UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number | 811-08673 | |||||
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| BNY Mellon Investment Portfolios |
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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:
| 12/31 |
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Date of reporting period: | 12/31/2019
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FORM N-CSR
Item 1. Reports to Stockholders.
BNY Mellon Investment Portfolios, Core Value Portfolio
ANNUAL REPORT December 31, 2019 |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
BNY Mellon Investment Adviser, Inc. | |
With Those of Other Funds | |
in Affiliated Issuers | |
Public Accounting Firm | |
the Fund’s Management Agreement | |
FOR MORE INFORMATION
Back Cover
| 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 Investment Portfolios, Core Value Portfolio (formerly, Dreyfus Investment Portfolios, Core Value Portfolio), covering the 12-month period from January 1, 2019 through December 31, 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.
In January 2019, a pivot in stance from the U.S. Federal Reserve (the “Fed”) helped stimulate a rebound across equity markets that continued into the second quarter of the year. However, escalating trade tensions disrupted equity markets in May. The dip was short-lived, as markets rose once again in June and July of 2019, when a trade deal appeared more likely and the pace of U.S. economic growth remained steady. Nevertheless, concerns continued to emerge over slowing global growth, resulting in bouts of market volatility in August 2019. Stocks rebounded in September and continued an upward path through most of October 2019, bolstered by central bank policy and consistent consumer spending. The rally generally continued through the end of the period, supported in part by an announcement from President Trump that the first phase of a trade deal with China was in process. U.S. equity markets reached new highs during the final months of the period.
In fixed-income markets, the year began with a recovery from the prior months’ volatility. After the Fed’s supportive statements in January 2019, other developed-market central banks followed suit and reiterated their abilities to buttress flagging growth rates by continuing accommodative policies. The Fed cut rates in July, September and October 2019, for a total 75 basis point reduction in the federal funds rate during the 12 months. Rates across much of the Treasury curve saw a slight increase during the month of November, and the long end of the curve rose in December. The yield curve steepened during the latter portion of the period. However, demand for fixed-income instruments during the year was strong, which helped to support positive bond market returns.
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.
January 15, 2020
2
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from January 1, 2019 through December 31, 2019, as provided by Brian Ferguson, Portfolio Manager
Market and Fund Performance Overview
For the 12-month period ended December 31, 2019, BNY Mellon Investment Portfolios, Core Value Portfolio’s (formerly, Dreyfus Investment Portfolios, Core Value Portfolio) Initial shares produced a total return of 26.81%, and its Service shares returned 26.59%.1 In comparison, the fund’s benchmark, the Russell 1000® Value Index (the “Index”), produced a total return of 26.54% for the same period.2
Despite ongoing trade tensions, value-oriented stocks posted strong gains, on average, during the reporting period, helped by a steady economy and a more accommodative stance from the U.S. Federal Reserve. The fund outperformed the Index due to certain sector allocations and stock selections.
The Fund’s Investment Approach
The fund seeks long-term growth of capital, with current income as a secondary objective. To pursue its goals, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in stocks. The fund focuses on stocks of large-cap value companies. The fund typically invests mainly in the stocks of U.S. issuers, and will limit its holdings of foreign stocks to 20% of the value of its total assets.
When choosing stocks, the fund uses a “bottom-up” stock-selection approach, focusing on individual companies, rather than a “top-down” approach that forecasts market trends. A three-step, value-screening process is used to select stocks based on value, sound business fundamentals and positive business momentum.
Stocks Surge on Supportive Federal Reserve Policy and Reduced Trade Tensions
The reporting period began with widespread expectations of interest rate cuts, as the Federal Reserve (the “Fed”) had earlier moved from a tightening policy to one that was “data dependent.” With this shift, stocks rallied late in 2018 and continued to rise early in 2019. In the second quarter, however, stocks generally moved sideways, weighed down at times by concerns about trade tensions and global growth.
Three quarter-point rate cuts in the second half of the period provided an additional boost to equities markets. The Fed announced an initial reduction at its July 2019 meeting and followed up with two additional rate cuts in September and October 2019. These reductions brought the federal funds rate to 1.50-1.75%, as trade tensions and other geopolitical concerns appeared to be weighing on economic growth. Other major central banks were also supportive.
In the third quarter of 2019, interest rate cuts and the prospect of a U.S.-China trade agreement led investors to anticipate a pickup in global growth. Investors’ concerns about trade tensions and the global economy hindered performance at times, but stocks finished up strong later in the reporting period, when the “Phase 1” U.S.-China trade deal was announced.
Stock Selection Drove Fund Outperformance
The fund’s performance was hindered by overweight positions in the materials and energy sectors, as well as stock selections primarily in the health care and information technology sectors. In health care, a position in CVS Health detracted from performance, as the company lowered its guidance early in the year as it continued to integrate its acquisition of Aetna, a managed care company. The fund’s position in Biogen, a pharmaceutical company, also hurt performance, as the company’s proposed Alzheimer’s product initially failed clinical trials early in 2019. In the information technology sector, a position in Corning hindered relative returns, as the company was hurt by display overcapacity and optical spending weakness. A position inTeradata also dragged on performance, as it continued to
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
struggle to implement its strategies and revenues declined. Other positions that hampered returns include Mosaic, an agricultural chemical company, Marathon Petroleum and Berkshire Hathaway.
On a more positive note, the fund’s overweight allocations to the information technology and financial sectors and its underweight allocations to real estate, utilities and consumer staples sectors benefited performance. Stock selection in the financial, energy, and utilities sectors were particularly helpful. In the financial sector, Citigroup, Voya Financial and Assurant, an insurance company, all contributed positively to relative returns. In the energy sector, an overweight position in Hess proved profitable, as did the lack of exposure in ExxonMobil. In the utilities sector, PPL, a UK-based company, benefited from the outcome of the recent election, which reduced Brexit uncertainty and removed the threat of nationalization of utility companies. A position in Edison International, based in California, gained when the company received some regulatory relief from liabilities related to wildfires. Other positions that contributed positively to returns included two construction aggregate companies, Martin Marietta Materials and Vulcan Materials. Positions in Qualcomm, a semiconductor company, and L3Harris Technologies, a defense contractor, also proved advantageus.
Positioned for Further Gains
Given supportive monetary policy, resolution of Brexit uncertainty, improving economic data and progress on trade relations with China, we are optimistic about the economy and the prospect for stronger corporate earnings about 2020. In addition, value stocks appear to be attractive relative to the broader market. We have emphasized stocks in the financial, materials, information technology and energy sectors and have underweight positions in the real estate, consumer staples, communication services, utilities, consumer discretionary, health care and industrial sectors.
January 15, 2020
1 Total return includes reinvestment of dividends and any capital gains paid. 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 March 31, 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 Russell 1000® Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies that are considered more value-oriented relative to the overall market, as defined by Russell’s leading style methodology. The Russell 1000® Value Index is constructed to provide a comprehensive and unbiased barometer for the large-cap value segment. The Index is completely reconstituted annually to ensure new and growing equities are included, and that the represented companies continue to reflect value characteristics. 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.
The fund is only available as a funding vehicle under variable life insurance policies or variable annuity contracts issued by insurance companies. Individuals may not purchase shares of the fund directly. A variable annuity is an insurance contract issued by an insurance company that enables investors to accumulate assets on a tax-deferred basis for retirement or other long-term goals. The investment objective and policies of BNY Mellon Investment Portfolios, Core Value Portfolio made available through insurance products may be similar to those of other funds managed or advised by BNY Mellon Investment Adviser, Inc. However, the investment results of the fund may be higher or lower than, and may not be comparable to, those of any other BNY Mellon funds.
4
FUND PERFORMANCE(Unaudited)
Comparison of change in value of $10,000 investment in Initial shares and Service shares of BNY Mellon Investment Portfolios, Core Value Portfolio with a hypothetical investment of $10,000 in the Russell 1000® Value Index (the “Index”)
† Source: Lipper Inc.
Past performance is not predictive of future performance. The fund’s performance does not reflect the deduction of additional charges and expenses imposed in connection with investing in variable insurance contracts which will reduce returns.
The above graph compares a hypothetical investment of $10,000 made in Initial and Service shares of BNY Mellon Investment Portfolios, Core Value Portfolio on 12/31/09 to a hypothetical investment of $10,000 made in the Index on that date.
The fund’s performance shown in the line graph above takes into account all applicable fees and expenses. The Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies that are considered more value-oriented relative to the overall market as defined by Russell’s leading style methodology. The Index is constructed to provide a comprehensive and unbiased barometer for the large-cap value segment. The Index is completely reconstituted annually to ensure new and growing equities are included and that the represented companies continue to reflect value characteristics. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report.
5
FUND PERFORMANCE(Unaudited) (continued)
Average Annual Total Returns as of 12/31/19 | |||
| 1 Year | 5 Years | 10 Years |
Initial shares | 26.81% | 8.31% | 11.08% |
Service shares | 26.59% | 8.01% | 10.80% |
Russell 1000® Value Index | 26.54% | 8.29% | 11.80% |
The performance data quoted represents past performance, which is no guarantee of future results. Share price and investment return fluctuate and an investor’s shares may be worth more or less than original cost upon redemption. Current performance may be lower or higher than the performance quoted. Go to www.bnymellonim.com/us for the fund’s most recent month-end returns.
The fund’s Initial shares are not subject to a Rule 12b-1 fee. The fund’s Service shares are subject to a 0.25% annual Rule 12b-1 fee. All dividends and capital gain distributions arereinvested.
The fund’s performance shown in the graph and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
6
UNDERSTANDING YOUR FUND’S EXPENSES(Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads), redemption fees and expenses associated with variable annuity or insurance contracts, 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 Investment Portfolios, Core Value Portfolio from July 1, 2019 to December 31, 2019. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended December 31, 2019 |
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Expense paid per $1,000† | $6.52 | $7.84 |
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Ending value (after expenses) | $1,103.10 | $1,102.40 |
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COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS(Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended December 31, 2019 |
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| Initial Shares | Service Shares |
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Expense paid per $1,000† | $6.26 | $7.53 |
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Ending value (after expenses) | $1,019.00 | $1,017.74 |
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† Expenses are equal to the fund’s annualized expense ratio of 1.23% for Initial Shares and 1.48% for Service Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
7
STATEMENT OF INVESTMENTS
December 31, 2019
Description | Shares | Value ($) | |||||
Common Stocks - 99.2% | |||||||
Automobiles & Components - 1.1% | |||||||
General Motors | 3,598 | 131,687 | |||||
Banks - 11.7% | |||||||
Bank of America | 10,696 | 376,713 | |||||
Citigroup | 4,217 | 336,896 | |||||
JPMorgan Chase & Co. | 3,914 | 545,612 | |||||
U.S. Bancorp | 3,112 | 184,511 | |||||
1,443,732 | |||||||
Capital Goods - 7.4% | |||||||
Gardner Denver Holdings | 2,140 | a | 78,495 | ||||
Honeywell International | 647 | 114,519 | |||||
Ingersoll-Rand | 552 | 73,372 | |||||
L3Harris Technologies | 623 | 123,273 | |||||
Northrop Grumman | 299 | 102,847 | |||||
Quanta Services | 2,851 | 116,064 | |||||
United Technologies | 1,984 | 297,124 | |||||
905,694 | |||||||
Consumer Durables & Apparel - 2.0% | |||||||
Lennar, Cl. A | 2,285 | 127,480 | |||||
PVH | 1,171 | 123,131 | |||||
250,611 | |||||||
Diversified Financials - 14.8% | |||||||
Berkshire Hathaway, Cl. B | 2,376 | a | 538,164 | ||||
Capital One Financial | 887 | 91,281 | |||||
E*TRADE Financial | 3,842 | 174,312 | |||||
LPL Financial Holdings | 1,312 | 121,032 | |||||
Morgan Stanley | 4,485 | 229,273 | |||||
Raymond James Financial | 648 | 57,970 | |||||
The Charles Schwab | 1,297 | 61,685 | |||||
The Goldman Sachs Group | 1,336 | 307,187 | |||||
Voya Financial | 3,948 | b | 240,749 | ||||
1,821,653 | |||||||
Energy - 10.9% | |||||||
Apergy | 2,808 | a | 94,854 | ||||
Concho Resources | 737 | 64,539 | |||||
ConocoPhillips | 2,845 | 185,010 | |||||
Hess | 3,763 | 251,406 | |||||
Marathon Petroleum | 4,426 | 266,666 | |||||
Phillips 66 | 2,210 | 246,216 | |||||
Pioneer Natural Resources | 661 | 100,056 | |||||
Schlumberger | 1,697 | 68,219 |
8
Description | Shares | Value ($) | |||||
Common Stocks - 99.2% (continued) | |||||||
Energy - 10.9% (continued) | |||||||
Valero Energy | 628 | 58,812 | |||||
1,335,778 | |||||||
Food, Beverage & Tobacco - 3.3% | |||||||
Archer-Daniels-Midland | 3,096 | 143,500 | |||||
Conagra Brands | 3,840 | 131,482 | |||||
PepsiCo | 937 | 128,060 | |||||
403,042 | |||||||
Health Care Equipment & Services - 7.7% | |||||||
Anthem | 428 | 129,269 | |||||
Becton Dickinson and Co. | 804 | 218,664 | |||||
Cigna | 314 | 64,210 | |||||
CVS Health | 884 | 65,672 | |||||
Humana | 263 | 96,395 | |||||
Medtronic | 3,249 | 368,599 | |||||
942,809 | |||||||
Household & Personal Products - .9% | |||||||
Colgate-Palmolive | 1,651 | 113,655 | |||||
Insurance - 6.0% | |||||||
American International Group | 2,885 | 148,087 | |||||
Assurant | 1,106 | 144,974 | |||||
Chubb | 1,145 | 178,231 | |||||
The Hartford Financial Services Group | 1,975 | 120,021 | |||||
Willis Towers Watson | 728 | 147,012 | |||||
738,325 | |||||||
Materials - 9.8% | |||||||
CF Industries Holdings | 6,090 | 290,737 | |||||
Freeport-McMoRan | 10,755 | 141,106 | |||||
Martin Marietta Materials | 910 | 254,472 | |||||
Newmont Goldcorp | 3,616 | 157,115 | |||||
The Mosaic Company | 5,807 | 125,663 | |||||
Vulcan Materials | 1,657 | 238,591 | |||||
1,207,684 | |||||||
Media & Entertainment - 2.8% | |||||||
Alphabet, Cl. A | 154 | a | 206,266 | ||||
Comcast, Cl. A | 1,814 | 81,576 | |||||
Omnicom Group | 716 | b | 58,010 | ||||
345,852 | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 3.2% | |||||||
Biogen | 203 | a | 60,236 | ||||
Bristol-Myers Squibb | 932 | 59,825 | |||||
Merck & Co. | 1,039 | 94,497 | |||||
Pfizer | 4,592 | 179,915 | |||||
394,473 |
9
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 99.2% (continued) | |||||||
Retailing - .5% | |||||||
Target | 468 | 60,002 | |||||
Semiconductors & Semiconductor Equipment - 6.2% | |||||||
Applied Materials | 2,492 | 152,112 | |||||
Broadcom | 453 | 143,157 | |||||
Microchip Technology | 1,189 | b | 124,512 | ||||
Micron Technology | 1,426 | a | 76,690 | ||||
Qualcomm | 2,345 | 206,899 | |||||
Texas Instruments | 485 | 62,221 | |||||
765,591 | |||||||
Software & Services - .5% | |||||||
International Business Machines | 433 | 58,039 | |||||
Technology Hardware & Equipment - 2.7% | |||||||
Apple | 333 | 97,785 | |||||
Corning | 4,213 | 122,640 | |||||
Western Digital | 1,681 | 106,693 | |||||
327,118 | |||||||
Telecommunication Services - 2.0% | |||||||
AT&T | 6,299 | 246,165 | |||||
Transportation - 1.5% | |||||||
Delta Air Lines | 2,110 | 123,393 | |||||
Union Pacific | 331 | 59,842 | |||||
183,235 | |||||||
Utilities - 4.2% | |||||||
Edison International | 2,638 | 198,932 | |||||
PPL | 8,939 | 320,731 | |||||
519,663 | |||||||
Total Common Stocks(cost $9,277,216) | 12,194,808 | ||||||
Exchange-Traded Funds - 1.0% | |||||||
Registered Investment Companies - 1.0% | |||||||
iShares Russell 1000 Value ETF | 904 | 123,378 |
10
Description | 1-Day | Shares | Value ($) | ||||
Investment Companies - .2% | |||||||
Registered Investment Companies - .2% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1.60 | 28,641 | c | 28,641 | |||
Total Investments(cost $9,428,396) | 100.4% | 12,346,827 | |||||
Liabilities, Less Cash and Receivables | (.4%) | (51,552) | |||||
Net Assets | 100.0% | 12,295,275 |
ETF—Exchange-Traded Fund
aNon-income producing security.
bSecurity, or portion thereof, on loan. At December 31, 2019, the value of the fund’s securities on loan was $391,204 and the value of the collateral was $397,768, consisting of U.S. Government & Agency securities.
cInvestment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
Portfolio Summary (Unaudited)† | Value (%) |
Financials | 32.6 |
Health Care | 10.9 |
Energy | 10.9 |
Materials | 9.8 |
Information Technology | 9.4 |
Industrials | 8.8 |
Communication Services | 4.8 |
Utilities | 4.2 |
Consumer Staples | 4.2 |
Consumer Discretionary | 3.6 |
Investment Companies | 1.2 |
100.4 |
† Based on net assets.
See notes to financial statements.
11
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS
Investment Companies | Value | Purchases($) | Sales($) | Value | Net | Dividends/ |
Registered Investment Companies; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 232,993 | 2,300,678 | 2,505,030 | 28,641 | .2 | 622 |
Investment of Cash Collateral for Securities Loaned; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | - | 205,813,499 | 205,813,499 | - | - | - |
Total | 232,993 | 208,114,177 | 208,318,529 | 28,641 | .2 | 622 |
See notes to financial statements.
12
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2019
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| Cost |
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Assets ($): |
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Investments in securities—See Statement of Investments |
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Unaffiliated issuers | 9,399,755 |
| 12,318,186 |
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Affiliated issuers |
| 28,641 |
| 28,641 |
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Receivable for investment securities sold |
| 58,236 |
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Dividends, interest and securities lending income receivable |
| 13,503 |
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Receivable for shares of Beneficial Interest subscribed |
| 11,740 |
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Prepaid expenses |
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| 104 |
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| 12,430,410 |
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Liabilities ($): |
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Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(b) |
| 6,395 |
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Payable for investment securities purchased |
| 67,710 |
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Trustees’ fees and expenses payable |
| 1,144 |
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Payable for shares of Beneficial Interest redeemed |
| 447 |
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Other accrued expenses |
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| 59,439 |
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| 135,135 |
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Net Assets ($) |
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| 12,295,275 |
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Composition of Net Assets ($): |
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Paid-in capital |
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| 8,538,244 |
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Total distributable earnings (loss) |
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| 3,757,031 |
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Net Assets ($) |
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| 12,295,275 |
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Net Asset Value Per Share | Initial Shares | Service Shares |
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Net Assets ($) | 11,563,582 | 731,693 |
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Shares Outstanding | 783,317 | 48,563 |
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Net Asset Value Per Share ($) | 14.76 | 15.07 |
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See notes to financial statements. |
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13
STATEMENT OF OPERATIONS
Year Ended December 31, 2019
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Investment Income ($): |
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Income: |
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Cash dividends: |
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Unaffiliated issuers |
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| 365,335 |
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Affiliated issuers |
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| 622 |
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Income from securities lending—Note 1(b) |
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| 801 |
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Total Income |
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| 366,758 |
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Expenses: |
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Management fee—Note 3(a) |
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| 111,509 |
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Professional fees |
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| 86,245 |
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Chief Compliance Officer fees—Note 3(b) |
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| 11,793 |
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Custodian fees—Note 3(b) |
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| 10,689 |
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Prospectus and shareholders’ reports |
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| 1,833 |
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Distribution fees—Note 3(b) |
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| 1,743 |
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Interest expense—Note 2 |
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| 999 |
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Trustees’ fees and expenses—Note 3(c) |
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| 349 |
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Loan commitment fees—Note 2 |
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| 322 |
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Shareholder servicing costs—Note 3(b) |
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| 166 |
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Registration fees |
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| 7 |
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Miscellaneous |
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| 17,422 |
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Total Expenses |
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| 243,077 |
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Less—reduction in expenses due to undertaking—Note 3(a) |
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| (42,589) |
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Net Expenses |
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| 200,488 |
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Investment Income—Net |
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| 166,270 |
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Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
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Net realized gain (loss) on investments | 953,893 |
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Net change in unrealized appreciation (depreciation) on investments | 2,259,345 |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 3,213,238 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 3,379,508 |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
14
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Year Ended December 31, | |||||
|
|
|
| 2019 |
| 2018 |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 166,270 |
|
|
| 153,517 |
| |
Net realized gain (loss) on investments |
| 953,893 |
|
|
| 1,729,935 |
| ||
Net change in unrealized appreciation |
| 2,259,345 |
|
|
| (4,004,534) |
| ||
Net Increase (Decrease) in Net Assets | 3,379,508 |
|
|
| (2,121,082) |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (1,915,369) |
|
|
| (3,841,035) |
| |
Service Shares |
|
| (76,427) |
|
|
| (155,263) |
| |
Total Distributions |
|
| (1,991,796) |
|
|
| (3,996,298) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 337,474 |
|
|
| 2,430,661 |
| |
Service Shares |
|
| 162,337 |
|
|
| 285,250 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 1,915,369 |
|
|
| 3,841,035 |
| |
Service Shares |
|
| 76,427 |
|
|
| 155,263 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (8,410,384) |
|
|
| (2,922,797) |
| |
Service Shares |
|
| (183,613) |
|
|
| (374,047) |
| |
Increase (Decrease) in Net Assets | (6,102,390) |
|
|
| 3,415,365 |
| |||
Total Increase (Decrease) in Net Assets | (4,714,678) |
|
|
| (2,702,015) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 17,009,953 |
|
|
| 19,711,968 |
| |
End of Period |
|
| 12,295,275 |
|
|
| 17,009,953 |
| |
Capital Share Transactions (Shares): |
| ||||||||
Initial Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 25,519 |
|
|
| 153,714 |
| |
Shares issued for distributions reinvested |
|
| 148,248 |
|
|
| 268,041 |
| |
Shares redeemed |
|
| (647,694) |
|
|
| (184,242) |
| |
Net Increase (Decrease) in Shares Outstanding | (473,927) |
|
|
| 237,513 |
| |||
Service Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 11,524 |
|
|
| 17,693 |
| |
Shares issued for distributions reinvested |
|
| 5,786 |
|
|
| 10,613 |
| |
Shares redeemed |
|
| (13,246) |
|
|
| (24,574) |
| |
Net Increase (Decrease) in Shares Outstanding | 4,064 |
|
|
| 3,732 |
| |||
|
|
|
|
|
|
|
|
|
|
See notes to financial statements. |
15
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. The fund’s total returns do not reflect expenses associated with variable annuity or insurance contracts. These figures have been derived from the fund’s financial statements.
Year Ended December 31, | ||||||
Initial Shares | 2019 | 2018 | 2017 | 2016 | 2015 | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 13.06 | 18.58 | 17.58 | 17.61 | 20.38 | |
Investment Operations: | ||||||
Investment income—neta | .16 | .12 | .13 | .19 | .17 | |
Net realized and unrealized gain | 3.12 | (1.88) | 2.25 | 2.46 | (.55) | |
Total from Investment Operations | 3.28 | (1.76) | 2.38 | 2.65 | (.38) | |
Distributions: | ||||||
Dividends from | (.12) | (.18) | (.21) | (.18) | (.16) | |
Dividends from net realized | (1.46) | (3.58) | (1.17) | (2.50) | (2.23) | |
Total Distributions | (1.58) | (3.76) | (1.38) | (2.68) | (2.39) | |
Net asset value, end of period | 14.76 | 13.06 | 18.58 | 17.58 | 17.61 | |
Total Return (%) | 26.81 | (11.24) | 14.47 | 18.32 | (2.22) | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.62 | 1.51 | 1.17 | 1.07 | 1.07 | |
Ratio of net expenses | 1.34 | 1.51 | 1.17 | 1.07 | 1.07 | |
Ratio of net investment income | 1.13 | .80 | .75 | 1.20 | .92 | |
Portfolio Turnover Rate | 91.68 | 118.35 | 91.07 | 87.64 | 105.48 | |
Net Assets, end of period ($ x 1,000) | 11,564 | 16,418 | 18,949 | 17,958 | 19,216 |
a Based on average shares outstanding.
See notes to financial statements.
16
Year Ended December 31, | |||||||
Service Shares | 2019 | 2018 | 2017 | 2016 | 2015 | ||
Per Share Data ($): | |||||||
Net asset value, beginning of period | 13.30 | 18.71 | 17.71 | 17.71 | 20.48 | ||
Investment Operations: | |||||||
Investment income—neta | .12 | .09 | .09 | .15 | .12 | ||
Net realized and unrealized gain | 3.20 | (1.92) | 2.25 | 2.48 | (.55) | ||
Total from Investment Operations | 3.32 | (1.83) | 2.34 | 2.63 | (.43) | ||
Distributions: | |||||||
Dividends from | (.09) | - | (.17) | (.13) | (.11) | ||
Dividends from net realized | (1.46) | (3.58) | (1.17) | (2.50) | (2.23) | ||
Total Distributions | (1.55) | (3.58) | (1.34) | (2.63) | (2.34) | ||
Net asset value, end of period | 15.07 | 13.30 | 18.71 | 17.71 | 17.71 | ||
Total Return (%) | 26.59 | (11.51) | 14.07 | 18.00 | (2.50) | ||
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | 1.88 | 1.76 | 1.42 | 1.32 | 1.32 | ||
Ratio of net expenses | 1.59 | 1.76 | 1.42 | 1.32 | 1.32 | ||
Ratio of net investment income | .84 | .54 | .50 | .94 | .67 | ||
Portfolio Turnover Rate | 91.68 | 118.35 | 91.07 | 87.64 | 105.48 | ||
Net Assets, end of period ($ x 1,000) | 732 | 592 | 763 | 11,745 | 10,927 |
a Based on average shares outstanding.
See notes to financial statements.
17
NOTES TO FINANCIAL STATEMENTS
NOTE 1—Significant Accounting Policies:
Core Value Portfolio (the “fund”) is a separate diversified series of BNY Mellon Investment Portfolios (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 four series, including the fund. The fund is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The fund’s investment objective is to seek long-term growth of capital, with current income as a secondary objective. 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 Company changed its name from Dreyfus Investment Portfolios to BNY Mellon Investment Portfolios. 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, which are sold without a sales charge. 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: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the Distribution Plan, and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under
18
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 Companyenters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
19
NOTES TO FINANCIAL STATEMENTS(continued)
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 American Depository Receipts 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.
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.
20
The following is a summary of the inputs used as of December 31, 2019in valuing the fund’s investments:
Assets ($) | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total |
Investments in Securities:† |
|
|
| |
Equity Securities - Common Stocks | 12,194,808 | - | - | 12,194,808 |
Exchange-Traded Funds | 123,378 | - | - | 123,378 |
Investment Companies | 28,641 | - | - | 28,641 |
† See Statement of Investments for additional detailed categorizations, if any.
(b)Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with 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 December 31, 2019, The Bank of New York Mellon earned $166 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
21
NOTES TO FINANCIAL STATEMENTS(continued)
(c) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(d) 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.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended December 31, 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 December 31, 2019, the fund did not incur any interest or penalties.
Each tax year in the four-year period ended December 31, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.
At December 31, 2019, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $169,814, undistributed capital gains $907,609 and unrealized appreciation $2,679,608.
The tax character of distributions paid to shareholders during the fiscal periods ended December 31, 2019 and December 31, 2018 were as follows: ordinary income $181,713 and $1,071,941, and long-term capital gains $1,810,083 and $2,924,357, respectively.
(f) 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
22
requirements for fair value measurements. The adoption of ASU 2018-13 had no impact on the operations of the fund for the period ended December 31, 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 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. 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 December 31, 2019 was approximately $30,140 with a related weighted average annualized interest rate of 3.31%.
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 August 30, 2019through March 31, 2020, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the expenses of the fund (excluding Rule 12b-1 Distribution Plan fees, Shareholder Services Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) do not exceed 1.00% of the value of the fund’s average daily net assets. On or after March 31, 2020, the Adviser may terminate this expense limitation at any time. The reduction in expenses, pursuant to the undertaking, amounted to $42,589 during the period ended December 31, 2019.
(b)Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing its shares, for servicing and/or maintaining Service shares’ shareholder accounts and for
23
NOTES TO FINANCIAL STATEMENTS(continued)
advertising and marketing for Service shares. The Distribution Plan provides for payments to be made at an annual rate of .25% of the value of the Service shares’ average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Distribution Plan are payable without regard to actual expenses incurred. During the period ended December 31, 2019,Service shares were charged $1,743 pursuant to the Distribution 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 December 31, 2019, the fund was charged $150 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 December 31, 2019, the fund was charged $10,689 pursuant to the custody agreement.
During the period ended December 31, 2019, the fund was charged $11,793 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: management fees of $7,721 Distribution Plan fees of $153, custodian fees of $3,600, Chief Compliance Officer fees of $3,261 and transfer agency fees of $215,
24
which are offset against an expense reimbursement currently in effect in the amount of $8,555.
(c) 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, during the period ended December 31, 2019, amounted to $13,814,518 and $21,742,376, respectively.
At December 31, 2019, the cost of investments for federal income tax purposes was $9,667,219; accordingly, accumulated net unrealized appreciation on investments was $2,679,608, consisting of $2,996,148 gross unrealized appreciation and $316,540 gross unrealized depreciation.
NOTE 5—Plan of Liquidation:
On November 26, 2019, the Board approved a Plan of Liquidation (the “Plan”). The Plan provides for the liquidation of the fund, the pro rata distribution of the assets of the fund to its shareholders and the closing of fund shareholder accounts (the “Liquidation”). The Liquidation of the fund will occur on or about April 30, 2020. Accordingly, effective March 31, 2020, the fund will be closed to any investments for new accounts.
25
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of Core Value Portfolio
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Core Value Portfolio (the “Fund”) (one of the funds constituting BNY Mellon Investment Portfolios), including the statements of investments and investments in affiliated issuers, as of December 31, 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 Investment Portfolios) at December 31, 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 December 31, 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
February 10, 2020
26
IMPORTANT TAX INFORMATION(Unaudited)
For federal tax purposes, the portfolio hereby reports 100% of the ordinary dividends paid during the fiscal year ended December 31, 2019 as qualifying for the corporate dividends received deduction. Shareholders will receive notification in early 2020 of the percentage applicable to the preparation of their 2019 income tax returns. Also, the portfolio hereby reports $.0238 per share as a short-term capital gain distribution and $1.4315 per share as a long-term capital gain distribution paid on March 21, 2019.
27
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 renewalof 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
28
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. They also considered that performance generally should be considered over longer periods of time, although it is possible that long-term performance can be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect disproportionately long-term performance. 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 above the Performance Group median in the three-year period; above and equal to the Performance Group median and Performance Universe median, respectively, in the four-year period; above the Performance Universe median in the five-year period; and below the Performance Group and Performance Universe medians in the remaining periods. The Board also considered the relative proximity of the fund’s performance to the Performance Group median in the five-year period (one basis point) and the Performance Group and Performance Universe medians in the ten-year period (within ten basis points). The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was considered that the fund’s returns were above the returns of the index in five of the ten calendar years shown.
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 at the Expense Group median and the fund’s actual management fee and total expenses were above the Expense Group and Expense Universe medians.
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
29
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
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 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 agreed to closely monitor performance and determined to approve renewal of the Agreement only until the first quarter 2020 regular Board meeting.
· 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.
30
In evaluating the Agreement, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and 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 through the first quarter 2020 regular Board meeting.
31
BOARD MEMBERS INFORMATION(Unaudited)
INDEPENDENT BOARD MEMBERS
Joseph S. DiMartino (76)
Chairman of the Board (1995)
Principal Occupation During Past 5 Years:
· Corporate Director and Trustee (1995-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ, Inc., a public company providing professional business services, products and solutions,Director (1997-Present)
No. of Portfolios for which Board Member Serves:118
———————
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:69
———————
J. Charles Cardona (64)
Board Member (2014)
Principal Occupation During Past 5 Years:
· President of the Adviser (2008-2016)
· Chairman (2013-2016) and Executive Vice President (1997-2013) of the Distributor
Other Public Company Board Memberships During Past 5 Years:
· BNY Mellon Liquidity Funds,Chairman andDirector (2019-Present)
No. of Portfolios for which Board Member Serves:33
———————
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
———————
32
Andrew J. Donohue (69)
Board Member (2019)
Principal Occupation During Past 5 Years:
· Of Counsel, Shearman & Sterling LLP (2017-2019)
· 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:55
———————
Isabel P. Dunst (72)
Board Member (2014)
Principal Occupation During Past 5 Years:
· Senior Counsel, Hogan Lovells LLP (2018-2019); 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 public company that designs, sources, markets and distributes watchesDirector (2003-Present)
No. of Portfolios for which Board Member Serves:47
———————
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:96
———————
33
BOARD MEMBERS INFORMATION (Unaudited) (continued)
INDEPENDENT BOARD MEMBERS (continued)
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:55
———————
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, Inc., a public company providing professional business services, products and solutions,Director (2008-Present)
· Blue Cross Blue Shield of Massachusetts, Director (2004-Present)
No. of Portfolios for which Board Member Serves:75
———————
Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80. The address of the Board Members and Officers is c/o 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.
Clifford L. Alexander, Jr., Emeritus Board Member
Whitney I. Gerard, Emeritus Board Member
George L. Perry, Emeritus Board Member
34
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 62 investment companies (comprised of 118 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 62 investment companies (comprised of 118 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.
Senior Managing Counsel of BNY Mellon since December 2019; Managing Counsel of BNY Mellon from April 2014 to December 2019; Secretary of the Adviser, and an officer of 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 portfolios) managed by the Adviser. He is 51 years old and has been an employee of the Adviser since April 2004.
35
OFFICERS OF THE FUND (Unaudited)(continued)
NATALYA ZELENSKY, Vice President and Assistant Secretary since March 2017.
Managing Counsel of BNY Mellon since December 2019; Counsel of BNY Mellon from May 2016 to December 2019; 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 2002.
Senior Accounting Manager- BNY Mellon Fund Administration, and an officer of 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 (63 investment companies, comprised of 141 portfolios). He is 62 years old and has served in various capacities with 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 56 investment companies (comprised of 134 portfolios) managed by the Adviser. She is 51 years old and has been an employee of the Distributor since 1997.
36
NOTES
37
BNY Mellon Investment Portfolios, Core Value Portfolio
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
Telephone 1-800-258-4260 or 1-800-258-4261
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 Attn: Institutional Services Department
E-mailSend your request to info@bnymellon.com
InternetInformation can be viewed online or downloaded atwww.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 atwww.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 atwww.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2020 BNY Mellon Securities Corporation |
BNY Mellon Investment Portfolios, MidCap Stock Portfolio
ANNUAL REPORT December 31, 2019 |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
BNY Mellon Investment Adviser, Inc. | |
With Those of Other Funds | |
in Affiliated Issuers | |
Public Accounting Firm | |
Renewal of the Fund’s | |
Investment Advisory Agreement | |
FOR MORE INFORMATION
Back Cover
| 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 Investment Portfolios, MidCap Stock Portfolio (formerly, Dreyfus Investment Portfolios, MidCap Stock Portfolio), covering the 12-month period from January 1, 2019 through December 31, 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.
In January 2019, a pivot in stance from the U.S. Federal Reserve (the “Fed”) helped stimulate a rebound across equity markets that continued into the second quarter of the year. However, escalating trade tensions disrupted equity markets in May. The dip was short-lived, as markets rose once again in June and July of 2019, when a trade deal appeared more likely and the pace of U.S. economic growth remained steady. Nevertheless, concerns continued to emerge over slowing global growth, resulting in bouts of market volatility in August 2019. Stocks rebounded in September and continued an upward path through most of October 2019, bolstered by central bank policy and consistent consumer spending. The rally generally continued through the end of the period, supported in part by an announcement from President Trump that the first phase of a trade deal with China was in process. U.S. equity markets reached new highs during the final months of the period.
In fixed-income markets, the year began with a recovery from the prior months’ volatility. After the Fed’s supportive statements in January 2019, other developed-market central banks followed suit and reiterated their abilities to buttress flagging growth rates by continuing accommodative policies. The Fed cut rates in July, September and October 2019, for a total 75 basis point reduction in the federal funds rate during the 12 months. Rates across much of the Treasury curve saw a slight increase during the month of November, and the long end of the curve rose in December. The yield curve steepened during the latter portion of the period. However, demand for fixed-income instruments during the year was strong, which helped to support positive bond market returns.
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.
January 15, 2020
2
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from January 1, 2019 through December 31, 2019, as provided by Peter D. Goslin, CFA, Adam T. Logan, CFA, Chris Yao, CFA and Syed A. Zamil, CFA, Portfolio Managers
As of December 2019, C. Wesley Boggs and William S. Cazalet left the fund’s portfolio management team, and Adam T. Logan and Chris Yao joined the fund’s portfolio management team.
Market and Fund Performance Overview
For the 12-month period ended December 31, 2019, BNY Mellon Investment Portfolios, MidCap Stock Portfolio (formerly, Dreyfus Investment Portfolios, MidCap Stock Portfolio) Initial shares produced a total return of 20.18%, and its Service shares produced a total return of 19.85%.1 In comparison, the fund’s benchmark, the S&P MidCap 400® Index (the “Index”), produced a total return of 26.20% for the same period.2
Mid-cap stocks posted strong gains over the reporting period in an environment of moderate growth and supportive central bank policies. The fund lagged the Index, primarily due to security selection shortfalls in the materials, consumer discretionary and communication services sectors.
The Fund’s Investment Approach
The fund seeks investment results that are greater than the total return performance of publicly traded, common stocks of medium-sized, domestic companies in the aggregate, as represented by the Index. To pursue this goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in stocks of mid-cap companies.
The fund invests in growth and value stocks, which are chosen through a disciplined investment process that combines quantitative-modeling techniques, fundamental analysis and risk management. Consistency of returns compared to the Index is a primary goal of the investment process.
The portfolio managers select stocks through a “bottom-up” structured approach that seeks to identify undervalued securities using a quantitative ranking process. The process is driven by a proprietary stock selection model that measures a diverse set of corporate characteristics to identify and rank stocks based on valuation, momentum, sentiment and earnings quality measures.
Next, the fund’s portfolio managers construct the portfolio through a risk-controlled process, focusing on stock selection, as opposed to making proactive decisions as to industry and sector exposure. The portfolio managers seek to maintain a portfolio that has exposure to industries and market capitalizations that are generally similar to the fund’s benchmark. Finally, within each sector and style subset, the fund will seek to overweight the most attractive stocks and underweight or not hold the stocks that have been ranked least attractive.
Markets Pivot on Central Bank Statements and Trade Policy
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 from fourth quarter 2018 volatility. At its first meeting of the year, the U.S. Federal Reserve (the “Fed”) 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
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
reassured investors of central bankers’ commitments to support flagging growth. In addition, the European Central Bank announced it would provide additional stimulus to support the eurozone economy. China also announced plans to stoke its slowing economic growth rate. The rebound continued throughout the month of January 2019, and equity markets maintained an upward trajectory through April 2019. 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.
However, concerns over slowing economic growth continued, and inflation floundered. The Fed decided to provide additional stimulus by cutting the federal funds rate. It did so three times during the period, each time by 25 basis points. These cuts occurred in July, September and October. Supported by rate cuts, moderate economic growth and optimism regarding a preliminary trade agreement with China, equity markets went on to post solid gains during the last several months of the year.
According to the S&P family of indices, large-cap stocks generally outperformed their mid- and small-cap counterparts during the period.
Security Selections Drove Fund Performance
The fund’s performance compared to the Index was mainly the result of stock selection shortfalls across a few market sectors. In the materials sector, stock selection within the containers and packaging industry was a leading detractor. The price of Allegheny Technologies fell, after it was purchased in February 2019, when the company lowered guidance twice during the period. Although the price partially recovered towards the end of the 12 months, it was still among the leading negative contributors. Within the consumer discretionary sector,Weight Watchers International was among the top detractors from portfolio performance. The stock of the weight management services company trended downward since the beginning of the period, most significantly after the company issued below-guidance earnings expectations for 2019, during its quarterly call in February. We eliminated the position in June. Within the communication services sector, a position in media company AMC Networks also constrained results during the period. Elsewhere in the markets, energy company Cabot Oil & Gas was among the leading individual detractors. After purchasing the stock in May 2019, the price dropped in July and August, when the company reduced its production guidance.Resideo Technologies was also among the top negative contributors. After its July purchase, the stock fell in October, when the company preannounced lower-than-expected 2019 guidance. We have since closed the position.
The fund achieved better results in several other areas. Our stock selection among real estate investment trusts (REITs) benefited performance, as did several positions within the information technology sector. A position in supply chain management system provider Manhattan Associates boosted returns. The stock price rose on better-than-expected quarterly results. A position in Zebra Technologies also benefited performance, as did the stock of Tech Data, which initially rallied on the back of favorable earnings and increased guidance. Later in the period, the company agreed to be acquired at a premium. Elsewhere in the markets, a position in Teledyne Technologies was also among the top contributors to portfolio performance. The electronics and communications product provider saw its stock price rise throughout much of the period, after beating earnings and raising guidance several times.
4
A Disciplined Approach to Stock Picking
As of the reporting period’s end, our quantitative models have continued to identify what we believe are attractive investment opportunities across a broad spectrum of mid-cap companies and industry groups. Stock market volatility experienced during the past year may have provided opportunities to purchase the stocks of companies ranked highly by our process. When the fund’s holdings reach what we perceive to be fuller valuations, we expect to replace them with high-quality companies that display then-currently-attractive valuations in our model. In addition, we continue to maintain a broadly diversified portfolio.
January 15, 2020
1 Total return includes reinvestment of dividends and any capital gains paid. 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 performance does not reflect the deduction of additional charges and expenses imposed in connection with investing in variable insurance contracts, which will reduce returns.
2 Source: Lipper Inc. — The S&P MidCap 400® Index provides investors with a benchmark for mid-sized companies. The Index measures the performance of mid-sized companies, reflecting the distinctive risk and return characteristics of this market segment. 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.
Stocks of mid-cap companies often experience sharper price fluctuations than stocks of large-cap companies.
The fund is only available as a funding vehicle under variable life insurance policies or variable annuity contracts issued by insurance companies. Individuals may not purchase shares of the fund directly. A variable annuity is an insurance contract issued by an insurance company that enables investors to accumulate assets on a tax-deferred basis for retirement or other long-term goals. The investment objective and policies of BNY Mellon Investment Portfolios, MidCap Stock Portfolio made available through insurance products may be similar to those of other funds managed by BNY Mellon Investment Adviser, Inc. However, the investment results of the fund may be higher or lower than, and may not be comparable to, those of any other BNY Mellon Investment Adviser, Inc. fund.
5
FUND PERFORMANCE(Unaudited)
Comparison of change in value of a $10,000 investment inInitial shares and Service shares of BNY Mellon Investment Portfolios, MidCap Stock Portfolio with a hypothetical investment of $10,000 in the S&P MidCap 400® Index (the “Index”)
† Source: Lipper Inc.
Past performance is not predictive of future performance. The fund’s performance does not reflect the deduction of additional charges and expenses imposed in connection with investing in variable insurance contracts which will reduce returns.
The above graph compares a hypothetical investment of $10,000 investment made in Initial and Service shares of BNY Mellon Investment Portfolios, MidCap Stock Portfolio on 12/31/09 to a hypothetical investment of $10,000 made in the Index on that date.
The fund’s performance shown in the line graph above takes into account all applicable fees and expenses. The Index provides investors with a benchmark for midsized companies. The Index measures the performance of midsized companies, reflecting the distinctive risk and return characteristics of this market segment. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report.
Average Annual Total Returns as of 12/31/19 | |||
| 1 Year | 5 Years | 10 Years |
Initial shares | 20.18% | 5.75% | 11.82% |
Service shares | 19.85% | 5.48% | 11.55% |
S&P MidCap 400® Index | 26.20% | 9.03% | 12.72% |
The performance data quoted represents past performance, which is no guarantee of future results. Share price and investment return fluctuate and an investor’s shares may be worth more or less than original cost upon redemption. Current performance may be lower or higher than the performance quoted. Go to www.bnymellonim.com/us for the fund’s most recent month-end returns.
The fund’s Initial shares are not subject to a Rule 12b-1 fee. The fund’s Service shares are subject to a 0.25% annual Rule 12b-1 fee. All dividends and capital gain distributions are reinvested.
The fund’s performance shown in the graph and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
6
UNDERSTANDING YOUR FUND’S EXPENSES(Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads), redemption fees and expenses associated with variable annuity or insurance contracts, 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 Investment Portfolios, MidCap Stock Portfolio from July 1, 2019 to December 31, 2019. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
| |||
Assume actual returns for the six months ended December 31, 2019 |
| |||
|
|
|
|
|
|
| Initial Shares | Service Shares |
|
Expense paid per $1,000† | $4.52 | $5.81 |
| |
Ending value (after expenses) | $1,060.90 | $1,059.50 |
|
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS(Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
| |||
Assuming a hypothetical 5% annualized return for the six months ended December 31, 2019 |
| |||
|
|
|
|
|
|
| Initial Shares | Service Shares |
|
Expense paid per $1,000† | $4.43 | $5.70 |
| |
Ending value (after expenses) | $1,020.82 | $1,019.56 |
| |
† Expenses are equal to the fund’s annualized expense ratio of .87% for Initial Shares and 1.12% for Service Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
7
STATEMENT OF INVESTMENTS
December 31, 2019
Description | Shares | Value ($) | |||||
Common Stocks - 99.4% | |||||||
Automobiles & Components - 1.9% | |||||||
Dana | 29,770 | 541,814 | |||||
Gentex | 79,040 | 2,290,579 | |||||
2,832,393 | |||||||
Banks - 5.7% | |||||||
BancorpSouth Bank | 21,150 | 664,322 | |||||
Cathay General Bancorp | 51,435 | 1,957,102 | |||||
Commerce Bancshares | 5,397 | a | 366,672 | ||||
First Financial Bankshares | 10,550 | a | 370,305 | ||||
Frost Bankers | 4,930 | a | 482,055 | ||||
MGIC Investment | 98,910 | 1,401,555 | |||||
PacWest Bancorp | 4,030 | 154,228 | |||||
Popular | 27,550 | 1,618,562 | |||||
Signature Bank | 1,240 | 169,396 | |||||
Trustmark | 25,600 | 883,456 | |||||
Umpqua Holdings | 33,590 | 594,543 | |||||
8,662,196 | |||||||
Capital Goods - 12.5% | |||||||
Acuity Brands | 14,080 | 1,943,040 | |||||
Allison Transmission Holdings | 25,440 | 1,229,261 | |||||
Carlisle | 13,880 | 2,246,339 | |||||
Curtiss-Wright | 15,260 | 2,149,981 | |||||
EMCOR Group | 23,200 | 2,002,160 | |||||
ITT | 13,150 | 971,917 | |||||
MasTec | 26,120 | a,b | 1,675,859 | ||||
Oshkosh | 24,530 | 2,321,764 | |||||
Spirit AeroSystems Holdings, Cl. A | 3,595 | 262,004 | |||||
Teledyne Technologies | 3,030 | b | 1,050,016 | ||||
The Timken Company | 37,270 | 2,098,674 | |||||
Valmont Industries | 6,340 | 949,605 | |||||
18,900,620 | |||||||
Commercial & Professional Services - 1.8% | |||||||
HNI | 21,620 | 809,885 | |||||
Manpowergroup | 20,430 | 1,983,753 | |||||
2,793,638 | |||||||
Consumer Durables & Apparel - 4.2% | |||||||
Deckers Outdoor | 12,060 | b | 2,036,452 | ||||
Tempur Sealy International | 21,130 | b | 1,839,578 | ||||
TRI Pointe Group | 74,490 | b | 1,160,554 | ||||
Whirlpool | 9,270 | a | 1,367,603 | ||||
6,404,187 |
8
Description | Shares | Value ($) | |||||
Common Stocks - 99.4% (continued) | |||||||
Consumer Services - 1.8% | |||||||
Churchill Downs | 3,730 | 511,756 | |||||
Jack in the Box | 16,770 | a | 1,308,563 | ||||
Norwegian Cruise Line Holdings | 14,770 | b | 862,716 | ||||
2,683,035 | |||||||
Diversified Financials - 5.0% | |||||||
Evercore, Cl. A | 9,910 | 740,872 | |||||
Federated Investors, Cl. B | 49,480 | 1,612,553 | |||||
Navient | 12,350 | 168,948 | |||||
OneMain Holdings | 34,390 | 1,449,539 | |||||
SEI Investments | 34,790 | 2,278,049 | |||||
Synchrony Financial | 34,570 | 1,244,866 | |||||
7,494,827 | |||||||
Energy - 3.0% | |||||||
Apergy | 8,570 | b | 289,495 | ||||
Cabot Oil & Gas | 62,160 | 1,082,206 | |||||
The Williams Companies | 54,920 | 1,302,702 | |||||
World Fuel Services | 42,400 | 1,841,008 | |||||
4,515,411 | |||||||
Food & Staples Retailing - 1.3% | |||||||
Casey's General Stores | 12,090 | 1,922,189 | |||||
Health Care Equipment & Services - 3.8% | |||||||
Hill-Rom Holdings | 16,430 | 1,865,298 | |||||
Masimo | 6,780 | b | 1,071,647 | ||||
STERIS | 8,700 | 1,326,054 | |||||
Veeva Systems, Cl. A | 8,890 | b | 1,250,467 | ||||
West Pharmaceutical Services | 1,880 | 282,620 | |||||
5,796,086 | |||||||
Insurance - 6.2% | |||||||
Brighthouse Financial | 44,630 | b | 1,750,835 | ||||
Brown & Brown | 58,970 | 2,328,136 | |||||
Globe Life | 9,750 | 1,026,188 | |||||
Kemper | 11,780 | 912,950 | |||||
Primerica | 15,615 | 2,038,694 | |||||
Unum Group | 45,460 | 1,325,614 | |||||
9,382,417 | |||||||
Materials - 5.7% | |||||||
Allegheny Technologies | 80,640 | a,b | 1,666,022 | ||||
Element Solutions | 79,090 | b | 923,771 | ||||
Reliance Steel & Aluminum | 18,560 | 2,222,746 | |||||
Sensient Technologies | 21,340 | a | 1,410,361 | ||||
Valvoline | 73,350 | 1,570,424 | |||||
Worthington Industries | 19,490 | 822,088 | |||||
8,615,412 |
9
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 99.4% (continued) | |||||||
Media & Entertainment - 2.4% | |||||||
AMC Networks, Cl. A | 34,820 | a,b | 1,375,390 | ||||
TEGNA | 39,060 | a | 651,911 | ||||
The New York Times Company, Cl. A | 49,870 | a | 1,604,318 | ||||
3,631,619 | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 8.0% | |||||||
Agilent Technologies | 3,750 | 319,913 | |||||
Bio-Rad Laboratories, Cl. A | 5,500 | b | 2,035,165 | ||||
Charles River Laboratories International | 16,040 | b | 2,450,270 | ||||
Exelixis | 103,760 | b | 1,828,251 | ||||
Incyte | 16,620 | b | 1,451,258 | ||||
Jazz Pharmaceuticals | 8,240 | b | 1,230,067 | ||||
Mettler-Toledo International | 750 | b | 594,960 | ||||
PRA Health Sciences | 2,530 | b | 281,210 | ||||
Prestige Consumer Healthcare | 4,610 | a,b | 186,705 | ||||
Syneos Health | 3,110 | b | 184,967 | ||||
Waters | 2,960 | b | 691,604 | ||||
Zoetis | 6,480 | 857,628 | |||||
12,111,998 | |||||||
Real Estate - 8.7% | |||||||
Apartment Investment & Management, Cl. A | 2,890 | c | 149,269 | ||||
CubeSmart | 6,030 | c | 189,824 | ||||
EastGroup Properties | 2,510 | c | 333,002 | ||||
First Industrial Realty Trust | 50,500 | c | 2,096,255 | ||||
Highwoods Properties | 24,310 | c | 1,189,002 | ||||
Lamar Advertising, Cl. A | 26,685 | c | 2,381,903 | ||||
Medical Properties Trust | 104,280 | a,c | 2,201,351 | ||||
Piedmont Office Realty Trust, Cl. A | 17,670 | c | 392,981 | ||||
PS Business Parks | 8,910 | c | 1,468,992 | ||||
Service Properties Trust | 15,885 | c | 386,482 | ||||
Tanger Factory Outlet Centers | 26,010 | a,c | 383,127 | ||||
Weingarten Realty Investors | 62,750 | c | 1,960,310 | ||||
13,132,498 | |||||||
Retailing - 2.1% | |||||||
AutoNation | 14,560 | b | 708,053 | ||||
Etsy | 15,230 | b | 674,689 | ||||
Foot Locker | 5,890 | 229,651 | |||||
Murphy USA | 13,940 | b | 1,630,980 | ||||
3,243,373 | |||||||
Semiconductors & Semiconductor Equipment - 3.7% | |||||||
Cirrus Logic | 28,760 | b | 2,370,112 | ||||
Semtech | 3,090 | b | 163,461 | ||||
Silicon Laboratories | 7,610 | b | 882,608 |
10
Description | Shares | Value ($) | |||||
Common Stocks - 99.4% (continued) | |||||||
Semiconductors & Semiconductor Equipment - 3.7% (continued) | |||||||
Synaptics | 15,860 | a,b | 1,043,112 | ||||
Teradyne | 10,980 | 748,726 | |||||
Universal Display | 2,220 | 457,475 | |||||
5,665,494 | |||||||
Software & Services - 8.9% | |||||||
CACI International, Cl. A | 9,220 | b | 2,304,908 | ||||
Fair Isaac | 3,950 | b | 1,479,986 | ||||
Fortinet | 4,450 | b | 475,082 | ||||
j2 Global | 20,450 | a | 1,916,369 | ||||
KBR | 19,900 | 606,950 | |||||
Leidos Holdings | 3,030 | 296,607 | |||||
Manhattan Associates | 24,600 | b | 1,961,850 | ||||
MAXIMUS | 21,170 | 1,574,836 | |||||
Perspecta | 30,630 | 809,857 | |||||
WEX | 10,020 | b | 2,098,789 | ||||
13,525,234 | |||||||
Technology Hardware & Equipment - 6.1% | |||||||
Ciena | 43,480 | b | 1,856,161 | ||||
Hewlett Packard Enterprise | 21,610 | 342,735 | |||||
Jabil | 15,810 | 653,427 | |||||
Tech Data | 14,670 | b | 2,106,612 | ||||
Xerox Holdings | 41,130 | 1,516,463 | |||||
Zebra Technologies, Cl. A | 10,710 | b | 2,735,762 | ||||
9,211,160 | |||||||
Transportation - 2.6% | |||||||
JetBlue Airways | 30,140 | b | 564,221 | ||||
Landstar System | 17,630 | 2,007,528 | |||||
Old Dominion Freight Line | 5,620 | a | 1,066,564 | ||||
United Airlines Holdings | 3,260 | b | 287,173 | ||||
3,925,486 | |||||||
Utilities - 4.0% | |||||||
MDU Resources Group | 62,120 | 1,845,585 | |||||
National Fuel Gas | 24,570 | a | 1,143,488 | ||||
NorthWestern | 4,240 | 303,881 | |||||
NRG Energy | 8,140 | 323,565 | |||||
OGE Energy | 53,050 | 2,359,133 | |||||
5,975,652 | |||||||
Total Common Stocks(cost $125,228,696) | 150,424,925 |
11
STATEMENT OF INVESTMENTS (continued)
Description | 1-Day | Shares | Value ($) | ||||
Investment Companies - .7% | |||||||
Registered Investment Companies - .7% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1.60 | 1,003,692 | d | 1,003,692 | |||
Investment of Cash Collateral for Securities Loaned - .2% | |||||||
Registered Investment Companies - .2% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1.60 | 386,235 | d | 386,235 | |||
Total Investments(cost $126,618,623) | 100.3% | 151,814,852 | |||||
Liabilities, Less Cash and Receivables | (.3%) | (526,670) | |||||
Net Assets | 100.0% | 151,288,182 |
aSecurity, or portion thereof, on loan. At December 31, 2019, the value of the fund’s securities on loan was $17,634,701 and the value of the collateral was $17,921,903, consisting of cash collateral of $386,235 and U.S. Government & Agency securities valued at $17,535,668.
bNon-income producing security.
cInvestment in real estate investment trust within the United States.
dInvestment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
Portfolio Summary (Unaudited)† | Value (%) |
Information Technology | 18.8 |
Industrials | 16.9 |
Financials | 16.9 |
Health Care | 11.8 |
Consumer Discretionary | 10.0 |
Real Estate | 8.7 |
Materials | 5.7 |
Utilities | 3.9 |
Energy | 3.0 |
Communication Services | 2.4 |
Consumer Staples | 1.3 |
Investment Companies | .9 |
100.3 |
† Based on net assets.
See notes to financial statements.
12
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS
Investment Companies | Value | Purchases($) | Sales($) | Value | Net | Dividends/ |
Registered Investment Companies; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1,087,825 | 17,760,394 | 17,844,527 | 1,003,692 | .7 | 17,519 |
Investment of Cash Collateral for Securities Loaned; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 2,039,430 | 4,404,437 | 6,057,632 | 386,235 | .2 | - |
Total | 3,127,255 | 22,164,831 | 23,902,159 | 1,389,927 | .9 | 17,519 |
See notes to financial statements.
13
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2019
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 125,228,696 |
| 150,424,925 |
| ||
Affiliated issuers |
| 1,389,927 |
| 1,389,927 |
| |
Dividends, interest and securities lending income receivable |
| 132,636 |
| |||
Receivable for shares of Beneficial Interest subscribed |
| 13,605 |
| |||
Prepaid expenses |
|
|
|
| 5,040 |
|
|
|
|
|
| 151,966,133 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(b) |
| 118,485 |
| |||
Liability for securities on loan—Note 1(b) |
| 386,235 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 94,710 |
| |||
Trustees’ fees and expenses payable |
| 2,286 |
| |||
Other accrued expenses |
|
|
|
| 76,235 |
|
|
|
|
|
| 677,951 |
|
Net Assets ($) |
|
| 151,288,182 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 127,765,060 |
|
Total distributable earnings (loss) |
|
|
|
| 23,523,122 |
|
Net Assets ($) |
|
| 151,288,182 |
|
Net Asset Value Per Share | Initial Shares | Service Shares |
|
Net Assets ($) | 76,834,535 | 74,453,647 |
|
Shares Outstanding | 4,122,601 | 4,017,892 |
|
Net Asset Value Per Share ($) | 18.64 | 18.53 |
|
|
|
|
|
See notes to financial statements. |
|
|
|
14
STATEMENT OF OPERATIONS
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends (net of $3,894 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 2,355,847 |
| ||
Affiliated issuers |
|
| 17,519 |
| ||
Income from securities lending—Note 1(b) |
|
| 22,983 |
| ||
Interest |
|
| 361 |
| ||
Total Income |
|
| 2,396,710 |
| ||
Expenses: |
|
|
|
| ||
Management fee—Note 3(a) |
|
| 1,127,256 |
| ||
Distribution fees—Note 3(b) |
|
| 182,521 |
| ||
Professional fees |
|
| 86,345 |
| ||
Prospectus and shareholders’ reports |
|
| 29,933 |
| ||
Trustees’ fees and expenses—Note 3(c) |
|
| 13,365 |
| ||
Chief Compliance Officer fees—Note 3(b) |
|
| 11,793 |
| ||
Custodian fees—Note 3(b) |
|
| 4,430 |
| ||
Loan commitment fees—Note 2 |
|
| 3,498 |
| ||
Shareholder servicing costs—Note 3(b) |
|
| 1,457 |
| ||
Registration fees |
|
| 524 |
| ||
Miscellaneous |
|
| 13,880 |
| ||
Total Expenses |
|
| 1,475,002 |
| ||
Investment Income—Net |
|
| 921,708 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | (2,572,437) |
| ||||
Net change in unrealized appreciation (depreciation) on investments | 28,415,232 |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 25,842,795 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 26,764,503 |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
15
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Year Ended December 31, | |||||
|
|
|
| 2019 |
| 2018 |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 921,708 |
|
|
| 774,011 |
| |
Net realized gain (loss) on investments |
| (2,572,437) |
|
|
| 10,954,767 |
| ||
Net change in unrealized appreciation |
| 28,415,232 |
|
|
| (36,858,835) |
| ||
Net Increase (Decrease) in Net Assets | 26,764,503 |
|
|
| (25,130,057) |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (6,099,962) |
|
|
| (10,986,089) |
| |
Service Shares |
|
| (5,546,134) |
|
|
| (9,034,600) |
| |
Total Distributions |
|
| (11,646,096) |
|
|
| (20,020,689) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 3,870,606 |
|
|
| 6,689,007 |
| |
Service Shares |
|
| 10,588,703 |
|
|
| 11,050,270 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 6,099,962 |
|
|
| 10,986,089 |
| |
Service Shares |
|
| 5,546,134 |
|
|
| 9,034,600 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (13,408,861) |
|
|
| (13,668,427) |
| |
Service Shares |
|
| (12,102,125) |
|
|
| (13,088,711) |
| |
Increase (Decrease) in Net Assets | 594,419 |
|
|
| 11,002,828 |
| |||
Total Increase (Decrease) in Net Assets | 15,712,826 |
|
|
| (34,147,918) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 135,575,356 |
|
|
| 169,723,274 |
| |
End of Period |
|
| 151,288,182 |
|
|
| 135,575,356 |
| |
Capital Share Transactions (Shares): |
| ||||||||
Initial Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 216,730 |
|
|
| 327,514 |
| |
Shares issued for distributions reinvested |
|
| 351,583 |
|
|
| 551,234 |
| |
Shares redeemed |
|
| (752,804) |
|
|
| (684,648) |
| |
Net Increase (Decrease) in Shares Outstanding | (184,491) |
|
|
| 194,100 |
| |||
Service Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 600,304 |
|
|
| 553,063 |
| |
Shares issued for distributions reinvested |
|
| 320,957 |
|
|
| 454,915 |
| |
Shares redeemed |
|
| (685,012) |
|
|
| (653,885) |
| |
Net Increase (Decrease) in Shares Outstanding | 236,249 |
|
|
| 354,093 |
| |||
|
|
|
|
|
|
|
|
|
|
See notes to financial statements. |
16
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. The fund’s total returns do not reflect expenses associated with variable annuity or insurance contracts. These figures have been derived from the fund’s financial statements.
Year Ended December 31, | ||||||
Initial Shares | 2019 | 2018 | 2017 | 2016 | 2015 | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 16.80 | 22.56 | 20.09 | 18.95 | 23.03 | |
Investment Operations: | ||||||
Investment income—neta | .13 | .12 | .10 | .21 | .18 | |
Net realized and unrealized | 3.15 | (3.19) | 2.92 | 2.50 | (.50) | |
Total from Investment Operations | 3.28 | (3.07) | 3.02 | 2.71 | (.32) | |
Distributions: | ||||||
Dividends from | (.12) | (.13) | (.22) | (.21) | (.14) | |
Dividends from | (1.32) | (2.56) | (.33) | (1.36) | (3.62) | |
Total Distributions | (1.44) | (2.69) | (.55) | (1.57) | (3.76) | |
Net asset value, end of period | 18.64 | 16.80 | 22.56 | 20.09 | 18.95 | |
Total Return (%) | 20.18 | (15.49) | 15.38 | 15.47 | (2.29) | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .86 | .86 | .87 | .85 | .85 | |
Ratio of net expenses | .86 | .86 | .87 | .85 | .85 | |
Ratio of net investment income | .73 | .59 | .50 | 1.16 | .89 | |
Portfolio Turnover Rate | 82.88 | 68.02 | 64.86 | 65.52 | 80.27 | |
Net Assets, end of period ($ x 1,000) | 76,835 | 72,374 | 92,776 | 123,226 | 123,354 |
a Based on average shares outstanding.
See notes to financial statements.
17
FINANCIAL HIGHLIGHTS (continued)
Year Ended December 31, | ||||||
Service Shares | 2019 | 2018 | 2017 | 2016 | 2015 | |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 16.71 | 22.45 | 20.00 | 18.88 | 22.97 | |
Investment Operations: | ||||||
Investment income—neta | .09 | .07 | .06 | .17 | .15 | |
Net realized and unrealized | 3.12 | (3.18) | 2.90 | 2.47 | (.52) | |
Total from Investment Operations | 3.21 | (3.11) | 2.96 | 2.64 | (.37) | |
Distributions: | ||||||
Dividends from | (.07) | (.07) | (.18) | (.16) | (.10) | |
Dividends from | (1.32) | (2.56) | (.33) | (1.36) | (3.62) | |
Total Distributions | (1.39) | (2.63) | (.51) | (1.52) | (3.72) | |
Net asset value, end of period | 18.53 | 16.71 | 22.45 | 20.00 | 18.88 | |
Total Return (%) | 19.85 | (15.69) | 15.04 | 15.20 | (2.52) | |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.11 | 1.11 | 1.12 | 1.10 | 1.10 | |
Ratio of net expenses | 1.11 | 1.11 | 1.12 | 1.10 | 1.10 | |
Ratio of net investment income | .48 | .34 | .28 | .94 | .72 | |
Portfolio Turnover Rate | 82.88 | 68.02 | 64.86 | 65.52 | 80.27 | |
Net Assets, end of period ($ x 1,000) | 74,454 | 63,202 | 76,948 | 63,972 | 49,363 |
a Based on average shares outstanding.
See notes to financial statements.
18
NOTES TO FINANCIAL STATEMENTS
NOTE 1—Significant Accounting Policies:
MidCap Stock Portfolio (the “fund”) is a separate diversified series of BNY Mellon Investment Portfolios (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 four series, including the fund. The fund is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The fund’s investment objective is to seek investment results that are greater than the total return performance of publicly traded common stocks of medium-size domestic companies in the aggregate, as represented by the Standard & Poor’s MidCap 400® Index. 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 Company changed its name from Dreyfus Investment Portfolios to BNY Mellon Investment Portfolios. 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, which are sold without a sales charge. 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: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the Distribution Plan, and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the
19
NOTES TO FINANCIAL STATEMENTS(continued)
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 Companyenters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
20
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 American Depository Receipts 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.
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.
21
NOTES TO FINANCIAL STATEMENTS(continued)
The following is a summary of the inputs used as of December 31, 2019in valuing the fund’s investments:
Level 1 - | Level 2 – Other | Level 3 - | Total | |
Assets ($) | ||||
Investments in Securities:† | ||||
Equity Securities- | 150,424,925 | - | - | 150,424,925 |
Investment Companies | 1,389,927 | - | - | 1,389,927 |
† See Statement of Investments for additional detailed categorizations, if any.
(b)Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with 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 December 31, 2019, The Bank of New York Mellon earned $4,609 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
22
(d) 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.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended December 31, 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 December 31, 2019, the fund did not incur any interest or penalties.
Each tax year in the four-year period ended December 31, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.
At December 31, 2019, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $893,369, accumulated capital losses $2,590,089 and unrealized appreciation $25,189,468.
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 netrealized capital gains, if any, realized subsequent to December 31, 2019. The fund has $2,590,089 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 December 31, 2019 and December 31, 2018 were as
23
NOTES TO FINANCIAL STATEMENTS(continued)
follows: ordinary income $799,710 and $4,070,215, and long-term capital gains $10,846,386 and $15,950,474, respectively.
(f) 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 December 31, 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 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. 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. During the period ended December 31, 2019, the fund did not borrow under the Facilities.
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.
(b)Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing its shares, for servicing and/or maintaining Service shares’ shareholder accounts and for advertising and marketing for Service shares. The Distribution Plan provides for payments to be made at an annual rate of .25% of the value of the Service shares’ average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The
24
fees payable under the Distribution Plan are payable without regard to actual expenses incurred. During the period ended December 31, 2019,Service shares were charged $182,521 pursuant to the Distribution 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 December 31, 2019, the fund was charged $1,259 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 December 31, 2019, the fund was charged $4,430 pursuant to the custody agreement.
During the period ended December 31, 2019, the fund was charged $11,793 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: management fees of $97,388, Distribution Plan fees of $16,052, custodian fees of $1,600, Chief Compliance Officer fees of $3,261 and transfer agency fees of $184.
(c) 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.
25
NOTES TO FINANCIAL STATEMENTS(continued)
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended December 31, 2019, amounted to $123,316,850 and $133,183,356, respectively.
At December 31, 2019, the cost of investments for federal income tax purposes was $126,625,384; accordingly, accumulated net unrealized depreciation on investments was $25,189,468, consisting of $28,622,646 gross unrealized appreciation and $3,433,178 gross unrealized depreciation.
26
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of MidCap Stock Portfolio
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of MidCap Stock Portfolio (the “Fund”) (one of the funds constituting BNY Mellon Investment Portfolios), including the statements of investments and investments in affiliated issuers, as of December 31, 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 Investment Portfolios) at December 31, 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 December 31, 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
February 10, 2020
27
IMPORTANT TAX INFORMATION(Unaudited)
For federal tax purposes, the portfolio hereby reports 100% of the ordinary dividends paid during the fiscal year ended December 31, 2019 as qualifying for the corporate dividends received deduction. Shareholders will receive notification in early 2020 of the percentage applicable to the preparation of their 2019 income tax returns. Also, the fund hereby $1.3238 per share as a long-term capital gain distribution paid on March 20, 2019.
28
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Trustees held on July 23-24, 2019, the Board considered the renewalof 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
29
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
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. They also considered that performance generally should be considered over longer periods of time, although it is possible that long-term performance can be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect disproportionately long-term performance. 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 below the Performance Group and Performance Universe medians for all periods, except the ten-year period when performance was above the Performance Group and Performance Universe medians. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was considered that the fund’s returns were above the returns of the index in five of the ten calendar years shown.
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 at 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 slightly above the Expense Group and the Expense Universe medians.
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 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
30
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 agreed to closely monitor performance and determined to approve renewal of the Agreement only until the first quarter 2020 regular Board meeting.
· 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
31
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
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 through the first quarter 2020 regular Board meeting.
32
BOARD MEMBERS INFORMATION(Unaudited)
INDEPENDENT BOARD MEMBERS
Joseph S. DiMartino (76)
Chairman of the Board (1995)
Principal Occupation During Past 5 Years:
· Corporate Director and Trustee (1995-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ, Inc., a public company providing professional business services, products and solutions,Director (1997-Present)
No. of Portfolios for which Board Member Serves:118
———————
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:69
———————
J. Charles Cardona (64)
Board Member (2014)
Principal Occupation During Past 5 Years:
· President of the Adviser (2008-2016)
· Chairman (2013-2016) and Executive Vice President (1997-2013) of the Distributor
Other Public Company Board Memberships During Past 5 Years:
· BNY Mellon Liquidity Funds,Chairman andDirector (2019-Present)
No. of Portfolios for which Board Member Serves:33
———————
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
———————
33
BOARD MEMBERS INFORMATION (Unaudited) (continued)
INDEPENDENT BOARD MEMBERS (continued)
Andrew J. Donohue (69)
Board Member (2019)
Principal Occupation During Past 5 Years:
· Of Counsel, Shearman & Sterling LLP (2017-2019)
· 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:55
———————
Isabel P. Dunst (72)
Board Member (2014)
Principal Occupation During Past 5 Years:
· Senior Counsel, Hogan Lovells LLP (2018-2019); 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 public company that designs, sources, markets and distributes watchesDirector (2003-Present)
No. of Portfolios for which Board Member Serves:47
———————
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:96
———————
34
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:55
———————
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, Inc., a public company providing professional business services, products and solutions,Director (2008-Present)
· Blue Cross Blue Shield of Massachusetts, Director (2004-Present)
No. of Portfolios for which Board Member Serves:75
———————
Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80. The address of the Board Members and Officers is c/o 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.
Clifford L. Alexander, Jr., Emeritus Board Member
Whitney I. Gerard, Emeritus Board Member
George L. Perry, Emeritus Board Member
35
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 62 investment companies (comprised of 118 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 62 investment companies (comprised of 118 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.
Senior Managing Counsel of BNY Mellon since December 2019; Managing Counsel of BNY Mellon from April 2014 to December 2019; Secretary of the Adviser, and an officer of 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 portfolios) managed by the Adviser. He is 51 years old and has been an employee of the Adviser since April 2004.
36
NATALYA ZELENSKY, Vice President and Assistant Secretary since March 2017.
Managing Counsel of BNY Mellon since December 2019; Counsel of BNY Mellon from May 2016 to December 2019; 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 2002.
Senior Accounting Manager- BNY Mellon Fund Administration, and an officer of 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 (63 investment companies, comprised of 141 portfolios). He is 62 years old and has served in various capacities with 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 56 investment companies (comprised of 134 portfolios) managed by the Adviser. She is 51 years old and has been an employee of the Distributor since 1997.
37
BNY Mellon Investment Portfolios, MidCap Stock Portfolio
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
Telephone 1-800-258-4260 or 1-800-258-4261
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 Attn: Institutional Services Department
E-mailSend your request to info@bnymellon.com
InternetInformation can be viewed online or downloaded atwww.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 atwww.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 atwww.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2020 BNY Mellon Securities Corporation |
BNY Mellon Investment Portfolios, Small Cap Stock Index Portfolio
ANNUAL REPORT December 31, 2019 |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
BNY Mellon Investment Adviser, Inc. | |
With Those of Other Funds | |
in Affiliated Issuers | |
Public Accounting Firm | |
the Fund’s Management Agreement | |
FOR MORE INFORMATION
Back Cover
| 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 Investment Portfolios, Small Cap Stock Index Portfolio (formerly, Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio), covering the 12-month period from January 1, 2019 through December 31, 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.
In January 2019, a pivot in stance from the U.S. Federal Reserve (the “Fed”) helped stimulate a rebound across equity markets that continued into the second quarter of the year. However, escalating trade tensions disrupted equity markets in May. The dip was short-lived, as markets rose once again in June and July of 2019, when a trade deal appeared more likely and the pace of U.S. economic growth remained steady. Nevertheless, concerns continued to emerge over slowing global growth, resulting in bouts of market volatility in August 2019. Stocks rebounded in September and continued an upward path through most of October 2019, bolstered by central bank policy and consistent consumer spending. The rally generally continued through the end of the period, supported in part by an announcement from President Trump that the first phase of a trade deal with China was in process. U.S. equity markets reached new highs during the final months of the period.
In fixed-income markets, the year began with a recovery from the prior months’ volatility. After the Fed’s supportive statements in January 2019, other developed-market central banks followed suit and reiterated their abilities to buttress flagging growth rates by continuing accommodative policies. The Fed cut rates in July, September and October 2019, for a total 75 basis point reduction in the federal funds rate during the 12 months. Rates across much of the Treasury curve saw a slight increase during the month of November, and the long end of the curve rose in December. The yield curve steepened during the latter portion of the period. However, demand for fixed-income instruments during the year was strong, which helped to support positive bond market returns.
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.
January 15, 2020
2
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from January 1, 2019 through December 31, 2019, as provided by portfolio managers Thomas J. Durante, CFA, Karen Q. Wong, CFA and Richard A. Brown, CFA, of Mellon Investments Corporation, Sub-Investment Adviser
Market and Fund Performance Overview
For the 12-month period ended December 31, 2019, BNY Mellon Investment Portfolios, Small Cap Stock Index Portfolio (formerly, Dreyfus Investment Portfolios, Small Cap Stock Index Portfolio) produced a total return of 22.21%.1 In comparison, the fund’s benchmark, the S&P SmallCap 600® Index (the “Index”), produced a 22.78% total return for the same period.2,3
Small-cap stocks gained over the reporting period, in an environment of moderate economic growth and supportive central bank policy. The difference in returns between the fund and the Index was primarily the result of transaction costs and operating expenses that are not reflected in the Index’s results.
The Fund’s Investment Approach
The fund seeks to match the performance of the Index. To pursue its goal, the fund generally invests in all of the stocks that comprise the Index. The fund generally invests in all 600 stocks in the Index in proportion to their weighting in the Index; however, at times, the fund may invest in a representative sample of stocks included in the Index. Under these circumstances, the fund expects to invest in approximately 500 or more of the stocks in the Index.
Markets Pivot on Central Bank Statements and Trade Policy
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 from fourth quarter 2018 volatility. At its first meeting of the year, the U.S. Federal Reserve (the “Fed”) 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. In addition, the European Central Bank announced it would provide additional stimulus to support the eurozone economy. China also announced plans to stoke its slowing economic growth rate. The rebound continued throughout the month of January 2019, and equity markets maintained an upward trajectory through April 2019. 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.
However, concerns over slowing economic growth continued, and inflation floundered. The Fed decided to provide additional stimulus by cutting the federal funds rate. It did so three
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
times during the period, each time by 25 basis points. These cuts occurred in July, September and October. Supported by rate cuts, moderate economic growth and optimism regarding a preliminary trade agreement with China, equity markets went on to post solid gains during the last several months of the year.
According to the S&P family of indices, large-cap stocks generally outperformed their mid- and small-cap counterparts during the period.
Information Technology Sector Leads the U.S. Small-Cap Market
During the 12-month period, the S&P 600 Index posted strong returns. Most sectors within the index delivered positive results. The industrials sector led the index, with companies in the aerospace and defense industry posting some of the best returns. Smaller organizations within the industry have benefited from merger and acquisition activity, with larger companies purchasing them to expand their existing product lines or gain access to newly developed technology. In the machinery industry, companies engaged in making customized technological components for food product manufacturing performed well. Elsewhere in the sector, electronic defense system manufacturers also generally provided strong returns. Information technology companies, particularly those involved in semiconductors and semiconductor equipment, also outperformed the overall market. Reduced trade with China provided an opportunity for U.S. companies to bring products to market that were traditionally provided by China, such as solar panels and computer chips. Electronic equipment manufacturers also outperformed, particularly those making components for communication infrastructure, automobiles and consumer electronics. Banks were a leading performer within the financials sector. The low rate environment benefited banks, as the frequency of mortgage refinancing increased after a dip in 2018. Mortgage insurers and debt collectors also posted strong returns, as did insurers.
Conversely, some sectors posted negative results during the year. Energy was the worst performing sector. Concerns over slowing economic growth and product demand, particularly in Europe and Japan, weighed on valuations. There were also issues with oversupply. U.S. stockpiles continued to grow, even as the price of oil fell, hurting exploration and production companies. Offshore drillers were also affected. In the communication services sector, wireline telecommunications companies have seen shrinking sales and decreasing growth prospects. Many such companies have been eliminating their dividends. In the entertainment industry, small movie theater chains also saw falling stock prices. Year-over-year movie ticket sales fell during 2019, hurting revenues.
Replicating the Performance of the Index
Although we do not actively manage the fund’s investments in response to macroeconomic trends, it is worth noting that the U.S. economy remains supported by a strong labor market and sound corporate balance sheets. However, the small-cap stock market’s currently constructive conditions could be undermined by unexpected political and economic
4
developments. As always, we have continued to monitor the factors considered by the fund’s investments.
January 15, 2020
1 Total return includes reinvestment of dividends and any capital gains paid. 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 performance does not reflect the deduction of additional charges and expenses imposed in connection with investing in variable insurance contracts, which will reduce returns. BNY Mellon Investment Adviser, Inc. has agreed to pay all of the fund’s expenses except management fees, Rule 12b-1 fees, and certain other expenses, including fees and expenses of the non-interested board members and their counsel.
2 Source: Lipper Inc. — The S&P SmallCap 600® Index measures the small-cap segment of the U.S. equity market. The Index is designed to track companies that meet specific inclusion criteria to ensure that they are liquid and financially viable. Investors cannot invest directly in any index.
3 “Standard & Poor’s®,” “S&P®,” and “Standard & Poor’s® SmallCap 600 Index” are trademarks of Standard & Poor’s Financial Services LLC (“Standard & Poor’s”) and have been licensed for use by the fund. The fund is not sponsored, endorsed, sold or promoted by Standard & Poor’s, and Standard & Poor’s makes no representation regarding the advisability of investing in the fund.
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. Stocks of small- and/or mid-cap companies often experience sharper price fluctuations than stocks of large-cap companies.
The fund may, but is not required to, use derivative instruments. 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.
The fund is only available as a funding vehicle under variable life insurance policies or variable annuity contracts issued by insurance companies. Individuals may not purchase shares of the fund directly. A variable annuity is an insurance contract issued by an insurance company that enables investors to accumulate assets on a tax-deferred basis for retirement or other long-term goals. The investment objective and policies of BNY Mellon Investment Portfolios, Small Cap Stock Index Portfolio made available through insurance products may be similar to those of other funds managed by BNY Mellon Investment Adviser, Inc. However, the investment results of the fund may be higher or lower than, and may not be comparable to, those of any other BNY Mellon Investment Adviser, Inc. fund.
5
FUND PERFORMANCE(Unaudited)
Comparison of change in value of a $10,000 investment in BNY Mellon Investment Portfolios, Small Cap Stock Index Portfolio with a hypothetical investment of $10,000 in the S&P SmallCap 600® Index (the “Index”)
† Source: Lipper Inc.
Past performance is not predictive of future performance. The fund’s performance does not reflect the deduction of additional charges and expenses imposed in connection with investing in variable insurance contracts which will reduce returns.
The above graph compares a hypothetical $10,000 investment made in BNY Mellon Investment Portfolios, Small Cap Stock Index Portfolio on 12/31/09 to a hypothetical investment of $10,000 made in the Index on that date.
The fund’s performance shown in the line graph above takes into account all applicable fees and expenses. The Index measures the small-cap segment of the U.S. equity market. The Index is designed to track companies that meet specific inclusion criteria to ensure that they are liquid and financially viable. Unlike a mutual fund, the Index is not subject to charges, fees and other expenses. Investors cannot invest directly in any index. Further information relating to fund performance, including expense reimbursements, if applicable, is contained in the Financial Highlights section of the prospectus and elsewhere in this report.
Average Annual Total Returns as of 12/31/19 | |||
| 1 Year | 5 Years | 10 Years |
Portfolio | 22.21% | 8.96% | 12.77% |
S&P SmallCap 600® Index | 22.78% | 9.56% | 13.35% |
The performance data quoted represents past performance, which is no guarantee of future results. Share price and investment return fluctuate and an investor’s shares may be worth more or less than original cost upon redemption. Current performance may be lower or higher than the performance quoted. Go to www.bnymellonim.com/us for the fund’s most recent month-end returns.
The fund is subject to a 0.25% annual Rule 12b-1 fee. All dividends and capital gain distributions are reinvested.
The fund’s performance shown in the graph and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
6
UNDERSTANDING YOUR FUND’S EXPENSES(Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads), redemption fees and expenses associated with variable annuity or insurance contracts, 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 Investment Portfolios, Small Cap Stock Index Portfolio from July 1, 2019 to December 31, 2019. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended December 31, 2019 |
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Expense paid per $1,000† | $3.14 |
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Ending value (after expenses) | $1,077.40 |
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COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS(Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended December 31, 2019 |
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Expense paid per $1,000† | $3.06 |
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Ending value (after expenses) | $1,022.18 |
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† Expenses are equal to the fund’s annualized expense ratio of .60%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
7
STATEMENT OF INVESTMENTS
December 31, 2019
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% | |||||||
Automobiles & Components - 2.1% | |||||||
American Axle & Manufacturing Holdings | 82,241 | a,b | 884,913 | ||||
Cooper Tire & Rubber | 36,437 | a | 1,047,564 | ||||
Cooper-Standard Holdings | 12,373 | b | 410,289 | ||||
Dorman Products | 21,266 | a,b | 1,610,262 | ||||
Fox Factory Holding | 28,372 | a,b | 1,973,840 | ||||
Garrett Motion | 55,456 | b | 554,005 | ||||
Gentherm | 23,569 | b | 1,046,228 | ||||
LCI Industries | 18,297 | 1,960,158 | |||||
Motorcar Parts of America | 13,805 | a,b | 304,124 | ||||
Standard Motor Products | 14,676 | 781,057 | |||||
Winnebago Industries | 24,726 | a | 1,309,983 | ||||
11,882,423 | |||||||
Banks - 11.3% | |||||||
Allegiance Bancshares | 13,551 | a,b | 509,518 | ||||
Ameris Bancorp | 48,327 | 2,055,831 | |||||
Axos Financial | 39,598 | b | 1,199,027 | ||||
Banc of California | 32,054 | 550,688 | |||||
Banner | 27,226 | 1,540,719 | |||||
Berkshire Hills Bancorp | 30,901 | 1,016,025 | |||||
Boston Private Financial Holdings | 61,893 | 744,573 | |||||
Brookline Bancorp | 57,577 | 947,717 | |||||
Cadence BanCorp | 93,801 | 1,700,612 | |||||
Central Pacific Financial | 20,959 | 619,967 | |||||
City Holding | 11,839 | 970,206 | |||||
Columbia Banking System | 52,350 | 2,129,860 | |||||
Community Bank System | 37,723 | a | 2,676,070 | ||||
Customers Bancorp | 20,597 | b | 490,415 | ||||
CVB Financial | 96,584 | 2,084,283 | |||||
Dime Community Bancshares | 22,759 | 475,436 | |||||
Eagle Bancorp | 24,568 | 1,194,742 | |||||
First BanCorp | 159,124 | 1,685,123 | |||||
First Commonwealth Financial | 73,174 | 1,061,755 | |||||
First Financial Bancorp | 72,011 | a | 1,831,960 | ||||
First Midwest Bancorp | 80,925 | 1,866,130 | |||||
Flagstar Bancorp | 25,680 | 982,260 | |||||
Franklin Financial Network | 9,492 | 325,860 | |||||
Glacier Bancorp | 62,652 | a | 2,881,365 | ||||
Great Western Bancorp | 40,686 | 1,413,432 | |||||
Hanmi Financial | 23,582 | 471,522 | |||||
Heritage Financial | 26,409 | a | 747,375 |
8
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% (continued) | |||||||
Banks - 11.3% (continued) | |||||||
HomeStreet | 17,708 | b | 602,072 | ||||
Hope Bancorp | 93,275 | 1,386,066 | |||||
Independent Bank | 24,945 | 2,076,671 | |||||
Meta Financial Group | 25,030 | 913,845 | |||||
National Bank Holdings, Cl. A | 22,341 | 786,850 | |||||
NBT Bancorp | 32,216 | a | 1,306,681 | ||||
NMI Holdings, Cl. A | 49,602 | b | 1,645,794 | ||||
Northfield Bancorp | 32,389 | 549,317 | |||||
Northwest Bancshares | 72,335 | a | 1,202,931 | ||||
OFG Bancorp | 36,804 | 868,942 | |||||
Old National Bancorp | 123,448 | 2,257,864 | |||||
Opus Bank | 15,453 | 399,769 | |||||
Pacific Premier Bancorp | 42,914 | 1,399,211 | |||||
Preferred Bank | 9,664 | 580,710 | |||||
Provident Financial Services | 43,243 | 1,065,940 | |||||
S&T Bancorp | 28,442 | a | 1,145,928 | ||||
Seacoast Banking Corp. of Florida | 38,227 | b | 1,168,599 | ||||
ServisFirst Bancshares | 33,799 | a | 1,273,546 | ||||
Simmons First National, Cl. A | 83,258 | a | 2,230,482 | ||||
Southside Bancshares | 23,187 | a | 861,165 | ||||
Tompkins Financial | 8,886 | a | 813,069 | ||||
Triumph Bancorp | 16,619 | b | 631,854 | ||||
TrustCo Bank | 68,834 | 596,791 | |||||
United Community Banks | 57,793 | 1,784,648 | |||||
Veritex Holdings | 35,063 | 1,021,385 | |||||
Walker & Dunlop | 21,045 | 1,361,191 | |||||
Westamerica Bancorporation | 19,704 | a | 1,335,340 | ||||
65,439,132 | |||||||
Capital Goods - 11.8% | |||||||
AAON | 29,377 | a | 1,451,518 | ||||
AAR | 24,175 | 1,090,292 | |||||
Actuant, Cl. A | 39,670 | 1,032,610 | |||||
Aegion | 22,776 | b | 509,499 | ||||
Aerojet Rocketdyne Holdings | 52,579 | a,b | 2,400,757 | ||||
AeroVironment | 15,659 | a,b | 966,787 | ||||
Alamo Group | 6,945 | 871,945 | |||||
Albany International, Cl. A | 22,688 | 1,722,473 | |||||
American Woodmark | 11,437 | b | 1,195,281 | ||||
Apogee Enterprises | 19,648 | 638,560 | |||||
Applied Industrial Technologies | 28,276 | 1,885,726 | |||||
Arcosa | 35,638 | 1,587,673 | |||||
Astec Industries | 16,488 | 692,496 | |||||
AZZ | 19,427 | 892,671 |
9
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% (continued) | |||||||
Capital Goods - 11.8% (continued) | |||||||
Barnes Group | 35,187 | 2,180,187 | |||||
Briggs & Stratton | 31,187 | a | 207,705 | ||||
Chart Industries | 26,177 | b | 1,766,686 | ||||
CIRCOR International | 14,797 | b | 684,213 | ||||
Comfort Systems USA | 26,858 | 1,338,871 | |||||
Cubic | 23,195 | a | 1,474,506 | ||||
DXP Enterprises | 12,055 | b | 479,910 | ||||
Encore Wire | 15,628 | 897,047 | |||||
EnPro Industries | 15,384 | 1,028,882 | |||||
ESCO Technologies | 18,943 | 1,752,227 | |||||
Federal Signal | 44,866 | 1,446,928 | |||||
Franklin Electric | 28,057 | 1,608,227 | |||||
Gibraltar Industries | 23,709 | b | 1,195,882 | ||||
GMS | 30,900 | b | 836,772 | ||||
Granite Construction | 32,286 | a | 893,354 | ||||
Griffon | 30,359 | a | 617,198 | ||||
Harsco | 56,753 | b | 1,305,887 | ||||
Hillenbrand | 54,578 | 1,817,993 | |||||
Insteel Industries | 13,825 | 297,099 | |||||
John Bean Technologies | 23,146 | a | 2,607,628 | ||||
Kaman | 20,496 | 1,351,096 | |||||
Lindsay | 7,775 | a | 746,322 | ||||
Lydall | 13,646 | b | 280,016 | ||||
Moog, Cl. A | 23,383 | 1,995,271 | |||||
Mueller Industries | 41,444 | 1,315,847 | |||||
MYR Group | 12,665 | b | 412,752 | ||||
National Presto Industries | 3,831 | a | 338,622 | ||||
Park Aerospace | 15,222 | a | 247,662 | ||||
Patrick Industries | 16,273 | a | 853,193 | ||||
PGT Innovations | 43,912 | b | 654,728 | ||||
Powell Industries | 6,411 | 314,075 | |||||
Proto Labs | 19,402 | b | 1,970,273 | ||||
Quanex Building Products | 23,986 | 409,681 | |||||
Raven Industries | 26,683 | 919,496 | |||||
Simpson Manufacturing | 29,714 | 2,383,954 | |||||
SPX | 32,461 | b | 1,651,616 | ||||
SPX FLOW | 31,362 | b | 1,532,661 | ||||
Standex International | 9,322 | 739,701 | |||||
Tennant | 13,522 | 1,053,634 | |||||
The Greenbrier Companies | 24,155 | 783,347 | |||||
Titan International | 37,963 | 137,426 | |||||
Triumph Group | 35,877 | 906,612 | |||||
Universal Forest Products | 44,920 | 2,142,684 |
10
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% (continued) | |||||||
Capital Goods - 11.8% (continued) | |||||||
Veritiv | 9,167 | b | 180,315 | ||||
Vicor | 13,222 | a,b | 617,732 | ||||
Wabash National | 39,574 | a | 581,342 | ||||
Watts Water Technologies, Cl. A | 20,363 | 2,031,413 | |||||
67,926,961 | |||||||
Commercial & Professional Services - 3.3% | |||||||
ABM Industries | 48,549 | 1,830,783 | |||||
Brady, Cl. A | 36,576 | 2,094,342 | |||||
Exponent | 37,946 | 2,618,653 | |||||
Forrester Research | 7,770 | 324,009 | |||||
Heidrick & Struggles International | 14,504 | 471,380 | |||||
Interface | 42,252 | 700,961 | |||||
Kelly Services, Cl. A | 24,112 | 544,449 | |||||
Korn Ferry | 40,053 | 1,698,247 | |||||
Matthews International, Cl. A | 22,473 | a | 857,794 | ||||
Mobile Mini | 31,823 | 1,206,410 | |||||
Pitney Bowes | 127,053 | a | 512,024 | ||||
R.R. Donnelley & Sons | 52,492 | 207,343 | |||||
Resources Connection | 22,668 | 370,168 | |||||
Team | 22,869 | b | 365,218 | ||||
TrueBlue | 27,766 | b | 668,050 | ||||
UniFirst | 11,111 | 2,244,200 | |||||
US Ecology | 19,210 | 1,112,451 | |||||
Viad | 14,722 | 993,735 | |||||
18,820,217 | |||||||
Consumer Durables & Apparel - 4.8% | |||||||
Callaway Golf | 69,322 | a | 1,469,626 | ||||
Cavco Industries | 6,300 | b | 1,230,894 | ||||
Century Communities | 19,498 | a,b | 533,270 | ||||
Crocs | 49,746 | b | 2,083,860 | ||||
Ethan Allen Interiors | 18,853 | 359,338 | |||||
Fossil Group | 35,300 | a,b | 278,164 | ||||
G-III Apparel Group | 31,754 | b | 1,063,759 | ||||
Installed Building Products | 15,633 | b | 1,076,645 | ||||
iRobot | 20,464 | a,b | 1,036,092 | ||||
Kontoor Brands | 34,332 | a | 1,441,601 | ||||
La-Z-Boy | 34,295 | 1,079,607 | |||||
LGI Homes | 14,667 | b | 1,036,224 | ||||
M.D.C. Holdings | 36,740 | 1,401,998 | |||||
M/I Homes | 20,608 | b | 810,925 | ||||
Meritage Homes | 26,594 | b | 1,625,159 | ||||
Movado Group | 12,639 | a | 274,772 | ||||
Oxford Industries | 12,364 | a | 932,493 |
11
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% (continued) | |||||||
Consumer Durables & Apparel - 4.8% (continued) | |||||||
Steven Madden | 57,067 | 2,454,452 | |||||
Sturm Ruger & Co. | 12,391 | 582,749 | |||||
TopBuild | 24,664 | b | 2,542,365 | ||||
Tupperware Brands | 37,508 | 321,819 | |||||
Unifi | 11,057 | b | 279,300 | ||||
Universal Electronics | 10,467 | b | 547,005 | ||||
Vera Bradley | 17,285 | a,b | 203,963 | ||||
Vista Outdoor | 43,637 | b | 326,405 | ||||
William Lyon Homes, Cl. A | 24,556 | b | 490,629 | ||||
Wolverine World Wide | 59,035 | 1,991,841 | |||||
27,474,955 | |||||||
Consumer Services - 2.3% | |||||||
American Public Education | 11,257 | b | 308,329 | ||||
BJ‘s Restaurants | 13,737 | a | 521,457 | ||||
Bloomin‘ Brands | 63,892 | a | 1,410,096 | ||||
Career Education | 52,336 | b | 962,459 | ||||
Chuy's Holdings | 11,245 | b | 291,470 | ||||
Dave & Buster's Entertainment | 22,220 | a | 892,577 | ||||
Dine Brands Global | 12,492 | a | 1,043,332 | ||||
El Pollo Loco Holdings | 15,438 | a,b | 233,731 | ||||
Fiesta Restaurant Group | 17,372 | a,b | 171,809 | ||||
Monarch Casino & Resort | 8,930 | b | 433,552 | ||||
Red Robin Gourmet Burgers | 9,902 | b | 326,964 | ||||
Regis | 16,708 | a,b | 298,572 | ||||
Ruth's Hospitality Group | 20,641 | 449,251 | |||||
Shake Shack, Cl. A | 22,600 | a,b | 1,346,282 | ||||
Strategic Education | 15,955 | 2,535,249 | |||||
Wingstop | 21,749 | 1,875,416 | |||||
13,100,546 | |||||||
Diversified Financials - 3.4% | |||||||
Apollo Commercial Real Estate Finance | 105,532 | a,c | 1,930,180 | ||||
ARMOUR Residential REIT | 43,194 | a,c | 771,877 | ||||
Blucora | 35,309 | b | 922,977 | ||||
Capstead Mortgage | 69,652 | a,c | 551,644 | ||||
Donnelley Financial Solutions | 23,325 | b | 244,213 | ||||
Encore Capital Group | 19,713 | a,b | 697,052 | ||||
Enova International | 25,469 | b | 612,784 | ||||
EZCORP, Cl. A | 39,850 | a,b | 271,777 | ||||
FGL Holdings | 94,800 | a | 1,009,620 | ||||
Granite Point Mortgage Trust | 39,285 | a,c | 722,058 | ||||
Greenhill & Co. | 11,916 | a | 203,525 | ||||
INTL. FCStone | 11,921 | b | 582,102 | ||||
Invesco Mortgage Capital | 104,559 | c | 1,740,907 |
12
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% (continued) | |||||||
Diversified Financials - 3.4% (continued) | |||||||
KKR Real Estate Finance Trust | 18,159 | a,c | 370,807 | ||||
New York Mortgage Trust | 210,999 | a,c | 1,314,524 | ||||
PennyMac Mortgage Investment Trust | 73,361 | a,c | 1,635,217 | ||||
Piper Jaffray | 10,484 | 838,091 | |||||
PRA Group | 33,361 | a,b | 1,211,004 | ||||
Ready Capital | 25,600 | a,c | 394,752 | ||||
Redwood Trust | 82,542 | c | 1,365,245 | ||||
Virtus Investment Partners | 4,857 | a | 591,194 | ||||
Waddell & Reed Financial, Cl. A | 51,444 | a | 860,144 | ||||
WisdomTree Investments | 88,240 | 427,082 | |||||
World Acceptance | 4,079 | a,b | 352,426 | ||||
19,621,202 | |||||||
Energy - 4.2% | |||||||
Archrock | 92,018 | 923,861 | |||||
Bonanza Creek Energy | 14,200 | a,b | 331,428 | ||||
Callon Petroleum | 285,987 | a,b | 1,381,315 | ||||
CONSOL Energy | 17,793 | b | 258,176 | ||||
Denbury Resources | 349,650 | a,b | 493,007 | ||||
Diamond Offshore Drilling | 50,440 | a,b | 362,664 | ||||
DMC Global | 10,772 | a | 484,094 | ||||
Dril-Quip | 26,108 | b | 1,224,726 | ||||
Era Group | 14,812 | b | 150,638 | ||||
Exterran | 22,128 | b | 173,262 | ||||
Geospace Technologies | 11,046 | b | 185,241 | ||||
Green Plains | 24,515 | a | 378,266 | ||||
Gulfport Energy | 102,756 | a,b | 312,378 | ||||
Helix Energy Solutions Group | 102,590 | b | 987,942 | ||||
HighPoint Resources | 83,872 | b | 141,744 | ||||
Jagged Peak Energy | 44,217 | a,b | 375,402 | ||||
KLX Energy Services Holdings | 17,186 | b | 110,678 | ||||
Laredo Petroleum | 126,379 | a,b | 362,708 | ||||
Matrix Service | 19,845 | b | 454,054 | ||||
McDermott International | 129,962 | a,b | 87,932 | ||||
Nabors Industries | 245,902 | 708,198 | |||||
Newpark Resources | 63,955 | a,b | 400,998 | ||||
Noble | 188,799 | b | 230,335 | ||||
Oasis Petroleum | 192,952 | a,b | 629,024 | ||||
Oceaneering International | 73,289 | b | 1,092,739 | ||||
Oil States International | 44,090 | b | 719,108 | ||||
Par Pacific Holdings | 26,735 | b | 621,321 | ||||
PDC Energy | 42,412 | a,b | 1,109,922 | ||||
Penn Virginia | 10,148 | b | 307,992 | ||||
ProPetro Holding | 58,709 | b | 660,476 |
13
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% (continued) | |||||||
Energy - 4.2% (continued) | |||||||
QEP Resources | 173,103 | 778,963 | |||||
Range Resources | 148,220 | a | 718,867 | ||||
Renewable Energy Group | 28,191 | a,b | 759,747 | ||||
REX American Resources | 3,833 | b | 314,153 | ||||
Ring Energy | 44,566 | a,b | 117,654 | ||||
RPC | 38,561 | a,b | 202,060 | ||||
SEACOR Holdings | 12,691 | b | 547,617 | ||||
SM Energy | 78,404 | 881,261 | |||||
Southwestern Energy | 372,793 | a,b | 902,159 | ||||
SRC Energy | 175,572 | b | 723,357 | ||||
Talos Energy | 15,100 | a,b | 455,265 | ||||
TETRA Technologies | 96,062 | b | 188,282 | ||||
US Silica Holdings | 54,697 | a | 336,387 | ||||
Valaris | 144,155 | a | 945,657 | ||||
Whiting Petroleum | 64,289 | a,b | 471,881 | ||||
24,002,939 | |||||||
Food & Staples Retailing - .6% | |||||||
PriceSmart | 16,394 | 1,164,302 | |||||
SpartanNash | 27,486 | 391,401 | |||||
The Andersons | 23,821 | 602,195 | |||||
The Chefs' Warehouse | 18,748 | b | 714,486 | ||||
United Natural Foods | 38,562 | a,b | 337,803 | ||||
3,210,187 | |||||||
Food, Beverage & Tobacco - 2.4% | |||||||
B&G Foods | 45,876 | a | 822,557 | ||||
Calavo Growers | 11,843 | a | 1,072,857 | ||||
Cal-Maine Foods | 21,966 | a | 939,046 | ||||
Coca-Cola Consolidated | 3,454 | 981,109 | |||||
Darling Ingredients | 119,123 | b | 3,344,974 | ||||
Fresh Del Monte Produce | 22,500 | 787,050 | |||||
J&J Snack Foods | 11,008 | a | 2,028,444 | ||||
John B. Sanfilippo & Son | 6,327 | 577,529 | |||||
MGP Ingredients | 9,462 | 458,434 | |||||
National Beverage | 8,678 | a,b | 442,752 | ||||
Seneca Foods, Cl. A | 4,933 | b | 201,217 | ||||
Universal | 17,842 | 1,018,065 | |||||
Vector Group | 82,949 | 1,110,687 | |||||
13,784,721 | |||||||
Health Care Equipment & Services - 7.6% | |||||||
Addus HomeCare | 9,758 | b | 948,673 | ||||
AMN Healthcare Services | 34,502 | b | 2,149,820 | ||||
AngioDynamics | 28,392 | b | 454,556 | ||||
BioTelemetry | 24,629 | a,b | 1,140,323 |
14
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% (continued) | |||||||
Health Care Equipment & Services - 7.6% (continued) | |||||||
Cardiovascular Systems | 25,918 | b | 1,259,356 | ||||
Community Health Systems | 88,237 | a,b | 255,887 | ||||
Computer Programs & Systems | 9,505 | 250,932 | |||||
CONMED | 20,940 | 2,341,720 | |||||
CorVel | 6,622 | b | 578,498 | ||||
Covetrus | 72,311 | a,b | 954,505 | ||||
Cross Country Healthcare | 27,943 | b | 324,698 | ||||
CryoLife | 27,637 | b | 748,686 | ||||
Cutera | 10,140 | b | 363,113 | ||||
Diplomat Pharmacy | 43,913 | b | 175,652 | ||||
Hanger | 26,686 | b | 736,800 | ||||
HealthStream | 18,341 | b | 498,875 | ||||
Heska | 5,162 | a,b | 495,242 | ||||
HMS Holdings | 64,610 | b | 1,912,456 | ||||
Inogen | 13,454 | b | 919,312 | ||||
Integer Holdings | 23,853 | b | 1,918,497 | ||||
Invacare | 25,069 | 226,122 | |||||
Lantheus Holdings | 28,416 | b | 582,812 | ||||
LeMaitre Vascular | 12,409 | a | 446,104 | ||||
LHC Group | 21,666 | b | 2,984,708 | ||||
Magellan Health | 15,788 | b | 1,235,411 | ||||
Meridian Bioscience | 32,265 | 315,229 | |||||
Merit Medical Systems | 40,081 | b | 1,251,329 | ||||
Mesa Laboratories | 2,978 | a | 742,713 | ||||
Natus Medical | 25,376 | b | 837,154 | ||||
Neogen | 38,294 | b | 2,499,066 | ||||
NextGen Healthcare | 35,894 | b | 576,817 | ||||
Omnicell | 30,816 | b | 2,518,284 | ||||
OraSure Technologies | 47,346 | b | 380,188 | ||||
Orthofix Medical | 14,087 | b | 650,538 | ||||
Owens & Minor | 47,605 | 246,118 | |||||
RadNet | 30,632 | b | 621,830 | ||||
Select Medical Holdings | 77,848 | b | 1,816,972 | ||||
SurModics | 9,601 | b | 397,769 | ||||
Tabula Rasa HealthCare | 14,069 | a,b | 684,879 | ||||
Tactile Systems Technology | 13,967 | a,b | 942,912 | ||||
The Ensign Group | 37,017 | 1,679,461 | |||||
The Pennant Group | 18,735 | b | 619,566 | ||||
The Providence Service | 8,387 | b | 496,343 | ||||
Tivity Health | 32,173 | a,b | 654,560 | ||||
U.S. Physical Therapy | 9,388 | a | 1,073,518 | ||||
Varex Imaging | 27,499 | b | 819,745 | ||||
43,727,749 |
15
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% (continued) | |||||||
Household & Personal Products - 1.3% | |||||||
Avon Products | 321,034 | 1,810,632 | |||||
Central Garden & Pet | 6,791 | b | 210,996 | ||||
Central Garden & Pet, Cl. A | 28,802 | b | 845,627 | ||||
Inter Parfums | 12,916 | 939,122 | |||||
Medifast | 8,668 | a | 949,839 | ||||
USANA Health Sciences | 8,962 | b | 703,965 | ||||
WD-40 | 10,113 | a | 1,963,338 | ||||
7,423,519 | |||||||
Insurance - 2.6% | |||||||
Ambac Financial Group | 32,825 | b | 708,035 | ||||
American Equity Investment Life Holding | 66,679 | 1,995,702 | |||||
AMERISAFE | 14,136 | 933,400 | |||||
eHealth | 14,720 | b | 1,414,298 | ||||
Employers Holdings | 22,881 | 955,282 | |||||
HCI Group | 4,326 | 197,482 | |||||
Horace Mann Educators | 29,767 | 1,299,627 | |||||
James River Group Holdings | 22,197 | 914,738 | |||||
Kinsale Captial Group | 15,159 | 1,541,064 | |||||
ProAssurance | 39,167 | 1,415,495 | |||||
Safety Insurance Group | 10,641 | 984,612 | |||||
Stewart Information Services | 17,755 | 724,226 | |||||
Third Point Reinsurance | 58,076 | b | 610,960 | ||||
United Fire Group | 15,512 | 678,340 | |||||
United Insurance Holdings | 16,471 | 207,699 | |||||
Universal Insurance Holdings | 21,765 | 609,202 | |||||
15,190,162 | |||||||
Materials - 4.9% | |||||||
AdvanSix | 20,669 | b | 412,553 | ||||
AK Steel Holding | 228,177 | a,b | 750,702 | ||||
American Vanguard | 19,349 | a | 376,725 | ||||
Balchem | 23,648 | 2,403,346 | |||||
Boise Cascade | 28,590 | 1,044,393 | |||||
Century Aluminum | 37,238 | a,b | 279,844 | ||||
Clearwater Paper | 12,887 | b | 275,266 | ||||
Cleveland-Cliffs | 197,484 | a | 1,658,866 | ||||
Ferro | 60,897 | b | 903,103 | ||||
FutureFuel | 18,697 | 231,656 | |||||
GCP Applied Technologies | 38,633 | b | 877,355 | ||||
H.B. Fuller | 37,222 | 1,919,539 | |||||
Hawkins | 7,070 | 323,877 | |||||
Haynes International | 9,361 | 334,937 | |||||
Innophos Holdings | 14,061 | 449,671 |
16
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% (continued) | |||||||
Materials - 4.9% (continued) | |||||||
Innospec | 17,860 | 1,847,438 | |||||
Kaiser Aluminum | 11,643 | 1,291,092 | |||||
Koppers Holdings | 15,385 | b | 588,015 | ||||
Kraton | 23,491 | b | 594,792 | ||||
Livent | 105,931 | a,b | 905,710 | ||||
LSB Industries | 14,961 | a,b | 62,836 | ||||
Materion | 15,150 | 900,667 | |||||
Mercer International | 29,879 | 367,512 | |||||
Myers Industries | 25,647 | 427,792 | |||||
Neenah | 12,529 | 882,417 | |||||
Olympic Steel | 7,105 | 127,322 | |||||
P.H. Glatfelter | 33,229 | 608,091 | |||||
Quaker Chemical | 9,431 | a | 1,551,588 | ||||
Rayonier Advanced Materials | 38,574 | a | 148,124 | ||||
Schweitzer-Mauduit International | 22,953 | 963,796 | |||||
Stepan | 14,476 | 1,482,921 | |||||
SunCoke Energy | 66,267 | 412,843 | |||||
TimkenSteel | 29,890 | b | 234,935 | ||||
Tredegar | 18,379 | 410,771 | |||||
Trinseo | 28,206 | 1,049,545 | |||||
US Concrete | 11,747 | b | 489,380 | ||||
Warrior Met Coal | 36,912 | 779,951 | |||||
28,369,371 | |||||||
Media & Entertainment - .7% | |||||||
Care.com | 20,337 | b | 305,665 | ||||
Gannett | 88,830 | a | 566,735 | ||||
Glu Mobile | 86,405 | b | 522,750 | ||||
QuinStreet | 32,868 | a,b | 503,209 | ||||
Scholastic | 22,208 | 853,898 | |||||
TechTarget | 16,890 | b | 440,829 | ||||
The E.W. Scripps Company, Cl. A | 39,063 | a | 613,680 | ||||
The Marcus | 16,720 | 531,194 | |||||
4,337,960 | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 4.6% | |||||||
Acorda Therapeutics | 29,983 | a,b | 61,165 | ||||
Akorn | 72,917 | b | 109,376 | ||||
AMAG Pharmaceuticals | 23,930 | b | 291,228 | ||||
Amphastar Pharmaceuticals | 25,714 | a,b | 496,023 | ||||
ANI Pharmaceuticals | 6,746 | b | 416,026 | ||||
Anika Therapeutics | 10,430 | b | 540,796 | ||||
Corcept Therapeutics | 76,085 | a,b | 920,628 | ||||
Cytokinetics | 42,963 | b | 455,837 | ||||
Eagle Pharmaceuticals | 7,407 | b | 445,013 |
17
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% (continued) | |||||||
Pharmaceuticals Biotechnology & Life Sciences - 4.6% (continued) | |||||||
Emergent BioSolutions | 32,043 | b | 1,728,720 | ||||
Enanta Pharmaceuticals | 11,844 | b | 731,722 | ||||
Endo International | 149,799 | b | 702,557 | ||||
Innoviva | 49,698 | b | 703,724 | ||||
Lannett | 25,876 | a,b | 228,226 | ||||
Luminex | 30,167 | 698,668 | |||||
Medpace Holdings | 20,092 | a,b | 1,688,934 | ||||
Momenta Pharmaceuticals | 83,174 | b | 1,641,023 | ||||
Myriad Genetics | 54,949 | a,b | 1,496,261 | ||||
NeoGenomics | 75,801 | a,b | 2,217,179 | ||||
Pacira Biosciences | 30,627 | b | 1,387,403 | ||||
Phibro Animal Health, Cl. A | 14,772 | 366,789 | |||||
Progenics Pharmaceuticals | 62,818 | a,b | 319,744 | ||||
REGENXBIO | 22,479 | a,b | 920,965 | ||||
Spectrum Pharmaceuticals | 82,294 | b | 299,550 | ||||
Supernus Pharmaceuticals | 39,064 | b | 926,598 | ||||
The Medicines Company | 54,584 | a,b | 4,636,365 | ||||
Vanda Pharmaceuticals | 40,045 | b | 657,138 | ||||
Xencor | 36,235 | b | 1,246,122 | ||||
26,333,780 | |||||||
Real Estate - 7.3% | |||||||
Acadia Realty Trust | 63,692 | c | 1,651,534 | ||||
Agree Realty | 31,126 | c | 2,184,111 | ||||
American Assets Trust | 34,834 | c | 1,598,881 | ||||
Armada Hoffler Properties | 40,457 | c | 742,386 | ||||
CareTrust REIT | 69,586 | c | 1,435,559 | ||||
CBL & Associates Properties | 134,331 | a,c | 141,048 | ||||
Cedar Realty Trust | 67,862 | c | 200,193 | ||||
Chatham Lodging Trust | 33,726 | c | 618,535 | ||||
Community Healthcare Trust | 13,533 | c | 580,024 | ||||
DiamondRock Hospitality | 145,830 | c | 1,615,796 | ||||
Easterly Government Properties | 54,239 | c | 1,287,091 | ||||
Essential Properties Realty Trust | 59,063 | a,c | 1,465,353 | ||||
Four Corners Property Trust | 49,870 | c | 1,405,835 | ||||
Franklin Street Properties | 78,758 | c | 674,168 | ||||
Getty Realty | 24,699 | c | 811,856 | ||||
Global Net Lease | 65,765 | a,c | 1,333,714 | ||||
Hersha Hospitality Trust | 25,084 | a,c | 364,972 | ||||
Independence Realty Trust | 65,413 | c | 921,015 | ||||
Industrial Logistics Properties Trust | 47,900 | c | 1,073,918 | ||||
Innovative Industrial Properties | 8,373 | a,c | 635,260 | ||||
iStar | 44,052 | a,c | 639,195 |
18
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% (continued) | |||||||
Real Estate - 7.3% (continued) | |||||||
Kite Realty Group Trust | 61,604 | c | 1,203,126 | ||||
Lexington Realty Trust | 183,169 | c | 1,945,255 | ||||
LTC Properties | 28,693 | a,c | 1,284,586 | ||||
Marcus & Millichap | 17,073 | a,b | 635,969 | ||||
National Storage Affiliates Trust | 42,872 | c | 1,441,357 | ||||
Office Properties Income Trust | 35,345 | a,c | 1,135,988 | ||||
Pennsylvania Real Estate Investment Trust | 39,505 | a,c | 210,562 | ||||
RE/MAX Holdings, Cl. A | 12,910 | 496,906 | |||||
Realogy Holdings | 82,928 | a | 802,743 | ||||
Retail Opportunity Investments | 85,067 | c | 1,502,283 | ||||
RPT Realty | 57,823 | a,c | 869,658 | ||||
Safehold | 9,044 | a,c | 364,473 | ||||
Saul Centers | 8,707 | c | 459,555 | ||||
Summit Hotel Properties | 78,099 | a,c | 963,742 | ||||
The St. Joe Company | 23,424 | b | 464,498 | ||||
Uniti Group | 135,062 | a,c | 1,108,859 | ||||
Universal Health Realty Income Trust | 9,401 | c | 1,103,301 | ||||
Urstadt Biddle Properties, Cl. A | 21,440 | c | 532,570 | ||||
Washington Prime Group | 141,089 | a,c | 513,564 | ||||
Washington Real Estate Investment Trust | 58,669 | c | 1,711,961 | ||||
Whitestone REIT | 30,225 | c | 411,665 | ||||
Xenia Hotels & Resorts | 82,281 | a,c | 1,778,092 | ||||
42,321,157 | |||||||
Retailing - 4.4% | |||||||
Abercrombie & Fitch, Cl. A | 47,076 | 813,944 | |||||
Asbury Automotive Group | 14,101 | a,b | 1,576,351 | ||||
Barnes & Noble Education | 27,435 | b | 117,147 | ||||
Big Lots | 27,951 | a | 802,753 | ||||
Boot Barn Holdings | 20,626 | a,b | 918,476 | ||||
Caleres | 29,027 | a | 689,391 | ||||
Chico's FAS | 86,457 | a | 329,401 | ||||
Conn's | 14,431 | b | 178,800 | ||||
Core-Mark Holding | 33,658 | 915,161 | |||||
Designer Brands, Cl. A | 41,108 | a | 647,040 | ||||
Express | 49,800 | a,b | 242,526 | ||||
Foundation Building Materials | 12,887 | b | 249,363 | ||||
GameStop, Cl. A | 44,236 | a | 268,955 | ||||
Genesco | 10,220 | a,b | 489,742 | ||||
Group 1 Automotive | 12,846 | a | 1,284,600 | ||||
Guess? | 32,042 | 717,100 | |||||
Haverty Furniture | 13,545 | 273,067 |
19
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% (continued) | |||||||
Retailing - 4.4% (continued) | |||||||
Hibbett Sports | 13,370 | a,b | 374,895 | ||||
J.C. Penney | 210,504 | a,b | 235,764 | ||||
Liquidity Services | 18,877 | b | 112,507 | ||||
Lithia Motors, Cl. A | 16,621 | a | 2,443,287 | ||||
Lumber Liquidators Holdings | 21,741 | b | 212,410 | ||||
MarineMax | 15,023 | b | 250,734 | ||||
Monro | 24,530 | a | 1,918,246 | ||||
Office Depot | 397,616 | 1,089,468 | |||||
PetMed Express | 13,859 | a | 325,964 | ||||
Rent-A-Center | 36,124 | 1,041,816 | |||||
Shoe Carnival | 6,686 | a | 249,254 | ||||
Shutterstock | 13,852 | a,b | 593,974 | ||||
Signet Jewelers | 38,034 | 826,859 | |||||
Sleep Number | 20,440 | a,b | 1,006,466 | ||||
Sonic Automotive, Cl. A | 17,632 | 546,592 | |||||
Stamps.com | 11,959 | b | 998,816 | ||||
Tailored Brands | 38,073 | a | 157,622 | ||||
The Buckle | 21,415 | a | 579,062 | ||||
The Cato, Cl. A | 16,333 | 284,194 | |||||
The Children's Place | 11,404 | a | 712,978 | ||||
The Michaels Companies | 58,539 | a,b | 473,581 | ||||
Zumiez | 14,730 | b | 508,774 | ||||
25,457,080 | |||||||
Semiconductors & Semiconductor Equipment - 3.5% | |||||||
Advanced Energy Industries | 27,995 | b | 1,993,244 | ||||
Axcelis Technologies | 24,523 | b | 590,882 | ||||
Brooks Automation | 52,486 | 2,202,313 | |||||
CEVA | 15,643 | b | 421,735 | ||||
Cohu | 29,570 | 675,674 | |||||
Diodes | 30,437 | b | 1,715,734 | ||||
DSP Group | 15,233 | b | 239,767 | ||||
FormFactor | 55,935 | b | 1,452,632 | ||||
Ichor Holdings | 16,599 | b | 552,249 | ||||
Kulicke & Soffa Industries | 47,103 | 1,281,202 | |||||
MaxLinear | 48,487 | b | 1,028,894 | ||||
Onto Innovation | 35,650 | b | 1,302,651 | ||||
PDF Solutions | 20,701 | b | 349,640 | ||||
Photronics | 48,853 | b | 769,923 | ||||
Power Integrations | 21,683 | 2,144,666 | |||||
Rambus | 81,641 | b | 1,124,605 | ||||
SMART Global Holdings | 9,355 | b | 354,929 | ||||
Ultra Clean Holdings | 29,203 | a,b | 685,394 | ||||
Veeco Instruments | 35,177 | b | 516,574 |
20
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% (continued) | |||||||
Semiconductors & Semiconductor Equipment - 3.5% (continued) | |||||||
Xperi | 36,661 | 678,228 | |||||
20,080,936 | |||||||
Software & Services - 4.5% | |||||||
8x8 | 72,329 | a,b | 1,323,621 | ||||
Agilysys | 14,912 | b | 378,914 | ||||
Alarm.com Holdings | 26,772 | a,b | 1,150,393 | ||||
Bottomline Technologies | 28,058 | b | 1,503,909 | ||||
Cardtronics, Cl. A | 26,717 | a,b | 1,192,914 | ||||
CSG Systems International | 24,260 | 1,256,183 | |||||
Ebix | 16,878 | a | 563,894 | ||||
Evertec | 43,501 | 1,480,774 | |||||
ExlService Holdings | 24,966 | b | 1,734,138 | ||||
LivePerson | 45,024 | a,b | 1,665,888 | ||||
ManTech International, Cl. A | 19,557 | 1,562,213 | |||||
MicroStrategy, Cl. A | 5,917 | b | 843,942 | ||||
NIC | 49,132 | 1,098,100 | |||||
OneSpan | 23,940 | b | 409,853 | ||||
Perficient | 23,473 | b | 1,081,401 | ||||
Progress Software | 32,924 | 1,367,992 | |||||
Qualys | 24,182 | a,b | 2,016,053 | ||||
SPS Commerce | 25,689 | b | 1,423,684 | ||||
Sykes Enterprises | 27,727 | b | 1,025,622 | ||||
TiVo | 94,793 | 803,845 | |||||
TTEC Holdings | 12,929 | 512,247 | |||||
Unisys | 36,889 | b | 437,504 | ||||
Virtusa | 21,740 | b | 985,474 | ||||
25,818,558 | |||||||
Technology Hardware & Equipment - 5.7% | |||||||
3D Systems | 88,445 | a,b | 773,894 | ||||
ADTRAN | 36,155 | 357,573 | |||||
Anixter International | 21,941 | b | 2,020,766 | ||||
Applied Optoelectronics | 14,624 | a,b | 173,733 | ||||
Arlo Technologies | 56,855 | a,b | 239,360 | ||||
Badger Meter | 21,416 | a | 1,390,541 | ||||
Bel Fuse, Cl. B | 7,659 | 157,010 | |||||
Benchmark Electronics | 27,960 | 960,706 | |||||
CalAmp | 24,833 | b | 237,900 | ||||
Comtech Telecommunications | 17,983 | 638,216 | |||||
CTS | 24,280 | 728,643 | |||||
Daktronics | 27,892 | 169,862 | |||||
Diebold Nixdorf | 57,698 | a,b | 609,291 | ||||
Digi International | 19,990 | b | 354,223 |
21
STATEMENT OF INVESTMENTS (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% (continued) | |||||||
Technology Hardware & Equipment - 5.7% (continued) | |||||||
ePlus | 9,810 | b | 826,885 | ||||
Extreme Networks | 90,279 | b | 665,356 | ||||
Fabrinet | 26,909 | b | 1,744,780 | ||||
FARO Technologies | 12,887 | b | 648,860 | ||||
Harmonic | 65,068 | b | 507,530 | ||||
Insight Enterprises | 26,105 | b | 1,834,920 | ||||
Itron | 25,962 | b | 2,179,510 | ||||
KEMET | 43,112 | 1,166,180 | |||||
Knowles | 63,078 | b | 1,334,100 | ||||
Methode Electronics | 26,765 | 1,053,203 | |||||
MTS Systems | 12,875 | 618,386 | |||||
NETGEAR | 21,347 | b | 523,215 | ||||
OSI Systems | 12,464 | b | 1,255,623 | ||||
Plantronics | 23,706 | a | 648,122 | ||||
Plexus | 21,127 | b | 1,625,511 | ||||
Rogers | 13,713 | b | 1,710,422 | ||||
Sanmina | 50,746 | b | 1,737,543 | ||||
ScanSource | 18,787 | b | 694,180 | ||||
TTM Technologies | 70,560 | a,b | 1,061,928 | ||||
Viavi Solutions | 167,325 | b | 2,509,875 | ||||
33,157,847 | |||||||
Telecommunication Services - 1.3% | |||||||
ATN International | 7,670 | 424,841 | |||||
Cincinnati Bell | 38,380 | a,b | 401,839 | ||||
Cogent Communications Holdings | 30,679 | 2,018,985 | |||||
Consolidated Communications Holdings | 52,851 | a | 205,062 | ||||
Iridium Communications | 71,487 | a,b | 1,761,440 | ||||
Shenandoah Telecommunication | 34,642 | 1,441,454 | |||||
Spok Holdings | 12,866 | 157,351 | |||||
Vonage Holdings | 165,539 | b | 1,226,644 | ||||
7,637,616 | |||||||
Transportation - 2.4% | |||||||
Allegiant Travel | 9,630 | 1,676,005 | |||||
ArcBest | 18,971 | 523,600 | |||||
Atlas Air Worldwide Holdings | 19,394 | b | 534,693 | ||||
Echo Global Logistics | 19,443 | b | 402,470 | ||||
Forward Air | 20,866 | 1,459,577 | |||||
Hawaiian Holdings | 34,424 | a | 1,008,279 | ||||
Heartland Express | 34,739 | 731,256 | |||||
Hub Group, Cl. A | 24,549 | b | 1,259,118 | ||||
Marten Transport | 27,894 | 599,442 | |||||
Matson | 31,512 | 1,285,690 | |||||
Saia | 19,126 | b | 1,781,013 |
22
Description | Shares | Value ($) | |||||
Common Stocks - 99.1% (continued) | |||||||
Transportation - 2.4% (continued) | |||||||
SkyWest | 36,620 | 2,366,751 | |||||
13,627,894 | |||||||
Utilities - 2.1% | |||||||
American States Water | 26,915 | a | 2,331,916 | ||||
Avista | 48,937 | 2,353,380 | |||||
California Water Service Group | 35,470 | a | 1,828,833 | ||||
El Paso Electric | 29,544 | 2,005,742 | |||||
Northwest Natural Holding | 22,180 | 1,635,331 | |||||
South Jersey Industries | 67,064 | a | 2,211,771 | ||||
12,366,973 | |||||||
Total Common Stocks(cost $426,995,056) | 571,113,885 | ||||||
Exchange-Traded Funds - .7% | |||||||
Registered Investment Companies - .7% | |||||||
iShares Core S&P Small-Cap ETF | 52,176 | a | 4,374,958 | ||||
Number of Rights | |||||||
Rights - .0% | |||||||
Materials - .0% | |||||||
A. Schulman | 22,372 | 0 | |||||
Principal Amount ($) | |||||||
Short-Term Investments - .0% | |||||||
U.S. Treasury Bills - .0% | |||||||
1.54%, 3/12/20 | 60,000 | d,e | 59,825 | ||||
1-Day | Shares | ||||||
Investment Companies - .0% | |||||||
Registered Investment Companies - .0% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1.60 | 195,402 | f | 195,402 |
23
STATEMENT OF INVESTMENTS (continued)
Description | 1-Day | Shares | Value ($) | ||||
Investment of Cash Collateral for Securities Loaned - 2.3% | |||||||
Registered Investment Companies - 2.3% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1.60 | 13,048,576 | f | 13,048,576 | |||
Total Investments(cost $444,653,025) | 102.1% | 588,792,646 | |||||
Liabilities, Less Cash and Receivables | (2.1%) | (12,284,422) | |||||
Net Assets | 100.0% | 576,508,224 |
ETF—Exchange-Traded Fund
REIT—Real Estate Investment Trust
aSecurity, or portion thereof, on loan. At December 31, 2019, the value of the fund’s securities on loan was $131,511,136 and the value of the collateral was $133,917,795, consisting of cash collateral of $13,048,576 and U.S. Government & Agency securities valued at $120,869,219.
bNon-income producing security.
cInvestment in real estate investment trust within the United States.
dHeld by a counterparty for open exchange traded derivative contracts.
eSecurity is a discount security. Income is recognized through the accretion of discount.
fInvestment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
Portfolio Summary (Unaudited)† | Value (%) |
Industrials | 17.4 |
Financials | 17.4 |
Information Technology | 13.7 |
Consumer Discretionary | 13.5 |
Health Care | 12.2 |
Real Estate | 7.3 |
Materials | 5.0 |
Consumer Staples | 4.2 |
Energy | 4.2 |
Investment Companies | 3.0 |
Utilities | 2.1 |
Communication Services | 2.1 |
Government | .0 |
102.1 |
† Based on net assets.
See notes to financial statements.
24
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS
Investment Companies | Value | Purchases ($) | Sales ($) | Value | Net | Dividends/ |
Registered Investment Companies | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 2,787,245 | 64,263,358 | 66,855,201 | 195,402 | .0 | 34,136 |
Investment of Cash Collateral for Securities Loaned: | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 11,321,620 | 94,016,950 | 92,289,994 | 13,048,576 | 2.3 | - |
Total | 14,108,865 | 158,280,308 | 159,145,195 | 13,243,978 | 2.3 | 34,136 |
See notes to financial statements.
25
STATEMENT OF FUTURES
December 31, 2019
Description | Number of | Expiration | Notional | Value ($) | Unrealized (Depreciation) ($) | |
Futures Long | ||||||
E-mini Russell 2000 | 16 | 3/20/2020 | 1,336,769 | 1,336,480 | (289) | |
Gross Unrealized Depreciation | (289) |
See notes to financial statements.
26
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2019
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 431,409,047 |
| 575,548,668 |
| ||
Affiliated issuers |
| 13,243,978 |
| 13,243,978 |
| |
Receivable for investment securities sold |
| 3,398,209 |
| |||
Dividends, interest and securities lending income receivable |
| 781,608 |
| |||
Receivable for shares of Beneficial Interest subscribed |
| 288,497 |
| |||
Receivable for futures variation margin—Note 4 |
| 1,760 |
| |||
|
|
|
|
| 593,262,720 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(b) |
| 284,514 |
| |||
Cash overdraft due to Custodian |
|
|
|
| 158,244 |
|
Liability for securities on loan—Note 1(b) |
| 13,048,576 |
| |||
Payable for investment securities purchased |
| 2,614,979 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 641,069 |
| |||
Trustees’ fees and expenses payable |
| 5,215 |
| |||
Interest payable—Note 2 |
| 1,899 |
| |||
|
|
|
|
| 16,754,496 |
|
Net Assets ($) |
|
| 576,508,224 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 405,719,273 |
|
Total distributable earnings (loss) |
|
|
|
| 170,788,951 |
|
Net Assets ($) |
|
| 576,508,224 |
|
Shares Outstanding |
|
| ||
(unlimited number of $.001 par value shares of Beneficial Interest authorized) | 30,254,699 |
| ||
Net Asset Value Per Share ($) |
| 19.06 |
| |
|
|
|
|
|
See notes to financial statements. |
|
|
|
|
27
STATEMENT OF OPERATIONS
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends (net of $3,273 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 8,282,948 |
| ||
Affiliated issuers |
|
| 34,136 |
| ||
Income from securities lending—Note 1(b) |
|
| 315,920 |
| ||
Interest |
|
| 4,048 |
| ||
Total Income |
|
| 8,637,052 |
| ||
Expenses: |
|
|
|
| ||
Management fee—Note 3(a) |
|
| 1,956,011 |
| ||
Distribution fees—Note 3(b) |
|
| 1,397,151 |
| ||
Trustees’ fees—Note 3(a,c) |
|
| 44,550 |
| ||
Loan commitment fees—Note 2 |
|
| 15,365 |
| ||
Interest expense—Note 2 |
|
| 1,899 |
| ||
Total Expenses |
|
| 3,414,976 |
| ||
Less—Trustees’ fees reimbursed by |
|
| (44,550) |
| ||
Net Expenses |
|
| 3,370,426 |
| ||
Investment Income—Net |
|
| 5,266,626 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 27,797,374 |
| ||||
Net realized gain (loss) on futures | 219,454 |
| ||||
Net Realized Gain (Loss) |
|
| 28,016,828 |
| ||
Net change in unrealized appreciation (depreciation) on investments | 76,714,804 |
| ||||
Net change in unrealized appreciation (depreciation) on futures | 105,469 |
| ||||
Net Change in Unrealized Appreciation (Depreciation) |
|
| 76,820,273 |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 104,837,101 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 110,103,727 |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
28
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Year Ended December 31, | |||||
|
|
|
| 2019 |
| 2018 |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 5,266,626 |
|
|
| 4,873,727 |
| |
Net realized gain (loss) on investments |
| 28,016,828 |
|
|
| 45,312,922 |
| ||
Net change in unrealized appreciation |
| 76,820,273 |
|
|
| (101,851,735) |
| ||
Net Increase (Decrease) in Net Assets | 110,103,727 |
|
|
| (51,665,086) |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders |
|
| (51,447,582) |
|
|
| (35,748,989) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold |
|
| 53,986,435 |
|
|
| 100,526,735 |
| |
Distributions reinvested |
|
| 51,447,582 |
|
|
| 35,748,989 |
| |
Cost of shares redeemed |
|
| (97,277,046) |
|
|
| (101,180,124) |
| |
Increase (Decrease) in Net Assets | 8,156,971 |
|
|
| 35,095,600 |
| |||
Total Increase (Decrease) in Net Assets | 66,813,116 |
|
|
| (52,318,475) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 509,695,108 |
|
|
| 562,013,583 |
| |
End of Period |
|
| 576,508,224 |
|
|
| 509,695,108 |
| |
Capital Share Transactions (Shares): |
| ||||||||
Shares sold |
|
| 3,009,705 |
|
|
| 5,002,002 |
| |
Shares issued for distributions reinvested |
|
| 2,958,457 |
|
|
| 1,837,050 |
| |
Shares redeemed |
|
| (5,403,137) |
|
|
| (5,081,360) |
| |
Net Increase (Decrease) in Shares Outstanding | 565,025 |
|
|
| 1,757,692 |
| |||
|
|
|
|
|
|
|
|
|
|
See notes to financial statements. |
29
FINANCIAL HIGHLIGHTS
The following table describes the performance for the fiscal periods indicated. 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. The fund’s total returns do not reflect expenses associated with variable annuity or insurance contracts. These figures have been derived from the fund’s financial statements.
Year Ended December 31, | ||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 17.17 | 20.12 | 18.88 | 16.71 | 18.40 | |||||
Investment Operations: | ||||||||||
Investment income—neta | .17 | .17 | .16 | .16 | .16 | |||||
Net realized and unrealized | 3.48 | (1.82) | 2.04 | 3.69 | (.53) | |||||
Total from Investment Operations | 3.65 | (1.65) | 2.20 | 3.85 | (.37) | |||||
Distributions: | ||||||||||
Dividends from | (.17) | (.17) | (.13) | (.16) | (.13) | |||||
Dividends from net realized | (1.59) | (1.13) | (.83) | (1.52) | (1.19) | |||||
Total Distributions | (1.76) | (1.30) | (.96) | (1.68) | (1.32) | |||||
Net asset value, end of period | 19.06 | 17.17 | 20.12 | 18.88 | 16.71 | |||||
Total Return (%) | 22.21 | (8.98) | 12.40 | 25.73 | (2.33) | |||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | .61 | .61 | .63 | .63 | .63 | |||||
Ratio of net expenses | .60 | .60 | .60 | .60 | .60 | |||||
Ratio of net investment income | .94 | .82 | .88 | .95 | .90 | |||||
Portfolio Turnover Rate | 28.13 | 23.26 | 16.90 | 24.24 | 19.72 | |||||
Net Assets, end of period ($ x 1,000) | 576,508 | 509,695 | 562,014 | 535,603 | 307,701 |
a Based on average shares outstanding.
See notes to financial statements.
30
NOTES TO FINANCIAL STATEMENTS
NOTE 1—Significant Accounting Policies:
Small Cap Stock Index Portfolio (the “fund”) is a separate diversified series of BNY Mellon Investment Portfolios (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 four series, including the fund. The fund is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The fund’s investment objective is to seek to match the performance of the S&P SmallCap 600®Index. 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. BNY Mellon Securities Corporation (the “Distributor”), a wholly-owned subsidiary of the Adviser, is the distributor of the fund’s shares, which are sold to the public without a sales charge.
Effective June 3, 2019, the Company changed its name from Dreyfus Investment Portfolios to BNY Mellon Investment Portfolios. 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.”
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund 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 Companyenters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these
31
NOTES TO FINANCIAL STATEMENTS(continued)
arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in 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
32
value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. U.S. Treasury Bills are valued at the mean price between quoted bid prices and asked prices by an independent pricing service (the “Service”) approved by the Company’s Board of Trustees (the “Board”). These securities are generally categorized within Level 2 of the fair value hierarchy.
The Service is engaged under the general oversight of the Board.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant American Depository Receipts and 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 Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
Futures, which are traded on an exchange, are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day and are generally categorized within Level 1 of the fair value hierarchy.
The following is a summary of the inputs used as of December 31, 2019in valuing the fund’s investments:
33
NOTES TO FINANCIAL STATEMENTS(continued)
Level 1 – Unadjusted | Level 2 - Other Significant Observable | Level 3 -Significant Unobservable | Total | ||
Assets ($) | |||||
Investments in Securities:† | |||||
Equity Securities— | 571,113,885 | - | - | 571,113,885 | |
Exchange-Traded Funds | 4,374,958 | - | - | 4,374,958 | |
Investment Companies | 13,243,978 | - | - | 13,243,978 | |
Rights | - | 0†† | - | 0 | |
U.S. Treasury Securities | - | 59,825 | - | 59,825 | |
Liabilities ($) | |||||
Other Financial Instruments: | |||||
Futures††† | (289) | - | - | (289) |
† 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.
††† Amount shown represents unrealized appreciation (depreciation) at period end, but only variation margin on exchanged traded and centrally cleared derivatives, if any, are reported in the Statement of Assets and Liabilities.
(b)Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with 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
34
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 December 31, 2019, The Bank of New York Mellon earned $62,102 from the lending of the fund’s portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Investments in other investment companies advised by the Adviser are considered “affiliated” under the Act.
(d) 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.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income and net realized capital gain sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended December 31, 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 December 31, 2019, the fund did not incur any interest or penalties.
Each tax year in the four-year period ended December 31, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.
At December 31, 2019, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $6,966,764, undistributed capital gains $27,336,479 and unrealized appreciation $136,184,359.
The tax character of distributions paid to shareholders during the fiscal periods ended December 31, 2019 and December 31, 2018 were as
35
NOTES TO FINANCIAL STATEMENTS(continued)
follows: ordinary income $6,700,232 and $10,686,933, and long-term capital gains $44,747,350 and $25,062,056, respectively.
(f) 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 December 31, 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 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. 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 December 31, 2019 was approximately $71,230 with a related weighted average annualized rate of 2.67%.
NOTE 3—Management Fee and Other Transactions with Affiliates:
(a)Pursuant to a management agreement (the “Agreement”) with the Adviser, the management fee is computed at the annual rate of .35% of the value of the fund’s average daily net assets and is payable monthly. Under the terms of the Agreement, the Adviser has agreed to pay all of the fund’s direct expenses, except management fees, Rule 12b-1 Distribution Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings, fees and expenses of non-interested Trustees (including counsel fees), and extraordinary expenses. The Adviser has also agreed to reduce its management fee in an amount equal to the fund’s allocable
36
portion of the accrued fees and expenses of the non-interested Trustees (including counsel fees). During the period ended December 31, 2019, fees reimbursed by the Adviser amounted to $44,550.
(b)Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, the fund pays the Distributor for distributing its shares, for servicing and/or maintaining shareholder accounts and for advertising and marketing. The Distribution Plan provides for payments to be made at an annual rate of .25% of the value of the fund’s average daily net assets. The Distributor may make payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Distribution Plan are payable without regard to actual expenses incurred. During the period ended December 31, 2019,the fund was charged $1,397,151 pursuant to the Distribution Plan.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: management fees of $170,254 and Distribution Plan fees of $121,610, which are offset against an expense reimbursement currently in effect in the amount of $7,350.
(c) 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 futures, during the period ended December 31, 2019, amounted to $156,200,756 and $190,906,419, respectively.
Derivatives:A derivative is a financial instrument whose performance is derived from the performance of another asset. Each type of derivative instrument that was held by the fund during the period ended December 31, 2019 is discussed below.
Futures:In the normal course of pursuing its investment objective, the fund is exposed to market risk, including equity price risk,as a result of changes in value of underlying financial instruments. The fund invests in futures in order to manage its exposure to or protect against changes in the market. A futures contract represents a commitment for the future purchase or a sale of an asset at a specified date. Upon entering into such contracts, these investments require initial margin deposits with a counterparty, which consist of cash or cash equivalents. The amount of
37
NOTES TO FINANCIAL STATEMENTS(continued)
these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses which are recorded in the Statement of Operations. When the contracts are closed, the fund recognizes a realized gain or loss which is reflected in the Statement of Operations. There is minimal counterparty credit risk to the fund with futures since they are exchange traded, and the exchange guarantees the futures against default. Futures open at December 31, 2019 are set forth in the Statement of Futures.
The following summarizes the average market value of derivatives outstanding duringthe period ended December 31, 2019:
|
| Average Market Value ($) |
Equity futures |
| 2,169,014 |
|
|
|
At December 31, 2019, the cost of investments for federal income tax purposes was $452,608,287; accordingly, accumulated net unrealized appreciation on investments was $136,184,359, consisting of $189,874,518 gross unrealized appreciation and $53,690,159 gross unrealized depreciation.
38
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of Small Cap Stock Index Portfolio
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Small Cap Stock Index Portfolio (the “Fund”) (one of the funds constituting BNY Mellon Investment Portfolios), including the statements of investments, investments in affiliated issuers and futures, as of December 31, 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 Investment Portfolios) at December 31, 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 December 31, 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
February 10, 2020
39
IMPORTANT TAX INFORMATION(Unaudited)
For federal tax purposes, the portfolio hereby reports 99.99% of the ordinary dividends paid during the fiscal year ended December 31, 2019 as qualifying for the corporate dividends received deduction. Shareholders will receive notification in early 2020 of the percentage applicable to the preparation of their 2018 income tax returns. Also, the fund hereby reports $0.621 per share as a short-term capital gain distribution and $1.5267 per share as a long-term capital gain distribution paid on March 20, 2019.
40
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
41
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
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 below the Performance Group median for all periods and above the Performance Universe median for all periods except the one-year period when performance was below the Performance Universe median. The Board considered the relative proximity of the fund’s performance to the Performance Group median in most of the periods when performance was below median. It was noted that there were only three other funds in the Performance Group. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and noted the proximity of the fund’s returns to the returns of the 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. Taking into account the fund’s “unitary” fee structure, the Board considered that the fund’s contractual management fee was slightly above the Expense Group median, the fund’s actual management fee was slightly above the Expense Group median and below the Expense Universe median and the fund’s total expenses were above the Expense Group median and below the Expense Universe median.
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, noting the fund’s “unitary” fee structure. 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 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
42
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 generally was satisfied with the fund’s overall relative 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 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
43
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
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.
44
BOARD MEMBERS INFORMATION(Unaudited)
INDEPENDENT BOARD MEMBERS
Joseph S. DiMartino (76)
Chairman of the Board (1995)
Principal Occupation During Past 5 Years:
· Corporate Director and Trustee (1995-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ, Inc., a public company providing professional business services, products and solutions,Director (1997-Present)
No. of Portfolios for which Board Member Serves:118
———————
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:69
———————
J. Charles Cardona (64)
Board Member (2014)
Principal Occupation During Past 5 Years:
· President of the Adviser (2008-2016)
· Chairman (2013-2016) and Executive Vice President (1997-2013) of the Distributor
Other Public Company Board Memberships During Past 5 Years:
· BNY Mellon Liquidity Funds,Chairman andDirector (2019-Present)
No. of Portfolios for which Board Member Serves:33
———————
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
———————
45
BOARD MEMBERS INFORMATION (Unaudited) (continued)
INDEPENDENT BOARD MEMBERS (continued)
Andrew J. Donohue (69)
Board Member (2019)
Principal Occupation During Past 5 Years:
· Of Counsel, Shearman & Sterling LLP (2017-2019)
· 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:55
———————
Isabel P. Dunst (72)
Board Member (2014)
Principal Occupation During Past 5 Years:
· Senior Counsel, Hogan Lovells LLP (2018-2019); 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 public company that designs, sources, markets and distributes watchesDirector (2003-Present)
No. of Portfolios for which Board Member Serves:47
———————
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:96
———————
46
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:55
———————
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, Inc., a public company providing professional business services, products and solutions,Director (2008-Present)
· Blue Cross Blue Shield of Massachusetts, Director (2004-Present)
No. of Portfolios for which Board Member Serves:75
———————
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.
Clifford L. Alexander, Jr., Emeritus Board Member
Whitney I. Gerard, Emeritus Board Member
George L. Perry, Emeritus Board Member
47
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 62 investment companies (comprised of 118 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 62 investment companies (comprised of 118 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.
Senior Managing Counsel of BNY Mellon since December 2019; Managing Counsel of BNY Mellon from April 2014 to December 2019; Secretary of the Adviser, and an officer of 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 portfolios) managed by the Adviser. He is 51 years old and has been an employee of the Adviser since April 2004.
48
NATALYA ZELENSKY, Vice President and Assistant Secretary since March 2017.
Managing Counsel of BNY Mellon since December 2019; Counsel of BNY Mellon from May 2016 to December 2019; 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 2002.
Senior Accounting Manager- BNY Mellon Fund Administration, and an officer of 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 (63 investment companies, comprised of 141 portfolios). He is 62 years old and has served in various capacities with 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 56 investment companies (comprised of 134 portfolios) managed by the Adviser. She is 51 years old and has been an employee of the Distributor since 1997.
49
BNY Mellon Investment Portfolios, Small Cap Stock Index Portfolio
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
Telephone 1-800-258-4260 or 1-800-258-4261
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 Attn: Institutional Services Department
E-mailSend your request to info@bnymellon.com
InternetInformation can be viewed online or downloaded atwww.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 atwww.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 atwww.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2020 BNY Mellon Securities Corporation |
BNY Mellon Investment Portfolios, Technology Growth Portfolio
ANNUAL REPORT December 31, 2019 |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of BNY Mellon Investment Adviser, Inc. or any other person in the BNY Mellon Investment Adviser, Inc. organization. Any such views are subject to change at any time based upon market or other conditions and BNY Mellon Investment Adviser, Inc. disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the BNY Mellon Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the BNY Mellon Family of Funds. |
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents
THE FUND
BNY Mellon Investment Adviser, Inc. | |
Those of Other Funds | |
in Affiliated Issuers | |
Public Accounting Firm | |
the Fund’s Management Agreement | |
FOR MORE INFORMATION
Back Cover
| 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 Investment Portfolios, Technology Growth Portfolio (formerly, Dreyfus Investment Portfolios, Technology Growth Portfolio), covering the 12-month period from January 1, 2019 through December 31, 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.
In January 2019, a pivot in stance from the U.S. Federal Reserve (the “Fed”) helped stimulate a rebound across equity markets that continued into the second quarter of the year. However, escalating trade tensions disrupted equity markets in May. The dip was short-lived, as markets rose once again in June and July of 2019, when a trade deal appeared more likely and the pace of U.S. economic growth remained steady. Nevertheless, concerns continued to emerge over slowing global growth, resulting in bouts of market volatility in August 2019. Stocks rebounded in September and continued an upward path through most of October 2019, bolstered by central bank policy and consistent consumer spending. The rally generally continued through the end of the period, supported in part by an announcement from President Trump that the first phase of a trade deal with China was in process. U.S. equity markets reached new highs during the final months of the period.
In fixed-income markets, the year began with a recovery from the prior months’ volatility. After the Fed’s supportive statements in January 2019, other developed-market central banks followed suit and reiterated their abilities to buttress flagging growth rates by continuing accommodative policies. The Fed cut rates in July, September and October 2019, for a total 75 basis point reduction in the federal funds rate during the 12 months. Rates across much of the Treasury curve saw a slight increase during the month of November, and the long end of the curve rose in December. The yield curve steepened during the latter portion of the period. However, demand for fixed-income instruments during the year was strong, which helped to support positive bond market returns.
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.
January 15, 2020
2
DISCUSSION OF FUND PERFORMANCE(Unaudited)
For the period from January 1, 2019 through December 31, 2019, as provided by Erik A. Swords, CFA, Portfolio Manager
Market and Fund Performance Overview
For the 12-month period ended December 31, 2019, BNY Mellon Investment Portfolios, Technology Growth Portfolio’s (formerly, Dreyfus Investment Portfolios, Technology Growth Portfolio) Initial shares produced a total return of 25.82%, and its Service shares produced a total return of 25.51%.1 The fund’s benchmarks, the NYSE® Technology Index and the S&P 500®Index, produced total returns of 38.67% and 31.46%, respectively, over the same period.2,3
Technology stocks gained ground as broader market indexes posted substantial gains. The fund underperformed its benchmarks due to unfavorable asset allocation and individual stock selections.
The Fund’s Investment Approach
The fund seeks capital appreciation. To pursue its goal, the fund normally invests at least 80% of its net assets in the stocks of growth companies of any size that BNY Mellon believes to be leading producers or beneficiaries of technological innovation. Up to 25% of the fund’s assets may be invested in foreign securities.
In choosing stocks, the fund looks for technology companies with the potential for strong earnings or revenue growth rates, although some of the fund’s investments may currently be experiencing losses. The fund’s investment process centers on a multi-dimensional approach that looks for opportunities across emerging-growth, cyclical, or stable-growth companies. The fund’s investment approach seeks companies that appear to have strong earnings momentum, positive earnings revisions, favorable growth, product, or market cycles and/or favorable valuations.
Stocks Posted Strong Gains; Technology Benefited from Continued Outsourcing
The reporting period began with wide expectations of interest rate cuts, as the Federal Reserve (the “Fed”) had earlier moved from a tightening policy to one that was “data dependent.” With this shift, stocks rallied late in 2018 and continued to rise early in 2019. Stocks generally moved sideways in the second quarter of 2019, but three quarter-point rate cuts in the second half of the period provided an additional boost to equities markets.
At its July 2019 meeting, the Fed announced an initial reduction, bringing the federal funds rate to 2.00-2.25%. The Fed followed up with two additional rate cuts in September and October 2019, as trade tensions and other geopolitical concerns appeared to be weighing on economic growth. Other major central banks were also supportive. Nevertheless, investors’ concerns about trade tensions and the global economy weighed on performance at times.
In the third quarter of 2019, growth-oriented stocks lagged the market after a long period of outperformance. The underperformance came as investors shifted to cyclical and value-oriented stocks on the expectation of a rebound in the global economy. With the prospect of a U.S.-China trade agreement, investors began to anticipate a pickup in global growth, which would especially benefit value-oriented and cyclical companies.
Despite swings in macroeconomic performance, technology stocks continue to benefit from an ongoing uptrend in outsourcing. This spending encompasses a number of themes across a wide range of industries, including artificial intelligence, blockchain technology, 5G, mobility, e-commerce, cybersecurity, social media and voice interfacing.
3
DISCUSSION OF FUND PERFORMANCE(Unaudited) (continued)
Asset Allocation and Stock Selection Hindered Returns
The fund lagged its benchmarks primarily due to allocation decisions. Certain stock selections also detracted from relative returns. The fund’s significant underweight position in the semiconductor industry was a primary detractor of performance, as this industry gained 56% for the year. An overweight position in the software industry also detracted. Although the industry posted a healthy 25% gain, it lagged the Index. Stock selection also contributed negatively to relative returns. For example, following a long period of outperformance,Xilinx, a semiconductor company, lagged the Index and the semiconductor industry, as its fundamentals deteriorated. In addition, Slack Technologies, a software company, experienced technical difficulties in the delivery of its services, which hurt revenues. Also, the fund’s lack of exposure to Facebook, which performed well despite regulatory concerns, was also a hindrance to fund performance.
On a more positive note, the fund benefited from a position inCoStar Group, a provider of software for managing commercial real estate, which rose about 65%. A position in Splunk, a data management and cybersecurity firm, boosted fund returns, as it posted a 43% gain, and the fund’s holding of Advanced Micro Devices, a semiconductor company, also was beneficial, as it rose 46%.
Positioning the Fund for Long-Term Technology Trends
With many corporate balance sheets flush with cash and with chief information officers predicting higher rates of corporate spending on productivity and efficiency enhancements, we believe conditions remain positive for further gains among information technology stocks. We expect that corporate spending on technology will continue to grow at 3-4%, in line with recent trends. So, we continue to position the fund to benefit from long-term trends in disruptive technologies.
January 15, 2020
1 Total return includes reinvestment of dividends and any capital gains paid. 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 performance does not reflect the deduction of additional charges and expenses imposed in connection with investing in variable insurance contracts, which will reduce returns.
2 Source: Bloomberg L.P. — The NYSE® Technology Index is an equal-dollar-weighted index designed to objectively represent the technology sector by holding 35 of the leading U.S., technology-related companies. Investors cannot invest directly in any index.
3 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.
Please note: the position in any security highlighted with italicized typeface was sold during the reporting period.
The technology sector has been among the most volatile sectors of the stock market. Technology companies involve greater risk because their revenue and/or earnings tend to be less predictable, and some companies may be experiencing significant losses.
Equities are subject generally to market, market sector, market liquidity, issuer and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
The fund is only available as a funding vehicle under variable life insurance policies or variable annuity contracts issued by insurance companies. Individuals may not purchase shares of the fund directly. A variable annuity is an insurance contract issued by an insurance company that enables investors to accumulate assets on a tax-deferred basis for retirement or other long-term goals. The investment objective and policies of BNY Mellon Investment Portfolios, Technology Growth Portfolio made available through insurance products may be similar to those of other funds managed or advised by BNY Mellon Investment Adviser, Inc. However, the investment results of the fund may be higher or lower than, and may not be comparable to, those of any other fund.
4
FUND PERFORMANCE(Unaudited)
Comparison of change in value of a $10,000 investment in Initial shares and Service shares of BNY Mellon Investment Portfolios, Technology Growth Portfolio with a hypothetical investment of $10,000 in the NYSE® Technology Index and S&P 500® Index
† Source: Bloomberg L.P.
†† Source: Lipper Inc.
Past performance is not predictive of future performance. The fund’s performance does not reflect the deduction of additional charges and expenses imposed in connection with investing in variable insurance contracts which will reduce returns.
The above graph compares a hypothetical investment of $10,000 made in Initial and Service shares of BNY Mellon Investment Portfolios, Technology Growth Portfolio on 12/31/09 to a hypothetical investment of $10,000 made in the NYSE® Technology Index and S&P 500® Index on that date.
The fund’s performance shown in the line graph above takes into account all applicable fees and expenses. The NYSE® Technology Index is an equal-dollar weighted index designed to objectively represent the technology sector by holding 35 of the leading U.S. technology-related companies. 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. 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.
5
FUND PERFORMANCE(Unaudited) (continued)
Average Annual Total Returns as of 12/31/19 | |||
| 1 Year | 5 Years | 10 Years |
Initial shares | 25.82% | 14.59% | 14.53% |
Service shares | 25.51% | 14.29% | 14.25% |
NYSE® Technology Index | 38.67% | 17.48% | 15.40% |
S&P 500® Index | 31.46% | 11.69% | 13.55% |
The performance data quoted represents past performance, which is no guarantee of future results. Share price and investment return fluctuate and an investor’s shares may be worth more or less than original cost upon redemption. Current performance may be lower or higher than the performance quoted. Go to www.bnymellonim.com/us for the fund’s most recent month-end returns.
The fund’s Initial shares are not subject to a Rule 12b-1 fee. The fund’s Service shares are subject to a 0.25% annual Rule 12b-1 fee. All dividends and capital gain distributions arereinvested.
The fund’s performance shown in the graph and table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
6
UNDERSTANDING YOUR FUND’S EXPENSES(Unaudited)
As a mutual fund investor, you pay ongoing expenses, such as management fees and other expenses. Using the information below, you can estimate how these expenses affect your investment and compare them with the expenses of other funds. You also may pay one-time transaction expenses, including sales charges (loads), redemption fees and expenses associated with variable annuity or insurance contracts, 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 Investment Portfolios, Technology Growth Portfolio from July 1, 2019 to December 31, 2019. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment |
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Assume actual returns for the six months ended December 31, 2019 |
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| Initial Shares | Service Shares |
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Expense paid per $1,000† | $4.07 | $5.36 |
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Ending value (after expenses) | $1,046.40 | $1,044.70 |
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COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS(Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (“SEC”) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment |
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Assuming a hypothetical 5% annualized return for the six months ended December 31, 2019 |
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| Initial Shares | Service Shares |
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Expense paid per $1,000† | $4.02 | $5.30 |
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Ending value (after expenses) | $1,021.22 | $1,019.96 |
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† Expenses are equal to the fund’s annualized expense ratio of .79% for Initial Shares and 1.04% for Service Shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
7
STATEMENT OF INVESTMENTS
December 31, 2019
Description | Shares | Value ($) | |||||
Common Stocks - 99.3% | |||||||
Alternative Carriers - .8% | |||||||
Bandwidth, Cl. A | 79,101 | a,b | 5,066,419 | ||||
Application Software - 18.8% | |||||||
Adobe | 77,091 | b | 25,425,383 | ||||
DocuSign | 118,456 | b | 8,778,774 | ||||
Everbridge | 99,476 | a,b | 7,767,086 | ||||
HubSpot | 62,995 | a,b | 9,984,707 | ||||
Salesforce.com | 181,280 | b | 29,483,379 | ||||
Slack Technologies, Cl. A | 379,704 | a,b | 8,535,746 | ||||
Splunk | 171,162 | b | 25,634,933 | ||||
115,610,008 | |||||||
Automobile Manufacturers - 3.1% | |||||||
Tesla Motors | 45,363 | a,b | 18,976,704 | ||||
Data Processing & Outsourced S - 5.8% | |||||||
FleetCor Technologies | 39,388 | b | 11,332,715 | ||||
PayPal Holdings | 112,788 | b | 12,200,278 | ||||
Square, Cl. A | 192,766 | a,b | 12,059,441 | ||||
35,592,434 | |||||||
Electronic Equipment & Instrum - 4.5% | |||||||
Cognex | 303,796 | 17,024,728 | |||||
FLIR Systems | 204,292 | 10,637,484 | |||||
27,662,212 | |||||||
Interactive Media & Services - 7.0% | |||||||
Alphabet, Cl. C | 19,687 | b | 26,321,913 | ||||
Pinterest, Cl. A | 243,108 | a,b | 4,531,533 | ||||
381,753 | b | 12,235,184 | |||||
43,088,630 | |||||||
Internet & Direct Marketing Re - 9.3% | |||||||
Alibaba Group Holding, ADR | 131,702 | b | 27,933,994 | ||||
Amazon.com | 15,784 | b | 29,166,307 | ||||
57,100,301 | |||||||
Internet Services & Infrastruc - 4.7% | |||||||
Shopify, Cl. A | 51,098 | b | 20,315,543 | ||||
Twilio, Cl. A | 88,611 | a,b | 8,708,689 | ||||
29,024,232 | |||||||
Semiconductor Equipment - 3.0% | |||||||
KLA | 105,354 | 18,770,922 | |||||
Semiconductors - 24.3% | |||||||
Advanced Micro Devices | 591,368 | a,b | 27,120,138 | ||||
Broadcom | 67,710 | 21,397,714 | |||||
Microchip Technology | 243,351 | a | 25,483,717 | ||||
NVIDIA | 76,863 | 18,085,864 |
8
Description | Shares | Value ($) | |||||
Common Stocks - 99.3% (continued) | |||||||
Semiconductors - 24.3% (continued) | |||||||
Qualcomm | 339,302 | 29,936,615 | |||||
Taiwan Semiconductor Manufacturing, ADR | 476,084 | 27,660,480 | |||||
149,684,528 | |||||||
Systems Software - 11.6% | |||||||
Microsoft | 172,005 | 27,125,188 | |||||
Proofpoint | 101,059 | b | 11,599,552 | ||||
Rapid7 | 109,953 | b | 6,159,567 | ||||
ServiceNow | 94,624 | b | 26,714,248 | ||||
71,598,555 | |||||||
Technology Hardware, Storage & - 6.4% | |||||||
Apple | 84,136 | 24,706,536 | |||||
Western Digital | 226,931 | 14,403,311 | |||||
39,109,847 | |||||||
Total Common Stocks(cost $471,381,707) | 611,284,792 | ||||||
1-Day | |||||||
Investment Companies - .7% | |||||||
Registered Investment Companies - .7% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1.60 | 4,705,932 | c | 4,705,932 | |||
Investment of Cash Collateral for Securities Loaned - 1.4% | |||||||
Registered Investment Companies - 1.4% | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1.60 | 8,597,487 | c | 8,597,487 | |||
Total Investments(cost $484,685,126) | 101.4% | 624,588,211 | |||||
Liabilities, Less Cash and Receivables | (1.4%) | (8,849,405) | |||||
Net Assets | 100.0% | 615,738,806 |
ADR—American Depository Receipt
aSecurity, or portion thereof, on loan. At December 31, 2019, the value of the fund’s securities on loan was $95,006,853 and the value of the collateral was $96,324,663, consisting of cash collateral of $8,597,487 and U.S. Government & Agency securities valued at $87,727,176.
bNon-income producing security.
cInvestment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the investment company’s prospectus.
9
STATEMENT OF INVESTMENTS (continued)
Portfolio Summary (Unaudited)† | Value (%) |
Information Technology | 79.1 |
Consumer Discretionary | 12.4 |
Communication Services | 7.8 |
Investment Companies | 2.1 |
101.4 |
† Based on net assets.
See notes to financial statements.
10
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS
Investment Companies | Value | Purchases($) | Sales($) | Value | Net | Dividends/ |
Registered Investment Companies; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 28,028,206 | 122,004,079 | 145,326,353 | 4,705,932 | .7 | 197,089 |
Investment of Cash Collateral for Securities Loaned; | ||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | - | 58,443,806 | 49,846,319 | 8,597,487 | 1.4 | - |
Total | 28,028,206 | 180,447,885 | 195,172,672 | 13,303,419 | 2.1 | 197,089 |
See notes to financial statements.
11
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2019
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| Cost |
| Value |
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Assets ($): |
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Investments in securities—See Statement of Investments |
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Unaffiliated issuers | 471,381,707 |
| 611,284,792 |
| ||
Affiliated issuers |
| 13,303,419 |
| 13,303,419 |
| |
Cash denominated in foreign currency |
|
| 53,099 |
| 53,333 |
|
Receivable for shares of Beneficial Interest subscribed |
| 267,234 |
| |||
Dividends, interest and securities lending income receivable |
| 180,091 |
| |||
Prepaid expenses |
|
|
|
| 5,966 |
|
|
|
|
|
| 625,094,835 |
|
Liabilities ($): |
|
|
|
| ||
Due to BNY Mellon Investment Adviser, Inc. and affiliates—Note 3(b) |
| 491,071 |
| |||
Liability for securities on loan—Note 1(c) |
| 8,597,487 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 188,630 |
| |||
Trustees’ fees and expenses payable |
| 3,333 |
| |||
Other accrued expenses |
|
|
|
| 75,508 |
|
|
|
|
|
| 9,356,029 |
|
Net Assets ($) |
|
| 615,738,806 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 398,746,378 |
|
Total distributable earnings (loss) |
|
|
|
| 216,992,428 |
|
Net Assets ($) |
|
| 615,738,806 |
|
Net Asset Value Per Share | Initial Shares | Service Shares |
|
Net Assets ($) | 140,590,755 | 475,148,051 |
|
Shares Outstanding | 5,566,672 | 20,106,552 |
|
Net Asset Value Per Share ($) | 25.26 | 23.63 |
|
|
|
|
|
See notes to financial statements. |
|
|
|
12
STATEMENT OF OPERATIONS
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends (net of $204,643 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 6,249,961 |
| ||
Affiliated issuers |
|
| 197,089 |
| ||
Income from securities lending—Note 1(c) |
|
| 88,347 |
| ||
Interest |
|
| 168 |
| ||
Total Income |
|
| 6,535,565 |
| ||
Expenses: |
|
|
|
| ||
Management fee—Note 3(a) |
|
| 4,382,080 |
| ||
Distribution fees—Note 3(b) |
|
| 1,121,651 |
| ||
Professional fees |
|
| 92,717 |
| ||
Trustees’ fees and expenses—Note 3(c) |
|
| 53,416 |
| ||
Prospectus and shareholders’ reports |
|
| 36,661 |
| ||
Loan commitment fees—Note 2 |
|
| 13,617 |
| ||
Custodian fees—Note 3(b) |
|
| 13,010 |
| ||
Chief Compliance Officer fees—Note 3(b) |
|
| 11,793 |
| ||
Registration fees |
|
| 6,064 |
| ||
Shareholder servicing costs—Note 3(b) |
|
| 951 |
| ||
Miscellaneous |
|
| 16,704 |
| ||
Total Expenses |
|
| 5,748,664 |
| ||
Investment Income—Net |
|
| 786,901 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions | 76,582,774 |
| ||||
Net realized gain (loss) on forward foreign currency exchange contracts | (1,319) |
| ||||
Net Realized Gain (Loss) |
|
| 76,581,455 |
| ||
Net change in unrealized appreciation (depreciation) on investments | 50,852,574 |
| ||||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 127,434,029 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 128,220,930 |
| |||
|
|
|
|
|
|
|
See notes to financial statements. |
13
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Year Ended December 31, | |||||
|
|
|
| 2019 |
| 2018 |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income (loss)—net |
|
| 786,901 |
|
|
| (270,215) |
| |
Net realized gain (loss) on investments |
| 76,581,455 |
|
|
| 68,298,336 |
| ||
Net change in unrealized appreciation |
| 50,852,574 |
|
|
| (78,510,083) |
| ||
Net Increase (Decrease) in Net Assets | 128,220,930 |
|
|
| (10,481,962) |
| |||
Distributions ($): |
| ||||||||
Distributions to shareholders: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (15,372,855) |
|
|
| (6,797,939) |
| |
Service Shares |
|
| (53,178,634) |
|
|
| (22,491,966) |
| |
Total Distributions |
|
| (68,551,489) |
|
|
| (29,289,905) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 5,520,702 |
|
|
| 10,375,145 |
| |
Service Shares |
|
| 34,966,237 |
|
|
| 109,254,245 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 15,372,855 |
|
|
| 6,797,939 |
| |
Service Shares |
|
| 53,178,634 |
|
|
| 22,491,966 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (14,531,490) |
|
|
| (12,323,077) |
| |
Service Shares |
|
| (46,058,388) |
|
|
| (77,103,922) |
| |
Increase (Decrease) in Net Assets | 48,448,550 |
|
|
| 59,492,296 |
| |||
Total Increase (Decrease) in Net Assets | 108,117,991 |
|
|
| 19,720,429 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 507,620,815 |
|
|
| 487,900,386 |
| |
End of Period |
|
| 615,738,806 |
|
|
| 507,620,815 |
| |
Capital Share Transactions (Shares): |
| ||||||||
Initial Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 226,629 |
|
|
| 399,715 |
| |
Shares issued for distributions reinvested |
|
| 647,824 |
|
|
| 263,180 |
| |
Shares redeemed |
|
| (604,414) |
|
|
| (487,590) |
| |
Net Increase (Decrease) in Shares Outstanding | 270,039 |
|
|
| 175,305 |
| |||
Service Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 1,548,688 |
|
|
| 4,452,721 |
| |
Shares issued for distributions reinvested |
|
| 2,390,051 |
|
|
| 919,541 |
| |
Shares redeemed |
|
| (2,044,014) |
|
|
| (3,213,266) |
| |
Net Increase (Decrease) in Shares Outstanding | 1,894,725 |
|
|
| 2,158,996 |
| |||
|
|
|
|
|
|
|
|
|
|
See notes to financial statements. |
14
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. The fund’s total returns do not reflect expenses associated with variable annuity or insurance contracts. These figures have been derived from the fund’s financial statements.
Year Ended December 31, | |||||||
Initial Shares | 2019 | 2018 | 2017 | 2016 | 2015 | ||
Per Share Data ($): | |||||||
Net asset value, | 22.56 | 23.95 | 17.69 | 17.78 | 18.65 | ||
Investment Operations: | |||||||
Investment income (loss)—neta | .08 | .04 | (.01) | .01 | (.04) | ||
Net realized and unrealized gain | 5.55 | (.11) | 7.29 | .77 | 1.12 | ||
Total from Investment Operations | 5.63 | (.07) | 7.28 | .78 | 1.08 | ||
Distributions: | |||||||
Dividends from net realized | (2.93) | (1.32) | (1.02) | (.87) | (1.95) | ||
Net asset value, end of period | 25.26 | 22.56 | 23.95 | 17.69 | 17.78 | ||
Total Return (%) | 25.82 | (.98) | 42.64 | 4.72 | 6.16 | ||
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | .79 | .79 | .82 | .83 | .83 | ||
Ratio of net expenses | .79 | .79 | .82 | .83 | .83 | ||
Ratio of net investment income | .33 | .14 | (.05) | .07 | (.22) | ||
Portfolio Turnover Rate | 77.56 | 55.34 | 42.07 | 64.26 | 70.33 | ||
Net Assets, end of period ($ x 1,000) | 140,591 | 119,470 | 122,670 | 87,243 | 96,422 |
a Based on average shares outstanding.
See notes to financial statements.
15
FINANCIAL HIGHLIGHTS (continued)
Year Ended December 31, | |||||||
Service Shares | 2019 | 2018 | 2017 | 2016 | 2015 | ||
Per Share Data ($): | |||||||
Net asset value, beginning of period | 21.31 | 22.75 | 16.88 | 17.06 | 18.01 | ||
Investment Operations: | |||||||
Investment income (loss)—neta | .02 | (.03) | (.06) | (.03) | (.08) | ||
Net realized and unrealized gain | 5.23 | (.09) | 6.95 | .72 | 1.08 | ||
Total from Investment Operations | 5.25 | (.12) | 6.89 | .69 | 1.00 | ||
Distributions: | |||||||
Dividends from net realized | (2.93) | (1.32) | (1.02) | (.87) | (1.95) | ||
Net asset value, end of period | 23.63 | 21.31 | 22.75 | 16.88 | 17.06 | ||
Total Return (%) | 25.51 | (1.27) | 42.36 | 4.38 | 5.92 | ||
Ratios/Supplemental Data (%): | |||||||
Ratio of total expenses | 1.04 | 1.04 | 1.07 | 1.08 | 1.08 | ||
Ratio of net expenses | 1.04 | 1.04 | 1.07 | 1.08 | 1.08 | ||
Ratio of net investment income (loss) | .08 | (.11) | (.30) | (.18) | (.47) | ||
Portfolio Turnover Rate | 77.56 | 55.34 | 42.07 | 64.26 | 70.33 | ||
Net Assets, end of period ($ x 1,000) | 475,148 | 388,151 | 365,231 | 225,801 | 217,006 |
a Based on average shares outstanding.
See notes to financial statements.
16
NOTES TO FINANCIAL STATEMENTS
NOTE 1—Significant Accounting Policies:
Technology Growth Portfolio (the “fund”) is a separate diversified series of BNY Mellon Investment Portfolios (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 four series, including the fund. The fund is only offered to separate accounts established by insurance companies to fund variable annuity contracts and variable life insurance policies. The fund’s investment objective is to seek capital appreciation. BNY Mellon Investment Adviser, Inc. (the “Adviser”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
Effective June 3, 2019, the Company changed its name from Dreyfus Investment Portfolios to BNY Mellon Investment Portfolios. 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, which are sold without a sales charge. 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: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the Distribution Plan, and the expenses borne by each class, the allocation of certain transfer agency costs, and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC
17
NOTES TO FINANCIAL STATEMENTS(continued)
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 Companyenters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
18
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.
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 December 31, 2019in valuing the fund’s investments:
19
NOTES TO FINANCIAL STATEMENTS(continued)
Assets ($) | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total |
Investments in Securities:† |
|
|
| |
Equity Securities - Common Stocks | 611,284,792 | - | - | 611,284,792 |
Investment Companies | 13,303,419 | - | - | 13,303,419 |
† See Statement of Investments for additional detailed categorizations, if any.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
(c)Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
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
20
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 December 31, 2019, The Bank of New York Mellon earned $17,086 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.
As of and during the period ended December 31, 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 December 31, 2019, the fund did not incur any interest or penalties.
Each tax year in the four-year period ended December 31, 2019 remains subject to examination by the Internal Revenue Service and state taxing authorities.
At December 31, 2019, the components of accumulated earnings on a tax basis were as follows: undistributed ordinary income $787,609, undistributed capital gains $76,433,899 and unrealized appreciation $139,770,920.
21
NOTES TO FINANCIAL STATEMENTS(continued)
The tax character of distributions paid to shareholders during the fiscal periods ended December 31, 2019 and December 31, 2018 were as follows: ordinary income $0 and $10,979,108, and long-term capital gains $68,551,489 and $18,310,797, 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 December 31, 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 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. 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. During the period ended December 31, 2019, the fund did not borrow under the Facilities.
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.
(b)Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing its shares, for servicing and/or maintaining Service shares’ shareholder accounts and for advertising and marketing for Service shares. The Distribution Plan provides for payments to be made at an annual rate of .25% of the value of the Service shares’ average daily net assets. The Distributor may make
22
payments to Participating Insurance Companies and to brokers and dealers acting as principal underwriter for their variable insurance products. The fees payable under the Distribution Plan are payable without regard to actual expenses incurred. During the period ended December 31, 2019,Service shares were charged $1,121,651 pursuant to the Distribution 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 December 31, 2019, the fund was charged $833 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 December 31, 2019, the fund was charged $13,010 pursuant to the custody agreement.
During the period ended December 31, 2019, the fund was charged $11,793 for services performed by the Chief Compliance Officer and his staff. These fees are included in Chief Compliance Officer fees in the Statement of Operations.
The components of “Due to BNY Mellon Investment Adviser, Inc. and affiliates” in the Statement of Assets and Liabilities consist of: management fees of $384,440, Distribution Plan fees of $98,812, custodian fees of $4,400, Chief Compliance Officer fees of $3,261 and transfer agency fees of $158.
(c) 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.
23
NOTES TO FINANCIAL STATEMENTS(continued)
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities and foreign currency exchange contracts (“forward contracts”), during the period ended December 31, 2019, amounted to $444,327,399 and $444,054,311, 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 December 31, 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 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
24
counterparty. At December 31, 2019, there were no forward contracts outstanding.
The following summarizes the average market value of derivatives outstanding duringthe period ended December 31, 2019:
|
| Average Market Value ($) |
Forward contracts |
| 46,535 |
|
|
|
At December 31, 2019, the cost of investments for federal income tax purposes was $484,817,525; accordingly, accumulated net unrealized appreciation on investments was $139,770,686, consisting of $157,653,513 gross unrealized appreciation and $17,882,827 gross unrealized depreciation.
25
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Trustees of Technology Growth Portfolio
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of Technology Growth Portfolio (the “Fund”) (one of the funds constituting BNY Mellon Investment Portfolios), including the statements of investments and investments in affiliated issuers, as of December 31, 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 Investment Portfolios) at December 31, 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 December 31, 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
February 10, 2020
26
IMPORTANT TAX INFORMATION(Unaudited)
The fund hereby reports $2.9349 per share as a long-term capital gain distribution paid on March 20, 2019.
27
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 renewalof 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
28
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 below the Performance Group and Performance Universe medians for all periods, except for the two- and four-year periods when performance was above the Performance Universe medians. The Board considered the relative proximity of the fund’s performance to the Performance Group and/or Performance Universe median in certain periods when performance was below median. The Adviser also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was considered that the fund’s returns were above the returns of the index in 4 of the 10 calendar years shown. The Board also noted that an additional primary portfolio manager had been added in March 2019.
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 and the fund’s actual management fee and total expenses were below the Expense Group and the Expense Universe medians.
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 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
29
INFORMATION ABOUT THE RENEWAL OF THE FUND’S MANAGEMENT AGREEMENT (Unaudited) (continued)
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.
· While the Board noted the fund’s favorable performance in calendar years 2017 and 2018 and that an additional primary portfolio manager was added in March 2019, the Board was concerned about the fund’s performance relative to the Performance Group and Performance Universe and agreed to closely monitor 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
30
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.
31
BOARD MEMBERS INFORMATION(Unaudited)
INDEPENDENT BOARD MEMBERS
Joseph S. DiMartino (76)
Chairman of the Board (1995)
Principal Occupation During Past 5 Years:
· Corporate Director and Trustee (1995-Present)
Other Public Company Board Memberships During Past 5 Years:
· CBIZ, Inc., a public company providing professional business services, products and solutions,Director (1997-Present)
No. of Portfolios for which Board Member Serves:118
———————
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:69
———————
J. Charles Cardona (64)
Board Member (2014)
Principal Occupation During Past 5 Years:
· President of the Adviser (2008-2016)
· Chairman (2013-2016) and Executive Vice President (1997-2013) of the Distributor
Other Public Company Board Memberships During Past 5 Years:
· BNY Mellon Liquidity Funds,Chairman andDirector (2019-Present)
No. of Portfolios for which Board Member Serves:33
———————
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
———————
32
Andrew J. Donohue (69)
Board Member (2019)
Principal Occupation During Past 5 Years:
· Of Counsel, Shearman & Sterling LLP (2017-2019)
· 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:55
———————
Isabel P. Dunst (72)
Board Member (2014)
Principal Occupation During Past 5 Years:
· Senior Counsel, Hogan Lovells LLP (2018-2019); 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 public company that designs, sources, markets and distributes watchesDirector (2003-Present)
No. of Portfolios for which Board Member Serves:47
———————
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:96
———————
33
BOARD MEMBERS INFORMATION (Unaudited) (continued)
INDEPENDENT BOARD MEMBERS (continued)
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:55
———————
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, Inc., a public company providing professional business services, products and solutions,Director (2008-Present)
· Blue Cross Blue Shield of Massachusetts, Director (2004-Present)
No. of Portfolios for which Board Member Serves:75
———————
Once elected all Board Members serve for an indefinite term, but achieve Emeritus status upon reaching age 80. The address of the Board Members and Officers is c/o 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.
Clifford L. Alexander, Jr., Emeritus Board Member
Whitney I. Gerard, Emeritus Board Member
George L. Perry, Emeritus Board Member
34
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 62 investment companies (comprised of 118 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 62 investment companies (comprised of 118 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.
Senior Managing Counsel of BNY Mellon since December 2019; Managing Counsel of BNY Mellon from April 2014 to December 2019; Secretary of the Adviser, and an officer of 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 portfolios) managed by the Adviser. He is 51 years old and has been an employee of the Adviser since April 2004.
35
OFFICERS OF THE FUND (Unaudited)(continued)
NATALYA ZELENSKY, Vice President and Assistant Secretary since March 2017.
Managing Counsel of BNY Mellon since December 2019; Counsel of BNY Mellon from May 2016 to December 2019; 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 2002.
Senior Accounting Manager- BNY Mellon Fund Administration, and an officer of 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 63 investment companies (comprised of 141 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 (63 investment companies, comprised of 141 portfolios). He is 62 years old and has served in various capacities with 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 56 investment companies (comprised of 134 portfolios) managed by the Adviser. She is 51 years old and has been an employee of the Distributor since 1997.
36
NOTES
37
BNY Mellon Investment Portfolios, Technology Growth Portfolio
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
Telephone 1-800-258-4260 or 1-800-258-4261
Mail The BNY Mellon Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 Attn: Institutional Services Department
E-mailSend your request to info@bnymellon.com
InternetInformation can be viewed online or downloaded atwww.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 atwww.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 atwww.bnymellonim.com/us and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-373-9387.
© 2020 BNY Mellon Securities Corporation |
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"). Mr. 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 $140,888 in 2018 and $145,352 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 $40,064 in 2018 and $36,908 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 $17,972 in 2018 and $12,160 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 $50 in 2018 and $57 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 $744,219 in 2018 and $605,259 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 Investment Portfolios
By: /s/ Renee LaRoche-Morris
Renee LaRoche-Morris
President (Principal Executive Officer)
Date: February 10, 2020
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: February 10, 2020
By: /s/ James Windels
James Windels
Treasurer (Principal Financial Officer)
Date: February 7, 2020
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)