Hamon
:
Hugh Simon, Hamon Investment Holdings Limited, Hamon Investment Holdings Ltd., Simon Associates Ltd.
and The Hamon Investment Group Pte Limited; Hamon also is an affiliate of BNY Mellon
Iridian
: David L. Cohen, Harold
J. Levy, Jeffrey Elliott, Steven Bucklan, Arovid Associates LLC, Alhero LLC and LLMD LLC
Kayne
: Stephen Rigali, Robert
Schwartzkopf, Jeannine Vanian, Douglas Foreman, Virtus Partners, Inc. and Virtus Investment Partners,
Inc. ("Virtus")
Lombardia
:
George Castro, Leslie Waite, Fernando Inzunza, Alvin Marley, Kelly Ko, Wendell Williams, Alvin Polit
and Lombardia Capital Partners, Inc.
Neuberger Berman
: Robert Conti, Joseph Amato, Bradley Tank, Jason
Ainsworth, James Dempsey, Neuberger Berman Holdings LLC, Lehman Brothers Holdings Inc., Neuberger Berman
Group LLC and NBSH Acquisition, LLC
Nicholas
: Catherine C. Somhegyi Nicholas, Arthur E. Nicholas and Nicholas
Investment Partners, LLC
RHJ
: Thomas McDowell, Carl Obeck, Thuong-Thao
Buu-Hoan, Timothy Todaro and Cara Thome
Riverbridge
: Andrew Turner, Mark A. Thompson, Rick Moulton, Jonathan
Little, Richard Potter, Colin Sharp, Ernesto Bertarelli, Donata Bertarelli, Northill US Holdings, Inc.,
Northill Jersey Holdings LP, Northill Capital (Jersey) LP, Northill Capital Holdings Limited, Donata
Bertarelli Northill Discretionary Trust, NCT Limited, Ernesto Bertarelli Northill Discretionary Trust,
Northill Purpose Trust, NC PT Limited, Landmark LP and LM (GP) Limited
Sarofim & Co.
: Fayez S.
Sarofim, Raye White, Christopher Sarofim and The Sarofim Group, Inc.
TS&W
: Horace Whitworth,
Cheryl Mounce, Lawrence Gibson, Herbert Thomson, Frank Reichel, Lori Anderson, Jessica Thompson, Aidan
Riordan, Old Mutual (US) Holdings, Inc., OM Group (UK) Limited, Old Mutual plc and TS&W Investment
GP LLC
Vulcan
:
Frank McFadden, C.T. Fitzpatrick, Robert Donnellan, Joseph Sanfratel and Gregory McClain
Walthausen
:
John B. Walthausen
Portfolio Allocation Manager
EACM, a wholly-owned subsidiary
of BNY Mellon, has been engaged as the Portfolio Allocation Manager for certain funds as described in
the prospectus. EACM is responsible for evaluating and recommending Sub-Advisers for these funds. It
is expected that differences in investment returns among the portions of a fund managed by different
Sub-Advisers will cause the actual percentage of the fund's assets managed by each Sub-Adviser to vary
over time.
Portfolio Managers and Portfolio Manager Compensation
See
the prospectus to determine which portions of the information provided below apply to your fund.
For
funds other than money market funds, an Affiliated Entity or the Sub-Adviser(s), as applicable, provide
the funds with portfolio managers who are authorized by the board to execute purchases and sales of securities.
For the TBCAM Stock Funds, portfolio managers are employed by the Manager. Portfolio managers are compensated
by the company that employs them, and are not compensated by the funds. Each fund's portfolio managers
are listed in Part I of this SAI.
The following provides information about the compensation policies
for portfolio managers.
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Alcentra
.
Alcentra's compensation arrangements include a fixed salary, discretionary cash bonus and a number of
long term incentive plans that are structured to align an employee's interest with the firm's longer
term goals. Portfolio managers are compensated in line with portfolio performance, rather than the growth
of assets under management. Other factors that may be taken into consideration include asset selection
and trade execution and management of portfolio risk.
ARX
. A portfolio manager's cash compensation is
comprised primarily of a market-based base salary and variable incentives paid (biannually) from ARX's
profits. The primary objectives of ARX's compensation structure are to motivate and reward continued
growth and profitability and to attract and retain high-performing individuals. ARX evaluates portfolio
managers not only for their direct performance results, but also for their contribution to ARX.
CCM
.
Through Andrew Cupps' ownership of the firm, he participates directly in the revenue of the firm, which
is determined by the performance of the firm's accounts, including the relevant funds, and the assets
under management by the firm. He also is compensated with a base salary.
CenterSquare
. The portfolio
managers' compensation is comprised of a market-based salary and incentive compensation, including both
annual and long-term retention incentive awards. Portfolio managers' incentive opportunities are 100%
discretionary and are pre-established for each individual based upon competitive industry compensation
benchmarks.
In addition to annual incentives, portfolio managers also are eligible to participate
in CenterSquare's Long Term Incentive Cash Award Plan. This plan provides for an annual award, payable
to participants (generally to senior level executives) 50% in deferred cash and 50% in BNY Mellon Restricted
Stock. These awards have a three-year cliff vest, with the participant becoming 100% vested on the third
anniversary of the grant date, provided the employee remains an employee of the company. The deferred
cash portion is generally invested by CenterSquare in affiliated mutual funds.
EACM
. Employees at EACM, including
investment professionals (
e.g
.,
portfolio managers), generally receive two forms of compensation: a base salary and a discretionary annual
bonus (based on the firm's profitability and their performance). The discretionary bonus is based upon
an individual's overall performance, with as much emphasis (for the relevant personnel) on contribution
to the risk monitoring and quality control areas as there is on generating superior performance. Personal
performance and firm performance are roughly equally weighted. As part of EACM's retention plan for
key management personnel, a portion of each annual bonus pool also is invested in an offshore fund of
hedge funds managed by EACM and vests over a period of three years.
EAM
. Portfolio managers at EAM are paid a
base salary in line with industry benchmarks and participate in EAM's revenue share plan. Portfolio
managers also are compensated by distribution of profits based on ownership.
Geneva
. Total compensation
for the portfolio management team, in which each member is a principal of the firm, includes a base salary
plus a fixed percentage of Geneva's profits based on ownership. Geneva believes that its compensation
plan allows for the portfolio management team to focus on delivering long-term performance for its clients.
Geneva also offers eligible employees the opportunity to participate in a company sponsored 401(k) retirement
plan.
Granite
.
Compensation of portfolio
managers at Granite includes base compensation and revenue-based and performance-based compensation for
each team (Small Cap and Large Cap) and, if principals, a profits interest in Granite. The overall compensation
structure is reviewed annually for market competitiveness with an objective of offering compensation
structures in the top third as compared to industry peers. Portfolio managers, and other key investment
personnel, have membership interests in Granite and are evaluated on an annual basis to determine additional
allocations of membership interests. Such interests entitle the members to distribution of profits as
well as certain liquidity features. The interests effectively vest over a determined time period so
as to provide a retention incentive.
Hamon
. Portfolio manager compensation is comprised of a market-based
salary and an annual incentive plan. Under the annual incentive plan, portfolio managers may receive
a bonus of up to two times their annual salary, at the discretion of management. In determining the
amount of the bonus, significant consideration is given to the portfolio manager's investment portfolio
performance over a one-year period (weighted 75%) and a three-year
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period
(weighted 25%) compared to peer groups and relevant indexes. Other factors considered are individual
qualitative performance, asset size and revenue growth of the product and funds managed by the portfolio
manager.
Iridian
.
Iridian's compensation structure includes the following components: base salary, 401(k) retirement
plan, and annual bonus if warranted by the overall financial success of the firm. Bonuses are based
on performance.
Kayne
.
Kayne's compensation structure
includes a base salary, an incentive bonus opportunity and a benefits package.
Base Salary
. Kayne pays each of its portfolio managers
a fixed base salary, which is designed to be competitive in light of the individual's experience and
responsibilities. Kayne management uses compensation survey results of investment industry compensation
conducted by an independent third party in evaluating competitive market compensation for its investment
management professionals.
Incentive Bonus
.
Incentive bonus pools at Kayne are based upon individual firm profits and in some instances overall
Virtus profitability. Individual payments are assessed using comparisons of actual investment performance
with specific peer group or index measures established at the beginning of each calendar year. Performance
of a fund managed is measured over one-, three and five-year periods. Generally, an individual manager's
participation is based on the performance of the funds/accounts managed as weighted roughly by total
assets in each of these funds/accounts. In certain instances, comparison of portfolio risk factors to
peer or index risk factors, as well as achievement of qualitative goals, also may be components of the
individual payment potential. The short-term incentive payment is generally paid in cash, but a portion
may be made in Virtus Restricted Stock Units.
Other
Benefits
. Portfolio managers at Kayne also are eligible to participate in broad-based plans offered
generally to employees of Virtus and its affiliates, including 401(k), health and other employee benefit
plans. While portfolio manager compensation contains a performance component, this component is adjusted
by Kayne to reward investment personnel for managing within the stated framework and for not taking unnecessary
risk.
Lombardia
.
Lombardia's compensation packages for its portfolio managers are comprised of base salaries and performance
bonuses. For performance bonuses, each investment professional is evaluated by Lombardia's compensation
committee using a combination of quantitative and subjective factors. The quantitative weight is 65%
and the subjective weight is 35%. The quantitative measure is based on an internal attribution report
broken down by analyst and focused on stock selection. Given that each of Lombardia's products has a
stock picking strategy, Lombardia believes that this is the best measure of added value. Lombardia's
compensation committee then considers three factors: (i) new idea generation, (ii) teamwork and (iii)
work ethic. New idea generation is intended to capture the quality and frequency of new idea generation.
This factor credits or penalizes ideas that do not make it into the portfolios. Teamwork and work ethic
will be measured both within individual teams and across the organization. The compensation of Alvin
W. Marley, a 25% owner of the firm, also is based on overall firm profitability.
Mellon Capital
. The primary
objectives of the Mellon Capital compensation plans are to:
·
Motivate
and reward superior investment and business performance
·
Motivate
and reward continued growth and profitability
·
Attract
and retain high-performing individuals critical to the on-going success of Mellon Capital
·
Create an ownership mentality for all
plan participants
Cash compensation is comprised primarily of a market-based base salary and (variable)
incentives (cash and deferred). Base salary is determined by the employees' experience and performance
in the role, taking into account the ongoing compensation benchmark analyses. Base salary is generally
a fixed amount that may change as a result of an annual review, upon assumption of new duties, or when
a market adjustment of the position occurs. Funding for the Mellon Capital Annual and Long Term Incentive
Plan is through a pre-determined fixed percentage of overall Mellon Capital profitability. Therefore,
all bonus awards are based initially on Mellon Capital's financial performance. Annual incentive opportunities
are pre-established for each individual, expressed as a percentage of
III-79
base
salary ("target awards"). These targets are derived based on a review of competitive market data for
each position annually. Annual awards are determined by applying multiples to this target award. Awards
are 100% discretionary. Factors considered in awards include individual performance, team performance,
investment performance of the associated portfolio(s) (including both short and long term returns) and
qualitative behavioral factors. Other factors considered in determining the award are the asset size
and revenue growth/retention of the products managed (if applicable). Awards are paid partially in cash
with the balance deferred through the Long Term Incentive Plan.
Participants in the Long Term Incentive Plan
have a high level of accountability and a large impact on the success of the business due to the position's
scope and overall responsibility. This plan provides for an annual award, payable in cash after a three-year
cliff vesting period, as well as a grant of BNY Mellon Restricted Stock for senior level roles.
The
same methodology described above is used to determine portfolio manager compensation with respect to
the management of mutual funds and other accounts. Mutual fund portfolio managers are also eligible
for the standard retirement benefits and health and welfare benefits available to all Mellon Capital
employees. Certain portfolio managers may be eligible for additional retirement benefits under several
supplemental retirement plans that Mellon Capital provides to restore dollar-for-dollar the benefits
of management employees that had been cut back solely as a result of certain limits due to tax laws.
These plans are structured to provide the same retirement benefits as the standard retirement benefits.
In addition, mutual fund portfolio managers whose compensation exceeds certain limits may elect to defer
a portion of their salary and/or bonus under the BNY Mellon Deferred Compensation Plan for Employees.
Neuberger
Berman
. Neuberger Berman's compensation philosophy is one that focuses on rewarding performance
and incentivizing its employees. Neuberger Berman also is focused on creating a compensation process
that is fair, transparent, and competitive with the market. Compensation for portfolio managers is more
heavily weighted on the variable portion of total compensation and reflects individual performance, overall
contribution to the team, collaboration with colleagues across Neuberger Berman and, most importantly,
overall investment performance. The bonus for a portfolio manager is determined by using a formula which
may or may not contain a discretionary component. The discretionary component is determined on the basis
of a variety of criteria including investment performance (including the pre-tax three-year track record
in order to emphasize long-term performance), utilization of central resources (including research, sales
and operations/support), business building to further the longer term sustainable success of the investment
team, effective team/people management and overall contribution to the success of Neuberger Berman. In
addition, compensation of portfolio managers at other comparable firms is considered, with an eye toward
remaining competitive with the market. The terms of long-term retention incentives at Neuberger Berman
are as follows:
Employee-Owned
Equity
. An integral part
of the management buyout of Neuberger Berman in 2009 was implementing an equity ownership structure which
embodies the importance of incentivizing and retaining key investment professionals. The senior portfolio
managers on the mutual fund teams are key shareholders in the equity ownership structure. On a yearly
basis over the subsequent five years, the equity ownership allocations will be re-evaluated and re-allocated
based on performance and other key metrics. A set percentage of employee equity and preferred stock
is subject to vesting.
Contingent Compensation
Plan
. Neuberger Berman also has established the Neuberger Berman Group Contingent Compensation
Plan pursuant to which a certain percentage of an employee's compensation is deemed contingent and vests
over a three-year period. Under the plan, most participating employees who are members of mutual fund
investment teams will receive a cash return on their contingent compensation with a portion of such return
being determined based on the team's investment performance, as well as the performance of a portfolio
of other investment funds managed by Neuberger Berman Group investment professionals.
Restrictive Covenants
. Portfolio managers who have received
equity interests have agreed to certain restrictive covenants, which impose obligations and restrictions
with respect to confidential information and employee and client solicitation.
Certain portfolio managers
may manage products other than mutual funds, such as high-net-worth separate accounts. For the management
of these accounts, a portfolio manager may generally receive a percentage of pre-tax revenue
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determined
on a monthly basis less certain deductions (
e.g.
,
a "finder's fee" or "referral fee" paid to a third party). The percentage of revenue a portfolio manager
receives will vary based on certain revenue thresholds.
Newton
. Portfolio manager compensation is primarily
comprised of a market-based salary, annual cash bonus and participation in the Newton Long Term Incentive
Plan. The level of variable compensation (annual cash bonus and Newton Long Term Incentive Plan) ranges
from 0% of base salary to in excess of 200% of base salary, depending upon corporate profits, team performance
and individual performance. The annual cash bonus is discretionary. Portfolio manager awards are heavily
weighted towards their investment performance relative to both benchmarks and peer comparisons and individual
qualitative performance. Awards also are reviewed against market data from industry compensation consultants
such as McLagan Partners to ensure comparability with competitors. The portfolio managers also are eligible
to participate, at the discretion of management, in the Newton Long Term Incentive Plan. This plan provides
for an annual cash award that vests after four years. The value of the award may change during the vesting
period based upon changes in Newton's operating income. Portfolio managers also are eligible to join
the BNY Mellon Group Personal Pension Plan. Employer contributions are invested in individual member
accounts. The value of the fund is not guaranteed and fluctuates based on market factors.
Nicholas
. Portfolio managers
are partners of the firm. Nicholas' compensation structure for its portfolio managers specifically aligns
their goals with that of Nicholas' clients, rewards investment performance and promotes teamwork through
their partnership in the firm. Portfolio managers typically receive a base salary and, as partners of
the firm, proportionately share in the aggregate profits of Nicholas. In addition to cash compensation,
portfolio managers receive a benefit package.
RHJ
.
Compensation of portfolio managers at RHJ includes base compensation and
bonus. In addition, Messrs. Holtz and Lipsker participate in revenues generated by the strategies they
manage.
Riverbridge
.
Riverbridge has three levels of compensation for investment team members. Investment team members are
compensated with a base compensation believed to be industry competitive relative to their level of responsibility.
The second level of compensation is predicated on the overall performance of the investment team and
individual contributions to the team. The chief investment officer makes a qualitative evaluation of
the performance of the individual team member that contemplates contributions made for the current year
and considers contributions made during the course of the last several years. Evaluation factors include,
but are not limited to, the performance of the relevant funds and other accounts managed relative to
expectations for how those funds and accounts should have performed, given their objective, policies,
strategies and limitations, and the market environment during the measurement period. This performance
factor is not based on the value of assets held in the portfolio strategy. Additional factors considered
include quality of research conducted, contributions made to the overall betterment of the investment
team and contribution to the betterment of the firm. The actual variable compensation may be more or
less than the target amount, based on how well the individual satisfies the objectives stated above.
Multi-year time periods are used to evaluate the individual performance of investment team members.
Riverbridge stresses superior long-term performance and accordingly benchmarks portfolio managers' performance
against comparable peer managers and the appropriate strategy benchmark. The third level of compensation
is ownership in the firm. Riverbridge also has adopted a 401(k) Safe Harbor Plan that allows employees
to contribute the maximum amount allowed by law. Generally, all employees are eligible to participate
in the plan. Riverbridge matches annually the employee's contribution in an amount equal to 100% of
the elective deferrals up to 3% of each employee's compensation, and an additional 50% on deferrals on
the next 2% of each employee's compensation.
Sarofim & Co
. The portfolio managers are compensated through (i)
payment of a fixed annual salary and discretionary annual bonus that may be based on a number of factors,
including fund performance, the performance of other accounts and the overall performance of Sarofim
& Co. over various time frames, including one-year, two-year and three-year periods, and (ii) the
possible issuance of stock options and incentive stock options. The fixed annual salary amounts and
the discretionary annual bonus amounts constitute the largest component of the portfolio managers' compensation,
and these amounts are determined annually through a comprehensive review process pursuant to which executive
officers and the members of Sarofim & Co.'s board of directors review and consider the accomplishments
and development of each portfolio manager, especially with respect to those client accounts involving
the portfolio manager. A lesser component of the portfolio managers' compensation results from the possible
issuance of stock options and incentive stock options. Portfolio managers are sometimes granted stock
options and incentive stock options to acquire shares of the capital stock of The Sarofim Group, Inc.,
the ultimate
III-81
corporate
parent of Sarofim & Co. The decisions as to whether to issue such options and to whom the options
are to be issued are made in conjunction with the annual salary and bonus review process, and the options
are issued pursuant to a stock option plan adopted by The Sarofim Group, Inc. The options are not based
on the particular performance or asset value of any particular client account or of all client accounts
as a group, but rather the performance and accomplishments of the individual to whom the option is to
be granted. There are various aspects of the review process that are designed to provide objectivity,
but, in the final analysis, the evaluation is a subjective one that is based upon a collective overall
assessment. There are, however, no specified formulas or benchmarks tied to the particular performance
or asset value of any particular client account or of all client accounts as a group.
Standish
. The portfolio managers'
compensation is comprised primarily of a market-based salary and an incentive compensation plan (annual
and long-term). Funding for the Standish Incentive Plan is through a pre-determined fixed percentage
of overall company profitability. Therefore, all bonus awards are based initially on Standish's overall
performance as opposed to the performance of a single product or group. All investment professionals
are eligible to receive incentive awards. Cash awards are payable in the February month end pay of the
following year. Most of the awards granted have some portion deferred for three years in the form of
deferred cash, BNY Mellon equity, interests in investment vehicles (consisting of investments in a range
of Standish products), or a combination of the above. Individual awards for portfolio managers are discretionary,
based on both individual and multi-sector product risk adjusted performance relative to both benchmarks
and peer comparisons over one year, three year and five year periods. Also considered in determining
individual awards are team participation and general contributions to Standish. Individual objectives
and goals are also established at the beginning of each calendar year and are taken into account. Portfolio
managers whose compensation exceeds certain levels may elect to defer portions of their base salaries
and/or incentive compensation pursuant to BNY Mellon's Elective Deferred Compensation Plan.
TBCAM
. TBCAM's rewards program
was designed to be market competitive and align its compensation with the goals of its clients. This
alignment is achieved through an emphasis on deferred awards which incentivizes its investment personnel
to focus on long-term alpha generation. The following factors encompass its investment professional
awards program: base salary, annual cash bonus, long-term incentive plan, deferred cash, BNY Mellon
restricted stock, TBCAM restricted shares and a franchise dividend pool (
i.e
., if a team meets a pre-established contribution margin,
any excess contribution is shared by the team and TBCAM and is paid out in both cash and long-term incentives).
Incentive
compensation awards are generally subject to management discretion and pool funding availability. Funding
for TBCAM annual and long-term incentive plans is through a pre-determined fixed percentage of overall
TBCAM profitability. Awards are paid in cash on an annual basis; however, some portfolio managers may
receive a portion of their annual incentive award in deferred vehicles.
Awards for select senior portfolio
managers are based on a two-stage model: an opportunity range based on the current level of business
and an assessment of long-term business value. A significant portion of the opportunity awarded is structured
and based upon the one-, three- and five-year (three-year and five-year weighted more heavily) pre-tax
performance of the portfolio manager's accounts relative to the performance of the appropriate peer groups.
TS&W
. For each portfolio manager, TS&W's
compensation structure includes the following components: base salary, annual bonus, deferred profit
sharing and the ability to participate in a voluntary income deferral plan.
Base Salary
. Each portfolio manager is paid a fixed base salary, which varies among portfolio
managers depending on the experience and responsibilities of the portfolio manager as well as the strength
or weakness of the employment market at the time the portfolio manager is hired or upon any renewal period
.
Bonus
. Each portfolio manager is eligible to receive an annual bonus.
Targeted bonus amounts vary among portfolio managers based on the experience level and responsibilities
of the portfolio manager. Bonus amounts are discretionary and tied to overall performance versus individual
objectives. Performance versus peer groups and benchmarks are taken into consideration. For capacity
constrained products, like small cap value, the small cap portfolio manager has an incentive program
tied to the revenue generated in that product area.
III-82
Deferred Profit Sharing
. All employees are eligible to receive
annual profit sharing contributions under a qualified profit sharing plan, subject to IRS limitations.
Discretionary contributions are made on an annual basis at the sole discretion of TS&W.
Deferred Compensation Plan
. Portfolio managers meeting certain
requirements also are eligible to participate in a voluntary, nonqualified deferred compensation plan
that allows participants to defer a portion of their income on a pre-tax basis and potentially earn tax-deferred
returns.
Equity Plan
.
Key employees may be awarded deferred TS&W equity grants. In addition, key employees may purchase
TS&W equity directly.
Vulcan
.
Vulcan's compensation structure includes the following components: base salary, bonus based on contribution
to the research process, retirement plan, medical benefits and substantial ownership in the firm.
Walter Scott
.
Compensation generally consists of
a competitive base salary and entitlement to annual profit share. In addition, all staff qualify for
retirement benefits, life assurance and health insurance.
All staff are eligible to participate in the
firm's annual profit share, which is a fixed percentage of pre-incentive operating profits. This is
the sole source of incentive compensation. Investment, operations, compliance and client service staff
are all focused upon the same goals of providing superior performance and service to clients. Success
in these goals drives the firm's profits and therefore the profit share.
For senior staff, the majority
of annual compensation is the profit share. An element of this is deferred via a long-term incentive
plan, largely invested in a long term global equity fund for which Walter Scott is the investment advisor
and BNY Mellon stock. The long term global equity fund has a deferral period of three years. Prior
to 2013, BNY Mellon restricted stock had a deferral period of three years. Grants awarded from 2013
onwards vest on a pro-rata basis over four years.
Walter Scott's compensation structure is designed to promote fair
and equal treatment of all clients. The remuneration and nominations committee of Walter Scott's governing
board determines the salary and profit share allocation based on the overall performance of the firm.
Walthausen
.
All members of Walthausen have common stock ownership in the firm. This is a founding principle of
the firm, which Walthausen believes maximizes the alignment of goals for the firm and its clients. As
the firm grows, Walthausen intends to expand ownership to new team members after an initial review period.
Walthausen's compensation structure consists of base salary, bonus and profit sharing. Each member
of the investment team receives a base salary which is commensurate with past experience and role within
the firm. Bonuses are similarly awarded based on team performance and firm profitability. As the firm
grows, Walthausen intends to allocate profits across ownership levels.
Certain Conflicts of Interest with Other Accounts
Portfolio managers may manage
multiple accounts for a diverse client base, including mutual funds, separate accounts (assets managed
on behalf of private clients or institutions such as pension funds, insurance companies and foundations),
private funds, bank collective trust funds or common trust accounts and wrap fee programs that invest
in securities in which a fund may invest or that may pursue a strategy similar to a fund's component
strategies ("Other Accounts").
Potential conflicts of interest may arise because of an Adviser's or portfolio manager's
management of a fund and Other Accounts. For example, conflicts of interest may arise with both the
aggregation and allocation of securities transactions and allocation of limited investment opportunities,
as an Adviser may be perceived as causing accounts it manages to participate in an offering to increase
the Adviser's overall allocation of securities in that offering, or to increase the Adviser's ability
to participate in future offerings by the same underwriter or issuer. Allocations of bunched trades,
particularly trade orders that were only partially filled due to limited availability, and allocation
of investment opportunities generally, could raise a potential conflict of interest, as an Adviser may
have an incentive to allocate securities that are expected to increase in value to preferred accounts.
IPOs, in particular, are frequently
III-83
of
very limited availability. A potential conflict of interest may be perceived to arise if transactions
in one account closely follow related transactions in a different account, such as when a fund purchase
increases the value of securities previously purchased by the Other Account or when a sale in one account
lowers the sale price received in a sale by a second account. Conflicts of interest may also exist with
respect to portfolio managers who also manage performance-based fee accounts, which could give the portfolio
managers an incentive to favor such Other Accounts over the corresponding funds such as deciding which
securities to allocate to a fund versus the performance-based fee account. Additionally, portfolio managers
may be perceived to have a conflict of interest if there are a large number of Other Accounts, in addition
to a fund, that they are managing on behalf of an Adviser. The Advisers periodically review each portfolio
manager's overall responsibilities to ensure that he or she is able to allocate the necessary time and
resources to effectively manage the fund. In addition, an Adviser could be viewed as having a conflict
of interest to the extent that the Adviser or its affiliates and/or portfolio managers have a materially
larger investment in Other Accounts than their investment in the fund.
Other Accounts may have investment objectives,
strategies and risks that differ from those of the relevant fund. In addition, the funds, as registered
investment companies, are subject to different regulations than certain of the Other Accounts and, consequently,
may not be permitted to engage in all the investment techniques or transactions, or to engage in such
techniques or transaction to the same degree, as the Other Accounts. For these or other reasons, the
portfolio managers may purchase different securities for the fund and the Other Accounts, and the performance
of securities purchased for the fund may vary from the performance of securities purchased for Other
Accounts. The portfolio managers may place transactions on behalf of Other Accounts that are directly
or indirectly contrary to investment decisions made for the fund, which could have the potential to adversely
impact the fund, depending on market conditions. In addition, if a fund's investment in an issuer is
at a different level of the issuer's capital structure than an investment in the issuer by Other Accounts,
in the event of credit deterioration of the issuer, there may be a conflict of interest between the fund's
and such Other Accounts' investments in the issuer.
If an Adviser sells securities short, it
may be seen as harmful to the performance of any funds investing "long" in the same or similar securities
whose market values fall as a result of short-selling activities.
BNY Mellon and its affiliates,
including the Manager, Sub-Advisers affiliated with the Manager and others involved in the management,
sales, investment activities, business operations or distribution of the funds, are engaged in businesses
and have interests other than that of managing the funds. These activities and interests include potential
multiple advisory, transactional, financial and other interests in securities, instruments and companies
that may be directly or indirectly purchased or sold by the funds or the funds' service providers, which
may cause conflicts that could disadvantage the funds.
BNY Mellon and its affiliates may have deposit,
loan and commercial banking or other relationships with the issuers of securities purchased by the funds.
BNY Mellon has no obligation to provide to the Adviser or the funds, or effect transactions on behalf
of the funds in accordance with, any market or other information, analysis, or research in its possession.
Consequently, BNY Mellon (including, but not limited to, BNY Mellon's central Risk Management Department)
may have information that could be material to the management of the funds and may not share that information
with relevant personnel of the Adviser. Accordingly, in making investment decisions for a fund, the
Adviser does not seek to obtain or use material inside information that BNY Mellon may possess with respect
to such issuers. However, because an Adviser, in the course of investing fund assets in loans, may have
access to material non-public information regarding a Borrower, the ability of a fund or funds advised
by such Adviser to purchase or sell publicly-traded securities of such Borrowers may be restricted.
Code
of Ethics
. The funds, the Manager, the Sub-Advisers and the Distributor each have adopted a Code
of Ethics that permits its personnel, subject to such respective Code of Ethics, to invest in securities,
including securities that may be purchased or held by a fund. The Code of Ethics subjects the personal
securities transactions of employees to various restrictions to ensure that such trading does not disadvantage
any fund. In that regard, portfolio managers and other investment personnel employed by the Manager
or an Affiliated Entity or a Sub-Adviser affiliated with the
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Manager
must preclear and report their personal securities transactions and holdings, which are reviewed for
compliance with the Code of Ethics and also are subject to the oversight of BNY Mellon's Investment Ethics
Committee. Portfolio managers and other investment personnel may be permitted to purchase, sell or hold
securities which also may be or are held in fund(s) they manage or for which they otherwise provide investment
advice.
Distributor
The Distributor, a wholly-owned subsidiary of
Dreyfus, located at 200 Park Avenue, New York, New York 10166, serves as each fund's distributor on
a best efforts basis pursuant to an agreement, renewable annually, with the fund or the corporation or
trust of which it is a part. The Distributor also serves as distributor for the other funds in the Dreyfus
Family of Funds and BNY Mellon Funds Trust.
Depending on your fund's distribution arrangements and share classes
offered, not all of the language below may be applicable to your fund (see the prospectus and "How to
Buy Shares" in Part II of this SAI to determine your fund's arrangements and share classes).
The Distributor compensates
from its own assets certain Service Agents for selling Class A shares subject to a CDSC and Class C shares
at the time of purchase. The proceeds of the CDSCs and fees pursuant to a fund's 12b-1 Plan, in part,
are used to defray the expenses incurred by the Distributor in connection with the sale of the applicable
class of a fund's shares. The Distributor also may act as a Service Agent and retain sales loads and
CDSCs and 12b-1 Plan fees. For purchases of Class A shares subject to a CDSC and Class C shares, the
Distributor generally will pay Service Agents on new investments made through such Service Agents a commission
of up to 1% of the NAV of such shares purchased by their clients.
The Distributor may pay Service Agents that have
entered into agreements with the Distributor a fee based on the amount invested in fund shares through
such Service Agents by employees participating in Retirement Plans, or other programs. Generally, the
Distributor may pay such Service Agents a fee of up to 1% of the amount invested through the Service
Agents. The Distributor, however, may pay Service Agents a higher fee and reserves the right to cease
paying these fees at any time. The Distributor will pay such fees from its own funds, other than amounts
received from a fund, including past profits or any other source available to it. Sponsors of such Retirement
Plans or the participants therein should consult their Service Agent for more information regarding any
such fee payable to the Service Agent.
Dreyfus or the Distributor may provide additional cash payments
out of its own resources to financial intermediaries that sell shares of a fund or provide other services
(other than Class Y shares). Such payments are separate from any sales charges, 12b-1 fees and/or shareholder
services fees or other expenses paid by the fund to those intermediaries. Because those payments are
not made by you or the fund, the fund's total expense ratio will not be affected by any such payments.
These additional payments may be made to Service Agents, including affiliates, that provide shareholder
servicing, sub-administration, recordkeeping and/or sub-transfer agency services, marketing support and/or
access to sales meetings, sales representatives and management representatives of the Service Agent.
Cash compensation also may be paid from Dreyfus' or the Distributor's own resources to Service Agents
for inclusion of a fund on a sales list, including a preferred or select sales list or in other sales
programs. These payments sometimes are referred to as "revenue sharing." From time to time, Dreyfus
or the Distributor also may provide cash or non-cash compensation to Service Agents in the form of:
occasional gifts; occasional meals, tickets or other entertainment; support for due diligence trips;
educational conference sponsorships; support for recognition programs; technology or infrastructure support;
and other forms of cash or non-cash compensation permissible under broker-dealer regulations. In some
cases, these payments or compensation may create an incentive for a Service Agent to recommend or sell
shares of a fund to you. In addition, the Distributor may provide additional and differing compensation
from its own assets to certain of its employees who promote the sale of select funds to certain Service
Agents, who in turn may recommend such funds to their clients. In some cases, these payments may create
an incentive for the employees of the Distributor to promote a fund for which the Distributor provides
a higher level of compensation. Please contact your Service Agent for details about any payments it
may receive in connection with the sale of fund shares or the provision of services to a fund.
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Transfer and Dividend Disbursing Agent and Custodian
The
Transfer Agent, a wholly-owned subsidiary of Dreyfus, located at 200 Park Avenue, New York, New York
10166, is each fund's transfer and dividend disbursing agent. Pursuant to a transfer agency agreement
with the funds, the Transfer Agent arranges for the maintenance of shareholder account records for the
funds, the handling of certain communications between shareholders and the funds and the payment of dividends
and distributions payable by the funds. For these services, the Transfer Agent receives a monthly fee
computed on the basis of the number of shareholder accounts it maintains for each fund during the month,
and is reimbursed for certain out-of-pocket expenses. The funds, other than the Index Funds, also may
make payments to certain financial intermediaries, including affiliates, who provide sub-administration,
recordkeeping and/or sub-transfer agency services to beneficial owners of fund shares.
The Custodian, an affiliate
of the Manager, located at One Wall Street, New York, New York 10286, serves as custodian for the investments
of the funds. The Custodian has no part in determining the investment policies of the funds or which
securities are to be purchased or sold by the funds. Pursuant to a custody agreement applicable to each
fund, the Custodian holds each fund's securities and keeps all necessary accounts and records. For its
custody services, the Custodian receives a monthly fee based on the market value of each fund's assets
held in custody and receives certain securities transaction charges.
Funds' Compliance Policies and Procedures
The funds have adopted compliance policies and
procedures pursuant to Rule 38a-1 under the 1940 Act that cover, among other matters, certain compliance
matters relevant to the management and operations of the funds.