SEC Company Response from BNY Mellon Advantage Funds, Inc. (CIK 0000914775) — Feb 25, 2020
BNY Mellon Advantage Funds, Inc. (CIK 0000914775)
Date: Feb. 25, 2020 · CIK: 0000914775 · Accession: 0001104659-20-024862
AI Filing Summary & Sentiment
File numbers found in text: 811-07123
Referenced dates: September 27, 2016
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CORRESP
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Proskauer Rose LLP Eleven Times Square New York, NY 10036-8299
February 25, 2020
VIA EDGAR
Securities and Exchange Commission
Division of Investment Management
100 F Street, N.E.
Washington, D.C. 20549
Attention: Mark Cowan
Re:
BNY Mellon Advantage Funds, Inc.
(Registration Nos: 33-51061
and 811-07123)
Ladies and Gentlemen:
On or about February 27, 2020, the above-referenced
registrant (the "Registrant") plans to file with the Securities and Exchange Commission (the "Commission"),
under the Securities Act of 1933, as amended (the "Securities Act"), and the Investment Company Act of 1940, as amended
(the "1940 Act"), Post-Effective Amendment No. 165 (the "Amendment") to the Registrant's Registration Statement
on Form N-1A (the "Registration Statement"). The Amendment will relate to Post-Effective Amendment No. 163 (the "485(a)
Amendment") to the Registration Statement that was filed with the Commission pursuant to Rule 485(a)(1) under the Securities
Act on December 30, 2019 in order to reflect certain previously-effective changes to the investment strategy of BNY Mellon Global
Real Return Fund (the "Fund"), a series of the Registrant. The Registrant filed a supplement to the Fund's prospectus
pursuant to Rule 497 under the Securities Act on July 31, 2019 disclosing these changes to the Fund's investment strategy.
The Amendment is being filed in order to
respond to comments of the staff (the "Staff") of the Commission on the 485(a) Amendment that were provided to the undersigned
by Mark Cowan of the Staff and to complete previously incomplete portions of the filing, including updating financial and other
information, to make certain other non-material revisions and to file exhibits, including the consent of the Fund's independent
registered public accounting firm. The prospectus included in the Amendment will be marked to indicate changes from the version
filed as part of the 485(a) Amendment, and the statement of additional information ("SAI") included in the Amendment
will be marked to indicate changes from the currently effective version thereof.
For the convenience of the Staff, and for
completeness purposes, the Staff's comments have been restated below in their entirety, and the response is set out immediately
following each comment. We have considered comments made by the Staff with respect to one section of the 485(a) Amendment as applicable
to similar disclosure elsewhere in the 485(a) Amendment. Capitalized terms used but not defined herein have the meanings assigned
to them in the 485(a) Amendment.
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GENERAL
1. Staff Comment: According to the Registrant's cover letter, the 485(a) Amendment was filed
in order to reflect certain previously-effective changes to the investment strategy of the Fund. The Registrant filed a supplement
to the Fund's prospectus pursuant to Rule 497 under the Securities Act on July 31, 2019 disclosing these changes to the Fund's
investment strategy.
In the Staff's
view, the change in strategy to use a Cayman subsidiary is a material change to the Fund's strategy that should have been filed
in a Post-Effective Amendment to the Registration Statement pursuant to Rule 485(a) under the Securities Act before the change
was implemented. Please explain why that was not done.
Response: On August 1,
2016, the Registrant, on behalf of its series BNY Mellon Dynamic Total Return Fund ("DTR"), filed Post-Effective Amendment
No. 130 to the Registration Statement ("PEA 130") for the purpose of making certain changes to DTR's investment strategy,
including the use of a Cayman subsidiary. The Staff reviewed PEA 130 and provided comments on the new disclosure regarding the
Cayman subsidiary, and the Registrant responded to the Staff's comments by letter dated September 27, 2016. In light of this and
because the disclosure in the Amendment regarding the Fund's use of a Cayman subsidiary is substantially similar to the corresponding
disclosure that the Staff reviewed in PEA 130, the Registrant did not file a Post-Effective Amendment to the Registration Statement
prior to the effectiveness of the investment strategy changes disclosed in the Fund's prospectus supplement dated July 31, 2019.
Moreover, substantially all of the Staff's comments on the 485(a) Amendment relating to the Fund's Cayman subsidiary (discussed
below) are identical to the Staff comments received on PEA 130 relating to DTR's Cayman subsidiary, and the Registrant has responded
herein in similar fashion as it did in its September 27, 2016 correspondence.
PROSPECTUS
Fund Summary—Fees and Expenses
2. Staff Comment: Please include a completed fee table (without brackets) in correspondence
with the rest of your responses to the Staff's comments at least five days prior to the Amendment going effective.
Response: A completed
fee table (without brackets) is attached as Exhibit A hereto. The fee table attached as Exhibit A hereto is marked to show changes
from the fee table that was filed as separate correspondence on February 21, 2020.
3. Staff Comment: Disclose whether the Example reflects the fee waiver disclosed in footnote
** [now footnote ***] to the fee table.
Response: The Example
to be included in the Amendment will reflect the expense limitation agreement disclosed in footnote *** to the fee table (as shown
on Exhibit A hereto). Appropriate disclosure will be added in the Amendment.
4. Staff Comment: Please confirm supplementally that, in accordance with Item 3, Instr. 3(f)
of Form N-1A, if "acquired fund fees and expenses" ("AFFE") exceed 0.01% of the average net assets of the Fund,
the Fund will include a line item in the fee table for AFFE.
Response: The Fund has
included a line item in the fee table for AFFE. Please see Exhibit A attached hereto.
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Fund Summary—Principal Investment
Strategy
5. Staff Comment: The Fund's name includes the term "Global". Please expressly describe
how the Fund will "invest [its] assets in investments that are tied economically to a number of countries throughout the world."
See Investment Company Names, Investment Company Act Release No. 24828, at n. 42 (Jan. 17, 2001). For example, the Fund
could include a policy that, under normal market conditions, it will invest significantly (e.g., at least 40% of its assets,
unless market conditions are not deemed favorable, in which case the Fund would invest at least 30% of its assets) in companies
organized or located in multiple countries outside the United States or doing a substantial amount of business in multiple countries
outside the United States.
Response: The
following disclosure will be added as the second sentence of the fourth paragraph under "Fund Summary—Principal Investment
Strategy" in the Amendment:
Under
normal market conditions, the fund will invest a substantial portion of its assets in the securities of issuers organized or
located outside the United States, whose primary listing exchange for securities is located outside the United States, whose
largest amount of revenues are derived from countries outside the United States or whose reporting currencies are other than
U.S. dollars, and derivatives which provide exposure to such issuers or foreign markets.
Corresponding
changes will be made under "Fund Details—Goal and Approach" in the Amendment, and the following sentence in that
section will be deleted in the Amendment: "The fund ordinarily invests in at least three countries, and, at times, may invest
a substantial portion of its assets in a single country."
6. Staff Comment: For all controlled foreign corporations ("CFCs"), funds should
provide the following disclosure (the Staff noted that a few items are missing from the Fund's disclosure in the 485(a) Amendment):
"CFC,"
when referenced in the following comments, includes any subsidiary(ies) of the CFC.
Comment
6(a). Disclose that the Fund complies with the provisions of the 1940 Act governing investment policies (Section 8) and capital
structure and leverage (Section 18) on an aggregate basis with the CFC.
Response to Comment 6(a):
The following responsive disclosure appeared in the 485(a) Amendment and will appear in the Amendment with the following revision
requested by the Staff (see Comment 12 below): "The fund and the subsidiary maywill
test for compliance with applicable investment restrictions, such as capital structure and leverage requirements, on a consolidated
basis and comply with investment policy disclosure requirements under the 1940 Act on a similar basis."
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Comment
6(b). Disclose that each investment adviser to the CFC complies with provisions of the 1940 Act relating to investment advisory
contracts (Section 15) as an investment adviser to the Fund under Section 2(a)(20) of the 1940 Act. The investment advisory agreement
between the CFC and its investment adviser is a material contract that should be included as an exhibit to the Registration Statement.
If the same person is the adviser to both the Fund and the CFC, then, for purposes of complying with Section 15(c), the reviews
of the Fund's and the CFC's investment advisory agreements may be combined.
Response to Comment 6(b):
The following responsive disclosure appeared in the 485(a) Amendment and will appear in the Amendment: "The subsidiary's advisory
contracts will be subject to the same regulatory requirements applicable to the fund's contracts." The subsidiary's advisory
contracts will be filed in the Amendment as exhibits to the Registration Statement.
Comment
6(c). Disclose that each CFC complies with provisions of the 1940 Act relating to affiliated transactions and custody (Section
17). Identify the custodian of the CFC.
Response to Comment 6(c):
The following responsive disclosure appeared in the 485(a) Amendment and will appear in the Amendment: "The subsidiary also
is subject to the fund's compliance program, to the extent the fund's policies and procedures apply to its investments and operations."
The Section 17 requirements (e.g., transactions involving affiliated persons, custody requirements) are covered by the Fund's
compliance program. The Fund's subsidiary, under management by the same investment adviser and sub-investment adviser as the Fund,
is subject to the Section 17 requirements as addressed by the compliance program to the same extent as the Fund. Accordingly, we
believe the existing disclosure sufficiently conveys the subsidiary's compliance with the Section 17 requirements. The subsidiary's
custodian is identified in the SAI as follows: "The custodian of the Subsidiary's assets is Citibank, N.A., located at 388
Greenwich Street, New York, New York 10013."
Comment
6(d). Disclose: (1) whether the Fund has received a private letter ruling from the Internal Revenue Service ("IRS")
stating that undistributed income derived from the CFC is qualifying income, and (2) if the Fund has not received a private
letter ruling, its basis for determining that such undistributed income is qualifying income, such as an opinion of counsel.
Response to Comment 6(d):
The Fund has not received a private letter ruling from the IRS stating that undistributed income derived from the subsidiary is
qualifying income. The Fund notes, however, that such a private letter ruling is not necessary as regulations issued in March 2019
by the IRS clarify that the annual net profit, if any, realized by such a subsidiary and imputed for income tax purposes to the
Fund will constitute qualifying income whether or not the imputed income is distributed by the subsidiary to the Fund. See
Guidance Under Section 851 Relating to Investments in Stock and Securities, 84 Fed. Reg. 9959 (Mar. 19, 2019).
Comment
6(e). Disclose any of the CFC's principal investment strategies or principal risks that constitute principal investment strategies
or risks of the Fund. The principal investment strategies and principal risk disclosures of a fund that invests in a CFC should
reflect aggregate operations of the fund and the CFC.
Response to Comment 6(e):
We believe that the current disclosure in "Fund Summary—Principal Investment Strategy" complies with the requirements
of Form N-1A and is otherwise appropriate. The last paragraph of "Summary Section—Principal Investment Strategies"
states that the subsidiary "invests directly in commodity-related instruments, including futures and options contracts, swap
agreements and pooled investment vehicles that invest in commodities." In addition, the first two sentences of Subsidiary
risk state: "To the extent the fund invests in the subsidiary, the fund will be indirectly exposed to the risks associated
with the subsidiary's investments. The subsidiary principally invests in commodity-related instruments, including futures and options
contracts, swap agreements and pooled investment vehicles that invest in commodities, and the fund's investment in the subsidiary
is subject to the same risks that apply to similar investments if held directly by the fund."
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We do not believe that any additional
disclosure is necessary, nor consistent with either the summarization requirements of Items 4(a) and (b)(1)(i) (to summarize the
disclosures required by the corresponding provisions in Item 9) or the plain English requirements of Rule 421(d) under the Securities
Act.
Comment
6(f). Confirm in correspondence that the financial statements of the CFC will be consolidated with those of the Fund.
Response to Comment 6(f):
The following responsive disclosure appeared in the 485(a) Amendment and will appear in the Amendment: "The subsidiary's financial
statements will be consolidated with the fund's financial statements in the annual and semi-annual reports provided to shareholders."
Comment
6(g). Confirm in correspondence that: (1) the CFC's management fee (including any performance fee) will be included in "Management
fees" and the CFC's expenses will be included in "Other expenses" in the Fund's prospectus fee table; (2) the CFC
and its board of directors will agree to designate an agent for service of process in the United States; and (3) the CFC and its
board of directors will agree to inspection by the Staff of the CFC's books and records, which will be maintained in accordance
with Section 31 of the 1940 Act and the rules thereunder.
Response to Comment 6(g):
The fee table (as shown on Exhibit A) reflects the fees and expenses of the Fund's investment in the subsidiary under "Other
expenses."
The subsidiary and its board
of directors will designate an agent for service of process in the United States. In addition, Fund management has confirmed that
the subsidiary's books and records are maintained in accordance with Section 31 of the 1940 Act and the rules thereunder and will
be accessible to the Staff to the same extent as the books and records of the Fund.
Fund Summary—Principal Risks
7. Staff Comment: Please add Management risk.
Response: Because the
Fund has included Allocation risk, which describes the same risks as Management risk (albeit in the context of a
fund whose assets are "allocated" among different asset classes), the Fund does not believe it is necessary or appropriate
to add Management risk.
8. Staff Comment: Market sector risk states: "The fund may significantly overweight
or underweight certain countries, companies, industries or market sectors, which may cause the fund's performance to be more or
less sensitive to developments affecting those countries, companies, industries or sectors." If the Fund is currently significantly
weighted in any companies, industries or sectors, please disclose that in the Principal Investment Strategy section and add appropriate
risk disclosure. Also, please disclose if the Fund is significantly overweighted in any country and add applicable risk disclosure.
Response: Because the
Fun