapyak was the head of the Investment Accounting and Support Department of the Manager. He is an officer of 64 investment companies (comprised of 135 portfolios) managed by the Manager. He is 57 years old and has been an employee of the Manager since February 1988.

BENNETT A. MACDOUGALL, Chief Legal Officer since October 2015.

Chief Legal Officer of the Manager since June 2015; from June 2005 to June 2015, he served in various capacities with Deutsche Bank – Asset & Wealth Management Division, including as Director and Associate General Counsel, and Chief Legal Officer of Deutsche Investment Management Americas Inc. from June 2012 to May 2015. He is an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 45 years old and has been an employee of the Manager since June 2015.

JANETTE E. FARRAGHER, Vice President and Secretary since December 2011.

Assistant General Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. She is 53 years old and has been an employee of the Manager since February 1984.

JAMES BITETTO, Vice President and Assistant Secretary since August 2005.

Managing Counsel of BNY Mellon and Secretary of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 50 years old and has been an employee of the Manager since December 1996.

JONI LACKS CHARATAN, Vice President and Assistant Secretary since August 2005.

Managing Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. She is 60 years old and has been an employee of the Manager since October 1988.

JOSEPH M. CHIOFFI, Vice President and Assistant Secretary since August 2005.

Managing Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 54 years old and has been an employee of the Manager since June 2000.

MAUREEN E. KANE, Vice President and Assistant Secretary since April 2015.

Managing Counsel of BNY Mellon since July 2014; from October 2004 until July 2014, General Counsel, and from May 2009 until July 2014, Chief Compliance Officer of Century Capital Management. She is an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. She is 54 years old and has been an employee of the Manager since July 2014.

SARAH S. KELLEHER, Vice President and Assistant Secretary since April 2014.

Senior Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager; from August 2005 to March 2013, Associate General Counsel of Third Avenue Management. She is 41 years old and has been an employee of the Manager since March 2013.

JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.

Senior Managing Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 51 years old and has been an employee of the Manager since October 1990.

JAMES WINDELS, Treasurer since November 2001.

Director – Mutual Fund Accounting of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 58 years old and has been an employee of the Manager since April 1985.

RICHARD CASSARO, Assistant Treasurer since January 2008.

Senior Accounting Manager – Money Market, Municipal Bond and Equity Funds of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 57 years old and has been an employee of the Manager since September 1982.

44

 

GAVIN C. REILLY, Assistant Treasurer since December 2005.

Tax Manager of the Investment Accounting and Support Department of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 48 years old and has been an employee of the Manager since April 1991.

ROBERT S. ROBOL, Assistant Treasurer since December 2005.

Senior Accounting Manager of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 52 years old and has been an employee of the Manager since October 1988.

ROBERT SALVIOLO, Assistant Treasurer since July 2007.

Senior Accounting Manager – Equity Funds of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since June 1989.

ROBERT SVAGNA, Assistant Treasurer since December 2002.

Senior Accounting Manager – Fixed Income and Equity Funds of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since November 1990.

JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.

Chief Compliance Officer of the Manager and The Dreyfus Family of Funds (65 investment companies, comprised of 160 portfolios). He is 59 years old and has served in various capacities with the Manager since 1980, including manager of the firm’s Fund Accounting Department from 1997 through October 2001.

CARIDAD M. CAROSELLA, Anti-Money Laundering Compliance Officer since January 2016

Anti-Money Laundering Compliance Officer of the Dreyfus Family of Funds and BNY Mellon Funds Trust since January 2016; from May 2015 to December 2015, Interim Anti-Money Laundering Compliance Officer of the Dreyfus Family of Funds and BNY Mellon Funds Trust and the Distributor; from January 2012 to May 2015, AML Surveillance Officer of the Distributor and from 2007 to December 2011, Financial Processing Manager of the Distributor. She is an officer of 60 investment companies (comprised of 155 portfolios) managed by the Manager. She is 48 years old and has been an employee of the Distributor since 1997.

45

 

For More Information

Dreyfus Global Real Return Fund

200 Park Avenue
New York, NY 10166

Manager

The Dreyfus Corporation
200 Park Avenue
New York, NY 10166

Sub-Investment Adviser

Newton Investment Management
(North America) Limited
160 Queen Victoria Street
London, EC4V, 4LA, UK

Custodian

The Bank of New York Mellon
225 Liberty Street
New York, NY 10286

Transfer Agent &
Dividend Disbursing Agent

Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166

Distributor

MBSC Securities Corporation
200 Park Avenue
New York, NY 10166

   

Ticker Symbols:

Class A: DRRAX  Class C: DRRCX  Class I: DRRIX  Class Y: DRRYX

Telephone Call your financial representative or 1-800-DREYFUS

Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144

E-mail Send your request to [email protected]

Internet Information can be viewed online or downloaded at www.dreyfus.com

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. (phone 1-800-SEC-0330 for information).

A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.dreyfus.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.

   

© 2016 MBSC Securities Corporation
6278AR1016

 


 

Dreyfus Total Emerging Markets Fund

     

 

ANNUAL REPORT

October 31, 2016

   
 

 

 

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

 

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

 

Contents

T H E   F U N D

F O R    M O R E    I N F O R M AT I O N

 

Back Cover

 

       
 


Dreyfus Total Emerging Markets Fund

 

The Fund

A LETTER FROM THE CHIEF EXECUTIVE OFFICER

Dear Shareholder:

We are pleased to present this annual report for Dreyfus Total Emerging Markets Fund, covering the 12-month period from November 1, 2015 through October 31, 2016. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.

Stocks and bonds generally advanced over the reporting period in the midst of heightened market volatility stemming from various global economic developments. Toward the end of 2015, investor sentiment deteriorated amid sluggish global economic growth, falling commodity prices, and the first increase in short-term U.S. interest rates in nearly a decade. These worries sparked sharp stock market declines in January 2016, but equities began to rally in February when U.S. monetary policymakers refrained from additional rate hikes, other central banks eased their monetary policies further, and commodity prices began to rebound. Stocks generally continued to climb through the summer, driving several broad measures of U.S. stock market performance to record highs in July and August before moderating as a result of uncertainty regarding U.S. elections and potential rate hikes. In the bond market, yields of high-quality sovereign bonds generally moved lower and their prices increased in response to robust investor demand for current income in a low interest rate environment.

The outcome of the U.S. presidential election and ongoing global economic headwinds suggest that uncertainty will persist in the financial markets over the foreseeable future. Some asset classes and industry groups may benefit from a changing economic and political landscape, while others probably will face challenges. Consequently, selectivity could become a more important determinant of investment success. As always, we encourage you to discuss the implications of our observations with your financial advisor.

Thank you for your continued confidence and support.

Sincerely,

Mark D. Santero
Chief Executive Officer
The Dreyfus Corporation
November 15, 2016

2

 

DISCUSSION OF FUND PERFORMANCE

For the period from November 1, 2015 through October 31, 2016, as provided by Sean P. Fitzgibbon, Federico Garcia Zamora, and Josephine Shea, Portfolio Managers

Fund and Market Performance Overview

For the 12-month period ended October 31, 2016, Dreyfus Total Emerging Markets Fund’s Class A shares produced a total return of 11.10%, Class C shares returned 10.17%, Class I shares returned 11.37%, and Class Y shares returned 11.47%.1 In comparison, the Morgan Stanley Capital International Emerging Markets Index (the “MSCI EM Index”), the fund’s benchmark, returned 9.27% for the same period.2 The fund’s secondary benchmark index, the hybrid “Total EM Index,” returned 9.91%. The Total EM Index is a blend of 70% MSCI EM Index, 15% JP Morgan (JPM) Government Bond Index-Emerging Markets Global Diversified, 7.5% JPM Emerging Markets Bond Index-Global, and 7.5% JPM Corporate Emerging Markets Bond Index-Diversified. 3

Improving global economic conditions drove emerging market securities higher, with equities and bonds both producing robust gains. Strong individual stock and bond selections enabled the fund to outperform its benchmarks.

The Fund’s Investment Approach

The fund seeks to maximize total return. To pursue its goal, the fund normally invests at least 70% of its assets in equities, bonds, and currencies issued by, or economically tied to, emerging markets. We base asset and country allocation decisions on our global macroeconomic view and top-down country-specific outlooks, along with our bottom-up valuation assessments of individual securities. Equity, bond, and currency investments all rely on in-depth fundamental analysis, supported by proprietary quantitative models. By constructing a portfolio that is liquid and diversified from an asset class and country perspective, we seek to reduce volatility and country concentration risk.

Markets Advanced as Conditions Improved

Emerging market stocks and bonds lost value in choppy trading during the last two months of 2015 under pressure from global economic concerns, weakening commodity prices, and declining foreign currency values against the U.S. dollar. Investor sentiment turned more sharply negative in January 2016 in response to further deterioration in commodity prices and economic slowdowns in China, Brazil, and other key regional markets. These developments sparked a flight to quality away from the emerging markets and toward developed markets, particularly the United States.

Emerging market equities staged a strong recovery starting in early February as investors responded positively to a rebound in commodity prices, an easing of market liquidity concerns, and a decline in the relative strength of the U.S. dollar. The stock market rally continued through the spring until June, when renewed volatility was triggered by a referendum in the United Kingdom to leave the European Union. However, emerging market equities bounced back quickly and continued to gain value over the summer.

Meanwhile, emerging market bonds generally rallied as interest rates declined and credit conditions improved in many developing nations. Business-friendly political developments in Brazil and signs of stabilizing growth in China further encouraged investors as the reporting period progressed.

Security Selections Bolstered Returns

The fund’s stock selections enhanced returns, led by strong individual investments in the relatively weak Mexican stock market, such as airport operator Grupo Aeroportuario del Centro Norte. In Thailand, food and beverage conglomerate Thai Beverage advanced sharply as sales volumes and pricing improved. Other leading equity holdings included mobile communications company Telekomunikasi Indonesia, which benefited from improving business trends, and Taiwanese pneumatic equipment manufacturer Airtac International Group, which reported revenue increases as the company expanded into new industrial areas.

3

 

DISCUSSION OF FUND PERFORMANCE (continued)

On a more negative note, lack of exposure to rebounding Brazilian commodities producers and financial institutions undermined the fund’s relative performance, while investments in other areas of the Brazilian stock market, such as beverage distributor Ambev and machinery supplier JBS, underperformed. A few other equity holdings further detracted from returns, including brokerage firm Korea Investment Holdings, Korean consumer products maker LG Household & Health Care, and Chinese pharmaceutical maker Sihuan Pharmaceutical Holdings Group.

Among bonds, the fund benefited from gains posted by a number of individual credits, including U.S. dollar-denominated sovereign and corporate bonds from issuers in Brazil, Kazakhstan, Russia, and the Ivory Coast. The fund’s currency positions also added value.

Emerging Markets Remain Well Positioned

As global economic conditions improve, we believe that emerging equity markets are likely to continue offering attractively valued, growth-oriented investment opportunities. As of the end of the reporting period, we are finding an increasing number of such opportunities in Taiwan and Indonesia, but relatively few in India and Mexico. We have increasingly emphasized stocks from the information technology sector, particularly in China, where we see potential for strong corporate earnings growth. In contrast, we have trimmed the fund’s exposure to the consumer staples and financials sectors, where opportunities currently appear less compelling.

In the bond portfolio, we have continued to focus on individual securities in which we have high levels of confidence, an approach that has led to moderately reduced fixed-income positions in Turkey and greater exposure to the Middle East.

November 15, 2016

Please note, the position in any security highlighted with italicized typeface was sold during the reporting period.

Equities are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.

Bonds are subject generally to interest-rate, credit, liquidity, and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.

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 charges 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 provided reflect the absorption of certain fund expenses by The Dreyfus Corporation pursuant to an agreement in effect until March 1, 2017, at which time it may be extended, terminated, or modified. Had these expenses not been absorbed, the fund’s returns would have been lower for all classes.

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.

3 Source: FactSet — Reflects reinvestment of net dividends and, where applicable, capital gain distributions. The Total EM Index is an unmanaged hybrid index composed of 70% Morgan Stanley Capital International Emerging Markets Index/15% JP Morgan (JPM) Government Bond Index-Emerging Markets Global Diversified/7.5% JPM Emerging Markets Bond Index-Global/7.5% JPM Corporate Emerging Markets Bond Index-Diversified. Investors cannot invest directly in any index.

4

 

FUND PERFORMANCE

Comparison of change in value of $10,000 investment in Dreyfus Total Emerging Markets Fund Class A shares, Class C shares, Class I shares and Class Y shares with the Morgan Stanley Capital International Emerging Markets Index and, a secondary benchmark, the hybrid Total EM Index.

 Source: Lipper Inc.

†† Source : FactSet

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

Past performance is not predictive of future performance.

The above graph compares a $10,000 investment made in each of the Class A, Class C, Class I and Class Y shares of Dreyfus Total Emerging Markets Fund on 3/25/11 (inception date) to a $10,000 investment made in the Morgan Stanley Capital International Emerging Markets Index (the “MSCI EM Index”) and a secondary benchmark, the hybrid Total EM Index. 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 MSCI EM Index is a market capitalization-weighted index composed of companies representative of the market structure of 21 emerging market countries in Europe, Latin America and the Pacific Basin. The Index excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Total EM Index is an unmanaged hybrid index composed of 70% MSCI EM Index /15% JP Morgan (JPM) Government Bond Index-Emerging Markets Global Diversified/7.5% JPM Emerging Markets Bond Index-Global/7.5% JPM Corporate Emerging Markets Bond Index-Diversified. Unlike a mutual fund, the indices are not subject to charges, fees and other expenses. Investors cannot invest directly in any index. These factors can contribute to the indices potentially outperforming the fund. 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 (continued)

         

Average Annual Total Returns as of 10/31/16

 

Inception

   

From

 

Date

1 Year

5 Year

Inception

Class A shares

       

with maximum sales charge (5.75%)

3/25/11

4.68%

-0.05%

-1.71%

without sales charge

3/25/11

11.10%

1.13%

-0.67%

Class C shares

       

with applicable redemption charge

3/25/11

9.17%

0.36%

-1.43%

without redemption

3/25/11

10.17%

0.36%

-1.43%

Class I shares

3/25/11

11.37%

1.38%

-0.43%

Class Y shares

7/1/13

11.47%

1.37%††

-0.46%††

Morgan Stanley Capital International Emerging Markets Index

3/31/11

9.27%

0.55%

-2.05%†††

Hybrid Index

3/31/11

9.91%

1.25%

-0.50%†††

Past performance is not predictive of future performance. The fund’s performance shown in the graph 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.

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

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

††† For comparative purposes, the value of the Index as of 3/31/11 is used as the beginning value on 3/25/11.

6

 

UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)

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

Review your fund’s expenses

The table below shows the expenses you would have paid on a $1,000 investment in Dreyfus Total Emerging Markets Fund from May 1, 2016 to October 31, 2016. 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 October 31, 2016

   

Class A

 

Class C

 

Class I

 

Class Y

Expenses paid per $1,000

$8.48

$12.43

$6.57

$6.90

Ending value (after expenses)

$1,108.90

$1,103.90

$1,109.40

$1,110.40

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

Using the SEC’s method to compare expenses

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

                 

Expenses and Value of a $1,000 Investment

assuming a hypothetical 5% annualized return for the six months ended October 31, 2016

   

Class A

 

Class C

 

Class I

 

Class Y

Expenses paid per $1,000

$8.11

$11.89

$6.29

$6.60

Ending value (after expenses)

$1,017.09

$1,013.32

$1,018.90

$1,018.60

 Expenses are equal to the fund’s annualized expense ratio of 1.60% for Class A, 2.35% for Class C, 1.24% for Class I and 1.30% for Class Y, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

7

 

STATEMENT OF INVESTMENTS

October 31, 2016

                     
 

Bonds and Notes - 29.2%

         

Principal
Amount ($)

a

Value ($)

 

Argentina - 1.8%

         

Argentine Government, Sr. Unscd. Bonds, 27.67%, 3/28/17

     

ARS

 

800,000

b

53,057

 

Argentine Government, Sr. Unscd. Bonds, 15.50%, 10/17/26

     

ARS

 

3,500,000

 

233,635

 

Argentine Government, Sr. Unscd. Bonds, 16.00%, 10/17/23

     

ARS

 

5,200,000

 

347,048

 

Argentine Government, Sr. Unscd. Notes, 5.83%, 12/31/33

     

ARS

 

775,000

b,c

353,626

 

Argentine Government, Unscd. Bonds, 18.20%, 10/3/21

     

ARS

 

2,135,000

 

148,910

 

Boncer, Bonds, 2.50%, 7/22/21

     

ARS

 

3,237,000

c

230,040

 

YPF, Sr. Unscd. Notes, 8.50%, 7/28/25

         

470,000

 

513,475

 
 

1,879,791

 

Austria - .5%

         

Suzano Austria GmbH, Gtd. Notes, 5.75%, 7/14/26

         

520,000

 

515,476

 

Bahrain - .9%

         

Bahraini Government, Sr. Unscd. Notes, 7.00%, 1/26/26

         

915,000

 

975,599

 

Brazil - 1.7%

         

Brazilian Government, Govt. Gtd. Notes, 5.33%, 2/15/28

         

650,000

 

640,250

 

Odebrecht Finance, Gtd. Notes, 4.38%, 4/25/25

         

1,055,000

 

515,631

 

Vale Overseas, Gtd. Notes, 6.88%, 11/21/36

         

600,000

 

608,070

 
 

1,763,951

 

Chile - .2%

         

AES Gener, Sr. Unscd. Notes, 5.00%, 7/14/25

         

200,000

d

205,781

 

Colombia - 1.2%

         

Ecopetrol, Sr. Unscd. Notes, 5.38%, 6/26/26

         

300,000

 

303,450

 

Ecopetrol, Sr. Unscd. Notes, 5.88%, 5/28/45

         

520,000

 

461,500

 

Emgesa, Sr. Unscd. Notes, 8.75%, 1/25/21

     

COP

 

237,000,000

 

79,164

 

Empresas Publicas de Medellin, Sr. Unscd. Notes, 8.38%, 2/1/21

     

COP

 

684,000,000

 

225,732

 

Empresas Publicas de Medellin, Sr. Unscd. Notes, 7.63%, 9/10/24

     

COP

 

230,000,000

d

71,505

 

Findeter, Sr. Unscd. Notes, 7.88%, 8/12/24

     

COP

 

450,000,000

d

141,576

 
 

1,282,927

 

Georgia - .7%

         

Georgian Railway JSC, Sr. Unscd. Notes, 7.75%, 7/11/22

         

630,000

 

705,600

 

Hungary - .8%

         

Hungarian Government, Sr. Unscd. Notes, 5.38%, 3/25/24

         

700,000

 

805,561

 

8

 

                     
 

Bonds and Notes - 29.2% (continued)

         

Principal
Amount ($)

a

Value ($)

 

India - 1.0%

         

Vedanta Resources, Sr. Unscd. Bonds, 8.25%, 6/7/21

         

950,000

 

977,360

 

Indonesia - .7%

         

Pertamina, Sr. Unscd. Notes, 4.30%, 5/20/23

         

650,000

 

674,864

 

Iraq - 1.2%

         

Iraqi Government, Unscd. Bonds, 5.80%, 1/15/28

         

1,530,000

 

1,237,055

 

Ireland - .7%

         

MMC Norilsk Nickel, Sr. Unscd. Notes, 6.63%, 10/14/22

         

480,000

d

536,738

 

Novolipetsk Steel via Steel Funding, Sr. Unscd. Notes, 4.50%, 6/15/23

         

200,000

d

200,185

 
 

736,923

 

Ivory Coast - 1.0%

         

Ivory Coast Government, Sr. Unscd. Notes, 5.38%, 7/23/24

         

995,000

 

1,007,622

 

Jamaica - .4%

         

Digicel Group, Sr. Unscd. Notes, 7.13%, 4/1/22

         

495,000

 

397,238

 

Kazakhstan - .7%

         

KazMunayGas National, Sr. Unscd. Notes, 4.40%, 4/30/23

         

700,000

 

710,283

 

Lebanon - .9%

         

Lebanese Government, Sr. Unscd. Notes, 6.20%, 2/26/25

         

830,000

 

800,950

 

Lebanese Government, Sr. Unscd. Notes, 6.60%, 11/27/26

         

150,000

 

146,249

 
 

947,199

 

Luxembourg - .6%

         

Cosan Luxembourg, Gtd. Notes, 7.00%, 1/20/27

         

550,000

d

573,375

 

Mexico - 2.3%

         

Cemex, Sr. Scd Notes, 5.70%, 1/11/25

         

950,000

 

969,000

 

Mexican Government, Bonds, Ser. M, 7.75%, 12/14/17

     

MXN

 

7,980,000

 

434,418

 

Mexican Government, Bonds, Ser. M 20, 10.00%, 12/5/24

     

MXN

 

7,080,000

 

466,517

 

Mexican Government, Bonds, Ser. S, 4.50%, 12/4/25

     

MXN

 

1,000,000

e

326,198

 

Sixsigma Networks Mexico, Gtd. Notes, 8.25%, 11/7/21

         

200,000

 

197,000

 
 

2,393,133

 

Morocco - 1.1%

         

Office Cherifien des Phosphates, Sr. Unscd. Notes, 6.88%, 4/25/44

         

1,040,000

 

1,145,706

 

Netherlands - 3.5%

         

Equate Petrochemical, Gtd. Notes, 4.25%, 11/3/26

         

690,000

d

680,513

 

GTH Finance, Gtd. Notes, 7.25%, 4/26/23

         

520,000

d

554,970

 

9

 

STATEMENT OF INVESTMENTS (continued)

                     
 

Bonds and Notes - 29.2% (continued)

         

Principal
Amount ($)

a

Value ($)

 

Netherlands - 3.5% (continued)

         

Lukoil International Finance, Gtd. Notes, 4.75%, 11/2/26

         

575,000

d

576,202

 

Petrobras Global Finance, Gtd. Notes, 8.38%, 5/23/21

         

810,000

 

897,318

 

VTR Finance, Sr. Scd. Notes, 6.88%, 1/15/24

         

880,000

 

921,800

 
 

3,630,803

 

Panama - .3%

         

AES Panama, Sr. Unscd. Notes, 6.00%, 6/25/22

         

280,000

d

292,983

 

Peru - .5%

         

Union Andina De Cementos, Sr. Unscd. Notes, 5.88%, 10/30/21

         

500,000

 

520,750

 

Poland - .8%

         

Polish Government, Bonds, Ser. 0420, 1.50%, 4/25/20

     

PLN

 

1,700,000

 

423,911

 

Polish Government, Bonds, Ser. 1017, 5.25%, 10/25/17

     

PLN

 

1,570,000

 

414,205

 
 

838,116

 

Russia - .9%

         

Russian Government, Bonds, Ser. 6215, 7.00%, 8/16/23

     

RUB

 

17,140,000

 

251,023

 

Russian Government, Sr. Unscd. Bonds, 4.75%, 5/27/26

         

200,000

 

212,088

 

Vnesheconombank, Sr. Unscd. Notes, 6.80%, 11/22/25

         

400,000

 

429,406

 
 

892,517

 

Senegal - .9%

         

Senegalese Government, Bonds, 6.25%, 7/30/24

         

900,000

 

928,724

 

Sri Lanka - .7%

         

Sri Lankan Government, Sr. Unscd. Bonds, 6.85%, 11/3/25

         

480,000

 

507,044

 

Sri Lankan Government, Sr. Unscd. Bonds, 6.83%, 7/18/26

         

200,000

 

211,770

 
 

718,814

 

Turkey - 1.4%

         

Turk Telekomunikasyon, Sr. Unscd. Notes, 4.88%, 6/19/24

         

800,000

 

791,160

 

Turkiye Vakiflar Bankasi, Sr. Unscd. Notes, 5.50%, 10/27/21

         

600,000

d

597,276

 
 

1,388,436

 

Ukraine - 1.0%

         

Ukrainian Government, Sr. Scd. Notes, 7.75%, 9/1/19

         

990,000

 

989,876

 

United Arab Emirates - .8%

         

DP World, Sr. Unscd. Notes, 6.85%, 7/2/37

         

700,000

 

800,908

 

Total Bonds and Notes
(cost $29,299,268)

 

29,937,371

 

10

 

                     
 

Common Stocks - 69.2%

         

Shares

 

Value ($)

 

Brazil - 3.1%

         

Ambev, ADR

         

346,400

 

2,043,760

 

JBS

         

370,700

 

1,127,662

 
 

3,171,422

 

China - 23.9%

         

AAC Technologies Holdings

         

83,000

 

791,949

 

Alibaba Group Holding, ADR

         

23,800

f

2,420,222

 

Anhui Conch Cement, Cl. H

         

544,000

 

1,508,081

 

ANTA Sports Products

         

417,000

 

1,204,402

 

Beijing Capital International Airport, Cl. H

         

934,000

 

979,095

 

China Construction Bank, Cl. H

         

2,121,000

 

1,553,375

 

China Lodging Group

         

37,700

 

1,621,477

 

CNOOC

         

1,849,000

 

2,353,106

 

Ctrip.com International, ADR

         

25,900

f

1,143,485

 

PICC Property & Casualty, Cl. H

         

912,000

 

1,476,971

 

Ping An Insurance Group Company of China, Cl. H

         

292,500

 

1,544,426

 

Shanghai Pharmaceuticals Holding, Cl. H

         

735,300

 

1,896,190

 

Tencent Holdings

         

198,100

 

5,256,749

 

ZTO Express, ADR

         

42,200

 

714,446

 
 

24,463,974

 

Hungary - 1.5%

         

Richter Gedeon

         

70,871

 

1,523,265

 

India - 3.4%

         

ICICI Bank, ADR

         

196,420

 

1,628,322

 

Reliance Industries, GDR

         

58,221

d

1,845,606

 
 

3,473,928

 

Indonesia - 5.1%

         

Bank Rakyat Indonesia

         

1,822,800

 

1,704,335

 

Matahari Department Store

         

1,051,300

 

1,452,306

 

Telekomunikasi Indonesia

         

6,392,700

 

2,067,535

 
 

5,224,176

 

Mexico - 2.1%

         

Arca Continental

         

140,600

 

873,757

 

Grupo Aeroportuario del Centro Norte

         

225,100

 

1,313,609

 
 

2,187,366

 

Peru - .9%

         

Credicorp

         

6,090

 

905,461

 

Philippines - 1.9%

         

Metropolitan Bank & Trust

         

741,634

 

1,245,182

 

Puregold Price Club

         

789,300

 

664,236

 
 

1,909,418

 

Russia - 3.2%

         

Sberbank of Russia, ADR

         

186,405

 

1,770,848

 

Yandex, Cl. A

         

76,650

f

1,509,239

 
 

3,280,087

 

South Africa - 3.6%

         

Barclays Africa Group

         

161,134

 

1,868,539

 

Clicks Group

         

195,920

 

1,823,525

 
 

3,692,064

 

South Korea - 10.2%

         

BGF Retail

         

6,391

 

971,845

 

Coway

         

24,291

 

1,902,096

 

11

 

STATEMENT OF INVESTMENTS (continued)

                     
 

Common Stocks - 69.2% (continued)

         

Shares

 

Value ($)

 

South Korea - 10.2% (continued)

         

Hugel

         

1,906

 

571,342

 

KB Financial Group

         

56,230

 

2,078,679

 

Korea Investment Holdings

         

21,441

 

770,133

 

LG Household & Health Care

         

1,737

 

1,244,780

 

NAVER

         

1,066

 

798,394

 

Samsung Biologics

         

2,453

f,g

291,552

 

Samsung Electronics

         

1,261

 

1,806,230

 
 

10,435,051

 

Taiwan - 6.9%

         

Advanced Semiconductor Engineering

         

735,158

 

864,275

 

Airtac International Group

         

157,000

 

1,251,224

 

Largan Precision

         

16,000

 

1,893,686

 

Taiwan Semiconductor Manufacturing

         

521,000

 

3,112,049

 
 

7,121,234

 

Thailand - 1.4%

         

Thai Beverage

         

2,026,700

 

1,405,761

 

Turkey - .8%

         

Turkiye Vakiflar Bankasi, Cl. D

         

545,875

 

807,985

 

United Arab Emirates - 1.2%

         

Abu Dhabi Commercial Bank

         

293,706

 

490,983

 

Emaar Properties

         

383,828

 

728,374

 
 

1,219,357

 

Total Common Stocks
(cost $63,100,555)

 

70,820,549

 

12

 

                     
 

Other Investment - 2.7%

         

Shares

 

Value ($)

 

Registered Investment Company;

         

Dreyfus Institutional Preferred Government Plus Money Market Fund
(cost $2,732,534)

         

2,732,534

h

2,732,534

 

Total Investments (cost $95,132,357)

 

101.1%

103,490,454

 

Liabilities, Less Cash and Receivables

 

(1.1%)

(1,075,898)

 

Net Assets

 

100.0%

102,414,556

 

ADR—American Depository Receipt

GDR—Global Depository Receipt

a Principal amount stated in U.S. Dollars unless otherwise noted.

ARS—Argentine Peso

COP—Colombian Peso

MXN—Mexican Peso

PLN—Polish Zloty

RUB—Russian Ruble

 

b Variable rate security—rate shown is the interest rate in effect at period end.

c Interest accruals are adjusted based on changes in the Argentine Consumer Price Index.

d Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At October 31, 2016, these securities were valued at $6,276,710 or 6.13% of net assets.

e Principal amount for accrual purposes is periodically adjusted based on changes in the Mexican Consumer Price Index.

f Non-income producing security.

g The valuation of this security has been determined in good faith by management under the direction of the Board of Directors. At October 31, 2016, the value of this security amounted to $291,552 or .28% of net assets.

h Investment in affiliated money market mutual fund.

   

Portfolio Summary (Unaudited)

Value (%)

Financial

18.1

Information Technology

16.3

Foreign/Governmental

15.6

Corporate Bonds

13.6

Consumer Discretionary

9.4

Consumer Staples

7.7

Industrials

5.9

Health Care

4.2

Energy

4.1

Money Market Investment

2.7

Telecommunication Services

2.0

Materials

1.5

 

101.1

 Based on net assets.

See notes to financial statements.

13

 

STATEMENT OF OPTIONS WRITTEN

October 31, 2016

             
   

Face Amount Covered by Contracts ($)

 

Value ($)

 

Call Options:

         

Mexican Peso,

         

December 2016 @ MXN 20

 

1,100,000

 

(12,497)

 

Mexican Peso,

         

December 2016 @ MXN 22

 

1,000,000

 

(3,232)

 

South African Rand,

         

December 2016 @ ZAR 16

 

1,100,000

 

(667)

 

South Korean Won,

         

January 2017 @ KRW 1,175

 

1,000,000

 

(12,045)

 

Turkish Lira,

         

January 2017 @ TRY 3.25

 

1,000,000

 

(10,513)

 

Total Options Written
(premiums received $62,384)

     

(38,954)

 

See notes to financial statements.

14

 

STATEMENT OF ASSETS AND LIABILITIES

October 31, 2016

             

 

 

 

 

 

 

 

 

 

 

Cost

 

Value

 

Assets ($):

 

 

 

 

Investments in securities—See Statement of Investments:

 

 

 

 

Unaffiliated issuers

 

92,399,823

 

100,757,920

 

Affiliated issuers

 

2,732,534

 

2,732,534

 

Cash

 

 

 

 

320,945

 

Cash denominated in foreign currency

 

 

294,318

 

296,422

 

Receivable for investment securities sold

 

 

 

 

2,564,302

 

Dividends and interest receivable

 

 

 

 

486,476

 

Unrealized appreciation on forward foreign
currency exchange contracts—Note 4

 

 

 

 

239,334

 

Prepaid expenses

 

 

 

 

13,848

 

 

 

 

 

 

107,411,781

 

Liabilities ($):

 

 

 

 

Due to The Dreyfus Corporation and affiliates—Note 3(c)

 

 

 

 

147,368

 

Payable for investment securities purchased

 

 

 

 

4,498,405

 

Unrealized depreciation on forward foreign
currency exchange contracts—Note 4

 

 

 

 

252,208

 

Outstanding options written, at value (premiums received
$62,384)—See Statement of Options Written—Note 4

 

 

 

 

38,954

 

Payable for shares of Common Stock redeemed

 

 

 

 

1

 

Accrued expenses

 

 

 

 

60,289

 

 

 

 

 

 

4,997,225

 

Net Assets ($)

 

 

102,414,556

 

Composition of Net Assets ($):

 

 

 

 

Paid-in capital

 

 

 

 

101,874,958

 

Accumulated undistributed investment income—net

 

 

 

 

1,624,029

 

Accumulated net realized gain (loss) on investments

 

 

 

 

(9,455,224)

 

Accumulated net unrealized appreciation (depreciation)
on investments, options transactions and foreign currency
transactions

 

 

 

8,370,793

 

Net Assets ($)

 

 

102,414,556

 

 

           

Net Asset Value Per Share

Class A

Class C

Class I

Class Y

 

Net Assets ($)

1,016,285

644,224

99,314,906

1,439,141

 

Shares Outstanding

89,072

57,708

8,662,743

125,463

 

Net Asset Value Per Share ($)

11.41

11.16

11.46

11.47

 

           

See notes to financial statements.

         

15

 

STATEMENT OF OPERATIONS

Year Ended October 31, 2016

             

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Income ($):

 

 

 

 

Income:

 

 

 

 

Interest (net of $3,048 foreign taxes withheld at source)

 

 

1,412,735

 

Dividends (net of $148,039 foreign taxes withheld at source):

 

 

 

 

Unaffiliated issuers

 

 

1,324,212

 

Affiliated issuers

 

 

7,345

 

Total Income

 

 

2,744,292

 

Expenses:

 

 

 

 

Management fee—Note 3(a)

 

 

856,310

 

Custodian fees—Note 3(c)

 

 

81,974

 

Professional fees

 

 

69,284

 

Registration fees

 

 

53,861

 

Directors’ fees and expenses—Note 3(d)

 

 

23,360

 

Prospectus and shareholders’ reports

 

 

9,268

 

Shareholder servicing costs—Note 3(c)

 

 

6,584

 

Distribution fees—Note 3(b)

 

 

4,591

 

Loan commitment fees—Note 2

 

 

1,689

 

Interest expense—Note 2

 

 

388

 

Miscellaneous

 

 

35,481

 

Total Expenses

 

 

1,142,790

 

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

 

 

(28,644)

 

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

 

 

(30)

 

Net Expenses

 

 

1,114,116

 

Investment Income—Net

 

 

1,630,176

 

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

 

 

Net realized gain (loss) on investments and foreign currency transactions

330,439

 

Net realized gain (loss) on options transactions

272,442

 

Net realized gain (loss) on forward foreign currency exchange contracts

1,005,697

 

Net Realized Gain (Loss)

 

 

1,608,578

 

Net unrealized appreciation (depreciation) on investments
and foreign currency transactions

 

 

9,479,219

 

Net unrealized appreciation (depreciation) on options transactions

 

 

(10,683)

 

Net unrealized appreciation (depreciation) on
forward foreign currency exchange contracts

 

 

(165,814)

 

Net Unrealized Appreciation (Depreciation)

 

 

9,302,722

 

Net Realized and Unrealized Gain (Loss) on Investments

 

 

10,911,300

 

Net Increase in Net Assets Resulting from Operations

 

12,541,476

 

             

See notes to financial statements.

         

16

 

STATEMENT OF CHANGES IN NET ASSETS

                   

 

 

 

 

Year Ended October 31,

 

 

 

 

2016

 

 

 

2015

 

Operations ($):

 

 

 

 

 

 

 

 

Investment income—net

 

 

1,630,176

 

 

 

1,472,527

 

Net realized gain (loss) on investments

 

1,608,578

 

 

 

(8,763,538)

 

Net unrealized appreciation (depreciation)
on investments

 

9,302,722

 

 

 

(3,971,985)

 

Net Increase (Decrease) in Net Assets
Resulting from Operations

12,541,476

 

 

 

(11,262,996)

 

Dividends to Shareholders from ($):

 

 

 

 

 

 

 

 

Investment income—net:

 

 

 

 

 

 

 

 

Class A

 

 

-

 

 

 

(19,328)

 

Class C

 

 

-

 

 

 

(6,578)

 

Class I

 

 

-

 

 

 

(1,439,219)

 

Class Y

 

 

-

 

 

 

(15,627)

 

Tax return of capital:

 

 

 

 

 

 

 

 

Class A

 

 

-

 

 

 

(2,184)

 

Class C

 

 

-

 

 

 

(1,782)

 

Class I

 

 

-

 

 

 

(174,189)

 

Class Y

 

 

-

 

 

 

(1,881)

 

Total Dividends

 

 

-

 

 

 

(1,660,788)

 

Capital Stock Transactions ($):

 

 

 

 

 

 

 

 

Net proceeds from shares sold:

 

 

 

 

 

 

 

 

Class A

 

 

139,418

 

 

 

37,137

 

Class C

 

 

9,158

 

 

 

-

 

Class I

 

 

31,578,081

 

 

 

5,140,978

 

Class Y

 

 

1,139,039

 

 

 

1,292,262

 

Dividends reinvested:

 

 

 

 

 

 

 

 

Class A

 

 

-

 

 

 

13,272

 

Class C

 

 

-

 

 

 

3,480

 

Class I

 

 

-

 

 

 

32,469

 

Class Y

 

 

-

 

 

 

11,336

 

Cost of shares redeemed:

 

 

 

 

 

 

 

 

Class A

 

 

(133,670)

 

 

 

(239,920)

 

Class C

 

 

(90,470)

 

 

 

(33,805)

 

Class I

 

 

(12,634,217)

 

 

 

(6,222,559)

 

Class Y

 

 

(919,109)

 

 

 

(731,868)

 

Increase (Decrease) in Net Assets
from Capital Stock Transactions

19,088,230

 

 

 

(697,218)

 

Total Increase (Decrease) in Net Assets

31,629,706

 

 

 

(13,621,002)

 

Net Assets ($):

 

 

 

 

 

 

 

 

Beginning of Period

 

 

70,784,850

 

 

 

84,405,852

 

End of Period

 

 

102,414,556

 

 

 

70,784,850

 

Undistributed investment income—net

1,624,029

 

 

 

1,988

 

17

 

STATEMENT OF CHANGES IN NET ASSETS (continued)

                   

 

 

 

 

Year Ended October 31,

 

 

 

 

2016

 

 

 

2015

 

Capital Share Transactions (Shares):

 

 

 

 

 

 

 

 

Class A

 

 

 

 

 

 

 

 

Shares sold

 

 

12,437

 

 

 

3,302

 

Shares issued for dividends reinvested

 

 

-

 

 

 

1,201

 

Shares redeemed

 

 

(12,581)

 

 

 

(21,943)

 

Net Increase (Decrease) in Shares Outstanding

(144)

 

 

 

(17,440)

 

Class C

 

 

 

 

 

 

 

 

Shares sold

 

 

798

 

 

 

-

 

Shares issued for dividends reinvested

 

 

-

 

 

 

318

 

Shares redeemed

 

 

(9,120)

 

 

 

(3,094)

 

Net Increase (Decrease) in Shares Outstanding

(8,322)

 

 

 

(2,776)

 

Class I

 

 

 

 

 

 

 

 

Shares sold

 

 

3,307,471

 

 

 

442,315

 

Shares issued for dividends reinvested

 

 

-

 

 

 

2,938

 

Shares redeemed

 

 

(1,266,125)

 

 

 

(538,385)

 

Net Increase (Decrease) in Shares Outstanding

2,041,346

 

 

 

(93,132)

 

Class Y

 

 

 

 

 

 

 

 

Shares sold

 

 

119,562

 

 

 

116,210

 

Shares issued for dividends reinvested

 

 

-

 

 

 

1,026

 

Shares redeemed

 

 

(96,316)

 

 

 

(68,748)

 

Net Increase (Decrease) in Shares Outstanding

23,246

 

 

 

48,488

 

                   

See notes to financial statements.

               

18

 

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.

             
     
   

Year Ended October 31,

Class A Shares

 

2016

2015

2014

2013

2012

Per Share Data ($):

           

Net asset value, beginning of period

 

10.27

12.13

12.22

11.52

11.38

Investment Operations:

           

Investment income—neta

 

.17

.19

.21

.21

.21

Net realized and unrealized
gain (loss) on investments

 

.97

(1.84)

(.13)

.51

.14

Total from Investment Operations

 

1.14

(1.65)

.08

.72

.35

Distributions:

           

Dividends from
investment income—net

 

-

(.19)

(.17)

(.02)

(.21)

Tax return of capital

 

-

(.02)

-

-

-

Total Distributions

 

-

(.21)

(.17)

(.02)

(.21)

Net asset value, end of period

 

11.41

10.27

12.13

12.22

11.52

Total Return (%)b

 

11.10

(13.76)

.71

6.25

3.18

Ratios/Supplemental Data (%):

       

Ratio of total expenses
to average net assets

 

1.69

1.72

1.71

1.71

1.81

Ratio of net expenses
to average net assets

 

1.60

1.60

1.60

1.61

1.65

Ratio of net investment income
to average net assets

 

1.60

1.71

1.80

1.78

1.86

Portfolio Turnover Rate

 

79.54

125.89

97.47

99.13

100.76

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

 

1,016

916

1,294

1,380

738

a Based on average shares outstanding.

b Exclusive of sales charge.

See notes to financial statements.

19

 

FINANCIAL HIGHLIGHTS (continued)

             
     
   

Year Ended October 31,

Class C Shares

 

2016

2015

2014

2013

2012

Per Share Data ($):

           

Net asset value, beginning of period

 

10.13

11.96

12.07

11.44

11.33

Investment Operations:

           

Investment income—neta

 

.09

.10

.12

.11

.13

Net realized and unrealized
gain (loss) on investments

 

.94

(1.81)

(.14)

.52

.13

Total from
Investment Operations

 

1.03

(1.71)

(.02)

.63

.26

Distributions:

           

Dividends from
investment income—net

 

-

(.10)

(.09)

-

(.15)

Tax return of capital

 

-

(.02)

-

-

-

Total Distributions

 

-

(.12)

(.09)

-

(.15)

Net asset value, end of period

 

11.16

10.13

11.96

12.07

11.44

Total Return (%)b

 

10.17

(14.36)

(.03)

5.42

2.38

Ratios/Supplemental Data (%):

       

Ratio of total expenses
to average net assets

 

2.41

2.46

2.44

2.42

2.51

Ratio of net expenses
to average net assets

 

2.35

2.35

2.35

2.36

2.40

Ratio of net investment income
to average net assets

 

.85

.96

1.04

.92

1.15

Portfolio Turnover Rate

 

79.54

125.89

97.47

99.13

100.76

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

 

644

669

823

720

589

a Based on average shares outstanding.

b Exclusive of sales charge.

See notes to financial statements.

20

 

             
     
   

Year Ended October 31,

Class I Shares

 

2016

2015

2014

2013

2012

Per Share Data ($):

           

Net asset value, beginning of period

 

10.29

12.16

12.25

11.54

11.40

Investment Operations:

           

Investment income—neta

 

.20

.21

.24

.24

.25

Net realized and unrealized
gain (loss) on investments

 

.97

(1.84)

(.13)

.51

.12

Total from Investment Operations

 

1.17

(1.63)

.11

.75

.37

Distributions:

           

Dividends from
investment income—net

 

-

(.21)

(.20)

(.04)

(.23)

Tax return of capital

 

-

(.03)

-

-

-

Total Distributions

 

-

(.24)

(.20)

(.04)

(.23)

Net asset value, end of period

 

11.46

10.29

12.16

12.25

11.54

Total Return (%)

 

11.37

(13.54)

.97

6.52

3.38

Ratios/Supplemental Data (%):

       

Ratio of total expenses
to average net assets

 

1.32

1.36

1.35

1.34

1.45

Ratio of net expenses
to average net assets

 

1.29

1.35

1.35

1.34

1.40

Ratio of net investment income
to average net assets

 

1.91

1.96

2.04

1.97

2.15

Portfolio Turnover Rate

 

79.54

125.89

97.47

99.13

100.76

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

 

99,315

68,147

81,636

83,306

69,209

a Based on average shares outstanding.

See notes to financial statements.

21

 

FINANCIAL HIGHLIGHTS (continued)

         
   
 

Year Ended October 31,

Class Y Shares

2016

2015

2014

2013a

Per Share Data ($):

       

Net asset value, beginning of period

10.29

12.16

12.25

11.41

Investment Operations:

       

Investment income—netb

.20

.24

.28

.06

Net realized and unrealized
gain (loss) on investments

.98

(1.87)

(.16)

.78

Total from Investment Operations

1.18

(1.63)

.12

.84

Distributions:

       

Dividends from
investment income—net

-

(.22)

(.21)

-

Tax return of capital

-

(.02)

-

-

Total Distributions

-

(.24)

(.21)

-

Net asset value, end of period

11.47

10.29

12.16

12.25

Total Return (%)

11.47

(13.53)

.95

7.45c

Ratios/Supplemental Data (%):

     

Ratio of total expenses
to average net assets

1.32

1.38

1.35

1.42d

Ratio of net expenses
to average net assets

1.30

1.30

1.33

1.35d

Ratio of net investment income
to average net assets

1.90

2.10

2.26

1.46d

Portfolio Turnover Rate

79.54

125.89

97.47

99.13

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

1,439

1,052

653

1

a From July 1, 2013 (commencement of initial offering) to October 31, 2013.

b Based on average shares outstanding.

c Not annualized.

d Annualized.

See notes to financial statements.

22

 

NOTES TO FINANCIAL STATEMENTS

NOTE 1—Significant Accounting Policies:

Dreyfus Total Emerging Markets Fund (the “fund”) is a separate non-diversified series of Advantage Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering ten series, including the fund. The fund’s investment objective is to seek to maximize total return. 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 Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 100 million shares of $.001 par value Common Stock in each of the following classes of shares: Class A, Class C, Class I and Class Y. 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 Class Y shares are sold at net asset value per share generally to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.

As of October 31, 2016, MBC Investments Corp., an indirect subsidiary of BNY Mellon, held 40,000 Class A shares, 40,000 Class C shares and 463,798 Class I shares of the fund.

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

The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’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.

23

 

NOTES TO FINANCIAL STATEMENTS (continued)

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

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

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

Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:

Level 1—unadjusted quoted prices in active markets for identical investments.

Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).

Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:

Investments in debt securities, excluding short-term investments (other than U.S. Treasury Bills), options and forward foreign currency exchange contracts (“forward contracts”) are valued each business day by an independent pricing service (the “Service”) approved by the Company’s Board of Directors (the “Board”). Investments for which quoted bid prices are readily available and are representative of the bid side of the market in

24

 

the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments are valued as determined by the Service, based on methods which include consideration of the following: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. These securities are generally categorized within Level 2 of the fair value hierarchy.

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

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

The Service is engaged under the general supervision of the Board.

Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and 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 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

25

 

NOTES TO FINANCIAL STATEMENTS (continued)

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 generally categorized within Level 3 of the fair value hierarchy.

Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.

Options, which are traded on an exchange, are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day and are generally categorized within Level 1 of the fair value hierarchy. Options traded over-the-counter (“OTC”) are valued at the mean between the bid and asked price and are generally categorized within Level 2 of the fair value hierarchy. Forward contracts are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.

The following is a summary of the inputs used as of October 31, 2016 in valuing the fund’s investments:

         
 

Level 1 –
Unadjusted
Quoted Prices

Level 2 – Other
Significant
Observable
Inputs

Level 3 –
Significant
Unobservable
Inputs

Total

Assets ($)

     

Investments in Securities:

     

Corporate Bonds

-

13,982,519

-

13,982,519

Equity Securities –
Foreign Common Stocks

70,528,997

291,552††

-

70,820,549

Foreign Government

-

15,954,852

-

15,954,852

Mutual Funds

2,732,534

-

-

2,732,534

Other Financial Instruments:

     

Forward Foreign Currency Exchange Contracts†††

-

239,334

-

239,334

26

 

         
 

Level 1 –
Unadjusted
Quoted Prices

Level 2 – Other
Significant
Observable
Inputs

Level 3 –
Significant
Unobservable
Inputs

Total

Liabilities ($)

       

Other Financial Instruments:

     

Forward Foreign Currency Exchange Contracts†††

-

(252,208)

-

(252,208)

Options Written

-

(38,954)

-

(38,954)

 See Statement of Investments for additional detailed categorizations.

†† Securities classified within Level 2 at period end as the values were determined pursuant to the fund’s fair valuation procedures. See note above for additional information.

††† Amount shown represents unrealized appreciation (depreciation) at period end.

At October 31, 2015, no exchange traded foreign equity securities were classified within Level 2 of the fair value hierarchy pursuant to the fund’s fair valuation procedures.

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

   

 

Equity Securities-Foreign ($)

Balance as of 10/31/2015

400,270

Realized gain (loss)

Change in unrealized appreciation (depreciation)

(173,285)

Purchases/ issuances

Sales/ dispositions

Transfers into Level 3

Transfers out of Level 3

(226,985)

Balance as of 10/31/2016

The amount of total gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to investments still held at 10/31/2016

 Transfers out of Level 3 represent the value at the date of transfer. The transfer out of Level 3 for the current period was due to the resumption of trading of a security.

(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on

27

 

NOTES TO FINANCIAL STATEMENTS (continued)

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 October 31, 2016 were as follows:

           

Affiliated Investment Company

Value
10/31/2015 ($)

Purchases ($)

Sales ($)

Value
10/31/2016 ($)

Net
Assets (%)

Dreyfus Institutional Preferred Government Plus Money Market Fund

1,494,487

65,118,821

63,880,774

2,732,534

2.7

 Formerly Dreyfus Institutional Preferred Plus Money Market Fund.

(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 delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S.

(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

28

 

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 October 31, 2016, 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 October 31, 2016, the fund did not incur any interest or penalties.

Each tax year in the four-year period ended October 31, 2016 remains subject to examination by the Internal Revenue Service and state taxing authorities.

At October 31, 2016, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $1,676,724, accumulated capital and other losses $9,316,997 and unrealized appreciation $8,179,871.

Under the Regulated Investment Company Modernization Act of 2010, the fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.

The accumulated capital loss carryover is available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to October 31, 2016. The fund has $5,538,457 of short-term capital losses and $3,758,320 of long-term capital losses which can be carried forward for an unlimited period.

The tax character of distributions paid to shareholders during the fiscal periods ended October 31, 2016 and October 31, 2015 were as follows: ordinary income $0 and $1,480,752, and tax return of capital $0 and $180,036, respectively.

During the period ended October 31, 2016, as a result of permanent book to tax differences, primarily due to the tax treatment for foreign currency gains and losses, passive foreign investment companies and consent fees, the fund decreased accumulated undistributed investment income-net by $8,135 and increased accumulated net realized gain (loss) on investments by the same amount. Net assets and net asset value per share were not affected by this reclassification.

29

 

NOTES TO FINANCIAL STATEMENTS (continued)

NOTE 2—Bank Lines of Credit:

The fund participates with other Dreyfus-managed funds in a $810 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 5, 2016, the unsecured credit facility with Citibank, N.A. was $555 million and prior to January 11, 2016, the unsecured credit facility with Citibank, N.A. was $480 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 October 31, 2016, was approximately $44,500 with a related weighted average annualized interest rate of .87%.

NOTE 3—Management Fee and Other Transactions with Affiliates:

(a) Pursuant to a management agreement with Dreyfus, the management fee is computed at the annual rate of 1% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus has contractually agreed, from November 1, 2015 through March 1, 2017, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the expenses of Class A, Class C, Class I and Class 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 1.35%, 1.35%, 1.35% and 1.30% of the value of the respective class’ average daily net assets. The reduction in expenses, pursuant to the undertaking, amounted to $28,644 during the period ended October 31, 2016.

During the period ended October 31, 2016, the Distributor retained $4 from commissions earned on sales of the fund’s Class A shares.

(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended October 31, 2016, Class C shares were charged $4,591 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

30

 

net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended October 31, 2016, Class A and Class C shares were charged $2,280 and $1,530, 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 Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, 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 October 31, 2016, the fund was charged $1,462 for transfer agency services and $72 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 $30.

The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended October 31, 2016, the fund was charged $81,974 pursuant to the custody agreement.

During the period ended October 31, 2016, the fund was charged $11,765 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 $87,539, Distribution Plan fees $416, Shareholder Services Plan fees $349, custodian fees $52,000, Chief Compliance Officer fees $6,826 and transfer agency fees $254, which are offset against an expense reimbursement currently in effect in the amount of $16.

31

 

NOTES TO FINANCIAL STATEMENTS (continued)

(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 use of the fund’s exchange privilege. At October 31, 2016, there were no redemption fees retained by the fund.

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, options transactions and forward contracts, during the period ended October 31, 2016, amounted to $87,678,304 and $65,848,646, respectively.

Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.

Each type of derivative instrument that was held by the fund during the period ended October 31, 2016 is discussed below.

Options Transactions: The fund purchases and writes (sells) put and call options to hedge against changes in foreign currencies or as a substitute for an investment. The fund is subject to market risk and currency risk in the course of pursuing its investment objectives through its investments in options contracts. A call option gives the purchaser of the option the right (but not the obligation) to buy, and obligates the writer to sell, the underlying financial instrument at the exercise price at any time during the option period, or at a specified date. Conversely, a put option gives the purchaser of the option the right (but not the obligation) to sell, and obligates the writer to buy the underlying financial instrument at the exercise price at any time during the option period, or at a specified date.

As a writer of call options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the

32

 

financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument decreases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument increases between those dates.

As a writer of put options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument increases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument decreases between those dates. The maximum payout for these contracts is limited to the number of put option contracts written and the related strike prices, respectively.

As a writer of an option, the fund has no control over whether the underlying financial instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the financial instrument underlying the written option. There is a risk of loss from a change in value of such options which may exceed the related premiums received. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. The Statement of Operations reflects any unrealized gains or losses which occurred during the period as well as any realized gains or losses which occurred upon the expiration or closing of the option transaction.

The following summarizes the fund’s call/put options written during the period ended October 31, 2016:

         
 

Face Amount

 

Options Terminated

 

Covered by

Premiums

 

Net Realized

Options Written:

Contracts ($)

Received ($)

Cost ($)

Gain ($)

Contracts outstanding
October 31, 2015

10,700,000

127,807

   

Contracts written

16,600,000

218,334

   

Contracts terminated:

       

Contracts expired

22,100,000

283,757

-

283,757

Contracts outstanding
October 31, 2016

5,200,000

62,384

   

Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign

33

 

NOTES TO FINANCIAL STATEMENTS (continued)

currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. The following summarizes open forward contracts at October 31, 2016:

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Purchases:

     

Bank of America

     

Euro,

       

Expiring

       

11/30/2016

1,670,000

1,828,449

1,835,447

6,998

South African Rand,

       

Expiring

       

1/13/2017

2,045,000

144,804

149,361

4,557

Barclays Bank

     

Mexican New Peso,

       

Expiring

       

1/13/2017

35,030,000

1,878,200

1,838,105

(40,095)

Citigroup

     

South Korean Won,

       

Expiring

       

1/13/2017

2,402,270,000

2,110,531

2,098,926

(11,605)

34

 

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Purchases: (continued)

Goldman Sachs International

     

Colombian Peso,

       

Expiring

       

1/13/2017

10,181,865,000

3,424,681

3,349,357

(75,324)

Russian Ruble,

       

Expiring

       

1/13/2017

167,585,000

2,646,344

2,591,957

(54,387)

JP Morgan Chase Bank

     

Brazilian Real,

       

Expiring

       

12/2/2016

21,205,000

6,475,730

6,577,274

101,544

Chilean Peso,

       

Expiring

       

1/13/2017

509,600,000

764,212

775,843

11,631

Indian Rupee,

       

Expiring

       

1/13/2017

460,760,000

6,810,936

6,823,092

12,156

Malaysian Ringgit,

       

Expiring

       

1/13/2017

12,080,000

2,888,624

2,869,284

(19,340)

Polish Zloty,

       

Expiring

       

1/13/2017

13,420,000

3,380,663

3,415,914

35,251

Turkish Lira,

       

Expiring

       

1/13/2017

2,515,000

803,463

799,840

(3,623)

Morgan Stanley Capital Services

     

South African Rand,

       

Expiring

       

1/13/2017

21,900,000

1,560,632

1,599,516

38,884

Sales:

     

Bank of America

     

Indonesian Rupiah,

       

Expiring

       

1/13/2017

9,812,580,000

741,804

743,490

(1,686)

Singapore Dollar,

       

Expiring

       

11/30/2016

2,170,000

1,558,549

1,560,107

(1,558)

Barclays Bank

     

Philippine Peso,

       

Expiring

       

1/13/2017

160,060,000

3,301,257

3,302,487

(1,230)

35

 

NOTES TO FINANCIAL STATEMENTS (continued)

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Sales: (continued)

Barclays Bank (continued)

South Korean Won,

       

Expiring

       

1/13/2017

1,400,000,000

1,234,459

1,223,217

11,242

Citigroup

     

Argentine Peso,

       

Expiring

       

12/7/2016

9,350,000

594,216

602,712

(8,496)

7/13/2017

4,390,000

251,576

253,770

(2,194)

Peruvian New Sol,

       

Expiring

       

1/9/2017

2,498,000

736,612

736,692

(80)

Goldman Sachs International

     

Hungarian Forint,

       

Expiring

       

1/13/2017

279,320,000

985,867

994,437

(8,570)

Mexican New Peso,

       

Expiring

       

1/13/2017

17,830,000

951,948

935,581

16,367

South African Rand,

       

Expiring

       

11/1/2016

629,998

45,375

46,723

(1,348)

HSBC

     

Hong Kong Dollars

       

Expiring

       

11/2/2016

2,558,658

329,916

329,913

3

JP Morgan Chase Bank

     

Argentine Peso,

       

Expiring

       

12/21/2016

2,200,000

138,713

140,714

(2,001)

Hungarian Forint,

       

Expiring

       

1/13/2017

647,890,000

2,286,173

2,306,621

(20,448)

Polish Zloty,

       

Expiring

       

11/2/2016

82,425

20,787

21,009

(222)

Taiwan Dollar,

       

Expiring

       

1/13/2017

5,000

158

159

(1)

Thai Baht,

       

Expiring

       

1/13/2017

100,440,000

2,867,502

2,866,868

634

36

 

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Sales: (continued)

Standard Chartered Bank

     

Hong Kong Dollars

       

Expiring

       

11/1/2016

5,595,011

721,487

721,420

67

Gross Unrealized Appreciation

   

239,334

Gross Unrealized Depreciation

   

(252,208)

The provisions of ASC Topic 210 “Disclosures about Offsetting Assets and Liabilities” require disclosure on the offsetting of financial assets and liabilities. These disclosures are required for certain investments, including derivative financial instruments subject to Master Agreements which are eligible for offsetting in the Statement of Assets and Liabilities and require the fund to disclose both gross and net information with respect to such investments. For financial reporting purposes, the fund does not offset derivative assets and derivative liabilities that are subject to Master Agreements in the Statement of Assets and Liabilities.

At October 31, 2016, derivative assets and liabilities (by type) on a gross basis are as follows:

           

Derivative Financial Instruments:

 

Assets ($)

 

Liabilities ($)

 

Options

 

-

 

(38,954)

 

Forward contracts

 

239,334

 

(252,208)

 

Total gross amount of derivative

         

assets and liabilities in the

         

Statement of Assets and Liabilities

 

239,334

 

(291,162)

 

Derivatives not subject to

         

Master Agreements

 

-

 

-

 

Total gross amount of assets

         

and liabilities subject to

         

Master Agreements

 

239,334

 

(291,162)

 

37

 

NOTES TO FINANCIAL STATEMENTS (continued)

The following tables present derivative assets and liabilities net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of October 31, 2016:

             
     

Financial

     
     

Instruments

     
     

and Derivatives

     
 

Gross Amount of

 

Available

Collateral

 

Net Amount of

Counterparty

Assets ($)

1

for Offset ($)

Received ($)

2

Assets ($)

Bank of America

11,555

 

(3,244)

-

 

8,311

Barclays Bank

11,242

 

(11,242)

-

 

-

Goldman Sachs
International

16,367

 

(16,367)

-

 

-

HSBC

3

 

-

-

 

3

JP Morgan
Chase Bank

161,216

 

(72,544)

(88,672)

 

-

Morgan Stanley
Capital Services

38,884

 

-

-

 

38,884

Standard
Chartered Bank

67

 

-

-

 

67

Total

239,334

 

(103,397)

(88,672)

 

47,265

             
     

Financial

     
     

Instruments

     
     

and Derivatives

     
 

Gross Amount of

 

Available

Collateral

 

Net Amount of

Counterparty

Liabilities ($)

1

for Offset ($)

Pledged ($)

2

Liabilities ($)

Bank of America

(3,244)

 

3,244

-

 

-

Barclays Bank

(41,325)

 

11,242

-

 

(30,083)

Citigroup

(34,420)

 

-

-

 

(34,420)

Goldman Sachs
International

(139,629)

 

16,367

-

 

(123,262)

JP Morgan
Chase Bank

(72,544)

 

72,544

-

 

-

Total

(291,162)

 

103,397

-

 

(187,765)

             

1 Absent a default event or early termination, OTC derivative assets and liabilities are presented at gross amounts and are
not offset in the Statement of Assets and Liabilities.

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 October 31, 2016:

     

 

 

Average Market Value ($)

Foreign currency options contracts

 

33,646

Forward contracts

 

35,319,009

     

At October 31, 2016, the cost of investments for federal income tax purposes was $95,298,703; accordingly, accumulated net unrealized appreciation on investments was $8,191,751, consisting of $10,775,574 gross unrealized appreciation and $2,583,823 gross unrealized depreciation.

38

 

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors
Dreyfus Total Emerging Markets Fund

We have audited the accompanying statement of assets and liabilities, including the statements of investments and options written, of Dreyfus Total Emerging Markets Fund (one of the series comprising Advantage Funds, Inc.) as of October 31, 2016, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2016 by correspondence with the custodian and others. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Dreyfus Total Emerging Markets Fund at October 31, 2016, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the indicated periods, in conformity with U.S. generally accepted accounting principles.

New York, New York
December 29, 2016

39

 

IMPORTANT TAX INFORMATION (Unaudited)

In accordance with federal tax law, the fund elects to provide each shareholder with their portion of the fund’s foreign taxes paid and the income sourced from foreign countries. Accordingly, the fund hereby reports the following information regarding its fiscal year ended October 31, 2016:

-the total amount of taxes paid to foreign countries was $148,501

-the total amount of income sourced from foreign countries was $2,265,513

Where required by federal tax law rules, shareholders will receive notification of their proportionate share of foreign taxes paid and foreign sourced income for the 2016 calendar year with Form 1099-DIV which will be mailed in early 2017.

40

 

BOARD MEMBERS INFORMATION (Unaudited)

INDEPENDENT BOARD MEMBERS

Joseph S. DiMartino (73)

Chairman of the Board (1995)

Principal Occupation During Past 5 Years:

· Corporate Director and Trustee (1995-present)

Other Public Company Board Memberships During Past 5 Years:

· CBIZ (formerly, Century Business Services, Inc.), a provider of outsourcing functions for small and medium size companies, Director (1997-present)

No. of Portfolios for which Board Member Serves: 135

———————

Peggy C. Davis (73)

Board Member (2006)

Principal Occupation During Past 5 Years:

· Shad Professor of Law, New York University School of Law (1983-present)

No. of Portfolios for which Board Member Serves: 49

———————

David P. Feldman (76)

Board Member (1996)

Principal Occupation During Past 5 Years:

· Corporate Director and Trustee (1985-present)

Other Public Company Board Memberships During Past 5 Years:

· BBH Mutual Funds Group (5 registered mutual funds), Director (1992-2014)

No. of Portfolios for which Board Member Serves: 35

———————

Ehud Houminer (76)

Board Member (1993)

Principal Occupation During Past 5 Years:

· Executive-in-Residence at the Columbia Business School, Columbia

University (1992-present)

Other Public Company Board Memberships During Past 5 Years:

· Avnet, Inc., an electronics distributor, Director (1993-2012)

No. of Portfolios for which Board Member Serves: 59

———————

41

 

BOARD MEMBERS INFORMATION (Unaudited) (continued)
INDEPENDENT BOARD MEMBERS (continued)

Lynn Martin (76)

Board Member (2012)

Principal Occupation During Past 5 Years:

· President of The Martin Hall Group LLC, a human resources consulting firm (2005-2012)

Other Public Company Board Memberships During Past 5 Years:

· AT&T, Inc., a telecommunications company, Director (1999-2012)

· Ryder System, Inc., a supply chain and transportation management company, Director (1993-2012)

No. of Portfolios for which Board Member Serves: 35

———————

Robin A. Melvin (53)

Board Member (2012)

Principal Occupation During Past 5 Years:

· Co-chairman, Illinois Mentoring Partnership, non-profit organization dedicated to increasing the quantity and quality of mentoring services in Illinois; (2014-present; served as a board member since 2013)

· Director, Boisi Family Foundation, a private family foundation that supports youth-serving organizations that promote the self sufficiency of youth from disadvantaged circumstances (1995-2012)

No. of Portfolios for which Board Member Serves: 107

———————

Dr. Martin Peretz (77)

Board Member (2006)

Principal Occupation During Past 5 Years:

· Editor-in-Chief Emeritus of The New Republic Magazine (2011-2012) (previously,

Editor-in-Chief, 1974-2011)

· Director of TheStreet.com, a financial information service on the web (1996-2010)

· Lecturer at Harvard University (1969-2012)

No. of Portfolios for which Board Member Serves: 35

———————

Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80. The address of the Board Members and Officers is c/o The Dreyfus Corporation, 200 Park Avenue, New York, New York 10166. Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from Dreyfus free of charge by calling this toll free number: 1-800-DREYFUS.

James F. Henry, Emeritus Board Member
Dr. Paul A. Marks, Emeritus Board Member
Philip L. Toia, Emeritus Board Member

42

 

OFFICERS OF THE FUND (Unaudited)

BRADLEY J. SKAPYAK, President since January 2010.

Chief Operating Officer and a director of the Manager since June 2009, Chairman of Dreyfus Transfer, Inc., an affiliate of the Manager and the transfer agent of the funds, since May 2011 and Executive Vice President of the Distributor since June 2007. From April 2003 to June 2009, Mr. Skapyak was the head of the Investment Accounting and Support Department of the Manager. He is an officer of 64 investment companies (comprised of 135 portfolios) managed by the Manager. He is 57 years old and has been an employee of the Manager since February 1988.

BENNETT A. MACDOUGALL, Chief Legal Officer since October 2015.

Chief Legal Officer of the Manager since June 2015; from June 2005 to June 2015, he served in various capacities with Deutsche Bank – Asset & Wealth Management Division, including as Director and Associate General Counsel, and Chief Legal Officer of Deutsche Investment Management Americas Inc. from June 2012 to May 2015. He is an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 45 years old and has been an employee of the Manager since June 2015.

JANETTE E. FARRAGHER, Vice President and Secretary since December 2011.

Assistant General Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. She is 53 years old and has been an employee of the Manager since February 1984.

JAMES BITETTO, Vice President and Assistant Secretary since August 2005.

Managing Counsel of BNY Mellon and Secretary of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 50 years old and has been an employee of the Manager since December 1996.

JONI LACKS CHARATAN, Vice President and Assistant Secretary since August 2005.

Managing Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. She is 60 years old and has been an employee of the Manager since October 1988.

JOSEPH M. CHIOFFI, Vice President and Assistant Secretary since August 2005.

Managing Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 54 years old and has been an employee of the Manager since June 2000.

MAUREEN E. KANE, Vice President and Assistant Secretary since April 2015.

Managing Counsel of BNY Mellon since July 2014; from October 2004 until July 2014, General Counsel, and from May 2009 until July 2014, Chief Compliance Officer of Century Capital Management. She is an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. She is 54 years old and has been an employee of the Manager since July 2014.

SARAH S. KELLEHER, Vice President and Assistant Secretary since April 2014.

Senior Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager; from August 2005 to March 2013, Associate General Counsel of Third Avenue Management. She is 41 years old and has been an employee of the Manager since March 2013.

JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.

Senior Managing Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 51 years old and has been an employee of the Manager since October 1990.

JAMES WINDELS, Treasurer since November 2001.

Director – Mutual Fund Accounting of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 58 years old and has been an employee of the Manager since April 1985.

RICHARD CASSARO, Assistant Treasurer since January 2008.

Senior Accounting Manager – Money Market, Municipal Bond and Equity Funds of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 57 years old and has been an employee of the Manager since September 1982.

43

 

OFFICERS OF THE FUND (Unaudited) (continued)

GAVIN C. REILLY, Assistant Treasurer since December 2005.

Tax Manager of the Investment Accounting and Support Department of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 48 years old and has been an employee of the Manager since April 1991.

ROBERT S. ROBOL, Assistant Treasurer since August 2005.

Senior Accounting Manager of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 52 years old and has been an employee of the Manager since October 1988.

ROBERT SALVIOLO, Assistant Treasurer since July 2007.

Senior Accounting Manager – Equity Funds of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since June 1989.

ROBERT SVAGNA, Assistant Treasurer since December 2002.

Senior Accounting Manager – Fixed Income and Equity Funds of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since November 1990.

JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.

Chief Compliance Officer of the Manager and The Dreyfus Family of Funds (65 investment companies, comprised of 160 portfolios). He is 59 years old and has served in various capacities with the Manager since 1980, including manager of the firm’s Fund Accounting Department from 1997 through October 2001.

CARIDAD M. CAROSELLA, Anti-Money Laundering Compliance Officer since January 2016

Anti-Money Laundering Compliance Officer of the Dreyfus Family of Funds and BNY Mellon Funds Trust since January 2016; from May 2015 to December 2015, Interim Anti-Money Laundering Compliance Officer of the Dreyfus Family of Funds and BNY Mellon Funds Trust and the Distributor; from January 2012 to May 2015, AML Surveillance Officer of the Distributor and from 2007 to December 2011, Financial Processing Manager of the Distributor. She is an officer of 60 investment companies (comprised of 155 portfolios) managed by the Manager. She is 48 years old and has been an employee of the Distributor since 1997.

44

 

NOTES

45

 

For More Information

Dreyfus Total Emerging Markets Fund

200 Park Avenue
New York, NY 10166

Manager

The Dreyfus Corporation
200 Park Avenue
New York, NY 10166

Custodian

The Bank of New York Mellon
225 Liberty Street
New York, NY 10286

Transfer Agent &
Dividend Disbursing Agent

Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166

Distributor

MBSC Securities Corporation
200 Park Avenue
New York, NY 10166

   

Ticker Symbols:

Class A: DTMAX      Class C: DTMCX      Class I: DTEIX      Class Y: DTMYX

Telephone Call your financial representative or 1-800-DREYFUS

Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144

E-mail Send your request to [email protected]

Internet Information can be viewed online or downloaded at www.dreyfus.com

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. (phone 1-800-SEC-0330 for information).

A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.dreyfus.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.

   

© 2016 MBSC Securities Corporation
6301AR1016

 


 

Dynamic Total Return Fund

     

 

ANNUAL REPORT

October 31, 2016

   
 

 

 

Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.dreyfus.com and sign up for Dreyfus 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 Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.

 

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

 

Contents

T H E    F U N D

F O R    M O R E    I N F O R M AT I O N

 

Back Cover

 

       
 


Dynamic Total Return Fund

 

The Fund

A LETTER FROM THE CHIEF EXECUTIVE OFFICER

Dear Shareholder:

We are pleased to present this annual report for Dynamic Total Return Fund, covering the 12-month period from November 1, 2015 through October 31, 2016. For information about how the fund performed during the reporting period, as well as general market perspectives, we provide a Discussion of Fund Performance on the pages that follow.

Stocks and bonds generally advanced over the reporting period in the midst of heightened market volatility stemming from various global economic developments. Toward the end of 2015, investor sentiment deteriorated amid sluggish global economic growth, falling commodity prices, and the first increase in short-term U.S. interest rates in nearly a decade. These worries sparked sharp stock market declines in January 2016, but equities began to rally in February when U.S. monetary policymakers refrained from additional rate hikes, other central banks eased their monetary policies further, and commodity prices began to rebound. Stocks generally continued to climb through the summer, driving several broad measures of U.S. stock market performance to record highs in July and August before moderating as a result of uncertainty regarding U.S. elections and potential rate hikes. In the bond market, yields of high-quality sovereign bonds generally moved lower and their prices increased in response to robust investor demand for current income in a low interest rate environment.

The outcome of the U.S. presidential election and ongoing global economic headwinds suggest that uncertainty will persist in the financial markets over the foreseeable future. Some asset classes and industry groups may benefit from a changing economic and political landscape, while others probably will face challenges. Consequently, selectivity could become a more important determinant of investment success. As always, we encourage you to discuss the implications of our observations with your financial advisor.

Thank you for your continued confidence and support.

Sincerely,

Mark D. Santero
Chief Executive Officer
The Dreyfus Corporation
November 15, 2016

2

 

DISCUSSION OF FUND PERFORMANCE

For the period from November 1, 2015 through October 31, 2016, as provided by Vassilis Dagioglu, James Stavena, Torrey Zaches, Joseph Miletich, and Sinead Colton, Portfolio Managers of Mellon Capital Management Corporation, Sub-Investment Adviser

Fund and Market Performance Overview

For the 12-month period ended October 31, 2016, Dynamic Total Return Fund’s Class A shares produced a total return of 0.70%, Class C shares returned -0.07%, Class I shares returned 1.01%, and Class Y shares returned 1.01%.1 In comparison, the fund’s benchmarks as of March 1, 2016, the Morgan Stanley Capital International World Index (the “MSCI World Index”), the Citi 3-Month Treasury Bill Index and a hybrid index comprised of 60% MSCI World Index and 40% Citigroup World Government Bond Index (the “CWGB Index”) returned 1.18%, 0.22% and 3.25%, respectively, for the same period. The fund’s benchmarks prior to March 1, 2016, the MSCI World Index (half-hedged), the CWGB Index (half-hedged) and a hybrid index comprised of 60% MSCI World Index (half-hedged) and 40% CWGB (half-hedged) returned 1.64%, 5.58% and 3.36%, respectively, for the 12-month period ended October 31, 2016. 2

Global bonds gained value amid falling interest rates, and equities posted more modestly positive returns in a volatile market environment. The fund performed roughly in line with the MSCI World Index, but lagged the MSCI World Index (half-hedged) and both hybrid indices due to a reduced exposure to German and Japanese equities. The fund’s Class A, Class I, and Class Y shares outperformed the Citi 3-Month Treasury Bill Index.

The Fund’s Investment Approach

The fund seeks total return through investments in instruments that provide investment exposure to global equity, bond, currency, and commodities markets, and in fixed-income securities. The fund targets a consistent volatility exposure across various economic regimes. The overall asset allocation of the fund is determined through a combination of bottom-up fundamental-based valuation and a top-down macroeconomic assessment. Among equity markets, the portfolio managers employ a bottom-up valuation approach using proprietary models to derive market-level expected returns. For bond markets, the portfolio managers use proprietary models to identify temporary mispricing among the long-term government bond markets. Our quantitative, long/short, relative value investment approach is designed to identify and exploit relative misvaluations across and within major developed capital markets such as the United States, Canada, Japan, Australia, and many Western European countries as well as emerging markets.

Volatility Buffeted Financial Markets

Global equities drifted lower during the final months of 2015 under pressure from weakening commodity prices and disappointment over recent central bank strategies in Europe. Investors also nervously anticipated a short-term interest rate hike in the United States, which occurred in mid-December. Investor sentiment turned more sharply negative in January 2016 amid further deterioration in commodity prices, disappointing economic data in China, and worries that higher short-term U.S. rates might weigh on economic activity.

Stocks began to rebound in mid-February when investors responded positively to encouraging economic data, recovering commodity prices, new rounds of monetary easing, and indications that monetary policymakers would delay additional U.S. rate hikes. Markets endured another bout of volatility in June when the United Kingdom voted to leave the European Union, but equities quickly rebounded. In October, uncertainty surrounding upcoming U.S. elections weighed on global stocks, and the MSCI World Index ended the reporting period with only a modestly positive return.

3

 

DISCUSSION OF FUND PERFORMANCE (continued)

Bonds fared better than equities in this environment when interest rates declined in response to sluggish global economic growth, low inflation, and aggressively accommodative monetary policies from most central banks.

Foreign Developed Equity Markets Weighed on Results

The fund’s relative performance was dampened by our decision to reduce its allocation to long positions in Japanese and German equity markets. This change reduced the fund’s participation in the rally that followed. In fixed-income markets, short positions in U.K. 10-year gilts proved counterproductive when the Bank of England increased its quantitative easing program after the Brexit referendum. A short position in German 10-year government bonds also undermined relative performance. Late in the reporting period, short positions in certain commodities markets, especially wheat and corn, were hurt by rallies stemming from weaker-than-expected inventories.

Positions that aided relative performance during the reporting period included a short position in the British pound, which depreciated after the Brexit vote. A short euro position and a long U.S. dollar position also supported gains from active currency trading. Among bonds, a long position in the U.S. 10-year Treasury bond benefited from falling growth expectations early in the reporting period. A long position in high yield bonds added value after we temporarily doubled the fund’s allocation during a significant rally. Finally, a long position in Treasury Inflation Protected Securities fared well when monetary policymakers delayed additional rate hikes.

We employed futures contracts to establish exposures to global stocks and bonds, and we used currency forward contracts to set our currency strategies during the reporting period.

Finding Ample Long-Short Opportunities

As of the reporting period’s end, we have maintained a modestly reduced allocation to global equities, focusing on U.S., German, and Japanese markets. In contrast, we increased the fund’s long exposure to U.S. Treasury and Australian government bonds with 10-year maturities while maintaining short positions in German and U.K. government bonds. We also have attempted to limit exposure to foreign currency risk by hedging back to the U.S. dollar through short positions in the euro, British pound, Australian dollar, and Canadian dollar.

November 15, 2016

Equities are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.

Bonds are subject generally to interest rate, credit, liquidity, call, sector, and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus.

Investing internationally involves special risks, including changes in currency exchange rates, political, economic, and social instability, a lack of comprehensive company information, differing auditing and legal standards, and less market liquidity. These risks generally are greater with emerging market countries than with more economically and politically established foreign countries.

Investments in foreign currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedged positions, that the U.S. dollar will decline relative to the currency being hedged.

Exposure to the commodities markets may subject the fund to greater volatility than investments in traditional securities. The values of commodities and commodity-linked investments are affected by events that might have less impact on the values of stocks and bonds. Investments linked to the prices of commodities are considered speculative. Prices of commodities and related contracts may fluctuate significantly over short periods for a variety of factors.

1 Total return includes reinvestment of dividends and any capital gains paid, and does not take into consideration the maximum initial sales charge in the case of Class A shares, or the applicable contingent deferred sales charge imposed on redemptions in the case of Class C shares. Had these charges been reflected, returns would have been lower. Share price, yield, and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. Past performance is no guarantee of future results.

2 Source: FactSet — Reflects reinvestment of net dividends and, where applicable, capital gain distributions. The Citi 3-Month Treasury Bill Index is a market value-weighted index of public obligations of the U.S. Treasury with maturities of 90 days. The Morgan Stanley Capital International (MSCI) World Index and MSCI World Index (half-hedged) are unmanaged indices of global stock market performance, including the United States, Canada, Europe, Australia, New Zealand, and the Far East. The Citigroup World Government Bond (CWGB) Index and the CWGB (half-hedged) are market capitalization-weighted indices which include select designated government bond markets of developed countries. The hybrid index as of March 1, 2016, is an unmanaged hybrid index composed of 60% MSCI World Index and 40% CWGB Index. The hybrid index prior to March 1, 2016, is an unmanaged hybrid index composed of 60% MSCI World Index (half-hedged) and 40% CWGB Index (half-hedged). Investors cannot invest directly in any index.

4

 

FUND PERFORMANCE

Comparison of change in value of $10,000 investment in Dynamic Total Return Fund Class A shares, Class C shares, Class I shares and Class Y shares with: (1) the fund’s benchmarks as of March 1, 2016, the Morgan Stanley Capital International World Index, the Citi 3-Month Treasury Bill Index, and a Hybrid Index A comprised of 60% Morgan Stanley Capital International World Index and 40% Citigroup World Government Bond Index; and (2) the fund’s benchmarks prior to March 1, 2016, the Morgan Stanley Capital International World Index (half-hedged), Citigroup World Government Bond Index (half-hedged), and a Hybrid Index B comprised of 60% Morgan Stanley Capital International World Index (half-hedged) and 40% Citigroup World Government Bond Index (half-hedged).

 Source: FactSet

†† 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 (inception date for Class Y shares), not reflecting the applicable sales charges for Class A shares.

Past performance is not predictive of future performance.

The above graph compares a $10,000 investment made in each of the Class A, Class C, Class I and Class Y shares of Dynamic Total Return Fund on 10/31/06 to a $10,000 investment made on that date in each of the following: the Morgan Stanley Capital International World Index (the “MSCI World Index”); the Citi 3-Month Treasury Bill Index; Hybrid Index A comprised of 60% MSCI World Index and 40% Citigroup World Government Bond (“CWGB”) Index ; the MSCI World Index (half-hedged); CWGB Index (half-hedged) and Hybrid Index B comprised of 60% MSCI World Index (half-hedged) and 40% CWGB Index (half-hedged). Returns assume all dividends and capital gain distributions are reinvested.

The fund invests primarily in instruments that provide exposure to global equity, bond and currency markets. 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 Morgan Stanley Capital International (MSCI) World Index and MSCI World Index (half-hedged) are unmanaged indices of global stock market performance, including the United States, Canada, Europe, Australia, New Zealand, and the Far East. The Citi 3-Month Treasury Bill Index is a market value-weighted index of public obligations of the U.S. Treasury with maturities of 90 days. The Citigroup World Government Bond (CWGB) Index and the CWGB (half-hedged) are market capitalization-weighted indices which include select designated government bond markets of developed countries. The hybrid index as of March 1, 2016, Hybrid Index A, is an unmanaged hybrid index comprised of 60% MSCI World Index and 40% CWGB Index. The hybrid index prior to March 1, 2016, Hybrid Index B, is an unmanaged hybrid index comprised of 60% MSCI World Index (half-hedged) and 40% CWGB Index (half-hedged). 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 (continued)

         

Average Annual Total Returns as of 10/31/16

 

Inception

     
 

Date

1 Year

5 Years

10 Years

Class A shares

       

with maximum sales charge (5.75%)

5/2/06

-5.07%

4.79%

2.09%

without sales charge

5/2/06

0.70%

6.05%

2.70%

Class C shares

       

with applicable redemption charge

5/2/06

-1.07%

5.25%

1.94%

without redemption

5/2/06

-0.07%

5.25%

1.94%

Class I shares

5/2/06

1.01%

6.37%

3.04%

Class Y shares

7/1/13

1.01%

6.52%††

2.93%††

Morgan Stanley Capital International World Index

 

1.18%

9.03%

3.89%

Citi 3-Month Treasury Bill Index

 

0.22%

0.08%

0.80%

Hybrid Index A

 

3.25%

5.47%

4.13%

Morgan Stanley Capital International World Index ( half-hedged )

 

1.64%

10.22%

4.17%

Citigroup World Government
Bond Index (half-hedged)

 

5.58%

2.07%

4.07%

Hybrid Index B

 

3.36%

7.05%

4.46%

Past performance is not predictive of future performance. The fund’s performance shown in the graph 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.

 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 (inception date for Class Y shares), not reflecting the applicable sales charges for Class A shares.

6

 

UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)

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

Review your fund’s expenses

The table below shows the expenses you would have paid on a $1,000 investment in Dynamic Total Return Fund from May 1, 2016 to October 31, 2016. 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 October 31, 2016

   

Class A

 

Class C

 

Class I

 

Class Y

Expenses paid per $1,000

$7.70

$11.50

$6.38

$5.97

Ending value (after expenses)

$1,028.80

$1,024.90

$1,030.80

$1,030.80

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 October 31, 2016

   

Class A

 

Class C

 

Class I

 

Class Y

Expenses paid per $1,000

$7.66

$11.44

$6.34

$5.94

Ending value (after expenses)

$1,017.55

$1,013.77

$1,018.85

$1,019.25

 Expenses are equal to the fund’s annualized expense ratio of 1.51% for Class A, 2.26% for Class C, 1.25% for Class I and 1.17% for Class Y, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period).

7

 

CONSOLIDATED STATEMENT OF INVESTMENTS

October 31, 2016

           
 

Common Stocks - 9.5%

 

Shares

 

Value ($)

 

Exchange-Traded Funds - 9.5%

         

iShares TIPS Bond ETF

 

589,965

 

68,353,345

 

SPDR Barclays High Yield Bond ETF

 

1,874,877

 

67,983,040

 

(cost $130,180,132)

     

136,336,385

 

Options Purchased - 3.8%

 

Face Amount
Covered by
Contracts/
Number of
Contracts($)

 

Value ($)

 

Call Options - 3.6%

         

Swiss Market Index Futures, December 2016 @ CHF 8,172

 

2,840

 

102,221

 

Swiss Market Index Futures, December 2016 @ CHF 8,174

 

370

 

13,811

 

U.S. Treasury 10 Year Note Futures, December 2016 @ $117

 

408,800,000

 

51,611,000

 
       

51,727,032

 

Put Options - .2%

         

EURO STOXX 50 Index Futures, December 2016 @ 2,750

 

59,020

 

1,183,942

 

NIKKEI 225 Index Futures, December 2016 @ 1,500

 

1,470,500

 

336,531

 

S & P 500 Index Futures, September 2016 @ 2,000

 

443

 

1,849,525

 
       

3,369,998

 

Total Options Purchased (cost $69,076,428)

     

55,097,030

 

Short-Term Investments - 67.5%

 

Principal Amount ($)

 

Value ($)

 

U.S. Treasury Bills

         

0.27%, 12/29/16

 

672,190,000

 

671,919,108

 

0.34%, 12/15/16

 

56,315,000

a

56,303,061

 

0.28%, 11/10/16

 

242,750,000

 

242,742,960

 

(cost $970,916,165)

     

970,965,129

 

Other Investment - 12.2%

 

Shares

 

Value ($)

 

Registered Investment Company;

         

Dreyfus Institutional Preferred Government Plus Money Market Fund
(cost $175,712,091)

 

175,712,091

b

175,712,091

 

Total Investments (cost $1,345,884,816)

 

93.0%

 

1,338,110,635

 

Cash and Receivables (Net)

 

7.0%

 

101,367,590

 

Net Assets

 

100.0%

 

1,439,478,225

 

CHF—Swiss Franc

ETF—Exchange-Traded Fund

SPDR—Standard & Poor's Depository Receipt

a Held by or on behalf of a counterparty for open financial futures contracts.

b Investment in affiliated money market mutual fund.

8

 

   

Portfolio Summary (Unaudited)

Value (%)

Short-Term/Money Market Investments

79.7

Exchange-Traded Funds

9.5

Options Purchased

3.8

 

93.0

 Based on net assets.

See notes to consolidated financial statements.

9

 

CONSOLIDATED STATEMENT OF FINANCIAL AND COMMODITY FUTURES

October 31, 2016

               
 

Contracts

Market Value Covered by Contracts ($)

Expiration

Unrealized Appreciation (Depreciation) ($)

 
           

Financial and Commodity Futures Long

   

ASX SPI 200

260

 

26,156,643

December 2016

252,775

 

Australian 10 Year Bond

3,364

 

339,379,714

December 2016

(4,809,228)

 

CAC 40 10 Euro

586

 

28,989,615

November 2016

163,344

 

Cocoa

526

a

13,902,180

March 2017

(350,891)

 

Coffee "C"

36

a

2,261,925

March 2017

(3,445)

 

Cotton No. 2

2

a

68,860

December 2016

(132)

 

Crude Soybean Oil

890

a

18,973,020

March 2017

924,496

 

DAX

283

 

82,924,173

December 2016

1,593,307

 

DJ Euro Stoxx 50

520

 

17,427,521

December 2016

555,183

 

Euro-Bund Option Put 177

2,281

 

37,134,014

December 2016

6,384,146

 

FTSE 100

1,156

 

98,041,885

December 2016

1,135,192

 

FTSE/MIB Index

210

 

19,719,414

December 2016

426,942

 

Gasoline

27

a

1,607,105

January 2017

(62,833)

 

Gold 100 oz

31

a

3,946,610

December 2016

(58,021)

 

IBEX 35 Index

92

 

9,217,573

November 2016

209,474

 

Live Cattle

11

a

454,630

December 2016

(3,603)

 

LME Primary Aluminum

416

a

18,046,600

January 2017

565,644

 

LME Primary Aluminum

290

a

12,571,500

November 2016

626,255

 

LME Primary Nickel

87

a

5,448,636

November 2016

(44,132)

 

LME Primary Nickel

86

a

5,402,778

January 2017

136,224

 

LME Refined Pig Lead

83

a

4,264,125

November 2016

210,959

 

LME Zinc

51

a

3,127,575

November 2016

109,842

 

Low Sulfur Gas Oil

72

a

3,200,400

January 2017

(197,338)

 

Nikkei 225 Index

187

 

15,540,240

December 2016

429,563

 

NY Harbor ULSD

23

a

1,469,866

January 2017

(86,441)

 

S&P/Toronto Stock Exchange 60 Index

56

 

7,235,369

December 2016

822,512

 

Silver

62

a

5,516,760

December 2016

(663,027)

 

Soybean

179

a

9,115,575

March 2017

429,006

 

Standard & Poor's 500

64

 

33,921,600

December 2016

6,839

 

Standard & Poor's 500 E-mini

3,205

 

339,746,025

December 2016

344,228

 

Sugar No. 11

118

a

2,850,691

March 2017

(137,921)

 

Topix

1,263

 

168,006,580

December 2016

6,491,822

 

U.S. Treasury 10 Year Notes

5,143

 

666,661,375

December 2016

(5,027,666)

 

10

 

             
 

Contracts

Market Value Covered by Contracts ($)

Expiration

Unrealized Appreciation (Depreciation) ($)

 

Financial and Commodity Futures Short

   

Amsterdam Exchange Index

4

 

(396,246)

November 2016

(6,955)

 

Brent Crude

17

a

(848,640)

March 2017

59,944

 

Canadian 10 Year Bond

1,250

 

(134,775,964)

December 2016

511,409

 

Chicago SRW Wheat

531

a

(11,516,063)

March 2017

(491,281)

 

Copper

1

a

(55,125)

December 2016

(3,177)

 

Corn No. 2 Yellow

401

a

(7,273,138)

March 2017

(262,356)

 

Crude Oil

119

a

(5,785,780)

March 2017

139,780

 

Euro-Bond

864

 

(153,811,823)

December 2016

1,630,060

 

Hang Seng

81

 

(11,961,144)

November 2016

283,840

 

Hard Red Winter Wheat

387

a

(8,368,875)

March 2017

(247,072)

 

Lean Hog

27

a

(517,860)

December 2016

83,955

 

LME Primary Aluminum

290

a

(12,571,500)

November 2016

(581,764)

 

LME Primary Nickel

87

a

(5,448,636)

November 2016

(141,848)

 

LME Refined Pig Lead

6

a

(309,450)

January 2017

2,120

 

LME Refined Pig Lead

83

a

(4,264,125)

November 2016

(557,905)

 

LME Zinc

38

a

(2,338,425)

January 2017

(334,179)

 

LME Zinc

51

a

(3,127,575)

November 2016

(179,216)

 

Long Gilt

1,380

 

(211,715,197)

December 2016

9,760,145

 

Natural Gas

234

a

(7,476,300)

January 2017

330,411

 

NYMEX Palladium

81

a

(5,005,800)

December 2016

84,406

 

Platinum

162

a

(7,926,660)

January 2017

367,811

 

Soybean Meal

94

a

(3,004,240)

March 2017

(167,527)

 

Gross Unrealized Appreciation

 

35,071,634

 

Gross Unrealized Depreciation

 

(14,417,958)

 

a These investments are held directly by the Subsidiary (see Note 1).

See notes to consolidated financial statements.

11

 

CONSOLIDATED STATEMENT OF OPTIONS WRITTEN

October 31, 2016

             
   

Number of Contracts

 

Value ($)

 

Put Options:

         

Swiss Market Index Futures

         

December 2016 @ CHF 8,172

 

2,840

 

(1,122,478)

 

Swiss Market Index Futures

         

December 2016 @ CHF 8,174

 

370

 

(147,221)

 

Total Options Written
(premiums received $868,871)

     

(1,269,699)

 

CHF—Swiss Franc

See notes to consolidated financial statements.

12

 

CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES

October 31, 2016

             

 

 

 

 

 

 

 

 

 

 

Cost

 

Value

 

Assets ($):

 

 

 

 

Investments in securities—See Consolidated
Statement of Investments:

 

 

 

 

Unaffiliated issuers

 

1,170,172,725

 

1,162,398,544

 

Affiliated issuers

 

175,712,091

 

175,712,091

 

Cash

 

 

 

 

76,823,174

 

Cash denominated in foreign currency

 

 

457,932

 

450,523

 

Unrealized appreciation on forward foreign
currency exchange contracts—Note 4

 

 

 

 

34,028,032

 

Cash collateral held by broker—Note 4

 

 

 

 

10,083,701

 

Receivable for shares of Common Stock subscribed

 

 

 

 

1,285,816

 

Dividends receivable

 

 

 

 

40,684

 

Prepaid expenses

 

 

 

 

57,440

 

 

 

 

 

 

1,460,880,005

 

Liabilities ($):

 

 

 

 

Due to The Dreyfus Corporation and affiliates—Note 3(c)

 

 

 

 

1,561,401

 

Unrealized depreciation on forward foreign
currency exchange contracts—Note 4

 

 

 

 

14,316,465

 

Payable for futures variation margin—Note 4

 

 

 

 

2,109,051

 

Payable for shares of Common Stock redeemed

 

 

 

 

1,766,682

 

Outstanding options written, at value (premiums received
$868,871)—See Statement of Options Written—Note 4

 

 

 

 

1,269,699

 

Accrued expenses and other liabilities

 

 

 

 

378,482

 

 

 

 

 

 

21,401,780

 

Net Assets ($)

 

 

1,439,478,225

 

Composition of Net Assets ($):

 

 

 

 

Paid-in capital

 

 

 

 

1,433,555,046

 

Accumulated investment (loss)—net

 

 

 

 

(2,748,744)

 

Accumulated net realized gain (loss) on investments

 

 

 

 

(24,700,600)

 

Accumulated net unrealized appreciation (depreciation)
on investments, options transactions and foreign currency
transactions (including $20,653,676 net unrealized
appreciation on futures)

 

 

 

33,372,523

 

Net Assets ($)

 

 

1,439,478,225

 

 

           

Net Asset Value Per Share

Class A

Class C

Class I

Class Y

 

Net Assets ($)

205,832,471

131,341,300

446,642,669

655,661,785

 

Shares Outstanding

13,084,540

8,854,943

27,784,140

40,796,251

 

Net Asset Value Per Share ($)

15.73

14.83

16.08

16.07

 

           

See notes to consolidated financial statements.

         

13

 

CONSOLIDATED STATEMENT OF OPERATIONS

Year Ended October 31, 2016

             

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Income ($):

 

 

 

 

Income:

 

 

 

 

Cash dividends (net of $67 foreign taxes withheld at source):

 

 

 

 

Unaffiliated issuers

 

 

3,671,885

 

Affiliated issuers

 

 

488,663

 

Interest

 

 

1,823,878

 

Total Income

 

 

5,984,426

 

Expenses:

 

 

 

 

Management fee—Note 3(a)

 

 

15,608,170

 

Shareholder servicing costs—Note 3(c)

 

 

1,757,259

 

Distribution fees—Note 3(b)

 

 

1,104,098

 

Professional fees

 

 

264,203

 

Subsidiary management fee—Note 3(a)

 

 

212,425

 

Registration fees

 

 

149,307

 

Directors’ fees and expenses—Note 3(d)

 

 

117,730

 

Prospectus and shareholders’ reports

 

 

107,837

 

Custodian fees—Note 3(c)

 

 

95,275

 

Loan commitment fees—Note 2

 

 

22,395

 

Miscellaneous

 

 

32,809

 

Total Expenses

 

 

19,471,508

 

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

 

 

(212,425)

 

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

 

 

(380)

 

Net Expenses

 

 

19,258,703

 

Investment (Loss)—Net

 

 

(13,274,277)

 

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

 

 

Net realized gain (loss) on investments and foreign currency transactions

(837,541)

 

Net realized gain (loss) on options transactions

10,810,063

 

Net realized gain (loss) on financial and commodity futures

(23,559,125)

 

Net realized gain (loss) on swap transactions

3,613,280

 

Net realized gain (loss) on forward foreign currency exchange contracts

35,727,868

 

Net Realized Gain (Loss)

 

 

25,754,545

 

Net unrealized appreciation (depreciation) on investments
and foreign currency transactions

 

 

9,142,786

 

Net unrealized appreciation (depreciation) on options transactions

 

 

(13,038,348)

 

Net unrealized appreciation (depreciation) on financial
and commodity futures

 

 

(13,954,441)

 

Net unrealized appreciation (depreciation) on swap transactions

 

 

(311,178)

 

Net unrealized appreciation (depreciation) on
forward foreign currency exchange contracts

 

 

15,499,761

 

Net Unrealized Appreciation (Depreciation)

 

 

(2,661,420)

 

Net Realized and Unrealized Gain (Loss) on Investments

 

 

23,093,125

 

Net Increase in Net Assets Resulting from Operations

 

9,818,848

 

             

See notes to consolidated financial statements.

         

14

 

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS

                   

 

 

 

 

Year Ended October 31,

 

 

 

 

2016

 

 

 

2015

 

Operations ($):

 

 

 

 

 

 

 

 

Investment (loss)—net

 

 

(13,274,277)

 

 

 

(11,567,681)

 

Net realized gain (loss) on investments

 

25,754,545

 

 

 

(36,702,175)

 

Net unrealized appreciation (depreciation)
on investments

 

(2,661,420)

 

 

 

32,779,962

 

Net Increase (Decrease) in Net Assets
Resulting from Operations

9,818,848

 

 

 

(15,489,894)

 

Capital Stock Transactions ($):

 

 

 

 

 

 

 

 

Net proceeds from shares sold:

 

 

 

 

 

 

 

 

Class A

 

 

85,425,288

 

 

 

266,485,465

 

Class C

 

 

46,807,391

 

 

 

132,899,289

 

Class I

 

 

299,261,521

 

 

 

555,886,892

 

Class Y

 

 

230,391,741

 

 

 

151,343,233

 

Cost of shares redeemed:

 

 

 

 

 

 

 

 

Class A

 

 

(148,416,191)

 

 

 

(47,238,345)

 

Class C

 

 

(57,090,576)

 

 

 

(11,200,243)

 

Class I

 

 

(343,046,982)

 

 

 

(126,279,767)

 

Class Y

 

 

(66,580,605)

 

 

 

(61,328,324)

 

Increase (Decrease) in Net Assets
from Capital Stock Transactions

46,751,587

 

 

 

860,568,200

 

Total Increase (Decrease) in Net Assets

56,570,435

 

 

 

845,078,306

 

Net Assets ($):

 

 

 

 

 

 

 

 

Beginning of Period

 

 

1,382,907,790

 

 

 

537,829,484

 

End of Period

 

 

1,439,478,225

 

 

 

1,382,907,790

 

Accumulated investment (loss)—net

(2,748,744)

 

 

 

(12,080,090)

 

Capital Share Transactions (Shares):

 

 

 

 

 

 

 

 

Class A

 

 

 

 

 

 

 

 

Shares sold

 

 

5,592,205

 

 

 

16,605,743

 

Shares redeemed

 

 

(9,694,240)

 

 

 

(2,986,569)

 

Net Increase (Decrease) in Shares Outstanding

(4,102,035)

 

 

 

13,619,174

 

Class C

 

 

 

 

 

 

 

 

Shares sold

 

 

3,221,954

 

 

 

8,694,888

 

Shares redeemed

 

 

(3,925,165)

 

 

 

(746,954)

 

Net Increase (Decrease) in Shares Outstanding

(703,211)

 

 

 

7,947,934

 

Class I a

 

 

 

 

 

 

 

 

Shares sold

 

 

19,107,885

 

 

 

34,065,593

 

Shares redeemed

 

 

(22,047,720)

 

 

 

(7,935,554)

 

Net Increase (Decrease) in Shares Outstanding

(2,939,835)

 

 

 

26,130,039

 

Class Y a

 

 

 

 

 

 

 

 

Shares sold

 

 

14,699,682

 

 

 

9,358,270

 

Shares redeemed

 

 

(4,261,697)

 

 

 

(3,869,466)

 

Net Increase (Decrease) in Shares Outstanding

10,437,985

 

 

 

5,488,804

 

                   

aDuring the period ended October 31, 2016, 369,275 Class Y shares representing $5,809,635 were exchanged for 369,082 Class I shares.

 

See notes to consolidated financial statements.

               

15

 

CONSOLIDATED FINANCIAL HIGHLIGHTS

The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. These figures have been derived from the fund’s financial statements.

             
     
   

Year Ended October 31,

Class A Shares

 

2016

2015

2014

2013

2012

Per Share Data ($):

           

Net asset value, beginning of period

 

15.63

15.36

14.18

12.49

11.74

Investment Operations:

           

Investment (loss)—neta

 

(.17)

(.22)

(.19)

(.01)

(.03)

Net realized and unrealized
gain (loss) on investments

 

.27

.49b

1.38

1.65

.78

Payment by affiliate

 

.05

Total from
Investment Operations

 

.10

.27

1.19

1.69

.75

Distributions:

           

Dividends from
investment income—net

 

(.01)

Net asset value,
end of period

 

15.73

15.63

15.36

14.18

12.49

Total Return (%)c

 

.70

1.69

8.42

13.53d

6.39

Ratios/Supplemental Data (%):

         

Ratio of total expenses
to average net assets

 

1.51

1.49

1.54

1.65

1.85

Ratio of net expenses
to average net assets

 

1.50

1.49

1.50

1.50

1.85

Ratio of net investment (loss)
to average net assets

 

(1.13)

(1.41)

(1.30)

(.04)

(.21)

Portfolio Turnover Rate

 

10.66

165.55

124.10

1.74

1.65

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

 

205,832

268,600

54,798

23,462

14,913

a Based on average shares outstanding.

b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.

c Exclusive of sales charge.

d The total return would have been 13.13% had a reimbursement for a trade error not been made by Mellon Capital.

See notes to consolidated financial statements.

16

 

             
     
   

Year Ended October 31,

Class C Shares

 

2016

2015

2014

2013

2012

Per Share Data ($):

           

Net asset value, beginning of period

 

14.85

14.70

13.66

12.12

11.48

Investment Operations:

           

Investment (loss)—neta

 

(.27)

(.33)

(.29)

(.10)

(.12)

Net realized and unrealized
gain (loss) on investments

 

.25

.48b

1.33

1.59

.76

Payment by affiliate

 

.05

Total from
Investment Operations

 

(.02)

.15

1.04

1.54

.64

Net asset value,
end of period

 

14.83

14.85

14.70

13.66

12.12

Total Return (%)c

 

(.07)

.95

7.61

12.71d

5.58

Ratios/Supplemental Data (%):

         

Ratio of total expenses
to average net assets

 

2.26

2.24

2.30

2.44

2.62

Ratio of net expenses
to average net assets

 

2.25

2.24

2.25

2.25

2.62

Ratio of net investment (loss)
to average net assets

 

(1.82)

(2.16)

(2.08)

(.78)

(.98)

Portfolio Turnover Rate

 

10.66

165.55

124.10

1.74

1.65

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

 

131,341

141,904

23,672

9,409

7,704

a Based on average shares outstanding.

b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.

c Exclusive of sales charge.

d The total return would have been 12.29% had a reimbursement for a trade error not been made by Mellon Capital.

See notes to consolidated financial statements.

17

 

CONSOLIDATED FINANCIAL HIGHLIGHTS (continued)

             
     
   

Year Ended October 31,

Class I Shares

 

2016

2015

2014

2013

2012

Per Share Data ($):

           

Net asset value, beginning of period

 

15.93

15.61

14.39

12.65

11.84

Investment Operations:

           

Investment income (loss)—neta

 

(.13)

(.19)

(.14)

.03

.02

Net realized and unrealized
gain (loss) on investments

 

.28

.51b

1.39

1.67

.79

Payment by affiliate

 

.05

Total from
Investment Operations

 

.15

.32

1.25

1.75

.81

Distributions:

           

Dividends from
investment income—net

 

(.03)

(.01)

Net asset value,
end of period

 

16.08

15.93

15.61

14.39

12.65

Total Return (%)

 

1.01

1.92

8.77

13.82c

6.84

Ratios/Supplemental Data (%):

         

Ratio of total expenses
to average net assets

 

1.25

1.22

1.21

1.29

1.47

Ratio of net expenses
to average net assets

 

1.24

1.22

1.21

1.25

1.47

Ratio of net investment income
(loss) to average net assets

 

(.86)

(1.15)

(.94)

.20

.13

Portfolio Turnover Rate

 

10.66

165.55

124.10

1.74

1.65

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

 

446,643

489,361

71,731

253,971

123,269

a Based on average shares outstanding.

b In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.

c The total return would have been 13.42% had a reimbursement for a trade error not been made by Mellon Capital.

See notes to consolidated financial statements.

18

 

             
     
   

Year Ended October 31,

Class Y Shares

   

2016

2015

2014

2013a

Per Share Data ($):

           

Net asset value, beginning of period

   

15.91

15.59

14.39

13.45

Investment Operations:

           

Investment (loss)—netb

   

(.11)

(.15)

(.17)

(.01)

Net realized and unrealized
gain (loss) on investments

   

.27

.47c

1.40

.90

Payment by affiliate

   

.05

Total from
Investment Operations

   

.16

.32

1.23

.94

Distributions:

           

Dividends from
investment income—net

   

(.03)

Net asset value,
end of period

   

16.07

15.91

15.59

14.39

Total Return (%)

   

1.01

2.05

8.56

6.99d,e

Ratios/Supplemental Data (%):

         

Ratio of total expenses
to average net assets

   

1.18

1.14

1.16

1.31f

Ratio of net expenses
to average net assets

   

1.16

1.14

1.16

1.25f

Ratio of net investment (loss)
to average net assets

   

(.68)

(.96)

(1.14)

(.18)f

Portfolio Turnover Rate

   

10.66

165.55

124.10

1.74

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

   

655,662

483,043

387,629

1

a From July 1, 2013 (commencement of initial offering) to October 31, 2013.

b Based on average shares outstanding.

c In addition to net realized and unrealized losses on investments, this amount includes an increase in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.

d Not annualized.

e The total return would have been 6.62% had a reimbursement for a trade error not been made by Mellon Capital.

f Annualized.

See notes to consolidated financial statements.

19

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—Significant Accounting Policies:

Dynamic Total Return Fund (the “fund”) is a separate non-diversified series of Advantage Funds, Inc. (the “Company”), which is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company and operates as a series company currently offering ten series, including the fund. The fund’s investment objective is to seek total return. 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. Mellon Capital Management Corporation (“Mellon Capital”), a wholly-owned subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser.

Effective August 5, 2016, the fund may invest in certain commodities through its investment in DTR Commodity Fund Ltd., (the “Subsidiary”), a wholly-owned and controlled subsidiary of the fund organized under the laws of the Cayman Islands. The Subsidiary has the ability to invest in commodities and securities consistent with the investment objective of the fund. Dreyfus serves as investment adviser for the Subsidiary, Mellon Capital serves as the Subsidiary’s sub-investment advisor and Citibank N.A. serves as the Subsidiary’s custodian. The financial statements have been consolidated and include the accounts of the fund and the Subsidiary. Accordingly, all inter-company transactions and balances have been eliminated. A subscription agreement was entered into between the fund and the Subsidiary, comprising the entire issued share capital of the Subsidiary, with the intent that the fund will remain the sole shareholder and retain all rights. Under the Amended and Restated Memorandum and Articles of Association, shares issued by the Subsidiary confer upon a shareholder the right to receive notice of, to attend and to vote at general meetings of the Subsidiary and shall confer upon the shareholder rights in a winding-up or repayment of capital and the right to participate in the profits or assets of the Subsidiary. The following summarizes the structure and relationship of the Subsidiary at October 31, 2016:

       
 

Subsidiary Activity

Consolidated fund Net Assets ($)

 

1,439,478,225

 

Subsidiary Percentage of fund Net Assets

 

5.76%

 

Subsidiary Financial Statement Information ($)

     

Total assets

 

83,165,107

 

Total liabilities

 

207,723

 

Net assets

 

82,957,384

 

Total income

 

2,733

 

Investment income (loss)—net

 

(347,192)

 

Net realized gain (loss)

 

(2,092,169)

 

Net unrealized appreciation (depreciation)

 

(503,255)

 

Net increase (decrease) in net assets resulting from operations

 

(2,942,616)

 

20

 

MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares. The fund is authorized to issue 500 million shares of $.001 par value Common Stock. The fund currently offers four classes of shares: Class A (200 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 Class Y shares are sold at net asset value per share generally to institutional investors. Other differences between the classes include the services offered to and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.

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

The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’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).

21

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:

Level 1—unadjusted quoted prices in active markets for identical investments.

Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).

Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:

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

Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. U.S. Treasury Bills are valued at the mean price between quoted bid prices and asked prices by an independent pricing service (the “Service”) approved by the Company’s Board of Directors (the “Board”). These securities are generally categorized within Level 2 of the fair value hierarchy.

The Service is engaged under the general supervision of the Board.

22

 

Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant American Depository Receipts and 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 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 generally categorized within Level 3 of the fair value hierarchy.

Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.

Financial and commodity futures and options, which are traded on an exchange, are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day and are generally categorized within Level 1 of the fair value hierarchy. Options traded over-the-counter (“OTC”) are valued at the mean between the bid and asked price and are generally categorized within Level 2 of the fair value hierarchy. Investments in swap transactions are valued each business day by the Service. Swaps are valued by the Service by using a swap pricing model which incorporates among other factors, default probabilities, recovery rates, credit curves of the underlying issuer and swap spreads on interest rates and are generally categorized within Level 2 of the fair value hierarchy. 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.

23

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following is a summary of the inputs used as of October 31, 2016 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:

     

Exchange-Traded Funds

136,336,385

136,336,385

Mutual Funds

175,712,091

175,712,091

U.S. Treasury

970,965,129

970,965,129

Other Financial Instruments:

     

Financial Futures

31,000,781

31,000,781

Commodity Futures

4,070,853

4,070,853

Forward Foreign Currency Exchange Contracts

34,028,032

34,028,032

Options Purchased

54,980,998

116,032

55,097,030

Liabilities ($)

       

Other Financial Instruments:

     

Financial Futures

(9,843,849)

(9,843,849)

Commodity Futures

(4,574,109)

(4,574,109)

Forward Foreign Currency Exchange Contracts

(14,316,465)

(14,316,465)

Options Written

(1,269,699)

(1,269,699)

 Amount shown represents unrealized appreciation (depreciation) at period end.

(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses

24

 

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 October 31, 2016 were as follows:

           

Affiliated Investment Company

Value
10/31/2015 ($)

Purchases ($)

Sales ($)

Value
10/31/2016 ($)

Net
Assets (%)

Dreyfus Institutional Preferred Government Plus Money Market Fund

251,700,815

853,881,455

929,870,179

175,712,091

12.2

 Formerly Dreyfus Institutional Preferred Plus Money Market Fund.

(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 delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S.

The fund’s investments in commodity-linked financial derivatives instruments may subject the fund to greater market price volatility than investments in traditional securities. The value of commodity-linked financial derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments.

(f) Dividends 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,

25

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

The Subsidiary is classified as a controlled foreign corporation under Subchapter N of the Code. Therefore, the fund is required to increase its taxable income by its share of the Subsidiary’s income. Net investment losses of the Subsidiary cannot be deducted by the fund in the current period nor carried forward to offset taxable income in future periods.

As of and during the period ended October 31, 2016, the fund did not have any liabilities for any uncertain tax positions. The fund recognizes interest and penalties, if any, related to uncertain tax positions as income tax expense in the Consolidated Statement of Operations. During the period ended October 31, 2016, the fund did not incur any interest or penalties.

Each tax year in the four-year period ended October 31, 2016 remains subject to examination by the Internal Revenue Service and state taxing authorities.

At October 31, 2016, the components of accumulated earnings on a tax basis were as follows: undistributed capital gains $2,620,552 and unrealized appreciation $6,051,371. In addition, the fund deferred for tax purposes late year ordinary losses of $2,748,744 to the first day of the following fiscal year.

During the period ended October 31, 2016, as a result of permanent book to tax differences, primarily due to the tax treatment for foreign currency transactions, net operating losses and swap periodic payments, the fund increased accumulated undistributed investment income-net by $22,605,623, decreased accumulated net realized gain (loss) on investments by $2,389,448 and decreased paid-in capital by $20,216,175. Net assets and net asset value per share were not affected by this reclassification.

26

 

NOTE 2—Bank Lines of Credit:

The fund participates with other Dreyfus-managed funds in a $810 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 5, 2016, the unsecured credit facility with Citibank, N.A. was $555 million and prior to January 11, 2016, the unsecured credit facility with Citibank, N.A. was $480 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. During the period ended October 31, 2016, the fund did not borrow under the Facilities.

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

(a) Dreyfus has entered into separate management agreements with the fund and the Subsidiary pursuant to which Dreyfus receives a management fee computed at the annual rate of 1.10% of the value of the average daily net assets of each of the fund and the Subsidiary which is payable monthly. In addition, Dreyfus has contractually agreed for as long as the fund invests in the Subsidiary, to waive the management fee it receives from the fund in an amount equal to the management fee paid to Dreyfus by the Subsidiary. The reduction in expenses, pursuant to the undertaking amounted to $212,425 during the period ended October 31, 2016.

Pursuant to separate sub-investment advisory agreements between Dreyfus and Mellon Capital with respect to the fund and the Subsidiary, Dreyfus pays Mellon Capital an annual fee of .65% of the value of the average daily net assets of each of the fund and the Subsidiary which is payable monthly.

During the period ended October 31, 2016, the Distributor retained $70,400 from commissions earned on sales of the fund’s Class A shares and $80,105 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 October 31, 2016, Class C shares were charged $1,104,098 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

27

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

net assets for the provision of certain services. The services provided may include personal services relating to shareholder accounts, such as answering shareholder inquiries regarding the fund and providing reports and other information, and services related to the maintenance of shareholder accounts. The Distributor may make payments to Service Agents (securities dealers, financial institutions or other industry professionals) with respect to these services. The Distributor determines the amounts to be paid to Service Agents. During the period ended October 31, 2016, Class A and Class C shares were charged $606,219 and $368,033, 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 Consolidated Statement of Operations.

The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, 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 October 31, 2016, the fund was charged $13,592 for transfer agency services and $917 for cash management services. These fees are included in Shareholder servicing costs in the Consolidated Statement of Operations. Cash management fees were partially offset by earnings credits of $380.

The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended October 31, 2016, the fund was charged $90,275 pursuant to the custody agreement.

During the period ended October 31, 2016, the fund was charged $9,804 for services performed by the Chief Compliance Officer and his staff.

The components of “Due to The Dreyfus Corporation and affiliates” in the Consolidated Statement of Assets and Liabilities consist of: management fees $1,341,551, Distribution Plan fees $84,618, Shareholder Services Plan fees $72,532, custodian fees $52,342, Chief Compliance Officer fees $5,688 and transfer agency fees $4,670.

(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.

28

 

NOTE 4—Securities Transactions:

The aggregate amount of purchases and sales of investment securities, excluding short-term securities, financial and commodity futures, options transactions, forward contracts and swap transactions, during the period ended October 31, 2016, amounted to $125,205,882 and $10,411,824, respectively.

Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.

Each type of derivative instrument that was held by the fund during the period ended October 31, 2016 is discussed below.

Financial and Commodity Futures: In the normal course of pursuing its investment objective, the fund is exposed to market risk, including equity price risk, interest rate risk and commodity risk, as a result of changes in value of underlying financial instruments. The fund invests in financial and commodity futures in order to manage its exposure to or protect against changes in the market. A futures contract represents a commitment for the future purchase or a sale of an asset at a specified date. Upon entering into such contracts, these investments require initial margin deposits with a counterparty, which consist of cash or cash equivalents. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses which are recorded in the Consolidated Statement of Operations. When the contracts are closed, the fund recognizes a realized gain or loss which is reflected in the Consolidated Statement of Operations. There is minimal counterparty credit risk to the fund with financial and commodity futures since they are exchange traded, and the exchange guarantees the financial and commodity futures against default. Financial and commodity futures open at October 31, 2016 are set forth in the Consolidated Statement of Financial and Commodity Futures.

29

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Options Transactions: The fund purchases and writes (sells) put and call options to hedge against changes in values of equities, interest rates or as a substitute for an investment. The fund is subject to market risk and interest rate risk in the course of pursuing its investment objectives through its investments in options contracts. A call option gives the purchaser of the option the right (but not the obligation) to buy, and obligates the writer to sell, the underlying financial instrument at the exercise price at any time during the option period, or at a specified date. Conversely, a put option gives the purchaser of the option the right (but not the obligation) to sell, and obligates the writer to buy the underlying financial instrument at the exercise price at any time during the option period, or at a specified date.

As a writer of call options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument decreases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument increases between those dates.

As a writer of put options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument increases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument decreases between those dates. The maximum payout for these contracts is limited to the number of put option contracts written and the related strike prices, respectively.

As a writer of an option, the fund has no control over whether the underlying financial instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the financial instrument underlying the written option. There is a risk of loss from a change in value of such options which may exceed the related premiums received. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. The Consolidated Statement of Operations reflects any unrealized gains or losses which occurred during the period as well as any realized gains or losses which occurred upon the expiration or closing of the option transaction.

The following summarizes the fund’s call/put options written during the period ended October 31, 2016:

30

 

         
     

Options Terminated

 

Number of

Premiums

 

Net Realized

Options Written:

Contracts

Received ($)

Cost ($)

(Loss) ($)

Contracts outstanding

       

October 31, 2015

4,800

1,356,261

   

Contracts written

24,690

6,744,431

   

Contracts terminated:

       

Contracts closed

26,280

7,231,821

5,735,949

1,495,872

Contracts outstanding

       

October 31, 2016

3,210

868,871

   

Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Consolidated Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. The following summarizes open forward contracts at October 31, 2016:

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Purchases:

     

Bank of America

     

Australian Dollar,

       

Expiring

       

12/21/2016

3,023,520

2,313,413

2,296,984

(16,429)

31

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Purchases: (continued)

Bank of America (continued)

British Pound,

       

Expiring

       

12/21/2016

2,219,360

2,854,460

2,719,984

(134,476)

Euro,

       

Expiring

       

12/21/2016

3,188,475

3,479,366

3,508,625

29,259

Japanese Yen,

       

Expiring

       

12/21/2016

3,219,181,110

31,901,124

30,765,078

(1,136,046)

New Zealand Dollar,

       

Expiring

       

12/21/2016

71,317,122

52,020,848

50,900,201

(1,120,647)

Swedish Krona,

       

Expiring

       

12/21/2016

55,180,705

6,303,597

6,125,793

(177,804)

BNP Paribas

     

Euro,

       

Expiring

       

12/21/2016

14,046,525

15,323,031

15,456,915

133,884

Japanese Yen,

       

Expiring

       

12/21/2016

1,585,994,890

15,241,246

15,157,040

(84,206)

Swedish Krona,

       

Expiring

       

12/21/2016

154,870,375

17,410,947

17,192,673

(218,274)

Citigroup

     

British Pound,

       

Expiring

       

12/21/2016

31,300,000

39,019,707

38,360,390

(659,317)

Canadian Dollar,

       

Expiring

       

12/21/2016

25,014,296

19,022,929

18,656,762

(366,167)

Japanese Yen,

       

Expiring

       

12/21/2016

1,764,183,600

17,527,354

16,859,954

(667,400)

New Zealand Dollar,

       

Expiring

       

12/21/2016

8,793,000

6,384,069

6,275,708

(108,361)

Swiss Franc,

       

Expiring

       

12/21/2016

42,225,376

43,603,688

42,803,653

(800,035)

32

 

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Purchases: (continued)

Goldman Sachs International

     

Canadian Dollar,

       

Expiring

       

12/21/2016

36,270,729

27,564,487

27,052,305

(512,182)

New Zealand Dollar,

       

Expiring

       

12/21/2016

41,445,398

30,135,778

29,580,261

(555,517)

Norwegian Krone,

       

Expiring

       

12/21/2016

235,193,958

28,548,846

28,468,837

(80,009)

Swiss Franc,

       

Expiring

       

12/21/2016

28,968

29,737

29,365

(372)

HSBC

     

British Pound,

       

Expiring

       

12/21/2016

8,760,000

11,598,591

10,736,007

(862,584)

Canadian Dollar,

       

Expiring

       

12/21/2016

22,095,962

16,791,776

16,480,140

(311,636)

Japanese Yen,

       

Expiring

       

12/21/2016

4,535,000,000

44,479,841

43,340,099

(1,139,742)

New Zealand Dollar,

       

Expiring

       

12/21/2016

11,611,000

8,454,782

8,286,961

(167,821)

Norwegian Krone,

       

Expiring

       

12/21/2016

279,992,783

34,018,721

33,891,470

(127,251)

Swiss Franc,

       

Expiring

       

12/21/2016

9,176,000

9,490,025

9,301,666

(188,359)

Nomura Securities

     

Swiss Franc,

       

Expiring

       

12/21/2016

12,407,000

12,759,389

12,576,914

(182,475)

Royal Bank of Canada

     

Australian Dollar,

       

Expiring

       

12/21/2016

15,873,480

12,143,196

12,059,167

(84,029)

33

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Purchases: (continued)

Royal Bank of Canada (continued)

British Pound,

       

Expiring

       

12/21/2016

15,793,640

20,058,812

19,356,236

(702,576)

Japanese Yen,

       

Expiring

       

12/21/2016

3,594,311,400

35,053,112

34,350,124

(702,988)

New Zealand Dollar,

       

Expiring

       

12/21/2016

24,387,000

17,300,138

17,405,402

105,264

Norwegian Krone,

       

Expiring

       

12/21/2016

682,590,435

82,970,669

82,623,533

(347,136)

Swedish Krona,

       

Expiring

       

12/21/2016

342,253,920

39,391,512

37,994,740

(1,396,772)

Swiss Franc,

       

Expiring

       

12/21/2016

21,032,000

21,400,953

21,320,034

(80,919)

Standard Chartered Bank

     

New Zealand Dollar,

       

Expiring

       

12/21/2016

16,552,297

12,080,363

11,813,646

(266,717)

Swiss Franc,

       

Expiring

       

12/21/2016

22,736,741

23,487,762

23,048,121

(439,641)

UBS

     

Swiss Franc,

       

Expiring

       

12/21/2016

12,407,000

12,754,509

12,576,914

(177,595)

Sales:

     

Bank of America

     

Australian Dollar,

       

Expiring

       

12/21/2016

22,176,700

16,759,043

16,847,757

(88,714)

British Pound,

       

Expiring

       

12/21/2016

4,965,585

6,065,338

6,085,680

(20,342)

Canadian Dollar,

       

Expiring

       

12/21/2016

14,740,525

11,135,091

10,994,132

140,959

34

 

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Sales: (continued)

Bank of America (continued)

Euro,

       

Expiring

       

12/21/2016

11,280,520

12,653,020

12,413,180

239,840

Bank of Montreal

     

Euro,

       

Expiring

       

12/21/2016

101,528,280

114,579,232

111,722,582

2,856,650

BNP Paribas

     

British Pound,

       

Expiring

       

12/21/2016

21,875,415

26,727,819

26,809,886

(82,067)

Canadian Dollar,

       

Expiring

       

12/21/2016

28,287,835

21,170,994

21,098,311

72,683

Citigroup

     

Australian Dollar,

       

Expiring

       

12/21/2016

74,146,254

56,289,256

56,329,304

(40,048)

British Pound,

       

Expiring

       

12/21/2016

69,896,663

92,376,198

85,663,362

6,712,836

Canadian Dollar,

       

Expiring

       

12/21/2016

13,189,000

9,949,757

9,836,936

112,821

Euro,

       

Expiring

       

12/21/2016

124,070,616

139,991,725

136,528,360

3,463,365

Japanese Yen,

       

Expiring

       

12/21/2016

842,331,289

8,296,712

8,049,994

246,718

Norwegian Krone,

       

Expiring

       

12/21/2016

71,396,000

8,825,281

8,642,063

183,218

Swedish Krona,

       

Expiring

       

12/21/2016

150,640,945

17,760,074

16,723,150

1,036,924

Swiss Franc,

       

Expiring

       

12/21/2016

10,243,000

10,491,878

10,383,278

108,600

Credit Suisse International

     

Japanese Yen,

       

Expiring

       

12/21/2016

360,548,396

3,554,740

3,445,690

109,050

35

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Sales: (continued)

Goldman Sachs International

     

Swedish Krona,

       

Expiring

       

12/21/2016

125,193,637

14,806,966

13,898,160

908,806

HSBC

     

Australian Dollar,

       

Expiring

       

12/21/2016

17,965,000

13,444,467

13,648,106

(203,639)

Canadian Dollar,

       

Expiring

       

12/21/2016

23,778,000

18,081,786

17,734,678

347,108

Norwegian Krone,

       

Expiring

       

12/21/2016

101,978,000

12,376,406

12,343,833

32,573

Swedish Krona,

       

Expiring

       

12/21/2016

121,009,000

14,326,017

13,433,609

892,408

Nomura Securities

     

Australian Dollar,

       

Expiring

       

12/21/2016

5,382,500

4,093,257

4,089,114

4,143

British Pound,

       

Expiring

       

12/21/2016

57,718,595

76,185,566

70,738,268

5,447,298

Canadian Dollar,

       

Expiring

       

12/21/2016

17,088,000

12,964,204

12,744,982

219,222

Euro,

       

Expiring

       

12/21/2016

78,932,969

89,095,589

86,858,510

2,237,079

Japanese Yen,

       

Expiring

       

12/21/2016

1,471,873,500

14,256,869

14,066,404

190,465

Royal Bank of Canada

     

Australian Dollar,

       

Expiring

       

12/21/2016

21,658,000

16,387,526

16,453,698

(66,172)

British Pound,

       

Expiring

       

12/21/2016

35,206,898

46,559,081

43,148,573

3,410,508

Canadian Dollar,

       

Expiring

       

12/21/2016

80,879,640

61,465,110

60,323,592

1,141,518

36

 

         

Forward Foreign Currency Exchange Contracts

Foreign Currency
Amounts

Cost/
Proceeds ($)

Value ($)

Unrealized Appreciation (Depreciation)($)

Sales: (continued)

Royal Bank of Canada (continued)

Euro,

       

Expiring

       

12/21/2016

43,852,480

48,900,362

48,255,642

644,720

Japanese Yen,

       

Expiring

       

12/21/2016

149,176,961

1,469,188

1,425,655

43,533

Swedish Krona,

       

Expiring

       

12/21/2016

192,179,030

22,645,130

21,334,430

1,310,700

Societe Generale

     

Japanese Yen,

       

Expiring

       

12/21/2016

3,154,798,839

31,103,673

30,149,789

953,884

UBS

     

Australian Dollar,

       

Expiring

       

12/21/2016

5,382,500

4,091,830

4,089,114

2,716

British Pound,

       

Expiring

       

12/21/2016

5,751,000

7,338,679

7,048,262

290,417

Canadian Dollar,

       

Expiring

       

12/21/2016

17,088,000

12,955,741

12,744,982

210,759

Japanese Yen,

       

Expiring

       

12/21/2016

1,471,873,500

14,254,508

14,066,404

188,104

Gross Unrealized Appreciation

   

34,028,032

Gross Unrealized Depreciation

   

(14,316,465)

Swap Transactions: The fund enters into swap agreements to exchange the interest rate on, or return generated by, one nominal instrument for the return generated by another nominal instrument. Swap agreements are privately negotiated in the OTC market or centrally cleared. The fund enters into these agreements to hedge certain market or interest rate risks, to manage the interest rate sensitivity (sometimes called duration) of fixed income securities, to provide a substitute for purchasing or selling particular securities or to increase potential returns.

For OTC swaps, the fund accrues for interim payments on a daily basis, with the net amount recorded within unrealized appreciation (depreciation) on swap agreements in the Consolidated Statement of Assets and

37

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Liabilities. Once the interim payments are settled in cash, the net amount is recorded as a realized gain (loss) on swaps, in addition to realized gain (loss) recorded upon the termination of swap transactions in the Consolidated Statement of Operations. Upfront payments made and/or received by the fund, are recorded as an asset and/or liability in the Consolidated Statement of Assets and Liabilities and are recorded as a realized gain or loss ratably over the agreement’s term/event with the exception of forward starting interest rate swaps which are recorded as realized gains or losses on the termination date.

Fluctuations in the value of swap agreements are recorded for financial statement purposes as unrealized appreciation or depreciation on swap transactions.

Total Return Swaps: Total return swaps involve commitments to pay interest in exchange for a market-linked return based on a notional principal amount. To the extent the total return of the security or index underlying the transaction exceeds or falls short of the specific reference entity, the fund either receives a payment from or makes a payment to the counterparty, respectively. Total return swaps are subject to general market risk, liquidity risk, counterparty risk and credit risk. This risk is mitigated by Master Agreements between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. At October 31, 2016, there were no open total return swaps entered into by the fund.

The following tables show the fund’s exposure to different types of market risk as it relates to the Consolidated Statement of Assets and Liabilities and the Consolidated Statement of Operations, respectively.

38

 

Fair value of derivative instruments as of October 31, 2016 is shown below:

               

 

 

Derivative
Assets ($)

 

 

 

Derivative
Liabilities ($)

 

Interest rate risk

69,896,760

1,2

Interest rate risk

 

(9,836,894)

1

Equity risk

16,201,051

1,2

Equity risk

 

(1,276,654)

1,3

Foreign exchange risk

34,028,032

4

Foreign exchange risk

 

(14,316,465)

4

Commodity risk

4,070,853

1

Commodity risk

 

(4,574,109)

1

Gross fair value of
derivative contracts

124,196,696

     

(30,004,122)

 
             
 

Consolidated Statement of Assets and Liabilities location:

 

1

Includes cumulative appreciation (depreciation) on financial and commodity futures as reported in the
Consolidated Statement of Financial and Commodity Futures, but only the unpaid variation margin
is reported in the Consolidated Statement of Assets and Liabilities.

2

Options purchased are included in Investments in securities—Unaffiliated issuers, at value.

3

Outstanding options written, at value.

 

4

Unrealized appreciation (depreciation) on forward foreign currency exchange contracts.

The effect of derivative instruments in the Consolidated Statement of Operations during the period ended October 31, 2016 is shown below:

                     

Amount of realized gain (loss) on derivatives recognized in income ($)

 

Underlying
risk

Futures

1

Options
Transactions

2

Forward
Contracts

3

Swap
Transactions

4

Total

 

Interest
rate

(25,955,174)

 

38,957,118

 

-

 

-

 

13,001,944

 

Equity

4,488,218

 

(28,147,055)

 

-

 

3,613,280

 

(20,045,557)

 

Foreign
exchange

-

 

-

 

35,727,868

 

-

 

35,727,868

 

Commodity

(2,092,169)

 

-

 

-

 

-

 

(2,092,169)

 

Total

(23,559,125)

 

10,810,063

 

35,727,868

 

3,613,280

 

26,592,086

 
                     

39

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

                       

Change in unrealized appreciation (depreciation) on derivatives recognized in income ($)

 

Underlying
risk

Futures

5

Options
Transactions

6

Forward
Contracts

7

Swap
Transactions

8

Total

 

Interest
rate

18,067,609

 

(11,425,110)

 

-

 

-

 

6,642,499

 

Equity

(31,518,794)

 

(1,613,238)

 

-

 

(311,178)

 

(33,443,210)

 

Foreign
exchange

-

 

-

 

15,499,761

 

-

 

15,499,761

 

Commodity

(503,256)

 

-

 

-

 

-

 

(503,256)

 

Total

(13,954,441)

 

(13,038,348)

 

15,499,761

 

(311,178)

 

(11,804,206)

 
                       
 

Consolidated Statement of Operations location:

 

1

Net realized gain (loss) on financial and commodity futures.

   

2

Net realized gain (loss) on options transactions.

3

Net realized gain (loss) on forward foreign currency exchange contracts.

   

4

Net realized gain (loss) on swap transactions.

   

5

Net unrealized appreciation (depreciation) on financial and commodity futures.

   

6

Net unrealized appreciation (depreciation) on options transactions.

   

7

Net unrealized appreciation (depreciation) on forward foreign currency exchange contracts.

 

8

Net unrealized appreciation (depreciation) on swap transactions.

   

The provisions of ASC Topic 210 “Disclosures about Offsetting Assets and Liabilities” require disclosure on the offsetting of financial assets and liabilities. These disclosures are required for certain investments, including derivative financial instruments subject to Master Agreements which are eligible for offsetting in the Consolidated Statement of Assets and Liabilities and require the fund to disclose both gross and net information with respect to such investments. For financial reporting purposes, the fund does not offset derivative assets and derivative liabilities that are subject to Master Agreements in the Consolidated Statement of Assets and Liabilities.

At October 31, 2016, derivative assets and liabilities (by type) on a gross basis are as follows:

           

Derivative Financial Instruments:

 

Assets ($)

 

Liabilities ($)

 

Financial and Commodity futures

 

35,071,634

 

(14,417,958)

 

Options

 

55,097,030

 

(1,269,699)

 

Forward contracts

 

34,028,032

 

(14,316,465)

 

Total gross amount of derivative

         

assets and liabilities in the

         

Consolidated Statement of Assets and Liabilities

 

124,196,696

 

(30,004,122)

 

Derivatives not subject to

         

Master Agreements

 

(90,161,682)

 

14,417,958

 

Total gross amount of assets

         

and liabilities subject to

         

Master Agreements

 

34,035,014

 

(15,586,164)

 

40

 

The following tables present derivative assets and liabilities net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of October 31, 2016:

             
     

Financial

     
     

Instruments

     
     

and Derivatives

     
 

Gross Amount of

 

Available

Collateral

 

Net Amount of

Counterparty

Assets ($)

1

for Offset ($)

Received ($)

2

Assets ($)

Bank of America

410,058

 

(410,058)

-

 

-

Bank of Montreal

2,856,650

 

-

-

 

2,856,650

BNP Paribas

206,567

 

(206,567)

-

 

-

Citigroup

11,864,482

 

(2,641,328)

-

 

9,223,154

Goldman Sachs
International

922,617

 

(922,617)

-

 

-

HSBC

1,272,089

 

(1,272,089)

-

 

-

Morgan Stanley
Capital Services

102,221

 

(102,221)

-

 

-

Nomura
Securities

8,098,207

 

(182,475)

-

 

7,915,732

Royal Bank
of Canada

6,656,243

 

(3,380,592)

-

 

3,275,651

Societe Generale

953,884

 

-

-

 

953,884

UBS

691,996

 

(177,595)

-

 

514,401

Total

34,035,014

 

(9,295,542)

-

 

24,739,472

             
     

Financial

     
     

Instruments

     
     

and Derivatives

     
 

Gross Amount of

 

Available

Collateral

 

Net Amount of

Counterparty

Liabilities ($)

1

for Offset ($)

Pledged ($)

2

Liabilities ($)

Bank of America

(2,694,458)

 

410,058

-

 

(2,284,400)

BNP Paribas

(384,547)

 

206,567

-

 

(177,980)

Citigroup

(2,641,328)

 

2,641,328

-

 

-

Goldman Sachs
International

(1,295,301)

 

922,617

190,000

 

(182,684)

HSBC

(3,001,032)

 

1,272,089

-

 

(1,728,943)

Morgan Stanley
Capital Services

(1,122,478)

 

102,221

-

 

(1,020,257)

Nomura
Securities

(182,475)

 

182,475

-

 

-

Royal Bank
of Canada

(3,380,592)

 

3,380,592

-

 

-

Standard
Chartered Bank

(706,358)

 

-

-

 

(706,358)

UBS

(177,595)

 

177,595

-

 

-

Total

(15,586,164)

 

9,295,542

190,000

 

(6,100,622)

             

1 Absent a default event or early termination, OTC derivative assets and liabilities are presented at gross amounts
and are not offset in the Consolidated Statement of Assets and Liabilities.

2 In some instances, the actual collateral received and/or pledged may be more than the amount shown due to
overcollateralization.

See Consolidated Statement of Investments for detailed information regarding collateral held for open financial
and commodity futures contracts.

41

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following summarizes the average market value of derivatives outstanding during the period ended October 31, 2016:

     

 

 

Average Market Value ($)

Equity financial futures

 

980,882,822

Equity options contracts

 

7,909,517

Interest rate financial futures

 

1,229,445,583

Interest rate options contracts

 

69,436,819

Forward contracts

 

1,850,059,567

Commodity futures

 

33,090,975

     

The following summarizes the average notional value of swap agreements outstanding during the period ended October 31, 2016:

     

 

 

Average Notional Value ($)

Equity total return swap agreements

 

49,683,276

     

At October 31, 2016, the cost of investments for federal income tax purposes was $1,335,962,283; accordingly, accumulated net unrealized appreciation on investments was $2,148,352, consisting of $6,205,217 gross unrealized appreciation and $4,056,865 gross unrealized depreciation.

NOTE 5—Pending Legal Matters:

The fund and dozens of other entities and individuals have been named as defendants in an adversary proceeding pending in the United States Bankruptcy Court for the Southern District of New York (Weisfelner, as Trustee of the LB Creditor Trust v. Fund 1, et al., Adv. Pro. No. 10-04609 the “Creditor Trust Action”). In addition, a separate adversary proceeding has been brought in the same Bankruptcy Court against a putative defendant class ( Weisfeiner, as Trustee of the LB Litigation Trust v. Hofman, at al., Adv. Pro No. 10-05525, the “Litigation Trust Action” and collectively with the Creditor Trust Action, the “Actions”). In both Actions, plaintiffs allege that payments made to shareholders of Lyondell Chemical Company (“Lyondell”) in connection with the acquisition of Lyondell by Basell AF S.C.A. in a cash-out merger on December 20, 2007 constitute “fraudulent transfers” under applicable state law, and seek to recover from the former Lyondell shareholders the merger consideration received for their shares. The Creditor Trust Action asserts claims for both intentional and constructive fraudulent transfer, while the Litigation Trust Action asserts a single claim for intentional fraudulent transfer.

On November 18, 2015, the Bankruptcy Court granted defendants’ motion to dismiss the intentional fraudulent transfer claim in both Actions, and on July 20, 2016, the Court granted defendants motion to dismiss the

42

 

constructive fraudulent transfer claim. In 2016, the United States District Court for the Southern District of New York reversed the Bankruptcy Court’s order dismissing the intentional fraudulent transfer claim in the Litigation Trust Action.

At this stage in the proceedings, it is not possible to assess with any reasonable certainty the probable outcome of the pending litigation. Consequently, at this time, management is unable to estimate the possible loss, if any, that may result.

43

 

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors
Dynamic Total Return Fund

We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated statements of investments, financial and commodity futures and options written, of Dynamic Total Return Fund (one of the series comprising Advantage Funds, Inc.) as of October 31, 2016, and the related consolidated statement of operations for the year then ended, the consolidated statement of changes in net assets for each of the two years in the period then ended, and the consolidated financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2016 by correspondence with the custodian and others. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the consolidated financial position of Dynamic Total Return Fund at October 31, 2016, the consolidated results of its operations for the year then ended, the consolidated changes in its net assets for each of the two years in the period then ended, and the consolidated financial highlights for each of the indicated periods, in conformity with U.S. generally accepted accounting principles.

New York, New York
December 29, 2016

44

 

BOARD MEMBERS INFORMATION (Unaudited)

INDEPENDENT BOARD MEMBERS

Joseph S. DiMartino (73)

Chairman of the Board (1995)

Principal Occupation During Past 5 Years:

· Corporate Director and Trustee (1995-present)

Other Public Company Board Memberships During Past 5 Years:

· CBIZ (formerly, Century Business Services, Inc.), a provider of outsourcing functions for small and medium size companies, Director (1997-present)

No. of Portfolios for which Board Member Serves: 135

———————

Peggy C. Davis (73)

Board Member (2006)

Principal Occupation During Past 5 Years:

· Shad Professor of Law, New York University School of Law (1983-present)

No. of Portfolios for which Board Member Serves: 49

———————

David P. Feldman (76)

Board Member (1996)

Principal Occupation During Past 5 Years:

· Corporate Director and Trustee (1985-present)

Other Public Company Board Memberships During Past 5 Years:

· BBH Mutual Funds Group (5 registered mutual funds), Director (1992-2014)

No. of Portfolios for which Board Member Serves: 35

———————

Ehud Houminer (76)

Board Member (1993)

Principal Occupation During Past 5 Years:

· Executive-in-Residence at the Columbia Business School, Columbia

University (1992-present)

Other Public Company Board Memberships During Past 5 Years:

· Avnet, Inc., an electronics distributor, Director (1993-2012)

No. of Portfolios for which Board Member Serves: 59

———————

45

 

BOARD MEMBERS INFORMATION (Unaudited) (continued)
INDEPENDENT BOARD MEMBERS (continued)

Lynn Martin (76)

Board Member (2012)

Principal Occupation During Past 5 Years:

· President of The Martin Hall Group LLC, a human resources consulting firm (2005-2012)

Other Public Company Board Memberships During Past 5 Years:

· AT&T, Inc., a telecommunications company, Director (1999-2012)

· Ryder System, Inc., a supply chain and transportation management company, Director (1993-2012)

No. of Portfolios for which Board Member Serves: 35

———————

Robin A. Melvin (53)

Board Member (2012)

Principal Occupation During Past 5 Years:

· Co-chairman, Illinois Mentoring Partnership, non-profit organization dedicated to increasing the quantity and quality of mentoring services in Illinois; (2014-present; served as a board member since 2013)

· Director, Boisi Family Foundation, a private family foundation that supports youth-serving organizations that promote the self sufficiency of youth from disadvantaged circumstances (1995-2012)

No. of Portfolios for which Board Member Serves: 107

———————

Dr. Martin Peretz (77)

Board Member (2006)

Principal Occupation During Past 5 Years:

· Editor-in-Chief Emeritus of The New Republic Magazine (2011-2012) (previously,

Editor-in-Chief, 1974-2011)

· Director of TheStreet.com, a financial information service on the web (1996-2010)

· Lecturer at Harvard University (1969-2012)

No. of Portfolios for which Board Member Serves: 35

———————

Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80. The address of the Board Members and Officers is c/o The Dreyfus Corporation, 200 Park Avenue, New York, New York 10166. Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from Dreyfus free of charge by calling this toll free number: 1-800-DREYFUS.

James F. Henry, Emeritus Board Member
Dr. Paul A. Marks, Emeritus Board Member
Philip L. Toia, Emeritus Board Member

46

 

OFFICERS OF THE FUND (Unaudited)

BRADLEY J. SKAPYAK, President since January 2010.

Chief Operating Officer and a director of the Manager since June 2009, Chairman of Dreyfus Transfer, Inc., an affiliate of the Manager and the transfer agent of the funds, since May 2011 and Executive Vice President of the Distributor since June 2007. From April 2003 to June 2009, Mr. Skapyak was the head of the Investment Accounting and Support Department of the Manager. He is an officer of 64 investment companies (comprised of 135 portfolios) managed by the Manager. He is 57 years old and has been an employee of the Manager since February 1988.

BENNETT A. MACDOUGALL, Chief Legal Officer since October 2015.

Chief Legal Officer of the Manager since June 2015; from June 2005 to June 2015, he served in various capacities with Deutsche Bank – Asset & Wealth Management Division, including as Director and Associate General Counsel, and Chief Legal Officer of Deutsche Investment Management Americas Inc. from June 2012 to May 2015. He is an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 45 years old and has been an employee of the Manager since June 2015.

JANETTE E. FARRAGHER, Vice President and Secretary since December 2011.

Assistant General Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. She is 53 years old and has been an employee of the Manager since February 1984.

JAMES BITETTO, Vice President and Assistant Secretary since August 2005.

Managing Counsel of BNY Mellon and Secretary of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 50 years old and has been an employee of the Manager since December 1996.

JONI LACKS CHARATAN, Vice President and Assistant Secretary since August 2005.

Managing Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. She is 60 years old and has been an employee of the Manager since October 1988.

JOSEPH M. CHIOFFI, Vice President and Assistant Secretary since August 2005.

Managing Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 54 years old and has been an employee of the Manager since June 2000.

MAUREEN E. KANE, Vice President and Assistant Secretary since April 2015.

Managing Counsel of BNY Mellon since July 2014; from October 2004 until July 2014, General Counsel, and from May 2009 until July 2014, Chief Compliance Officer of Century Capital Management. She is an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. She is 54 years old and has been an employee of the Manager since July 2014.

SARAH S. KELLEHER, Vice President and Assistant Secretary since April 2014.

Senior Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager; from August 2005 to March 2013, Associate General Counsel of Third Avenue Management. She is 41 years old and has been an employee of the Manager since March 2013.

JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.

Senior Managing Counsel of BNY Mellon, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 51 years old and has been an employee of the Manager since October 1990.

JAMES WINDELS, Treasurer since November 2001.

Director – Mutual Fund Accounting of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 58 years old and has been an employee of the Manager since April 1985.

RICHARD CASSARO, Assistant Treasurer since January 2008.

Senior Accounting Manager – Money Market, Municipal Bond and Equity Funds of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 57 years old and has been an employee of the Manager since September 1982.

47

 

OFFICERS OF THE FUND (Unaudited) (continued)

GAVIN C. REILLY, Assistant Treasurer since December 2005.

Tax Manager of the Investment Accounting and Support Department of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 48 years old and has been an employee of the Manager since April 1991.

ROBERT S. ROBOL, Assistant Treasurer since December 2005.

Senior Accounting Manager of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 52 years old and has been an employee of the Manager since October 1988.

ROBERT SALVIOLO, Assistant Treasurer since July 2007.

Senior Accounting Manager – Equity Funds of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since June 1989.

ROBERT SVAGNA, Assistant Treasurer since December 2002.

Senior Accounting Manager – Fixed Income and Equity Funds of the Manager, and an officer of 65 investment companies (comprised of 160 portfolios) managed by the Manager. He is 49 years old and has been an employee of the Manager since November 1990.

JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.

Chief Compliance Officer of the Manager and The Dreyfus Family of Funds (65 investment companies, comprised of 160 portfolios). He is 59 years old and has served in various capacities with the Manager since 1980, including manager of the firm’s Fund Accounting Department from 1997 through October 2001.

CARIDAD M. CAROSELLA, Anti-Money Laundering Compliance Officer since January 2016

Anti-Money Laundering Compliance Officer of the Dreyfus Family of Funds and BNY Mellon Funds Trust since January 2016; from May 2015 to December 2015, Interim Anti-Money Laundering Compliance Officer of the Dreyfus Family of Funds and BNY Mellon Funds Trust and the Distributor; from January 2012 to May 2015, AML Surveillance Officer of the Distributor and from 2007 to December 2011, Financial Processing Manager of the Distributor. She is an officer of 60 investment companies (comprised of 155 portfolios) managed by the Manager. She is 48 years old and has been an employee of the Distributor since 1997.

48

 

NOTES

49

 

For More Information

Dynamic Total Return Fund

200 Park Avenue
New York, NY 10166

Manager

The Dreyfus Corporation
200 Park Avenue
New York, NY 10166

Sub-Investment Adviser

Mellon Capital Management
Corporation
50 Fremont Street, Suite 3900
San Francisco, CA 94105

Custodian

The Bank of New York Mellon
225 Liberty Street
New York, NY 10286

Transfer Agent &
Dividend Disbursing Agent

Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166

Distributor

MBSC Securities Corporation
200 Park Avenue
New York, NY 10166

   

Ticker Symbols:

Class A: AVGAX   Class C: AVGCX   Class I: AVGRX   Class Y: AVGYX

Telephone Call your financial representative or 1-800-DREYFUS

Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144

E-mail Send your request to [email protected]

Internet Information can be viewed online or downloaded at www.dreyfus.com

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. (phone 1-800-SEC-0330 for information).

A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.dreyfus.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.

   

© 2016 MBSC Securities Corporation
6140AR1016

 


 
 

Item 2.             Code of Ethics.

The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.  There have been no amendments to, or waivers in connection with, the Code of Ethics during the period covered by this Report.

Item 3.             Audit Committee Financial Expert.

The Registrant's Board has determined that David P. Feldman, a member of the Audit Committee of the Board, is an audit committee financial expert as defined by the Securities and Exchange Commission (the "SEC").  Mr. Feldman is "independent" as defined by the SEC for purposes of audit committee financial expert determinations.

Item 4.             Principal Accountant Fees and Services.

 

(a)  Audit Fees.  The aggregate fees billed for each of the last two fiscal years (the "Reporting Periods") for professional services rendered by the Registrant's principal accountant (the "Auditor") for the audit of the Registrant's annual financial statements or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $163,578 in 2015 and $167,665 in 2016.

 

(b)  Audit-Related Fees. The aggregate fees billed in the Reporting Periods for assurance and related services by the Auditor that are reasonably related to the performance of the audit of the Registrant's financial statements and are not reported under paragraph (a) of this Item 4 were $25,092 in 2015 and $25,720 in 2016. These services consisted of one or more of the following: (i) agreed upon procedures related to compliance with Internal Revenue Code section 817(h), (ii) security counts required by Rule 17f-2 under the Investment Company Act of 1940, as amended, (iii) advisory services as to the accounting or disclosure treatment of Registrant transactions or events and (iv) advisory services to the accounting or disclosure treatment of the actual or potential impact to the Registrant of final or proposed rules, standards or interpretations by the Securities and Exchange Commission, the Financial Accounting Standards Boards or other regulatory or standard-setting bodies.

 

The aggregate fees billed in the Reporting Periods for non-audit assurance and related services by the Auditor to the Registrant's investment adviser (not including any sub-investment adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant ("Service Affiliates"), that were reasonably related to the performance of the annual audit of the Service Affiliate, which required pre-approval by the Audit Committee were $0 in 2015 and $0 in 2016.

 

(c)  Tax Fees.  The aggregate fees billed in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice, and tax planning ("Tax Services") were $18,170 in 2015 and $21,060 in 2016. These services consisted of: (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local tax planning, advice and assistance regarding statutory, regulatory or administrative developments; (iii) tax advice regarding tax qualification matters and/or treatment of various financial instruments held or proposed to be acquired or held, and (iv) determination of Passive Foreign Investment Companies. The aggregate fees billed in the Reporting Periods for Tax Services by the Auditor to Service Affiliates, which required pre-approval by the Audit Committee were $0 in 2015 and $0 in 2016. 

 


 

(d)  All Other Fees.  The aggregate fees billed in the Reporting Periods for products and services provided by the Auditor, other than the services reported in paragraphs (a) through (c) of this Item, were $121 in 2015    and $212  in 2016. These services consisted of a review of the Registrant's anti-money laundering program.

 

The aggregate fees billed in the Reporting Periods for Non-Audit Services by the Auditor to Service Affiliates, other than the services reported in paragraphs (b) through (c) of this Item, which required pre-approval by the Audit Committee, were $0 in 2015 and $0 in 2016. 

 

(e)(1) Audit Committee Pre-Approval Policies and Procedures. The Registrant's Audit Committee has established policies and procedures (the "Policy") for pre-approval (within specified fee limits) of the Auditor's engagements for non-audit services to the Registrant and Service Affiliates without specific case-by-case consideration. The pre-approved services in the Policy can include pre-approved audit services, pre-approved audit-related services, pre-approved tax services and pre-approved all other services.  Pre-approval considerations include whether the proposed services are compatible with maintaining the Auditor's independence.  Pre-approvals pursuant to the Policy are considered annually.

(e)(2) Note. None of the services described in paragraphs (b) through (d) of this Item 4 were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

 

(f) None of the hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal account's full-time, permanent employees.

Non-Audit Fees. The aggregate non-audit fees billed by the Auditor for services rendered to the Registrant, and rendered to Service Affiliates, for the Reporting Periods were  $19,591,507 in 2015 and $20,423,084 in 2016. 

 

Auditor Independence. The Registrant's Audit Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates, which were not pre-approved (not requiring pre-approval), is compatible with maintaining the Auditor's independence.

 

Item 5.             Audit Committee of Listed Registrants.

                        Not applicable. 

Item 6.             Investments.

(a)                    Not applicable.

Item 7.             Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

                        Not applicable. 

Item 8.             Portfolio Managers of Closed-End Management Investment Companies.

Not applicable. 


 

Item 9.             Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.

                        Not applicable.

Item 10.           Submission of Matters to a Vote of Security Holders.

There have been no material changes to the procedures applicable to Item 10.

Item 11.           Controls and Procedures.

(a)        The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

(b)        There were no changes to the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. 

Item 12.           Exhibits.

(a)(1)   Code of ethics referred to in Item 2.

(a)(2)   Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.

(a)(3)   Not applicable.

(b)        Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Advantage Funds, Inc.

By:       /s/ Bradley J. Skapyak

            Bradley J. Skapyak

            President

 

Date:    December 21, 2016

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

By:       /s/ Bradley J. Skapyak

            Bradley J. Skapyak

            President

 

Date:    December 21, 2016

 

By:       /s/ James Windels

            James Windels

            Treasurer

 

Date:    December 21, 2016

 

 

 


 

EXHIBIT INDEX

(a)(1)   Code of ethics referred to in Item 2.

(a)(2)   Certifications of principal executive and principal financial officers as required by Rule 30a-2(a) under the Investment Company Act of 1940.  (EX-99.CERT)

(b)        Certification of principal executive and principal financial officers as required by Rule 30a-2(b) under the Investment Company Act of 1940.  (EX-99.906CERT)

 

 

THE DREYFUS FAMILY OF FUNDS

CODE OF ETHICS FOR PRINCIPAL EXECUTIVE

AND SENIOR FINANCIAL OFFICERS

 

1.      Covered Officers/Purpose of the Code

This code of ethics (the "Code") for the investment companies within the complex (each, a "Fund") applies to each Fund's Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer or Controller, or other persons performing similar functions, each of whom is listed on Exhibit A (the "Covered Officers"), for the purpose of promoting:

·           honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

·           full, fair, accurate, timely and understandable disclosure in reports and documents that the Fund files with, or submits to, the Securities and Exchange Commission (the "SEC") and in other public communications made by the Fund;

·           compliance with applicable laws and governmental rules and regulations;

·           the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and

·           accountability for adherence to the Code.

Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest.

2.      Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest

Overview. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the Fund.  For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Fund.

Certain conflicts of interest arise out of the relationships between Covered Officers and the Fund and already are subject to conflict of interest provisions in the Investment Company Act of 1940, as amended (the "Investment Company Act"), and the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Fund because of their status as "affiliated persons" of the Fund. The compliance programs and procedures of the Fund and the Fund's investment adviser (the "Adviser") are designed to prevent, or identify and correct, violations of these provisions. The Code does not, and is not intended to, repeat or replace these programs and procedures, and the circumstances they cover fall outside of the parameters of the Code.

Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Fund and the Adviser of which the Covered Officers are also officers or employees.  As a result, the Code recognizes that the Covered Officers, in the ordinary course of their duties (whether formally for the Fund or for the Adviser, or for both), will be involved in establishing policies and implementing decisions that will have different effects on the Adviser and the Fund. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Fund and the Adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Fund and, if addressed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, will be deemed to have been handled ethically. In addition, it is recognized by the Fund's Board that the Covered Officers also may be officers or employees of one or more other investment companies covered by this or other codes of ethics.

 


 

 

Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act.  Covered Officers should keep in mind that the Code cannot enumerate every possible scenario.  The overarching principle of the Code is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Fund.

Each Covered Officer must:

·           not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Fund whereby the Covered Officer would benefit personally to the detriment of the Fund;

·           not cause the Fund to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Fund; and

·           not retaliate against any employee or Covered Officer for reports of potential violations that are made in good faith.

3.      Disclosure and Compliance

·           Each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the Fund within his area of responsibility;

·           each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Fund to others, whether within or outside the Fund, including to the Fund's Board members and auditors, and to governmental regulators and self-regulatory organizations;

·           each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Fund and the Adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Fund files with, or submits to, the SEC and in other public communications made by the Fund; and

·           it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations.

 


 

 

4.      Reporting and Accountability

Each Covered Officer must:

·           upon adoption of the Code (or thereafter, as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he has received, read, and understands the Code;

·           annually thereafter affirm to the Board that he has complied with the requirements of the Code; and

·           notify the Adviser's General Counsel (the "General Counsel") promptly if he knows of any violation of the Code.  Failure to do so is itself a violation of the Code.

The General Counsel is responsible for applying the Code to specific situations in which questions are presented under it and has the authority to interpret the Code in any particular situation. However, waivers sought by any Covered Officer will be considered by the Fund's Board.

The Fund will follow these procedures in investigating and enforcing the Code:

·           the General Counsel will take all appropriate action to investigate any potential violations reported to him;

·           if, after such investigation, the General Counsel believes that no violation has occurred, the General Counsel is not required to take any further action;

·           any matter that the General Counsel believes is a violation will be reported to the Board;

·           if the Board concurs that a violation has occurred, it will consider appropriate action, which may include: review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the Adviser or its board; or dismissal of the Covered Officer;

·           the Board will be responsible for granting waivers, as appropriate; and

·           any waivers of or amendments to the Code, to the extent required, will be disclosed as provided by SEC rules.

5.      Other Policies and Procedures

The Code shall be the sole code of ethics adopted by the Fund for purposes of Section 406 of the Sarbanes-Oxley Act of 2002 and the rules and forms applicable to registered investment companies thereunder. The Fund's, its principal underwriter's and the Adviser's codes of ethics under Rule 17j-1 under the Investment Company Act and the Adviser's additional policies and procedures, including its Code of Conduct, are separate requirements applying to the Covered Officers and others, and are not part of the Code.

 


 

 

6.      Amendments 

The Code may not be amended except in written form, which is specifically approved or ratified by a majority vote of the Fund's Board, including a majority of independent Board members.

7.      Confidentiality 

All reports and records prepared or maintained pursuant to the Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or the Code, such matters shall not be disclosed to anyone other than the appropriate Funds and their counsel, the appropriate Boards (or Committees) and their counsel and the Adviser

8.      Internal Use

The Code is intended solely for the internal use by the Fund and does not constitute an admission, by or on behalf of the Fund, as to any fact, circumstance, or legal conclusion.

Dated as of:  July 1, 2003

 


 

 

Exhibit A

Persons Covered by the Code of Ethics

 

 

Bradley J. Skapyak

President

(Principal Executive Officer)

 

 

 

James Windels

Treasurer

(Principal Financial and Accounting Officer)

 

 

 

Revised as of: January 1, 2010

[EX-99.CERT]—Exhibit  (a)(2)

 

SECTION 302 CERTIFICATION

 

I, Bradley J. Skapyak, certify that:

1.  I have reviewed this report on Form N-CSR of Advantage Funds, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4.  The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5.  The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

                                                                        By:       /s/ Bradley J. Skapyak

                                                                                    Bradley J. Skapyak

                                                                                    President

                                                                        Date:    December 21, 2016


 

SECTION 302 CERTIFICATION

I, James Windels, certify that:

1.  I have reviewed this report on Form N-CSR of Advantage Funds, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

4.  The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5.  The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

                                                                        By:       /s/ James Windels

                                                                                    James Windels

                                                                                    Treasurer

                                                                        Date:    December 21, 2016

 

 [EX-99.906CERT]

Exhibit (b)

 

 

SECTION 906 CERTIFICATIONS

            In connection with this report on Form N-CSR for the Registrant as furnished to the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

            (1)        the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and

 

            (2)        the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

                                                                        By:       /s/ Bradley J. Skapyak

                                                                        Bradley J. Skapyak

                                                                                    President

 

                                                                        Date:    December 21, 2016

 

 

                                                                        By:       /s/ James Windels

                                                                                    James Windels

                                                                                    Treasurer

 

                                                                        Date:    December 21, 2016

 

 

This certificate is furnished pursuant to the requirements of Form N-CSR and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934.

 

 



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