UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
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Investment Company Act file number |
811-09891 |
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BNY Mellon Opportunity Funds |
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(Exact name of Registrant as specified in charter) |
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c/o BNY Mellon Investment Adviser, Inc. 240 Greenwich Street New York, New York 10286 |
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(Address of principal executive offices) (Zip code) |
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Bennett A. MacDougall, Esq. 240 Greenwich Street New York, New York 10286 |
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(Name and address of agent for service) |
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Registrant's telephone number, including area code: |
(212) 922-6400 |
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Date of fiscal year end:
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09/30 |
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Date of reporting period: |
09/30/19
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The following N-CSR relates only to the Registrant's series listed below and does not relate to any series of the Registrant with a different fiscal year end and, therefore, different N-CSR reporting requirements. A separate N-CSR will be filed for any series with a different fiscal year end, as appropriate.
BNY Mellon Natural Resources Fund
BNY Mellon Natural Resources Fund
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ANNUAL REPORT September 30, 2019 |
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Save time. Save paper. View your next shareholder report online as soon as it’s available. Log into www.bnymellonim.com/us and sign up for eCommunications. It’s simple and only takes a few minutes. |
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The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
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Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
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BNY Mellon Investment Adviser, Inc. |
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With Those of Other Funds |
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in Affiliated Issuers |
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Public Accounting Firm |
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the Fund’s Management Agreement |
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FOR MORE INFORMATION
Back Cover
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The Fund |
A LETTER FROM THE PRESIDENT OF BNY MELLON INVESTMENT ADVISER, INC.
Dear Shareholder:
We are pleased to present this annual report for BNY Mellon Natural Resources Fund (formerly, Dreyfus Natural Resources Fund), covering the 12-month period from October 1, 2018 through September 30, 2019. 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.
Equity markets weakened in the fourth quarter of 2018, as concerns about rising interest rates, trade tensions and slowing global growth provided downward pressure on returns. In December 2018, stocks experienced a sharp sell-off, as it appeared that the U.S. Federal Reserve (the “Fed”) would maintain its hawkish stance on monetary policy. In January 2019, the Fed commented that it would slow the pace of interest-rate increases, which helped stimulate a rebound across equity markets that continued into the second quarter. Escalating trade tensions disrupted equity markets again in May. The dip was short-lived, as markets rose once again in June. However, despite continued supportive central bank policies, pockets of volatility persisted through the end of the period. Despite the turbulence, several major U.S. equity indices posted modestly positive returns for the 12-month period. In general, small-cap stocks lagged their mid- and large-cap counterparts and non-U.S. markets trailed U.S. performance.
In fixed-income markets, October 2018 brought a risk-off mentality, fueled in part by equity market volatility. A flight to quality supported price increases for U.S. Treasuries, which continued through the end of the year, leading to a flattening yield curve. After the Fed’s supportive statements in January 2019, other developed market central banks followed suit and reiterated their abilities to bolster flagging growth by continuing supportive policies. This helped to further buoy fixed-income instrument prices. At the end of July and in mid-September, the Fed cut the federal funds rate by 25 basis points, for a total reduction of 50 basis points thus far in 2019. Both the U.S. and Global Bloomberg Barclays Aggregate Bond Indices produced strong returns for the 12 months.
We believe that over the near term, the outlook for the U.S. remains positive, but we will monitor relevant data for any signs of a change. As always, we encourage you to discuss the risks and opportunities in today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee LaRoche-Morris
President
BNY Mellon Investment Adviser, Inc.
October 15, 2019
2
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from October 1, 2018 through September 30, 2019, as provided by Robin Wehbé, portfolio manager
Market and Fund Performance Overview
For the 12-month period ended September 30, 2019, BNY Mellon Natural Resources Fund’s (formerly, Dreyfus Natural Resources Fund) Class A shares produced a total return of
-15.38%, Class C shares returned -15.97%, Class I shares returned -15.16% and Class Y shares returned -15.04%.1 In comparison, the fund’s benchmark, the S&P 500® Index (the “Index”), produced a total return of 4.25% for the same period.2 The S&P Global Natural Resources Index, which more closely reflects the fund’s composition, returned -10.98% for the reporting period.3
Some stocks provided negative returns over the reporting period, resulting from market volatility fueled by geopolitical, trade and economic uncertainty. The fund trailed the Index and the S&P Global Natural Resources Index due in part to allocation and security selection decisions in the U.S. upstream oil production, integrated energy and metals and mining industries.
The Fund’s Investment Approach
The fund seeks long-term capital appreciation. To pursue its goal, the fund normally invests at least 80% of its assets, plus any borrowings for investment purposes, in stocks of companies in natural resources and natural resource-related sectors. Generally, these are companies principally engaged in owning or developing natural resources, or supplying goods, technology and services relating to natural resources.
The fund invests in growth and value stocks and typically will maintain exposure to the major natural resources sectors. Using fundamental research and direct management contact, the portfolio managers seek stocks of companies with strong positions in their natural resources sector, sustained achievement records and strong financial condition. There are no prescribed limits on the weightings of securities in any particular natural resources sector or in any individual company, and the fund may invest in companies of any market capitalization. The fund may invest in foreign securities, including emerging-market securities, without limitation.
Markets Pivot on Central Bank and Trade Activity
At the beginning of October 2018, many equity markets felt pressure from slowing global growth, escalating trade issues between U.S. and China, Brexit difficulties and additional geopolitical issues elsewhere in Europe and the emerging markets. Renewed articulation of hawkish narratives by U.S. Federal Reserve (“Fed”) officials alarmed investors and stoked volatility. In December, equities reached new lows for the year, as economic and political news continued to unnerve investors. Investors also feared the European Central Bank (ECB) would proceed with its plan to conclude stimulus measures in January, despite moderating growth rates.
January 2019 marked a turnaround in the markets. Talk of a potential trade deal between the U.S. and China helped fuel investor optimism, as equity prices recovered. The ECB announced it would provide additional stimulus to support the eurozone economy. China
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
also announced plans to stoke its slowing economic growth rate. At its first meeting of the year, the Federal Open Market Committee emphasized its focus on data as a primary driver for rate-hike decisions, and its ability to suspend additional rate increases when the data is not supportive. These sentiments reassured investors of central bankers’ commitments to support flagging growth. The rebound continued throughout the month of January, and equity markets maintained an upward trajectory through April. However, renewed trade tensions between the U.S. and China in May caused stocks to pull back once again. The dip was short-lived, as markets rose once again in June. At the end of July and again in September, the Fed cut the federal funds rate by 25 basis points. However, despite continued supportive central bank policies, pockets of volatility persisted through the end of the period.
Security Selection Drove Fund Performance
The fund underperformed its primary and secondary benchmark during the volatile period. The longer-term, cycle-dependent decision-making process of the team will often lead to underperformance in volatile periods, since they are not tactical, short-term allocators. During the 12 months, many positions within energy hurt relative performance. In particular, U.S. upstream operation companies, metals and mining companies and integrated energy companies provided a headwind. We sold Anadarko Petroleum ahead of the bounce in energy equities, singling that out as one of the top detractors. Occidental Petroleum was also a laggard, as the company shifted strategy and acquired Anadarko, thus spooking investors and preventing it from performing with the rest of energy. A position in Vale also weighed on performance. Shares of the Brazil-based metals and mining company slid during the period after a mine collapsed. We have since closed the position and reallocated into Anglo American, which saw price appreciation during the period. However, due to the timing of the transition, we did not participate in much of the price increase, hurting benchmark-relative results. In addition, a lack of exposure to energy companies Exxon and Chevron detracted from relative results.
Conversely, stock selection and allocation decisions within the forest products sector was beneficial to relative returns, as was an underweight to steel and an overweight to next-generation energy. Packaging company Ball was among the top contributors to results. The defensively positioned company stood up well during the market volatility. A position in fertilizer company CF Industries Holdings was also among the top performers. Many agricultural stocks have been recovering as supply-and-demand dynamics affecting grain prices have normalized. Casella Waste Systems was also a top individual contributor. This mid-Atlantic waste-management company has seen an increase in demand for its services, since China stopped accepting several forms of waste from the U.S.
Keeping an Eye on Long-Term Trends
We continue to identify what we believe are attractive investment opportunities in an environment of slowing economic growth and volatile stock prices. We believe the transition to green, next-generation energy is a long-term story. It is our opinion that society is moving from petroleum-based fuels and single-use plastics towards more efficient, sustainable and responsible alternatives. We think that wind and solar energy, and the technology supporting these industries, will be a source of growth in the future. As these methods of powering the grid become more competitive versus traditional methods, these areas will become more
4
accessible to and attractive for investors. We believe these areas of U.S. energy are currently undervalued.
It is also our opinion that oil and gas stocks will continue their trend downward as these methods of sustainable power become more prominent, but we still believe U.S. energy is undervalued. The North American energy revolution has led to an improvement in profitability not fully discounted as of yet. We are currently maintaining our position in precious metals, as we feel gold in the portfolio is a good defensive position. We remain underweight to metals and mining because we have yet to identify a catalyst that we expect will help prices recover from their current lows. Within agriculture, we expect the focus on rural America during the upcoming election to benefit agricultural companies.
October 15, 2019
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. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. The fund’s return reflects the absorption of certain fund expenses by BNY Mellon Investment Adviser, Inc. pursuant to an agreement in effect through February 1, 2020, at which time it may be extended, modified, or terminated. Had these expenses not been absorbed, returns would have been lower.
2 Source: Lipper Inc. — The S&P 500® Index is widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. Investors cannot invest directly in any index.
3 Source: Lipper Inc. — The S&P Global Natural Resources Index includes 90 of the largest publicly traded companies in natural resources and commodities businesses that meet specific investability requirements, offering investors diversified and investable equity exposure across three primary commodity-related sectors: agribusiness, energy and metals & mining. Investors cannot invest directly in any index.
Please note: the position in any security highlighted with italicized typeface was sold during the reporting period.
Equities are subject generally to market, market sector, market liquidity, issuer and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
Because the fund’s investments are concentrated in the natural resources and related sectors, the value of its shares will be affected by factors particular to those sectors and may fluctuate more widely than that of a fund which invests in a broad range of industries. The market value of these securities may be affected by numerous factors, including events occurring in nature, inflationary pressures and domestic and international politics. Interest rates, commodity prices, economic, tax, and energy developments, and government regulations may affect the supply and demand for natural resources and the share prices of companies in the sector.
Securities of companies within specific natural resources sectors can perform differently from the overall market. This may be due to changes in such things as the regulatory or competitive environment or to changes in investor perceptions regarding a sector. Because the fund may allocate relatively more assets to certain natural resources sectors than others, the fund’s performance may be more sensitive to developments that affect those sectors emphasized by the fund.
Small and midsized companies carry additional risks because their earnings and revenues tend to be less predictable, and their share prices more volatile, than those of larger, more established companies.
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 are greater with emerging-market countries than with more economically and politically established foreign countries.
The fund may use derivative instruments, such as options, futures, options on futures, forward contracts and swaps. A small investment in derivatives could have a potentially large impact on the fund’s performance. The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets.
5
FUND PERFORMANCE (Unaudited)
Comparison of change in value of a $10,000 investment in Class A shares, Class C shares and Class I shares of BNY Mellon Natural Resources Fund with a hypothetical investment of $10,000 in the S&P 500® Index and the S&P Global Natural Resources Index
† Source: Lipper Inc.
Past performance is not predictive of future performance.
The above graph compares a hypothetical $10,000 investment made in Class A, Class C and Class I shares of BNY Mellon Natural Resources Fund on 9/30/09 to a hypothetical investment of $10,000 made in the S&P 500® Index and the S&P Global Natural Resources 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 S&P 500® Index is widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. The S&P Global Natural Resources Index includes 90 of the largest publicly traded companies in natural resources and commodities businesses that meet specific investability requirements, offering investors diversified and investable equity exposure across three primary commodity-related sectors: agribusiness, energy, and metals & mining. 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.
6
Comparison of change in value of $1,000,000 investment in Class Y shares of BNY Mellon Natural Resources Fund with a hypothetical investment of $1,000,000 in the S&P 500® Index and the S&P Global Natural Resources Index
† Source: Lipper Inc.
†† The total return figures presented for Class Y shares of the fund reflect the performance of the fund’s Class I shares for the period prior to 9/1/15 (the inception date for Class Y shares).
Past performance is not predictive of future performance.
The above graph compares a hypothetical $1,000,000 investment made in Class Y shares of BNY Mellon Natural Resources Fund on 9/30/09 to a hypothetical investment of $1,000,000 made in the S&P 500® Index and the S&P Global Natural Resources Index on that date. All dividends and capital gain distributions are reinvested.
The fund’s performance shown in the line graph above takes into account all other applicable fees and expenses of the fund’s Class Y shares. The S&P 500® Index is widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. The S&P Global Natural Resources Index includes 90 of the largest publicly traded companies in natural resources and commodities businesses that meet specific investability requirements, offering investors diversified and investable equity exposure across three primary commodity-related sectors: agribusiness, energy, and metals & mining. 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.
7
FUND PERFORMANCE (Unaudited) (continued)
† 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 I shares for the period prior to 9/1/15 (the inception date for Class Y shares).
The performance data quoted represents past performance, which is no guarantee of future results. Share price and investment return fluctuate and an investor’s shares may be worth more or less than original cost upon redemption. Current performance may be lower or higher than the performance quoted. Go to im.bnymellon.com for the fund’s most recent month-end returns.
The fund’s performance shown in the graphs and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. In addition to the performance of Class A shares shown with and without a maximum sales charge, the fund’s performance shown in the table takes into account all other applicable fees and expenses on all classes.
8
UNDERSTANDING YOUR FUND’S EXPENSES (Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads) and redemption fees, which are not shown in this section and would have resulted in higher total expenses. For more information, see your fund’s prospectus or talk to your financial adviser.
Review your fund’s expenses
The table below shows the expenses you would have paid on a $1,000 investment in BNY Mellon Natural Resources Fund from April 1, 2019 to September 30, 2019. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
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 $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
9
STATEMENT OF INVESTMENTS
September 30, 2019
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Description |
Shares |
Value ($) |
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Common Stocks - 97.6% |
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Agricultural Products - 5.0% |
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Archer-Daniels-Midland |
271,887 |
11,166,399 |
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Bunge |
87,664 |
4,963,536 |
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16,129,935 |
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Copper - 5.1% |
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Freeport-McMoRan |
1,189,085 |
11,379,543 |
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Lundin Mining |
1,053,608 |
4,954,506 |
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16,334,049 |
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Diversified Metals & Mining - 5.0% |
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Anglo American |
536,685 |
12,363,857 |
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Teck Resources, Cl. B |
226,597 |
a |
3,677,669 |
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16,041,526 |
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Electric Utilities - 3.5% |
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NextEra Energy |
35,896 |
8,363,409 |
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Orsted |
32,507 |
b |
3,019,207 |
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11,382,616 |
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Electronic Equipment & Instruments - 1.0% |
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Itron |
45,637 |
c |
3,375,312 |
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Environmental & Facilities Services - 3.5% |
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Casella Waste Systems, Cl. A |
144,202 |
c |
6,192,034 |
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Covanta Holding |
289,197 |
a |
5,000,216 |
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11,192,250 |
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Fertilizers & Agricultural Chemicals - 14.7% |
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CF Industries Holdings |
249,835 |
12,291,882 |
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FMC |
144,328 |
12,654,679 |
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Nutrien |
276,429 |
13,770,852 |
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Yara International |
203,193 |
8,766,124 |
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47,483,537 |
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Gold - 12.1% |
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Barrick Gold |
813,408 |
14,072,017 |
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Newcrest Mining |
628,174 |
14,645,541 |
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Newmont Goldcorp |
278,161 |
10,547,865 |
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39,265,423 |
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Heavy Electrical Equipment - 2.0% |
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Vestas Wind Systems |
81,466 |
6,328,874 |
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Industrial Gases - 2.2% |
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Air Liquide |
49,384 |
7,036,380 |
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Integrated Oil & Gas - 21.7% |
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BP |
2,846,264 |
17,995,789 |
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Galp Energia |
362,891 |
5,458,462 |
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Gazprom, ADR |
1,057,740 |
7,287,236 |
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Occidental Petroleum |
110,014 |
4,892,323 |
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10
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Description |
Shares |
Value ($) |
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Common Stocks - 97.6% (continued) |
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Integrated Oil & Gas - 21.7% (continued) |
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OMV |
124,111 |
6,649,034 |
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Petroleo Brasileiro, ADR |
527,629 |
6,933,045 |
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Total |
399,203 |
20,782,467 |
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69,998,356 |
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Metal & Glass Containers - 3.7% |
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Ball |
163,676 |
11,917,250 |
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Oil & Gas Drilling - 1.2% |
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Helmerich & Payne |
99,743 |
a |
3,996,702 |
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Oil & Gas Equipment & Services - .9% |
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Saipem |
672,343 |
c |
3,047,462 |
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Oil & Gas Exploration & Production - 6.5% |
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Concho Resources |
56,924 |
3,865,140 |
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Diamondback Energy |
50,485 |
a |
4,539,106 |
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Hess |
148,065 |
8,954,971 |
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Pioneer Natural Resources |
29,630 |
3,726,565 |
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21,085,782 |
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Oil & Gas Refining & Marketing - 7.5% |
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Marathon Petroleum |
124,266 |
7,549,159 |
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PBF Energy, Cl. A |
144,859 |
3,938,716 |
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S-Oil |
50,079 |
4,179,965 |
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Valero Energy |
102,195 |
8,711,102 |
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24,378,942 |
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Semiconductors - 2.0% |
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First Solar |
112,062 |
a,c |
6,500,717 |
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Total Common Stocks (cost $303,767,980) |
315,495,113 |
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1-Day
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Investment Companies - 1.9% |
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Registered Investment Companies - 1.9% |
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Dreyfus Institutional Preferred Government Plus Money Market Fund
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1.89 |
6,156,121 |
d |
6,156,121 |
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11
STATEMENT OF INVESTMENTS (continued)
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Description |
1-Day
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Shares |
Value ($) |
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Investment of Cash Collateral for Securities Loaned - 1.1% |
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Registered Investment Companies - 1.1% |
|||||||
|
Dreyfus Institutional Preferred Government Plus Money Market Fund
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1.89 |
3,520,314 |
d |
3,520,314 |
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Total Investments (cost $313,444,415) |
100.6% |
325,171,548 |
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Liabilities, Less Cash and Receivables |
(.6%) |
(1,920,277) |
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Net Assets |
100.0% |
323,251,271 |
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ADR—American Depository Receipt
a Security, or portion thereof, on loan. At September 30, 2019, the value of the fund’s securities on loan was $19,524,438 and the value of the collateral was $20,009,003, consisting of cash collateral of $3,520,314 and U.S. Government & Agency securities valued at $16,488,689.
b Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At September 30, 2019, these securities were valued at $3,019,207 or .93% of net assets.
c Non-income producing security.
d Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
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Portfolio Summary (Unaudited) † |
Value (%) |
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Materials |
42.7 |
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Energy |
37.9 |
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Industrials |
5.4 |
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Consumer Staples |
5.0 |
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Utilities |
3.5 |
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Information Technology |
3.1 |
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Investment Companies |
3.0 |
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100.6 |
† Based on net assets.
See notes to financial statements.
12
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS
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Investment Companies |
Value
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Purchases($) |
Sales($) |
Value
|
Net
|
Dividends/
|
|
Registered Investment Companies; |
||||||
|
Dreyfus Institutional Preferred Government Plus Money Market Fund |
3,874,536 |
163,568,876 |
161,287,291 |
6,156,121 |
1.9 |
126,218 |
|
Investment of Cash Collateral for Securities Loaned:† |
||||||
|
Dreyfus Institutional Preferred Government Money Market Fund, Institutional Shares |
- |
23,013,757 |
23,013,757 |
- |
- |
- |
|
Dreyfus Institutional Preferred Government Plus Money Market Fund |
- |
108,488,698 |
104,968,384 |
3,520,314 |
1.1 |
- |
|
Total |
3,874,536 |
295,071,331 |
289,269,432 |
9,676,435 |
3.0 |
126,218 |
† Effective January 2, 2019, cash collateral for securities lending was transferred from Dreyfus Institutional Preferred Government Money Market Fund, Institutional Shares to Dreyfus Institutional Preferred Government Plus Money Market Fund.
See notes to financial statements.
13
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2019
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Cost |
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Value |
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Assets ($): |
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||
|
Investments in securities—See Statement of Investments
|
|
|
|
|||
|
Unaffiliated issuers |
303,767,980 |
|
315,495,113 |
|
||
|
Affiliated issuers |
|
9,676,435 |
|
9,676,435 |
|
|
|
Cash denominated in foreign currency |
|
|
743,793 |
|
735,679 |
|
|
Dividends, interest and securities lending income receivable |
|
1,018,774 |
|
|||
|
Receivable for shares of Beneficial Interest subscribed |
|
605,665 |
|
|||
|
Prepaid expenses |
|
|
|
|
67,507 |
|
|
|
|
|
|
|
327,599,173 |
|
|
Liabilities ($): |
|
|
|
|
||
|
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(c) |
|
247,225 |
|
|||
|
Cash overdraft due to Custodian |
|
|
|
|
2,362 |
|
|
Liability for securities on loan—Note 1(c) |
|
3,520,314 |
|
|||
|
Payable for shares of Beneficial Interest redeemed |
|
393,744 |
|
|||
|
Trustees fees and expenses payable |
|
4,361 |
|
|||
|
Other accrued expenses |
|
|
|
|
179,896 |
|
|
|
|
|
|
|
4,347,902 |
|
|
Net Assets ($) |
|
|
323,251,271 |
|
||
|
Composition of Net Assets ($): |
|
|
|
|
||
|
Paid-in capital |
|
|
|
|
331,210,229 |
|
|
Total distributable earnings (loss) |
|
|
|
|
(7,958,958) |
|
|
Net Assets ($) |
|
|
323,251,271 |
|
||
|
Net Asset Value Per Share |
Class A |
Class C |
Class I |
Class Y |
|
|
Net Assets ($) |
56,407,495 |
8,341,146 |
247,344,376 |
11,158,254 |
|
|
Shares Outstanding |
2,030,045 |
326,876 |
8,650,537 |
389,796 |
|
|
Net Asset Value Per Share ($) |
27.79 |
25.52 |
28.59 |
28.63 |
|
|
|
|
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
|
14
STATEMENT OF OPERATIONS
Year Ended September 30, 2019
15
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
|
|
Year Ended September 30, |
|||||
|
|
|
|
|
2019 |
|
2018 |
|
||
|
Operations ($): |
|
|
|
|
|
|
|
|
|
|
Investment income—net |
|
|
7,940,339 |
|
|
|
5,076,707 |
|
|
|
Net realized gain (loss) on investments |
|
(12,960,736) |
|
|
|
13,671,412 |
|
||
|
Net change in unrealized appreciation
|
|
(65,712,159) |
|
|
|
20,756,675 |
|
||
|
Net Increase (Decrease) in Net Assets
|
(70,732,556) |
|
|
|
39,504,794 |
|
|||
|
Distributions ($): |
|
||||||||
|
Distributions to shareholders: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
(1,050,131) |
|
|
|
(372,999) |
|
|
|
Class C |
|
|
(103,001) |
|
|
|
- |
|
|
|
Class I |
|
|
(4,782,985) |
|
|
|
(1,539,884) |
|
|
|
Class Y |
|
|
(167,439) |
|
|
|
(41,566) |
|
|
|
Total Distributions |
|
|
(6,103,556) |
|
|
|
(1,954,449) |
|
|
|
Beneficial Interest Transactions ($): |
|
||||||||
|
Net proceeds from shares sold: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
17,890,579 |
|
|
|
36,612,090 |
|
|
|
Class C |
|
|
1,475,862 |
|
|
|
5,919,345 |
|
|
|
Class I |
|
|
132,278,962 |
|
|
|
172,918,585 |
|
|
|
Class Y |
|
|
6,098,750 |
|
|
|
6,761,659 |
|
|
|
Distributions reinvested: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
962,026 |
|
|
|
331,557 |
|
|
|
Class C |
|
|
96,436 |
|
|
|
- |
|
|
|
Class I |
|
|
4,064,593 |
|
|
|
1,371,055 |
|
|
|
Class Y |
|
|
153,573 |
|
|
|
33,291 |
|
|
|
Cost of shares redeemed: |
|
|
|
|
|
|
|
|
|
|
Class A |
|
|
(36,549,492) |
|
|
|
(46,239,071) |
|
|
|
Class C |
|
|
(6,294,167) |
|
|
|
(3,365,767) |
|
|
|
Class I |
|
|
(161,433,192) |
|
|
|
(102,918,446) |
|
|
|
Class Y |
|
|
(2,866,878) |
|
|
|
(642,046) |
|
|
|
Increase (Decrease) in Net Assets
|
(44,122,948) |
|
|
|
70,782,252 |
|
|||
|
Total Increase (Decrease) in Net Assets |
(120,959,060) |
|
|
|
108,332,597 |
|
|||
|
Net Assets ($): |
|
||||||||
|
Beginning of Period |
|
|
444,210,331 |
|
|
|
335,877,734 |
|
|
|
End of Period |
|
|
323,251,271 |
|
|
|
444,210,331 |
|
|
16
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 September 30, |
||||||
|
Class A Shares |
2019 |
2018 |
2017 |
2016 |
2015 |
|
|
Per Share Data ($): |
||||||
|
Net asset value, beginning of period |
33.28 |
30.04 |
26.56 |
23.30 |
31.73 |
|
|
Investment Operations: |
||||||
|
Investment income—neta |
.55 |
.32 |
.15 |
.27 |
.32 |
|
|
Net realized and unrealized
|
(5.64) |
3.05 |
3.69 |
3.21 |
(8.25) |
|
|
Total from Investment Operations |
(5.09) |
3.37 |
3.84 |
3.48 |
(7.93) |
|
|
Distributions: |
||||||
|
Dividends from
|
(.40) |
(.13) |
(.36) |
(.22) |
(.22) |
|
|
Dividends from net realized
|
- |
- |
- |
- |
(.28) |
|
|
Total Distributions |
(.40) |
(.13) |
(.36) |
(.22) |
(.50) |
|
|
Net asset value, end of period |
27.79 |
33.28 |
30.04 |
26.56 |
23.30 |
|
|
Total Return (%)b |
(15.38) |
11.29 |
14.52 |
15.06 |
(25.38) |
|
|
Ratios/Supplemental Data (%): |
||||||
|
Ratio of total expenses
|
1.24 |
1.28 |
1.36 |
1.44 |
1.47 |
|
|
Ratio of net expenses
|
1.24 |
1.28 |
1.34 |
1.34 |
1.34 |
|
|
Ratio of net investment income to average net assets |
1.94 |
.99 |
.53 |
1.12 |
1.11 |
|
|
Portfolio Turnover Rate |
77.60 |
55.65 |
94.39 |
108.16 |
100.82 |
|
|
Net Assets, end of period ($ x 1,000) |
56,407 |
88,769 |
88,293 |
77,594 |
51,613 |
|
a Based on average shares outstanding.
b Exclusive of sales charge.
See notes to financial statements.
18
|
Year Ended September 30, |
||||||
|
Class C Shares |
2019 |
2018 |
2017 |
2016 |
2015 |
|
|
Per Share Data ($): |
||||||
|
Net asset value, beginning of period |
30.61 |
27.70 |
24.53 |
21.54 |
29.42 |
|
|
Investment Operations: |
||||||
|
Investment income (loss)—neta |
.33 |
.13 |
(.05) |
.08 |
.12 |
|
|
Net realized and unrealized
|
(5.21) |
2.78 |
3.41 |
2.97 |
(7.67) |
|
|
Total from Investment Operations |
(4.88) |
2.91 |
3.36 |
3.05 |
(7.55) |
|
|
Distributions: |
||||||
|
Dividends from
|
(.21) |
- |
(.19) |
(.06) |
(.05) |
|
|
Dividends from net realized
|
- |
- |
- |
- |
(.28) |
|
|
Total Distributions |
(.21) |
- |
(.19) |
(.06) |
(.33) |
|
|
Net asset value, end of period |
25.52 |
30.61 |
27.70 |
24.53 |
21.54 |
|
|
Total Return (%)b |
(15.97) |
10.51 |
13.73 |
14.21 |
(25.95) |
|
|
Ratios/Supplemental Data (%): |
||||||
|
Ratio of total expenses
|
1.96 |
1.96 |
2.04 |
2.12 |
2.16 |
|
|
Ratio of net expenses
|
1.96 |
1.96 |
2.03 |
2.09 |
2.08 |
|
|
Ratio of net investment income (loss)
|
1.23 |
.42 |
(.18) |
.37 |
.43 |
|
|
Portfolio Turnover Rate |
77.60 |
55.65 |
94.39 |
108.16 |
100.82 |
|
|
Net Assets, end of period ($ x 1,000) |
8,341 |
15,606 |
11,741 |
10,154 |
9,414 |
|
a Based on average shares outstanding.
b Exclusive of sales charge.
See notes to financial statements.
19
FINANCIAL HIGHLIGHTS (continued)
|
Year Ended September 30, |
||||||
|
Class I Shares |
2019 |
2018 |
2017 |
2016 |
2015 |
|
|
Per Share Data ($): |
||||||
|
Net asset value, beginning of period |
34.26 |
30.91 |
27.30 |
23.95 |
32.59 |
|
|
Investment Operations: |
||||||
|
Investment income—neta |
.67 |
.47 |
.25 |
.35 |
.44 |
|
|
Net realized and unrealized
|
(5.84) |
3.09 |
3.78 |
3.29 |
(8.51) |
|
|
Total from Investment Operations |
(5.17) |
3.56 |
4.03 |
3.64 |
(8.07) |
|
|
Distributions: |
||||||
|
Dividends from
|
(.50) |
(.21) |
(.42) |
(.29) |
(.29) |
|
|
Dividends from net realized
|
- |
- |
- |
- |
(.28) |
|
|
Total Distributions |
(.50) |
(.21) |
(.42) |
(.29) |
(.57) |
|
|
Net asset value, end of period |
28.59 |
34.26 |
30.91 |
27.30 |
23.95 |
|
|
Total Return (%) |
(15.16) |
11.59 |
14.85 |
15.35 |
(25.19) |
|
|
Ratios/Supplemental Data (%): |
||||||
|
Ratio of total expenses
|
.98 |
1.00 |
1.05 |
1.11 |
1.17 |
|
|
Ratio of net expenses
|
.98 |
1.00 |
1.05 |
1.08 |
1.09 |
|
|
Ratio of net investment income
|
2.28 |
1.42 |
.86 |
1.40 |
1.51 |
|
|
Portfolio Turnover Rate |
77.60 |
55.65 |
94.39 |
108.16 |
100.82 |
|
|
Net Assets, end of period ($ x 1,000) |
247,344 |
330,252 |
233,080 |
144,068 |
58,533 |
|
a Based on average shares outstanding.
See notes to financial statements.
20
|
Year Ended September 30, |
|||||||
|
Class Y Shares |
2019 |
2018 |
2017 |
2016 |
2015 |
a |
|
|
Per Share Data ($): |
|||||||
|
Net asset value, beginning of period |
34.30 |
30.94 |
27.31 |
23.95 |
25.37 |
||
|
Investment Operations: |
|||||||
|
Investment income—netb |
.76 |
.55 |
.41 |
.43 |
.07 |
||
|
Net realized and unrealized
|
(5.89) |
3.06 |
3.65 |
3.23 |
(1.49) |
||
|
Total from Investment Operations |
(5.13) |
3.61 |
4.06 |
3.66 |
(1.42) |
||
|
Distributions: |
|||||||
|
Dividends from
|
(.54) |
(.25) |
(.43) |
(.30) |
- |
||
|
Net asset value, end of period |
28.63 |
34.30 |
30.94 |
27.31 |
23.95 |
||
|
Total Return (%) |
(15.04) |
11.75 |
14.98 |
15.45 |
(5.60) |
c |
|
|
Ratios/Supplemental Data (%): |
|||||||
|
Ratio of total expenses
|
.85 |
.87 |
.93 |
.99 |
2.54 |
d |
|
|
Ratio of net expenses
|
.85 |
.87 |
.93 |
.98 |
1.10 |
d |
|
|
Ratio of net investment income
|
2.56 |
1.63 |
1.38 |
1.54 |
3.69 |
d |
|
|
Portfolio Turnover Rate |
77.60 |
55.65 |
94.39 |
108.16 |
100.82 |
||
|
Net Assets, end of period ($ x 1,000) |
11,158 |
9,583 |
2,763 |
414 |
1 |
||
a From September 1, 2015 (commencement of initial offering) to September 30, 2015.
b Based on average shares outstanding.
c Not annualized.
d Annualized.
See notes to financial statements.
21
NOTES TO FINANCIAL STATEMENTS
NOTE 1—Significant Accounting Policies:
BNY Mellon Natural Resources Fund (the “fund”) is a separate non-diversified series of BNY Mellon Opportunity Funds (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 three series, including the fund. The fund’s investment objective is to seek long-term capital appreciation. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
Effective June 3, 2019, the fund changed its name from Dreyfus Natural Resources Fund to BNY Mellon Natural Resources Fund and the Company changed its name from Dreyfus Opportunity Funds to BNY Mellon Opportunity Funds. In addition, The Dreyfus Corporation, the fund’s investment adviser, changed its name to “BNY Mellon Investment Adviser, Inc.”, MBSC Securities Corporation, the fund’s distributor, changed its name to “BNY Mellon Securities Corporation” and Dreyfus Transfer, Inc., the fund’s transfer agent, changed its name to “BNY Mellon Transfer, Inc.”
BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Class A, Class C, Class I, Class T and Class Y. Class A and Class T shares generally are subject to a sales charge imposed at the time of purchase. Class C shares are subject to a contingent deferred sales charge (“CDSC”) imposed on Class C shares redeemed within one year of purchase. Class C shares automatically convert to Class A shares ten years after the date of purchase, without the imposition of a sales charge. Class I and Class Y shares are sold at net asset value per share generally to institutional investors. As of the date of this report, the fund did not offer Class T shares for purchase. 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
22
that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund is an investment company and applies the accounting and reporting guidance of the FASB ASC Topic 946 Financial Services-Investment Companies. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The 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).
23
NOTES TO FINANCIAL STATEMENTS (continued)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in equity securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Trustees (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.
24
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
The following is a summary of the inputs used as of September 30, 2019 in valuing the fund’s investments:
|
Level 1 - Unadjusted Quoted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 -Significant Unobservable Inputs |
Total |
|
|
Assets ($) |
||||
|
Investments in Securities: † |
||||
|
Equity Securities - Common Stocks |
197,934,715 |
117,560,398†† |
- |
315,495,113 |
|
Investment Companies |
9,676,435 |
- |
- |
9,676,435 |
† See Statement of Investments for additional detailed categorizations, if any.
†† Securities classified within Level 2 at period end as the values were determined pursuant to the fund’s fair valuation procedures.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
(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
25
NOTES TO FINANCIAL STATEMENTS (continued)
amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of the Adviser, the fund may lend securities to qualified institutions. It is the fund’s policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral equivalent to at least 100% of the market value of securities on loan is maintained at all times. Collateral is either in the form of cash, which can be invested in certain money market mutual funds managed by the Adviser, or U.S. Government and Agency securities. The fund is entitled to receive all dividends, interest and distributions on securities loaned, in addition to income earned as a result of the lending transaction. Should a borrower fail to return the securities in a timely manner, The Bank of New York Mellon is required to replace the securities for the benefit of the fund or credit the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended September 30, 2019, The Bank of New York Mellon earned $31,835 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
(d) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(e) Dividends and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(f) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
26
As of and during the period ended September 30, 2019, 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 September 30, 2019, the fund did not incur any interest or penalties.
Each tax year in the four-year period ended September 30, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.
At September 30, 2019, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $6,426,803, accumulated capital losses $24,671,268 and unrealized appreciation $10,285,507.
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 September 30, 2019. The fund has $24,671,268 of short-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 September 30, 2019 and September 30, 2018 were as follows: ordinary income $6,103,556 and $1,954,449, respectively.
(g) New Accounting Pronouncements: Effective June 1, 2019, the fund adopted Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The update provides guidance that eliminates, adds and modifies certain disclosure requirements for fair value measurements. The adoption of ASU 2018-13 had no impact on the operations of the fund for the period ended September 30, 2019.
NOTE 2—Bank Lines of Credit:
The fund participates with other long-term open-end funds managed by the Adviser in a $1.030 billion unsecured credit facility led by Citibank, N.A. (the “Citibank Credit Facility”) and a $300 million unsecured credit facility provided by The Bank of New York Mellon (the “BNYM Credit Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions (each, a “Facility”). The Citibank Credit Facility is available in two tranches: (i) Tranche A is in an
27
NOTES TO FINANCIAL STATEMENTS (continued)
amount equal to $830 million and is available to all long-term open-ended funds, including the fund, and (ii) Tranche B is in amount equal to $200 million and is available only to BNY Mellon Floating Rate Income Fund, a series of BNY Mellon Investment Funds IV, Inc. Prior to October 3, 2018, the unsecured credit facility with Citibank, N.A. was $830 million. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for Tranche A of the Citibank Credit Facility and the BNYM Credit Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing.
The average amount of borrowings outstanding under the Facilities during the period ended September 30, 2019 was approximately $107,950 with a related weighted average annualized interest rate of 3.29%.
NOTE 3—Management Fee and Other Transactions with Affiliates:
(a) Pursuant to a management agreement with the Adviser, the management fee is computed at the annual rate of .75% of the value of the fund’s average daily net assets and is payable monthly. The Adviser has contractually agreed, from October 1, 2018 through February 1, 2020, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 1.10% of the fund’s average daily net assets. During the period ended September 30, 2019, there were no reduction in expenses, pursuant to the undertaking.
During the period ended September 30, 2019, the Distributor retained $9,662 from commissions earned on sales of the fund’s Class A shares and $11,695 from CDSC fees on redemptions of the fund’s Class C shares.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Class C shares pay the Distributor for distributing its shares at an annual rate of .75% of the value of its average daily net assets. During the period ended September 30, 2019, Class C shares were charged $84,749 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
28
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 September 30, 2019, Class A and Class C shares were charged $163,952 and $28,250, respectively, pursuant to the Shareholder Services Plan.
The fund has an arrangement with the transfer agent whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency fees. The fund had an arrangement with the custodian to receive earnings credits when positive cash balances were maintained, which were used to offset custody fees. Effective February 1, 2019, the arrangement with the custodian changed whereby the fund will no longer receive earnings credits to offset its custody fees and will receive interest income or overdraft fees going forward. For financial reporting purposes, the fund includes net earnings credits, if any, as an expense offset in the Statement of Operations.
The fund compensates BNY Mellon Transfer, Inc., a wholly-owned subsidiary of the Adviser, under a transfer agency agreement for providing transfer agency and cash management services 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 September 30, 2019, the fund was charged $24,873 for transfer agency services. These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended September 30, 2019, the fund was charged $31,950 pursuant to the custody agreement.
During the period ended September 30, 2019, the fund was charged $11,614 for services performed by the Chief Compliance Officer and his staff. These fees are included in Miscellaneous in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: management fees $202,570, Distribution Plan fees $5,492, Shareholder Services Plan fees $13,537, custodian fees $17,972, Chief Compliance Officer fees $3,378 and transfer agency fees $4,276.
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NOTES TO FINANCIAL STATEMENTS (continued)
(d) Each Board member also serves as a Board member of other funds in the BNY Mellon Family of Funds complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward contracts, during the period ended September 30, 2019, amounted to $276,515,527 and $320,793,981, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively, “Master Agreements”) with its over-the-counter (“OTC”) derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.
Each type of derivative instrument that was held by the fund during the period ended September 30, 2019 is discussed below.
Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain
30
on each open contract. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. At September 30, 2019, there were no forward contracts outstanding.
The following summarizes the average market value of derivatives outstanding during the period ended September 30, 2019:
|
|
|
Average Market Value ($) |
|
Forward contracts |
|
87,186 |
|
|
|
|
At September 30, 2019, the cost of investments for federal income tax purposes was $314,859,467; accordingly, accumulated net unrealized appreciation on investments was $10,312,081, consisting of $32,281,294 gross unrealized appreciation and $21,969,213 gross unrealized depreciation.
31
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of BNY Mellon Natural Resources Fund (formerly, Dreyfus Natural Resources Fund)
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of BNY Mellon Natural Resources Fund (the “Fund”) (formerly, Dreyfus Natural Resources Fund) (one of the funds constituting BNY Mellon Opportunity Funds), including the statements of investments and investments in affiliated issuers, as of September 30, 2019, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the funds constituting BNY Mellon Opportunity Funds) at September 30, 2019, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of the Fund’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2019, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies in the BNY Mellon Family of Funds since at least 1957, but we are unable to determine the specific year.
New York, New York
November 26, 2019
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IMPORTANT TAX INFORMATION (Unaudited)
For federal tax purposes, the fund hereby reports 88.21% of the ordinary dividends paid during the fiscal year ended September 30, 2019 as qualifying for the corporate dividends received deduction. Also certain dividends paid by the fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the distributions paid during the fiscal year, $6,103,556 represents the maximum amount that may be considered qualified dividend income. Shareholders will receive notification in early 2020 of the percentage applicable to the preparation of their 2019 income tax returns.
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Trustees held on July 23-24, 2019, the Board considered the renewal of the fund’s Management Agreement pursuant to which the Adviser provides the fund with investment advisory and administrative services (the “Agreement”). The Board members, a majority of whom are not “interested persons” (as defined in the Investment Company Act of 1940, as amended) of the fund, were assisted in their review by independent legal counsel and met with counsel in executive session separate from representatives of the Adviser. In considering the renewal of the Agreement, the Board considered all factors that it believed to be relevant, including those discussed below. The Board did not identify any one factor as dispositive, and each Board member may have attributed different weights to the factors considered.
Analysis of Nature, Extent, and Quality of Services Provided to the Fund. The Board considered information provided to it at the meeting and in previous presentations from representatives of the Adviser regarding the nature, extent, and quality of the services provided to funds in the BNY Mellon fund complex. The Adviser provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. The Adviser also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the BNY Mellon fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or the Adviser) and the Adviser’s corresponding need for broad, deep, and diverse resources to be able to provide ongoing shareholder services to each intermediary or distribution channel, as applicable to the fund.
The Board also considered research support available to, and portfolio management capabilities of, the fund’s portfolio management personnel and that the Adviser also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered the Adviser’s extensive administrative, accounting and compliance infrastructures. The Board also considered portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended May 31, 2019, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. The Adviser previously had furnished the Board with a description of the methodology Broadridge used to
34
select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Representatives of the Adviser stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations and policies that may be applicable to the fund and comparison funds. The Board discussed with representatives of the Adviser and/or its affiliates the results of the comparisons and considered that the fund’s total return performance was above the Performance Group and Performance Universe medians for all periods. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that the fund’s contractual management fee was below the Expense Group median, the fund’s actual management fee was below the Expense Group and Expense Universe medians and the fund’s total expenses were below the Expense Group and Expense Universe medians (lowest in the Expense Group).
Representatives of the Adviser stated that the Adviser has contractually agreed, until February 1, 2020, to waive receipt of its fees and/or assume the direct expenses of the fund so that the direct expenses of none of its classes (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 1.10% of the fund’s average daily net assets.
Representatives of the Adviser reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by the Adviser that are in the same Lipper category as the fund and (2) paid to the Adviser, or the primary employer of the fund’s primary portfolio manager(s) that is affiliated with the Adviser, for advising any separate accounts and/or other types of client portfolios that are considered to have similar investment strategies and policies as the fund (the “Similar Clients”), and explained the nature of the Similar Clients. They discussed differences in fees paid and the relationship of the fees paid in light of any differences in the services provided and other relevant factors. The Board considered the relevance of the fee information provided for the Similar Clients to evaluate the appropriateness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. Representatives of the Adviser reviewed the expenses allocated and profit received by the Adviser and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to the Adviser and its affiliates for managing the funds in the BNY Mellon fund complex, and the method used to determine the expenses and profit. The Board concluded that the profitability results were not unreasonable, given the services rendered and service levels provided by the Adviser. The Board also had been provided with information prepared by an independent consulting firm regarding the
35
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
Adviser’s approach to allocating costs to, and determining the profitability of, individual funds and the entire BNY Mellon fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement, considered in relation to the mix of services provided by the Adviser, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Representatives of the Adviser stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that the Adviser may have realized any economies of scale would be less. Representatives of the Adviser also stated that, as a result of shared and allocated costs among funds in the BNY Mellon fund complex, the extent of economies of scale could depend substantially on the level of assets in the complex as a whole, so that increases and decreases in complex-wide assets can affect potential economies of scale in a manner that is disproportionate to, or even in the opposite direction from, changes in the fund’s asset level. The Board also considered potential benefits to the Adviser from acting as investment adviser and took into consideration the soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by the Adviser are adequate and appropriate.
· The Board was satisfied with the fund’s performance.
· The Board concluded that the fee paid to the Adviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to the Adviser and its affiliates in connection with the management of the fund had been adequately considered by the Adviser in connection with the fee rate charged to the fund pursuant to the Agreement and that, to the extent in the future it were determined that material economies of scale had not been shared with the fund, the Board would seek to have those economies of scale shared with the fund.
In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and
36
other interactions with the Adviser and its affiliates, of the Adviser and the services provided to the fund by the Adviser. The Board also relied on information received on a routine and regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreement, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of the Agreement for the fund, or substantially similar agreements for other BNY Mellon funds that the Board oversees, during which lengthy discussions took place between the Board and representatives of the Adviser. Certain aspects of the arrangements may receive greater scrutiny in some years than in others, and the Board’s conclusions may be based, in part, on their consideration of the fund’s arrangements, or substantially similar arrangements for other BNY Mellon funds that the Board oversees, in prior years. The Board determined to renew the Agreement.
37
BOARD MEMBERS INFORMATION (Unaudited)
INDEPENDENT BOARD MEMBERS
Chairman of the Board (2000)
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: 120
———————
Francine J. Bovich (68)
Board Member (2015)
Principal Occupation During Past 5 Years:
· Trustee, The Bradley Trusts, private trust funds (2011-Present)
Other Public Company Board Memberships During Past 5 Years:
· Annaly Capital Management, Inc., a real estate investment trust, Director (2014-Present)
No. of Portfolios for which Board Member Serves: 70
———————
J. Charles Cardona (63)
Board Member (2014)
Principal Occupation During Past 5 Years:
· President and a Director of the Adviser (2008-2016),
· Chairman of the Distributor (2013-2016)
· Executive Vice President of the Distributor (2006-2015)
Other Public Company Board Memberships During Past 5 Years:
· The Distributor, Director (2005-2016)
· BNY Mellon Liquidity Funds, Chairman and Director (2019-Present)
No. of Portfolios for which Board Member Serves: 33
———————
38
Gordon J. Davis (78)
Board Member (2012)
Principal Occupation During Past 5 Years:
· Partner in the law firm of Venable LLP (2012-Present)
Other Public Company Board Memberships During Past 5 Years:
· Consolidated Edison, Inc., a utility company, Director (1989-2014)
· The Phoenix Companies, Inc., a life insurance company, Director (2000-2014)
No. of Portfolios for which Board Member Serves: 53
———————
Andrew J. Donohue (69)
Board Member (2019)
Principal Occupation During Past 5 Years:
· Of Counsel, Shearman & Sterling LLP (September 2017-July 2019)
· Chief of Staff to the Chair of the SEC (2015-2017)
· Managing Director and Investment Company General Counsel of Goldman Sachs (2012-2015)
Other Public Company Board Memberships During Past 5 Years:
· Oppenheimer Funds (58 funds), Director (2017-2019)
No. of Portfolios for which Board Member Serves: 56
———————
Isabel P. Dunst (72)
Board Member (2014)
Principal Occupation During Past 5 Years:
· Senior Counsel, Hogan Lovells LLP (2018-2019; previously, Of Counsel, 2015-2018, Partner, 1990-2014)
No. of Portfolios for which Board Member Serves: 33
———————
Nathan Leventhal (76)
Board Member (2009)
Principal Occupation During Past 5 Years:
· President Emeritus of Lincoln Center for the Performing Arts (2001-Present)
· President of the Palm Beach Opera (2016-Present)
· Chairman of the Avery Fisher Artist Program, Lincoln Center (1997-2014)
Other Public Company Board Memberships During Past 5 Years:
· Movado Group, Inc., a designer and manufacturer of watches Director (2003-Present)
No. of Portfolios for which Board Member Serves: 47
———————
39
BOARD MEMBERS INFORMATION (Unaudited) (continued)
INDEPENDENT BOARD MEMBERS (continued)
Robin A. Melvin (56)
Board Member (2014)
Principal Occupation During Past 5 Years:
· Co-chairman, Mentor Illinois, a non-profit organization dedicated to increasing the quantity and quality of mentoring services in Illinois (2014-Present; Board member (2013-Present)
No. of Portfolios for which Board Member Serves: 97
———————
Roslyn M. Watson (70)
Board Member (2014)
Principal Occupation During Past 5 Years:
· Principal, Watson Ventures, Inc., a real estate investment company (1993-Present)
Other Public Company Board Memberships During Past 5 Years:
· American Express Bank, FSB, Director (1993-2018)
No. of Portfolios for which Board Member Serves: 56
———————
Benaree Pratt Wiley (73)
Board Member (2009)
Principal Occupation During Past 5 Years:
· Principal, The Wiley Group, a firm specializing in strategy and business development (2005-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 (2008-Present)
· Blue Cross Blue Shield of Massachusetts, Director (2004-Present)
No. of Portfolios for which Board Member Serves: 76
———————
The address of the Board Members and Officers is c/o BNY Mellon Investment Adviser, Inc. 240 Greenwich Street, New York, New York 10286. Additional information about the Board Members is available in the fund’s Statement of Additional Information which can be obtained from the Adviser free of charge by calling this toll free number: 1-800-373-9387.
40
OFFICERS OF THE FUND (Unaudited)
RENEE LAROCHE-MORRIS, President since May 2019.
President and a director of BNY Mellon Investment Adviser, Inc. since January 2018. She is an officer of 63 investment companies (comprised of 120 portfolios) managed by the Adviser. She is 48 years old and has been an employee of BNY Mellon since 2003.
JAMES WINDELS, Treasurer since November 2001.
Director- BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 143 portfolios) managed by the Adviser. He is 61 years old and has been an employee of the Adviser since April 1985.
BENNETT A. MACDOUGALL, Chief Legal Officer since October 2015.
Chief Legal Officer of the Adviser and Associate General Counsel and Managing Director of BNY Mellon since June 2015; Director and Associate General Counsel of Deutsche Bank – Asset & Wealth Management Division from June 2005 to June 2015, and as Chief Legal Officer of Deutsche Investment Management Americas Inc. from June 2012 to May 2015. He is an officer of 64 investment companies (comprised of 143 portfolios) managed by the Adviser. He is 48 years old and has been an employee of the Adviser since June 2015.
DAVID DIPETRILLO, Vice President since May 2019.
Head of North America Product, BNY Mellon Investment Management since January 2018, Director of Product Strategy, BNY Mellon Investment Management from January 2016 to December 2017; Head of US Retail Product and Channel Marketing, BNY Mellon Investment Management from January 2014 to December 2015. He is an officer of 63 investment companies (comprised of 120 portfolios) managed by the Adviser. He is 41 years old and has been an employee of BNY Mellon since 2005.
JAMES BITETTO, Vice President since August 2005 and Secretary since February 2018.
Managing Counsel of BNY Mellon and Secretary of the Adviser, and an officer of 64 investment companies (comprised of 143 portfolios) managed by the Adviser. He is 53 years old and has been an employee of the Adviser since December 1996.
SONALEE CROSS, Vice President and Assistant Secretary since March 2018.
Counsel of BNY Mellon since October 2016; Associate at Proskauer Rose LLP from April 2016 to September 2016; Attorney at EnTrust Capital from August 2015 to February 2016; Associate at Sidley Austin LLP from September 2013 to August 2015. She is an officer of 64 investment companies (comprised of 143 portfolios) managed by the Adviser. She is 32 years old and has been an employee of the Adviser since October 2016.
DEIRDRE CUNNANE, Vice President and Assistant Secretary since March 2019.
Counsel of BNY Mellon since August 2018; Senior Regulatory Specialist at BNY Mellon Investment Management Services from February 2016 to August 2018; Trustee Associate at BNY Mellon Trust Company (Ireland) Limited from August 2013 to February 2016. She is an officer of 64 investment companies (comprised of 143 portfolios) managed by the Adviser. She is 29 years old and has been an employee of the Adviser since August 2018.
SARAH S. KELLEHER, Vice President and Assistant Secretary since April 2014.
Managing Counsel of BNY Mellon since December 2017, Senior Counsel of BNY Mellon from March 2013 to December 2017. She is an officer of 64 investment companies (comprised of 143 portfolios) managed by the Adviser. She is 44 years old and has been an employee of the Adviser since March 2013.
JEFF PRUSNOFSKY, Vice President and Assistant Secretary since August 2005.
Senior Managing Counsel of BNY Mellon, and an officer of 64 investment companies (comprised of 143 portfolios) managed by the Adviser. He is 54 years old and has been an employee of the Adviser since October 1990.
PETER M. SULLIVAN, Vice President and Assistant Secretary since March 2019.
Managing Counsel of BNY Mellon, and an officer of 64 investment companies (comprised of 143 portfolios) managed by the Adviser. He is 51 years old and has been an employee of the Adviser since April 2004.
41
OFFICERS OF THE FUND (Unaudited) (continued)
NATALYA ZELENSKY, Vice President and Assistant Secretary since March 2017.
Counsel of BNY Mellon since May 2016; Attorney at Wildermuth Endowment Strategy Fund/Wildermuth Advisory, LLC from November 2015 to May 2016 and Assistant General Counsel at RCS Advisory Services from July 2014 to November 2015. She is an officer of 64 investment companies (comprised of 143 portfolios) managed by the Adviser. She is 34 years old and has been an employee of the Adviser since May 2016.
GAVIN C. REILLY, Assistant Treasurer since December 2005.
Tax Manager - BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 143 portfolios) managed by the Adviser. He is 51 years old and has been an employee of the Adviser since April 1991.
ROBERT S. ROBOL, Assistant Treasurer since August 2005.
Senior Accounting Manager- BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 143 portfolios) managed by the Adviser. He is 55 years old and has been an employee of the Adviser since October 1988.
ROBERT SALVIOLO, Assistant Treasurer since July 2007.
Senior Accounting Manager – BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 143 portfolios) managed by the Adviser. He is 52 years old and has been an employee of the Adviser since June 1989.
ROBERT SVAGNA, Assistant Treasurer since December 2002.
Senior Accounting Manager – BNY Mellon Fund Administration, and an officer of 64 investment companies (comprised of 143 portfolios) managed by the Adviser. He is 52 years old and has been an employee of the Adviser since November 1990.
JOSEPH W. CONNOLLY, Chief Compliance Officer since October 2004.
Chief Compliance Officer of the Adviser, the BNY Mellon Family of Funds and BNY Mellon Funds Trust (64 investment companies, comprised of 143 portfolios). He is 62 years old and has served in various capacities with the the Adviser 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 BNY Mellon 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 BNY Mellon Family of Funds and BNY Mellon Funds Trust and the Distributor; from January 2012 to May 2015, AML Surveillance Officer of the Distributor. She is an officer of 57 investment companies (comprised of 136 portfolios) managed by the Adviser. She is 51 years old and has been an employee of the Distributor since 1997.
42
NOTES
43
NOTES
44
NOTES
45
BNY Mellon Natural Resources Fund
240 Greenwich Street
New York, NY 10286
Adviser
BNY Mellon Investment Adviser, Inc.
240 Greenwich Street
New York, NY 10286
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
BNY Mellon Transfer, Inc.
240 Greenwich Street
New York, NY 10286
Distributor
BNY Mellon Securities Corporation
240 Greenwich Street
New York, NY 10286
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Ticker Symbols: |
Class A: DNLAX Class C: DLDCX Class I: DLDRX Class Y: DLDYX |
Telephone Call your financial representative or 1-800-373-9387
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
E-mail Send your request to info@bnymellon.com
Internet Information can be viewed online or downloaded at www.bnymellonim.com/us
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-PORT. The fund’s Forms N-PORT are available on the SEC’s website at www.sec.gov.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at www.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
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© 2019 BNY Mellon Securities Corporation
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Item 2. Code of Ethics.
The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. There have been no amendments to, or waivers in connection with, the Code of Ethics during the period covered by this Report.
Item 3. Audit Committee Financial Expert.
The Registrant's Board has determined that Joseph S. DiMartino, 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"). Joseph S. DiMartino 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 $35,222 in 2018 and $36,338 in 2019.
(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 $10,216 in 2018 and $10,225 in 2019. 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 2018 and $0 in 2019.
(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 $3,963 in 2018 and $4,268 in 2019. 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 2018 and $0 in 2019.
(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 $320 in 2018 and $383 in 2019. 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 2018 and $0 in 2019.
(e)(1) Audit Committee Pre-Approval Policies and Procedures. The Registrant's Audit Committee has established policies and procedures (the "Policy") for pre-approval (within specified fee limits) of the Auditor's engagements for non-audit services to the Registrant and Service Affiliates without specific case-by-case consideration. The pre-approved services in the Policy can include pre-approved audit services, pre-approved audit-related services, pre-approved tax services and pre-approved all other services. Pre-approval considerations include whether the proposed services are compatible with maintaining the Auditor's independence. Pre-approvals pursuant to the Policy are considered annually.
(e)(2) Note. None of the services described in paragraphs (b) through (d) of this Item 4 were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) None of the hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.
Non-Audit Fees. The aggregate non-audit fees billed by the Auditor for services rendered to the Registrant, and rendered to Service Affiliates, for the Reporting Periods were $665,432 in 2018 and $616,403 in 2019.
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. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
(a)(1) Code of ethics referred to in Item 2.
(a)(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.
BNY Mellon Opportunity Funds
By: /s/ Renee LaRoche-Morris
Renee LaRoche-Morris
President (Principal Executive Officer)
Date: November 25, 2019
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ Renee LaRoche-Morris
Renee LaRoche-Morris
President (Principal Executive Officer)
Date: November 25, 2019
By: /s/ James Windels
James Windels
Treasurer (Principal Financial Officer)
Date: November 25, 2019
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)