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 | 811-5125 | |||||
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| Dreyfus Variable Investment Fund |
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| (Exact name of Registrant as specified in charter) |
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c/o The Dreyfus Corporation 200 Park Avenue New York, New York 10166 |
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| (Address of principal executive offices) (Zip code) |
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| John Pak, Esq. 200 Park Avenue New York, New York 10166 |
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| (Name and address of agent for service) |
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Registrant's telephone number, including area code: | (212) 922-6000 | |||||
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Date of fiscal year end:
| 12/31 |
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Date of reporting period: | 06/30/15 |
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FORM N-CSR
Item 1. Reports to Stockholders.
Dreyfus Variable |
Investment Fund, |
Appreciation Portfolio |
SEMIANNUAL REPORT June 30, 2015
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents | |
THE FUND | |
2 | A Letter from the President |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
11 | Statement of Assets and Liabilities |
12 | Statement of Operations |
13 | Statement of Changes in Net Assets |
15 | Financial Highlights |
17 | Notes to Financial Statements |
26 | Information About the Renewal of the Fund’s Investment Advisory and Sub-Investment Advisory Agreements |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus Variable Investment Fund,
Appreciation Portfolio
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Variable Investment Fund, Appreciation Portfolio, covering the six-month period from January 1, 2015, through June 30, 2015. 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.
The U.S. stock market proved volatile on its way to posting modest gains over the first half of 2015. Investors were worried when the economic recovery stalled during the first quarter of the year due to unusually harsh winter weather, a strengthening U.S. dollar, and expected increases in short-term interest rates. These fears waned during the second quarter, when economic growth seemed to regain momentum. While a number of headwinds remained, investors were encouraged by better employment data, stronger housing markets, and stabilizing currency exchange rates.
We expect economic uncertainty and bouts of market volatility to persist over the near term as Europe continues to struggle with instability in Greece, China addresses a stubborn economic slowdown, geopolitical conflicts flare across the Middle East, and U.S. investors await the first in a series of short-term interest rate hikes. We remain more optimistic regarding the economy’s long-term outlook, which we believe should be supported by improved consumer and business confidence as well as aggressively accommodative monetary policies from many of the world’s major central banks.As always, we urge you to discuss these observations with your financial advisor, who can help you assess their implications for your investment portfolio.
Thank you for your continued confidence and support.
J. Charles Cardona
President
The Dreyfus Corporation
July 15, 2015
2
DISCUSSION OF FUND PERFORMANCE
For the period of January 1, 2015, through June 30, 2015, as provided by Fayez Sarofim, Portfolio Manager of Fayez Sarofim & Co., Sub-Investment Adviser
Fund and Market Performance Overview
For the six-month period ended June 30, 2015, Dreyfus Variable Investment Fund, Appreciation Portfolio’s Initial shares produced a total return of –0.30%, and its Service shares produced a total return of –0.45%.1 In comparison, the fund’s benchmark, the Standard & Poor’s® 500 Composite Stock Price Index (“S&P 500 Index”), produced a total return of 1.23% for the same period.2
U.S. equities advanced modestly over the first half of 2015 amid choppy economic growth. Overweighted allocations to the energy and consumer staples sectors weighed on the fund’s underperformance compared to its benchmark.
The Fund’s Investment Approach
The fund seeks long-term capital growth consistent with the preservation of capital. Its secondary goal is current income. To pursue these goals, the fund normally invests at least 80% of its assets in common stocks.The fund focuses on blue-chip companies with total market capitalizations of more than $5 billion at the time of purchase, including multinational companies. These are established companies that have demonstrated sustained patterns of profitability, strong balance sheets, an expanding global presence, and the potential to achieve predictable, above-average earnings growth.
In choosing stocks, the fund first identifies economic sectors it believes will expand over the next three to five years or longer. Using fundamental analysis, the fund then seeks companies within these sectors that have proven track records and dominant positions in their industries.The fund employs a “buy-and-hold” investment strategy, which generally has resulted in an annual portfolio turnover of below 15%. A low portfolio turnover rate helps reduce the fund’s trading costs and minimizes tax liability by limiting the distribution of capital gains.3
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
Choppy Economic Growth Constrained Equity Gains
The S&P 500 Index made scant progress over the first half of 2015. U.S. economic data softened more than expected over the winter months and remained mixed through the spring while global growth slowed. Investors were skittish about the possibility of higher short-term interest rates from the Federal Reserve Board (the “Fed”), and they were unsettled by the debt crisis in Greece.
Market leadership narrowed in this environment, with strength concentrated in only three sectors of the S&P 500 Index: the health care, consumer discretionary, and telecommunications services sectors. Five segments, including the energy and industrials sectors, posted negative returns.
Fund Strategies Produced Mixed Results
The fund lagged the S&P 500 Index over the first half of 2015 but registered strengthening relative results compared to previous reporting periods.The primary factors detracting from relative performance over the reporting period included overweighted allocations to the energy and consumer staples sectors. Relative results also were penalized by an underweighted and selectively focused position in the consumer discretionary sector, as well as by stock selection shortfalls in the industrials sector.
On a more positive note, our stock selection strategy in the information technology sector — particularly an overweighted position in Apple — was a primary factor supporting relative performance.The fund’s lack of exposure to utilities, the reporting period’s weakest sector, also contributed positively to relative results. Stock selections in the strong-performing health care sector, which featured positions in Novo Nordisk, Gilead Sciences, and Abbott Laboratories, also proved advantageous, but this positive impact was offset by an underweighted presence in the sector.
The largest positive contributors to the fund’s returns over the first half of 2015 were Apple, Novo Nordisk,Walt Disney, Estee Lauder, Gilead Sciences, JPMorgan Chase
& Co., Christian Dior, Walgreens Boots Alliance, and McGraw-Hill Financial.
Positions detracting from performance included Chevron, ExxonMobil, Procter & Gamble, Union Pacific, Twenty-First Century Fox, Wal-Mart Stores, and Canadian Pacific Railway.
4
Positioned for the Next Phase of the Economic Cycle
The S&P 500 Index may continue to lack clear direction until investors are more confident of the U.S. economy’s ability to withstand higher interest rates. The debt crisis in Greece hurt stocks in late June, but its impact on the U.S. and global economies are expected to be limited. Even as the Fed begins to normalize monetary policy, still-low interest rates, muted inflation, and aggressive monetary easing abroad are expected to support equity valuations.
Nonetheless, investors’ risk appetites are likely to diminish, and their preferences may begin to shift.We expect profit fundamentals to command greater attention, and greater forward earnings support may be required to drive the market higher. Stocks of large, high-quality companies seem well positioned for better relative performance as the business cycle matures and monetary policies normalize.The large, globally prominent industry leaders in which the fund invests, with their established competitive advantages and strong balance sheets, in our view typically have greater flexibility than smaller companies to absorb higher labor costs and sustain earnings growth as interest rates rise.
July 15, 2015
Equity funds 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 Dreyfus Stock Index Fund, Inc. made available through insurance products may be similar to other funds managed by Dreyfus. However, the investment results of the fund may be higher or lower than, and may not be comparable to, those of any other Dreyfus fund.
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. – Reflects reinvestment of dividends daily and, where applicable, capital gain |
distributions.The Standard & Poor’s 500 Composite Stock Price Index is a widely accepted, unmanaged index of |
U.S. stock market performance. Investors cannot invest directly in any index. |
3 Achieving tax efficiency is not a part of the fund’s investment objective, and there can be no guarantee that the fund |
will achieve any particular level of taxable distributions in future years. In periods when the manager has to sell |
significant amounts of securities (e.g., during periods of significant net redemptions or changes in index components) |
funds can be expected to be less tax efficient than during periods of more stable market conditions and asset flows. |
The Fund 5
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 DreyfusVariable Investment Fund,Appreciation Portfolio from January 1, 2015 to June 30, 2015. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended June 30, 2015
Initial Shares | Service Shares | |||
Expenses paid per $1,000† | $ 3.96 | $ 5.20 | ||
Ending value (after expenses) | $ 997.00 | $ 995.50 |
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 June 30, 2015
Initial Shares | Service Shares | |||
Expenses paid per $1,000† | $ 4.01 | $ 5.26 | ||
Ending value (after expenses) | $ 1,020.83 | $ 1,019.59 |
† Expenses are equal to the fund’s annualized expense ratio of .80% for Initial shares and 1.05% for Service shares, |
multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS
June 30, 2015 (Unaudited)
Common Stocks—99.5% | Shares | Value ($) | |
Banks—1.2% | |||
Wells Fargo & Co. | 120,000 | 6,748,800 | |
Capital Goods—1.3% | |||
United Technologies | 67,000 | 7,432,310 | |
Consumer Durables & Apparel—2.2% | |||
Christian Dior | 55,100 | 10,756,104 | |
Hermes International | 3,177 | 1,185,114 | |
11,941,218 | |||
Consumer Services—1.3% | |||
McDonald’s | 76,200 | 7,244,334 | |
Diversified Financials—10.1% | |||
American Express | 106,000 | 8,238,320 | |
BlackRock | 30,600 | 10,586,988 | |
Franklin Resources | 152,300 | 7,467,269 | |
Intercontinental Exchange | 12,000 | 2,683,320 | |
JPMorgan Chase & Co. | 219,600 | 14,880,096 | |
State Street | 80,500 | 6,198,500 | |
Visa, Cl. A | 86,200 | 5,788,330 | |
55,842,823 | |||
Energy—13.5% | |||
Chevron | 173,800 | 16,766,486 | |
ConocoPhillips | 161,100 | 9,893,151 | |
EOG Resources | 34,600 | 3,029,230 | |
Exxon Mobil | 294,764 | 24,524,365 | |
Imperial Oil | 98,800 | a | 3,815,656 |
Occidental Petroleum | 147,800 | 11,494,406 | |
Phillips 66 | 58,800 | 4,736,928 | |
74,260,222 | |||
Food & Staples Retailing—2.3% | |||
Walgreens Boots Alliance | 106,500 | 8,992,860 | |
Whole Foods Market | 89,100 | 3,514,104 | |
12,506,964 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Food, Beverage & Tobacco—18.3% | |||
Altria Group | 290,900 | 14,227,919 | |
Anheuser-Busch InBev, ADR | 27,000 | 3,258,090 | |
Coca-Cola | 481,000 | 18,869,630 | |
Diageo, ADR | 25,000 | 2,901,000 | |
Nestle, ADR | 203,500 | 14,684,560 | |
PepsiCo | 120,400 | 11,238,136 | |
Philip Morris International | 378,900 | 30,376,413 | |
SABMiller | 100,000 | 5,191,377 | |
100,747,125 | |||
Health Care Equipment & Services—1.7% | |||
Abbott Laboratories | 191,800 | 9,413,544 | |
Household & Personal Products—4.6% | |||
Estee Lauder, Cl. A | 130,600 | 11,317,796 | |
Procter & Gamble | 177,900 | 13,918,896 | |
25,236,692 | |||
Insurance—1.3% | |||
ACE | 70,100 | 7,127,768 | |
Materials—2.1% | |||
Air Products & Chemicals | 5,000 | 684,150 | |
Praxair | 90,900 | 10,867,095 | |
11,551,245 | |||
Media—6.9% | |||
Comcast, Cl. A | 169,000 | 10,163,660 | |
McGraw-Hill Financial | 54,800 | 5,504,660 | |
Twenty-First Century Fox, Cl. A | 279,736 | 9,104,008 | |
Walt Disney | 115,600 | 13,194,584 | |
37,966,912 | |||
Pharmaceuticals, | |||
Biotech & Life Sciences—11.9% | |||
AbbVie | 191,800 | 12,887,042 | |
Celgene | 25,000 | b | 2,893,375 |
Gilead Sciences | 57,300 | 6,708,684 | |
Johnson & Johnson | 69,700 | 6,792,962 | |
Novartis, ADR | 84,000 | 8,260,560 | |
Novo Nordisk, ADR | 278,100 | 15,228,756 |
8
Common Stocks (continued) | Shares | Value ($) | |
Pharmaceuticals, | |||
Biotech & Life Sciences (continued) | |||
Roche Holding, ADR | 366,900 | 12,867,183 | |
65,638,562 | |||
Retailing—2.0% | |||
Target | 46,900 | 3,828,447 | |
Wal-Mart Stores | 102,600 | 7,277,418 | |
11,105,865 | |||
Semiconductors & | |||
Semiconductor Equipment—3.3% | |||
Intel | 172,400 | 5,243,546 | |
Texas Instruments | 215,600 | 11,105,556 | |
Xilinx | 45,000 | 1,987,200 | |
18,336,302 | |||
Software & Services—5.9% | |||
Automatic Data Processing | 99,200 | 7,958,816 | |
Facebook, Cl. A | 74,600 | b | 6,398,069 |
International Business Machines | 65,800 | 10,703,028 | |
Oracle | 179,800 | 7,245,940 | |
32,305,853 | |||
Technology Hardware & Equipment—6.9% | |||
Apple | 261,550 | 32,804,909 | |
QUALCOMM | 82,800 | 5,185,764 | |
37,990,673 | |||
Transportation—2.7% | |||
Canadian Pacific Railway | 49,400 | 7,915,362 | |
Union Pacific | 74,100 | 7,066,917 | |
14,982,279 | |||
Total Common Stocks | |||
(cost $273,581,975) | 548,379,491 | ||
Other Investment—1.7% | |||
Registered Investment Company; | |||
Dreyfus Institutional Preferred | |||
Plus Money Market Fund | |||
(cost $9,148,683) | 9,148,683 | c | 9,148,683 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Investment of Cash Collateral | ||||
for Securities Loaned—.7% | Shares | Value ($) | ||
Registered Investment Company; | ||||
Dreyfus Institutional Cash Advantage Fund | ||||
(cost $3,868,465) | 3,868,465 | c | 3,868,465 | |
Total Investments (cost $286,599,123) | 101.9 | % | 561,396,639 | |
Liabilities, Less Cash and Receivables | (1.9 | %) | (10,501,367 | ) |
Net Assets | 100.0 | % | 550,895,272 |
ADR—American Depository Receipts
a Security, or portion thereof, on loan.At June 30, 2015, the value of the fund’s securities on loan was $3,777,499 |
and the value of the collateral held by the fund was $3,868,465. |
b Non-income producing security. |
c Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Food, Beverage & Tobacco | 18.3 | Money Market Investments | 2.4 |
Energy | 13.5 | Food & Staples Retailing | 2.3 |
Pharmaceuticals, | Consumer Durables & Apparel | 2.2 | |
Biotech & Life Sciences | 11.9 | Materials | 2.1 |
Diversified Financials | 10.1 | Retailing | 2.0 |
Media | 6.9 | Health Care Equipment & Services | 1.7 |
Technology Hardware & Equipment | 6.9 | Insurance | 1.3 |
Software & Services | 5.9 | Consumer Services | 1.3 |
Household & Personal Products | 4.6 | Capital Goods | 1.3 |
Semiconductors & | Banks | 1.2 | |
Semiconductor Equipment | 3.3 | ||
Transportation | 2.7 | 101.9 | |
† Based on net assets. | |||
See notes to financial statements. |
10
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2015 (Unaudited)
Cost | Value | |
Assets ($): | ||
Investments in securities—See Statement of Investments (including | ||
securities on loan, valued at $3,777,499)—Note 1(c): | ||
Unaffiliated issuers | 273,581,975 | 548,379,491 |
Affiliated issuers | 13,017,148 | 13,017,148 |
Cash | 26,427 | |
Dividends and securities lending income receivable | 1,338,485 | |
Receivable for investment securities sold | 212,212 | |
Prepaid expenses | 4,775 | |
562,978,538 | ||
Liabilities ($): | ||
Due to The Dreyfus Corporation and affiliates—Note 3(b) | 325,835 | |
Due to Fayez Sarofim & Co. | 102,201 | |
Payable for shares of Beneficial Interest redeemed | 7,734,348 | |
Liability for securities on loan—Note 1(c) | 3,868,465 | |
Accrued expenses | 52,417 | |
12,083,266 | ||
Net Assets ($) | 550,895,272 | |
Composition of Net Assets ($): | ||
Paid-in capital | 237,879,184 | |
Accumulated undistributed investment income—net | 214,428 | |
Accumulated net realized gain (loss) on investments | 38,003,901 | |
Accumulated net unrealized appreciation (depreciation) | ||
on investments and foreign currency transactions | 274,797,759 | |
Net Assets ($) | 550,895,272 | |
Net Asset Value Per Share | ||
Initial Shares | Service Shares | |
Net Assets ($) | 301,861,795 | 249,033,477 |
Shares Outstanding | 6,475,553 | 5,374,748 |
Net Asset Value Per Share ($) | 46.62 | 46.33 |
See notes to financial statements. |
The Fund 11
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2015 (Unaudited)
Investment Income ($): | ||
Income: | ||
Cash dividends (net of $262,764 foreign taxes withheld at source): | ||
Unaffiliated issuers | 7,572,915 | |
Affiliated issuers | 1,071 | |
Income from securities lending—Note 1(c) | 4,332 | |
Total Income | 7,578,318 | |
Expenses: | ||
Investment advisory fee—Note 3(a) | 1,533,611 | |
Sub-investment advisory fee—Note 3(a) | 626,405 | |
Distribution fees—Note 3(b) | 326,660 | |
Professional fees | 51,344 | |
Prospectus and shareholders’ reports | 24,056 | |
Trustees’ fees and expenses—Note 3(c) | 22,127 | |
Custodian fees—Note 3(b) | 21,975 | |
Shareholder servicing costs—Note 3(b) | 1,136 | |
Loan commitment fees—Note 2 | 989 | |
Interest expense—Note 2 | 677 | |
Miscellaneous | 15,659 | |
Total Expenses | 2,624,639 | |
Less—reduction in fees due to earnings credits—Note 3(b) | (3 | ) |
Net Expenses | 2,624,636 | |
Investment Income—Net | 4,953,682 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments | 38,063,614 | |
Net unrealized appreciation (depreciation) on | ||
investments and foreign currency transactions | (44,789,909 | ) |
Net Realized and Unrealized Gain (Loss) on Investments | (6,726,295 | ) |
Net (Decrease) in Net Assets Resulting from Operations | (1,772,613 | ) |
See notes to financial statements. |
12
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
June 30, 2015 | Year Ended | |||
(Unaudited) | December 31, 2014 | |||
Operations ($): | ||||
Investment income—net | 4,953,682 | 10,358,834 | ||
Net realized gain (loss) on investments | 38,063,614 | 27,347,692 | ||
Net unrealized appreciation | ||||
(depreciation) on investments | (44,789,909 | ) | 7,612,519 | |
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | (1,772,613 | ) | 45,319,045 | |
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Initial Shares | (2,827,200 | ) | (6,210,078 | ) |
Service Shares | (2,044,860 | ) | (4,157,846 | ) |
Net realized gain on investments: | ||||
Initial Shares | (14,565,873 | ) | (9,146,788 | ) |
Service Shares | (12,097,365 | ) | (6,764,797 | ) |
Total Dividends | (31,535,298 | ) | (26,279,509 | ) |
Beneficial Interest Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Initial Shares | 5,973,824 | 16,457,471 | ||
Service Shares | 14,200,087 | 35,946,895 | ||
Dividends reinvested: | ||||
Initial Shares | 17,393,073 | 15,356,866 | ||
Service Shares | 14,142,225 | 10,922,643 | ||
Cost of shares redeemed: | ||||
Initial Shares | (33,143,145 | ) | (72,828,378 | ) |
Service Shares | (28,959,976 | ) | (45,422,441 | ) |
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | (10,393,912 | ) | (39,566,944 | ) |
Total Increase (Decrease) in Net Assets | (43,701,823 | ) | (20,527,408 | ) |
Net Assets ($): | ||||
Beginning of Period | 594,597,095 | 615,124,503 | ||
End of Period | 550,895,272 | 594,597,095 | ||
Undistributed investment income—net | 214,428 | 132,806 |
The Fund 13
STATEMENT OF CHANGES IN NET ASSETS (continued)
Six Months Ended | ||||
June 30, 2015 | Year Ended | |||
(Unaudited) | December 31, 2014 | |||
Capital Share Transactions: | ||||
Initial Shares | ||||
Shares sold | 122,102 | 342,337 | ||
Shares issued for dividends reinvested | 371,176 | 325,702 | ||
Shares redeemed | (678,583 | ) | (1,518,733 | ) |
Net Increase (Decrease) in Shares Outstanding | (185,305 | ) | (850,694 | ) |
Service Shares | ||||
Shares sold | 293,404 | 751,479 | ||
Shares issued for dividends reinvested | 303,606 | 233,185 | ||
Shares redeemed | (601,078 | ) | (951,348 | ) |
Net Increase (Decrease) in Shares Outstanding | (4,068 | ) | 33,316 | |
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.
Six Months Ended | ||||||||||||
June 30, 2015 | Year Ended December 31, | |||||||||||
Initial Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 49.51 | 47.95 | 40.47 | 37.99 | 35.44 | 31.40 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .44 | .89 | .86 | .82 | .73 | .64 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (.59 | ) | 2.86 | 7.59 | 3.14 | 2.42 | 4.09 | |||||
Total from Investment Operations | (.15 | ) | 3.75 | 8.45 | 3.96 | 3.15 | 4.73 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.44 | ) | (.90 | ) | (.87 | ) | (1.48 | ) | (.60 | ) | (.69 | ) |
Dividends from net realized | ||||||||||||
gain on investments | (2.30 | ) | (1.29 | ) | (.10 | ) | — | — | — | |||
Total Distributions | (2.74 | ) | (2.19 | ) | (.97 | ) | (1.48 | ) | (.60 | ) | (.69 | ) |
Net asset value, end of period | 46.62 | 49.51 | 47.95 | 40.47 | 37.99 | 35.44 | ||||||
Total Return (%) | (.30 | )b | 8.09 | 21.11 | 10.44 | 9.01 | 15.32 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .80 | c | .80 | .81 | .81 | .80 | .81 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .80 | c | .80 | .81 | .81 | .80 | .81 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 1.83 | c | 1.84 | 1.95 | 2.02 | 1.99 | 2.01 | |||||
Portfolio Turnover Rate | 5.60 | b | 3.65 | 7.71 | 3.05 | 4.24 | 11.90 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 301,862 | 329,802 | 360,197 | 345,985 | 326,445 | 310,385 |
a | Based on average shares outstanding. |
b | Not annualized. |
c | Annualized. |
See notes to financial statements.
The Fund 15
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||||
June 30, 2015 | Year Ended December 31, | |||||||||||
Service Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 49.23 | 47.69 | 40.25 | 37.74 | 35.23 | 31.21 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .38 | .76 | .75 | .72 | .63 | .58 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (.60 | ) | 2.85 | 7.55 | 3.10 | 2.42 | 4.05 | |||||
Total from Investment Operations | (.22 | ) | 3.61 | 8.30 | 3.82 | 3.05 | 4.63 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.38 | ) | (.78 | ) | (.76 | ) | (1.31 | ) | (.54 | ) | (.61 | ) |
Dividends from net realized | ||||||||||||
gain on investments | (2.30 | ) | (1.29 | ) | (.10 | ) | — | — | — | |||
Total Distributions | (2.68 | ) | (2.07 | ) | (.86 | ) | (1.31 | ) | (.54 | ) | (.61 | ) |
Net asset value, end of period | 46.33 | 49.23 | 47.69 | 40.25 | 37.74 | 35.23 | ||||||
Total Return (%) | (.45 | )b | 7.83 | 20.83 | 10.14 | 8.74 | 15.04 | |||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.05 | c | 1.05 | 1.06 | 1.06 | 1.05 | 1.06 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.05 | c | 1.05 | 1.06 | 1.06 | 1.05 | 1.06 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 1.58 | c | 1.59 | 1.70 | 1.79 | 1.75 | 1.74 | |||||
Portfolio Turnover Rate | 5.60 | b | 3.65 | 7.71 | 3.05 | 4.24 | 11.90 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 249,033 | 264,795 | 254,928 | 220,568 | 174,160 | 125,296 |
a | Based on average shares outstanding. |
b | Not annualized. |
c | Annualized. |
See notes to financial statements.
16
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Appreciation Portfolio (the “fund”) is a separate diversified series of Dreyfus Variable Investment Fund (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 seven 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 capital growth consistent with the preservation of capital. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Fayez Sarofim & Co. (“Sarofim & Co.”) serves as the fund’s sub-investment adviser.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares, which are sold to the public 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 inter-
The Fund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
pretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
18
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value.All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. 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 financial futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Trustees (the “Board”).
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
The following is a summary of the inputs used as of June 30, 2015 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities— | ||||
Domestic | ||||
Common Stocks† | 462,315,728 | — | — | 462,315,728 |
Equity Securities— | ||||
Foreign | ||||
Common Stocks† | 86,063,763 | — | — | 86,063,763 |
Mutual Funds | 13,017,148 | — | — | 13,017,148 |
† See Statement of Investments for additional detailed categorizations. |
At December 31, 2014, $15,893,896 of exchange traded foreign equity securities were classified within Level 2 of the fair value hierarchy pursuant to the fund’s fair valuation procedures.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes
20
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 Dreyfus, 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 Dreyfus, 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 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
the fund with the market value of the unreturned securities and is subrogated to the fund’s rights against the borrower and the collateral. During the period ended June 30, 2015, The Bank of New York Mellon earned $1,356 from lending portfolio securities, pursuant to the securities lending agreement.
(d) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended June 30, 2015, were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 12/31/2014 ($) | Purchases ($) | Sales ($) | 6/30/2015 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Preferred | |||||
Plus Money | |||||
Market Fund | 1,263,200 | 33,810,859 | 25,925,376 | 9,148,683 | 1.7 |
Dreyfus | |||||
Institutional | |||||
Cash | |||||
Advantage | |||||
Fund | 4,154,880 | 46,129,045 | 46,415,460 | 3,868,465 | .7 |
Total | 5,418,080 | 79,939,904 | 72,340,836 | 13,017,148 | 2.4 |
(e) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net are normally declared and paid quarterly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(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
22
best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended June 30, 2015, 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 June 30, 2015, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended December 31, 2014 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2014 was as follows: $10,543,184 and long-term capital gain $15,736,325. The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $430 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing.
The average amount of borrowings outstanding under the Facilities during the period ended June 30, 2015 was approximately $123,800 with a related weighted average annualized interest rate of 1.10%.
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 3—Investment Advisory Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .5325% of the value of the fund’s average daily net assets. Pursuant to a sub-investment advisory agreement with Sarofim & Co., the fund pays Sarofim & Co. a monthly sub-investment advisory fee at the annual rate of .2175% of the value of the fund’s average daily net assets. Both fees are 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 fees payable under the Distribution Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2015, Service shares were charged $326,660 pursuant to the Distribution Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended June 30, 2015, the fund was charged $1,052 for transfer agency services and $66 for
24
cash management services.These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $3.
The fund compensates The Bank of NewYork 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 June 30, 2015, the fund was charged $21,975 pursuant to the custody agreement.
During the period ended June 30, 2015, the fund was charged $6,240 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $250,217, Distribution Plan fees $53,710, custodian fees $18,459, Chief Compliance Officer fees $3,169 and transfer agency fees $280.
(c) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2015, amounted to $32,096,188 and $69,544,837, respectively.
At June 30, 2015, accumulated net unrealized appreciation on investments was $274,797,516, consisting of $278,528,634 gross unrealized appreciation and $3,731,118 gross unrealized depreciation.
At June 30, 2015, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
The Fund 25
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
INVESTMENT ADVISORY AND SUB-INVESTMENT
ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on March 11-12, 2015, the Board considered the renewal of the fund’s Investment Advisory Agreement, pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the “Agreement”), and the Sub-Investment Advisory Agreement (together, the “Agreements”), pursuant to which Fayez Sarofim & Co. (the “Subadviser”) provides day-today management of the fund’s investments. The Board members, none of whom are “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 Dreyfus and the Subadviser. In considering the renewal of the Agreements, 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 them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ 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 Dreyfus 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 Dreyfus’
26
extensive administrative, accounting, and compliance infrastructures, as well as Dreyfus’ supervisory activities over the Subadviser. 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 Lipper, Inc. (“Lipper”), 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 December 31, 2014, 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 Lipper as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds.They also noted 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 the results of the comparisons and noted 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 it was equal to the Performance Group median and above the Performance Universe median. Dreyfus
The Fund 27
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY
AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index and noted that the fund’s performance was above the return of the index in five of the ten years.
The Board discussed with representatives of Dreyfus and the Sub-Adviser the investment strategy employed in the management of the fund’s assets and how that strategy affected the fund’s relative performance. They discussed, among other matters, plans for increased management focus on ways to improve the fund’s performance.The Board members noted that the Sub-Adviser is an experienced manager with a long-term “buy-and-hold” investment approach to investing in high quality, “mega-cap” companies. The Sub-Adviser’s considerable reputation, based on following this investment approach, was noted. A representative of the Sub-Adviser reminded the Board members that high quality, mega-cap stocks have been out of favor, which has affected the fund’s relative performance.
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 noted that the fund’s contractual management fee was above the Expense Group median and the fund’s actual management fee and total expenses were above the Expense Group and Expense Universe medians.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Lipper category as the fund and (2) paid to Dreyfus or the Subadviser or its affiliates 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 and reasonableness of the fund’s management fee.
28
The Board considered the fee to the Subadviser in relation to the fee paid to Dreyfus by the fund and the respective services provided by the Subadviser and Dreyfus.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus 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 Dreyfus. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus 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 Agreements bear a reasonable relationship to the mix of services provided by Dreyfus and the Subadviser, including the nature, extent and quality of such services, 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. Dreyfus representatives noted 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 Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus fund complex, the extent of economies of scale could depend substantially on the level of assets in
The Fund 29
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY
AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
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 Dreyfus and the Subadviser from acting as investment adviser and sub-investment adviser, respectively, and noted 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 Agreements. 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 Dreyfus and the Subadviser are adequate and appropriate.
The Board noted Dreyfus’ efforts to improve fund performance and agreed to closely monitor performance.
The Board concluded that the fees paid to Dreyfus and the Subadviser were reasonable in light of the considerations described above.
The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus 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 Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with Dreyfus and its affiliates
30
and the Subadviser, of the fund and the services provided to the fund by Dreyfus and the Subadviser. 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 Agreements, 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 prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. 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 same or similar arrangements in prior years. The Board determined to renew the Agreements.
The Fund 31
NOTES
For More Information
Telephone 1-800-554-4611 or 1-516-338-3300 | |
The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 | |
Attn: Investments Division |
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-DREYFUS.
Dreyfus Variable |
Investment Fund, |
Growth and Income |
Portfolio |
SEMIANNUAL REPORT June 30, 2015
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents | |
THE FUND | |
2 | A Letter from the President |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
13 | Statement of Assets and Liabilities |
14 | Statement of Operations |
15 | Statement of Changes in Net Assets |
17 | Financial Highlights |
19 | Notes to Financial Statements |
27 | Information About the Renewal of the Fund’s Investment Advisory Agreement |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus Variable Investment Fund,
Growth and Income Portfolio
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Variable Investment Fund, Growth and Income Portfolio, covering the six-month period from January 1, 2015, through June 30, 2015. 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.
The U.S. stock market proved volatile on its way to posting modest gains over the first half of 2015. Investors were worried when the economic recovery stalled during the first quarter of the year due to unusually harsh winter weather, a strengthening U.S. dollar, and expected increases in short-term interest rates. These fears waned during the second quarter, when economic growth seemed to regain momentum. While a number of headwinds remained, investors were encouraged by better employment data, stronger housing markets, and stabilizing currency exchange rates.
We expect economic uncertainty and bouts of market volatility to persist over the near term as Europe continues to struggle with instability in Greece, China addresses a stubborn economic slowdown, geopolitical conflicts flare across the Middle East, and U.S. investors await the first in a series of short-term interest rate hikes. We remain more optimistic regarding the economy’s long-term outlook, which we believe should be supported by improved consumer and business confidence as well as aggressively accommodative monetary policies from many of the world’s major central banks.As always, we urge you to discuss these observations with your financial advisor, who can help you assess their implications for your investment portfolio.
Thank you for your continued confidence and support.
J. Charles Cardona
President
The Dreyfus Corporation
July 15, 2015
2
DISCUSSION OF FUND PERFORMANCE
For the period of January 1, 2015, through June 30, 2015, as provided by John Bailer and Elizabeth Slover, Portfolio Managers
Fund and Market Performance Overview
For the six-month period ended June 30, 2015, Dreyfus Variable Investment Fund, Growth and Income Portfolio’s Initial shares achieved a total return of 2.65%, and its Service shares achieved a total return of 2.52%.1 In comparison, the fund’s benchmark, the Standard & Poor’s 500® Composite Stock Price Index (the “S&P 500 Index”), produced a total return of 1.23% for the same period.2
U.S. equities advanced modestly over the first half of 2015 as the market digested earlier gains amid choppy economic growth.The fund outperformed its benchmark, largely due to strong stock selections in the consumer staples, energy, health care, information technology and materials sectors.
The Fund’s Investment Approach
The fund seeks long-term capital growth, current income, and growth of income consistent with reasonable investment risk.To pursue these goals, the fund normally invests primarily in stocks of domestic and foreign issuers.We seek to create a portfolio that includes a blend of growth and dividend-paying stocks, as well as other investments that provide income.We choose stocks through a disciplined investment process that combines computer modeling techniques, “bottom-up” fundamental analysis, and risk management. The investment process is designed to provide investors with investment exposure to sector weightings and risk characteristics similar to those of the S&P 500 Index.
U.S. Stocks Digested Previous Gains
In contrast to robust employment gains and improved business and consumer confidence during much of 2014, the economic recovery proved more uneven over the first half of 2015.The U.S. economy contracted modestly during the first quarter in the face of severe winter weather and a labor slowdown in West Coast ports. Global economic weakness further weighed on U.S. exporters when massive quantitative easing programs in Europe and Japan caused the U.S. dollar to appreciate
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
sharply against most foreign currencies. Meanwhile, sharply lower oil prices created challenges for energy producers. In this environment, the S&P 500 Index repeatedly vacillated between gains and losses over the first few months of the year.
Fortunately, the economy seemed to get back on track in the spring, when labor markets resumed their vigorous gains, housing markets showed renewed signs of strength, oil prices rebounded, and currency exchange rates stabilized.These developments supported higher stock prices through mid-June until concerns regarding a debt crisis in Greece derailed the advance. Consumer discretionary companies and health care providers fared particularly well during the second quarter, while richly valued, dividend-paying utilities lagged market averages.
Stock Selections Drove Fund Performance
Although the fund’s comparatively strong returns were bolstered by underweighted exposure to the relatively weak utilities and industrials sectors, most of its outperformance stemmed from favorable individual stock selections across a variety of market sectors. In the consumer staples sector, the fund benefited from its focus on fast-growing companies, such as CVS Health, which achieved success through an emphasis on providing health care services through its retail stores and clinics. Packaged food maker ConAgra Foods also added to relative returns as company management, under pressure from activist investors, stated its intent to maximize shareholder returns. The fund invested in several of the energy sector’s better performers, including refiners Valero Energy and Phillips 66 while avoiding the large, integrated oil companies such as Exxon Mobil and Chevron.
In the health care sector, top performers included health systems management firm UnitedHealth Group and biotechnology developer Biogen. Pharmaceutical services provider Omnicare also gained value after agreeing to be acquired by CVS Health. Our effective security selection among technology stocks was led by our positions in network security company Fortinet and computer/cell phone manufacturer Apple, with both companies generating strong earnings results. Finally, in the materials sector, construction products providers Martin Marietta Materials and Vulcan Materials gained ground after reporting strong earnings and issuing positive outlooks.
The only area in which the fund significantly underperformed its benchmark was the consumer discretionary sector, where apparel makers PVH and Michael Kors Holdings suffered due to currency exposures and weak overseas spending trends. The fund’s
4
telecommunications holdings slightly underperformed market averages due to Windstream Holdings, which faced skepticism about future earnings growth and the sustainability of their high dividend yield. Notable underperformers in other sectors included computer storage companies SanDisk and EMC, semiconductor equipment maker Applied Materials, software providers Oracle and Microsoft, oil and gas producer EOG Resources and industrial component maker Precision Castparts. However other holdings in the technology, energy and industrial sectors more than made up for these disappointments.
Positioned for Improved Growth
In light of recent employment gains, strength in housing markets, low energy prices, and mild inflation, we believe the U.S. economy is well positioned for the second half of 2015. While the fund’s sector allocations remain similar to those of the benchmark, we have identified particularly compelling investment opportunities in the financials, consumer discretionary, and energy sectors. In contrast, the fund holds mildly underweighted exposure to the utilities, telecommunications, and industrials sectors.We also have trimmed the fund’s exposure to health care holdings by locking in profits among some of the sector’s better recent performers.
July 15, 2015
Please note, the position in any security highlighted with italicized typeface was sold during the reporting period. Equity funds 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 use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets. Derivatives can be highly volatile, illiquid, and difficult to value and there is the risk that changes in the value of a derivative held by the fund will not correlate with the underlying instruments or the fund’s other investments.
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 Dreyfus Variable Investment Fund, Growth and Income Portfolio made available through insurance products may be similar to other funds managed or advised by Dreyfus. However, the investment results of the fund may be higher or lower than, and may not be comparable to, those of any other Dreyfus fund.
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. — Reflects reinvestment of net dividends and, where applicable, capital gain |
distributions.The Standard & Poor’s 500® Composite Stock Price Index is a widely accepted, unmanaged index of |
U.S. stock market performance. Investors cannot invest directly in any index. |
The Fund 5
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 Dreyfus Variable Investment Fund, Growth and Income Portfolio from January 1, 2015 to June 30, 2015. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended June 30, 2015
Initial Shares | Service Shares | |||
Expenses paid per $1,000† | $ 4.42 | $ 5.67 | ||
Ending value (after expenses) | $ 1,026.50 | $ 1,025.20 |
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 June 30, 2015
Initial Shares | Service Shares | |||
Expenses paid per $1,000† | $ 4.41 | $ 5.66 | ||
Ending value (after expenses) | $ 1,020.43 | $ 1,019.19 |
† Expenses are equal to the fund’s annualized expense ratio of .88% for Initial shares and 1.13% for Service shares, |
multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS
June 30, 2015 (Unaudited)
Common Stocks—99.1% | Shares | Value ($) | |
Automobiles & Components—1.2% | |||
Delphi Automotive | 4,836 | 411,495 | |
General Motors | 7,105 | 236,810 | |
Tesla Motors | 1,703 | a,b | 456,847 |
1,105,152 | |||
Banks—7.1% | |||
Bank of America | 54,879 | 934,041 | |
Citigroup | 30,034 | 1,659,078 | |
JPMorgan Chase & Co. | 34,725 | 2,352,966 | |
PNC Financial Services Group | 3,430 | 328,080 | |
Regions Financial | 32,162 | 333,198 | |
Wells Fargo & Co. | 14,819 | 833,421 | |
6,440,784 | |||
Capital Goods—6.7% | |||
Danaher | 6,378 | 545,893 | |
Honeywell International | 18,740 | 1,910,918 | |
Northrop Grumman | 1,497 | 237,469 | |
Owens Corning | 8,720 | 359,700 | |
Precision Castparts | 2,839 | 567,431 | |
Raytheon | 6,465 | 618,571 | |
United Technologies | 16,633 | 1,845,099 | |
6,085,081 | |||
Commercial & Professional Services—.6% | |||
Tyco International | 13,801 | 531,063 | |
Consumer Durables & Apparel—2.1% | |||
Hanesbrands | 13,576 | 452,352 | |
lululemon athletica | 5,554 | b | 362,676 |
NIKE, Cl. B | 6,999 | 756,032 | |
Under Armour, Cl. A | 3,493 | b | 291,456 |
1,862,516 | |||
Consumer Services—1.5% | |||
Carnival | 15,810 | 780,856 | |
McDonald’s | 5,914 | 562,244 | |
1,343,100 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Diversified Financials—7.8% | |||
Ameriprise Financial | 3,382 | 422,513 | |
Berkshire Hathaway, Cl. B | 4,952 | b | 674,017 |
BlackRock | 1,487 | 514,472 | |
Capital One Financial | 7,534 | 662,766 | |
Charles Schwab | 13,889 | 453,476 | |
Goldman Sachs Group | 5,880 | 1,227,685 | |
Intercontinental Exchange | 2,605 | 582,504 | |
Invesco | 6,439 | 241,398 | |
Morgan Stanley | 22,301 | 865,056 | |
TD Ameritrade Holding | 10,203 | 375,675 | |
Voya Financial | 21,836 | 1,014,719 | |
7,034,281 | |||
Energy—8.4% | |||
Anadarko Petroleum | 7,805 | 609,258 | |
EOG Resources | 19,204 | 1,681,310 | |
Occidental Petroleum | 29,278 | 2,276,950 | |
Phillips 66 | 11,717 | 943,922 | |
Schlumberger | 23,894 | 2,059,424 | |
7,570,864 | |||
Food & Staples Retailing—1.9% | |||
CVS Health | 16,323 | 1,711,956 | |
Food, Beverage & Tobacco—7.4% | |||
Archer-Daniels-Midland | 9,458 | 456,065 | |
Coca-Cola Enterprises | 27,197 | 1,181,438 | |
ConAgra Foods | 25,755 | 1,126,009 | |
Molson Coors Brewing, Cl. B | 5,266 | 367,619 | |
Mondelez International, Cl. A | 27,016 | 1,111,438 | |
PepsiCo | 22,904 | 2,137,859 | |
Philip Morris International | 3,858 | 309,296 | |
6,689,724 | |||
Health Care Equipment & Services—4.2% | |||
Boston Scientific | 26,300 | b | 465,510 |
Cardinal Health | 10,319 | 863,184 | |
McKesson | 3,304 | 742,772 | |
Medtronic | 9,064 | 671,642 |
8
Common Stocks (continued) | Shares | Value ($) | |
Health Care Equipment & Services (continued) | |||
UnitedHealth Group | 8,340 | 1,017,480 | |
3,760,588 | |||
Household & Personal Products—.8% | |||
Estee Lauder, Cl. A | 8,102 | 702,119 | |
Insurance—3.3% | |||
American International Group | 13,720 | 848,170 | |
FNF Group | 6,381 | 236,033 | |
Hartford Financial Services Group | 9,100 | 378,287 | |
Marsh & McLennan | 10,148 | 575,392 | |
Prudential Financial | 10,228 | 895,155 | |
2,933,037 | |||
Materials—3.9% | |||
Dow Chemical | 14,473 | 740,583 | |
Martin Marietta Materials | 7,839 | 1,109,297 | |
Mosaic | 10,104 | 473,372 | |
Packaging Corporation of America | 3,719 | 232,400 | |
Potash Corp of Saskatchewan | 11,031 | 341,630 | |
Vulcan Materials | 7,568 | 635,182 | |
3,532,464 | |||
Media—4.4% | |||
AMC Networks, Cl. A | 4,983 | b | 407,859 |
CBS, Cl. B | 9,576 | 531,468 | |
Cinemark Holdings | 7,279 | 292,397 | |
Comcast, Cl. A | 9,531 | 573,194 | |
Interpublic Group of Companies | 49,984 | 963,192 | |
Omnicom Group | 6,017 | 418,121 | |
Twenty-First Century Fox, Cl. A | 7,145 | 232,534 | |
Viacom, Cl. B | 8,928 | 577,106 | |
3,995,871 | |||
Pharmaceuticals, Biotech & Life Sciences—10.0% | |||
AbbVie | 16,624 | 1,116,967 | |
Alexion Pharmaceuticals | 3,080 | b | 556,772 |
Allergan | 2,795 | b | 848,171 |
Biogen | 2,217 | b | 895,535 |
Bristol-Myers Squibb | 10,728 | 713,841 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Pharmaceuticals, Biotech & | |||
Life Sciences (continued) | |||
Eli Lilly & Co. | 5,634 | 470,383 | |
Illumina | 2,461 | b | 537,384 |
Mallinckrodt | 3,653 | b | 430,031 |
Merck & Co. | 15,272 | 869,435 | |
Pfizer | 42,131 | 1,412,652 | |
Regeneron Pharmaceuticals | 1,211 | b | 617,767 |
Vertex Pharmaceuticals | 4,408 | b | 544,300 |
9,013,238 | |||
Real Estate—.7% | |||
Communications Sales & Leasing | 25,306 | 625,564 | |
Retailing—4.4% | |||
Amazon.com | 2,720 | b | 1,180,725 |
Dollar Tree | 6,673 | b | 527,100 |
Home Depot | 6,577 | 730,902 | |
Kohl’s | 3,450 | 216,005 | |
Priceline Group | 650 | b | 748,391 |
Ulta Salon Cosmetics & Fragrance | 3,418 | b | 527,910 |
3,931,033 | |||
Semiconductors & Semiconductor Equipment—2.7% | |||
Applied Materials | 28,818 | 553,882 | |
Avago Technologies | 3,663 | 486,923 | |
Microchip Technology | 14,674 | a | 695,914 |
Texas Instruments | 14,188 | 730,824 | |
2,467,543 | |||
Software & Services—11.2% | |||
Accenture, Cl. A | 3,599 | 348,311 | |
Adobe Systems | 6,289 | b | 509,472 |
Akamai Technologies | 7,279 | b | 508,220 |
Cognizant Technology Solutions, Cl. A | 8,484 | b | 518,288 |
Facebook, Cl. A | 15,604 | b | 1,338,277 |
Fortinet | 8,380 | b | 346,345 |
Google, Cl. A | 1,515 | b | 818,161 |
Google, Cl. C | 1,519 | b | 790,655 |
10
Common Stocks (continued) | Shares | Value ($) | |
Software & Services (continued) | |||
Intuit | 5,333 | 537,406 | |
LinkedIn, Cl. A | 1,965 | b | 406,028 |
Oracle | 43,419 | 1,749,786 | |
salesforce.com | 10,529 | b | 733,134 |
Splunk | 4,602 | b | 320,391 |
Visa, Cl. A | 18,133 | 1,217,631 | |
10,142,105 | |||
Technology Hardware & | |||
Equipment—6.7% | |||
Apple | 31,386 | 3,936,589 | |
Cisco Systems | 65,197 | 1,790,310 | |
Hewlett-Packard | 9,811 | 294,428 | |
Western Digital | 412 | 32,309 | |
6,053,636 | |||
Telecommunication Services—1.1% | |||
Verizon Communications | 19,465 | 907,264 | |
Windstream Holdings | 16,913 | a | 107,905 |
1,015,169 | |||
Transportation—.7% | |||
Delta Air Lines | 2,840 | 116,667 | |
FedEx | 2,801 | 477,290 | |
593,957 | |||
Utilities—.3% | |||
NRG Yield, Cl. A | 6,636 | a | 145,926 |
NRG Yield, Cl. C | 6,636 | a | 145,262 |
291,188 | |||
Total Common Stocks | |||
(cost $71,661,497) | 89,432,033 | ||
Other Investment—.5% | |||
Registered Investment Company; | |||
Dreyfus Institutional Preferred | |||
Plus Money Market Fund | |||
(cost $473,805) | 473,805 | c | 473,805 |
The Fund 11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Investment of Cash Collateral | ||||
for Securities Loaned—1.0% | Shares | Value ($) | ||
Registered Investment Company; | ||||
Dreyfus Institutional Cash Advantage Fund | ||||
(cost $862,314) | 862,314 | c | 862,314 | |
Total Investments (cost $72,997,616) | 100.6 | % | 90,768,152 | |
Liabilities, Less Cash and Receivables | (.6 | %) | (544,636 | ) |
Net Assets | 100.0 | % | 90,223,516 |
a Security, or portion thereof, on loan.At June 30, 2015, the value of the fund’s securities on loan was $1,536,029 |
and the value of the collateral held by the fund was $1,564,625, consisting of cash collateral of $862,314 and U.S. |
Government & Agency securities valued at $702,311. |
b Non-income producing security. |
c Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Software & Services | 11.2 | Semiconductors & | |
Pharmaceuticals, | Semiconductor Equipment | 2.7 | |
Biotech & Life Sciences | 10.0 | Consumer Durables & Apparel | 2.1 |
Energy | 8.4 | Food & Staples Retailing | 1.9 |
Diversified Financials | 7.8 | Consumer Services | 1.5 |
Food, Beverage & Tobacco | 7.4 | Money Market Investments | 1.5 |
Banks | 7.1 | Automobiles & Components | 1.2 |
Capital Goods | 6.7 | Telecommunication Services | 1.1 |
Technology Hardware & Equipment | 6.7 | Household & Personal Products | .8 |
Media | 4.4 | Real Estate | .7 |
Retailing | 4.4 | Transportation | .7 |
Health Care Equipment & Services | 4.2 | Commercial & Professional Services | .6 |
Materials | 3.9 | Utilities | .3 |
Insurance | 3.3 | 100.6 | |
† Based on net assets. | |||
See notes to financial statements. |
12
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2015 (Unaudited)
Cost | Value | |
Assets ($): | ||
Investments in securities—See Statement of Investments (including | ||
securities on loan, valued at $1,536,029)—Note 1(b): | ||
Unaffiliated issuers | 71,661,497 | 89,432,033 |
Affiliated issuers | 1,336,119 | 1,336,119 |
Cash | 214 | |
Receivable for investment securities sold | 969,242 | |
Dividends and securities lending income receivable | 105,622 | |
Prepaid expenses | 1,137 | |
91,844,367 | ||
Liabilities ($): | ||
Due to The Dreyfus Corporation and affiliates—Note 3(b) | 67,888 | |
Liability for securities on loan—Note 1(b) | 862,314 | |
Payable for investment securities purchased | 646,068 | |
Payable for shares of Beneficial Interest redeemed | 18,394 | |
Accrued expenses | 26,187 | |
1,620,851 | ||
Net Assets ($) | 90,223,516 | |
Composition of Net Assets ($): | ||
Paid-in capital | 66,596,226 | |
Accumulated undistributed investment income—net | 38,265 | |
Accumulated net realized gain (loss) on investments | 5,818,489 | |
Accumulated net unrealized appreciation | ||
(depreciation) on investments | 17,770,536 | |
Net Assets ($) | 90,223,516 | |
Net Asset Value Per Share | ||
Initial Shares | Service Shares | |
Net Assets ($) | 83,590,001 | 6,633,515 |
Shares Outstanding | 2,745,304 | 217,655 |
Net Asset Value Per Share ($) | 30.45 | 30.48 |
See notes to financial statements. |
The Fund 13
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2015 (Unaudited)
Investment Income ($): | ||
Income: | ||
Cash dividends (net of $197 foreign taxes withheld at source): | ||
Unaffiliated issuers | 727,544 | |
Affiliated issuers | 305 | |
Income from securities lending—Note 1(b) | 3,344 | |
Total Income | 731,193 | |
Expenses: | ||
Investment advisory fee—Note 3(a) | 344,414 | |
Professional fees | 26,111 | |
Prospectus and shareholders’ reports | 9,730 | |
Distribution fees—Note 3(b) | 8,739 | |
Custodian fees—Note 3(b) | 7,926 | |
Trustees’ fees and expenses—Note 3(c) | 2,677 | |
Shareholder servicing costs—Note 3(b) | 410 | |
Loan commitment fees—Note 2 | 306 | |
Miscellaneous | 11,308 | |
Total Expenses | 411,621 | |
Less—reduction in fees due to earnings credits—Note 3(b) | (1 | ) |
Net Expenses | 411,620 | |
Investment Income—Net | 319,573 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments | 5,985,446 | |
Net unrealized appreciation (depreciation) on investments | (3,864,691 | ) |
Net Realized and Unrealized Gain (Loss) on Investments | 2,120,755 | |
Net Increase in Net Assets Resulting from Operations | 2,440,328 | |
See notes to financial statements. |
14
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
June 30, 2015 | Year Ended | |||
(Unaudited) | December 31, 2014 | |||
Operations ($): | ||||
Investment income—net | 319,573 | 696,079 | ||
Net realized gain (loss) on investments | 5,985,446 | 9,409,709 | ||
Net unrealized appreciation | ||||
(depreciation) on investments | (3,864,691 | ) | (1,303,965 | ) |
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 2,440,328 | 8,801,823 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Initial Shares | (304,116 | ) | (658,649 | ) |
Service Shares | (15,862 | ) | (38,245 | ) |
Net realized gain on investments: | ||||
Initial Shares | (7,596,149 | ) | — | |
Service Shares | (629,912 | ) | — | |
Total Dividends | (8,546,039 | ) | (696,894 | ) |
Beneficial Interest Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Initial Shares | 1,654,774 | 5,712,344 | ||
Service Shares | 123,505 | 507,846 | ||
Dividends reinvested: | ||||
Initial Shares | 7,900,265 | 658,649 | ||
Service Shares | 645,774 | 38,245 | ||
Cost of shares redeemed: | ||||
Initial Shares | (5,853,940 | ) | (12,784,397 | ) |
Service Shares | (837,308 | ) | (2,071,360 | ) |
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | 3,633,070 | (7,938,673 | ) | |
Total Increase (Decrease) in Net Assets | (2,472,641 | ) | 166,256 | |
Net Assets ($): | ||||
Beginning of Period | 92,696,157 | 92,529,901 | ||
End of Period | 90,223,516 | 92,696,157 | ||
Undistributed investment income—net | 38,265 | 38,670 |
The Fund 15
STATEMENT OF CHANGES IN NET ASSETS (continued)
Six Months Ended | ||||
June 30, 2015 | Year Ended | |||
(Unaudited) | December 31, 2014 | |||
Capital Share Transactions: | ||||
Initial Shares | ||||
Shares sold | 51,900 | 188,310 | ||
Shares issued for dividends reinvested | 260,035 | 20,879 | ||
Shares redeemed | (183,965 | ) | (415,673 | ) |
Net Increase (Decrease) in Shares Outstanding | 127,970 | (206,484 | ) | |
Service Shares | ||||
Shares sold | 3,983 | 16,350 | ||
Shares issued for dividends reinvested | 21,242 | 1,211 | ||
Shares redeemed | (26,555 | ) | (67,438 | ) |
Net Increase (Decrease) in Shares Outstanding | (1,330 | ) | (49,877 | ) |
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.
Six Months Ended | ||||||||||||
June 30, 2015 | Year Ended December 31, | |||||||||||
Initial Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 32.68 | 29.92 | 22.07 | 18.96 | 19.76 | 16.86 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .11 | .24 | .23 | .30 | .25 | .20 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .74 | 2.77 | 7.86 | 3.12 | (.80 | ) | 2.91 | |||||
Total from Investment Operations | .85 | 3.01 | 8.09 | 3.42 | (.55 | ) | 3.11 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.11 | ) | (.25 | ) | (.24 | ) | (.31 | ) | (.25 | ) | (.21 | ) |
Dividends from net realized | ||||||||||||
gain on investments | (2.97 | ) | — | — | — | — | — | |||||
Total Distributions | (3.08 | ) | (.25 | ) | (.24 | ) | (.31 | ) | (.25 | ) | (.21 | ) |
Net asset value, end of period | 30.45 | 32.68 | 29.92 | 22.07 | 18.96 | 19.76 | ||||||
Total Return (%) | 2.65 | b | 10.07 | 36.78 | 18.08 | (2.79 | ) | 18.61 | ||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .88 | c | .87 | .89 | .91 | .89 | .88 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .88 | c | .87 | .89 | .91 | .89 | .88 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | .72 | c | .78 | .91 | 1.42 | 1.24 | 1.16 | |||||
Portfolio Turnover Rate | 30.77 | b | 51.99 | 50.46 | 48.39 | 83.28 | 82.26 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 83,590 | 85,534 | 84,479 | 67,525 | 65,629 | 77,151 |
a | Based on average shares outstanding. |
b | Not annualized. |
c | Annualized. |
See notes to financial statements.
The Fund 17
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||||
June 30, 2015 | Year Ended December 31, | |||||||||||
Service Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 32.71 | 29.94 | 22.09 | 18.98 | 19.77 | 16.87 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .07 | .16 | .17 | .25 | .20 | .16 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .74 | 2.78 | 7.85 | 3.12 | (.79 | ) | 2.91 | |||||
Total from Investment Operations | .81 | 2.94 | 8.02 | 3.37 | (.59 | ) | 3.07 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.07 | ) | (.17 | ) | (.17 | ) | (.26 | ) | (.20 | ) | (.17 | ) |
Dividends from net realized | ||||||||||||
gain on investments | (2.97 | ) | — | — | — | — | — | |||||
Total Distributions | (3.04 | ) | (.17 | ) | (.17 | ) | (.26 | ) | (.20 | ) | (.17 | ) |
Net asset value, end of period | 30.48 | 32.71 | 29.94 | 22.09 | 18.98 | 19.77 | ||||||
Total Return (%) | 2.52 | b | 9.83 | 36.43 | 17.77 | (2.99 | ) | 18.29 | ||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.13 | c | 1.12 | 1.14 | 1.16 | 1.14 | 1.13 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.13 | c | 1.12 | 1.14 | 1.16 | 1.14 | 1.13 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | .46 | c | .52 | .65 | 1.17 | .99 | .91 | |||||
Portfolio Turnover Rate | 30.77 | b | 51.99 | 50.46 | 48.39 | 83.28 | 82.26 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 6,634 | 7,162 | 8,051 | 7,358 | 7,222 | 9,028 |
a | Based on average shares outstanding. |
b | Not annualized. |
c | Annualized. |
See notes to financial statements.
18
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Growth and Income Portfolio (the “fund”) is a separate non-diversified series of Dreyfus Variable Investment Fund (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 seven 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 capital growth, current income and growth of income consistent with reasonable investment risk. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares, which are sold to the public 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
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
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).
20
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value.All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. 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 financial futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the proce-
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
dures 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 are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of June 30, 2015 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities— | ||||
Domestic | ||||
Common Stocks† | 88,240,804 | — | — | 88,240,804 |
Equity Securities— | ||||
Foreign | ||||
Common Stocks† | 1,191,229 | — | — | 1,191,229 |
Mutual Funds | 1,336,119 | — | — | 1,336,119 |
† See Statement of Investments for additional detailed categorizations. |
At June 30, 2015, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.
(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.
22
Pursuant to a securities lending agreement with The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, 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 Dreyfus, 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. During the period ended June 30, 2015, The Bank of New York Mellon earned $1,033 from lending portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended June 30, 2015 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 12/31/2014 ($) | Purchases ($) | Sales ($) | 6/30/2015 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Preferred | |||||
Plus Money | |||||
Market Fund | 1,189,496 | 7,128,147 | 7,843,838 | 473,805 | .5 |
Dreyfus | |||||
Institutional | |||||
Cash Advantage | |||||
Fund | 871,655 | 6,427,208 | 6,436,549 | 862,314 | 1.0 |
Total | 2,061,151 | 13,555,355 | 14,280,387 | 1,336,119 | 1.5 |
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net are normally declared and paid quarterly. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(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 sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended June 30, 2015, 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 June 30, 2015, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended December 31, 2014 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2014 was as follows: ordinary income $696,894.The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $430 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon (each, a “Facility”), each to be utilized primarily for temporary
24
or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended June 30, 2015, the fund did not borrow under the Facilities.
NOTE 3—Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with Dreyfus, the investment advisory 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 fees payable under the Distribution Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2015, Service shares were charged $8,739 pursuant to the Distribution Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of
The Fund 25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 June 30, 2015, the fund was charged $319 for transfer agency services and $24 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $1.
The fund compensates The Bank of NewYork 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 June 30, 2015, the fund was charged $7,926 pursuant to the custody agreement.
During the period ended June 30, 2015, the fund was charged $6,240 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $56,739, Distribution Plan fees $1,397, custodian fees $6,500, Chief Compliance Officer fees $3,169 and transfer agency fees $83.
(c) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2015, amounted to $28,079,992 and $32,158,431, respectively.
At June 30, 2015, accumulated net unrealized appreciation on investments was $17,770,536, consisting of $19,507,239 gross unrealized appreciation and $1,736,703 gross unrealized depreciation.
At June 30, 2015, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
26
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
INVESTMENT ADVISORY AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Trustees held on March 11-12, 2015, the Board considered the renewal of the fund’s Investment Advisory Agreement pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the “Agreement”).The Board members, none of whom are “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 Dreyfus representatives. 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 them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ 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 Dreyfus 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 Dreyfus’ extensive administrative, accounting and compliance infrastructures. The Board also considered portfolio
The Fund 27
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
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 Lipper, Inc. (“Lipper”), 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 December 31, 2014, 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 Lipper as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds.They also noted 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 the results of the comparisons and noted that the fund’s total return performance was above the Performance Group median for three of the six periods (and below the median for three of the six periods (ranking lowest in the one-year period)) and above the Performance Universe median for all periods except the one-year period. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index.
28
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 noted that the fund’s contractual management fee was above the Expense Group median and the fund’s actual management fee and total expenses were above the Expense Group and Expense Universe medians.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Lipper category as the fund and (2) paid to Dreyfus or the Dreyfus-affiliated primary employer of the fund’s primary portfolio manager(s) 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 and reasonableness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus 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 Dreyfus. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus fund complex. The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Fund 29
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
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 bear a reasonable relationship to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, 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. Dreyfus representatives noted 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 Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus 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 Dreyfus from acting as investment adviser and noted 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 Dreyfus are adequate and appropriate.
The Board generally was satisfied with the fund’s performance.
The Board concluded that the fee paid to Dreyfus was reasonable in light of the considerations described above.
30
The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus 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 Dreyfus and its affiliates, of the fund and the services provided to the fund by Dreyfus. 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 prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. 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 same or similar arrangements in prior years.The Board determined to renew the Agreement.
The Fund 31
NOTES
For More Information
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-DREYFUS.
Telephone 1-800-554-4611 or 1-516-338-3300 | |
The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 | |
Attn: Investments Division |
Dreyfus Variable |
Investment Fund, |
International |
Equity Portfolio |
SEMIANNUAL REPORT June 30, 2015
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents | |
THE FUND | |
2 | A Letter from the President |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
11 | Statement of Assets and Liabilities |
12 | Statement of Operations |
13 | Statement of Changes in Net Assets |
15 | Financial Highlights |
17 | Notes to Financial Statements |
30 | Information About the Renewal of the Fund’s Investment Advisory and Sub-Investment Advisory Agreements |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus Variable Investment Fund,
International Equity Portfolio
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Variable Investment Fund, International Equity Portfolio, covering the six-month period from January 1, 2015, through June 30, 2015. 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.
International stock markets posted moderate gains, on average, over the first half of 2015. Despite ongoing concerns that persistent economic weakness and deflationary pressures in Europe, Japan, and China might undermine corporate profits for non-U.S. and multinational companies, investor sentiment was buoyed by increasingly accommodative monetary policies from major central banks. Indeed, aggressive monetary stimulus measures caused most local currencies to depreciate against the U.S. dollar, making foreign exports more attractive to U.S. consumers in a recovering domestic economy. In this environment, more developed markets generally produced higher returns than emerging markets.
We remain optimistic regarding the long-term outlook for the global economy generally and for international equities in particular. Despite pockets of persistent instability in some areas, we believe currency depreciation has enhanced Europe’s competitiveness in global markets, recent wage negotiations in Japan suggest that long-awaited inflationary pressure may be taking root, and more stimulative economic policies in China may provide a catalyst for growth in the rest of Asia. As always, we urge you to discuss these observations with your financial advisor, who can help you assess their implications for your investment portfolio.
Thank you for your continued confidence and support.
J. Charles Cardona
President
The Dreyfus Corporation
July 15, 2015
2
DISCUSSION OF FUND PERFORMANCE
For the reporting period of January 1, 2015, through June 30, 2015, as provided by Paul Markham and Jeff Munroe, Primary Portfolio Managers, Newton Capital Management Limited, Sub-Investment Adviser
Fund and Market Performance Overview
For the six-month period ended June 30, 2015, Dreyfus Variable Investment Fund, International Equity Portfolio’s (the “fund”) Initial shares produced a total return of 6.50%, and its Service shares returned 6.35%.1 This compares with a 5.52% return for the fund’s benchmark, the Morgan Stanley Capital International Europe, Australasia, Far East Index (“MSCI EAFE Index”), for the same period.2
International equities advanced over the first half of 2015 amid aggressively accommodative monetary policies. Favorable stock selections in the consumer staples, consumer discretionary, and industrials sectors helped the fund outperform its benchmark.
The Fund’s Investment Approach
The fund seeks to achieve long-term capital growth by investing primarily in stocks of foreign companies.
The process of seeking investment ideas takes place within the framework of Newton’s global investment themes.These themes are based on observable economic, industrial, or social trends that we believe will affect markets, industries, or companies globally, and so help to identify areas of investment opportunity and risk. Such themes currently include debt burden, which asserts that certain economies and institutions need to reduce their budget deficits and debt obligations, which jeopardizes their economic prospects (and provides the rationale for the portfolio’s underweighted exposure to the financial sector). Elsewhere, our net effects theme identifies the investment opportunities and challenges inherent in an interconnected world.
When choosing stocks, we consider trends in economic variables, such as gross domestic product, inflation, and interest rates; investment themes; the relative values of equities, bonds, and cash; company fundamentals; and long-term trends in currency movements. Within markets and sectors determined to be relatively attractive, we seek what we believe are attractively priced companies that possess a sustainable
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
competitive advantage in their market or sector. Securities are generally sold when themes or strategies change, when we determine that the company’s prospects have changed, or when a stock reaches what we determine to be a full valuation.
Economic Developments Drove Market Performance
International stock markets rallied over the first quarter of 2015 in response to a fresh wave of monetary easing in Europe and Japan. Quantitative easing caused most international currencies to depreciate sharply against the U.S. dollar, creating a favorable environment for exporters to the United States and companies that compete with imported U.S. goods. International equities gave back some of their previous gains during the second quarter amid rebounding oil prices and expectations that U.S. monetary policymakers would begin to raise short-term interest rates.These factors contributed to higher sovereign bond yields, and equities declined in tandem. The sell-off was exacerbated in June by an intensifying debt crisis in Greece and plunging equity values in China.
In this environment, Japanese equities led the MSCI EAFE Index’s advance. European equities also fared well in local currency terms, but returns for U.S. residents were dampened by the weakening euro.
Security Selections Buoyed Results
The fund particularly benefited during the reporting period from strong stock selections in the consumer staples sector. Japan Tobacco gained value when it announced the divestment of non-core assets and achieved improved pricing in some markets. Japanese drug store chain Sugi Holdings also performed strongly. In the consumer discretionary sector, Japanese convenience store operator Don Quijote Holdings reported strong earnings and improving gross profit margins. Italian tire manufacturer Pirelli & C aided results in the industrials sector, and an underweighted position in the struggling energy sector further bolstered relative performance. From a regional perspective, underweighted exposure to Asia/Pacific ex-Japan and successful stock selections in the United Kingdom boosted results compared to the benchmark.
Conversely, the fund’s investments in the information technology sector lagged market averages. Finnish technology company Nokia suffered after announcing the takeover of a French telecommunications equipment maker, and semiconductor manufacturer Tokyo Electron was hurt by the cancellation of a planned merger. In
4
the financials sector, rising bond yields provided greater competition for dividend-paying stocks, such as German residential property developer LEG Immobilien.The fund’s weakest holding for the reporting period was casino operator Sands China, which encountered declining traffic volumes and delays in completing a new hotel.
At times during the reporting period, the fund employed forward contracts to hedge its currency exposures.
Maintaining a Cautious Investment Posture
In our view, global financial markets continue to face challenges, including sluggish economic growth, growing debt burdens, market volatility in China, upcoming U.S. rate hikes, and the risk that major central banks have exhausted their policy options in the event of an unexpected downturn.
Against this backdrop, our emphasis remains on identifying companies with structural tailwinds or qualities that position them as relatively safe havens, such as strong balance sheets, pricing power, robust cash flows, cost flexibility, and reasonable valuations.We have identified a number of stocks meeting our criteria in the consumer discretionary, health care, telecommunications services and consumer staples sectors, but relatively few in the energy, financials, materials and industrials sectors.
July 15, 2015
Equity funds 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’s performance will be influenced by political, social, and economic factors affecting investments in foreign companies. Special risks associated with investments in foreign companies include exposure to currency fluctuations, less liquidity, less developed or less efficient trading markets, lack of comprehensive company information, political instability, and differing auditing and legal standards.These risks are enhanced in emerging market countries.
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 Dreyfus Variable Investment Fund, International Equity Portfolio made available through insurance products may be similar to other funds managed or advised by Dreyfus. However, the investment results of the fund may be higher or lower than, and may not be comparable to, those of any other Dreyfus fund.
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. — Reflects reinvestment of net dividends and, where applicable, capital gain |
distributions.The Morgan Stanley Capital International Europe,Australasia, Far East (MSCI EAFE) Index is an |
unmanaged index composed of a sample of companies representative of the market structure of European and Pacific |
Basin countries. Investors cannot invest directly in an index. |
The Fund 5
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 Dreyfus Variable Investment Fund, International Equity Portfolio from January 1, 2015 to June 30, 2015. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended June 30, 2015
Initial Shares | Service Shares | |
Expenses paid per $1,000† | $ 5.89 | $ 7.16 |
Ending value (after expenses) | $ 1,065.00 | $ 1,063.50 |
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 June 30, 2015
Initial Shares | Service Shares | |
Expenses paid per $1,000† | $ 5.76 | $ 7.00 |
Ending value (after expenses) | $ 1,019.09 | $ 1,017.85 |
† Expenses are equal to the fund’s annualized expense ratio of 1.15% for Initial shares and 1.40% for Service shares, |
multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS
June 30, 2015 (Unaudited)
Common Stocks—99.8% | Shares | Value ($) | |
Australia—.8% | |||
Dexus Property Group | 56,291 | 317,049 | |
Belgium—1.8% | |||
Anheuser-Busch InBev | 5,945 | 712,488 | |
Brazil—.2% | |||
International Meal Company Alimentacao | 28,351 | a | 86,537 |
China—.8% | |||
China Biologic Products | 2,861 | a | 329,473 |
Finland—1.0% | |||
Nokia | 57,787 | 392,342 | |
France—4.7% | |||
Air Liquide | 5,332 | 674,391 | |
Sanofi | 6,580 | 647,305 | |
Vivendi | 23,808 | 600,522 | |
1,922,218 | |||
Germany—11.2% | |||
Bayer | 4,739 | 663,316 | |
Brenntag | 11,590 | 664,534 | |
Commerzbank | 51,260 | a | 655,194 |
Continental | 1,371 | 324,416 | |
Infineon Technologies | 52,672 | 653,570 | |
LEG Immobilien | 12,882 | a | 895,010 |
SAP | 5,755 | 401,640 | |
Telefonica Deutschland Holding | 50,272 | 289,757 | |
4,547,437 | |||
Hong Kong—5.5% | |||
AIA Group | 120,600 | 789,578 | |
Belle International Holdings | 420,000 | 483,852 | |
Jardine Matheson Holdings | 7,900 | 448,325 | |
Man Wah Holdings | 508,400 | 499,116 | |
2,220,871 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) |
India—1.0% | ||
HDFC Bank, ADR | 7,048 | 426,615 |
Ireland—1.7% | ||
CRH | 24,695 | 693,000 |
Israel—.1% | ||
Bank Hapoalim | 11,029 | 59,412 |
Italy—2.0% | ||
Atlantia | 16,379 | 404,645 |
Pirelli & C | 24,954 | 421,195 |
825,840 | ||
Japan—28.9% | ||
Don Quijote Holdings | 27,500 | 1,170,691 |
FANUC | 2,800 | 573,796 |
Japan Airlines | 21,836 | 761,856 |
Japan Tobacco | 26,800 | 954,867 |
LIXIL Group | 15,800 | 313,715 |
M3 | 14,800 | 297,729 |
NGK Spark Plug | 18,000 | 499,326 |
Nomura Holdings | 80,400 | 545,657 |
Recruit Holdings | 15,935 | 486,311 |
Sawai Pharmaceutical | 5,900 | 343,727 |
Skylark | 48,300 | 636,580 |
SoftBank | 21,300 | 1,254,661 |
Stanley Electric | 16,200 | 337,806 |
Sugi Holdings | 15,100 | 771,132 |
Suntory Beverage & Food | 9,400 | 374,433 |
Tokyo Electron | 11,400 | 721,623 |
TOPCON | 22,600 | 544,756 |
Toyota Motor | 17,300 | 1,159,553 |
11,748,219 | ||
Macau—.7% | ||
Sands China | 82,800 | 278,793 |
8
Common Stocks (continued) | Shares | Value ($) | |
Mexico—.5% | |||
Grupo Financiero Santander Mexico, Cl. B, ADR | 24,039 | 219,957 | |
Netherlands—3.4% | |||
Reed Elsevier | 24,170 | 573,276 | |
Wolters Kluwer | 27,639 | 821,023 | |
1,394,299 | |||
Norway—1.1% | |||
DNB | 26,864 | 448,165 | |
Philippines—.8% | |||
Energy Development | 1,952,300 | 323,868 | |
LT Group | 19,100 | 5,896 | |
329,764 | |||
Portugal—.7% | |||
Galp Energia | 23,724 | 278,241 | |
Russia—.5% | |||
TBC Bank, GDR | 20,029 | 206,299 | |
Switzerland—11.9% | |||
Actelion | 2,924 | a | 427,834 |
Credit Suisse Group | 27,648 | a | 759,991 |
Nestle | 12,784 | 922,958 | |
Novartis | 10,368 | 1,021,885 | |
Roche Holding | 2,917 | 817,428 | |
Zurich Insurance Group | 2,871 | a | 873,936 |
4,824,032 | |||
United Kingdom—20.5% | |||
Associated British Foods | 10,128 | 456,877 | |
Barclays | 257,202 | 1,052,748 | |
British American Tobacco | 12,722 | 682,635 | |
Centrica | 169,662 | 703,237 | |
Dixons Carphone | 58,398 | 416,119 | |
GlaxoSmithKline | 29,769 | 618,589 | |
Imagination Technologies Group | 44,177 | a | 153,576 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
United Kingdom (continued) | |||
Just Eat | 73,538 | a | 470,041 |
Merlin Entertainments | 57,406 | b | 385,238 |
Next | 4,063 | 475,604 | |
Prudential | 53,002 | 1,276,249 | |
Vodafone Group | 277,933 | 1,003,754 | |
Wolseley | 10,271 | 655,695 | |
8,350,362 | |||
Total Investments (cost $35,879,254) | 99.8 | % | 40,611,413 |
Cash and Receivables (Net) | .2 | % | 98,253 |
Net Assets | 100.0 | % | 40,709,666 |
ADR—American Depository Receipts
GDR—Global Depository Receipts
a Non-income producing security. |
b Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933.This security may be |
resold in transactions exempt from registration, normally to qualified institutional buyers.At June 30, 2015, this |
security was valued at $385,238 or .9% of net assets. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Financial | 20.9 | Technology | 5.7 |
Consumer Services | 20.2 | Basic Materials | 4.9 |
Consumer Goods | 19.3 | Utilities | 2.5 |
Health Care | 11.7 | Oil & Gas | .7 |
Industrial | 7.6 | ||
Telecommunications | 6.3 | 99.8 | |
† Based on net assets. | |||
See notes to financial statements. |
10
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2015 (Unaudited)
Cost | Value | ||
Assets ($): | |||
Investments in securities—See Statement of Investments | 35,879,254 | 40,611,413 | |
Cash denominated in foreign currencies | 41,750 | 41,652 | |
Receivable for investment securities sold | 637,682 | ||
Dividends receivable | 156,595 | ||
Unrealized appreciation on forward | |||
foreign currency exchange contracts—Note 4 | 32,097 | ||
Prepaid expenses | 262 | ||
41,479,701 | |||
Liabilities ($): | |||
Due to The Dreyfus Corporation and affiliates—Note 3(b) | 48,726 | ||
Cash overdraft due to Custodian | 11,036 | ||
Payable for investment securities purchased | 462,694 | ||
Payable for shares of Beneficial Interest redeemed | 109,225 | ||
Unrealized depreciation on forward foreign | |||
currency exchange contracts—Note 4 | 101,675 | ||
Accrued expenses | 36,679 | ||
770,035 | |||
Net Assets ($) | 40,709,666 | ||
Composition of Net Assets ($): | |||
Paid-in capital | 45,315,182 | ||
Accumulated undistributed investment income—net | 120,400 | ||
Accumulated net realized gain (loss) on investments | (9,381,100 | ) | |
Accumulated net unrealized appreciation (depreciation) | |||
on investments and foreign currency transactions | 4,655,184 | ||
Net Assets ($) | 40,709,666 | ||
Net Asset Value Per Share | |||
Initial Shares | Service Shares | ||
Net Assets ($) | 30,199,755 | 10,509,911 | |
Shares Outstanding | 1,597,377 | 556,237 | |
Net Asset Value Per Share ($) | 18.91 | 18.89 | |
See notes to financial statements. |
The Fund 11
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2015 (Unaudited)
Investment Income ($): | ||
Income: | ||
Cash dividends (net of $65,789 foreign taxes withheld at source): | ||
Unaffiliated issuers | 649,727 | |
Affiliated issuers | 250 | |
Total Income | 649,977 | |
Expenses: | ||
Investment advisory fee—Note 3(a) | 154,270 | |
Professional fees | 33,931 | |
Custodian fees—Note 3(b) | 24,133 | |
Distribution fees—Note 3(b) | 13,250 | |
Prospectus and shareholders’ reports | 7,831 | |
Trustees’ fees and expenses—Note 3(c) | 1,621 | |
Shareholder servicing costs—Note 3(b) | 174 | |
Loan commitment fees—Note 2 | 137 | |
Miscellaneous | 13,584 | |
Total Expenses | 248,931 | |
Investment Income—Net | 401,046 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments and foreign currency transactions | 204,526 | |
Net realized gain (loss) on forward foreign currency exchange contracts | 269,140 | |
Net Realized Gain (Loss) | 473,666 | |
Net unrealized appreciation (depreciation) on | ||
investments and foreign currency transactions | 2,041,092 | |
Net unrealized appreciation (depreciation) on | ||
forward foreign currency exchange contracts | (347,483 | ) |
Net Unrealized Appreciation (Depreciation) | 1,693,609 | |
Net Realized and Unrealized Gain (Loss) on Investments | 2,167,275 | |
Net Increase in Net Assets Resulting from Operations | 2,568,321 | |
See notes to financial statements. |
12
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
June 30, 2015 | Year Ended | |||
(Unaudited) | December 31, 2014 | |||
Operations ($): | ||||
Investment income—net | 401,046 | 1,007,018 | ||
Net realized gain (loss) on investments | 473,666 | 2,957,460 | ||
Net unrealized appreciation | ||||
(depreciation) on investments | 1,693,609 | (5,070,557 | ) | |
Net Increase (Decrease) in Net Assets�� | ||||
Resulting from Operations | 2,568,321 | (1,106,079 | ) | |
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Initial Shares | (998,035 | ) | (706,951 | ) |
Service Shares | (321,999 | ) | (224,609 | ) |
Total Dividends | (1,320,034 | ) | (931,560 | ) |
Beneficial Interest Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Initial Shares | 1,079,530 | 2,642,372 | ||
Service Shares | 802,669 | 871,107 | ||
Dividends reinvested: | ||||
Initial Shares | 998,035 | 706,951 | ||
Service Shares | 321,999 | 224,609 | ||
Cost of shares redeemed: | ||||
Initial Shares | (2,530,110 | ) | (4,294,625 | ) |
Service Shares | (963,527 | ) | (2,130,320 | ) |
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | (291,404 | ) | (1,979,906 | ) |
Total Increase (Decrease) in Net Assets | 956,883 | (4,017,545 | ) | |
Net Assets ($): | ||||
Beginning of Period | 39,752,783 | 43,770,328 | ||
End of Period | 40,709,666 | 39,752,783 | ||
Undistributed investment income—net | 120,400 | 1,039,388 |
The Fund 13
STATEMENT OF CHANGES IN NET ASSETS (continued)
Six Months Ended | ||||
June 30, 2015 | Year Ended | |||
(Unaudited) | December 31, 2014 | |||
Capital Share Transactions: | ||||
Initial Shares | ||||
Shares sold | 56,577 | 139,933 | ||
Shares issued for dividends reinvested | 53,172 | 37,704 | ||
Shares redeemed | (132,684 | ) | (227,128 | ) |
Net Increase (Decrease) in Shares Outstanding | (22,935 | ) | (49,491 | ) |
Service Shares | ||||
Shares sold | 42,065 | 46,350 | ||
Shares issued for dividends reinvested | 17,155 | 11,979 | ||
Shares redeemed | (50,214 | ) | (112,745 | ) |
Net Increase (Decrease) in Shares Outstanding | 9,006 | (54,416 | ) | |
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 return do not reflect expenses associated with variable annuity or insurance contracts.These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||||||||
June 30, 2015 | Year Ended December 31, | |||||||||||
Initial Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 18.35 | 19.28 | 16.86 | 13.75 | 16.44 | 15.19 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .19 | .46 | .27 | .28 | .21 | .22 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | 1.00 | (.96 | ) | 2.66 | 2.90 | (2.57 | ) | 1.28 | ||||
Total from Investment Operations | 1.19 | (.50 | ) | 2.93 | 3.18 | (2.36 | ) | 1.50 | ||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.63 | ) | (.43 | ) | (.51 | ) | (.07 | ) | (.33 | ) | (.25 | ) |
Net asset value, end of period | 18.91 | 18.35 | 19.28 | 16.86 | 13.75 | 16.44 | ||||||
Total Return (%) | 6.50 | b | (2.65 | ) | 17.74 | 23.15 | (14.68 | ) | 10.03 | |||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.15 | c | 1.08 | 1.11 | 1.06 | 1.10 | 1.06 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.15 | c | 1.08 | 1.11 | 1.06 | 1.10 | 1.06 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 2.01 | c | 2.44 | 1.49 | 1.88 | 1.35 | 1.47 | |||||
Portfolio Turnover Rate | 17.50 | b | 44.96 | 48.07 | 45.03 | 56.20 | 63.67 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 30,200 | 29,731 | 32,192 | 28,058 | 33,297 | 47,443 |
a | Based on average shares outstanding. |
b | Not annualized. |
c | Annualized. |
See notes to financial statements.
The Fund 15
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||||
June 30, 2015 | Year Ended December 31, | |||||||||||
Service Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 18.31 | 19.24 | 16.83 | 13.72 | 16.41 | 15.17 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .17 | .42 | .23 | .23 | .17 | .18 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .99 | (.97 | ) | 2.65 | 2.90 | (2.57 | ) | 1.28 | ||||
Total from Investment Operations | 1.16 | (.55 | ) | 2.88 | 3.13 | (2.40 | ) | 1.46 | ||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.58 | ) | (.38 | ) | (.47 | ) | (.02 | ) | (.29 | ) | (.22 | ) |
Net asset value, end of period | 18.89 | 18.31 | 19.24 | 16.83 | 13.72 | 16.41 | ||||||
Total Return (%) | 6.35 | b | (2.90 | ) | 17.43 | 22.83 | (14.91 | ) | 9.74 | |||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.40 | c | 1.33 | 1.36 | 1.31 | 1.35 | 1.31 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.40 | c | 1.33 | 1.36 | 1.31 | 1.35 | 1.31 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 1.78 | c | 2.22 | 1.24 | 1.53 | 1.09 | 1.23 | |||||
Portfolio Turnover Rate | 17.50 | b | 44.96 | 48.07 | 45.03 | 56.20 | 63.67 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 10,510 | 10,022 | 11,578 | 9,749 | 9,439 | 13,819 |
a | Based on average shares outstanding. |
b | Not annualized. |
c | Annualized. |
See notes to financial statements.
16
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
International Equity Portfolio (the “fund”) is a separate non-diversified series of Dreyfus Variable Investment Fund (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 seven 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 growth.The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. Newton Capital Management Limited (“Newton”), a wholly-owned subsidiary of BNY Mellon and an affiliate of Dreyfus, serves as the fund’s sub-investment adviser.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares, 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
The Fund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
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).
18
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in securities are valued at the last sales price on the securities exchange or national securities market on which such securities are primarily traded. Securities listed on the National Market System for which market quotations are available are valued at the official closing price or, if there is no official closing price that day, at the last sales price. For open short positions, asked prices are used for valuation purposes. Bid price is used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value.All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. 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 financial futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Trustees (the “Board”). Certain factors may be considered when fair valuing investments such
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Forward foreign currency exchange contracts (“forward contracts”) are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of June 30, 2015 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||||
Level 1— | Significant | Significant | ||||
Unadjusted | Observable | Unobservable | ||||
Quoted Prices | Inputs | Inputs | Total | |||
Assets ($) | ||||||
Investments in Securities: | ||||||
Equity Securities— | ||||||
Foreign | ||||||
Common Stocks† | 40,611,413 | — | — | 40,611,413 | ||
Other Financial | ||||||
Instruments: | ||||||
Forward Foreign | ||||||
Currency Exchange | ||||||
Contracts†† | — | 32,097 | — | 32,097 | ||
Liabilities ($) | ||||||
Other Financial | ||||||
Instruments: | ||||||
Forward Foreign | ||||||
Currency Exchange | ||||||
Contracts†† | — | (101,675 | ) | — | (101,675 | ) |
† See Statement of Investments for additional detailed categorizations. |
†† Amount shown represents unrealized appreciation (depreciation) at period end. |
20
At December 31, 2014, $38,567,759 of exchange traded foreign equity securities were classified within Level 2 of the fair value hierarchy pursuant to the fund’s fair valuation procedures.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
(d) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended June 30, 2015, were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 12/31/2014 ($) | Purchases ($) | Sales ($) | 6/30/2015 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Preferred | |||||
Plus Money | |||||
Market Fund | 332,000 | 5,903,309 | 6,235,309 | — | — |
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S.These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S.
(f) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended June 30, 2015, 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 June 30, 2015, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended December 31, 2014 remains subject to examination by the Internal Revenue Service and state taxing authorities.
22
Under the Regulated Investment Company Modernization Act of 2010 (the “2010 Act”), the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 (“post-enactment losses”) for an unlimited period. Furthermore, post-enactment capital loss carryovers retain their character as either short-term or long-term capital losses rather than short-term as they were under previous statute.The 2010 Act requires post-enactment losses to be utilized before the utilization of losses incurred in taxable years prior to the effective date of the 2010 Act (“pre-enactment losses”).As a result of this ordering rule, pre-enactment losses may be more likely to expire unused.
The fund has an unused capital loss carryover of $9,808,168 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to December 31, 2014. If not applied, the carryover expires in fiscal year 2017.
The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2014 was as follows: ordinary income $931,560.The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $430 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended June 30, 2015, the fund did not borrow under the Facilities.
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 3—Investment Advisory Fee, Sub-Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .75% of the value of the fund’s average daily net assets and is payable monthly.
Pursuant to a sub-investment advisory agreement between Dreyfus and Newton, the sub-investment advisory fee is payable monthly by Dreyfus, and is based upon the value of the fund’s average daily net assets, computed at the following rates:
Average Net Assets | ||
0 up to $100 million | .35 | % |
$100 million up to $1 billion | .30 | % |
$1 billion up to $1.5 billion | .26 | % |
In excess of $1.5 billion | .20 | % |
(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 fees payable under the Distribution Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2015, Service shares were charged $13,250 pursuant to the Distribution Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
24
The fund compensates The Bank of NewYork 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 June 30, 2015, the fund was charged $24,133 pursuant to the custody agreement.
During the period ended June 30, 2015, the fund was charged $6,240 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $25,700, Distribution Plan fees $2,216, custodian fees $17,503, Chief Compliance Officer fees $3,169 and transfer agency fees $138.
(c) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward contracts, during the period ended June 30, 2015, amounted to $7,099,187 and $7,764,221, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset.The fund enters into
The Fund 25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively,“Master Agreements”) with its over-the counter (“OTC”) derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or 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 June 30, 2015 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 is mitigated by Master Agreements between the fund and the counter-party and the posting of collateral, if any, by the counterparty to the
26
fund to cover the fund’s exposure to the counterparty. The following summarizes open forward contracts at June 30, 2015:
Foreign | Unrealized | |||||
Forward Foreign Currency | Currency | Appreciation | ||||
Exchange Contracts | Amounts | Cost ($) | Value ($) | (Depreciation) ($) | ||
Purchases: | ||||||
Japanese Yen, | ||||||
Expiring: | ||||||
7/1/2015 a | 31,744,461 | 257,308 | USD | 259,382 | 2,074 | |
7/2/2015 b | 4,111,995 | 33,477 | USD | 33,599 | 122 | |
7/15/2015 b | 260,967,000 | 2,192,281 | USD | 2,132,737 | (59,544 | ) |
Sales: | Proceeds ($) | |||||
Euro, | ||||||
Expiring | ||||||
7/1/2015 c | 132,346 | 147,658 | USD | 147,546 | 112 | |
Hong Kong Dollar, | ||||||
Expiring: | ||||||
7/2/2015 c | 208,331 | 26,873 | USD | 26,876 | (3 | ) |
7/3/2015 c | 231,372 | 29,845 | USD | 29,848 | (3 | ) |
Israeli Shekel, | ||||||
Expiring | ||||||
7/1/2015 a | 465,662 | 123,566 | USD | 123,388 | 178 | |
Japanese Yen, | ||||||
Expiring: | ||||||
7/15/2015 b | 260,967,000 | 2,162,348 | USD | 2,132,737 | 29,611 | |
8/14/2015 b | 253,389,000 | 2,029,424 | AUD | 2,071,549 | (42,125 | ) |
Gross Unrealized | ||||||
Appreciation | 32,097 | |||||
Gross Unrealized | ||||||
Depreciation | (101,675 | ) |
AUD—Australian Dollar
USD—U.S. Dollar
Counterparties:
a | UBS |
b | JP Morgan Chase Bank |
c | Royal Bank of Scotland |
The provisions of ASC Topic 210 “Disclosures about Offsetting Assets and Liabilities” require disclosure on the offsetting of financial assets and liabilities. These disclosures are required for certain investments, including derivative financial instruments subject to Master Agreements which are eligible for offsetting in the Statement of Assets and Liabilities and require the fund to disclose both gross and net information with respect to such investments. For financial reporting
The Fund 27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
purposes, the fund does not offset derivative assets and derivative liabilities that are subject to Master Agreements in the Statement of Assets and Liabilities.
At June 30, 2015, derivative assets and liabilities (by type) on a gross basis are as follows:
Derivative Financial Instruments: | Assets ($) | Liabilities ($) | |
Forward contracts | 32,097 | (101,675 | ) |
Total gross amount of derivative | |||
assets and liabilities in the | |||
Statement of Assets and Liabilities | 32,097 | (101,675 | ) |
Derivatives not subject | |||
to Master Agreements | — | — | |
Total gross amount of assets and | |||
liabilities subject to Master Agreements | 32,097 | (101,675 | ) |
The following tables present derivative assets and liabilities net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of June 30, 2015:
Financial | |||||||
Instruments | |||||||
and | |||||||
Derivatives | |||||||
Gross Amount of | Available | Collateral | Net Amount | ||||
Counterparty | Assets ($)1 | for Offset ($) | Received ($) | of Assets ($) | |||
JP Morgan Chase Bank | 29,733 | (29,733 | ) | — | — | ||
UBS | 2,252 | — | — | 2,252 | |||
Royal Bank of Scotland | 112 | (6 | ) | — | 106 | ||
Total | 32,097 | (29,739 | ) | — | 2,358 | ||
Financial | |||||||
Instruments | |||||||
and | |||||||
Derivatives | |||||||
Gross Amount of | Available | Collateral | Net Amount of | ||||
Counterparty | Liabilities ($)1 | for Offset ($) | Pledged ($) | Liabilities ($) | |||
JP Morgan Chase Bank | (101,669 | ) | 29,733 | — | (71,936 | ) | |
Royal Bank of Scotland | (6 | ) | 6 | — | — | ||
Total | (101,675 | ) | 29,739 | — | (71,936 | ) |
1 | Absent a default event or early termination, OTC derivative assets and liabilities are presented at |
gross amounts and are not offset in the Statement of Assets and Liabilities. |
28
The following summarizes the average market value of derivatives outstanding during the period ended June 30, 2015:
Average Market Value ($) | |
Forward contracts | 2,666,072 |
At June 30, 2015, accumulated net unrealized appreciation on investments was $4,732,159, consisting of $7,180,349 gross unrealized appreciation and $2,448,190 gross unrealized depreciation.
At June 30, 2015, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
The Fund 29
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
INVESTMENT ADVISORY AND SUB-INVESTMENT
ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on March 11-12, 2015, the Board considered the renewal of the fund’s Investment Advisory Agreement, pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the “Agreement”), and the Sub-Investment Advisory Agreement (together, the “Agreements”), pursuant to which Newton Capital Management Limited (the “Subadviser”) provides day-to-day management of the fund’s invest-ments.The Board members, none of whom are “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 Dreyfus and the Subadviser. In considering the renewal of the Agreements, 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 them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ 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 Dreyfus also provides oversight of day-to-day fund operations,
30
including fund accounting and administration and assistance in meeting legal and regulatory requirements. The Board also considered Dreyfus’ extensive administrative, accounting, and compliance infrastructures, as well as Dreyfus’ supervisory activities over the Subadviser. 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 Lipper, Inc. (“Lipper”), 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 December 31, 2014, 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 Lipper as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds. The Board discussed the results of the comparisons and noted that the fund’s total return performance was generally above the Performance Group and Performance Universe medians (ranking in the first quartile of the Performance Group for most periods). Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index
The Fund 31
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY
AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
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 noted that the fund’s contractual management fee was below the Expense Group median, the fund’s actual management fee was below the Expense Group and Expense Universe medians and the fund’s total expenses were above the Expense Group and Expense Universe medians.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Lipper category as the fund and (2) paid to Dreyfus or the Subadviser or its affiliates 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 and reasonableness of the fund’s management fee.
The Board considered the fee to the Subadviser in relation to the fee paid to Dreyfus by the fund and the respective services provided by the Subadviser and Dreyfus. The Board also noted the Subadviser’s fee is paid by Dreyfus (out of its fee from the fund) and not the fund.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus 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 Dreyfus. The Board also had been provided with information prepared by an independent
32
consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus 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 Agreements bear a reasonable relationship to the mix of services provided by Dreyfus and the Subadviser, including the nature, extent and quality of such services, 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. Since Dreyfus, and not the fund, pays the Subadviser pursuant to the Sub-Investment Advisory Agreement, the Board did not consider the Subadviser’s profitability to be relevant to its deliberations. Dreyfus representatives noted 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 Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus 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 Dreyfus and the Subadviser from acting as investment adviser and sub-investment adviser, respectively, and noted 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 busi-
The Fund 33
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY
AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
ness decision with respect to the renewal of the Agreements. 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 Dreyfus and the Subadviser are adequate and appropriate.
The Board was satisfied with the fund’s performance.
The Board concluded that the fees paid to Dreyfus and the Subadviser were reasonable in light of the considerations described above.
The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus 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 Agreements, the Board considered these conclusions and determinations and also relied on its previous knowledge, gained through meetings and other interactions with Dreyfus and its affiliates and the Subadviser, of the fund and the services provided to the fund by Dreyfus and the Subadviser.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 Agreements, 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 prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. 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 same or similar arrangements in prior years. The Board determined to renew the Agreements.
34
NOTES
For More Information
Telephone 1-800-554-4611 or 1-516-338-3300 | |
The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 | |
Attn: Investments Division |
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-DREYFUS.
Dreyfus Variable |
Investment Fund, |
International Value |
Portfolio |
SEMIANNUAL REPORT June 30, 2015
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents | |
THE FUND | |
2 | A Letter from the President |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
12 | Statement of Assets and Liabilities |
13 | Statement of Operations |
14 | Statement of Changes in Net Assets |
16 | Financial Highlights |
18 | Notes to Financial Statements |
31 | Information About the Renewal of the Fund’s Investment Advisory Agreement |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus Variable Investment Fund,
International Value Portfolio
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Variable Investment Fund, International Value Portfolio, covering the six-month period from January 1, 2015, through June 30, 2015. 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.
International stock markets posted moderate gains, on average, over the first half of 2015. Despite ongoing concerns that persistent economic weakness and deflationary pressures in Europe, Japan, and China might undermine corporate profits for non-U.S. and multinational companies, investor sentiment was buoyed by increasingly accommodative monetary policies from major central banks. Indeed, aggressive monetary stimulus measures caused most local currencies to depreciate against the U.S. dollar, making foreign exports more attractive to U.S. consumers in a recovering domestic economy. In this environment, more developed markets generally produced higher returns than emerging markets.
We remain optimistic regarding the long-term outlook for the global economy generally and for international equities in particular. Despite pockets of persistent instability in some areas, we believe currency depreciation has enhanced Europe’s competitiveness in global markets, recent wage negotiations in Japan suggest that long-awaited inflationary pressure may be taking root, and more stimulative economic policies in China may provide a catalyst for growth in the rest of Asia. As always, we urge you to discuss these observations with your financial advisor, who can help you assess their implications for your investment portfolio.
Thank you for your continued confidence and support.
J. Charles Cardona
President
The Dreyfus Corporation
July 15, 2015
2
DISCUSSION OF FUND PERFORMANCE
For the period of January 1, 2015, through June 30, 2015, as provided by D. Kirk Henry and Clifford Smith, Portfolio Managers
Fund and Market Performance Overview
For the six-month period ended June 30, 2015, Dreyfus Variable Investment Fund, International Value Portfolio’s Initial shares produced a total return of 7.45%, and its Service shares produced a total return of 7.36%.1 This compares with a 5.52% return for the fund’s benchmark, the Morgan Stanley Capital International Europe, Australasia, Far East Index (“MSCI EAFE® Index”), for the same period.2
International equities gained ground over the first half of 2015 with support from central bank quantitative easing programs. The fund outperformed its benchmark, largely on the strength of favorable country allocations and stock selections in Japan, Italy, and Australia.
The Fund’s Investment Approach
The fund seeks long-term capital growth. To pursue this goal, the fund normally invests in stocks of foreign companies that we consider to be value companies. The fund may invest in companies of any size, and may also invest in companies located in emerging markets. Our investment approach is value-oriented and research-driven. When selecting stocks, we conduct extensive quantitative and fundamental research that emphasizes individual stock selection rather than economic and industry trends. We focus on how a stock is valued relative to its intrinsic worth based on traditional value measures, the company’s underlying business health as measured by return on assets and return on equity, and the presence of a catalyst that may trigger an increase in the stock price.
Central Banks Spurred International Economic Rebound
During the first three months of 2015, a slowdown in U.S. economic activity precipitated in part by severe winter weather cast a shadow over global growth prospects. Meanwhile, massive quantitative easing programs in Europe and Japan provided a supportive backdrop for international equities, providing inexpensive capital for business operations and expansion. Quantitative easing also caused most
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
international currencies to decline sharply in value against the U.S. dollar, creating a favorable environment for exporters to the United States and for those competing locally with U.S. imports. Consequently, international equities climbed during most of the reporting period with notably strong performance from Japan and the better positioned European markets.Although many Asian and European countries continued to report encouraging economic developments through the end of the reporting period, a debt crisis in Greece and an abrupt drop in Chinese stock prices unsettled international investors, driving the Index lower during the last week of June.
Allocation and Stock Selection Strategies Enhanced Returns
Overweighted exposure to the Japanese and Italian markets bolstered the fund’s relative returns, as did underweighted exposure to Australia. Individual stock selections in these markets further enhanced relative performance. In Japan, we identified several attractively valued financial stocks that produced significant gains as they recovered from prior weakness, including banks, such as Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group, and property financiers, such as Nomura Real Estate Holdings. In the consumer area, drug store chain Matsumotokiyoshi Holdings encountered improving domestic consumption trends.Top performing Italian holdings included oil refinery Saras, which benefited from lower oil prices and rising domestic demand, and aerospace manufacturer Finmeccanica, which achieved significant milestones in a major corporate restructuring. In Australia, QBE Insurance Group was the fund’s leading holding, rising due to an improved debt profile and increased capital resources.
A few holdings in other markets further contributed to the fund’s relatively strong returns. In the United Kingdom, insurance provider esure Group traded higher after posting strong quarterly results, while food retailer Tesco made progress recapturing lost market share in the wake of a restructuring program. In Sweden, consumer products maker Svenska Cellulosa benefited from declining local currency valuations.
On a more negative note, the fund’s exposure to French utilities GDF Suez and Electricite de France detracted from returns due to company-specific problems, while French food retailer Casino Guichard Perrachon was hurt by a challenging pricing environment. South Korean conglomerate Samsung Electronics dipped slightly on profit taking after posting strong results in 2014. Luxembourg-based steel maker ArcelorMittal suffered amid industry-wide weakness in the iron and steel
4
industry. Swedish communication equipment firm Ericsson and German equipment manufacturer Aixtron both posted weak quarterly results.
Positioned for Further Recovery
While unresolved issues such as the Greek debt crisis and Chinese stock market volatility continue to overhang the market, we see these challenges as temporary impediments to further economic progress in Europe and Asia. We have adopted a constructive view of current market conditions, and we have continued to find attractive investment opportunities within the asset class.Among country allocations, we have recently increased the fund’s exposure to stocks in Germany and Singapore, while reducing exposure in France, where we have taken some profits. Among sectors, the fund’s overweighted exposure to energy stocks has increased as holdings have appreciated.We also have boosted exposure to telecommunications stocks while decreasing the fund’s industrial exposure.
July 15, 2015
Please note, the position in any security highlighted with italicized typeface was sold during the reporting period. Equity funds 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’s performance will be influenced by political, social, and economic factors affecting investments in foreign companies. Special risks associated with investments in foreign companies include exposure to currency fluctuations, less liquidity, less developed or less efficient trading markets, lack of comprehensive company information, political instability, and differing auditing and legal standards.These risks are enhanced in emerging markets countries.
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 Dreyfus Variable Investment Fund, International Value Portfolio made available through insurance products may be similar to other funds managed or advised by Dreyfus. However, the investment results of the fund may be higher or lower than, and may not be comparable to, those of any other Dreyfus fund.
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. Return figures for the |
fund reflect the absorption of certain fund expenses by The Dreyfus Corporation pursuant to an undertaking in effect |
through January 1, 2016, at which time it may be extended, terminated, or modified. Had these expenses not been |
absorbed, the fund’s returns would have been lower. |
2 SOURCE: LIPPER INC. — Reflects reinvestment of net dividends and, where applicable, capital gain |
distributions.The Morgan Stanley Capital International Europe,Australasia, Far East (MSCI EAFE®) Index is an |
unmanaged index composed of a sample of companies representative of the market structure of European and Pacific |
Basin countries. Investors cannot invest directly in any index. |
The Fund 5
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 Dreyfus Variable Investment Fund, International Value Portfolio from January 1, 2015 to June 30, 2015. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended June 30, 2015
Initial Shares | Service Shares | |||
Expenses paid per $1,000† | $ 4.53 | $ 5.76 | ||
Ending value (after expenses) | $ 1,074.50 | $ 1,073.60 |
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 June 30, 2015
Initial Shares | Service Shares | |||
Expenses paid per $1,000† | $ 4.41 | $ 5.61 | ||
Ending value (after expenses) | $ 1,020.43 | $ 1,019.24 |
† Expenses are equal to the fund’s annualized expense ratio of .88% for Initial shares and 1.12% for Service shares, |
multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS |
June 30, 2015 (Unaudited) |
Common Stocks—90.7% | Shares | Value ($) | |
Australia—2.3% | |||
Australia & New Zealand Banking Group | 16,839 | 418,347 | |
Primary Health Care | 58,059 | 225,769 | |
QBE Insurance Group | 48,620 | 512,800 | |
1,156,916 | |||
Austria—.5% | |||
Erste Group Bank | 9,842 | a | 279,521 |
Brazil—.5% | |||
Petroleo Brasileiro, ADR | 25,963 | a | 234,965 |
China—1.5% | |||
CNOOC | 205,000 | 290,910 | |
FIH Mobile | 344,000 | 208,134 | |
Guangzhou Automobile Group, Cl. H | 292,000 | 270,470 | |
769,514 | |||
Denmark—.9% | |||
Carlsberg, Cl. B | 5,229 | 474,696 | |
France—8.1% | |||
BNP Paribas | 9,291 | 560,891 | |
Casino Guichard Perrachon | 4,659 | 352,939 | |
Cie de St-Gobain | 6,076 | 272,783 | |
Danone | 4,585 | 296,422 | |
Electricite de France | 24,798 | 552,922 | |
GDF Suez | 20,268 | 375,994 | |
Sanofi | 8,603 | 846,316 | |
Total | 17,925 | 870,691 | |
4,128,958 | |||
Germany—5.5% | |||
Aixtron | 31,581 | a | 213,326 |
Deutsche Bank | 27,842 | 836,520 | |
E.ON | 19,225 | 256,125 | |
LANXESS | 7,320 | 431,620 | |
METRO | 11,410 | 359,735 | |
Suedzucker | 8,934 | 148,654 | |
Talanx | 9,414 | 289,038 | |
Wacker Chemie | 2,651 | 273,677 | |
2,808,695 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Hong Kong—4.1% | |||
CITIC | 237,000 | 424,986 | |
COSCO Pacific | 290,792 | 394,648 | |
Esprit Holdings | 189,879 | 177,838 | |
Lifestyle International Holdings | 171,500 | 318,152 | |
Pacific Basin Shipping | 431,000 | 145,121 | |
WH Group | 382,000 | b | 260,201 |
Yue Yuen Industrial Holdings | 112,000 | 374,944 | |
2,095,890 | |||
India—1.6% | |||
Reliance Industries, GDR | 16,701 | b | 520,236 |
State Bank of India, GDR | 7,058 | 291,848 | |
812,084 | |||
Ireland—.6% | |||
CRH | 10,532 | 295,553 | |
Israel—1.2% | |||
Teva Pharmaceutical Industries, ADR | 10,379 | 613,399 | |
Italy—3.9% | |||
Assicurazioni Generali | 33,893 | 610,617 | |
Finmeccanica | 22,342 | a | 280,963 |
Saras | 153,393 | a | 272,249 |
Telecom Italia | 403,693 | a | 512,166 |
UniCredit | 50,033 | 336,071 | |
2,012,066 | |||
Japan—20.4% | |||
Aiful | 74,800 | a | 241,418 |
Credit Saison | 20,700 | 443,819 | |
Denso | 6,500 | 323,765 | |
East Japan Railway | 5,990 | 538,872 | |
Ebara | 80,000 | 387,629 | |
Fujitsu | 98,000 | 548,034 | |
Honda Motor | 28,900 | 935,469 | |
INPEX | 31,000 | 352,466 | |
LIXIL Group | 26,300 | 522,196 | |
Mitsubishi UFJ Financial Group | 94,600 | 680,059 | |
Nippon Shokubai | 37,000 | 506,696 | |
Nippon Telegraph & Telephone | 14,400 | 521,652 |
8
Common Stocks (continued) | Shares | Value ($) | |
Japan (continued) | |||
Nippon Telegraph & Telephone, ADR | 2,780 | 100,886 | |
Nissan Motor | 32,100 | 334,416 | |
Nomura Real Estate Holdings | 21,900 | 459,885 | |
Ricoh | 43,000 | 446,215 | |
Sawai Pharmaceutical | 7,800 | 454,418 | |
Shimamura | 1,400 | 147,110 | |
SoftBank | 9,100 | 536,029 | |
Sumitomo Electric Industries | 28,350 | 439,433 | |
Sumitomo Mitsui Financial Group | 20,300 | 905,484 | |
Sumitomo Mitsui Trust Holdings | 73,240 | 335,485 | |
Yamada Denki | 70,300 | 281,464 | |
10,442,900 | |||
Netherlands—4.4% | |||
Aegon | 42,781 | 314,402 | |
ING Groep | 30,066 | 496,418 | |
Koninklijke Philips | 39,476 | 1,004,306 | |
Randstad Holding | 6,551 | 426,591 | |
2,241,717 | |||
Russia—.3% | |||
Gazprom, ADR | 29,535 | 152,105 | |
Singapore—1.7% | |||
United Overseas Bank | 33,400 | 572,104 | |
Wilmar International | 113,500 | 276,408 | |
848,512 | |||
South Korea—2.5% | |||
Hyundai Mobis | 1,388 | 263,800 | |
KB Financial Group | 3,078 | 101,823 | |
KB Financial Group, ADR | 12,693 | 417,219 | |
Korea Electric Power | 5,746 | 235,929 | |
Samsung Electronics | 244 | 277,370 | |
1,296,141 | |||
Spain—1.7% | |||
Banco Popular Espanol | 57,151 | a | 276,905 |
Banco Santander | 38,471 | 268,660 | |
Ebro Foods | 16,226 | 314,035 | |
859,600 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Sweden—2.6% | |||
Electrolux, Ser. B | 5,886 | 184,464 | |
Ericsson, Cl. B | 45,216 | 468,531 | |
Getinge, Cl. B | 18,619 | 448,077 | |
Svenska Cellulosa, Cl. B | 9,939 | 252,736 | |
1,353,808 | |||
Switzerland—6.1% | |||
ABB | 28,693 | a | 600,897 |
Credit Suisse Group | 29,022 | a | 797,760 |
Holcim | 7,132 | a | 526,347 |
Roche Holding | 4,204 | 1,178,082 | |
3,103,086 | |||
United Kingdom—18.7% | |||
Anglo American | 19,449 | 280,685 | |
ArcelorMittal | 29,973 | 291,817 | |
Aviva | 41,955 | 324,663 | |
Barclays | 97,743 | 400,070 | |
BHP Billiton | 17,775 | 348,831 | |
BP | 128,912 | 851,021 | |
esure Group | 134,386 | 536,328 | |
GlaxoSmithKline | 45,484 | 945,142 | |
Home Retail Group | 166,484 | 442,081 | |
HSBC Holdings | 96,230 | 861,994 | |
Royal Bank of Scotland Group | 63,308 | a | 349,644 |
Royal Dutch Shell, Cl. A | 31,795 | 892,492 | |
Serco Group | 191,495 | 355,044 | |
Spire Healthcare Group | 66,270 | b | 346,740 |
Standard Chartered | 60,375 | 966,660 | |
Tesco | 210,019 | 701,394 | |
Unilever | 14,819 | 635,659 | |
9,530,265 | |||
United States—1.6% | |||
iShares MSCI EAFE ETF | 12,913 | 819,846 | |
Total Common Stocks | |||
(cost $56,669,243) | 46,330,237 |
10
Preferred Stocks—.9% | Shares | Value ($) | |
Germany | |||
Volkswagen | |||
(cost $507,374) | 2,061 | 477,924 | |
Other Investment—1.3% | |||
Registered Investment Company; | |||
Dreyfus Institutional Preferred | |||
Plus Money Market Fund | |||
(cost $659,462) | 659,462 | c | 659,462 |
Total Investments (cost $57,836,079) | 92.9 | % | 47,467,623 |
Cash and Receivables (Net) | 7.1 | % | 3,609,947 |
Net Assets | 100.0 | % | 51,077,570 |
ADR—American Depository Receipts
ETF—Exchange-Traded Fund
GDR—Global Depository Receipts
a Non-income producing security. |
b Securities exempt from registration pursuant to Rule 144A under the Securities Act of 1933.These securities may be |
resold in transactions exempt from registration, normally to qualified institutional buyers.At June 30, 2015, these |
securities were valued at $1,127,177 or 2.2% of net assets. |
c Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Financial | 27.2 | Information Technology | 4.2 |
Industrial | 10.5 | Telecommunication Services | 3.2 |
Health Care | 9.9 | Utilities | 2.8 |
Consumer Discretionary | 9.7 | Exchange-Traded Funds | 1.6 |
Energy | 8.7 | Money Market Investment | 1.3 |
Consumer Staples | 8.0 | ||
Materials | 5.8 | 92.9 | |
† Based on net assets. | |||
See notes to financial statements. |
The Fund 11
STATEMENT OF ASSETS AND LIABILITIES |
June 30, 2015 (Unaudited) |
Cost | Value | ||
Assets ($): | |||
Investments in securities—See Statement of Investments: | |||
Unaffiliated issuers | 57,176,617 | 46,808,161 | |
Affiliated issuers | 659,462 | 659,462 | |
Cash | 3,637,189 | ||
Cash denominated in foreign currencies | 204,934 | 203,070 | |
Receivable for investment securities sold | 625,014 | ||
Dividends receivable | 199,400 | ||
Prepaid expenses | 20,181 | ||
52,152,477 | |||
Liabilities ($): | |||
Due to The Dreyfus Corporation and affiliates—Note 3(b) | 66,759 | ||
Payable for investment securities purchased | 606,978 | ||
Payable for shares of Beneficial Interest redeemed | 359,959 | ||
Unrealized depreciation on forward foreign | |||
currency exchange contracts—Note 4 | 1,225 | ||
Accrued expenses | 39,986 | ||
1,074,907 | |||
Net Assets ($) | 51,077,570 | ||
Composition of Net Assets ($): | |||
Paid-in capital | 88,581,760 | ||
Accumulated undistributed investment income—net | 570,647 | ||
Accumulated net realized gain (loss) on investments | (27,690,514 | ) | |
Accumulated net unrealized appreciation (depreciation) | |||
on investments and foreign currency transactions | (10,384,323 | ) | |
Net Assets ($) | 51,077,570 | ||
Net Asset Value Per Share | |||
Initial Shares | Service Shares | ||
Net Assets ($) | 28,598,444 | 22,479,126 | |
Shares Outstanding | 2,577,858 | 2,022,979 | |
Net Asset Value Per Share ($) | 11.09 | 11.11 | |
See notes to financial statements. |
12
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2015 (Unaudited)
Investment Income ($): | ||
Income: | ||
Cash dividends (net of $71,850 foreign taxes withheld at source): | ||
Unaffiliated issuers | 815,861 | |
Affiliated issuers | 299 | |
Total Income | 816,160 | |
Expenses: | ||
Investment advisory fee—Note 3(a) | 244,286 | |
Professional fees | 31,934 | |
Distribution fees—Note 3(b) | 30,070 | |
Custodian fees—Note 3(b) | 22,390 | |
Prospectus and shareholders’ reports | 11,467 | |
Trustees’ fees and expenses—Note 3(c) | 3,684 | |
Interest expense—Note 2 | 2,500 | |
Shareholder servicing costs—Note 3(b) | 253 | |
Loan commitment fees—Note 2 | 100 | |
Miscellaneous | 9,287 | |
Total Expenses | 355,971 | |
Less—reduction in expenses due to undertakings—Note 3(a) | (112,522 | ) |
Less—reduction in fees due to earnings credits—Note 3(b) | (1 | ) |
Net Expenses | 243,448 | |
Investment Income—Net | 572,712 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments and foreign currency transactions | (161,633 | ) |
Net realized gain (loss) on forward foreign currency exchange contracts | 19,162 | |
Net Realized Gain (Loss) | (142,471 | ) |
Net unrealized appreciation (depreciation) on | ||
investments and foreign currency transactions | 2,800,776 | |
Net unrealized appreciation (depreciation) on | ||
forward foreign currency exchange contracts | (1,200 | ) |
Net Unrealized Appreciation (Depreciation) | 2,799,576 | |
Net Realized and Unrealized Gain (Loss) on Investments | 2,657,105 | |
Net Increase in Net Assets Resulting from Operations | 3,229,817 | |
See notes to financial statements. |
The Fund 13
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
June 30, 2015 | Year Ended | |||
(Unaudited) | December 31, 2014 | |||
Operations ($): | ||||
Investment income—net | 572,712 | 1,034,678 | ||
Net realized gain (loss) on investments | (142,471 | ) | 4,092,850 | |
Net unrealized appreciation | ||||
(depreciation) on investments | 2,799,576 | (10,996,546 | ) | |
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 3,229,817 | (5,869,018 | ) | |
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Initial Shares | (521,657 | ) | (668,683 | ) |
Service Shares | (474,160 | ) | (357,164 | ) |
Total Dividends | (995,817 | ) | (1,025,847 | ) |
Beneficial Interest Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Initial Shares | 7,972,747 | 4,647,859 | ||
Service Shares | 4,427,098 | 6,597,103 | ||
Dividends reinvested: | ||||
Initial Shares | 521,657 | 668,683 | ||
Service Shares | 474,160 | 357,164 | ||
Cost of shares redeemed: | ||||
Initial Shares | (13,993,428 | ) | (10,629,784 | ) |
Service Shares | (6,743,667 | ) | (13,085,279 | ) |
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | (7,341,433 | ) | (11,444,254 | ) |
Total Increase (Decrease) in Net Assets | (5,107,433 | ) | (18,339,119 | ) |
Net Assets ($): | ||||
Beginning of Period | 56,185,003 | 74,524,122 | ||
End of Period | 51,077,570 | 56,185,003 | ||
Undistributed investment income—net | 570,647 | 993,752 |
14
Six Months Ended | ||||
June 30, 2015 | Year Ended | |||
(Unaudited) | December 31, 2014 | |||
Capital Share Transactions: | ||||
Initial Shares | ||||
Shares sold | 716,257 | 401,204 | ||
Shares issued for dividends reinvested | 48,079 | 57,104 | ||
Shares redeemed | (1,328,011 | ) | (905,183 | ) |
Net Increase (Decrease) in Shares Outstanding | (563,675 | ) | (446,875 | ) |
Service Shares | ||||
Shares sold | 394,368 | 563,237 | ||
Shares issued for dividends reinvested | 43,621 | 30,449 | ||
Shares redeemed | (598,548 | ) | (1,126,902 | ) |
Net Increase (Decrease) in Shares Outstanding | (160,559 | ) | (533,216 | ) |
See notes to financial statements. |
The Fund 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.
Six Months Ended | ||||||||||||
June 30, 2015 | Year Ended December 31, | |||||||||||
Initial Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 10.55 | 11.82 | 9.82 | 8.96 | 11.21 | 10.92 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .13 | .19 | .18 | .20 | .24 | .18 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .65 | (1.27 | ) | 2.04 | .93 | (2.26 | ) | .30 | ||||
Total from Investment Operations | .78 | (1.08 | ) | 2.22 | 1.13 | (2.02 | ) | .48 | ||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.24 | ) | (.19 | ) | (.22 | ) | (.27 | ) | (.23 | ) | (.19 | ) |
Net asset value, end of period | 11.09 | 10.55 | 11.82 | 9.82 | 8.96 | 11.21 | ||||||
Total Return (%) | 7.45 | b | (9.32 | ) | 22.99 | 12.67 | (18.48 | ) | 4.46 | |||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.34 | c | 1.29 | 1.25 | 1.28 | 1.25 | 1.26 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .88 | c | .99 | .95 | 1.19 | 1.25 | 1.26 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 2.40 | c | 1.68 | 1.71 | 2.19 | 2.24 | 1.72 | |||||
Portfolio Turnover Rate | 36.26 | b | 45.43 | 57.30 | 45.97 | 46.71 | 61.13 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 28,598 | 33,147 | 42,421 | 35,568 | 40,549 | 59,242 |
a | Based on average shares outstanding. |
b | Not annualized. |
c | Annualized. |
See notes to financial statements.
16
Six Months Ended | ||||||||||||
June 30, 2015 | Year Ended December 31, | |||||||||||
Service Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 10.55 | 11.82 | 9.82 | 8.95 | 11.21 | 10.92 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .13 | .16 | .16 | .16 | .22 | .15 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | .64 | (1.28 | ) | 2.03 | .95 | (2.28 | ) | .31 | ||||
Total from Investment Operations | .77 | (1.12 | ) | 2.19 | 1.11 | (2.06 | ) | .46 | ||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.21 | ) | (.15 | ) | (.19 | ) | (.24 | ) | (.20 | ) | (.17 | ) |
Net asset value, end of period | 11.11 | 10.55 | 11.82 | 9.82 | 8.95 | 11.21 | ||||||
Total Return (%) | 7.36 | b | (9.57 | ) | 22.69 | 12.42 | (18.76 | ) | 4.22 | |||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.58 | c | 1.54 | 1.50 | 1.53 | 1.50 | 1.51 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.12 | c | 1.24 | 1.20 | 1.43 | 1.50 | 1.51 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 2.28 | c | 1.40 | 1.47 | 1.77 | 2.03 | 1.44 | |||||
Portfolio Turnover Rate | 36.26 | b | 45.43 | 57.30 | 45.97 | 46.71 | 61.13 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 22,479 | 23,038 | 32,104 | 33,660 | 32,809 | 48,962 |
a | Based on average shares outstanding. |
b | Not annualized. |
c | Annualized. |
See notes to financial statements.
The Fund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
InternationalValue Portfolio (the “fund”) is a separate diversified series of Dreyfus Variable Investment Fund (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 seven 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 capital growth. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares, 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
18
SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in 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 financial futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the proce-
20
dures 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 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.
Forward foreign currency exchange contracts (“forward contracts”) are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of June 30, 2015 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities— | ||||
Foreign | ||||
Common Stocks† | 45,510,391 | — | — | 45,510,391 |
Equity Securities— | ||||
Foreign | ||||
Preferred Stocks† | 477,924 | — | — | 477,924 |
Exchange-Traded | ||||
Funds | 819,846 | — | — | 819,846 |
Mutual Funds | 659,462 | — | — | 659,462 |
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Level 2—Other | Level 3— | |||||
Level 1— | Significant | Significant | ||||
Unadjusted | Observable | Unobservable | ||||
Quoted Prices | Inputs | Inputs | Total | |||
Liabilities ($) | ||||||
Other Financial | ||||||
Instruments: | ||||||
Forward Foreign | ||||||
Currency Exchange | ||||||
Contracts†† | — | (1,225 | ) | — | (1,225 | ) |
† | See Statement of Investments for additional detailed categorizations. |
†† | Amount shown represents unrealized (depreciation) at period end. |
At December 31, 2014, $53,349,445 of exchange traded foreign equity securities were classified within Level 2 of the fair value hierarchy pursuant to the fund’s fair valuation procedures.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
22
(d) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended June 30, 2015 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 12/31/2014 ($) | Purchases ($) | Sales ($) | 6/30/2015 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Preferred | |||||
Plus Money | |||||
Market Fund | 487,000 | 12,760,590 | 12,588,128 | 659,462 | 1.3 |
(e) Risk: Investing in foreign markets may involve special risks and considerations not typically associated with investing in the U.S.These risks include revaluation of currencies, high rates of inflation, repatriation restrictions on income and capital, and adverse political and economic developments. Moreover, securities issued in these markets may be less liquid, subject to government ownership controls and delayed settlements, and their prices may be more volatile than those of comparable securities in the U.S.
(f) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(g) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
As of and during the period ended June 30, 2015, 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 June 30, 2015, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended December 31, 2014 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010 (the “2010 Act”), the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 (“post-enactment losses”) for an unlimited period. Furthermore, post-enactment capital loss carryovers retain their character as either short-term or long-term capital losses rather than short-term as they were under previous statute.The 2010 Act requires post-enactment losses to be utilized before the utilization of losses incurred in taxable years prior to the effective date of the 2010 Act (“pre-enactment losses”).As a result of this ordering rule, pre-enactment losses may be more likely to expire unused.
The fund has an unused capital loss carryover of $26,945,289 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to December 31, 2014. If not applied, $2,290,912 of the carryover expires in fiscal year 2016 and $21,640,693 expires in fiscal year 2017. The fund has $3,013,684 of post-enactment long-term capital losses which can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2014 was as follows: ordinary income $1,025,847. The tax character of current year distributions will be determined at the end of the current fiscal year.
24
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $430 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon, subsidiary of BNY Mellon and an affiliate of Dreyfus (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing.
The average amount of borrowings outstanding under the Facilities during the period ended June 30, 2015 was approximately $456,400 with a related weighted average annualized interest rate of 1.10%.
NOTE 3—Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with Dreyfus, the investment advisory fee is computed at the annual rate of 1% of the value of the fund’s average daily net assets and is payable monthly. Dreyfus has agreed, from January 1, 2015 through January 1, 2016, to waive receipt of a portion of the fund’s investment advisory fee in the amount of .30% of the value of the fund’s average daily net assets.
Dreyfus has also contractually agreed, from March 20, 2015 through January 1, 2016, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the expenses of none of the classes (excluding Rule 12b-1 Distribution Plan fees, taxes, interest expense, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed .79% of the value of the fund’s average daily net assets.
The Fund 25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The reduction in expenses, pursuant to the undertakings, amounted to $112,522 during the period ended June 30, 2015.
(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 fees payable under the Distribution Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2015, Service shares were charged $30,070 pursuant to the Distribution Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended June 30, 2015, the fund was charged $245 for transfer agency services and $22 for cash management services.These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $1.
The fund compensates The Bank of NewYork 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 June 30, 2015, the fund was charged $22,390 pursuant to the custody agreement.
26
During the period ended June 30, 2015, the fund was charged $6,240 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $40,512, Distribution Plan fees $4,910, custodian fees $38,998, Chief Compliance Officer fees $3,169 and transfer agency fees $256, which are offset against an expense reimbursement currently in effect in the amount of $21,086.
(c) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities and forward contracts, during the period ended June 30, 2015, amounted to $17,505,089 and $28,698,758, respectively.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset. The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively,“Master Agreements”) with its over-the counter (“OTC”) derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or 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 June 30, 2015 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
The Fund 27
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 nonper-formance on these forward contracts, which is generally limited to the unrealized gain on each open contract.This risk is mitigated by Master Agreements between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty.The following summarizes open forward contracts at June 30, 2015:
Foreign | ||||||
Forward Foreign Currency | Currency | Unrealized | ||||
Exchange Contracts | Amounts | Cost ($) | Value ($) (Depreciation) ($) | |||
Purchases: | ||||||
Euro, | ||||||
Expiring | ||||||
7/1/2015 a | 124,787 | 139,837 | 139,119 | (718 | ) | |
Japanese Yen, | ||||||
Expiring | ||||||
7/2/2015 b | 29,803,403 | 243,779 | 243,522 | (257 | ) | |
Sales: | Proceeds ($) | |||||
Japanese Yen, | ||||||
Expiring | ||||||
7/1/2015 c | 8,544,594 | 69,567 | 69,817 | (250 | ) | |
(1,225 | ) |
Counterparties:
a | JP Morgan Chase Bank |
b | Morgan Stanley Capital Services |
c | Goldman Sachs International |
28
The provisions of ASC Topic 210 “Disclosures about Offsetting Assets and Liabilities” require disclosure on the offsetting of financial assets and liabilities.These disclosures are required for certain investments, including derivative financial instruments subject to Master Agreements which are eligible for offsetting in the Statement of Assets and Liabilities and require the fund to disclose both gross and net information with respect to such investments. For financial reporting purposes, the fund does not offset derivative assets and derivative liabilities that are subject to Master Agreements in the Statement of Assets and Liabilities.
At June 30, 2015, derivative liabilities (by type) on a gross basis are as follows:
Derivative Financial Instruments: | Liabilities ($) | |
Forward contracts | (1,225 | ) |
Total gross amount of derivative liabilities | ||
in the Statement of Assets and Liabilities | (1,225 | ) |
Derivatives not subject to Master Agreements | — | |
Total gross amount of liabilities | ||
subject to Master Agreements | (1,225 | ) |
The following table presents derivative liabilities net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of June 30, 2015:
Financial | ||||||
Instruments | ||||||
and | ||||||
Derivatives | ||||||
Gross Amount of | Available | Collateral | Net Amount of | |||
Counterparty | Liabilities ($)1 | for Offset ($) | Pledged ($) | Liabilities ($) | ||
Goldman Sachs | ||||||
International | (250 | ) | — | — | (250 | ) |
JP Morgan Chase Bank | (718 | ) | — | — | (718 | ) |
Morgan Stanley | ||||||
Capital Services | (257 | ) | — | — | (257 | ) |
Total | (1,225 | ) | — | — | (1,225 | ) |
1 | Absent a default event or early termination, OTC derivative liabilities are presented at gross |
amounts and are not offset in the Statement of Assets and Liabilities. |
The Fund 29
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The following summarizes the average market value of derivatives outstanding during the period ended June 30, 2015:
Average Market Value ($) | |
Forward contracts | 337,432 |
At June 30, 2015, accumulated net unrealized depreciation on investments was $10,368,456, consisting of $1,227,612 gross unrealized appreciation and $11,596,068 gross unrealized depreciation.
At June 30, 2015, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
30
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
INVESTMENT ADVISORY AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Trustees held on March 11-12, 2015, the Board considered the renewal of the fund’s Investment Advisory Agreement pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the “Agreement”).The Board members, none of whom are “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 Dreyfus representatives. 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 them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ 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 Dreyfus also provides oversight of day-to-day fund operations, including fund accounting and administration and assistance in meeting
The Fund 31
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
legal and regulatory requirements. The Board also considered Dreyfus’ 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 Lipper, Inc. (“Lipper”), 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 December 31, 2014, 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 Lipper as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds. The Board discussed the results of the comparisons and noted that the fund’s total return performance was at or below the Performance Group median for all periods (ranking in the fourth quartile for most periods) and below the Performance Universe median for all periods (ranking in the fourth quartile for most periods). Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index. Representatives of Dreyfus
32
discussed with the Board factors affecting the fund’s performance, including issues with specific stock selection.They noted that the fund had a new lead portfolio manager designated approximately two years ago and stated plans for increased management focus on ways to improve the fund’s performance.
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 noted that the fund’s contractual management fee was above 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 above the Expense Group and Expense Universe medians.
Dreyfus representatives noted that Dreyfus has agreed to waive receipt of a portion of the fund’s management fee in the amount of .30% of the value of the fund’s average daily net assets until September 30, 2015.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Lipper category as the fund and (2) paid to Dreyfus or the Dreyfus-affiliated primary employer of the fund’s primary portfolio manager(s) 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 and reasonableness of the fund’s management fee.
The Fund 33
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing the fund and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus 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 Dreyfus. The Board also noted the fee waiver arrangement and its effect on the profitability of Dreyfus and its affiliates. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus 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 bear a reasonable relationship to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, 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. Dreyfus representatives noted 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 Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus 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
34
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 Dreyfus from acting as investment adviser and noted 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 Dreyfus are adequate and appropriate.
The Board agreed to closely monitor performance and determined to approve renewal of the Agreement only through September 30, 2015.
The Board concluded that the fee paid to Dreyfus was reasonable in light of the considerations described above.
The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus 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 Dreyfus and its affiliates, of the fund and the services provided to the fund by Dreyfus. 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
The Fund 35
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
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 prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. 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 same or similar arrangements in prior years.The Board determined to renew the Agreement through September 30, 2015.
36
For More Information
Telephone 1-800-554-4611 or 1-516-338-3300 | |
The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 | |
Attn: Investments Division |
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-DREYFUS.
Dreyfus Variable |
Investment Fund, |
Money Market |
Portfolio |
SEMIANNUAL REPORT June 30, 2015
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents | |
THE FUND | |
2 | A Letter from the President |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
10 | Statement of Assets and Liabilities |
11 | Statement of Operations |
12 | Statement of Changes in Net Assets |
13 | Financial Highlights |
14 | Notes to Financial Statements |
21 | Information About the Renewal of the Fund’s Investment Advisory Agreement |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus Variable Investment Fund,
Money Market Portfolio
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Variable Investment Fund, Money Market Portfolio, covering the six-month period from January 1, 2015, through June 30, 2015. 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.
Longer term U.S.Treasury securities fared well during the first quarter of 2015 when long-term interest rates fell amid robust demand from global investors, but those gains were erased over the second quarter amid heightened market volatility stemming from renewed domestic economic concerns and expectations of higher short-term interest rates over the months ahead. Yet, yields of money market instruments remained steady, anchored near zero percent by an unchanged target for overnight interest rates.Yields also experienced downward pressure from robust demand for a relatively limited supply of money market-eligible instruments.
We expect economic uncertainty to persist over the near term as Europe continues to struggle with instability in Greece, China addresses a stubborn economic slowdown, geopolitical conflicts flare across the Middle East, and U.S. investors await the first in a series of short-term interest rate hikes. We remain more optimistic regarding the economy’s long-term outlook, which we believe should be supported by improved consumer and business confidence as well as aggressively accommodative monetary policies from many of the world’s major central banks. Nonetheless, we expect short-term interest rates to remain near current levels at least until later in 2015, and any eventual rate hikes are expected to be gradual and modest.As always, we urge you to discuss these observations with your financial advisor, who can help you assess their implications for your investment portfolio.
Thank you for your continued confidence and support.
J. Charles Cardona
President
The Dreyfus Corporation
July 15, 2015
2
DISCUSSION OF FUND PERFORMANCE
For the period of January 1, 2015, through June 30, 2015, as provided by Bernard W. Kiernan, Jr., Senior Portfolio Manager
Fund and Market Performance Overview
For the six-month period ended June 30, 2015, Dreyfus Variable Investment Fund, Money Market Portfolio produced an annualized yield of 0.00%. Taking into account the effects of compounding, the fund provided an annualized effective yield of 0.00% for the same period.1
Money market yields remained anchored near zero percent during a choppy economic recovery over the first half of 2015 as the Federal Reserve Board (the “Fed”) left its target for the federal funds rate unchanged in a range between 0% and 0.25%.
The Fund’s Investment Approach
The fund seeks as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity.To pursue this goal, the fund invests in a diversified portfolio of high-quality, dollar-denominated short-term debt securities, including securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, certificates of deposit, time deposits, bankers’ acceptances, and other short-term securities issued by domestic or foreign banks, repurchase agreements, including tri-party repurchase agreements, asset-backed securities, domestic and foreign commercial paper, and other short-term corporate and bank obligations and dollar-denominated foreign bank obligations. Normally, the fund invests at least 25% of its net assets in domestic or dollar-denominated foreign bank obligations.
U.S. Economic Recovery Back on Track after Soft Patch
The reporting period began in the midst of a domestic economic recovery that gained traction though the end of 2014. January 2015 saw more good economic news, including 201,000 new jobs and a jump in compensation for hourly workers by its largest margin since the recession.The unemployment rate dipped to 5.5% in February, and 266,000 jobs were created across a variety of industries. Wages and personal incomes also moved higher, while energy prices began to rebound from previously depressed levels. On a more negative note, exports and orders for durable goods weakened in February, and retail sales proved disappointing.
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
March brought less encouraging economic news when job creation moderated to 119,000 positions and the unemployment rate was unchanged. Moreover, an appreciating U.S. dollar drove the U.S. trade deficit to a six-and-a-half year high. In contrast, average hourly wages rose 0.3% during the month, helping to push the personal savings rate to its highest level in more than two years. For the first quarter overall, the U.S. economy contracted modestly, posting an annualized GDP growth rate of –0.2%.
The economy began to rebound in April. The unemployment rate slid to 5.4%, and 187,000 new jobs were created, lending credence to the Fed’s comments that the winter soft patch would be transitory. Average hourly earnings advanced modestly during the month, and the manufacturing and service sectors continued to expand. The housing market also showed renewed signs of life when housing starts surged and permit issuance for new construction climbed above year-ago levels. In contrast, industrial production dropped for the fifth consecutive month, which some analysts attributed to seasonal factors and the impact of lower commodity prices on mining output.
The rebound gained momentum in May, as employers added an estimated 254,000 jobs and hourly wages in the private sector rose 0.3%. The unemployment rate ticked higher to 5.5%. Meanwhile, stabilizing currency exchange rates enabled the U.S. trade deficit to shrink significantly during the month, and retail sales posted robust gains. Fuel prices continued to rebound, sending the inflation rate higher, but energy prices remained well below year-ago levels.
Investor sentiment in the financial markets deteriorated in June in the midst of uncertainty regarding debt relief for Greece, but the U.S. economy continued to gain traction. 223,000 new jobs were added during the month, while the unemployment rate fell to a multi-year low of 5.3%. Manufacturing activity expanded for the 30th consecutive month, and consumer spending rose as Americans earned higher levels of disposable income.
Rates May Begin Rising Gradually Later This Year
At its June meeting, the Fed reiterated that “it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2%,” and “economic conditions may, for some time, warrant keeping the target federal funds rate
4
below levels the Committee views as normal in the longer run.”Therefore, while many analysts expect the first in a series of rate hikes later this year, those increases are likely to be gradual.
In light of these expectations — and until it becomes clearer that higher short-term rates are imminent — we currently intend to maintain the fund’s weighted average maturity in a range we consider to be in line with industry averages. As always, we remain focused on well-established issuers with good quality and liquidity characteristics.
July 15, 2015
An investment in the fund is not insured or guaranteed by the FDIC or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
Short-term corporate and asset-backed securities holdings, while rated in the highest rating category by one or more NRSRO (or unrated, if deemed of comparable quality by Dreyfus), involve credit and liquidity risks and risk of principal loss.
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 Dreyfus Variable Investment Fund, Money Market Portfolio made available through insurance products may be similar to other funds managed or advised by Dreyfus. However, the investment results of the fund may be higher or lower than, and may not be comparable to, those of any other Dreyfus fund.
1 Annualized effective yield is based upon dividends declared daily and reinvested monthly. Past performance is no |
guarantee of future results.Yields fluctuate.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.Yields |
provided for the fund reflect the absorption of certain fund expenses by The Dreyfus Corporation pursuant to an |
undertaking in effect that may be extended, terminated, or modified at any time. Had these expenses not been |
absorbed, fund yields would have been lower, and in some cases, 7-day yields during the reporting period would have |
been negative absent the expense absorption. |
The Fund 5
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 Dreyfus Variable Investment Fund, Money Market Portfolio from January 1, 2015 to June 30, 2015. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended June 30, 2015
Expenses paid per $1,000† | $ .99 |
Ending value (after expenses) | $ 1,000.00 |
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 June 30, 2015
Expenses paid per $1,000† | $ 1.00 |
Ending value (after expenses) | $ 1,023.80 |
† Expenses are equal to the fund’s annualized expense ratio of .20%, multiplied by the average account value over the |
period, multiplied by 181/365 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS
June 30, 2015 (Unaudited)
Principal | |||
Negotiable Bank Certificates of Deposit—49.2% | Amount ($) | Value ($) | |
Bank of Montreal (Yankee) | |||
0.29%, 10/14/15 | 5,000,000 | 5,000,000 | |
Bank of Tokyo-Mitsubishi Ltd. (Yankee) | |||
0.26%, 9/8/15 | 5,000,000 | 5,000,000 | |
Canadian Imperial | |||
Bank of Commerce (Yankee) | |||
0.14%, 7/28/15 | 7,000,000 | 7,000,000 | |
Credit Suisse New York (Yankee) | |||
0.28%, 10/1/15 | 7,000,000 | 7,000,000 | |
DZ Bank AG (Yankee) | |||
0.33%, 10/14/15 | 5,000,000 | 5,000,000 | |
HSBC Bank USA (Yankee) | |||
0.36%, 7/1/15 | 5,000,000 | a | 5,000,000 |
Landesbank Hessen-Thuringen | |||
Girozentrale (Yankee) | |||
0.15%, 7/27/15 | 5,000,000 | b | 5,000,000 |
Mizuho Bank Ltd/NY (Yankee) | |||
0.25%, 7/29/15 | 5,000,000 | 5,000,000 | |
Norinchukin Bank/NY (Yankee) | |||
0.24%, 7/8/15 | 5,000,000 | 5,000,000 | |
Sumitomo Mitsui Banking Corp. (Yankee) | |||
0.25%, 8/11/15 | 5,000,000 | b | 5,000,000 |
Sumitomo Mitsui Trust Bank (Yankee) | |||
0.25%, 8/25/15 | 5,000,000 | b | 5,000,000 |
Total Negotiable | |||
Bank Certificates of Deposit | |||
(cost $59,000,000) | 59,000,000 | ||
Commercial Paper—29.2% | |||
Australia and New Zealand | |||
Banking Group Ltd. | |||
0.28%, 7/10/15 | 5,000,000 | a,b | 5,000,000 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Principal | |||
Commercial Paper (continued) | Amount ($) | Value ($) | |
BNP Paribas | |||
0.26%, 9/15/15 | 5,000,000 | 4,997,256 | |
Coca Cola Company | |||
0.22%, 7/15/15 | 5,000,000 | b | 4,999,572 |
Credit Agricole | |||
0.06%, 7/1/15 | 5,000,000 | 5,000,000 | |
Erste Abwicklungsanstalt | |||
0.24%, 9/17/15 | 5,000,000 | b | 4,997,400 |
State Street Corp. | |||
0.20%, 9/16/15 | 5,000,000 | 4,997,861 | |
Westpac Banking Corp. | |||
0.27%, 7/1/15 | 5,000,000 | a,b | 5,000,000 |
Total Commercial Paper | |||
(cost $34,992,089) | 34,992,089 | ||
Asset-Backed Commercial Paper—4.2% | |||
Collateralized Commercial Paper | |||
Program Co., LLC | |||
0.35%, 11/5/15 | |||
(cost $4,993,826) | 5,000,000 | 4,993,826 | |
Time Deposits—9.2% | |||
Royal Bank of Canada (Toronto) | |||
0.05%, 7/1/15 | 5,000,000 | 5,000,000 | |
Svenska Handelsbanken Inc (Grand Cayman) | |||
0.04%, 7/1/15 | 6,000,000 | 6,000,000 | |
Total Time Deposits | |||
(cost $11,000,000) | 11,000,000 |
8
Principal | ||||
Repurchase Agreement—10.8% | Amount ($) | Value ($) | ||
ABN AMRO Bank N.V. | ||||
0.13%, dated 6/30/15, due 7/1/15 in the amount of | ||||
$13,000,047 (fully collateralized by $28,611,198 | ||||
Government National Mortgage Association, Mortgage | ||||
Pools, 2%-5%, due 4/15/38-7/20/44, value | ||||
$13,222,358 and $37,061 U.S. Treasury Notes, | ||||
1.38%, due 7/31/18, value $37,643) | ||||
(cost $13,000,000) | 13,000,000 | 13,000,000 | ||
Total Investments (cost $122,985,915) | 102.6 | % | 122,985,915 | |
Liabilities, Less Cash and Receivables | (2.6 | %) | (3,093,884 | ) |
Net Assets | 100.0 | % | 119,892,031 |
a Variable rate security—interest rate subject to periodic change. |
b Securities exempt from registration pursuant to Rule 144A under the Securities Act of 1933.These securities may be |
resold in transactions exempt from registration, normally to qualified institutional buyers.At June 30, 2015, these |
securities amounted to $34,996,972 or 29.2% of net assets. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Banking | 83.4 | Beverages-Soft Drink | 4.2 |
Repurchase Agreement | 10.8 | ||
Asset-Backed/Banking | 4.2 | 102.6 | |
† Based on net assets. | |||
See notes to financial statements. |
The Fund 9
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2015 (Unaudited)
Cost | Value | |
Assets ($): | ||
Investments in securities—See Statement of | ||
Investments (including a Repurchase Agreement | ||
of $13,000,000)—Note 1(b) | 122,985,915 | 122,985,915 |
Cash | 702,778 | |
Interest receivable | 22,835 | |
Prepaid expenses | 1,507 | |
123,713,035 | ||
Liabilities ($): | ||
Due to The Dreyfus Corporation and affiliates—Note 2(a) | 35,691 | |
Payable for shares of Beneficial Interest redeemed | 3,760,945 | |
Accrued expenses | 24,368 | |
3,821,004 | ||
Net Assets ($) | 119,892,031 | |
Composition of Net Assets ($): | ||
Paid-in capital | 119,890,252 | |
Accumulated net realized gain (loss) on investments | 1,779 | |
Net Assets ($) | 119,892,031 | |
Shares Outstanding | ||
(unlimited number of $.001 par value shares of Beneficial Interest authorized) | 119,858,978 | |
Net Asset Value, offering and redemption price per share ($) | 1.00 | |
See notes to financial statements. |
10
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2015
Investment Income ($): | ||
Interest Income | 131,054 | |
Expenses: | ||
Investment advisory fee—Note 2(a) | 333,526 | |
Custodian fees—Note 2(a) | 35,175 | |
Professional fees | 26,033 | |
Trustees’ fees and expenses—Note 2(b) | 4,369 | |
Prospectus and shareholders’ reports | 4,272 | |
Shareholder servicing costs—Note 2(a) | 355 | |
Miscellaneous | 12,436 | |
Total Expenses | 416,166 | |
Less—reduction in expenses due to undertaking—Note 2(a) | (284,099 | ) |
Less—reduction in fees due to earnings credits—Note 2(a) | (1,036 | ) |
Net Expenses | 131,031 | |
Investment Income—Net | 23 | |
Net Realized Gain (Loss) on Investments—Note 1(b) ($) | 1,779 | |
Net Increase in Net Assets Resulting from Operations | 1,802 | |
See notes to financial statements. |
The Fund 11
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
June 30, 2015 | Year Ended | |||
(Unaudited) | December 31, 2014 | |||
Operations ($): | ||||
Investment income—net | 23 | 47 | ||
Net realized gain (loss) on investments | 1,779 | — | ||
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 1,802 | 47 | ||
Dividends to Shareholders from ($): | ||||
Investment income—net | (23 | ) | (258 | ) |
Beneficial Interest Transactions ($1.00 per share): | ||||
Net proceeds from shares sold | 154,112,507 | 240,527,823 | ||
Dividends reinvested | 23 | 258 | ||
Cost of shares redeemed | (159,843,706 | ) | (242,850,260 | ) |
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | (5,731,176 | ) | (2,322,179 | ) |
Total Increase (Decrease) in Net Assets | (5,729,397 | ) | (2,322,390 | ) |
Net Assets ($): | ||||
Beginning of Period | 125,621,428 | 127,943,818 | ||
End of Period | 119,892,031 | 125,621,428 | ||
See notes to financial statements. |
12
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.
Six Months Ended | ||||||||||||
June 30, 2015 | Year Ended December 31, | |||||||||||
(Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .000 | .000 | .000 | .000 | .000 | .000 | ||||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—neta | (.000 | ) | (.000 | ) | (.000 | ) | (.000 | ) | (.000 | ) | (.000 | ) |
Net asset value, end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||||
Total Return (%) | .00 | b,c | .00 | c | .00 | c | .00 | c | .01 | .01 | ||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .62 | b | .59 | .60 | .59 | .60 | .58 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .20 | b | .14 | .14 | .21 | .17 | .29 | |||||
Ratio of net investment income | ||||||||||||
to average net assetsc | .00 | b | .00 | .00 | .00 | .00 | .00 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 119,892 125,621 | 127,944 | 148,305 | 221,362 | 211,094 |
a | Amount represents less than $.001 per share. |
b | Annualized. |
c | Amount represents less than .01%. |
See notes to financial statements.
The Fund 13
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Money Market Portfolio (the “fund”) is a separate diversified series of DreyfusVariable Investment Fund (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 seven series, including the fund.The fund’s investment objective is to seek as high a level of current income as is consistent with the preservation of capital and the maintenance of liquidity. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser. MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares, which are sold to the public without a sales charge.
It is the fund’s policy to maintain a continuous net asset value per share of $1.00; the fund has adopted certain investment, portfolio valuation and dividend and distribution policies to enable it to do so. There is no assurance, however, that the fund will be able to maintain a stable net asset value per share of $1.00.
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”)
14
under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: Investments in securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. If amortized cost is determined not to approximate market value, the fair value of the portfolio securities will be determined by procedures established by and under the general supervision of the Company’s Board of Trustees (the “Board”).
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.
The Fund 15
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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. For example, money market securities are valued using amortized cost, in accordance with rules under the Act. Generally, amortized cost approximates the current fair value of a security, but since the value is not obtained from a quoted price in an active market, such securities are reflected within Level 2 of the fair value hierarchy.
The following is a summary of the inputs used as of June 30, 2015 in valuing the fund’s investments:
Short-Term | |
Valuation Inputs | Investments ($)† |
Level 1—Unadjusted Quoted Prices | — |
Level 2—Other Significant Observable Inputs | 122,985,915 |
Level 3—Significant Unobservable Inputs | — |
Total | 122,985,915 |
† See Statement of Investments for additional detailed categorizations.
At June 30, 2015, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Interest income, adjusted for accretion of discount and amortization of premium on investments, is earned from settlement date and is recognized on the accrual basis.
16
Realized gains and losses from securities transactions are recorded on the identified cost basis. Cost of investments represents amortized cost.
The fund may enter into repurchase agreements with financial institutions, deemed to be creditworthy by Dreyfus, subject to the seller’s agreement to repurchase and the fund’s agreement to resell such securities at a mutually agreed upon price. Pursuant to the terms of the repurchase agreement, such securities must have an aggregate market value greater than or equal to the terms of the repurchase price plus accrued interest at all times. If the value of the underlying securities falls below the value of the repurchase price plus accrued interest, the fund will require the seller to deposit additional collateral by the next business day. If the request for additional collateral is not met, or the seller defaults on its repurchase obligation, the fund maintains its right to sell the underlying securities at market value and may claim any resulting loss against the seller.The fund may also jointly enter into one or more repurchase agreements with other Dreyfus-managed funds in accordance with an exemptive order granted by the SEC pursuant to section 17(d) and Rule 17d-1 under the Act. Any joint repurchase agreements must be collateralized fully by U.S. Government securities.
(c) Dividends to shareholders: It is the policy of the fund to declare dividends daily from investment income-net. Such dividends are paid monthly. 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.
(d) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
The Fund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
As of and during the period ended June 30, 2015, 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 June 30, 2015, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended December 31, 2014 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2014 was all ordinary income.The tax character of current year distributions will be determined at the end of the current fiscal year.
At June 30, 2015, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
NOTE 2—Investment Adivsory Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with Dreyfus, the advisory fee is computed at the annual rate of .50% of the value of the fund’s average daily net assets and is payable monthly.
Dreyfus has undertaken to waive receipt of the management fee and/or reimburse operating expenses in order to facilitate a daily yield at or above a certain level which may change from time to time.This undertaking is voluntary and not contractual, and may be terminated at any time. The reduction in expenses, pursuant to the undertaking, amounted to $284,099 during the period ended June 30, 2015.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and
18
custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended June 30, 2015, the fund was charged $180 for transfer agency services and $9 for cash management services.These fees are included in Shareholder servicing costs in the Statement of Operations.
The fund compensates The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of Dreyfus, 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 June 30, 2015, the fund was charged $35,175 pursuant to the custody agreement. These fees were partially offset by earnings credits of $1,036.
During the period ended June 30, 2015, the fund was charged $6,240 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $58,362, custodian fees $22,967, Chief Compliance Officer fees $3,169 and transfer agency fees $83, which are offset against an expense reimbursement currently in effect in the amount of $48,890.
(b) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 3—Regulatory Developments:
On July 23, 2014, the SEC adopted amendments to the rules that govern money market mutual funds. In part, the amendments will require structural changes to most types of money market funds to one extent or another; however, the SEC provided for an extended two-year transition period to comply with such structural requirements. At this time, management is evaluating the reforms adopted and the manner for implementing these reforms over time and its impact on the financial statements.
20
INFORMATION ABOUT THE RENEWAL OF THE FUND’S |
INVESTMENT ADVISORY AGREEMENT (Unaudited) |
At a meeting of the fund’s Board of Trustees held on March 11-12, 2015, the Board considered the renewal of the fund’s Investment Advisory Agreement pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the “Agreement”).The Board members, none of whom are “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 Dreyfus representatives. 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 them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ 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 Dreyfus 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 Dreyfus’ extensive administrative, accounting and compliance infrastructures.
The Fund 21
INFORMATION ABOUT THE RENEWAL OF | THE FUND’S |
INVESTMENT ADVISORY AGREEMENT | (Unaudited) (continued) |
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Lipper, Inc. (“Lipper”), 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 December 31, 2014, 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 Lipper as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds.The Board discussed the results of the comparisons and noted that the fund’s total return performance was generally at or one basis point below the Performance Group and Performance Universe medians.
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 noted that the fund’s contractual management fee was above the Expense Group median and the fund’s actual management fee and total expenses were below the Expense Group and Expense Universe medians(lowest total expenses in the Expense Group).The Board also considered the current fee waiver and expense reimbursement arrangement undertaken by Dreyfus.
Dreyfus representatives reviewed with the Board the management or investment advisory fees paid by funds advised or administered by Dreyfus that are in the same Lipper category as the fund (the “Similar
22
Funds”), and explained the nature of the Similar Funds.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 Funds to evaluate the appropriateness and reasonableness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing the fund (which was zero) and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit. The Board also noted the fee waiver and expense reimbursement arrangement and its effect on the profitability of Dreyfus and its affil-iates.The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus 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 bear a reasonable relationship to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, 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. Dreyfus representatives noted 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 Dreyfus may have realized any economies of scale would be less. Dreyfus represen-
The Fund 23
INFORMATION ABOUT THE RENEWAL OF | THE FUND’S |
INVESTMENT ADVISORY AGREEMENT | (Unaudited) (continued) |
tatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus 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 Dreyfus from acting as investment adviser and noted that there were no 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 Dreyfus are adequate and appropriate.
The Board generally was satisfied with the fund’s relative performance.
The Board concluded that the fee paid to Dreyfus was reasonable in light of the considerations described above.
The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus 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.
24
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 Dreyfus and its affiliates, of the fund and the services provided to the fund by Dreyfus. 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 measures; 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 prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. 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 same or similar arrangements in prior years.The Board determined to renew the Agreement.
The Fund 25
For More Information
Telephone 1-800-554-4611 or 1-516-338-3300 | |
The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 | |
Attn: Investments Division |
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Information regarding how the fund voted proxies relating to fund securities for the most recent 12-month period ended June 30 is available on the SEC’s website at http://www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
Dreyfus Variable |
Investment Fund, |
Opportunistic |
Small Cap Portfolio |
SEMIANNUAL REPORT June 30, 2015
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents | |
THE FUND | |
2 | A Letter from the President |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
12 | Statement of Assets and Liabilities |
13 | Statement of Operations |
14 | Statement of Changes in Net Assets |
16 | Financial Highlights |
18 | Notes to Financial Statements |
27 | Information About the Renewal of the Fund’s Investment Advisory Agreement |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus Variable Investment Fund,
Opportunistic Small Cap Portfolio
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for DreyfusVariable Investment Fund, Opportunistic Small Cap Portfolio, covering the six-month period from January 1, 2015, through June 30, 2015. 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.
The U.S. stock market proved volatile on its way to posting modest gains over the first half of 2015. Investors were worried when the economic recovery stalled during the first quarter of the year due to unusually harsh winter weather, a strengthening U.S. dollar, and expected increases in short-term interest rates. These fears waned during the second quarter, when economic growth seemed to regain momentum. While a number of headwinds remained, investors were encouraged by better employment data, stronger housing markets, and stabilizing currency exchange rates.
We expect economic uncertainty and bouts of market volatility to persist over the near term as Europe continues to struggle with instability in Greece, China addresses a stubborn economic slowdown, geopolitical conflicts flare across the Middle East, and U.S. investors await the first in a series of short-term interest rate hikes. We remain more optimistic regarding the economy’s long-term outlook, which we believe should be supported by improved consumer and business confidence as well as aggressively accommodative monetary policies from many of the world’s major central banks.As always, we urge you to discuss these observations with your financial advisor, who can help you assess their implications for your investment portfolio.
Thank you for your continued confidence and support.
J. Charles Cardona
President
The Dreyfus Corporation
July 15, 2015
2
DISCUSSION OF FUND PERFORMANCE
For the period of January 1, 2015, through June 30, 2015, as provided by David A. Daglio, Primary Portfolio Manager; James Boyd and Dale Dutile, Portfolio Managers
Fund and Market Performance Overview
For the six-month period ended June 30, 2015, Dreyfus Variable Investment Fund, Opportunistic Small Cap Portfolio’s Initial shares produced a total return of 10.19%, and its Service shares returned 10.05%.1 In comparison, the Russell 2000® Index, the fund’s benchmark, produced a total return of 4.75% for the same period.2
U.S. equities advanced modestly over the first half of 2015 in the face of choppy economic growth, with small-cap stocks delivering greater gains than their large-cap counterparts.The fund outperformed its benchmark, mainly due to successful security selections in the information technology, health care, industrials, and financials sectors.
The Fund’s Investment Approach
The fund seeks capital growth. Stocks are selected for the fund’s portfolio based primarily on bottom-up, fundamental analysis. The fund’s portfolio managers use a disciplined investment process that relies, in general, on proprietary fundamental research and valuation. Generally, elements of the process include analysis of mid-cycle business prospects, estimation of the intrinsic value of the company, and the identification of a revaluation trigger. Intrinsic value is based on the combination of the valuation assessment of the company’s operating divisions with the firm’s economic balance sheet. Mid-cycle estimates, growth prospects, and competitive advantages are some of the factors used in the valuation assessment. A company’s stated and hidden liabilities and assets are included in the portfolio managers’ economic balance sheet calculation. Sector overweights and underweights are a function of the relative attractiveness of securities within the fund’s investable universe.The fund’s portfolio managers invest in stocks that they believe have attractive reward to risk opportunities and may actively adjust the fund’s portfolio to reflect new developments.
Domestically Oriented Small Caps Outperformed
Small-cap stocks got off to a slow start in January 2015 along with the rest of the U.S. stock market in response to a modest economic slowdown precipitated, in part, by
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
severe winter weather. However, small-cap stocks quickly rebounded along with the domestic economy while large-cap stocks, many with substantial international exposure, struggled in the face of weakening foreign currencies and lackluster global growth. By early February, small-cap stocks had ventured into new record territory as investors sought domestic refuge from international turmoil and shrinking currency values.
When global currency rates stabilized in the spring, large-cap stock prices followed small-caps higher, supported by positive corporate earnings and gains in domestic labor and housing markets. Some investors began to unwind small-cap positions in late April, causing the asset class to dip while larger-cap stocks maintained their upward trajectory. However, intensifying global uncertainties prompted investor sentiment to shift once again in favor of stocks with less foreign exposure, driving small caps higher in May and early June. Although the entire equity market slipped in late-June over concerns regarding a debt crisis in Greece, small-cap stocks generally held up better than their larger counterparts.
Technology and Health Care Sectors Led Gains
The fund delivered its strongest performance compared to its benchmark in the information technology sector. Automobile dealer software vendor Dealertrack Technologies appreciated sharply when it was acquired at substantial premium. Universal Display appreciated sharply as the company announced a royalty deal with a major consumer electronic company. CoreLogic benefited from rising mortgage volumes. In the health care sector, favorable insurance trends and good operational execution enabled holdings such as women’s health products maker TherapeuticsMD, biopharmaceutical developer GW Pharmaceuticals, and polymer-based pharmaceutical company Flamel Technologies to post notably strong gains. The fund also significantly outperformed its benchmark in the industrials sector, led by staffing outsourcer TrueBlue and modular carpet maker Interface; and among financial companies, where regional bank SVB Financial Group and banking services provider Columbia Banking System produced outsized returns.
Only one holding detracted significantly from the fund’s performance relative to its benchmark during the reporting period. Apollo Education Group, a for-profit higher education provider, declined due to a negative change in enrollment growth patterns, prompting us to sell the fund’s position.
4
Focusing on Individual Growth Opportunities
While we wouldn’t be surprised to see a short-term consolidation in small-cap stock prices after recent gains, we remain optimistic regarding the prospects for the asset class over the second half of 2015.The profit outlook for many small companies appears strong in light of the continuing U.S. economic recovery, and most remain relatively insulated from troubled overseas markets. In this environment, we expect individual company profit growth to drive stock appreciation, and we have invested the fund’s assets accordingly. As of the end of the reporting period, we have found a relatively large number of attractive investment opportunities in the information technology sector and, to a lesser degree, the industrials, health care, and financials sectors. In contrast, the fund currently holds underweighted exposure to the energy, consumer discretionary, utilities, and consumer staples sectors.
July 15, 2015
Equity funds 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 midcap 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 Dreyfus Variable Investment Fund, Opportunistic Small Cap Portfolio made available through insurance products may be similar to other funds managed or advised by Dreyfus. However, the investment results of the fund may be higher or lower than, and may not be comparable to, those of any other Dreyfus fund.
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. — Reflects reinvestment of dividends and, where applicable, capital gain distributions. |
The Russell 2000® Index is an unmanaged index of small-cap stock performance and is composed of the 2,000 |
smallest companies in the Russell 3000® Index.The Russell 3000® Index is composed of the 3,000 largest U.S. |
companies based on total market capitalization. Investors cannot invest directly in any index. |
The Fund 5
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 DreyfusVariable Investment Fund, Opportunistic Small Cap Portfolio from January 1, 2015 to June 30, 2015. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended June 30, 2015
Initial Shares | Service Shares | |||
Expenses paid per $1,000† | $ 4.38 | $ 5.68 | ||
Ending value (after expenses) | 1,$ 101.90 | $ 1,100.50 |
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 June 30, 2015
Initial Shares | Service Shares | |||
Expenses paid per $1,000† | $ 4.21 | $ 5.46 | ||
Ending value (after expenses) | $ 1,020.63 | $1,019.39 |
Expenses are equal to the fund’s annualized expense ratio of .84% for Initial shares and 1.09% for Service shares, |
multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS
June 30, 2015 (Unaudited)
Common Stocks—99.4% | Shares | Value ($) | |
Automobiles & Components—2.3% | |||
Dana Holding | 77,824 | 1,601,618 | |
Winnebago Industries | 122,022 | a | 2,878,499 |
4,480,117 | |||
Banks—18.4% | |||
Ameris Bancorp | 89,222 | 2,256,424 | |
BofI Holding | 35,278 | a,b | 3,729,237 |
Columbia Banking System | 99,422 | 3,235,192 | |
CVB Financial | 76,845 | 1,353,240 | |
EverBank Financial | 394,724 | 7,756,327 | |
Pinnacle Financial Partners | 36,286 | 1,972,870 | |
Simmons First National, Cl. A | 22,190 | 1,035,829 | |
South State | 40,835 | 3,103,052 | |
SVB Financial Group | 54,708 | b | 7,876,858 |
Talmer Bancorp, Cl. A | 171,112 | 2,866,126 | |
WesBanco | 29,659 | 1,008,999 | |
36,194,154 | |||
Capital Goods—5.4% | |||
Altra Industrial Motion | 30,667 | 833,529 | |
Beacon Roofing Supply | 17,322 | b | 575,437 |
Encore Wire | 23,516 | 1,041,524 | |
Generac Holdings | 73,664 | a,b | 2,928,144 |
Simpson Manufacturing | 29,193 | 992,562 | |
Thermon Group Holdings | 176,351 | b | 4,244,768 |
10,615,964 | |||
Commercial & Professional | |||
Services—10.2% | |||
Herman Miller | 64,826 | 1,875,416 | |
HNI | 31,314 | 1,601,711 | |
Huron Consulting Group | 9,187 | b | 643,917 |
Interface | 105,935 | 2,653,672 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Commercial & Professional | |||
Services (continued) | |||
Knoll | 46,663 | 1,167,975 | |
Korn/Ferry International | 88,354 | 3,072,069 | |
Steelcase, Cl. A | 241,898 | 4,574,291 | |
TrueBlue | 147,931 | b | 4,423,137 |
20,012,188 | |||
Consumer Durables & Apparel—.7% | |||
WCI Communities | 57,330 | b | 1,398,279 |
Consumer Services—1.8% | |||
LifeLock | 213,062 | b | 3,494,217 |
Diversified Financials—4.2% | |||
FNFV Group | 58,418 | b | 898,469 |
Nelnet, Cl. A | 20,363 | 881,921 | |
Raymond James Financial | 61,572 | 3,668,460 | |
SLM | 278,949 | b | 2,753,227 |
8,202,077 | |||
Energy—.9% | |||
Western Refining | 40,325 | 1,758,977 | |
Exchange-Traded Funds—.6% | |||
iShares Russell 2000 ETF | 9,545 | a | 1,191,598 |
Health Care Equipment & | |||
Services—1.4% | |||
HeartWare International | 38,986 | a,b | 2,833,892 |
Materials—5.4% | |||
Chemtura | 102,151 | b | 2,891,895 |
New Gold | 492,614 | b | 1,325,132 |
OMNOVA Solutions | 266,410 | b | 1,995,411 |
Royal Gold | 11,703 | 720,788 | |
Trinseo | 88,485 | a | 2,374,937 |
8
Common Stocks (continued) | Shares | Value ($) | |
Materials (continued) | |||
Yamana Gold | 468,399 | 1,405,197 | |
10,713,360 | |||
Media—3.3% | |||
Entravision Communications, Cl. A | 86,882 | 715,039 | |
Media General | 92,558 | b | 1,529,058 |
Nexstar Broadcasting Group, Cl. A | 24,991 | 1,399,496 | |
Sinclair Broadcast Group, Cl. A | 105,866 | a | 2,954,720 |
6,598,313 | |||
Pharmaceuticals, Biotech & | |||
Life Sciences—13.6% | |||
Emergent BioSolutions | 201,540 | b | 6,640,743 |
Flamel Technologies, ADR | 142,983 | b | 3,029,810 |
GW Pharmaceuticals, ADR | 40,454 | b | 4,969,369 |
Revance Therapeutics | 140,165 | b | 4,482,477 |
Sangamo BioSciences | 107,595 | b | 1,193,228 |
TherapeuticsMD | 808,498 | b | 6,354,794 |
26,670,421 | |||
Real Estate—1.7% | |||
Realogy Holdings | 73,160 | b | 3,418,035 |
Retailing—2.2% | |||
Office Depot | 497,501 | b | 4,308,359 |
Semiconductors & Semiconductor | |||
Equipment—5.9% | |||
Applied Micro Circuits | 163,357 | a,b | 1,102,660 |
Lattice Semiconductor | 52,916 | b | 311,675 |
Mellanox Technologies | 52,203 | b | 2,536,544 |
Microsemi | 84,083 | b | 2,938,701 |
Veeco Instruments | 164,328 | b | 4,722,787 |
11,612,367 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Common Stocks (continued) | Shares | Value ($) | |
Software & Services—8.3% | |||
CoreLogic | 117,600 | b | 4,667,544 |
Dealertrack Technologies | 73,449 | b | 4,611,863 |
Infoblox | 223,096 | b | 5,847,346 |
Tableau Software, Cl. A | 10,405 | b | 1,199,696 |
16,326,449 | |||
Technology Hardware & | |||
Equipment—11.7% | |||
Arrow Electronics | 64,115 | b | 3,577,617 |
Ciena | 153,811 | b | 3,642,244 |
FEI | 12,700 | 1,053,211 | |
Jabil Circuit | 30,733 | 654,305 | |
JDS Uniphase | 317,958 | b | 3,681,954 |
Keysight Technologies | 24,076 | b | 750,930 |
ScanSource | 91,811 | b | 3,494,327 |
Tech Data | 22,816 | b | 1,313,289 |
Universal Display | 91,898 | b | 4,753,883 |
22,921,760 | |||
Transportation—1.4% | |||
ArcBest | 18,427 | 585,979 | |
Diana Shipping | 172,039 | a,b | 1,212,875 |
Scorpio Bulkers | 605,534 | b | 987,020 |
2,785,874 | |||
Total Common Stocks | |||
(cost $155,249,912) | 195,536,401 | ||
Other Investment—.8% | |||
Registered Investment Company; | |||
Dreyfus Institutional Preferred | |||
Plus Money Market Fund | |||
(cost $1,559,212) | 1,559,212 | c | 1,559,212 |
10
Investment of Cash Collateral | ||||
for Securities Loaned—6.8% | Shares | Value ($) | ||
Registered Investment Company; | ||||
Dreyfus Institutional Cash Advantage Fund | ||||
(cost $13,364,516) | 13,364,516 | c | 13,364,516 | |
Total Investments (cost $170,173,640) | 107.0 | % | 210,460,129 | |
Liabilities, Less Cash and Receivables | (7.0 | %) | (13,838,483 | ) |
Net Assets | 100.0 | % | 196,621,646 |
ADR—American Depository Receipts
ETF—Exchange-Traded Fund
a Security, or portion thereof, on loan.At June 30, 2015, the value of the fund’s securities on loan was $13,241,063 |
and the value of the collateral held by the fund was $13,581,560, consisting of cash collateral of $13,364,516 and |
U.S. Government & Agency securities valued at $217,044. |
b Non-income producing security. |
c Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
Banks | 18.4 | Media | 3.3 |
Pharmaceuticals, | Automobiles & Components | 2.3 | |
Biotech & Life Sciences | 13.6 | Retailing | 2.2 |
Technology Hardware & Equipment | 11.7 | Consumer Services | 1.8 |
Commercial & Professional Services | 10.2 | Real Estate | 1.7 |
Software & Services | 8.3 | Health Care Equipment & Services | 1.4 |
Money Market Investments | 7.6 | Transportation | 1.4 |
Semiconductors & | Energy | .9 | |
Semiconductor Equipment | 5.9 | Consumer Durables & Apparel | .7 |
Capital Goods | 5.4 | Exchange-Traded Funds | .6 |
Materials | 5.4 | ||
Diversified Financials | 4.2 | 107.0 | |
† Based on net assets. | |||
See notes to financial statements. |
The Fund 11
STATEMENT OF ASSETS AND LIABILITIES |
June 30, 2015 (Unaudited) |
Cost | Value | ||
Assets ($): | |||
Investments in securities—See Statement of Investments (including | |||
securities on loan, valued at $13,241,063)—Note 1(b): | |||
Unaffiliated issuers | 155,249,912 | 195,536,401 | |
Affiliated issuers | 14,923,728 | 14,923,728 | |
Cash | 8,129 | ||
Receivable for investment securities sold | 1,594,405 | ||
Dividends and securities lending income receivable | 69,483 | ||
Prepaid expenses | 2,276 | ||
212,134,422 | |||
Liabilities ($): | |||
Due to The Dreyfus Corporation and affiliates—Note 3(b) | 144,203 | ||
Liability for securities on loan—Note 1(b) | 13,364,516 | ||
Payable for investment securities purchased | 1,859,572 | ||
Payable for shares of Beneficial Interest redeemed | 100,884 | ||
Accrued expenses | 43,601 | ||
15,512,776 | |||
Net Assets ($) | 196,621,646 | ||
Composition of Net Assets ($): | |||
Paid-in capital | 150,133,883 | ||
Accumulated investment (loss)—net | (327,680 | ) | |
Accumulated net realized gain (loss) on investments | 6,528,954 | ||
Accumulated net unrealized appreciation | |||
(depreciation) on investments | 40,286,489 | ||
Net Assets ($) | 196,621,646 | ||
Net Asset Value Per Share | |||
Initial Shares | Service Shares | ||
Net Assets ($) | 177,655,637 | 18,966,009 | |
Shares Outstanding | 3,423,885 | 374,157 | |
Net Asset Value Per Share ($) | 51.89 | 50.69 | |
See notes to financial statements. |
12
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2015 (Unaudited)
Investment Income ($): | ||
Income: | ||
Cash dividends (net of $3,715 foreign taxes withheld at source): | ||
Unaffiliated issuers | 448,175 | |
Affiliated issuers | 851 | |
Income from securities lending—Note 1(b) | 28,457 | |
Total Income | 477,483 | |
Expenses: | ||
Investment advisory fee—Note 3(a) | 701,296 | |
Professional fees | 31,285 | |
Distribution fees—Note 3(b) | 22,474 | |
Custodian fees—Note 3(b) | 15,597 | |
Prospectus and shareholders’ reports | 13,768 | |
Trustees’ fees and expenses—Note 3(c) | 7,232 | |
Loan commitment fees—Note 2 | 923 | |
Shareholder servicing costs—Note 3(b) | 590 | |
Interest expense—Note 2 | 33 | |
Miscellaneous | 11,967 | |
Total Expenses | 805,165 | |
Less—reduction in fees due to earnings credits—Note 3(b) | (2 | ) |
Net Expenses | 805,163 | |
Investment (Loss)—Net | (327,680 | ) |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments | 6,652,487 | |
Net unrealized appreciation (depreciation) on investments | 12,167,037 | |
Net Realized and Unrealized Gain (Loss) on Investments | 18,819,524 | |
Net Increase in Net Assets Resulting from Operations | 18,491,844 | |
See notes to financial statements. |
The Fund 13
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
June 30, 2015 | Year Ended | |||
(Unaudited) | December 31, 2014 | |||
Operations ($): | ||||
Investment (loss)—net | (327,680 | ) | (106,205 | ) |
Net realized gain (loss) on investments | 6,652,487 | 20,642,102 | ||
Net unrealized appreciation | ||||
(depreciation) on investments | 12,167,037 | (17,676,537 | ) | |
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | 18,491,844 | 2,859,360 | ||
Dividends to Shareholders from ($): | ||||
Net realized gain on investments: | ||||
Initial Shares | (2,507,973 | ) | — | |
Service Shares | (273,325 | ) | — | |
Total Dividends | (2,781,298 | ) | — | |
Beneficial Interest Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Initial Shares | 3,324,680 | 12,156,105 | ||
Service Shares | 465,891 | 1,343,199 | ||
Dividends reinvested: | ||||
Initial Shares | 2,507,973 | — | ||
Service Shares | 273,325 | — | ||
Cost of shares redeemed: | ||||
Initial Shares | (12,976,546 | ) | (32,908,362 | ) |
Service Shares | (1,348,158 | ) | (3,078,631 | ) |
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | (7,752,835 | ) | (22,487,689 | ) |
Total Increase (Decrease) in Net Assets | 7,957,711 | (19,628,329 | ) | |
Net Assets ($): | ||||
Beginning of Period | 188,663,935 | 208,292,264 | ||
End of Period | 196,621,646 | 188,663,935 | ||
Accumulated investment (loss)—net | (327,680 | ) | — |
14
Six Months Ended | ||||
June 30, 2015 | Year Ended | |||
(Unaudited) | December 31, 2014 | |||
Capital Share Transactions: | ||||
Initial Shares | ||||
Shares sold | 69,579 | 266,416 | ||
Shares issued for dividends reinvested | 50,779 | — | ||
Shares redeemed | (266,645 | ) | (708,339 | ) |
Net Increase (Decrease) in Shares Outstanding | (146,287 | ) | (441,923 | ) |
Service Shares | ||||
Shares sold | 9,748 | 29,718 | ||
Shares issued for dividends reinvested | 5,661 | — | ||
Shares redeemed | (28,312 | ) | (67,278 | ) |
Net Increase (Decrease) in Shares Outstanding | (12,903 | ) | (37,560 | ) |
See notes to financial statements. |
The Fund 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.
Six Months Ended | ||||||||||||
June 30, 2015 | Year Ended December 31, | |||||||||||
Initial Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 47.78 | 47.03 | 31.66 | 26.26 | 30.58 | 23.49 | ||||||
Investment Operations: | ||||||||||||
Investment income (loss)—neta | (.08 | ) | (.01 | ) | (.09 | ) | (.02 | ) | (.10 | ) | .12 | |
Net realized and unrealized | ||||||||||||
gain (loss) on investments | 4.91 | .76 | 15.46 | 5.42 | (4.10 | ) | 7.16 | |||||
Total from Investment Operations | 4.83 | .75 | 15.37 | 5.40 | (4.20 | ) | 7.28 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | — | — | — | — | (.12 | ) | (.19 | ) | ||||
Dividends from net realized | ||||||||||||
gain on investments | (.72 | ) | — | — | — | — | — | |||||
Total Distributions | (.72 | ) | — | — | — | (.12 | ) | (.19 | ) | |||
Net asset value, end of period | 51.89 | 47.78 | 47.03 | 31.66 | 26.26 | 30.58 | ||||||
Total Return (%) | 10.19 | b | 1.60 | 48.55 | 20.56 | (13.82 | ) | 31.11 | ||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .84 | c | .83 | .93 | .88 | .88 | .86 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .84 | c | .83 | .93 | .88 | .82 | .70 | |||||
Ratio of net investment income | ||||||||||||
(loss) to average net assets | (.33 | )c | (.03 | ) | (.23 | ) | (.05 | ) | (.36 | ) | .46 | |
Portfolio Turnover Rate | 33.20 | b | 77.96 | 84.80 | 61.38 | 91.45 | 192.88 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 177,656 | 170,570 | 188,702 | 181,323 | 165,656 | 194,105 |
a | Based on average shares outstanding. |
b | Not annualized. |
c | Annualized. |
See notes to financial statements.
16
Six Months Ended | ||||||||||||
June 30, 2015 | Year Ended December 31, | |||||||||||
Service Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 46.75 | 46.14 | 31.13 | 25.89 | 30.20 | 23.24 | ||||||
Investment Operations: | ||||||||||||
Investment income (loss)—neta | (.14 | ) | (.13 | ) | (.18 | ) | (.09 | ) | (.17 | ) | .06 | |
Net realized and unrealized | ||||||||||||
gain (loss) on investments | 4.80 | .74 | 15.19 | 5.33 | (4.05 | ) | 7.06 | |||||
Total from Investment Operations | 4.66 | .61 | 15.01 | 5.24 | (4.22 | ) | 7.12 | |||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | — | — | — | — | (.09 | ) | (.16 | ) | ||||
Dividends from net realized | ||||||||||||
gain on investments | (.72 | ) | — | — | — | — | — | |||||
Total Distributions | (.72 | ) | — | — | — | (.09 | ) | (.16 | ) | |||
Net asset value, end of period | 50.69 | 46.75 | 46.14 | 31.13 | 25.89 | 30.20 | ||||||
Total Return (%) | 10.05 | b | 1.32 | 48.22 | 20.24 | (14.03 | ) | 30.77 | ||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.09 | c | 1.08 | 1.18 | 1.13 | 1.13 | 1.11 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.09 | c | 1.08 | 1.18 | 1.13 | 1.07 | .95 | |||||
Ratio of net investment income | ||||||||||||
(loss) to average net assets | (.58 | )c | (.28 | ) | (.48 | ) | (.30 | ) | (.61 | ) | .22 | |
Portfolio Turnover Rate | 33.20 | b | 77.96 | 84.80 | 61.38 | 91.45 | 192.88 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 18,966 | 18,094 | 19,590 | 14,078 | 12,902 | 15,414 |
a | Based on average shares outstanding. |
b | Not annualized. |
c | Annualized. |
See notes to financial statements.
The Fund 17
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Opportunistic Small Cap Portfolio (the “fund”) is a separate diversified series of Dreyfus Variable Investment Fund (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 seven 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 growth. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares, which are sold to the public 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
18
SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The Fund 19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in 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 financial futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Trustees (the “Board”).
20
Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of June 30, 2015 in valuing the fund’s investments:
Level 2—Other | Level 3— | |||
Level 1— | Significant | Significant | ||
Unadjusted | Observable | Unobservable | ||
Quoted Prices | Inputs | Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities— | ||||
Domestic | ||||
Common Stocks† | 182,402,420 | — | — | 182,402,420 |
Equity Securities— | ||||
Foreign | ||||
Common Stocks† | 11,942,383 | — | — | 11,942,383 |
Exchange-Traded | ||||
Funds | 1,191,598 | — | — | 1,191,598 |
Mutual Funds | 14,923,728 | — | — | 14,923,728 |
† See Statement of Investments for additional detailed categorizations. |
At June 30, 2015, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.
(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
The Fund 21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 Dreyfus, 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 Dreyfus, 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. During the period ended June 30, 2015, The Bank of New York Mellon earned $8,741 from lending portfolio securities, pursuant to the securities lending agreement.
(c) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended June 30, 2015 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 12/31/2014 ($) | Purchases ($) | Sales ($) | 6/30/2015 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Preferred | |||||
Plus Money | |||||
Market Fund | 1,512,119 | 26,167,245 | 26,120,152 | 1,559,212 | .8 |
Dreyfus | |||||
Institutional | |||||
Cash | |||||
Advantage | |||||
Fund | 5,164,901 | 95,763,530 | 87,563,915 | 13,364,516 | 6.8 |
Total | 6,677,020 | 121,930,775 | 113,684,067 | 14,923,728 | 7.6 |
22
(d) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(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 sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended June 30, 2015, 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 June 30, 2015, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended December 31, 2014 remains subject to examination by the Internal Revenue Service and state taxing authorities.
The tax character of current year distributions will be determined at the end of the current fiscal year.
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $430 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon (each, a “Facility”), each to be utilized primarily for temporary
The Fund 23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing.
The average amount of borrowings outstanding under the Facilities during the period ended June 30, 2015 was approximately $6,100 with a related weighted average annualized interest rate of 1.11%.
NOTE 3—Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with Dreyfus, the investment advisory 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 fees payable under the Distribution Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2015, Service shares were charged $22,474 pursuant to the Distribution Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
24
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended June 30, 2015, the fund was charged $488 for transfer agency services and $36 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $2.
The fund compensates The Bank of NewYork 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 June 30, 2015, the fund was charged $15,597 pursuant to the custody agreement.
During the period ended June 30, 2015, the fund was charged $6,240 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $122,453, Distribution Plan fees $3,921, custodian fees $14,500, Chief Compliance Officer fees $3,169 and transfer agency fees $160.
(c) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales of investment securities, excluding short-term securities, during the period ended June 30, 2015, amounted to $61,557,008 and $70,490,488, respectively.
The Fund 25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
At June 30, 2015, accumulated net unrealized appreciation on investments was $40,286,489, consisting of $45,147,024 gross unrealized appreciation and $4,860,535 gross unrealized depreciation.
At June 30, 2015, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
26
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
INVESTMENT ADVISORY AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Trustees held on March 11-12, 2015, the Board considered the renewal of the fund’s Investment Advisory Agreement pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the “Agreement”).The Board members, none of whom are “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 Dreyfus representatives. 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 them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ 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 Dreyfus 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 Dreyfus’ extensive administrative, accounting and compliance infrastructures.
The Fund 27
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
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 Lipper, Inc. (“Lipper”), 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 December 31, 2014, 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 Lipper as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds. The Board discussed the results of the comparisons and noted that the fund’s total return performance was at or above the Performance Group and/or Performance Universe medians in half the periods shown and that the fund’s performance ranked in the first quartile of the Performance Group and Performance Universe in the two- and three-year periods. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons.The Board noted that the fund’s contractual management fee was below the Expense
28
Group median and the fund’s actual management fee and total expenses were below the Expense Group and Expense Universe medians.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Lipper category as the fund and (2) paid to Dreyfus or the Dreyfus-affiliated primary employer of the fund’s primary portfolio manager(s) 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 and reasonableness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing the fund (which was zero) and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus 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 bear a reasonable relationship to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, and (2) in light of the relevant circumstances for the fund and the extent to
The Fund 29
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
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. Dreyfus representatives noted 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 Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus 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 Dreyfus from acting as investment adviser and noted 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 Dreyfus are adequate and appropriate.
The Board generally was satisfied with the fund’s performance.
The Board concluded that the fee paid to Dreyfus was reasonable in light of the considerations described above.
The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus 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 Dreyfus and its affiliates, of the fund and the services provided to the fund by Dreyfus. 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 prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. 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 same or similar arrangements in prior years.The Board determined to renew the Agreement.
The Fund 31
NOTES
For More Information
Telephone 1-800-554-4611 or 1-516-338-3300 | |
The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 | |
Attn: Investments Division |
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-DREYFUS.
Dreyfus Variable |
Investment Fund, |
Quality Bond Portfolio |
SEMIANNUAL REPORT June 30, 2015
The views expressed in this report reflect those of the portfolio manager only through the end of the period covered and do not necessarily represent the views of Dreyfus or any other person in the Dreyfus organization. Any such views are subject to change at any time based upon market or other conditions and Dreyfus disclaims any responsibility to update such views.These views may not be relied on as investment advice and, because investment decisions for a Dreyfus fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Dreyfus fund.
Not FDIC-Insured • Not Bank-Guaranteed • May Lose Value |
Contents | |
THE FUND | |
2 | A Letter from the President |
3 | Discussion of Fund Performance |
6 | Understanding Your Fund’s Expenses |
6 | Comparing Your Fund’s Expenses With Those of Other Funds |
7 | Statement of Investments |
19 | Statement of Financial Futures |
20 | Statement of Options Written |
22 | Statement of Assets and Liabilities |
23 | Statement of Operations |
24 | Statement of Changes in Net Assets |
26 | Financial Highlights |
28 | Notes to Financial Statements |
47 | Information About the Renewal of the Fund’s Investment Advisory Agreement |
FOR MORE INFORMATION | |
Back Cover |
Dreyfus Variable Investment Fund,
Quality Bond Portfolio
The Fund
A LETTER FROM THE PRESIDENT
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Variable Investment Fund, Quality Bond Portfolio, covering the six-month period from January 1, 2015, through June 30, 2015. 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.
U.S. and global bond markets proved volatile on their way to posting flat to modestly negative returns over the first half of 2015. U.S. fixed-income markets rallied when the economic recovery stalled during the first quarter of the year due to unusually harsh winter weather and a strengthening U.S. dollar, and global bonds benefited from increasingly aggressive monetary policies in Europe and Japan. However, during the second quarter, bonds generally lost value when economic growth seemed to regain momentum in the United States and major international markets.
We expect economic uncertainty and bouts of market volatility to persist over the near term as Europe continues to struggle with instability in Greece, China addresses a stubborn economic slowdown, geopolitical conflicts flare across the Middle East, and U.S. investors await the first in a series of short-term interest rate hikes. We remain more optimistic regarding the economy’s long-term outlook, which we believe should be supported by improved consumer and business confidence as well as aggressively accommodative monetary policies from many of the world’s major central banks.As always, we urge you to discuss these observations with your financial advisor, who can help you assess their implications for your investment portfolio.
Thank you for your continued confidence and support.
J. Charles Cardona
President
The Dreyfus Corporation
July 15, 2015
2
DISCUSSION OF FUND PERFORMANCE
For the period of January 1, 2015, through June 30, 2015, as provided by David Bowser, CFA, Primary Portfolio Manager
Fund and Market Performance Overview
For the six-month period ended June 30, 2015, Dreyfus Variable Investment Fund, Quality Bond Portfolio’s Initial shares achieved a total return of –0.82%, and its Service shares achieved a total return of –0.86%.1 The Barclays U.S.Aggregate Bond Index (the “Index”), the fund’s benchmark, achieved a total return of –0.10% for the same period.2
Fixed-income securities encountered heightened volatility during the reporting period amid changing economic sentiment. Positions in European bonds and overweighted exposure to investment-grade corporate-backed securities weighed on the fund’s results compared to the benchmark.
The Fund’s Investment Approach
The fund seeks to maximize total return consisting of capital appreciation and current income. To pursue this goal, the fund normally invests at least 80% of its net assets in bonds, including corporate bonds, debentures, notes, mortgage-related securities, collateralized mortgage obligations and asset-backed securities, convertible debt obligations, preferred stocks, convertible preferred stocks, municipal obligations, and zero coupon bonds, that, when purchased, are A-rated or better or what we believe are the unrated equivalent, and in securities issued or guaranteed by the U.S. government or its agencies or its instrumentalities. The fund may also invest in fixed income securities rated lower than A (but not lower than B), up to 10% of its net assets in bonds issued by foreign issuers that are denominated in foreign currencies, and up to 20% of its net assets in bonds of foreign issuers whether denominated in U.S. dollars or in a foreign currency.
Bond Market Returns Faltered
In early 2015, strong employment data sparked concerns that the Federal Reserve Board (the “Fed”) might raise short-term interest rates during the first half of the year.This forecast sent long-term bond yields sharply higher and prices lower until
The Fund 3
DISCUSSION OF FUND PERFORMANCE (continued)
weaker-than-expected data in other areas of the economy dashed expectations of imminent rate hikes. In fact, U.S. GDP contracted mildly over the first quarter of 2015 as a strengthening U.S. dollar and severe winter weather weighed on economic activity.These drags proved transitory when the economy showed renewed signs of recovery in the spring. Consequently, long-term U.S.Treasury yields climbed, more than erasing previous gains.
Changing investor sentiment also produced heightened volatility in other market sectors. Investment-grade corporate bonds rebounded from previous weakness early in the reporting period, but renewed instability in Greece and China sparked later declines. Conversely, high yield corporate bonds held up relatively well amid strong demand from investors seeking competitive yields. In contrast to weakness among nominal U.S. Treasury securities, Treasury Inflation Protected Securities (“TIPS”) strengthened over the second quarter when inflationary pressures showed signs of intensifying. In overseas markets, European sovereign bonds responded well to aggressive quantitative easing by the European Central Bank, but bonds issued by some of the region’s more peripheral nations later suffered during a dispute regarding the debt crisis in Greece.
Sector Allocations Dampened Relative Results
The fund’s mild underperformance compared to its benchmark was mainly due to a relatively new position in sovereign bonds from Italy and Spain, which we believed would fare well as local credit conditions improved. However, despite improving fundamentals locally, bonds from peripheral European nations were hurt late in the reporting period by worries that Greece and the European Union would be unable to agree on debt relief measures. In addition, the fund’s investment-grade corporate backed bonds fared well over much of the reporting period, but overweighted exposure weighed on relative performance late in the reporting period when they lost value amid global economic concerns.To a lesser extent, the fund encountered shortfalls its security selection strategy among residential mortgage-backed securities.
The fund achieved better relative results with commercial mortgage-backed securities and asset-backed securities, where overweighted positons and favorable security selections added value. Positions in TIPS also fared well during the second quarter of the year.The fund’s interest-rate strategies further supported relative performance as a relatively short average duration cushioned the impact of rising long-term interest
4
rates. Finally, the fund benefited from its positions in foreign currencies over the first half of the year.
At times, the fund employed interest-rate futures to establish its duration positioning and currency forward contracts and options to hedge its currency positions.
A Somewhat Less Constructive Investment Posture
The U.S. economic recovery seems to be intact, and the Fed is widely expected to begin raising short-term interest rates later this year. Therefore, we have maintained the fund’s modestly short average duration. In addition, we have trimmed its holdings of European sovereign bonds and investment-grade corporate securities, and we have maintained underweighted exposure to U.S. Treasuries and residential mortgage-backed securities. We also have eliminated most of the fund’s TIPS positions in the wake of recent gains. In contrast, we have retained overweighted exposure to high yield bonds, commercial mortgages, and asset-backed securities.
July 15, 2015
Bond funds are subject generally to interest rate, credit, liquidity, and market risks, to varying degrees, all of which are more fully described in the fund’s prospectus. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes, and rate increases can cause price declines.
Investments in foreign currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar, or, in the case of hedged positions, that the U.S. dollar will decline relative to the currency being hedged. Each of these risks could increase the fund’s volatility.
High yield bonds are subject to increased credit risk and are considered speculative in terms of the issuer’s perceived ability to continue making interest payments on a timely basis and to repay principal upon maturity.
The fund may use derivative instruments, such as options, futures, and options on futures, forward contracts, swaps (including credit default swaps on corporate bonds and asset-backed securities), options on swaps, and other credit derivatives. A small investment in derivatives could have a potentially large impact on the fund’s performance. 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 Dreyfus Variable Investment Fund, Quality Bond Portfolio made available through insurance products may be similar to other funds managed or advised by Dreyfus. However, the investment results of the fund may be higher or lower than, and may not be comparable to, those of any other Dreyfus fund.
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. — Reflects reinvestment of dividends and, where applicable, capital gain distributions. |
The Barclays U.S.Aggregate Bond Index is a widely accepted, unmanaged total return index of corporate, U.S. |
government and U.S. government agency debt instruments, mortgage-backed securities, and asset-backed securities with |
an average maturity of 1-10 years.The Index does not include fees and expenses to which the fund is subject. |
Investors cannot invest directly in any index. |
The Fund 5
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 DreyfusVariable Investment Fund, Quality Bond Portfolio from January 1, 2015 to June 30, 2015. It also shows how much a $1,000 investment would be worth at the close of the period, assuming actual returns and expenses.
Expenses and Value of a $1,000 Investment
assuming actual returns for the six months ended June 30, 2015
Initial Shares | Service Shares | |||
Expenses paid per $1,000† | $ 4.54 | $ 5.78 | ||
Ending value (after expenses) | $ 991.80 | $ 991.40 |
COMPARING YOUR FUND’S EXPENSES
WITH THOSE OF OTHER FUNDS (Unaudited)
Using the SEC’s method to compare expenses
The Securities and Exchange Commission (SEC) has established guidelines to help investors assess fund expenses. Per these guidelines, the table below shows your fund’s expenses based on a $1,000 investment, assuming a hypothetical 5% annualized return. You can use this information to compare the ongoing expenses (but not transaction expenses or total cost) of investing in the fund with those of other funds. All mutual fund shareholder reports will provide this information to help you make this comparison. Please note that you cannot use this information to estimate your actual ending account balance and expenses paid during the period.
Expenses and Value of a $1,000 Investment
assuming a hypothetical 5% annualized return for the six months ended June 30, 2015
Initial Shares | Service Shares | |||
Expenses paid per $1,000† | $ 4.61 | $ 5.86 | ||
Ending value (after expenses) | $ 1,020.23 | $ 1,018.99 |
† Expenses are equal to the fund’s annualized expense ratio of .92 for Initial Shares and 1.17% for Service Shares, |
multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
6
STATEMENT OF INVESTMENTS
June 30, 2015 (Unaudited)
Coupon | Maturity | Principal | |||
Bonds and Notes—119.0% | Rate (%) | Date | Amount ($)a | Value ($) | |
Asset-Backed Ctfs./ | |||||
Auto Receivables—5.7% | |||||
AmeriCredit Automobile Receivables | |||||
Trust, Ser. 2013-1, Cl. D | 2.09 | 2/8/19 | 305,000 | 304,371 | |
AmeriCredit Automobile Receivables | |||||
Trust, Ser. 2012-5, Cl. D | 2.35 | 12/10/18 | 155,000 | 157,281 | |
AmeriCredit Automobile Receivables | |||||
Trust, Ser. 2014-1, Cl. D | 2.54 | 6/8/20 | 275,000 | 274,252 | |
AmeriCredit Automobile Receivables | |||||
Trust, Ser. 2012-4, Cl. D | 2.68 | 10/9/18 | 245,000 | 249,636 | |
AmeriCredit Automobile Receivables | |||||
Trust, Ser. 2011-5, Cl. D | 5.05 | 12/8/17 | 490,000 | 503,481 | |
Capital Auto Receivables Asset | |||||
Trust, Ser. 2013-1, Cl. D | 2.19 | 9/20/21 | 160,000 | 161,201 | |
Santander Drive Auto Receivables | |||||
Trust, Ser. 2013-1, Cl. D | 2.27 | 1/15/19 | 210,000 | 209,384 | |
Santander Drive Auto Receivables | |||||
Trust, Ser. 2012-6, Cl. D | 2.52 | 9/17/18 | 285,000 | 286,553 | |
Santander Drive Auto Receivables | |||||
Trust, Ser. 2013-2, Cl. D | 2.57 | 3/15/19 | 510,000 | 517,369 | |
Santander Drive Auto Receivables | |||||
Trust, Ser. 2012-5, Cl. C | 2.70 | 8/15/18 | 440,000 | 445,031 | |
Santander Drive Auto Receivables | |||||
Trust, Ser. 2012-1, Cl. C | 3.78 | 11/15/17 | 42,605 | 42,877 | |
Santander Drive Auto Receivables | |||||
Trust, Ser. 2011-3, Cl. D | 4.23 | 5/15/17 | 200,000 | 202,636 | |
Santander Drive Auto Receivables | |||||
Trust, Ser. 2011-4, Cl. D | 4.74 | 9/15/17 | 235,000 | 240,813 | |
3,594,885 | |||||
Asset-Backed Ctfs./ | |||||
Home Equity Loans—.2% | |||||
First NLC Trust, | |||||
Ser. 2005-2, Cl. M1 | 0.67 | 9/25/35 | 125,000 | b | 119,794 |
Casinos—.3% | |||||
International Game Technology, | |||||
Sr. Scd. Notes | 6.25 | 2/15/22 | 215,000 | c | 206,400 |
The Fund 7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Coupon | Maturity | Principal | |||
Bonds and Notes (continued) | Rate (%) | Date | Amount ($)a | Value ($) | |
Commercial Mortgage | |||||
Pass-Through Ctfs.—6.9% | |||||
Aventura Mall Trust, | |||||
Ser. 2013-AVM, Cl. C | 3.74 | 12/5/32 | 420,000 | b,c | 435,068 |
Citigroup Commercial Mortgage | |||||
Trust, Ser. 2007-C6, Cl. A4 | 5.71 | 12/10/49 | 200,000 | b�� | 214,108 |
Commercial Mortgage Trust, | |||||
Ser. 2015-LC19, Cl. AM | 3.53 | 2/10/48 | 170,000 | 170,608 | |
Commercial Mortgage Trust, | |||||
Ser. 2013-WWP, Cl. C | 3.54 | 3/10/31 | 175,000 | c | 173,687 |
Commercial Mortgage Trust, | |||||
Ser. 2013-WWP, Cl. B | 3.73 | 3/10/31 | 150,000 | c | 153,232 |
Commercial Mortgage Trust, | |||||
Ser. 2014-UBS2, Cl. AM | 4.20 | 3/10/47 | 70,000 | 74,369 | |
Commercial Mortgage Trust, | |||||
Ser. 2014-CR14, Cl. A4 | 4.24 | 2/10/47 | 305,000 | b | 329,815 |
Commercial Mortgage Trust, | |||||
Ser. 2014-UBS2, Cl. B | 4.70 | 3/10/47 | 50,000 | 53,903 | |
Commercial Mortgage Trust, | |||||
Ser. 2013-LC13, Cl. C | 5.05 | 8/10/46 | 130,000 | b,c | 140,527 |
Credit Suisse Mortgage Trust, | |||||
Ser. 2014-USA, Cl. B | 4.18 | 9/15/37 | 315,000 | c | 326,338 |
Credit Suisse Mortgage Trust, | |||||
Ser. 2014-USA, Cl. D | 4.37 | 9/15/37 | 175,000 | c | 171,196 |
Credit Suisse Mortgage Trust, | |||||
Ser. 2014-USA, Cl. E | 4.37 | 9/15/37 | 190,000 | c | 176,063 |
Extended Stay America Trust, | |||||
Ser. 2013-ESH7, Cl. C7 | 3.90 | 12/5/31 | 225,000 | c | 227,848 |
GAHR Commericial Mortgage Trust, | |||||
Ser. 2015-NRF, Cl. BFX | 3.49 | 12/15/19 | 95,000 | b,c | 95,895 |
GAHR Commericial Mortgage Trust, | |||||
Ser. 2015-NRF, Cl. DFX | 3.49 | 12/15/19 | 215,000 | b,c | 211,306 |
Hilton USA Trust, | |||||
Ser. 2013-HLT, Cl. CFX | 3.71 | 11/5/30 | 345,000 | c | 348,107 |
Houston Galleria Mall Trust, | |||||
Ser. 2015-HGLR, Cl. A1A2 | 3.09 | 3/5/37 | 100,000 | c | 97,475 |
Houston Galleria Mall Trust, | |||||
Ser. 2015-HGLR, Cl. B | 3.19 | 3/5/37 | 220,000 | c | 214,186 |
8
Coupon | Maturity | Principal | |||
Bonds and Notes (continued) | Rate (%) | Date | Amount ($)a | Value ($) | |
Commercial Mortgage | |||||
Pass-Through Ctfs. (continued) | |||||
JP Morgan Chase Commercial | |||||
Mortgage Securities Trust, | |||||
Ser. 2013-LC11, Cl. C | 3.96 | 4/15/46 | 165,000 | b | 163,262 |
JPMBB Commercial Mortgage | |||||
Securities Trust, | |||||
Ser. 2014-C18, Cl. A5 | 4.08 | 2/15/47 | 340,000 | 362,777 | |
UBS Commercial Mortgage Trust, | |||||
Ser. 2012-C1, Cl. A3 | 3.40 | 5/10/45 | 135,000 | 139,938 | |
WFRBS Commercial Mortgage Trust, | |||||
Ser. 2013-C17, Cl. A4 | 4.02 | 12/15/46 | 50,000 | 53,510 | |
4,333,218 | |||||
Consumer Discretionary—2.7% | |||||
21st Century Fox America, | |||||
Gtd. Notes | 4.00 | 10/1/23 | 90,000 | 92,889 | |
Clear Channel Worldwide Holdings, | |||||
Gtd. Notes, Ser. B | 7.63 | 3/15/20 | 85,000 | 88,931 | |
Comcast, | |||||
Gtd. Notes | 6.30 | 11/15/17 | 85,000 | 94,649 | |
Cox Communications, | |||||
Sr. Unscd. Notes | 6.25 | 6/1/18 | 205,000 | c | 228,090 |
CVS Pass-Through Trust, | |||||
Pass Thru Certificates Notes | 6.04 | 12/10/28 | 253,220 | 288,868 | |
CVS Pass-Through Trust, | |||||
Pass Thru Certificates Notes | 8.35 | 7/10/31 | 235,098 | c | 312,478 |
Sky, | |||||
Gtd. Notes | 3.75 | 9/16/24 | 345,000 | c | 337,456 |
Time Warner, | |||||
Gtd. Debs. | 5.35 | 12/15/43 | 210,000 | 215,960 | |
1,659,321 | |||||
Consumer Staples—1.9% | |||||
Altria Group, | |||||
Gtd. Notes | 4.00 | 1/31/24 | 55,000 | 55,952 | |
Altria Group, | |||||
Gtd. Notes | 4.75 | 5/5/21 | 105,000 | 113,929 | |
ConAgra Foods, | |||||
Sr. Unscd. Notes | 4.65 | 1/25/43 | 66,000 | 56,194 |
The Fund 9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Coupon | Maturity | Principal | |||
Bonds and Notes (continued) | Rate (%) | Date | Amount ($)a | Value ($) | |
Consumer Staples (continued) | |||||
HJ Heinz, | |||||
Gtd. Notes | 3.95 | 7/15/25 | 155,000 | c | 156,174 |
Lorillard Tobacco, | |||||
Gtd. Notes | 3.75 | 5/20/23 | 215,000 | 209,317 | |
Reynolds American, | |||||
Gtd. Notes | 4.85 | 9/15/23 | 310,000 | 328,090 | |
Wm. Wrigley Jr., | |||||
Sr. Unscd. Notes | 3.38 | 10/21/20 | 235,000 | c | 242,454 |
1,162,110 | |||||
Energy—5.2% | |||||
Anadarko Petroleum, | |||||
Sr. Unscd. Notes | 6.38 | 9/15/17 | 165,000 | 181,165 | |
Continental Resources, | |||||
Gtd. Notes | 4.90 | 6/1/44 | 95,000 | 80,293 | |
Continental Resources, | |||||
Gtd. Notes | 5.00 | 9/15/22 | 165,000 | 162,010 | |
Energy Transfer Partners, | |||||
Sr. Unscd. Notes | 4.90 | 2/1/24 | 210,000 | 213,932 | |
Energy Transfer Partners, | |||||
Sr. Unscd. Notes | 5.15 | 2/1/43 | 270,000 | 241,283 | |
Ensco, | |||||
Sr. Unscd. Notes | 4.50 | 10/1/24 | 175,000 | d | 167,498 |
Freeport-McMoRan, | |||||
Gtd. Notes | 5.45 | 3/15/43 | 190,000 | 159,138 | |
Freeport-McMoran Oil & Gas, | |||||
Gtd. Notes | 6.88 | 2/15/23 | 310,000 | 333,250 | |
Kinder Morgan, | |||||
Gtd. Notes | 7.75 | 1/15/32 | 235,000 | 270,640 | |
Kinder Morgan Energy Partners, | |||||
Gtd. Notes | 6.85 | 2/15/20 | 170,000 | 196,502 | |
Marathon Petroleum, | |||||
Sr. Unscd. Notes | 3.63 | 9/15/24 | 355,000 | 349,217 | |
Spectra Energy Partners, | |||||
Sr. Unscd. Notes | 2.95 | 9/25/18 | 80,000 | 81,879 | |
Spectra Energy Partners, | |||||
Sr. Unscd. Notes | 4.75 | 3/15/24 | 70,000 | 74,107 | |
Talisman Energy, | |||||
Sr. Unscd. Bonds | 3.75 | 2/1/21 | 135,000 | 133,813 |
10
Coupon | Maturity | Principal | |||
Bonds and Notes (continued) | Rate (%) | Date | Amount ($)a | Value ($) | |
Energy (continued) | |||||
Transocean, | |||||
Gtd. Notes | 6.88 | 12/15/21 | 235,000 | b,d | 212,088 |
Unit, | |||||
Gtd. Notes | 6.63 | 5/15/21 | 85,000 | 82,875 | |
Williams Partners, | |||||
Sr. Unscd. Notes | 3.35 | 8/15/22 | 125,000 | 118,477 | |
Williams Partners, | |||||
Sr. Unscd. Notes | 4.50 | 11/15/23 | 180,000 | 181,136 | |
Williams Partners, | |||||
Sr. Unscd. Notes | 6.30 | 4/15/40 | 65,000 | 66,237 | |
3,305,540 | |||||
Financial—13.8% | |||||
ABN AMRO Bank, | |||||
Sr. Unscd. Notes | 2.50 | 10/30/18 | 230,000 | c | 233,788 |
Bank of America, | |||||
Sr. Unscd. Notes | 1.32 | 1/15/19 | 400,000 | b | 403,941 |
Bank of America, | |||||
Sr. Unscd. Notes | 4.00 | 4/1/24 | 365,000 | 372,097 | |
Bank of America, | |||||
Sub. Notes | 4.25 | 10/22/26 | 380,000 | 373,075 | |
Bank of America, | |||||
Sr. Unscd. Notes | 5.63 | 7/1/20 | 40,000 | 45,132 | |
Bank of America, | |||||
Sub. Notes | 5.70 | 5/2/17 | 320,000 | 341,553 | |
Barclays, | |||||
Sub. Notes | 4.38 | 9/11/24 | 355,000 | 341,026 | |
CIT Group, | |||||
Sr. Unscd. Notes | 5.00 | 5/15/17 | 85,000 | 87,864 | |
Citigroup, | |||||
Sr. Unscd. Notes | 5.38 | 8/9/20 | 210,000 | 235,049 | |
Citigroup, | |||||
Sub. Notes | 5.50 | 9/13/25 | 255,000 | 276,145 | |
DDR, | |||||
Sr. Unscd. Notes | 4.75 | 4/15/18 | 340,000 | 363,007 | |
Denali Borrower, | |||||
Sr. Scd. Notes | 5.63 | 10/15/20 | 170,000 | c | 179,138 |
Discover Financial Services, | |||||
Sr. Unscd. Notes | 5.20 | 4/27/22 | 589,000 | 627,165 |
The Fund 11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Coupon | Maturity | Principal | |||
Bonds and Notes (continued) | Rate (%) | Date | Amount ($)a | Value ($) | |
Financial (continued) | |||||
ERAC USA Finance, | |||||
Gtd. Notes | 3.85 | 11/15/24 | 60,000 | c | 60,337 |
ERAC USA Finance, | |||||
Gtd. Notes | 6.38 | 10/15/17 | 120,000 | c | 131,982 |
Ford Motor Credit, | |||||
Sr. Unscd. Notes, Ser. 1 | 1.12 | 3/12/19 | 315,000 | b | 312,877 |
General Electric Capital, | |||||
Sr. Unscd. Notes | 0.79 | 1/14/19 | 360,000 | b | 360,434 |
Goldman Sachs Group, | |||||
Sr. Unscd. Notes | 1.37 | 11/15/18 | 385,000 | b | 388,730 |
Goldman Sachs Group, | |||||
Sr. Unscd. Notes | 1.88 | 11/29/23 | 375,000 | b | 381,877 |
Health Care REIT, | |||||
Sr. Unscd. Notes | 5.13 | 3/15/43 | 280,000 | 281,068 | |
HSBC Holdings, | |||||
Sr. Unscd. Notes | 4.00 | 3/30/22 | 335,000 | 351,046 | |
JPMorgan Chase & Co., | |||||
Sr. Unscd. Notes | 4.35 | 8/15/21 | 150,000 | 160,688 | |
Liberty Mutual Group, | |||||
Gtd. Notes | 6.50 | 5/1/42 | 105,000 | c | 123,366 |
Morgan Stanley, | |||||
Sr. Unscd. Bonds | 3.70 | 10/23/24 | 370,000 | 368,933 | |
Morgan Stanley, | |||||
Sr. Unscd. Notes | 3.75 | 2/25/23 | 65,000 | 65,789 | |
Morgan Stanley, | |||||
Sr. Unscd. Notes | 5.50 | 7/28/21 | 100,000 | 112,897 | |
Pacific LifeCorp, | |||||
Sr. Unscd. Notes | 5.13 | 1/30/43 | 360,000 | c | 365,413 |
Prudential Financial, | |||||
Jr. Sub. Notes | 5.88 | 9/15/42 | 240,000 | b | 254,832 |
Regency Centers, | |||||
Gtd. Notes | 5.88 | 6/15/17 | 120,000 | 129,758 | |
Royal Bank of Scotland, | |||||
Sub. Notes | 9.50 | 3/16/22 | 445,000 | b | 491,847 |
Royal Bank of Scotland Group, | |||||
Sr. Unscd. Notes | 2.55 | 9/18/15 | 270,000 | 270,769 |
12
Coupon | Maturity | Principal | ||||
Bonds and Notes (continued) | Rate (%) | Date | Amount ($)a | Value ($) | ||
Financial (continued) | ||||||
Synchrony Financial, | ||||||
Sr. Unscd. Notes | 3.75 | 8/15/21 | 160,000 | 161,431 | ||
8,653,054 | ||||||
Foreign/Governmental—6.7% | ||||||
Brazilian Government, | ||||||
Sr. Unscd. Notes | 2.63 | 1/5/23 | 355,000 | d | 315,950 | |
Brazilian Government, | ||||||
Notes, Ser. F | BRL | 10.00 | 1/1/23 | 500,000 | 142,094 | |
Comision | ||||||
Federal de Electricidad, | ||||||
Sr. Unscd. Notes | 4.88 | 1/15/24 | 310,000 | c | 317,750 | |
Italian Government, | ||||||
Treasury Bonds | EUR | 1.50 | 6/1/25 | 1,030,000 | 1,067,634 | |
Italian Government, | ||||||
Treasury Bonds | EUR | 4.75 | 9/1/44 | 200,000 | c | 281,009 |
Mexican Government, | ||||||
Sr. Unscd. Notes | 4.75 | 3/8/44 | 200,000 | 191,000 | ||
Petrobras International Finance, | ||||||
Gtd. Notes | 5.75 | 1/20/20 | 155,000 | 153,968 | ||
Petroleos Mexicanos, | ||||||
Gtd. Notes | 4.88 | 1/24/22 | 100,000 | 104,237 | ||
Petroleos Mexicanos, | ||||||
Gtd. Notes | 5.50 | 1/21/21 | 205,000 | 222,835 | ||
Portuguese Government, | ||||||
Unscd. Notes | 5.13 | 10/15/24 | 180,000 | c | 184,514 | |
Spanish Government, | ||||||
Sr. Unscd. Bonds | EUR | 2.75 | 10/31/24 | 910,000 | c | 1,055,350 |
Uruguayan Government, | ||||||
Sr. Unscd. Notes | 4.50 | 8/14/24 | 145,000 | 152,613 | ||
4,188,954 | ||||||
Health Care—1.6% | ||||||
AmerisourceBergen, | ||||||
Sr. Unscd. Notes | 3.25 | 3/1/25 | 95,000 | 91,579 | ||
Anthem, | ||||||
Sr. Unscd. Notes | 2.30 | 7/15/18 | 300,000 | 302,004 |
The Fund 13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Coupon | Maturity | Principal | |||
Bonds and Notes (continued) | Rate (%) | Date | Amount ($)a | Value ($) | |
Health Care (continued) | |||||
Becton Dickinson and Company, | |||||
Sr. Unscd. Notes | 3.73 | 12/15/24 | 65,000 | 64,909 | |
Becton Dickinson and Company, | |||||
Sr. Unscd. Notes | 4.69 | 12/15/44 | 45,000 | 43,715 | |
CHS/Community Health Systems, | |||||
Sr. Scd. Notes | 5.13 | 8/1/21 | 25,000 | 25,531 | |
CHS/Community Health Systems, | |||||
Gtd. Notes | 6.88 | 2/1/22 | 25,000 | 26,437 | |
Fresenius Medical Care | |||||
US Finance II, Gtd. Notes | 4.13 | 10/15/20 | 110,000 | c | 111,925 |
Medtronic, | |||||
Gtd. Notes | 4.63 | 3/15/45 | 195,000 | c | 197,887 |
Zimmer Holdings, | |||||
Sr. Unscd. Notes | 3.55 | 4/1/25 | 160,000 | 154,904 | |
1,018,891 | |||||
Industrial—.5% | |||||
AECOM, | |||||
Gtd. Notes | 5.75 | 10/15/22 | 175,000 | c | 177,625 |
Waste Management, | |||||
Gtd. Notes | 6.10 | 3/15/18 | 105,000 | 117,294 | |
294,919 | |||||
Information Technology—.2% | |||||
Hewlett-Packard, | |||||
Sr. Unscd. Notes | 6.00 | 9/15/41 | 50,000 | 49,614 | |
Open Text, | |||||
Gtd. Notes | 5.63 | 1/15/23 | 65,000 | c | 64,513 |
114,127 | |||||
Materials—1.7% | |||||
Agrium, | |||||
Sr. Unscd. Debs. | 3.38 | 3/15/25 | 115,000 | 109,566 | |
Agrium, | |||||
Sr. Unscd. Debs. | 4.13 | 3/15/35 | 70,000 | 62,795 | |
Dow Chemical, | |||||
Sr. Unscd. Bonds | 3.50 | 10/1/24 | 195,000 | 191,718 | |
Glencore Funding, | |||||
Gtd. Notes | 4.63 | 4/29/24 | 165,000 | c | 163,928 |
LYB International Finance, | |||||
Gtd. Bonds | 4.00 | 7/15/23 | 120,000 | 123,012 | |
Mosaic, | |||||
Sr. Unscd. Notes | 4.25 | 11/15/23 | 235,000 | 242,047 |
14
Coupon | Maturity | Principal | |||
Bonds and Notes (continued) | Rate (%) | Date | Amount ($)a | Value ($) | |
Materials (continued) | |||||
Vale Overseas, | |||||
Gtd. Notes | 4.38 | 1/11/22 | 75,000 | d | 73,459 |
Vale Overseas, | |||||
Gtd. Notes | 6.88 | 11/21/36 | 95,000 | 92,322 | |
1,058,847 | |||||
Municipal Bonds—1.4% | |||||
California, | |||||
GO (Build America Bonds) | 7.30 | 10/1/39 | 340,000 | 481,243 | |
Chicago, | |||||
GO (Project and | |||||
Refunding Series) | 6.31 | 1/1/44 | 65,000 | 57,724 | |
Illinois, | |||||
GO (Pension | |||||
Funding Series) | 5.10 | 6/1/33 | 110,000 | 102,625 | |
New York City, | |||||
GO (Build America Bonds) | 5.99 | 12/1/36 | 200,000 | 242,232 | |
883,824 | |||||
Telecommunications—3.0% | |||||
AT&T, | |||||
Sr. Unscd. Notes | 1.19 | 11/27/18 | 310,000 | b | 312,305 |
Digicel, | |||||
Sr. Unscd. Notes | 6.00 | 4/15/21 | 200,000 | c | 193,324 |
Frontier Communications, | |||||
Sr. Unscd. Notes | 8.75 | 4/15/22 | 290,000 | 288,550 | |
Intelsat Jackson Holdings, | |||||
Gtd. Notes | 7.25 | 4/1/19 | 85,000 | 86,594 | |
Rogers Communications, | |||||
Gtd. Notes | 4.10 | 10/1/23 | 185,000 | 190,507 | |
T-Mobile USA, | |||||
Gtd. Notes | 6.13 | 1/15/22 | 90,000 | d | 93,150 |
Verizon Communications, | |||||
Sr. Unscd. Notes | 5.15 | 9/15/23 | 160,000 | 175,470 | |
Verizon Communications, | |||||
Sr. Unscd. Notes | 6.55 | 9/15/43 | 130,000 | 152,598 | |
West, | |||||
Gtd. Notes | 5.38 | 7/15/22 | 175,000 | c | 164,281 |
Wind Acquisition Finance, | |||||
Scd. Notes | 7.38 | 4/23/21 | 200,000 | c | 202,750 |
1,859,529 |
The Fund 15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Principal | ||||
Bonds and Notes (continued) | Amount ($) | Value ($) | ||
U.S. Government Agencies/ | ||||
Mortgage-Backed—24.9% | ||||
Federal Home Loan Mortgage Corp.: | ||||
4.00% | 2,135,000 | e,f | 2,257,971 | |
5.50%, 5/1/40 | 21,395 | f | 23,991 | |
Federal National Mortgage Association: | ||||
3.00% | 1,285,000 | e,f | 1,331,370 | |
3.50% | 3,065,000 | e,f | 3,164,889 | |
4.00% | 785,000 | e,f | 831,753 | |
4.50% | 300,000 | e,f | 324,375 | |
3.50%, 9/1/44 | 1,619,458 | f | 1,675,001 | |
5.00%, 3/1/21—10/1/33 | 1,131,276 | f | 1,249,301 | |
5.50%, 2/1/34—7/1/40 | 267,397 | f | 302,132 | |
6.00%, 2/1/39 | 28,065 | f | 31,857 | |
7.00%, 6/1/29—9/1/29 | 20,213 | f | 21,534 | |
Government National Mortgage Association I: | ||||
5.50%, 4/15/33 | 426,785 | 491,110 | ||
Government National Mortgage Association II: | ||||
3.00 % | 2,185,000 | e | 2,205,826 | |
4.50 % | 1,555,000 | e | 1,676,970 | |
7.00%, 9/20/28—7/20/29 | 5,476 | 6,476 | ||
15,594,556 | ||||
U.S. Government Securities—39.5% | ||||
U.S. Treasury Bonds: | ||||
3.75%, 11/15/43 | 2,980,000 | 3,352,500 | ||
4.50%, 2/15/36 | 395,000 | d | 496,774 | |
U.S. Treasury Floating Rate Notes; | ||||
0.09%, 7/31/16 | 10,620,000 | b | 10,623,059 | |
U.S. Treasury Inflation Protected | ||||
Securities Notes, | ||||
0.63%, 1/15/24 | 613,434 | g | 624,648 | |
U.S. Treasury Notes: | ||||
0.75%, 1/15/17 | 5,820,000 | 5,842,279 | ||
1.50%, 12/31/18 | 2,080,000 | 2,100,638 | ||
1.88%, 10/31/17 | 435,000 | d | 446,079 | |
2.63%, 1/31/18 | 1,215,000 | 1,269,865 | ||
24,755,842 |
16
Coupon | Maturity | Principal | ||||
Bonds and Notes (continued) | Rate (%) | Date | Amount ($)a | Value ($) | ||
Utilities—2.8% | ||||||
AES, | ||||||
Sr. Unscd. Notes | 8.00 | 6/1/20 | 80,000 | 92,800 | ||
Consolidated Edison Company of | ||||||
New York, Sr. Unscd. Debs., | ||||||
Ser. 06-D | 5.30 | 12/1/16 | 400,000 | 421,546 | ||
Dynegy, | ||||||
Gtd. Notes | 6.75 | 11/1/19 | 35,000 | c | 36,593 | |
Dynegy, | ||||||
Gtd. Notes | 7.38 | 11/1/22 | 310,000 | c | 326,275 | |
Enel Finance International, | ||||||
Gtd. Notes | 6.00 | 10/7/39 | 160,000 | c | 178,261 | |
Exelon Generation, | ||||||
Sr. Unscd. Notes | 6.25 | 10/1/39 | 185,000 | 204,802 | ||
Nevada Power, | ||||||
Mortgage Notes, Ser. R | 6.75 | 7/1/37 | 150,000 | 197,584 | ||
Sempra Energy, | ||||||
Sr. Unscd. Notes | 6.50 | 6/1/16 | 295,000 | 309,130 | ||
1,766,991 | ||||||
Total Bonds and Notes | ||||||
(cost $74,061,656) | 74,570,802 | |||||
Short-Term Investments—.4% | ||||||
U.S. Treasury Bills: | ||||||
0.04%, 8/13/15 | 210,000 | h | 210,001 | |||
0.04%, 10/29/15 | 30,000 | h | 29,999 | |||
Total Short-Term Investments | ||||||
(cost $239,986) | 240,000 | |||||
Other Investment—5.6% | Shares | Value ($) | ||||
Registered Investment Company; | ||||||
Dreyfus Institutional Preferred | ||||||
Plus Money Market Fund | ||||||
(cost $3,490,470) | 3,490,470 | i | 3,490,470 |
The Fund 17
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Investment of Cash Collateral | ||||
for Securities Loaned—1.3% | Shares | Value ($) | ||
Registered Investment Company; | ||||
Dreyfus Institutional Cash Advantage Fund | ||||
(cost $792,550) | 792,550 | i | 792,550 | |
Total Investments (cost $78,584,662) | 126.3 | % | 79,093,822 | |
Liabilities, Less Cash and Receivables | (26.3 | %) | (16,457,199 | ) |
Net Assets | 100.0 | % | 62,636,623 |
GO—General Obligation
REIT—Real Estate Investment Trust
a Principal amount stated in U.S. Dollars unless otherwise noted. |
BRL—Brazilian Real |
EUR—Euro |
b Variable rate security—interest rate subject to periodic change. |
c Securities exempt from registration pursuant to Rule 144A under the Securities Act of 1933.These securities may be |
resold in transactions exempt from registration, normally to qualified institutional buyers.At June 30, 2015, these |
securities were valued at $9,003,989 or 14.4% of net assets. |
d Security, or portion thereof, on loan.At June 30, 2015, the value of the fund’s securities on loan was $1,685,520 |
and the value of the collateral held by the fund was $1,753,975, consisting of cash collateral of $792,550 and U.S. |
Government & Agency securities valued at $961,425. |
e Purchased on a forward commitment basis. |
f The Federal Housing Finance Agency (“FHFA”) placed the Federal Home Loan Mortgage Corporation and Federal |
National Mortgage Association into conservatorship with FHFA as the conservator.As such, the FHFA oversees the |
continuing affairs of these companies. |
g Principal amount for accrual purposes is periodically adjusted based on changes in the Consumer Price Index. |
h Held by or on behalf of a counterparty for open financial futures contracts. |
i Investment in affiliated money market mutual fund. |
Portfolio Summary (Unaudited)† | |||
Value (%) | Value (%) | ||
U.S. Government & Agencies/ | Commercial Mortgage-Backed | 6.9 | |
Mortgage-Backed | 64.4 | Foreign/Governmental | 6.7 |
Corporate Bonds | 33.7 | Asset-Backed | 5.9 |
Short-Term/ | Municipal Bonds | 1.4 | |
Money Market Investments | 7.3 | 126.3 | |
† Based on net assets. | |||
See notes to financial statements. |
18
STATEMENT OF FINANCIAL FUTURES
June 30, 2015 (Unaudited)
Unrealized | ||||||
Market Value | Appreciation | |||||
Covered by | (Depreciation) | |||||
Contracts | Contracts ($) | Expiration | at 6/30/2015 | ($) | ||
Financial Futures Long | ||||||
Australian 3 Year Bond | 30 | 2,577,218 | September 2015 | (6,087 | ) | |
U.S. Treasury 5 Year Notes | 29 | 3,458,477 | September 2015 | 17,930 | ||
Financial Futures Short | ||||||
Euro-Bond | 12 | (2,033,490 | ) | September 2015 | (18,897 | ) |
Euro 30 Year Bond | 2 | (331,423 | ) | September 2015 | 5,065 | |
U.S. Treasury 10 Year Notes | 31 | (3,911,328 | ) | September 2015 | 15,141 | |
Gross Unrealized Appreciation | 38,136 | |||||
Gross Unrealized Depreciation | (24,984 | ) |
TheFund 19
STATEMENT OF OPTIONS WRITTEN
June 30, 2015 (Unaudited)
Face Amount | |||
Covered by | |||
Contracts ($) | Value ($) | ||
Call Options: | |||
Chilean Peso, | |||
September 2015 @ CLP 650 | 190,000 | (2,660 | ) |
Colombian Peso, | |||
August 2015 @ COP 2,650 | 95,000 | (1,842 | ) |
Hungarian Forint, | |||
July 2015 @ HUF 295 | 100,000 | (394 | ) |
Hungarian Forint, | |||
September 2015 @ HUF 295 | 95,000 | (1,408 | ) |
Indonesian Rupiah, | |||
September 2015 @ IDR 14,000 | 100,000 | (876 | ) |
Malaysian Ringgit, | |||
July 2015 @ MYR 3.77 | 100,000 | (819 | ) |
New Zealand Dollar, | |||
September 2015 @ NZD 1.16 | 280,000 | (2,676 | ) |
Norwegian Krone, | |||
August 2015 @ NOK 8.60 | 175,000 | (4,680 | ) |
Norwegian Krone, | |||
September 2015 @ NOK 9 | 165,000 | (1,808 | ) |
South African Rand, | |||
July 2015 @ ZAR 13 | 100,000 | (62 | ) |
South African Rand, | |||
September 2015 @ ZAR 13 | 95,000 | (1,232 | ) |
South Korean Won, | |||
August 2015 @ KRW 1,120 | 95,000 | (1,229 | ) |
South Korean Won, | |||
September 2015 @ KRW 1,130 | 320,000 | (4,233 | ) |
South Korean Won, | |||
September 2015 @ KRW 1,150 | 100,000 | (803 | ) |
Swiss Franc, | |||
September 2015 @ CHF 1.08 | 165,000 | (960 | ) |
Turkish Lira, | |||
September 2015 @ TRY 3.05 | 95,000 | (383 | ) |
20
Face Amount | |||
Covered by | |||
Contracts ($) | Value ($) | ||
Put Options: | |||
Brazilian Real, | |||
August 2015 @ BRL 2.80 | 95,000 | (20 | ) |
Brazilian Real, | |||
August 2015 @ BRL 2.97 | 95,000 | (227 | ) |
Colombian Peso, | |||
September 2015 @ COP 2,425 | 100,000 | (426 | ) |
New Zealand Dollar, | |||
August 2015 @ NZD 1.05 | 120,000 | (14 | ) |
New Zealand Dollar, | |||
September 2015 @ NZD 1.09 | 280,000 | (660 | ) |
Polish Zloty, | |||
July 2015 @ PLN 3.65 | 100,000 | (237 | ) |
South Korean Won, | |||
September 2015 @ KRW 1,080 | 320,000 | (1,043 | ) |
Swedish Krona , | |||
September 2015 @ SEK 1.03 | 1,500,000 | (1,475 | ) |
(premiums received $33,682) | (30,167 | ) |
BRL—Brazilian Real |
CHF—Swiss Franc |
CLP—Chilean Peso |
COP—Colombian Peso |
HUF—Hungarian Forint |
IDR—Indonesian Rupiah |
KRW—South Korean Won |
MYR—Malaysian Ringgit |
NZD—New Zealand Dollar |
NOK—Norwegian Krone |
PLN—Polish Zloty |
SEK—Swedish Krona |
TRY—Turkish Lira |
ZAR—South African Rand |
See notes to financial statements. |
The Fund 21
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2015 (Unaudited)
Cost | Value | ||
Assets ($): | |||
Investments in securities—See Statement of Investments (including | |||
securities on loan, valued at $1,685,520)—Note 1(c): | |||
Unaffiliated issuers | 74,301,642 | 74,810,802 | |
Affiliated issuers | 4,283,020 | 4,283,020 | |
Cash | 36,511 | ||
Cash denominated in foreign currencies | 68,449 | 57,266 | |
Receivable for investment securities sold | 3,530,772 | ||
Dividends, interest and securities lending income receivable | 421,360 | ||
Unrealized appreciation on forward foreign | |||
currency exchange contracts—Note 4 | 64,538 | ||
Prepaid expenses | 1,798 | ||
83,206,067 | |||
Liabilities ($): | |||
Due to The Dreyfus Corporation and affiliates—Note 3(b) | 45,022 | ||
Payable for open mortgage dollar roll transactions—Note 4 | 11,793,980 | ||
Payable for investment securities purchased | 7,817,609 | ||
Liability for securities on loan—Note 1(c) | 792,550 | ||
Payable for shares of Beneficial Interest redeemed | 32,378 | ||
Outstanding options written, at value (premiums received | |||
$33,682)—See Statement of Options Written—Note 4 | 30,167 | ||
Unrealized depreciation on forward foreign | |||
currency exchange contracts—Note 4 | 14,271 | ||
Payable for futures variation margin—Note 4 | 7,965 | ||
Accrued expenses | 35,502 | ||
20,569,444 | |||
Net Assets ($) | 62,636,623 | ||
Composition of Net Assets ($): | |||
Paid-in capital | 63,033,351 | ||
Accumulated undistributed investment income—net | 139,468 | ||
Accumulated net realized gain (loss) on investments | (1,096,957 | ) | |
Accumulated net unrealized appreciation (depreciation) on investments, | |||
options transactions and foreign currency transactions (including | |||
$13,152 net unrealized appreciation on financial futures) | 560,761 | ||
Net Assets ($) | 62,636,623 | ||
Net Asset Value Per Share | |||
Initial Shares | Service Shares | ||
Net Assets ($) | 46,875,055 | 15,761,568 | |
Shares Outstanding | 3,924,561 | 1,325,063 | |
Net Asset Value Per Share ($) | 11.94 | 11.89 | |
See notes to financial statements. |
22
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2015 (Unaudited)
Investment Income ($): | ||
Income: | ||
Interest | 890,466 | |
Dividends; | ||
Affiliated issuers | 341 | |
Income from securities lending—Note 1(c) | 2,726 | |
Total Income | 893,533 | |
Expenses: | ||
Management fee—Note 3(a) | 211,336 | |
Professional fees | 38,725 | |
Distribution fees—Note 3(b) | 20,877 | |
Prospectus and shareholders’ reports | 16,366 | |
Custodian fees—Note 3(b) | 5,291 | |
Trustees’ fees and expenses—Note 3(c) | 2,557 | |
Loan commitment fees—Note 2 | 331 | |
Shareholder servicing costs—Note 3(b) | 283 | |
Miscellaneous | 23,857 | |
Total Expenses | 319,623 | |
Less—reduction in fees due to earnings credits—Note 3(b) | (1 | ) |
Net Expenses | 319,622 | |
Investment Income—Net | 573,911 | |
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): | ||
Net realized gain (loss) on investments and foreign currency transactions | 437,667 | |
Net realized gain (loss) on options transactions | 13,463 | |
Net realized gain (loss) on financial futures | (20,074 | ) |
Net realized gain (loss) on forward foreign currency exchange contracts | 26,426 | |
Net Realized Gain (Loss) | 457,482 | |
Net unrealized appreciation (depreciation) on | ||
investments and foreign currency transactions | (1,557,586 | ) |
Net unrealized appreciation (depreciation) on options transactions | 3,515 | |
Net unrealized appreciation (depreciation) on financial futures | 32,457 | |
Net unrealized appreciation (depreciation) on | ||
forward foreign currency exchange contracts | 28,852 | |
Net Unrealized Appreciation (Depreciation) | (1,492,762 | ) |
Net Realized and Unrealized Gain (Loss) on Investments | (1,035,280 | ) |
Net (Decrease) in Net Assets Resulting from Operations | (461,369 | ) |
See notes to financial statements. |
The Fund 23
STATEMENT OF CHANGES IN NET ASSETS
Six Months Ended | ||||
June 30, 2015 | Year Ended | |||
(Unaudited) | December 31, 2014 | |||
Operations ($): | ||||
Investment income—net | 573,911 | 1,166,231 | ||
Net realized gain (loss) on investments | 457,482 | 1,158,831 | ||
Net unrealized appreciation | ||||
(depreciation) on investments | (1,492,762 | ) | 1,045,303 | |
Net Increase (Decrease) in Net Assets | ||||
Resulting from Operations | (461,369 | ) | 3,370,365 | |
Dividends to Shareholders from ($): | ||||
Investment income—net: | ||||
Initial Shares | (493,763 | ) | (1,134,201 | ) |
Service Shares | (150,390 | ) | (348,565 | ) |
Total Dividends | (644,153 | ) | (1,482,766 | ) |
Beneficial Interest Transactions ($): | ||||
Net proceeds from shares sold: | ||||
Initial Shares | 2,536,248 | 2,812,762 | ||
Service Shares | 702,897 | 1,451,337 | ||
Dividends reinvested: | ||||
Initial Shares | 493,763 | 1,134,201 | ||
Service Shares | 150,390 | 348,565 | ||
Cost of shares redeemed: | ||||
Initial Shares | (5,205,703 | ) | (10,808,535 | ) |
Service Shares | (2,175,045 | ) | (4,484,712 | ) |
Increase (Decrease) in Net Assets from | ||||
Beneficial Interest Transactions | (3,497,450 | ) | (9,546,382 | ) |
Total Increase (Decrease) in Net Assets | (4,602,972 | ) | (7,658,783 | ) |
Net Assets ($): | ||||
Beginning of Period | 67,239,595 | 74,898,378 | ||
End of Period | 62,636,623 | 67,239,595 | ||
Undistributed investment income—net | 139,468 | 209,710 |
24
Six Months Ended | ||||
June 30, 2015 | Year Ended | |||
(Unaudited) | December 31, 2014 | |||
Capital Share Transactions: | ||||
Initial Shares | ||||
Shares sold | 208,146 | 233,647 | ||
Shares issued for dividends reinvested | 40,467 | 94,271 | ||
Shares redeemed | (426,742 | ) | (896,303 | ) |
Net Increase (Decrease) in Shares Outstanding | (178,129 | ) | (568,385 | ) |
Service Shares | ||||
Shares sold | 57,869 | 120,720 | ||
Shares issued for dividends reinvested | 12,369 | 29,099 | ||
Shares redeemed | (178,794 | ) | (373,952 | ) |
Net Increase (Decrease) in Shares Outstanding | (108,556 | ) | (224,133 | ) |
See notes to financial statements. |
The Fund 25
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.
Six Months Ended | ||||||||||||
June 30, 2015 | Year Ended December 31, | |||||||||||
Initial Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 12.16 | 11.85 | 12.37 | 11.92 | 11.55 | 11.08 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .11 | .20 | .21 | .22 | .29 | .41 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (.21 | ) | .36 | (.39 | ) | .59 | .51 | .51 | ||||
Total from Investment Operations | (.10 | ) | .56 | (.18 | ) | .81 | .80 | .92 | ||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.12 | ) | (.25 | ) | (.34 | ) | (.36 | ) | (.43 | ) | (.45 | ) |
Net asset value, end of period | 11.94 | 12.16 | 11.85 | 12.37 | 11.92 | 11.55 | ||||||
Total Return (%) | (.82 | )b | 4.79 | (1.54 | ) | 7.00 | 7.04 | 8.38 | ||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | .92 | c | .85 | .92 | .84 | .79 | .77 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | .92 | c | .85 | .92 | .84 | .79 | .77 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 1.83 | c | 1.68 | 1.76 | 1.80 | 2.54 | 3.55 | |||||
Portfolio Turnover Rated | 167.40 | b | 387.86 | 397.26 | 518.55 | 379.94 | 288.08 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 46,875 | 49,880 | 55,337 | 66,251 | 69,072 | 105,205 |
a Based on average shares outstanding. |
b Not annualized. |
c Annualized. |
d The portfolio turnover rates excluding mortgage dollar roll transactions for the periods ended June 30, 2015, |
December 31, 2014, 2013, 2012, 2011 and 2010 were 59.67%, 182.67%, 176.37%, 269.42%, 162.19% |
and 129.47%, respectively. |
See notes to financial statements.
26
Six Months Ended | ||||||||||||
June 30, 2015 | Year Ended December 31, | |||||||||||
Service Shares | (Unaudited) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||
Per Share Data ($): | ||||||||||||
Net asset value, | ||||||||||||
beginning of period | 12.11 | 11.80 | 12.33 | 11.88 | 11.51 | 11.04 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .09 | .17 | .18 | .19 | .26 | .38 | ||||||
Net realized and unrealized | ||||||||||||
gain (loss) on investments | (.20 | ) | .36 | (.40 | ) | .59 | .51 | .50 | ||||
Total from Investment Operations | (.11 | ) | .53 | (.22 | ) | .78 | .77 | .88 | ||||
Distributions: | ||||||||||||
Dividends from | ||||||||||||
investment income—net | (.11 | ) | (.22 | ) | (.31 | ) | (.33 | ) | (.40 | ) | (.41 | ) |
Net asset value, end of period | 11.89 | 12.11 | 11.80 | 12.33 | 11.88 | 11.51 | ||||||
Total Return (%) | (.86 | )b | 4.56 | (1.80 | ) | 6.70 | 6.78 | 8.20 | ||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | ||||||||||||
to average net assets | 1.17 | c | 1.10 | 1.17 | 1.09 | 1.04 | 1.02 | |||||
Ratio of net expenses | ||||||||||||
to average net assets | 1.17 | c | 1.10 | 1.17 | 1.09 | 1.04 | 1.02 | |||||
Ratio of net investment income | ||||||||||||
to average net assets | 1.58 | c | 1.43 | 1.51 | 1.55 | 2.22 | 3.29 | |||||
Portfolio Turnover Rated | 167.40 | b | 387.86 | 397.26 | 518.55 | 379.94 | 288.08 | |||||
Net Assets, end of period | ||||||||||||
($ x 1,000) | 15,762 | 17,359 | 19,561 | 24,378 | 26,776 | 27,780 |
a Based on average shares outstanding. |
b Not annualized. |
c Annualized. |
d The portfolio turnover rates excluding mortgage dollar roll transactions for the periods ended June 30, 2015, |
December 31, 2014, 2013, 2012, 2011 and 2010 were 59.67%, 182.67%, 176.37%, 269.42%, 162.19% |
and 129.47%, respectively. |
See notes to financial statements.
The Fund 27
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Quality Bond Portfolio (the “fund”) is a separate diversified series of DreyfusVariable Investment Fund (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 seven series, including the fund.The fund’s investment objective is to seek to maximize total return, consisting of capital appreciation and current income. The Dreyfus Corporation (the “Manager” or “Dreyfus”), a wholly-owned subsidiary of The Bank of New York Mellon Corporation (“BNY Mellon”), serves as the fund’s investment adviser.
MBSC Securities Corporation (the “Distributor”), a wholly-owned subsidiary of Dreyfus, is the distributor of the fund’s shares, which are sold without 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
28
SEC registrants. The fund’s financial statements are prepared in accordance with GAAP, which may require the use of management estimates and assumptions. Actual results could differ from those estimates.
The Company enters into contracts that contain a variety of indemnifications. The fund’s maximum exposure under these arrangements is unknown.The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements.These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The Fund 29
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Registered investment companies that are not traded on an exchange are valued at their net asset value and are generally categorized within Level 1 of the fair value hierarchy.
Investments in securities, excluding short-term investments (other than U.S. Treasury Bills), financial futures, options and forward foreign currency exchange contracts (“forward contracts”) are valued each business day by an independent pricing service (the “Service”) approved by the Company’s Board of Trustees (the “Board”). Investments for which quoted bid prices are readily available and are representative of the bid side of the market in the judgment of the Service are valued at the mean between the quoted bid prices (as obtained by the Service from dealers in such securities) and asked prices (as calculated by the Service based upon its evaluation of the market for such securities). Other investments (which constitute a majority of the portfolio securities) are valued as determined by the Service, based on methods which include consideration of the following: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions. These securities are generally categorized within Level 2 of the fair value hierarchy.
U.S. Treasury Bills are valued at the mean price between quoted bid prices and asked prices by the Service. These securities are generally categorized within Level 2 of the fair value hierarchy.
The Service’s procedures are reviewed by Dreyfus under the general supervision of the Board.
30
When market quotations or official closing prices are not readily available, or are determined not to reflect accurately fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
Financial futures and options, which are traded on an exchange, are valued at the last sales price on the securities exchange on which such securities are primarily traded or at the last sales price on the national securities market on each business day and are generally categorized within Level 1 of the fair value hierarchy. Options traded over-the-counter (“OTC”) are valued at the mean between the bid and asked price and are generally categorized within Level 2 of the fair value hierarchy. Forward contracts are valued at the forward rate and are generally categorized within Level 2 of the fair value hierarchy.
The Fund 31
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The following is a summary of the inputs used as of June 30, 2015 in valuing the fund’s investments:
Level 2—Other | Level 3— | ||||||
Level 1— | Significant | Significant | |||||
Unadjusted | Observable | Unobservable | |||||
Quoted Prices | Inputs | Inputs | Total | ||||
Assets ($) | |||||||
Investments in Securities: | |||||||
Asset-Backed | — | 3,714,679 | — | 3,714,679 | |||
Commercial | |||||||
Mortgage-Backed | — | 4,333,218 | — | 4,333,218 | |||
Corporate Bonds† | — | 21,099,729 | — | 21,099,729 | |||
Foreign Government | — | 4,188,954 | — | 4,188,954 | |||
Municipal Bonds† | — | 883,824 | — | 883,824 | |||
Mutual Funds | 4,283,020 | — | — | 4,283,020 | |||
U.S. Government | |||||||
Agencies/ | |||||||
Mortgage-Backed | — | 15,594,556 | — | 15,594,556 | |||
U.S. Treasury | — | 24,995,842 | — | 24,995,842 | |||
Other Financial | |||||||
Instruments: | |||||||
Financial Futures†† | 38,136 | — | — | 38,136 | |||
Forward Foreign | |||||||
Currency Exchange | |||||||
Contracts†† | — | 64,538 | — | 64,538 | |||
Liabilities ($) | |||||||
Other Financial | |||||||
Instruments: | |||||||
Financial Futures†† | (24,984 | ) | — | — | (24,984 | ) | |
Forward Foreign | |||||||
Currency Exchange | |||||||
Contracts†† | — | (14,271 | ) | — | (14,271 | ) | |
Options Written | — | (30,167 | ) | — | (30,167 | ) |
† | See Statement of Investments for additional detailed categorizations. |
†† | Amount shown represents unrealized appreciation (depreciation) at period end. |
At June 30, 2015, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes
32
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 Dreyfus, 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 Dreyfus 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 sub-
The Fund 33
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
rogated to the fund’s rights against the borrower and the collateral. During the period ended June 30, 2015, The Bank of New York Mellon earned $825 from lending portfolio securities, pursuant to the securities lending agreement.
(d) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act. Investments in affiliated investment companies during the period ended June 30, 2015 were as follows:
Affiliated | |||||
Investment | Value | Value | Net | ||
Company | 12/31/2014 ($) | Purchases ($) | Sales ($) | 6/30/2015 ($) | Assets (%) |
Dreyfus | |||||
Institutional | |||||
Preferred | |||||
Plus Money | |||||
Market Fund | 383,669 | 13,376,424 | 10,269,623 | 3,490,470 | 5.6 |
Dreyfus | |||||
Institutional | |||||
Cash Advantage | |||||
Fund | 683,250 | 3,139,090 | 3,029,790 | 792,550 | 1.3 |
Total | 1,066,919 | 16,515,514 | 13,299,413 | 4,283,020 | 6.9 |
(e) Dividends to shareholders: Dividends are recorded on the ex-dividend date. Dividends from investment income-net are normally declared and paid on a monthly basis. Dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”).To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
On June 30, 2015, the Board declared a cash dividend of $.021 and $.019 per share for the Initial shares and Service shares, respectively, from undistributed investment income-net payable on July 1, 2015 (ex-dividend date) to shareholders of record as of the close of business on June 30, 2015.
34
(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 sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended June 30, 2015, 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 June 30, 2015, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended December 31, 2014 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010 (the “2010 Act”), the fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 (“post-enactment losses”) for an unlimited period. Furthermore, post-enactment capital loss carryovers retain their character as either short-term or long-term capital losses rather than short-term as they were under previous statute.The 2010 Act requires post-enactment losses to be utilized before the utilization of losses incurred in taxable years prior to the effective date of the 2010 Act (“pre-enactment losses”).As a result of this ordering rule, pre-enactment losses may be more likely to expire unused.
The fund has an unused capital loss carryover of $1,434,066 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to December 31, 2014. If not applied, the carryover expires in fiscal year 2017.
The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2014 was as follows: ordinary income $1,482,766. The tax character of current year distributions will be determined at the end of the current fiscal year.
The Fund 35
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in a $430 million unsecured credit facility led by Citibank, N.A. and a $300 million unsecured credit facility provided by The Bank of New York Mellon (each, a “Facility”), each to be utilized primarily for temporary or emergency purposes, including the financing of redemptions. In connection therewith, the fund has agreed to pay its pro rata portion of commitment fees for each Facility. Interest is charged to the fund based on rates determined pursuant to the terms of the respective Facility at the time of borrowing. During the period ended June 30, 2015, the fund did not borrow under the Facilities.
NOTE 3—Investment Advisory Fee and Other Transactions with Affiliates:
(a) Pursuant to an investment advisory agreement with Dreyfus, the investment advisory fee is computed at the annual rate of .65% 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 fees payable under the Distribution Plan are payable without regard to actual expenses incurred. During the period ended June 30, 2015, Service shares were charged $20,877 pursuant to the Distribution Plan.
The fund has arrangements with the transfer agent and the custodian whereby the fund may receive earnings credits when positive cash balances are maintained, which are used to offset transfer agency and custody fees. For financial reporting purposes, the fund includes net earnings credits as an expense offset in the Statement of Operations.
36
The fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of Dreyfus, under a transfer agency agreement for providing transfer agency and cash management services for the fund. The majority of transfer agency fees are comprised of amounts paid on a per account basis, while cash management fees are related to fund subscriptions and redemptions. During the period ended June 30, 2015, the fund was charged $183 for transfer agency services and $17 for cash management services.These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were partially offset by earnings credits of $1.
The fund compensates The Bank of NewYork 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 June 30, 2015, the fund was charged $5,291 pursuant to the custody agreement.
During the period ended June 30, 2015, the fund was charged $6,240 for services performed by the Chief Compliance Officer and his staff.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $33,560, Distribution Plan fees $3,246, custodian fees $4,985, Chief Compliance Officer fees $3,169 and transfer agency fees $62.
(d) Each Board member also serves as a Board member of other funds within the Dreyfus complex. Annual retainer fees and attendance fees are allocated to each fund based on net assets.
NOTE 4—Securities Transactions:
The aggregate amount of purchases and sales (including paydowns) of investment securities, excluding short-term securities, forward contracts, financial futures and options transactions, during the period ended June 30, 2015, amounted to $130,802,065 and $136,927,512, respectively, of which $84,177,760 in purchases and $84,308,130 in sales were from mortgage dollar roll transactions.
The Fund 37
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Mortgage Dollar Rolls: A mortgage dollar roll transaction involves a sale by the fund of mortgage related securities that it holds with an agreement by the fund to repurchase similar securities at an agreed upon price and date.The securities purchased will bear the same interest rate as those sold, but generally will be collateralized by pools of mortgages with different prepayment histories than those securities sold.The fund accounts for mortgage dollar rolls as purchases and sales transactions.
Derivatives: A derivative is a financial instrument whose performance is derived from the performance of another asset.The fund enters into International Swaps and Derivatives Association, Inc. Master Agreements or similar agreements (collectively,“Master Agreements”) with its OTC derivative contract counterparties in order to, among other things, reduce its credit risk to counterparties. Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under a Master Agreement, the fund may offset with the counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment in the event of default or termination.
Each type of derivative instrument that was held by the fund during the period ended June 30, 2015 is discussed below.
Financial Futures: In the normal course of pursuing its investment objective, the fund is exposed to market risk, including interest rate risk as a result of changes in value of underlying financial instruments.The fund invests in financial futures in order to manage its exposure to or protect against changes in the market. A financial futures contract represents a commitment for the future purchase or a sale of an asset at a specified date. Upon entering into such contracts, these investments require initial margin deposits with counterparty, which consist of cash or cash equivalents.The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses which are recorded in the Statement of Operations. When the contracts are closed, the fund
38
recognizes a realized gain or loss which is reflected in the Statement of Operations.There is minimal counterparty credit risk to the fund with financial futures since they are exchange traded, and the exchange guarantees the financial futures against default. Financial futures open at June 30, 2015 are set forth in the Statement of Financial Futures.
Options Transactions: The fund purchases and writes (sells) put and call options to hedge against changes in interest rates and foreign currencies or as a substitute for an investment. The fund is subject to market risk, interest rate risk and currency risk in the course of pursuing its investment objectives through its investments in options contracts. A call option gives the purchaser of the option the right (but not the obligation) to buy, and obligates the writer to sell, the underlying financial instrument at the exercise price at any time during the option period, or at a specified date. Conversely, a put option gives the purchaser of the option the right (but not the obligation) to sell, and obligates the writer to buy the underlying financial instrument at the exercise price at any time during the option period, or at a specified date.
As a writer of call options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument decreases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument increases between those dates.
As a writer of put options, the fund receives a premium at the outset and then bears the market risk of unfavorable changes in the price of the financial instrument underlying the option. Generally, the fund realizes a gain, to the extent of the premium, if the price of the underlying financial instrument increases between the date the option is written and the date on which the option is terminated. Generally, the fund incurs a loss if the price of the financial instrument decreases between those dates.
The Fund 39
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
As a writer of an option, the fund has no control over whether the underlying financial instrument may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the financial instrument underlying the written option.There is a risk of loss from a change in value of such options which may exceed the related premiums received.This risk is mitigated by Master Agreements between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty.The Statement of Operations reflects any unrealized gains or losses which occurred during the period as well as any realized gains or losses which occurred upon the expiration or closing of the option transaction.
The following summarizes the fund’s call/put options written during the period ended June 30, 2015:
Face Amount | Options Terminated | |||
Covered by | Premiums | Net Realized | ||
Options Written: | Contracts ($) | Received ($) | Cost ($) | Gain ($) |
Contracts outstanding | ||||
December 31, 2014 | — | — | ||
Contracts written | 14,200,000 | 82,292 | ||
Contracts terminated: | ||||
Contracts closed | 8,965,000 | 46,275 | 35,147 | 11,128 |
Contracts expired | 355,000 | 2,335 | — | 2,335 |
Total contracts terminated | 9,320,000 | 4,860 | 35,147 | 13,463 |
Contracts outstanding | ||||
June 30, 2015 | 4,880,000 | 33,682 |
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
40
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 is mitigated by Master Agreements between the fund and the counter-party and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. The following summarizes open forward contracts at June 30, 2015:
Foreign | Unrealized | |||||
Forward Foreign Currency | Currency | Appreciation | ||||
Exchange Contracts | Amounts | Cost ($) | Value ($) (Depreciation) ($) | |||
Purchases: | ||||||
Australian Dollar, | ||||||
Expiring | ||||||
7/31/2015 a | 125,000 | 96,162 | 96,265 | 103 | ||
Brazilian Real, | ||||||
Expiring | ||||||
8/4/2015 b | 460,000 | 142,724 | 146,031 | 3,307 | ||
Chilean Peso, | ||||||
Expiring | ||||||
7/31/2015 a | 59,660,000 | 93,852 | 93,048 | (804 | ) | |
Indian Rupee, | ||||||
Expiring | ||||||
7/31/2015 a | 37,160,000 | 576,992 | 579,809 | 2,817 | ||
Indonesian Rupiah, | ||||||
Expiring: | ||||||
7/31/2015 a | 622,145,000 | 46,308 | 46,363 | 55 | ||
7/31/2015 c | 629,500,000 | 46,845 | 46,911 | 66 | ||
Mexican New Peso, | ||||||
Expiring | ||||||
7/31/2015 a | 2,840,000 | 185,487 | 180,268 | (5,219 | ) | |
Norwegian Krone, | ||||||
Expiring | ||||||
7/31/2015 c | 1,420,000 | 183,543 | 180,975 | (2,568 | ) |
The Fund 41
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Foreign | Unrealized | |||||
Forward Foreign Currency | Currency | Appreciation | ||||
Exchange Contracts | Amounts | Cost ($) | Value ($) (Depreciation) ($) | |||
Purchases (continued): | ||||||
Polish Zloty, | ||||||
Expiring: | ||||||
7/31/2015 b | 490,000 | 132,995 | 130,206 | (2,789 | ) | |
7/31/2015 d | 260,000 | 70,553 | 69,089 | (1,464 | ) | |
Sales: | Proceeds ($) | |||||
Brazilian Real, | ||||||
Expiring | ||||||
8/4/2015 e | 440,000 | 140,409 | 139,682 | 727 | ||
Colombian Peso, | ||||||
Expiring | ||||||
7/16/2015 a | 501,830,000 | 200,191 | 192,286 | 7,905 | ||
Euro, | ||||||
Expiring: | ||||||
7/31/2015 a | 659,000 | 738,574 | 735,001 | 3,573 | ||
7/31/2015 b | 619,000 | 693,806 | 690,388 | 3,418 | ||
7/31/2015 f | 220,000 | 246,633 | 245,372 | 1,261 | ||
7/31/2015 g | 267,000 | 299,294 | 297,793 | 1,501 | ||
7/31/2015 h | 541,000 | 606,461 | 603,393 | 3,068 | ||
7/31/2015 i | 423,000 | 474,204 | 471,784 | 2,420 | ||
Hungarian Forint, | ||||||
Expiring: | ||||||
7/31/2015 e | 55,070,000 | 198,926 | 194,494 | 4,432 | ||
7/31/2015 h | 27,560,000 | 99,523 | 97,335 | 2,188 | ||
Indian Rupee, | ||||||
Expiring | ||||||
7/31/2015 c | 12,840,000 | 198,916 | 200,343 | (1,427 | ) | |
Malaysian Ringgit, | ||||||
Expiring | ||||||
7/31/2015 a | 370,000 | 101,951 | 97,809 | 4,142 | ||
New Zealand Dollar, | ||||||
Expiring | ||||||
7/31/2015 a | 390,000 | 267,201 | 263,524 | 3,677 | ||
Peruvian New Sol, | ||||||
Expiring | ||||||
8/6/2015 a | 2,470,000 | 775,997 | 772,627 | 3,370 | ||
Singapore Dollar, | ||||||
Expiring | ||||||
7/31/2015 b | 270,000 | 202,066 | 200,367 | 1,699 | ||
Turkish Lira, | ||||||
Expiring: | ||||||
7/31/2015 b | 80,000 | 30,321 | 29,559 | 762 | ||
7/31/2015 h | 180,000 | 68,244 | 66,509 | 1,735 | ||
South African Rand, | ||||||
Expiring | ||||||
7/31/2015 a | 4,780,000 | 399,155 | 390,678 | 8,477 |
42
Foreign | Unrealized | |||||
Forward Foreign Currency | Currency | Appreciation | ||||
Exchange Contracts | Amounts | Proceeds ($) | Value ($) (Depreciation) ($) | |||
Sales (continued): | ||||||
South Korean Won, | ||||||
Expiring | ||||||
7/31/2015 g | 216,070,000 | 196,955 | 193,563 | 3,392 | ||
Swiss Franc, | ||||||
Expiring | ||||||
7/31/2015 h | 480,000 | 514,470 | 514,027 | 443 | ||
Gross Unrealized | ||||||
Appreciation | 64,538 | |||||
Gross Unrealized | ||||||
Depreciation | (14,271 | ) |
Counterparties:
a | JP Morgan Chase Bank |
b | Goldman Sachs International |
c | Citigroup |
d | Bank of America |
e | Morgan Stanley Capital Services |
f | Barclays Bank |
g | Credit Suisse International |
h | Deutsche Bank |
i | UBS Securities |
The following tables show the fund’s exposure to different types of market risk as it relates to the Statement of Assets and Liabilities and the Statement of Operations, respectively.
Fair value of derivative instruments as of June 30, 2015 is shown below:
Derivative | Derivative | |||
Assets ($) | Liabilities ($) | |||
Interest rate risk1 | 38,136 | Interest rate risk1 | (24,984 | ) |
Foreign exchange risk2 | 64,538 | Foreign exchange risk2,3 | (44,438 | ) |
Gross fair value of | ||||
derivatives contracts | 102,674 | (69,422 | ) |
Statement of Assets and Liabilities location:
1 | Includes cumulative appreciation (depreciation) on financial futures as reported in the Statement of |
Financial Futures, but only the unpaid variation margin is reported in the Statement of Assets | |
and Liabilities. | |
2 | Unrealized appreciation (depreciation) on forward foreign currency exchange contracts. |
3 | Outstanding options written, at value. |
The Fund 43
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The effect of derivative instruments in the Statement of Operations during the period ended June 30, 2015 is shown below:
Amount of realized gain (loss) on derivatives recognized in income ($) | |||||||
Financial | Options | Forward | |||||
Underlying risk | Futures4 | Transactions5 | Contracts6 | Total | |||
Interest rate | (20,074 | ) | 13,496 | — | (6,578 | ) | |
Foreign exchange | — | (33 | ) | 26,426 | 26,393 | ||
Total | (20,074 | ) | 13,463 | 26,426 | 19,815 |
Change in unrealized appreciation (depreciation) on derivatives recognized in income ($)
Financial | Options | Forward | ||
Underlying risk | Futures7 | Transactions8 | Contracts9 | Total |
Interest rate | 32,457 | — | — | 32,457 |
Foreign exchange | — | 3,515 | 28,852 | 32,367 |
Total | 32,457 | 3,515 | 28,852 | 64,824 |
Statement of Operations location:
4 | Net realized gain (loss) on financial futures. |
5 | Net realized gain (loss) on options transactions. |
6 | Net realized gain (loss) on forward foreign currency exchange contracts. |
7 | Net unrealized appreciation (depreciation) on financial futures. |
8 | Net unrealized appreciation (depreciation) on options transactions. |
9 | Net unrealized appreciation (depreciation) on forward foreign currency exchange contracts. |
The provisions of ASC Topic 210 “Disclosures about Offsetting Assets and Liabilities” require disclosure on the offsetting of financial assets and liabilities. These disclosures are required for certain investments, including derivative financial instruments subject to Master Agreements which are eligible for offsetting in the Statement of Assets and Liabilities and require the fund to disclose both gross and net information with respect to such investments. For financial reporting purposes, the fund does not offset derivative assets and derivative liabilities that are subject to Master Agreements in the Statement of Assets and Liabilities.
44
At June 30, 2015, derivative assets and liabilities (by type) on a gross basis are as follows:
Derivative Financial Instruments: | Assets ($) | Liabilities ($) | ||
Financial futures | 38,136 | (24,984 | ) | |
Options | — | (30,167 | ) | |
Forward contracts | 64,538 | (14,271 | ) | |
Total gross amount of derivative assets | ||||
and liabilities in the Statement of | ||||
Assets and Liabilities | 102,674 | (69,422 | ) | |
Derivatives not subject | ||||
to Master Agreements | (43,029 | ) | 24,984 | |
Total gross amount of | ||||
assets and liabilities | ||||
subject to Master Agreements | 59,645 | (44,438 | ) |
The following tables present derivative assets and liabilities net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of June 30, 2015:†
Financial | |||||
Instruments | |||||
and | |||||
Derivatives | |||||
Gross Amount of | Available | Collateral | Net Amount of | ||
Counterparties | Assets ($)1 | for Offset ($) | Received ($)2 | Assets ($) | |
Barclays Bank | 1,261 | (1,261 | ) | — | — |
Citigroup | 66 | (66 | ) | — | — |
Deutsche Bank | 7,434 | (7,434 | ) | — | — |
Goldman Sachs | |||||
International | 9,186 | (4,034 | ) | — | 5,152 |
JP Morgan Chase Bank | 34,119 | (14,279 | ) | — | 19,840 |
Morgan Stanley | |||||
Capital Services | 5,159 | (20 | ) | — | 5,139 |
UBS Securities | 2,420 | (2,420 | ) | — | — |
Total | 59,645 | (29,514 | ) | — | 30,131 |
The Fund 45
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Financial | ||||||
Instruments | ||||||
and | ||||||
Derivatives | ||||||
Gross Amount of | Available | Collateral | Net Amount of | |||
Counterparties | Liabilities ($)1 | for Offset ($) | Pledged ($)2 | Liabilities ($) | ||
Bank of America | (1,464 | ) | — | — | (1,464 | ) |
Barclays Bank | (3,216 | ) | 1,261 | — | (1,955 | ) |
Citigroup | (6,429 | ) | 66 | — | (6,363 | ) |
Deutsche Bank | (9,720 | ) | 7,434 | — | (2,286 | ) |
Goldman Sachs | ||||||
International | (4,034 | ) | 4,034 | — | — | |
Morgan Stanley | ||||||
Capital Services | (20 | ) | 20 | — | — | |
JP Morgan Chase Bank | (14,279 | ) | 14,279 | — | — | |
UBS Securities | (5,277 | ) | 2,420 | — | (2,857 | ) |
Total | (44,439 | ) | 29,514 | — | (14,925 | ) |
1 | Absent a default event or early termination, OTC derivative assets and liabilities are presented at |
gross amounts and are not offset in the Statement of Assets and Liabilities. | |
2 | In some instances, the actual collateral received and/or pledged may be more than the amount |
shown due to overcollateralization. | |
† | See Statement of Investments for detailed information regarding collateral held for open financial |
futures contracts. |
The following summarizes the average market value of derivatives outstanding during the period ended June 30, 2015:
Average Market Value ($) | |
Interest rate financial futures | 8,148,979 |
Interest rate options contracts | 5,893 |
Foreign currency options contracts | 6,821 |
Forward contracts | 6,662,174 |
At June 30, 2015, accumulated net unrealized appreciation on investments was $$509,160, consisting of $1,164,271 gross unrealized appreciation and $655,111 gross unrealized depreciation.
At June 30, 2015, the cost of investments for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
46
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
INVESTMENT ADVISORY AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Trustees held on March 11-12, 2015, the Board considered the renewal of the fund’s Investment Advisory Agreement pursuant to which Dreyfus provides the fund with investment advisory and administrative services (the “Agreement”).The Board members, none of whom are “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 Dreyfus representatives. 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 them at the meeting and in previous presentations from Dreyfus representatives regarding the nature, extent, and quality of the services provided to funds in the Dreyfus fund complex. Dreyfus provided the number of open accounts in the fund, the fund’s asset size and the allocation of fund assets among distribution channels. Dreyfus also had previously provided information regarding the diverse intermediary relationships and distribution channels of funds in the Dreyfus fund complex (such as retail direct or intermediary, in which intermediaries typically are paid by the fund and/or Dreyfus) and Dreyfus’ 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 Dreyfus 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 Dreyfus’ extensive administrative, accounting and compliance infrastructures.
The Fund 47
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Lipper, Inc. (“Lipper”), 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 December 31, 2014, 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 Lipper as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Lipper used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
Dreyfus representatives stated that the usefulness of performance comparisons may be affected by a number of factors, including different investment limitations that may be applicable to the fund and comparison funds.They also noted 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 Dreyfus and its affiliates the results of the comparisons and noted that the fund’s total return performance was at or below the Performance Group and Performance Universe medians for all periods (ranking lowest in the Performance Group in the one- and two-year periods) except for the ten-year period when it was above the medians. The Board also noted that the fund’s yield performance was below the Performance Group median for eight of the ten one-year periods ended December 31st, and below the Performance Universe median for six of the ten one-year periods. The Dreyfus representatives noted the proximity to the Performance Group and/or Performance
48
Universe median(s) of the fund’s total return and yield performance during certain periods when it was below median. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index and noted that the fund’s returns were above those of the benchmark in five of the ten calendar years shown. The representatives of Dreyfus and its affiliates discussed the fund’s relative underperformance and how it was impacted by the ratings quality standards used in the management of the fund’s portfolio.
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 noted that the fund’s contractual management fee was above the Expense Group median (highest in the Expense Group) and the fund’s actual management fee (highest in the Expense Group and Expense Universe ) and total expenses (highest in the Expense Group) were above the Expense Group and Expense Universe medians.
Dreyfus representatives reviewed with the Board the management or investment advisory fees (1) paid by funds advised or administered by Dreyfus that are in the same Lipper category as the fund and (2) paid to Dreyfus or the Dreyfus-affiliated primary employer of the fund’s primary portfolio manager(s) 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 and reasonableness of the fund’s management fee.
Analysis of Profitability and Economies of Scale. Dreyfus representatives reviewed the expenses allocated and profit received by Dreyfus and its affiliates and the resulting profitability percentage for managing
The Fund 49
INFORMATION ABOUT THE RENEWAL OF THE FUND’S
INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
the fund (which was zero) and the aggregate profitability percentage to Dreyfus and its affiliates for managing the funds in the Dreyfus fund complex, and the method used to determine the expenses and profit. The Board also had been provided with information prepared by an independent consulting firm regarding Dreyfus’ approach to allocating costs to, and determining the profitability of, individual funds and the entire Dreyfus 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 bear a reasonable relationship to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, 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. Dreyfus representatives noted 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 Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also noted that, as a result of shared and allocated costs among funds in the Dreyfus 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 Dreyfus from acting as investment adviser and noted that there were no 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 dis-
50
cussions 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 Dreyfus are adequate and appropriate.
The Board accepted the fund’s overall performance.
The Board concluded that the fee paid to Dreyfus was reasonable in light of the considerations described above.
The Board determined that the economies of scale which may accrue to Dreyfus and its affiliates in connection with the management of the fund had been adequately considered by Dreyfus 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 Dreyfus and its affiliates, of the fund and the services provided to the fund by Dreyfus. 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 prior or similar agreements during which lengthy discussions took place between the Board and Dreyfus representatives. 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 same or similar arrangements in prior years.The Board determined to renew the Agreement.
The Fund 51
NOTES
For More Information
Telephone 1-800-554-4611 or 516-338-3300 | |
The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 | |
Attn: Investments Division |
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The fund’s Forms N-Q are available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities, and information regarding how the fund voted these proxies for the most recent 12-month period ended June 30 is available at http://www.dreyfus.com and on the SEC’s website at http://www.sec.gov. The description of the policies and procedures is also available without charge, upon request, by calling 1-800-DREYFUS.
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
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. [CLOSED END FUNDS ONLY]
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures applicable to Item 10.
Item 11. Controls and Procedures.
(a) The Registrant's principal executive and principal financial officers have concluded, based on their evaluation of the Registrant's disclosure controls and procedures as of a date within 90 days of the filing date of this report, that the Registrant's disclosure controls and procedures are reasonably designed to ensure that information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the required time periods and that information required to be disclosed by the Registrant in the reports that it files or submits on Form N-CSR is accumulated and communicated to the Registrant's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no changes to the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable.
(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.
Dreyfus Variable Investment Fund
By: /s/ Bradley J. Skapyak __
Bradley J. Skapyak,
President
Date: August 3, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: /s/ Bradley J. Skapyak__
Bradley J. Skapyak,
President
Date: August 3, 2015
By: /s/ James Windels_____
James Windels,
Treasurer
Date: August 3, 2015
EXHIBIT INDEX
(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)