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 | 811-05125 | |||||
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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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| Bennett A. MacDougall, 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) 922-6400 | |||||
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Date of fiscal year end:
| 12/31 |
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Date of reporting period: | 06/30/18 |
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FORM N-CSR
Item 1. Reports to Stockholders.
Dreyfus Variable Investment Fund, Appreciation Portfolio
SEMIANNUAL REPORT June 30, 2018 |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of 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
With Those of Other Funds | |
in Affiliated Issuers | |
the Fund’s Investment Advisory and | |
Sub-Investment Advisory Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF DREYFUS
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, 2018 through June 30, 2018. 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.
Volatility returned to the financial markets over the first half of 2018. Although stocks set a series of new record highs in January amid growing corporate earnings, reduced corporate tax rates and synchronized global economic growth, investors later grew nervous about rising interest rates, renewed inflationary pressures, escalating geopolitical tensions and the prospects of more protectionist U.S. trade policies. Consequently, U.S. stocks produced mildly positive returns over the reporting period. Meanwhile, bonds typically lost a degree of value over the first six months of the year due to rising interest rates and inflation concerns.
Despite the return of heightened market volatility, we believe that underlying market fundamentals remain sound. Ongoing economic growth, robust labor markets, rising corporate earnings and strong consumer and business confidence seem likely to support stock and corporate bond prices over the months ahead. Monetary policymakers have indicated that short-term interest rates probably will rise further, but U.S. government bond prices may already reflect those expectations. As always, we encourage you to discuss the risks and opportunities of today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee Laroche-Morris
President
The Dreyfus Corporation
July 16, 2018
2
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from January 1, 2018 through June 30, 2018, as provided by portfolio manager Fayez Sarofim of Fayez Sarofim & Co., Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended June 30, 2018, Dreyfus Variable Investment Fund, Appreciation Portfolio’s Initial shares achieved a total return of 1.15%, and its Service shares achieved a total return of 1.04%.1 In comparison, the fund’s benchmark, the S&P 500® Index (the “Index”), produced a total return of 2.65% for the same period.2
U.S. stocks posted mild gains during the reporting period amid sustained economic growth, rising interest rates, and intensifying trade tensions. The fund underperformed its benchmark, largely due to overweighted exposure to the consumer staples sector and stock selection shortfalls in the health care and consumer discretionary sectors.
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 net 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, we identify economic sectors we believe will expand over the next three to five years or longer. Using fundamental analysis, we then seek 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 rate of below 15%. A low portfolio turnover rate helps reduce the fund’s trading costs and can help limit the distribution of capital gains generated due to portfolio turnover.3
Stocks Fluctuated Amid Uncertainty
After a volatile first quarter that saw the Index experience one of its fastest 10% corrections on record, U.S. stocks recovered over the second quarter to close the first half of 2018 on a mildly positive note. The market advanced even as trade conflicts heated up, the Federal Reserve Board increased the pace of monetary tightening, and political risks resurfaced in the Eurozone. Market leadership rotated as the reporting period progressed, but the consumer discretionary and information technology sectors ranked as the Index’s strongest sectors for the reporting period overall. The energy sector also outperformed market averages, aided by a rally in crude oil prices. The consumer staples and telecommunication services sectors were the weakest sectors and, along with the industrials, financials and materials sectors, posted losses.
Fund Strategies Produced Mixed Results
The fund registered a modest gain for the reporting period, but it lagged the Index. The primary factor detracting from relative performance was overweighted representation in the consumer staples sector, particularly in the weak tobacco and beverages industries. Another impediment was our security selections in the health care sector, which focused on global pharmaceutical companies rather than health care equipment producers. Relative performance also was constrained by underweighted exposure to Internet retailers in the consumer discretionary sector.
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
The largest individual detractors from returns over the reporting period included Philip Morris International, Altria Group, Comcast, Chubb, and Novo Nordisk.
The fund produced better results in other areas. Most notably, the fund benefited from a limited and selective presence in the industrials sector, which was pressured by higher tariffs and rising fuel prices. Avoiding the conglomerates and machinery segments was particularly beneficial. An above-market allocation to the information technology sector also was advantageous, and this benefit was amplified by favorable stock selections within the sector. Technology holdings such as Visa, ASML, Automatic Data Processing, and Apple generated double-digit returns for the reporting period. Favorable stock selections among financial companies and lack of exposure to the telecommunication services sector also added value. Holdings making the largest positive contributions to the fund’s return included Microsoft, Apple, Twenty-First Century Fox, Facebook, and Visa.
Industry Leaders Can Weather Macroeconomic Headwinds
Recent market turbulence notwithstanding, we believe that the foundation for a continued market advance remains solid: the U.S. economy and underlying corporate fundamentals remain healthy, and equity valuations have become more attractive. Nevertheless, investors remain nervous and alert to signs of rising inflation, escalating trade tensions, and the stresses of generally tighter financial conditions.
The high-quality industry leaders in the fund’s portfolio have the financial strength and flexibility to help weather volatility surrounding these concerns. Their ability to manage increasing costs based on their scale, strong balance sheets, and management resources positions them to sustain earnings growth as interest rates rise. Furthermore, these businesses are generating record cash flows and enhancing shareholder value through dividend increases and share buybacks. Given the deep financial resources, earnings outlook and capital deployment acumen of the companies in the fund, we remain confident in its ability to deliver superior, risk-adjusted returns over the longer term.
July 16, 2018
1 Total return includes reinvestment of dividends and any capital gains paid. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. The fund’s performance does not reflect the deduction of additional charges and expenses imposed in connection with investing in variable insurance contracts, which will reduce returns.
2 Source: Lipper Inc. — The S&P 500® Index is widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. Investors cannot invest directly in any index.
3 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), the fund can be expected to be less tax efficient than during periods of more stable market conditions and asset flows.
Equities are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
The fund is only available as a funding vehicle under variable life insurance policies or variable annuity contracts issued by insurance companies. Individuals may not purchase shares of the fund directly. A variable annuity is an insurance contract issued by an insurance company that enables investors to accumulate assets on a tax-deferred basis for retirement or other long-term goals. The investment objective and policies of Dreyfus Variable Investment Fund, Appreciation Portfolio made available through insurance products may be similar to those of 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.
4
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, Appreciation Portfolio from January 1, 2018 to June 30, 2018. 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, 2018 | |||||||
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| Initial Shares | Service Shares | ||
Expenses paid per $1,000† | $4.04 | $5.28 | |||||
Ending value (after expenses) | $1,011.50 | $1,010.40 |
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, 2018 | |||||||
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| Initial Shares | Service Shares | ||
Expenses paid per $1,000† | $4.06 | $5.31 | |||||
Ending value (after expenses) | $1,020.78 | $1,019.54 |
† Expenses are equal to the fund’s annualized expense ratio of .81% for Initial shares and 1.06% for Service shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
June 30, 2018 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 99.7% | |||||||
Banks - 4.5% | |||||||
JPMorgan Chase & Co. | 129,075 | 13,449,615 | |||||
Wells Fargo & Co. | 80,375 | 4,455,990 | |||||
17,905,605 | |||||||
Capital Goods - 1.6% | |||||||
United Technologies | 51,075 | 6,385,907 | |||||
Commercial & Professional Services - .7% | |||||||
Verisk Analytics | 23,740 | a | 2,555,374 | ||||
Consumer Durables & Apparel - 3.2% | |||||||
Hermes International | 2,677 | 1,637,506 | |||||
LVMH Moet Hennessy Louis Vuitton | 15,500 | 5,162,383 | |||||
NIKE, Cl. B | 71,615 | 5,706,283 | |||||
12,506,172 | |||||||
Consumer Services - 1.4% | |||||||
McDonald's | 35,925 | 5,629,088 | |||||
Diversified Financials - 9.2% | |||||||
American Express | 69,625 | 6,823,250 | |||||
BlackRock | 20,000 | 9,980,800 | |||||
Intercontinental Exchange | 66,450 | 4,887,398 | |||||
S&P Global | 35,425 | 7,222,803 | |||||
State Street | 80,425 | 7,486,763 | |||||
36,401,014 | |||||||
Energy - 7.0% | |||||||
Chevron | 82,300 | 10,405,189 | |||||
ConocoPhillips | 76,500 | 5,325,930 | |||||
Exxon Mobil | 140,739 | 11,643,337 | |||||
27,374,456 | |||||||
Food, Beverage & Tobacco - 15.7% | |||||||
Altria Group | 179,150 | 10,173,929 | |||||
Anheuser-Busch InBev, ADR | 37,400 | b | 3,768,424 | ||||
Coca-Cola | 230,750 | 10,120,695 | |||||
Constellation Brands, Cl. A | 23,100 | 5,055,897 | |||||
Nestle, ADR | 103,425 | 8,008,198 | |||||
PepsiCo | 63,000 | 6,858,810 | |||||
Philip Morris International | 219,775 | 17,744,633 | |||||
61,730,586 | |||||||
Health Care Equipment & Services - 2.9% | |||||||
Abbott Laboratories | 105,675 | 6,445,118 | |||||
UnitedHealth Group | 20,500 | 5,029,470 | |||||
11,474,588 | |||||||
Household & Personal Products - 2.9% | |||||||
Estee Lauder, Cl. A | 79,475 | 11,340,288 |
6
Description | Shares | Value ($) | |||||
Common Stocks - 99.7% (continued) | |||||||
Insurance - 2.6% | |||||||
Chubb | 81,750 | 10,383,885 | |||||
Materials - 2.0% | |||||||
Air Products & Chemicals | 9,925 | 1,545,620 | |||||
Praxair | 41,000 | 6,484,150 | |||||
8,029,770 | |||||||
Media - 5.6% | |||||||
Comcast, Cl. A | 272,840 | 8,951,880 | |||||
Twenty-First Century Fox, Cl. A | 139,811 | 6,947,209 | |||||
Walt Disney | 58,825 | 6,165,448 | |||||
22,064,537 | |||||||
Pharmaceuticals, Biotechnology & Life Sciences - 5.1% | |||||||
AbbVie | 86,725 | 8,035,071 | |||||
Novartis, ADR | 12,550 | 948,027 | |||||
Novo Nordisk, ADR | 139,250 | 6,422,210 | |||||
Roche Holding, ADR | 169,550 | 4,684,667 | |||||
20,089,975 | |||||||
Retailing - 1.3% | |||||||
Amazon.com | 3,100 | a | 5,269,380 | ||||
Semiconductors & Semiconductor Equipment - 5.7% | |||||||
ASML Holding | 37,375 | b | 7,399,129 | ||||
Infineon Technologies, ADR | 50,000 | 1,278,500 | |||||
Texas Instruments | 125,875 | 13,877,719 | |||||
22,555,348 | |||||||
Software & Services - 19.1% | |||||||
Alphabet, Cl. C | 13,544 | a | 15,110,364 | ||||
Automatic Data Processing | 17,090 | 2,292,453 | |||||
Facebook, Cl. A | 116,285 | a | 22,596,501 | ||||
Microsoft | 238,835 | 23,551,519 | |||||
Visa, Cl. A | 87,525 | b | 11,592,686 | ||||
75,143,523 | |||||||
Technology Hardware & Equipment - 6.0% | |||||||
Apple | 126,950 | 23,499,714 | |||||
Transportation - 3.2% | |||||||
Canadian Pacific Railway | 30,575 | 5,595,837 | |||||
Union Pacific | 50,250 | 7,119,420 | |||||
12,715,257 | |||||||
Total Common Stocks (cost $170,919,516) | 393,054,467 | ||||||
7-Day | |||||||
Other Investment - .2% | |||||||
Registered Investment Company; | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1.83 | 1,044,075 | c | 1,044,075 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | 7-Day | Shares | Value ($) | ||||
Investment of Cash Collateral for Securities Loaned - .9% | |||||||
Registered Investment Company; | |||||||
Dreyfus Institutional Preferred Government Money Market Fund, Institutional Shares | 1.85 | 3,414,131 | c | 3,414,131 | |||
Total Investments (cost $175,377,722) | 100.8% | 397,512,673 | |||||
Liabilities, Less Cash and Receivables | (.8%) | (3,183,156) | |||||
Net Assets | 100.0% | 394,329,517 |
ADR—American Depository Receipt
a Non-income producing security.
b Security, or portion thereof, on loan. At June 30, 2018, the value of the fund’s securities on loan was $22,199,980 and the value of the collateral held by the fund was $22,502,272, consisting of cash collateral of $3,414,131 and U.S. Government & Agency securities valued at $19,088,141.
c Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the respective investment company’s prospectus.
Portfolio Summary (Unaudited) † | Value (%) |
Software & Services | 19.1 |
Food, Beverage & Tobacco | 15.7 |
Diversified Financials | 9.2 |
Energy | 7.0 |
Technology Hardware & Equipment | 6.0 |
Semiconductors & Semiconductor Equipment | 5.7 |
Media | 5.6 |
Pharmaceuticals, Biotechnology & Life Sciences | 5.1 |
Banks | 4.5 |
Transportation | 3.2 |
Consumer Durables & Apparel | 3.2 |
Health Care Equipment & Services | 2.9 |
Household & Personal Products | 2.9 |
Insurance | 2.6 |
Materials | 2.0 |
Capital Goods | 1.6 |
Consumer Services | 1.4 |
Retailing | 1.3 |
Money Market Investments | 1.1 |
Commercial & Professional Services | .7 |
100.8 |
† Based on net assets.
See notes to financial statements.
8
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS (Unaudited)
Registered Investment Companies | Value | Purchases($) | Sales ($) | Value | Net | Dividends/ |
Dreyfus Institutional Preferred Government Money Market Fund, Institutional Shares | - | 35,420,470 | 32,006,339 | 3,414,131 | .9 | - |
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1,867,769 | 19,155,405 | 19,979,099 | 1,044,075 | .2 | 11,429 |
Total | 1,867,769 | 54,575,875 | 51,985,438 | 4,458,206 | 1.1 | 11,429 |
See notes to financial statements.
9
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2018 (Unaudited)
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| Cost |
| Value |
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Assets ($): |
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Investments in securities—See Statement of Investments |
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Unaffiliated issuers | 170,919,516 |
| 393,054,467 |
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Affiliated issuers |
| 4,458,206 |
| 4,458,206 |
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Cash |
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| 6,743 |
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Dividends and securities lending income receivable |
| 838,984 |
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Receivable for investment securities sold |
| 638,328 |
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Prepaid expenses |
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| 2,907 |
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| 398,999,635 |
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Liabilities ($): |
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Due to The Dreyfus Corporation and affiliates—Note 3(b) |
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| 216,795 |
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Due to Fayez Sarofim & Co. |
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| 71,746 |
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Liability for securities on loan—Note 1(c) |
| 3,414,131 |
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Payable for shares of Beneficial Interest redeemed |
| 920,325 |
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Trustees fees and expenses payable |
| 915 |
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Accrued expenses |
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| 46,206 |
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| 4,670,118 |
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Net Assets ($) |
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| 394,329,517 |
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Composition of Net Assets ($): |
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Paid-in capital |
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| 151,553,000 |
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Accumulated undistributed investment income—net |
| 376,934 |
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Accumulated net realized gain (loss) on investments |
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| 20,264,514 |
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Accumulated net unrealized appreciation (depreciation) |
| 222,135,069 |
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Net Assets ($) |
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| 394,329,517 |
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Net Asset Value Per Share | Initial Shares | Service Shares |
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Net Assets ($) | 258,687,564 | 135,641,953 |
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Shares Outstanding | 6,606,168 | 3,497,434 |
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Net Asset Value Per Share ($) | 39.16 | 38.78 |
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See notes to financial statements. |
10
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2018 (Unaudited)
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Investment Income ($): |
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Income: |
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|
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Cash dividends (net of $156,938 foreign taxes withheld at source): |
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Unaffiliated issuers |
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| 4,452,388 |
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Affiliated issuers |
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| 11,429 |
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Income from securities lending—Note 1(c) |
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| 14,522 |
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Total Income |
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| 4,478,339 |
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Expenses: |
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|
|
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Investment advisory fee—Note 3(a) |
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| 1,070,315 |
| ||
Sub-investment advisory fee—Note 3(a) |
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| 437,171 |
| ||
Distribution fees—Note 3(b) |
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| 173,220 |
| ||
Professional fees |
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| 48,612 |
| ||
Prospectus and shareholders’ reports |
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| 24,562 |
| ||
Trustees’ fees and expenses—Note 3(c) |
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| 15,702 |
| ||
Custodian fees—Note 3(b) |
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| 9,874 |
| ||
Loan commitment fees—Note 2 |
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| 4,295 |
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Shareholder servicing costs—Note 3(b) |
|
| 1,061 |
| ||
Miscellaneous |
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| 24,882 |
| ||
Total Expenses |
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| 1,809,694 |
| ||
Less—reduction in fees due to earnings credits—Note 3(b) |
|
| (92) |
| ||
Net Expenses |
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| 1,809,602 |
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Investment Income—Net |
|
| 2,668,737 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions | 20,332,502 |
| ||||
Net unrealized appreciation (depreciation) on investments |
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| (18,286,262) |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 2,046,240 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 4,714,977 |
| |||
See notes to financial statements. |
11
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 2,668,737 |
|
|
| 5,173,319 |
| |
Net realized gain (loss) on investments |
| 20,332,502 |
|
|
| 50,697,356 |
| ||
Net unrealized appreciation (depreciation) |
| (18,286,262) |
|
|
| 42,703,302 |
| ||
Net Increase (Decrease) in Net Assets | 4,714,977 |
|
|
| 98,573,977 |
| |||
Distributions to Shareholders from ($): |
| ||||||||
Investment income—net: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (1,819,354) |
|
|
| (3,397,259) |
| |
Service Shares |
|
| (785,683) |
|
|
| (1,710,007) |
| |
Net realized gain on investments: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (33,250,618) |
|
|
| (32,675,856) |
| |
Service Shares |
|
| (17,449,259) |
|
|
| (22,119,380) |
| |
Total Distributions |
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| (53,304,914) |
|
|
| (59,902,502) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 3,354,469 |
|
|
| 7,444,269 |
| |
Service Shares |
|
| 4,712,813 |
|
|
| 8,089,313 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 35,069,972 |
|
|
| 36,073,115 |
| |
Service Shares |
|
| 18,234,942 |
|
|
| 23,829,387 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (19,635,689) |
|
|
| (35,224,654) |
| |
Service Shares |
|
| (16,092,237) |
|
|
| (61,387,520) |
| |
Increase (Decrease) in Net Assets | 25,644,270 |
|
|
| (21,176,090) |
| |||
Total Increase (Decrease) in Net Assets | (22,945,667) |
|
|
| 17,495,385 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 417,275,184 |
|
|
| 399,779,799 |
| |
End of Period |
|
| 394,329,517 |
|
|
| 417,275,184 |
| |
Undistributed investment income—net | 376,934 |
|
|
| 313,234 |
| |||
Capital Share Transactions (Shares): |
| ||||||||
Initial Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 78,623 |
|
|
| 177,820 |
| |
Shares issued for distributions reinvested |
|
| 919,599 |
|
|
| 937,609 |
| |
Shares redeemed |
|
| (471,225) |
|
|
| (847,904) |
| |
Net Increase (Decrease) in Shares Outstanding | 526,997 |
|
|
| 267,525 |
| |||
Service Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 115,344 |
|
|
| 198,043 |
| |
Shares issued for distributions reinvested |
|
| 482,893 |
|
|
| 625,749 |
| |
Shares redeemed |
|
| (382,133) |
|
|
| (1,507,252) |
| |
Net Increase (Decrease) in Shares Outstanding | 216,104 |
|
|
| (683,460) |
| |||
See notes to financial statements. |
12
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 | ||||||||||||
Initial Shares | June 30, 2018 | Year Ended December 31, | ||||||||||
(Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||
Per Share Data ($): | ||||||||||||
Net asset value, beginning of period | 44.71 | 41.01 | 45.23 | 49.51 | 47.95 | 40.47 | ||||||
Investment Operations: | ||||||||||||
Investment income—neta | .30 | .56 | .68 | .80 | .89 | .86 | ||||||
Net realized and unrealized | .05 | 9.55 | 2.48 | (1.97) | 2.86 | 7.59 | ||||||
Total from Investment Operations | .35 | 10.11 | 3.16 | (1.17) | 3.75 | 8.45 | ||||||
Distributions: | ||||||||||||
Dividends from | (.29) | (.57) | (.69) | (.81) | (.90) | (.87) | ||||||
Dividends from net realized | (5.61) | (5.84) | (6.69) | (2.30) | (1.29) | (.10) | ||||||
Total Distributions | (5.90) | (6.41) | (7.38) | (3.11) | (2.19) | (.97) | ||||||
Net asset value, end of period | 39.16 | 44.71 | 41.01 | 45.23 | 49.51 | 47.95 | ||||||
Total Return (%) | 1.15b | 27.33 | 7.91 | (2.47) | 8.09 | 21.11 | ||||||
Ratios/Supplemental Data (%): | ||||||||||||
Ratio of total expenses | .81c | .81 | .82 | .80 | .80 | .81 | ||||||
Ratio of net expenses | .81c | .81 | .82 | .80 | .80 | .81 | ||||||
Ratio of net investment income | 1.41c | 1.35 | 1.64 | 1.70 | 1.84 | 1.95 | ||||||
Portfolio Turnover Rate | 2.83b | 3.97 | 4.19 | 11.97 | 3.65 | 7.71 | ||||||
Net Assets, end of period ($ x 1,000) | 258,688 | 271,790 | 238,340 | 256,828 | 329,802 | 360,197 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
13
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||
Service Shares | June 30, 2018 | Year Ended December 31, | ||||||||
(Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 44.34 | 40.72 | 44.96 | 49.23 | 47.69 | 40.25 | ||||
Investment Operations: | ||||||||||
Investment income—neta | .24 | .46 | .57 | .68 | .76 | .75 | ||||
Net realized and unrealized | .05 | 9.46 | 2.46 | (1.96) | 2.85 | 7.55 | ||||
Total from Investment Operations | .29 | 9.92 | 3.03 | (1.28) | 3.61 | 8.30 | ||||
Distributions: | ||||||||||
Dividends from | (.24) | (.46) | (.58) | (.69) | (.78) | (.76) | ||||
Dividends from net realized | (5.61) | (5.84) | (6.69) | (2.30) | (1.29) | (.10) | ||||
Total Distributions | (5.85) | (6.30) | (7.27) | (2.99) | (2.07) | (.86) | ||||
Net asset value, end of period | 38.78 | 44.34 | 40.72 | 44.96 | 49.23 | 47.69 | ||||
Total Return (%) | 1.04b | 27.00 | 7.64 | (2.72) | 7.83 | 20.83 | ||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | 1.06c | 1.06 | 1.07 | 1.05 | 1.05 | 1.06 | ||||
Ratio of net expenses | 1.06c | 1.06 | 1.07 | 1.05 | 1.05 | 1.06 | ||||
Ratio of net investment income | 1.16c | 1.11 | 1.41 | 1.45 | 1.59 | 1.70 | ||||
Portfolio Turnover Rate | 2.83b | 3.97 | 4.19 | 11.97 | 3.65 | 7.71 | ||||
Net Assets, end of period ($ x 1,000) | 135,642 | 145,485 | 161,440 | 231,421 | 264,795 | 254,928 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
14
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 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 is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’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
15
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in 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
16
the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Trustees (the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
The following is a summary of the inputs used as of June 30, 2018 in valuing the fund’s investments:
17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Level 1 - | Level 2 - Other | Level 3 – | Total | ||
Assets ($) | |||||
Investments in Securities: | |||||
Equity Securities - Domestic Common Stocks† | 348,149,586 | - | - | 348,149,586 | |
Equity Securities - Foreign Common Stocks† | 44,904,881 | - | - | 44,904,881 | |
Registered Investment Companies | 4,458,206 | - | - | 4,458,206 |
† See Statement of Investments for additional detailed categorizations.
At December 31, 2017, $5,986,088 of exchange traded foreign equity securities were classified within Level 2 of the fair value hierarchy pursuant to the fund’s fair valuation procedures. It is the fund’s policy to recognize transfers between levels at the end of the reporting period.
(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.
18
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. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended June 30, 2018, The Bank of New York Mellon earned $3,083 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.
(e) Dividends and distributions to shareholders: Dividends and distributions 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 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, 2018, 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
19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
expense in the Statement of Operations. During the period ended June 30, 2018, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended December 31, 2017 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, 2017 was as follows: ordinary income $5,358,909 and long-term capital gains $54,543,593. 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 an $830 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, 2018, the fund did not borrow under the Facilities.
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, 2018, Service shares were charged $173,220 pursuant to the Distribution Plan.
20
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, 2018, the fund was charged $847 for transfer agency services and $92 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were offset by earnings credits of $92.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended June 30, 2018, the fund was charged $9,874 pursuant to the custody agreement.
During the period ended June 30, 2018, the fund was charged $6,320 for services performed by the Chief Compliance Officer and his staff. These fees are included in Miscellaneous in the Statement of Operations.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $175,653, Distribution Plan fees $28,431, custodian fees $6,037, Chief Compliance Officer fees $6,320 and transfer agency fees $354.
(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, 2018, amounted to $11,377,901 and $35,179,280, respectively.
At June 30, 2018, accumulated net unrealized appreciation on investments was $222,134,951, consisting of $222,538,034 gross unrealized appreciation and $403,083 gross unrealized depreciation.
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
At June 30, 2018, 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).
22
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 February 14-15, 2018, 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-to-day 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’ 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 Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended December 31, 2017, 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
23
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
“Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Broadridge 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 with representatives of Dreyfus, its affiliates and/or the Subadviser the results of the comparisons and considered that the fund’s total return performance was below the Performance Group median for all periods, except for the one- and two-year periods when it was above the median, and at or above the Performance Universe median for all periods, except for the four- and five-year periods when it was below the median. The Board considered the relative proximity of the fund’s performance to the Performance Group and/or Performance Universe median in certain periods when performance was below median. 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 considered that: the fund’s contractual management fee was below the Expense Group median and the fund’s actual management fee and total expenses were slightly above the Expense Group median and above the Expense Universe median.
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 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.
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
24
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, considered in relation to the mix of services provided by Dreyfus and the Subadviser, including the nature, extent and quality of such services, supported the renewal of the Agreements 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 stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also stated 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 took into consideration the soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the 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 improved performance in recent periods.
· The Board concluded that the fees paid to Dreyfus and the Subadviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to 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.
25
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
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 Dreyfus and the Subadviser 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 the Agreements for the fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, 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 fund’s arrangements, or substantially similar arrangements for other Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
26
NOTES
27
NOTES
28
NOTES
29
Dreyfus Variable Investment Fund, Appreciation Portfolio
200 Park Avenue
New York, NY 10166
Manager
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Sub-Investment Adviser
Fayez Sarofim & Co.
Two Houston Center
Suite 2907
Houston, TX 77010
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
Telephone 1-800-258-4260 or 1-800-258-4261
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 Attn: Institutional Services Department
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
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, D.C. 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.
© 2018 MBSC Securities Corporation |
Dreyfus Variable Investment Fund, Government Money Market Portfolio
SEMIANNUAL REPORT June 30, 2018 |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of 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
With Those of Other Funds | |
the Fund’s Investment Advisory | |
Agreement |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF DREYFUS
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Variable Investment Fund, Government Money Market Portfolio, covering the six-month period from January 1, 2018 through June 30, 2018. 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.
Volatility returned to the financial markets over the first half of 2018. Although stocks set a series of new record highs in January amid growing corporate earnings, reduced corporate tax rates and synchronized global economic growth, investors later grew nervous about rising interest rates, renewed inflationary pressures, escalating geopolitical tensions and the prospects of more protectionist U.S. trade policies. Consequently, U.S. stocks produced mildly positive returns over the reporting period. Meanwhile, bonds typically lost a degree of value over the first six months of the year due to rising interest rates and inflation concerns.
Despite the return of heightened market volatility, we believe that underlying market fundamentals remain sound. Ongoing economic growth, robust labor markets, rising corporate earnings and strong consumer and business confidence seem likely to support stock and corporate bond prices over the months ahead. Monetary policymakers have indicated that short-term interest rates probably will rise further, but U.S. government bond prices may already reflect those expectations. As always, we encourage you to discuss the risks and opportunities of today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee Laroche-Morris
President
The Dreyfus Corporation
July 16, 2018
2
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from January 1, 2018 through June 30, 2018, as provided by Bernard W. Kiernan, Jr., Senior Portfolio Manager
Market and Fund Performance Overview
For the six-month period ended June 30, 2018, Dreyfus Variable Investment Fund, Government Money Market Portfolio produced an annualized yield of 1.02%. Taking into account the effects of compounding, the fund provided an annualized effective yield of 1.02% for the same period.1
Yields of money market instruments climbed over the reporting period in response to sustained economic growth, more stimulative fiscal policies, and two increases in short-term interest rates by the Federal Reserve Board (the “Fed”).
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 its goal, the fund normally invests at least 99.5% of its total assets in securities issued or guaranteed as to principal and interest by the U.S. government or its agencies or instrumentalities, repurchase agreements collateralized solely by cash and/or government securities, and cash (including tri-party repurchase agreements). The securities in which the fund invests include those backed by the full faith and credit of the U.S. government and those that are neither insured nor guaranteed by the U.S. government.
Short-Term Interest Rates and Inflationary Pressures Rise
The months before the start of the reporting period saw a continued economic expansion, robust labor market gains, and rising short-term interest rates as the Fed continued to move away from its aggressively accommodative monetary policy of the past decade. The Fed implemented another interest-rate hike in mid-December, raising the federal funds rate to between 1.25% and 1.50%. Meanwhile, investors responded positively to the enactment of federal tax reform legislation that sharply reduced corporate tax rates.
At the start of the reporting period in January 2018, 176,000 new jobs were added to the labor force and the unemployment rate stayed at 4.1%. Corporate earnings growth continued to exceed expectations, and hiring activity proved brisk. Hourly wages began to rise at their strongest pace since the 2008 recession, suggesting that inflation might begin to accelerate.
February saw renewed volatility in the financial markets as inflation fears mounted in response to the addition of 324,000 new jobs. The unemployment rate remained steady at 4.1% for the fifth consecutive month. Manufacturing activity continued to expand, and consumer confidence remained high.
Heightened volatility in the financial markets persisted in March, when investors reacted nervously to political rhetoric regarding potentially more protectionist U.S. trade policies. Job creation trailed off compared to previous months with 155,000 new jobs, but the manufacturing sector posted its strongest job gains in more than three years. The
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
unemployment rate remained at 4.1%. The U.S. economy grew at a 2.0% annualized rate over the first quarter of 2018.
In April, the unemployment rate slid to 3.9% and 175,000 new jobs were added to the workforce. Retail sales grew by 0.3% amid persistently strong consumer confidence, which remained robust despite sharply rising fuel prices. In addition, long-term interest rates continued to climb, as the yield on 10-year U.S. Treasury bonds topped 3% for the first time since 2014.
May saw a further decrease in the unemployment rate to 3.8%, its lowest level since December 1969. An estimated 244,000 new jobs were added during the month. Meanwhile, retail sales grew at a faster-than-expected 0.8% rate in May, even as fuel prices continued to move higher. The Consumer Price Index and average hourly wages rose 2.8% and 2.7% above year-ago levels, respectively, indicating that inflation was accelerating.
The labor market remained robust in June, when an estimated 213,000 new jobs were created. The unemployment rate ticked higher to 4.0% during the month as previously sidelined workers returned to the labor force. Inflationary pressures continued to build, as the Consumer Price Index increased 2.9% over the 12 months ended in June 2018, its largest annualized gain since February 2012.
Additional Rate Hikes Expected
After its June meeting, the Fed’s Federal Open Market Committee said, “The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2% objective over the medium term.” Notably, the Fed removed language from previous statements suggesting that the pace of economic growth would warrant “gradual” increases in short-term interest rates. Most analysts expect at least two more interest-rate hikes over the remainder of 2018.
In the rising interest-rate environment, we have maintained the fund’s weighted average maturity in a range that is modestly shorter than industry averages. This strategy is intended to capture higher yields as they become available. As always, we have retained our longstanding focus on quality and liquidity.
July 16, 2018
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.
You could lose money by investing in a money market fund. Although the fund seeks to preserve the value of your investment at $1.00 per share, it cannot guarantee it will do so. An investment in the fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The fund’s sponsor has no legal obligation to provide financial support to the fund, and you should not expect that the sponsor will provide financial support to the fund at any time.
Although the fund’s board has no current intention to impose a fee upon the sale of shares or temporarily suspend redemptions if the fund’s liquidity falls below certain levels, the board reserves the ability to do so after providing at least 60 days’ prior written notice to shareholders.
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, Government Money Market Portfolio made available through insurance products may be similar to those of 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.
4
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, Government Money Market Portfolio from January 1, 2018 to June 30, 2018. 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, 2018 | |||||||||
Expenses paid per $1,000† | $2.88 | ||||||||
Ending value (after expenses) | $1,005.10 |
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, 2018 | |||||||||
Expenses paid per $1,000† | $2.91 | ||||||||
Ending value (after expenses) | $1,021.92 |
† Expenses are equal to the fund’s annualized expense ratio of .58%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
June 30, 2018 (Unaudited)
Description | Principal | Value ($) | |||
U.S. Government Agencies - 49.1% | |||||
Federal Farm Credit Bank | |||||
1.96%, 7/6/18, 1 Month LIBOR - .09% | 10,000,000 | a | 9,995,384 | ||
Federal Home Loan Bank | |||||
1.60%, 7/2/18 | 17,000,000 | b | 16,999,244 | ||
Federal Home Loan Bank | |||||
1.75%, 8/8/18 | 29,535,000 | b | 29,481,066 | ||
Federal Home Loan Bank | |||||
2.05%, 7/23/18, 1 Month LIBOR - .04% | 5,000,000 | a | 5,000,159 | ||
Federal Home Loan Bank | |||||
2.13%, 9/25/18, 3 Month LIBOR - .21% | 10,000,000 | a | 10,000,000 | ||
Total U.S. Government Agencies |
| ||||
Repurchase Agreements - 55.6% | |||||
ABN AMRO Bank | |||||
Tri-Party Agreement thru BNY Mellon, 2.05%, dated 6/29/18, due 7/2/18 in the amount of $1,000,171 (fully collateralized by $1,021,806 U.S. Treasuries, 1%-3.13%, due 11/30/18-11/15/45, value $1,020,000) | 1,000,000 | 1,000,000 | |||
Bank of Nova Scotia | |||||
Tri-Party Agreement thru BNY Mellon, 2.10%, dated 6/29/18, due 7/2/18 in the amount of $30,005,250 (fully collateralized by $29,382,045 U.S. Treasuries (including strips), 0%-3.63%, due 7/19/18-11/15/47, value $30,600,005) | 30,000,000 | 30,000,000 | |||
BNP Paribas | |||||
Tri-Party Agreement thru BNY Mellon, 2.05%, dated 6/29/18, due 7/2/18 in the amount of $30,005,125 (fully collateralized by $26,754,972 U.S. Treasuries (including strips), 0%-8.75%, due 8/15/18-2/15/26, value $30,600,000) | 30,000,000 | 30,000,000 | |||
Credit Agricole CIB | |||||
Tri-Party Agreement thru BNY Mellon, 2.08%, dated 6/29/18, due 7/2/18 in the amount of $20,003,467 (fully collateralized by $22,002,931 U.S. Treasuries (including strips), 0%-8.75%, due 7/5/18-5/15/48, value $20,400,001) | 20,000,000 | 20,000,000 | |||
Total Repurchase Agreements |
| ||||
Total Investments (cost $152,475,853) | 104.7% | 152,475,853 | |||
Liabilities, Less Cash and Receivables | (4.7%) | (6,898,042) | |||
Net Assets | 100.0% | 145,577,811 |
a Variable rate security—rate shown is the interest rate in effect at period end. Date shown represents the earlier of the next interest reset date or ultimate maturity date.
b Security is a discount security. Income is recognized through the accretion of discount.
6
Portfolio Summary (Unaudited) † | Value (%) |
Repurchase Agreements | 55.6 |
Federal Home Loan Bank | 42.2 |
Federal Farm Credit Bank | 6.9 |
104.7 |
† Based on net assets.
See notes to financial statements.
7
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2018 (Unaudited)
|
|
|
|
|
|
| ||
|
|
| Cost |
| Value |
| ||
Assets ($): |
|
|
|
| ||||
Investments in securities—See Statement of Investments | 152,475,853 |
| 152,475,853 |
| ||||
Cash |
|
|
|
| 968,080 |
| ||
Interest receivable |
| 28,556 |
| |||||
Prepaid expenses |
|
|
|
| 986 |
| ||
|
|
|
|
| 153,473,475 |
| ||
Liabilities ($): |
|
|
|
| ||||
Due to The Dreyfus Corporation and affiliates—Note 2(b) |
|
|
| 80,177 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 7,801,419 |
| |||||
Accrued expenses |
|
|
|
| 14,068 |
| ||
|
|
|
|
| 7,895,664 |
| ||
Net Assets ($) |
|
| 145,577,811 |
| ||||
Composition of Net Assets ($): |
|
|
|
| ||||
Paid-in capital |
|
|
|
| 145,573,638 |
| ||
Accumulated undistributed investment income—net |
| 5,770 |
| |||||
Accumulated net realized gain (loss) on investments |
|
|
|
| (1,597) |
| ||
Net Assets ($) |
|
| 145,577,811 |
| ||||
Shares Outstanding |
|
| ||||||
(unlimited number of $.001 par value shares of Beneficial Interest authorized) | 145,542,364 |
| ||||||
Net Asset Value Per Share ($) |
| 1.00 |
| |||||
See notes to financial statements. |
8
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2018 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Interest Income |
|
| 1,412,490 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 2(a) |
|
| 444,278 |
| ||
Professional fees |
|
| 48,231 |
| ||
Trustees’ fees and expenses—Note 2(c) |
|
| 6,191 |
| ||
Prospectus and shareholders’ reports |
|
| 4,629 |
| ||
Custodian fees—Note 2(b) |
|
| 2,719 |
| ||
Shareholder servicing costs—Note 2(b) |
|
| 298 |
| ||
Miscellaneous |
|
| 9,724 |
| ||
Total Expenses |
|
| 516,070 |
| ||
Less—reduction in fees due to earnings credits—Note 2(b) |
|
| (2,024) |
| ||
Net Expenses |
|
| 514,046 |
| ||
Investment Income—Net |
|
| 898,444 |
| ||
Net Realized Gain (Loss) on Investments—Note 1(b) ($) | (1,597) |
| ||||
Net Increase in Net Assets Resulting from Operations |
| 896,847 |
| |||
See notes to financial statements. |
9
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 898,444 |
|
|
| 607,701 |
| |
Net realized gain (loss) on investments |
| (1,597) |
|
|
| - |
| ||
Net Increase (Decrease) in Net Assets | 896,847 |
|
|
| 607,701 |
| |||
Distributions to Shareholders from ($): |
| ||||||||
Investment income—net |
|
| (900,500) |
|
|
| (600,690) |
| |
Beneficial Interest Transactions ($1.00 per share): |
| ||||||||
Net proceeds from shares sold |
|
| 306,255,961 |
|
|
| 502,509,413 |
| |
Distributions reinvested |
|
| 900,500 |
|
|
| 600,690 |
| |
Cost of shares redeemed |
|
| (357,922,175) |
|
|
| (455,428,616) |
| |
Increase (Decrease) in Net Assets | (50,765,714) |
|
|
| 47,681,487 |
| |||
Total Increase (Decrease) in Net Assets | (50,769,367) |
|
|
| 47,688,498 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 196,347,178 |
|
|
| 148,658,680 |
| |
End of Period |
|
| 145,577,811 |
|
|
| 196,347,178 |
| |
Undistributed investment income—net | 5,770 |
|
|
| 7,826 |
| |||
See notes to financial statements. |
10
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, 2018 | Year Ended December 31, | |||||||||
(Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||
Investment Operations: | ||||||||||
Investment income—net | .005 | .003 | .000a | .000a | .000a | .000a | ||||
Distributions: | ||||||||||
Dividends from | (.005) | (.003) | (.000)a | (.000)a | (.000)a | (.000)a | ||||
Net asset value, end of period | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | 1.00 | ||||
Total Return (%) | .51b | .34 | .02 | .00c | .00c | .00c | ||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | .58d | .58 | .62 | .62 | .59 | .60 | ||||
Ratio of net expenses | .58d | .57 | .39 | .23 | .14 | .14 | ||||
Ratio of net investment income | 1.01d | .37 | .01 | .00c | .00c | .00c | ||||
Net Assets, end of period ($ x 1,000) | 145,578 | 196,347 | 148,659 | 152,576 | 125,621 | 127,944 |
a Amount represents less than $.001 per share.
b Not annualized.
c Amount represents less than .01%.
d Annualized.
See notes to financial statements.
11
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Government Money Market 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 as high a level of current income as is consistent with the preservaton 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 without a sales charge.
The fund operates as a “government money market fund” as that term is defined in Rule 2a-7 under the Act. It is the fund’s policy to maintain a constant net asset value (“NAV”) per share of $1.00 and 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 constant NAV 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 is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’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.
12
(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 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.
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, 2018 in valuing the fund’s investments:
13
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Valuation Inputs | Short-Term Investments ($)† |
Level 1 - Unadjusted Quoted Prices | — |
Level 2 - Other Significant Observable Inputs | 152,475,853 |
Level 3 - Significant Unobservable Inputs | – |
Total | 152,475,853 |
† See Statement of Investments for additional detailed categorizations.
At June 30, 2018, there were no transfers between levels of the fair value hierarchy. It is the fund’s policy to recognize transfers between levels at the end of the reporting period.
(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. Realized gains and losses from securities transactions are recorded on the identified cost basis.
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 collateral is held on behalf of the fund by the tri-party administrator with respect to any tri-party agreement. 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 and distributions 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
14
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.
As of and during the period ended June 30, 2018, 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, 2018, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended December 31, 2017 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, 2017 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, 2018, 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 investment 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.
(b) 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, 2018, the fund was
15
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
charged $187 for transfer agency services and $15 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were offset by earnings credits of $15.
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, 2018, the fund was charged $2,719 pursuant to the custody agreement. These fees were partially offset by earnings credits of $2,009.
During the period ended June 30, 2018, the fund was charged $6,320 for services performed by the Chief Compliance Officer and his staff. These fees are included in Miscellaneous in the Statement of Operations.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $72,053, custodian fees $1,465, Chief Compliance Officer fees $6,320 and transfer agency fees $339.
(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.
16
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 14-15, 2018, 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.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended December 31, 2017, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Broadridge 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
17
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
applicable to the fund and comparison funds. The Board discussed with representatives of Dreyfus and/or its affiliates the results of the comparisons and considered that the fund’s total return performance was below the Performance Group and Performance Universe medians for all periods, except for the ten-year period when it was at the medians. The Board considered the relative proximity of the fund’s performance to the Performance Universe median in certain periods when performance was below median.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that: the fund’s contractual management fee was 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 paid by funds advised or administered by Dreyfus that are in the same Lipper category as the fund (the “Similar 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 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 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 Agreement, considered in relation to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Dreyfus representatives also stated 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 took into consideration that there were no soft dollar arrangements in effect for trading the fund’s investments.
18
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 expressed concern about the fund’s performance and agreed to closely monitor performance.
· The Board concluded that the fee paid to Dreyfus continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to 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 Dreyfus 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 the Agreement for the fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, 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 fund’s arrangements, or substantially similar arrangements for other Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreement.
19
NOTES
20
NOTES
21
Dreyfus Variable Investment Fund, Government Money Market Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
Telephone 1-800-258-4260 or 1-800-258-4261
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144
Attn: Institutional Services Department
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
The fund will disclose daily, on www.dreyfus.com, the fund’s complete schedule of holdings as of the end of the previous business day. The schedule of holdings will remain on the website until the fund files its Form N-Q or Form N-CSR for the period that includes the date of the posted holdings.
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 www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. (phone 1-800-SEC-0330 for information).
Information regarding how the fund voted proxies related to portfolio securities for the most recent 12-month period ended June 30 is available at www.dreyfus.com and on the SEC’s website at www.sec.gov and without charge, upon request, by calling 1-800-DREYFUS.
© 2018 MBSC Securities Corporation |
Dreyfus Variable Investment Fund, Growth and Income Portfolio
SEMIANNUAL REPORT June 30, 2018 |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of 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
With Those of Other Funds | |
in Affiliated Issuers | |
of the Fund’s Investment Advisory | |
Agreement |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF DREYFUS
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, 2018 through June 30, 2018. 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.
Volatility returned to the financial markets over the first half of 2018. Although stocks set a series of new record highs in January amid growing corporate earnings, reduced corporate tax rates and synchronized global economic growth, investors later grew nervous about rising interest rates, renewed inflationary pressures, escalating geopolitical tensions and the prospects of more protectionist U.S. trade policies. Consequently, U.S. stocks produced mildly positive returns over the reporting period. Meanwhile, bonds typically lost a degree of value over the first six months of the year due to rising interest rates and inflation concerns.
Despite the return of heightened market volatility, we believe that underlying market fundamentals remain sound. Ongoing economic growth, robust labor markets, rising corporate earnings and strong consumer and business confidence seem likely to support stock and corporate bond prices over the months ahead. Monetary policymakers have indicated that short-term interest rates probably will rise further, but U.S. government bond prices may already reflect those expectations. As always, we encourage you to discuss the risks and opportunities of today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee Laroche-Morris
President
The Dreyfus Corporation
July 16, 2018
2
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from January 1, 2018 through June 30, 2018, as provided by John Bailer and Elizabeth Slover, Portfolio Managers
Market and Fund Performance Overview
For the six-month period ended June 30, 2018, Dreyfus Variable Investment Fund, Growth and Income Portfolio’s Initial shares achieved a total return of 4.60%, and its Service shares achieved a total return of 4.46%.1 In comparison, the fund’s benchmark, the S&P 500® Index (the “Index”), produced a total return of 2.65% for the same period.2
U.S. stocks posted mild gains during the reporting period amid sustained economic growth, intensifying inflationary pressures, and international trade tensions. The fund outperformed the Index largely due to favorable security selections in the health care, information technology, consumer staples, industrials, and energy 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 its goal, 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 Index.
In selecting securities, we seek companies that possess some or all of the following characteristics: growth of earnings potential; operating margin improvement; revenue growth prospects; business improvement; good business fundamentals; dividend yield consistent with the fund’s strategy pertaining to income; value, or how a stock is priced relative to its perceived intrinsic worth; and healthy financial profile, which measures the financial well-being of the company.
The fund may use listed equity options to seek to enhance and/or mitigate risk. The fund will engage in “covered” option transactions where the fund has in its possession, for the duration of the strategy, the underlying physical asset or cash to satisfy any obligation the fund may have with respect to the option strategy.
Stocks Fluctuated Amid Uncertainty
A growing U.S. economy and business-friendly tax reforms drove U.S. stocks sharply higher in January 2018. However, stocks soon reversed course and volatility soared in response to rising wage pressures, which signaled a possible acceleration of inflation. Although the market recovered as these concerns eased, escalating political rhetoric regarding more protectionist U.S. trade policies soon sparked additional volatility.
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
Positive U.S. economic data continued to accrue during the second quarter of 2018. Stocks gradually recouped previously lost ground, but the market’s advance was constrained by concerns about U.S. tariffs on steel and aluminum imports, which were followed by retaliation from trading partners who threatened higher tariffs on a variety of U.S. exports. The industrials and materials sectors were hit particularly hard by escalating trade tensions. Some of the more interest rate-sensitive industry groups—such as the telecommunication services, consumer staples, and financials sectors—also trailed market averages. In contrast, information technology and consumer discretionary stocks fared relatively well.
Individual Stock Selections Drove Fund Outperformance
The fund’s stock selection strategy proved effective across a variety of industry groups. In the health care sector, the fund benefited from underweighted exposure to pharmaceutical and biotechnology companies vulnerable to pricing pressures. Instead, we focused on stronger-performing equipment and supply companies, such as IDEXX Laboratories, ABIOMED, Boston Scientific, and Becton Dickinson, as well as health care providers, such as WellCare Health Plans and UnitedHealth Group. Top performers in the information technology sector included software developers Fortinet and ServiceNow, Internet companies Twilio and Alphabet, and communications equipment makers Cisco Systems and Palo Alto Networks. Returns from consumer staples holdings benefited from underweighted positions in relatively weak tobacco and household products companies and overweighted exposure to food producer Kellogg. Among industrials companies, the fund deemphasized weaker-performing conglomerates, focusing instead on defense contractors such as Raytheon. In the energy sector, holdings leveraged to rising oil prices bolstered returns, including refiner Valero Energy and exploration-and-production company Hess Corporation. Overweighted exposure to Internet retailing giant Wayfair, Inc. also contributed positively to the fund’s relative performance.
On the other hand, the fund lagged the Index in the consumer discretionary sector, largely due to disappointing returns from discount retailer Dollar Tree. Other notable disappointments included asset management firm Ameriprise Financial and cable services provider Charter Communications.
Positioned for Further Gains
Despite rising interest rates and ongoing trade tensions, we believe the robust economy and lower corporate tax rates set the stage for stock market advances over the second half of 2018. Therefore, we have emphasized growth-oriented stocks in the information technology sector, and the fund holds mildly overweight exposure to industrials, energy and
4
telecommunication services stocks. In contrast, the fund holds underweighted exposure to the consumer staples, real estate, utilities and health care sectors.
July 16, 2018
1 Total return includes reinvestment of dividends and any capital gains paid. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. The fund’s performance does not reflect the deduction of additional charges and expenses imposed in connection with investing in variable insurance contracts, which will reduce returns.
2 Source: Lipper Inc. — The S&P 500® Index is widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization. Investors cannot invest directly in any index.
Please note: the position in any security highlighted with italicized typeface was sold during the reporting period.
Equities are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
The 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 those of 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.
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, 2018 to June 30, 2018. 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, 2018 | |||||||
|
|
|
| Initial Shares | Service Shares | ||
Expenses paid per $1,000† | $4.67 | $5.93 | |||||
Ending value (after expenses) | $1,046.00 | $1,044.60 |
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, 2018 | |||||||
|
|
|
| Initial Shares | Service Shares | ||
Expenses paid per $1,000† | $4.61 | $5.86 | |||||
Ending value (after expenses) | $1,020.23 | $1,018.99 |
† Expenses are equal to the fund’s annualized expense ratio of .92% for Initial shares and 1.17% for Service shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
6
STATEMENT OF INVESTMENTS
June 30, 2018 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 99.4% | |||||||
Automobiles & Components - 1.5% | |||||||
Aptiv | 4,230 | 387,595 | |||||
General Motors | 9,722 | 383,047 | |||||
Tesla | 1,446 | a,b | 495,906 | ||||
1,266,548 | |||||||
Banks - 8.4% | |||||||
Bank of America | 50,332 | 1,418,859 | |||||
BB&T | 18,110 | 913,468 | |||||
Citigroup | 10,120 | 677,230 | |||||
JPMorgan Chase & Co. | 18,032 | 1,878,934 | |||||
PNC Financial Services Group | 4,118 | 556,342 | |||||
SunTrust Banks | 6,020 | 397,440 | |||||
U.S. Bancorp | 8,328 | 416,567 | |||||
Wells Fargo & Co. | 16,578 | 919,084 | |||||
7,177,924 | |||||||
Capital Goods - 7.1% | |||||||
Dover | 2,646 | 193,687 | |||||
Fortive | 8,613 | 664,148 | |||||
Harris | 1,358 | 196,285 | |||||
Honeywell International | 9,176 | 1,321,803 | |||||
L3 Technologies | 2,269 | 436,374 | |||||
PACCAR | 7,012 | 434,464 | |||||
Quanta Services | 9,906 | b | 330,860 | ||||
Raytheon | 5,404 | 1,043,945 | |||||
United Technologies | 11,971 | 1,496,734 | |||||
6,118,300 | |||||||
Commercial & Professional Services - 1.1% | |||||||
Cintas | 2,529 | 468,042 | |||||
CoStar Group | 1,150 | b | 474,524 | ||||
942,566 | |||||||
Consumer Durables & Apparel - .4% | |||||||
PVH | 2,264 | 338,966 | |||||
Consumer Services - 1.4% | |||||||
Chipotle Mexican Grill | 731 | b | 315,331 | ||||
Las Vegas Sands | 11,308 | 863,479 | |||||
1,178,810 | |||||||
Diversified Financials - 5.2% | |||||||
Ameriprise Financial | 5,285 | 739,266 | |||||
Berkshire Hathaway, Cl. B | 9,621 | b | 1,795,760 | ||||
Capital One Financial | 2,209 | 203,007 | |||||
Goldman Sachs Group | 2,019 | 445,331 | |||||
Morgan Stanley | 8,514 | 403,564 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 99.4% (continued) | |||||||
Diversified Financials - 5.2% (continued) | �� | ||||||
Raymond James Financial | 3,173 | 283,508 | |||||
Voya Financial | 11,618 | a | 546,046 | ||||
4,416,482 | |||||||
Energy - 6.9% | |||||||
Anadarko Petroleum | 10,556 | 773,227 | |||||
Andeavor | 3,576 | 469,100 | |||||
Apergy | 6,913 | 288,618 | |||||
EOG Resources | 1,726 | 214,766 | |||||
Hess | 6,922 | 463,013 | |||||
Marathon Petroleum | 10,420 | 731,067 | |||||
Occidental Petroleum | 13,125 | 1,098,300 | |||||
Phillips 66 | 7,010 | 787,293 | |||||
Schlumberger | 4,258 | 285,414 | |||||
Valero Energy | 6,878 | 762,289 | |||||
5,873,087 | |||||||
Exchange-Traded Funds - .5% | |||||||
iShares Russell 1000 Value ETF | 3,452 | 419,004 | |||||
Food & Staples Retailing - 1.0% | |||||||
Costco Wholesale | 2,339 | 488,804 | |||||
CVS Health | 6,247 | 401,994 | |||||
890,798 | |||||||
Food, Beverage & Tobacco - 4.0% | |||||||
Coca-Cola | 4,513 | 197,940 | |||||
Coca-Cola European Partners | 5,030 | 204,419 | |||||
Conagra Brands | 13,936 | 497,933 | |||||
Kellogg | 13,257 | a | 926,267 | ||||
Kraft Heinz | 9,728 | 611,113 | |||||
Monster Beverage | 3,992 | b | 228,742 | ||||
PepsiCo | 7,359 | 801,174 | |||||
3,467,588 | |||||||
Health Care Equipment & Services - 7.9% | |||||||
Abbott Laboratories | 6,527 | 398,082 | |||||
ABIOMED | 1,214 | b | 496,587 | ||||
Becton Dickinson & Co. | 3,299 | 790,308 | |||||
Boston Scientific | 22,318 | b | 729,799 | ||||
Edwards Lifesciences | 3,155 | b | 459,274 | ||||
Humana | 1,419 | 422,337 | |||||
IDEXX Laboratories | 2,561 | b | 558,144 | ||||
McKesson | 1,385 | 184,759 | |||||
Quest Diagnostics | 3,221 | 354,117 | |||||
UnitedHealth Group | 7,077 | 1,736,271 | |||||
WellCare Health Plans | 2,446 | b | 602,303 | ||||
6,731,981 |
8
Description | Shares | Value ($) | |||||
Common Stocks - 99.4% (continued) | |||||||
Insurance - 2.3% | |||||||
American International Group | 9,550 | 506,341 | |||||
Assurant | 2,976 | 307,986 | |||||
Hartford Financial Services Group | 7,923 | 405,103 | |||||
Progressive | 12,383 | 732,454 | |||||
1,951,884 | |||||||
Materials - 5.5% | |||||||
CF Industries Holdings | 15,990 | 709,956 | |||||
DowDuPont | 12,538 | 826,505 | |||||
Freeport-McMoRan | 47,043 | 811,962 | |||||
Martin Marietta Materials | 2,812 | 628,004 | |||||
Mosaic | 11,162 | 313,094 | |||||
Praxair | 4,759 | 752,636 | |||||
Vulcan Materials | 4,906 | 633,168 | |||||
4,675,325 | |||||||
Media - 1.0% | |||||||
Comcast, Cl. A | 12,372 | 405,925 | |||||
Omnicom Group | 6,282 | a | 479,128 | ||||
885,053 | |||||||
Pharmaceuticals, Biotechnology & Life Sciences - 4.4% | |||||||
Biogen | 1,014 | b | 294,303 | ||||
BioMarin Pharmaceutical | 2,688 | b | 253,210 | ||||
Merck & Co. | 15,850 | 962,095 | |||||
Neurocrine Biosciences | 4,160 | a,b | 408,678 | ||||
Pfizer | 23,262 | 843,945 | |||||
Vertex Pharmaceuticals | 2,711 | b | 460,762 | ||||
Zoetis | 6,817 | 580,740 | |||||
3,803,733 | |||||||
Real Estate - 1.3% | |||||||
Lamar Advertising, Cl. A | 7,816 | c | 533,911 | ||||
Outfront Media | 17,848 | c | 347,144 | ||||
Uniti Group | 9,954 | a,c | 199,379 | ||||
1,080,434 | |||||||
Retailing - 5.9% | |||||||
Amazon.com | 1,722 | b | 2,927,056 | ||||
Home Depot | 5,272 | 1,028,567 | |||||
O'Reilly Automotive | 2,342 | b | 640,701 | ||||
Wayfair, Cl. A | 4,185 | a,b | 497,011 | ||||
5,093,335 | |||||||
Semiconductors & Semiconductor Equipment - 4.0% | |||||||
Broadcom | 5,061 | 1,228,001 | |||||
Microchip Technology | a | 0 | |||||
NVIDIA | 3,773 | 893,824 | |||||
QUALCOMM | 4,380 | 245,806 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 99.4% (continued) | |||||||
Semiconductors & Semiconductor Equipment - 4.0% (continued) | |||||||
Texas Instruments | 9,301 | 1,025,435 | |||||
3,393,066 | |||||||
Software & Services - 16.3% | |||||||
Activision Blizzard | 9,144 | 697,870 | |||||
Alphabet, Cl. C | 1,309 | b | 1,460,386 | ||||
Facebook, Cl. A | 11,310 | b | 2,197,759 | ||||
FleetCor Technologies | 2,095 | b | 441,312 | ||||
Fortinet | 5,405 | b | 337,434 | ||||
HubSpot | 2,292 | b | 287,417 | ||||
International Business Machines | 11,281 | 1,575,956 | |||||
Microsoft | 21,663 | 2,136,188 | |||||
Oracle | 9,177 | 404,339 | |||||
PayPal Holdings | 9,120 | b | 759,422 | ||||
salesforce.com | 5,594 | b | 763,022 | ||||
ServiceNow | 2,743 | b | 473,085 | ||||
Splunk | 3,290 | b | 326,072 | ||||
Square, Cl. A | 6,340 | a,b | 390,798 | ||||
Teradata | 8,458 | a,b | 339,589 | ||||
Twilio, Cl. A | 5,514 | b | 308,894 | ||||
Visa, Cl. A | 8,014 | 1,061,454 | |||||
13,960,997 | |||||||
Technology Hardware & Equipment - 6.1% | |||||||
Apple | 17,194 | 3,182,781 | |||||
Cisco Systems | 31,051 | 1,336,125 | |||||
Palo Alto Networks | 2,494 | b | 512,442 | ||||
Xerox | 6,711 | 161,064 | |||||
5,192,412 | |||||||
Telecommunication Services - 4.5% | |||||||
AT&T | 35,060 | 1,125,777 | |||||
T-Mobile US | 8,662 | b | 517,554 | ||||
Verizon Communications | 43,859 | 2,206,546 | |||||
3,849,877 | |||||||
Transportation - 1.7% | |||||||
Delta Air Lines | 11,390 | 564,261 | |||||
Union Pacific | 6,023 | 853,339 | |||||
1,417,600 | |||||||
Utilities - 1.0% | |||||||
FirstEnergy | 15,797 | a | 567,270 | ||||
PPL | 10,868 | 310,281 | |||||
877,551 | |||||||
Total Common Stocks (cost $63,472,693) | 85,003,321 |
10
Description | 7-Day | Shares | Value ($) | ||||
Other Investment - .7% | |||||||
Registered Investment Company; | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1.83 | 603,731 | d | 603,731 | |||
Investment of Cash Collateral for Securities Loaned - 1.4% | |||||||
Registered Investment Company; | |||||||
Dreyfus Institutional Preferred Government Money Market Fund, Institutional Shares | 1.85 | 1,188,932 | d | 1,188,932 | |||
Total Investments (cost $65,265,356) | 101.5% | 86,795,984 | |||||
Liabilities, Less Cash and Receivables | (1.5%) | (1,273,882) | |||||
Net Assets | 100.0% | 85,522,102 |
ETF—Exchange-Traded Fund
a Security, or portion thereof, on loan. At June 30, 2018, the value of the fund’s securities on loan was $4,420,685 and the value of the collateral held by the fund was $4,780,341, consisting of cash collateral of $1,188,932 and U.S. Government & Agency securities valued at $3,591,409.
b Non-income producing security.
c Investment in real estate investment trust.
d Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the respective investment company’s prospectus.
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Portfolio Summary (Unaudited) † | Value (%) |
Software & Services | 16.3 |
Banks | 8.4 |
Health Care Equipment & Services | 7.9 |
Capital Goods | 7.1 |
Energy | 6.9 |
Technology Hardware & Equipment | 6.1 |
Retailing | 5.9 |
Materials | 5.5 |
Diversified Financials | 5.2 |
Telecommunication Services | 4.5 |
Pharmaceuticals, Biotechnology & Life Sciences | 4.4 |
Food, Beverage & Tobacco | 4.0 |
Semiconductors & Semiconductor Equipment | 4.0 |
Insurance | 2.3 |
Money Market Investments | 2.1 |
Transportation | 1.7 |
Automobiles & Components | 1.5 |
Consumer Services | 1.4 |
Real Estate | 1.3 |
Commercial & Professional Services | 1.1 |
Food & Staples Retailing | 1.0 |
Media | 1.0 |
Utilities | 1.0 |
Exchange-Traded Funds | .5 |
Consumer Durables & Apparel | .4 |
101.5 |
† Based on net assets.
See notes to financial statements.
12
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS (Unaudited)
Registered Investment Companies | Value | Purchases ($) | Sales ($) | Value | Net | Dividends/ |
Dreyfus Institutional Preferred Government Money Market Fund, Institutional Shares | 2,023,897 | 7,541,765 | 8,376,730 | 1,188,932 | 1.4 | — |
Dreyfus Institutional Preferred Government Plus Money Market Fund | 439,494 | 11,182,224 | 11,017,987 | 603,731 | .7 | 5,534 |
Total | 2,463,391 | 18,723,989 | 19,394,717 | 1,792,663 | 2.1 | 5,534 |
See notes to financial statements.
13
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2018 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 63,472,693 |
| 85,003,321 |
| ||
Affiliated issuers |
| 1,792,663 |
| 1,792,663 |
| |
Cash |
|
|
|
| 8,326 |
|
Receivable for investment securities sold |
| 516,576 |
| |||
Dividends and securities lending income receivable |
| 43,377 |
| |||
Prepaid expenses |
|
|
|
| 1,425 |
|
|
|
|
|
| 87,365,688 |
|
Liabilities ($): |
|
|
|
| ||
Due to The Dreyfus Corporation and affiliates—Note 3(b) |
|
|
| 66,214 |
| |
Liability for securities on loan—Note 1(b) |
| 1,188,932 |
| |||
Payable for investment securities purchased |
| 507,499 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 55,097 |
| |||
Trustees fees and expenses payable |
| 524 |
| |||
Accrued expenses |
|
|
|
| 25,320 |
|
|
|
|
|
| 1,843,586 |
|
Net Assets ($) |
|
| 85,522,102 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 59,736,321 |
|
Accumulated undistributed investment income—net |
| 123,161 |
| |||
Accumulated net realized gain (loss) on investments |
|
|
|
| 4,131,992 |
|
Accumulated net unrealized appreciation (depreciation) |
| 21,530,628 |
| |||
Net Assets ($) |
|
| 85,522,102 |
|
Net Asset Value Per Share | Initial Shares | Service Shares |
|
Net Assets ($) | 80,609,752 | 4,912,350 |
|
Shares Outstanding | 2,610,015 | 158,806 |
|
Net Asset Value Per Share ($) | 30.88 | 30.93 |
|
See notes to financial statements. |
14
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2018 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends: |
| |||||
Unaffiliated issuers |
|
| 752,676 |
| ||
Affiliated issuers |
|
| 5,534 |
| ||
Income from securities lending—Note 1(b) |
|
| 6,017 |
| ||
Total Income |
|
| 764,227 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 323,255 |
| ||
Professional fees |
|
| 43,754 |
| ||
Distribution fees—Note 3(b) |
|
| 6,275 |
| ||
Prospectus and shareholders’ reports |
|
| 6,153 |
| ||
Custodian fees—Note 3(b) |
|
| 4,670 |
| ||
Trustees’ fees and expenses—Note 3(c) |
|
| 3,857 |
| ||
Loan commitment fees—Note 2 |
|
| 1,005 |
| ||
Shareholder servicing costs—Note 3(b) |
|
| 370 |
| ||
Miscellaneous |
|
| 15,255 |
| ||
Total Expenses |
|
| 404,594 |
| ||
Less—reduction in fees due to earnings credits—Note 3(b) |
|
| (31) |
| ||
Net Expenses |
|
| 404,563 |
| ||
Investment Income—Net |
|
| 359,664 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 4,535,000 |
| ||||
Net unrealized appreciation (depreciation) on investments |
|
| (1,031,837) |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 3,503,163 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 3,862,827 |
| |||
See notes to financial statements. |
15
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 359,664 |
|
|
| 693,408 |
| |
Net realized gain (loss) on investments |
| 4,535,000 |
|
|
| 7,904,298 |
| ||
Net unrealized appreciation (depreciation) |
| (1,031,837) |
|
|
| 6,378,459 |
| ||
Net Increase (Decrease) in Net Assets | 3,862,827 |
|
|
| 14,976,165 |
| |||
Distributions to Shareholders from ($): |
| ||||||||
Investment income—net: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (327,492) |
|
|
| (575,664) |
| |
Service Shares |
|
| (13,601) |
|
|
| (26,116) |
| |
Net realized gain on investments: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (7,425,461) |
|
|
| (3,384,893) |
| |
Service Shares |
|
| (452,886) |
|
|
| (241,113) |
| |
Total Distributions |
|
| (8,219,440) |
|
|
| (4,227,786) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 1,037,922 |
|
|
| 3,050,148 |
| |
Service Shares |
|
| 11,106 |
|
|
| 267,978 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 7,752,953 |
|
|
| 3,960,557 |
| |
Service Shares |
|
| 466,487 |
|
|
| 267,229 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (6,144,005) |
|
|
| (9,798,754) |
| |
Service Shares |
|
| (622,038) |
|
|
| (1,199,596) |
| |
Increase (Decrease) in Net Assets | 2,502,425 |
|
|
| (3,452,438) |
| |||
Total Increase (Decrease) in Net Assets | (1,854,188) |
|
|
| 7,295,941 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 87,376,290 |
|
|
| 80,080,349 |
| |
End of Period |
|
| 85,522,102 |
|
|
| 87,376,290 |
| |
Undistributed investment income—net | 123,161 |
|
|
| 104,590 |
| |||
Capital Share Transactions (Shares): |
| ||||||||
Initial Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 32,257 |
|
|
| 100,546 |
| |
Shares issued for distributions reinvested |
|
| 263,469 |
|
|
| 135,968 |
| |
Shares redeemed |
|
| (194,080) |
|
|
| (324,338) |
| |
Net Increase (Decrease) in Shares Outstanding | 101,646 |
|
|
| (87,824) |
| |||
Service Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 360 |
|
|
| 8,785 |
| |
Shares issued for distributions reinvested |
|
| 15,831 |
|
|
| 9,184 |
| |
Shares redeemed |
|
| (19,339) |
|
|
| (39,159) |
| |
Net Increase (Decrease) in Shares Outstanding | (3,148) |
|
|
| (21,190) |
| |||
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, 2018 | Year Ended December 31, | ||||||||
Initial Shares | (Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||
Per Share Data ($): | |||||||||
Net asset value, | 32.72 | 28.81 | 29.98 | 32.68 | 29.92 | 22.07 | |||
Investment Operations: | |||||||||
Investment income—neta | .14 | .26 | .33 | .26 | .24 | .23 | |||
Net realized and unrealized | 1.19 | 5.22 | 2.27 | .28 | 2.77 | 7.86 | |||
Total from Investment Operations | 1.33 | 5.48 | 2.60 | .54 | 3.01 | 8.09 | |||
Distributions: | |||||||||
Dividends from | (.13) | (.23) | (.34) | (.27) | (.25) | (.24) | |||
Dividends from net realized | (3.04) | (1.34) | (3.43) | (2.97) | – | – | |||
Total Distributions | (3.17) | (1.57) | (3.77) | (3.24) | (.25) | (.24) | |||
Net asset value, end of period | 30.88 | 32.72 | 28.81 | 29.98 | 32.68 | 29.92 | |||
Total Return (%) | 4.60b | 19.71 | 10.04 | 1.59 | 10.07 | 36.78 | |||
Ratios/Supplemental Data (%): | |||||||||
Ratio of total expenses | .92c | .90 | .90 | .88 | .87 | .89 | |||
Ratio of net expenses | .92c | .90 | .90 | .88 | .87 | .89 | |||
Ratio of net investment income | .85c | .85 | 1.17 | .84 | .78 | .91 | |||
Portfolio Turnover Rate | 35.63b | 61.00 | 64.41 | 62.03 | 51.99 | 50.46 | |||
Net Assets, end of period ($ x 1,000) | 80,610 | 82,070 | 74,797 | 78,296 | 85,534 | 84,479 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
17
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | ||||||||||
June 30, 2018 | Year Ended December 31, | |||||||||
Service Shares | (Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | ||||
Per Share Data ($): | ||||||||||
Net asset value, | 32.76 | 28.85 | 30.01 | 32.71 | 29.94 | 22.09 | ||||
Investment Operations: | ||||||||||
Investment income—neta | .09 | .18 | .25 | .18 | .16 | .17 | ||||
Net realized and unrealized | 1.21 | 5.22 | 2.29 | .27 | 2.78 | 7.85 | ||||
Total from Investment Operations | 1.30 | 5.40 | 2.54 | .45 | 2.94 | 8.02 | ||||
Distributions: | ||||||||||
Dividends from | (.09) | (.15) | (.27) | (.18) | (.17) | (.17) | ||||
Dividends from net | (3.04) | (1.34) | (3.43) | (2.97) | – | – | ||||
Total Distributions | (3.13) | (1.49) | (3.70) | (3.15) | (.17) | (.17) | ||||
Net asset value, end of period | 30.93 | 32.76 | 28.85 | 30.01 | 32.71 | 29.94 | ||||
Total Return (%) | 4.46b | 19.38 | 9.78 | 1.32 | 9.83 | 36.43 | ||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | 1.17c | 1.15 | 1.15 | 1.13 | 1.12 | 1.14 | ||||
Ratio of net expenses | 1.17c | 1.15 | 1.15 | 1.13 | 1.12 | 1.14 | ||||
Ratio of net investment income | .60c | .60 | .92 | .59 | .52 | .65 | ||||
Portfolio Turnover Rate | 35.63b | 61.00 | 64.41 | 62.03 | 51.99 | 50.46 | ||||
Net Assets, end of period ($ x 1,000) | 4,912 | 5,306 | 5,283 | 5,739 | 7,162 | 8,051 |
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 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 is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’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
19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in 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
20
the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Trustees (the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of June 30, 2018 in valuing the fund’s investments:
Level 1-Unadjusted Quoted Prices | Level 2-Other Significant Observable Inputs | Level 3-Significant Unobservable Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities—Domestic Common Stocks† | 84,379,898 | – | – | 84,379,898 |
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Level 1-Unadjusted Quoted Prices | Level 2-Other Significant Observable Inputs | Level 3-Significant Unobservable Inputs | Total | |
Assets ($) | ||||
Equity Securities—Foreign Common Stocks† | 204,419 | – | – | 204,419 |
Exchange-Traded Funds | 419,004 | – | – | 419,004 |
Registered Investment Companies | 1,792,663 | – | – | 1,792,663 |
† See Statement of Investments for additional detailed categorizations.
At June 30, 2018, there were no transfers between levels of the fair value hierarchy. It is the fund’s policy to recognize transfers between levels at the end of the reporting period.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of 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. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended June 30, 2018, The Bank of New York Mellon earned $1,218 from lending portfolio securities, pursuant to the securities lending agreement.
22
(c) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act.
(d) Dividends and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net 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, 2018, 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, 2018, the fund did not incur any interest or penalties.
Each tax year in the three year period ended December 31, 2017 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, 2017 was as follows: ordinary income $601,780 and long-term capital gains $3,626,006. 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 an $830 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.
23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
During the period ended June 30, 2018, 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, 2018, Service shares were charged $6,275 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, 2018, the fund was charged $211 for transfer agency services and $31 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were offset by earnings credits of $31.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended June 30, 2018, the fund was charged $4,670 pursuant to the custody agreement.
24
During the period ended June 30, 2018, the fund was charged $6,320 for services performed by the Chief Compliance Officer and his staff. These fees are included in Miscellaneous in the Statement of Operations.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $53,711, Distribution Plan fees $1,031, custodian fees $5,000, Chief Compliance Officer fees $6,320 and transfer agency fees $152.
(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, 2018, amounted to $30,627,676 and $36,182,071, respectively.
At June 30, 2018, accumulated net unrealized appreciation on investments was $21,530,628, consisting of $22,657,766 gross unrealized appreciation and $1,127,138 gross unrealized depreciation.
At June 30, 2018, 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).
25
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 14-15, 2018, 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. Board also considered portfolio management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended December 31, 2017, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
26
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 considered that performance generally should be considered over longer periods of time, although it is possible that long-term performance can be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect disproportionately long-term performance. The Board discussed with representatives of Dreyfus and/or its affiliates the results of the comparisons and considered that the fund’s total return performance was below the Performance Group and Performance Universe medians for all periods, except for the five-year period when it was above the Performance Group and Performance Universe medians and the ten-year period when it was at the Performance Group median and above the Performance Universe median. The Board considered the relative proximity of the fund’s performance to the Performance Group and/or Performance Universe median in certain periods when performance was below median. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was considered that the fund’s returns were above the returns of the index in five of the ten calendar years shown.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that: the fund’s contractual management fee was 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 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.
27
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement, considered in relation to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Dreyfus representatives stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also stated 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 took into consideration the soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by Dreyfus are adequate and appropriate.
· The Board expressed concern with the fund’s performance in recent periods and agreed to closely monitor performance.
· The Board concluded that the fee paid to Dreyfus continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to 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 Dreyfus and the services provided to the fund by Dreyfus. The Board also relied on information received on a routine and
28
regular basis throughout the year relating to the operations of the fund and the investment management and other services provided under the Agreement, including information on the investment performance of the fund in comparison to similar mutual funds and benchmark performance indices; general market outlook as applicable to the fund; and compliance reports. In addition, the Board’s consideration of the contractual fee arrangements for this fund had the benefit of a number of years of reviews of the Agreement for the fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, 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 fund’s arrangements, or substantially similar arrangements for other Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreement.
29
Dreyfus Variable Investment Fund, Growth and Income Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
Telephone 1-800-258-4260 or 1-800-258-4261
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 Attn: Institutional Services Department
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
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, D.C. 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.
© 2018 MBSC Securities Corporation |
Dreyfus Variable Investment Fund, International Equity Portfolio
SEMIANNUAL REPORT June 30, 2018 |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of 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
With Those of Other Funds | |
in Affiliated Issuers | |
Currency Exchange Contracts | |
the Fund’s Investment Advisory | |
and Sub-Investment Advisory | |
Agreements |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF DREYFUS
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, 2018 through June 30, 2018. 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.
Volatility returned to the financial markets over the first half of 2018. Although stocks set a series of new record highs in January amid growing corporate earnings, reduced corporate tax rates and synchronized global economic growth, investors later grew nervous about rising interest rates, renewed inflationary pressures, escalating geopolitical tensions and the prospects of more protectionist U.S. trade policies. Consequently, U.S. stocks produced mildly positive returns over the reporting period. Meanwhile, bonds typically lost a degree of value over the first six months of the year due to rising interest rates and inflation concerns.
Despite the return of heightened market volatility, we believe that underlying market fundamentals remain sound. Ongoing economic growth, robust labor markets, rising corporate earnings and strong consumer and business confidence seem likely to support stock and corporate bond prices over the months ahead. Monetary policymakers have indicated that short-term interest rates probably will rise further, but U.S. government bond prices may already reflect those expectations. As always, we encourage you to discuss the risks and opportunities of today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee Laroche-Morris
President
The Dreyfus Corporation
July 16, 2018
2
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from January 1, 2018 through June 30, 2018, as provided by the fund’s primary portfolio managers, Paul Markham, Jeff Munroe, and Yuko Takano of Newton Investment Management (North America) Limited, Sub-Investment Adviser
Market and Fund Performance Overview
For the six-month period ended June 30, 2018, Dreyfus Variable Investment Fund, International Equity Portfolio’s Initial Shares produced a total return of -3.74%, and its Service Shares produced a total return of -3.85%.1 This compares with a -2.75% return produced by the fund’s benchmark, the MSCI EAFE Index (the “Index”), for the same period.2
International equities lost value over the reporting period amid rising interest rates and more protectionist U.S. trade policies. Shortfalls in the health care and utilities sectors dampened the fund’s results compared to the Index.
The Fund’s Investment Approach
The fund seeks capital growth by investing at least 80% of its net assets 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. As of the end of the reporting period, such themes included debt burden, which asserts that certain economies and institutions need to reduce their budget deficits and debt obligations, which jeopardizes their economic prospects (and provided the rationale for the portfolio’s underweighted exposure during the reporting period to the financials 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 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.
Rising Volatility Amid Political Worries
The first quarter of 2018 witnessed the return of volatility to international stock markets. Equities came under pressure towards the end of January in an environment of rising government-bond yields. Following a brief period of stabilization, equity markets again succumbed to downward pressures, this time due to the Trump administration’s move to impose tariffs on aluminum and steel imports.
The second quarter of the year was equally volatile as President Trump stepped up his protectionist rhetoric on trade. Italy was another focus of investors’ attention when a constitutional crisis in May briefly roiled markets. Against this more febrile political backdrop, global macroeconomic conditions appeared somewhat less buoyant and synchronized than at the start of 2018.
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
Security Selections Dampened Fund Results
The fund lagged the Index over the reporting period, mainly due to stock selection shortfalls in the health care and utilities sectors. An overweighted position in financial stocks and lack of exposure to utilities also detracted from relative performance.
A number of individual holdings proved disappointing. After we added French insurer AXA to the fund’s portfolio in January, investors reacted negatively to the announced acquisition of XL Catlin, the reinsurance and specialty commercial lines insurer. Deutsche Post reported mixed results due to weakness in its Post and Parcel division stemming from cost increases in Germany. Japanese industrial machinery producer Ebara also issued a disappointing set of results, as the company’s sales and profit margins were constrained by a delay in the oil-and-gas-related recovery. Rising bond yields proved detrimental to U.K.-based wireless carrier Vodafone Group owing to the narrowing yield differences between sovereign bonds and the company’s dividend. The stock was also hurt by concerns surrounding the acquisition of assets from Liberty Global.
The fund achieved better results from the information technology, consumer staples, and real estate sectors. In addition, Japan yielded a number of top performers. Information technology staffing business TechnoPro Holdings gained momentum amid favorable labor-market conditions. Meanwhile, pharmacy operator Sugi Holdings fared well by demonstrating its execution capabilities as medical costs increased. Finally, Holland-based publisher Wolters Kluwer moved higher after exhibiting better-than-expected organic sales growth.
Finding Opportunities in Volatile Markets
As of midyear, interest rates were rising, debt burdens remain high, and equity valuations were elevated, leaving little margin for error in the appraisal of risks versus prospective rewards. However, more volatile market conditions may provide greater opportunities as well as elevated risks. We intend to continue to invest in companies where we anticipate growth expectations will be achieved and where valuations are reflective of the wider environment. We have identified an ample number of opportunities meeting our criteria in the financials and information technology sectors, but relatively few in the materials, utilities, and health care sectors.
July 16, 2018
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 MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. Investors cannot invest directly in any index.
Equities are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
The fund’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 those of 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.
4
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, 2018 to June 30, 2018. 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, 2018 | |||||||
|
|
| Initial Shares | Service Shares | |||
Expenses paid per $1,000† | $6.67 | $7.88 | |||||
Ending value (after expenses) | $962.60 | $961.50 |
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, 2018 | |||||||
|
|
| Initial Shares | Service Shares | |||
Expenses paid per $1,000† | $6.85 | $8.10 | |||||
Ending value (after expenses) | $1,018.00 | $1,016.76 |
† Expenses are equal to the fund’s annualized expense ratio of 1.37% for Initial shares and 1.62% for Service shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
June 30, 2018 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 97.6% | |||||||
Australia - .9% | |||||||
Dexus | 44,672 | 321,008 | |||||
China - 1.0% | |||||||
Baidu, ADR | 1,359 | a | 330,237 | ||||
France - 7.0% | |||||||
AXA | 23,446 | 575,396 | |||||
BNP Paribas | 11,750 | 729,855 | |||||
Total | 9,012 | 549,470 | |||||
Vivendi | 20,542 | 503,768 | |||||
2,358,489 | |||||||
Georgia - .8% | |||||||
TBC Bank Group | 11,716 | 269,970 | |||||
Germany - 8.0% | |||||||
Deutsche Post | 10,123 | 330,652 | |||||
Deutsche Wohnen-BR | 5,156 | 249,277 | |||||
Hella KGaA & Co. | 9,595 | 537,843 | |||||
Infineon Technologies | 20,732 | 528,523 | |||||
LEG Immobilien | 4,366 | 474,580 | |||||
SAP | 5,042 | 582,623 | |||||
2,703,498 | |||||||
Hong Kong - 3.7% | |||||||
AIA Group | 106,000 | 926,838 | |||||
Man Wah Holdings | 405,200 | 318,144 | |||||
1,244,982 | |||||||
India - 1.7% | |||||||
HDFC Bank, ADR | 5,559 | 583,806 | |||||
Ireland - 3.8% | |||||||
AIB Group | 100,960 | 548,241 | |||||
CRH | 20,529 | 724,741 | |||||
1,272,982 | |||||||
Japan - 33.0% | |||||||
Don Quijote Holdings | 13,900 | 667,913 | |||||
Ebara | 19,800 | 616,095 | |||||
FANUC | 1,700 | 337,881 | |||||
Invincible Investment | 1,126 | 507,496 | |||||
Japan Airlines | 14,036 | 497,976 | |||||
Japan Tobacco | 25,800 | 721,230 | |||||
M3 | 9,200 | 366,870 | |||||
Macromill | 13,600 | 334,733 | |||||
Mitsubishi UFJ Financial Group | 89,400 | 509,600 | |||||
Recruit Holdings | 19,805 | 548,454 | |||||
Seven & i Holdings | 7,900 | 344,713 |
6
Description | Shares | Value ($) | |||||
Common Stocks - 97.6% (continued) | |||||||
Japan - 33.0% (continued) | |||||||
Skylark | 21,800 | 322,722 | |||||
SoftBank Group | 7,600 | 547,304 | |||||
Sony | 24,600 | 1,258,496 | |||||
Sugi Holdings | 12,000 | 694,757 | |||||
Suntory Beverage & Food | 7,200 | 307,601 | |||||
Suzuki Motor | 8,200 | 453,124 | |||||
TechnoPro Holdings | 21,300 | 1,310,148 | |||||
Topcon | 23,400 | 401,572 | |||||
Yokogawa Electric | 23,400 | 416,789 | |||||
11,165,474 | |||||||
Netherlands - 6.2% | |||||||
Royal Dutch Shell, Cl. B | 30,376 | 1,087,807 | |||||
Wolters Kluwer | 17,896 | 1,008,584 | |||||
2,096,391 | |||||||
Norway - 1.6% | |||||||
DNB | 27,528 | 538,436 | |||||
Portugal - 1.0% | |||||||
Galp Energia | 18,401 | 351,018 | |||||
South Korea - 1.6% | |||||||
Samsung SDI | 2,877 | 552,425 | |||||
Switzerland - 9.9% | |||||||
Credit Suisse Group | 43,014 | a | 649,358 | ||||
Ferguson | 10,864 | 881,729 | |||||
Novartis | 9,017 | 685,449 | |||||
Roche Holding | 2,932 | 652,987 | |||||
Zurich Insurance Group | 1,627 | 483,188 | |||||
3,352,711 | |||||||
United Kingdom - 17.4% | |||||||
Anglo American | 14,651 | 327,700 | |||||
Associated British Foods | 12,636 | 456,598 | |||||
Barclays | 308,261 | 768,903 | |||||
Diageo | 10,456 | 375,617 | |||||
GlaxoSmithKline | 26,949 | 544,087 | |||||
Prudential | 25,680 | 587,842 | |||||
RELX | 16,591 | 353,884 | |||||
Royal Bank of Scotland Group | 347,168 | a | 1,173,385 | ||||
Unilever | 10,945 | 610,768 | |||||
Vodafone Group | 286,223 | 694,366 | |||||
5,893,150 | |||||||
Total Common Stocks (cost $30,066,344) | 33,034,577 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Preferred Dividend | |||||||
Preferred Stocks - 1.6% | |||||||
Germany - 1.6% | |||||||
Volkswagen | 2.76 | 3,186 | 529,146 | ||||
7-Day | |||||||
Other Investment - .4% | |||||||
Registered Investment Company; | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1.83 | 155,110 | b | 155,110 | |||
Total Investments (cost $30,728,089) | 99.6% | 33,718,833 | |||||
Cash and Receivables (Net) | .4% | 140,805 | |||||
Net Assets | 100.0% | 33,859,638 |
ADR—American Depository Receipt
BR—Bearer Certificate
a Non-income producing security.
b Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the respective investment company’s prospectus.
Portfolio Summary (Unaudited) † | Value (%) |
Financial | 24.6 |
Consumer Goods | 16.4 |
Consumer Services | 15.1 |
Industrial | 13.0 |
Technology | 8.1 |
Health Care | 6.8 |
Oil & Gas | 5.9 |
Real Estate | 4.6 |
Telecommunications | 3.7 |
Basic Materials | 1.0 |
Money Market Investment | .4 |
99.6 |
† Based on net assets.
See notes to financial statements.
8
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS (Unaudited)
Registered Investment Company | Value | Purchases($) | Sales($) | Value | Net | Dividends/ |
Dreyfus Institutional Preferred Government Plus Money Market Fund | 161,206 | 4,558,243 | 4,564,339 | 155,110 | .4 | 4,546 |
See notes to financial statements.
9
STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS June 30, 2018 (Unaudited)
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation)($) |
Citigroup | |||||
United States Dollar | 1,430,265 | British Pound | 1,051,000 | 8/16/18 | 40,112 |
State Street Bank and Trust Co | |||||
Japanese Yen | 20,330 | United States Dollar | 185 | 7/3/18 | (1) |
United States Dollar | 3,120 | Japanese Yen | 344,250 | 7/2/18 | 11 |
Gross Unrealized Appreciation | 40,123 | ||||
Gross Unrealized Depreciation | (1) |
See notes to financial statements.
10
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2018 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments: |
|
|
| |||
Unaffiliated issuers | 30,572,979 |
| 33,563,723 |
| ||
Affiliated issuers |
| 155,110 |
| 155,110 |
| |
Cash |
|
|
|
| 4,467 |
|
Cash denominated in foreign currency |
|
| 16,933 |
| 16,858 |
|
Dividends receivable |
| 149,981 |
| |||
Tax reclaim receivable |
| 101,654 |
| |||
Unrealized appreciation on forward foreign |
| 40,123 |
| |||
Prepaid expenses |
|
|
|
| 534 |
|
|
|
|
|
| 34,032,450 |
|
Liabilities ($): |
|
|
|
| ||
Due to The Dreyfus Corporation and affiliates—Note 3(b) |
|
|
| 36,651 |
| |
Payable for investment securities purchased |
| 52,596 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 36,407 |
| |||
Trustees fees and expenses payable |
| 107 |
| |||
Unrealized depreciation on forward foreign |
| 1 |
| |||
Accrued expenses |
|
|
|
| 47,050 |
|
|
|
|
|
| 172,812 |
|
Net Assets ($) |
|
| 33,859,638 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 28,834,486 |
|
Accumulated undistributed investment income—net |
| 233,995 |
| |||
Accumulated net realized gain (loss) on investments |
|
|
|
| 1,764,283 |
|
Accumulated net unrealized appreciation (depreciation) |
| 3,026,874 |
| |||
Net Assets ($) |
|
| 33,859,638 |
|
Net Asset Value Per Share | Initial Shares | Service Shares |
|
Net Assets ($) | 26,947,951 | 6,911,687 |
|
Shares Outstanding | 1,335,718 | 342,547 |
|
Net Asset Value Per Share ($) | 20.17 | 20.18 |
|
See notes to financial statements. |
11
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2018 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends (net of $56,631 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 574,848 |
| ||
Affiliated issuers |
|
| 4,546 |
| ||
Total Income |
|
| 579,394 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 134,107 |
| ||
Professional fees |
|
| 63,905 |
| ||
Prospectus and shareholders’ reports |
|
| 17,367 |
| ||
Distribution fees—Note 3(b) |
|
| 9,355 |
| ||
Custodian fees—Note 3(b) |
|
| 7,989 |
| ||
Trustees’ fees and expenses—Note 3(c) |
|
| 1,463 |
| ||
Loan commitment fees—Note 2 |
|
| 295 |
| ||
Shareholder servicing costs—Note 3(b) |
|
| 166 |
| ||
Miscellaneous |
|
| 19,824 |
| ||
Total Expenses |
|
| 254,471 |
| ||
Less—reduction in fees due to earnings credits—Note 3(b) |
|
| (15) |
| ||
Net Expenses |
|
| 254,456 |
| ||
Investment Income—Net |
|
| 324,938 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions | 1,903,443 |
| ||||
Net realized gain (loss) on forward foreign currency exchange contracts | (138,820) |
| ||||
Net Realized Gain (Loss) |
|
| 1,764,623 |
| ||
Net unrealized appreciation (depreciation) on investments |
|
| (3,446,385) |
| ||
Net unrealized appreciation (depreciation) on |
|
| 39,316 |
| ||
Net Unrealized Appreciation (Depreciation) |
|
| (3,407,069) |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (1,642,446) |
| ||
Net Increase from Payment by Affiliate |
|
| 198 |
| ||
Net (Decrease) in Net Assets Resulting from Operations |
| (1,317,310) |
| |||
See notes to financial statements. |
12
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 324,938 |
|
|
| 318,330 |
| |
Net realized gain (loss) on investments |
| 1,764,623 |
|
|
| 1,682,229 |
| ||
Net unrealized appreciation (depreciation) |
| (3,407,069) |
|
|
| 6,290,600 |
| ||
Net increase from payment by affiliate |
| 198 |
|
|
| 4,470 |
| ||
Net Increase (Decrease) in Net Assets | (1,317,310) |
|
|
| 8,295,629 |
| |||
Distributions to Shareholders from ($): |
| ||||||||
Investment income—net: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (343,225) |
|
|
| (280,462) |
| |
Service Shares |
|
| (73,009) |
|
|
| (61,227) |
| |
Total Distributions |
|
| (416,234) |
|
|
| (341,689) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 933,622 |
|
|
| 1,710,528 |
| |
Service Shares |
|
| 368,739 |
|
|
| 579,595 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 343,225 |
|
|
| 280,462 |
| |
Service Shares |
|
| 73,009 |
|
|
| 61,227 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (1,982,182) |
|
|
| (3,712,719) |
| |
Service Shares |
|
| (939,829) |
|
|
| (2,104,373) |
| |
Increase (Decrease) in Net Assets | (1,203,416) |
|
|
| (3,185,280) |
| |||
Total Increase (Decrease) in Net Assets | (2,936,960) |
|
|
| 4,768,660 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 36,796,598 |
|
|
| 32,027,938 |
| |
End of Period |
|
| 33,859,638 |
|
|
| 36,796,598 |
| |
Undistributed investment income—net | 233,995 |
|
|
| 325,291 |
| |||
Capital Share Transactions (Shares): |
| ||||||||
Initial Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 44,321 |
|
|
| 89,932 |
| |
Shares issued for distributions reinvested |
|
| 16,383 |
|
|
| 15,783 |
| |
Shares redeemed |
|
| (93,719) |
|
|
| (195,697) |
| |
Net Increase (Decrease) in Shares Outstanding | (33,015) |
|
|
| (89,982) |
| |||
Service Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 17,314 |
|
|
| 30,986 |
| |
Shares issued for distributions reinvested |
|
| 3,481 |
|
|
| 3,442 |
| |
Shares redeemed |
|
| (44,437) |
|
|
| (111,339) |
| |
Net Increase (Decrease) in Shares Outstanding | (23,642) |
|
|
| (76,911) |
| |||
See notes to financial statements. |
13
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, 2018 | Year Ended December 31, | |||||
Initial Shares | (Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 21.21 | 16.85 | 18.00 | 18.35 | 19.28 | 16.86 |
Investment Operations: | ||||||
Investment income—neta | .20 | .19 | .22 | .21 | .46 | .27 |
Net realized and unrealized | (.98) | 4.37 | (1.23) | .07 | (.96) | 2.66 |
Total from Investment Operations | (.78) | 4.56 | (1.01) | .28 | (.50) | 2.93 |
Distributions: | ||||||
Dividends from | (.26) | (.20) | (.16) | (.63) | (.43) | (.51) |
Payment by affiliate | .00b,c | .00b,c | .02c | - | - | - |
Net asset value, end of period | 20.17 | 21.21 | 16.85 | 18.00 | 18.35 | 19.28 |
Total Return (%) | (3.74)c,d | 27.32c | (5.54)c | 1.38 | (2.65) | 17.74 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.37e | 1.14 | 1.17 | 1.14 | 1.08 | 1.11 |
Ratio of net expenses | 1.37e | 1.14 | 1.17 | 1.14 | 1.08 | 1.11 |
Ratio of net investment income | 1.87e | .97 | 1.28 | 1.13 | 2.44 | 1.49 |
Portfolio Turnover Rate | 17.29d | 28.36 | 36.91 | 32.28 | 44.96 | 48.07 |
Net Assets, end of period ($ x 1,000) | 26,948 | 29,037 | 24,574 | 28,330 | 29,731 | 32,192 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c In 2018, 2017 and 2016, the fund received proceeds from a class action settlement from The Bank of New York Mellon Corporation. In 2018 and 2017, this payment had no impact on total return. In 2016, the total return would have been (5.65%) had payment not been made by The Bank of New York Mellon Corporation.
d Not annualized.
e Annualized.
See notes to financial statements.
14
Six Months Ended | ||||||
June 30, 2018 | Year Ended December 31, | |||||
Service Shares | (Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 21.19 | 16.82 | 17.97 | 18.31 | 19.24 | 16.83 |
Investment Operations: | ||||||
Investment income—neta | .17 | .14 | .18 | .17 | .42 | .23 |
Net realized and unrealized | (.98) | 4.38 | (1.24) | .07 | (.97) | 2.65 |
Total from Investment Operations | (.81) | 4.52 | (1.06) | .24 | (.55) | 2.88 |
Distributions: | ||||||
Dividends from | (.20) | (.15) | (.11) | (.58) | (.38) | (.47) |
Payment by affiliate | .00b,c | .00b,c | .02c | - | - | - |
Net asset value, end of period | 20.18 | 21.19 | 16.82 | 17.97 | 18.31 | 19.24 |
Total Return (%) | (3.85)c,d | 27.02c | (5.83)c | 1.17 | (2.90) | 17.43 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.62e | 1.39 | 1.42 | 1.39 | 1.33 | 1.36 |
Ratio of net expenses | 1.62e | 1.39 | 1.42 | 1.39 | 1.33 | 1.36 |
Ratio of net investment income | 1.61e | .73 | 1.05 | .90 | 2.22 | 1.24 |
Portfolio Turnover Rate | 17.29d | 28.36 | 36.91 | 32.28 | 44.96 | 48.07 |
Net Assets, end of period ($ x 1,000) | 6,912 | 7,760 | 7,454 | 9,389 | 10,022 | 11,578 |
a Based on average shares outstanding.
b Amount represents less than $.01 per share.
c In 2018, 2017 and 2016, the fund received proceeds from a class action settlement from The Bank of New York Mellon Corporation. In 2018 and 2017, this payment had no impact on total return. In 2016, the total return would have been (5.94%) had payment not been made by The Bank of New York Mellon Corporation.
d Not annualized.
e Annualized.
See notes to financial statements.
15
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 Investment Management (North America) 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 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.
16
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 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
17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
used when no asked price is available. Registered investment companies that are not traded on an exchange are valued at their net asset value. All of the preceding securities are generally categorized within Level 1 of the fair value hierarchy.
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Trustees (the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
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, 2018 in valuing the fund’s investments:
18
Level 1- Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3- Significant Unobservable Inputs | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities - Foreign Common Stocks | 33,034,577 | - | - | 33,034,577 |
Equity Securities - Foreign Preferred Stocks | 529,146 | - | - | 529,146 |
Registered Investment Company | 155,110 | - | - | 155,110 |
Forward Foreign Currency Exchange Contracts† | - | 40,123 | - | 40,123 |
Liabilities ($) | ||||
Other Financial Instruments: | ||||
Forward Foreign Currency Exchange Contracts† | - | (1) | - | (1) |
† Amount shown represents unrealized appreciation (depreciation) at period end.
At December 31, 2017, 34,865,793 of exchange traded foreign equity securities were classified within Level 2 of the fair value hierarchy pursuant to the fund’s fair valuation procedures. It is the fund’s policy to recognize transfers between levels at the end of the reporting period.
(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
19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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.
(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 and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(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, 2018, 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, 2018, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended December 31, 2017 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, 2017 was as follows: ordinary income $341,689. The tax character of current year distributions will be determined at the end of the current fiscal year.
20
NOTE 2—Bank Lines of Credit:
The fund participates with other Dreyfus-managed funds in an $830 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, 2018, the fund did not borrow under the Facilities.
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, 2018, Service shares were charged $9,355 pursuant to the Distribution Plan.
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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, 2018, the fund was charged $103 for transfer agency services and $15 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were offset by earnings credits of $15.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended June 30, 2018, the fund was charged $7,989 pursuant to the custody agreement.
During the period ended June 30, 2018, the fund was charged $6,320 for services performed by the Chief Compliance Officer and his staff. These fees are included in Miscellaneous in the Statement of Operations.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $21,369, Distribution Plan fees $1,463, custodian fees $7,359, Chief Compliance Officer fees $6,320 and transfer agency fees $140.
(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.
(d) During the period ended June 30, 2018, the fund received proceeds of $198 from a class action settlement from BNY Mellon related to foreign exchange transactions.
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, 2018, amounted to $6,093,545 and $7,493,474, respectively.
22
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, 2018 is discussed below.
Forward Foreign Currency Exchange Contracts: The fund enters into forward contracts in order to hedge its exposure to changes in foreign currency exchange rates on its foreign portfolio holdings, to settle foreign currency transactions or as a part of its investment strategy. When executing forward contracts, the fund is obligated to buy or sell a foreign currency at a specified rate on a certain date in the future. With respect to sales of forward contracts, the fund incurs a loss if the value of the contract increases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. Forward contracts open at June 30, 2018 are set forth in the Statement of 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
23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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, 2018, derivative assets and liabilities (by type) on a gross basis are as follows:
Derivative Financial Instruments: |
| Assets ($) |
| Liabilities ($) |
|
Forward contracts | 40,123 | (1) | |||
Total gross amount of derivative | |||||
assets and liabilities in the | |||||
Statement of Assets and Liabilities | 40,123 | (1) | |||
Derivatives not subject to | |||||
Master Agreements | - | - | |||
Total gross amount of assets | |||||
and liabilities subject to | |||||
Master Agreements | 40,123 | (1) |
The following tables present derivative assets and liabilities net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of June 30, 2018:
Financial | ||||||
Instruments | ||||||
and Derivatives | ||||||
Gross Amount of | Available | Collateral | Net Amount of | |||
Counterparty | Assets ($) | 1 | for Offset ($) | Received ($) |
| Assets ($) |
Citigroup | 40,112 | - | - | 40,112 | ||
State Street Bank | 11 | (1) | - | 10 | ||
Total | 40,123 | (1) | - | 40,122 | ||
Financial | ||||||
Instruments | ||||||
and Derivatives | ||||||
Gross Amount of | Available | Collateral | Net Amount of | |||
Counterparty | Liabilities ($) | 1 | for Offset ($) | Pledged ($) |
| Liabilities ($) |
State Street Bank | (1) | 1 | - | - | ||
Total | (1) | 1 | - | - | ||
1 Absent a default event or early termination, OTC derivative assets and liabilities are presented at gross amounts |
24
The following summarizes the average market value of derivatives outstanding during the period ended June 30, 2018:
|
| Average Market Value ($) |
Forward contracts | 1,580,736 | |
At June 30, 2018, accumulated net unrealized appreciation on investments inclusive of derivative contracts was $3,030,866, consisting of $5,496,059 gross unrealized appreciation and $2,465,193 gross unrealized depreciation.
At June 30, 2018, the cost of investments inclusive of derivative contracts for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
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 February 14-15, 2018, 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 Investment Management (North America) Limited (the “Subadviser”) provides day-to-day 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’ 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 Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended December 31, 2017, 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
26
statements available to Broadridge as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Broadridge 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 with representatives of Dreyfus, its affiliates and/or the Subadviser the results of the comparisons and considered that the fund’s total return performance was below the Performance Group and Performance Universe medians for all periods. The Board considered the relative proximity of the fund’s performance to the Performance Group median in certain periods. Dreyfus also provided a comparison of the fund’s calendar year total returns to the returns of the fund’s benchmark index, and it was considered that the fund’s returns were above the returns of the index in six of the ten calendar years shown.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that: the fund’s contractual management fee was at the Expense Group median, the fund’s actual management fee was slightly above 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 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 took into consideration that 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 consulting firm regarding Dreyfus’ approach to allocating costs to, and
27
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AND SUB-INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
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, considered in relation to the mix of services provided by Dreyfus and the Subadviser, including the nature, extent and quality of such services, supported the renewal of the Agreements 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 stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also stated 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 took into consideration the soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the 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 expressed concern about the fund’s performance and agreed to closely monitor performance.
· The Board concluded that the fees paid to Dreyfus and the Subadviser continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to 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
28
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 Dreyfus and the Subadviser 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 the Agreements for the fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, 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 fund’s arrangements, or substantially similar arrangements for other Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreements.
29
Dreyfus Variable Investment Fund, International Equity Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Sub-Investment Adviser
Newton Investment Management
(North America) Limited
160 Queen Victoria Street
London, EC4V 4LA
UK
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
Telephone 1-800-258-4260 or 1-800-258-4261
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 Attn: Institutional Services Department
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
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, D.C. 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.
© 2018 MBSC Securities Corporation |
Dreyfus Variable Investment Fund, International Value Portfolio
SEMIANNUAL REPORT June 30, 2018 |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of 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
With Those of Other Funds | |
in Affiliated Issuers | |
Currency Exchange Contracts | |
of the Fund’s Investment | |
Advisory Agreement |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF DREYFUS
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, 2018 through June 30, 2018. 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.
Volatility returned to the financial markets over the first half of 2018. Although stocks set a series of new record highs in January amid growing corporate earnings, reduced corporate tax rates and synchronized global economic growth, investors later grew nervous about rising interest rates, renewed inflationary pressures, escalating geopolitical tensions and the prospects of more protectionist U.S. trade policies. Consequently, U.S. stocks produced mildly positive returns over the reporting period. Meanwhile, bonds typically lost a degree of value over the first six months of the year due to rising interest rates and inflation concerns.
Despite the return of heightened market volatility, we believe that underlying market fundamentals remain sound. Ongoing economic growth, robust labor markets, rising corporate earnings and strong consumer and business confidence seem likely to support stock and corporate bond prices over the months ahead. Monetary policymakers have indicated that short-term interest rates probably will rise further, but U.S. government bond prices may already reflect those expectations. As always, we encourage you to discuss the risks and opportunities of today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee Laroche-Morris
President
The Dreyfus Corporation
July 16, 2018
2
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from January 1, 2018 through June 30, 2018, as provided by Mark A. Bogar, CFA, James A. Lydotes, CFA, and Andrew Leger, Portfolio Managers
Market and Fund Performance Overview
For the six-month period ended June 30, 2018, Dreyfus Variable Investment Fund, International Value Portfolio’s Initial Shares produced a total return of -2.98%, and its Service Shares produced a total return of -3.19%.1 This compares with a -2.75% return produced by the fund’s benchmark, the MSCI EAFE Index (the “Index”), for the same period.2
International equities lost ground under pressure from high levels of market volatility, exacerbated by U.S. inflationary pressures and international trade conflicts. The fund underperformed the Index, largely due to disappointing stock selections among French, Japanese, and Belgian stocks.
The Fund’s Investment Approach
The fund seeks long-term capital growth. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in stocks. The fund normally invests substantially all of its assets in the stocks of foreign companies, including those located in emerging market countries. The fund’s investment approach is value-oriented and research-driven. In selecting stocks, the portfolio managers identify potential investments through extensive quantitative and fundamental research.
Emphasizing individual stock selection rather than economic and industry trends, the fund focuses on three key factors: value, or how a stock is valued relative to its intrinsic worth based on traditional value measures: business health, or overall efficiency and profitability as measured by return on assets and return on equity: and business momentum, or the presence of a catalyst (such as corporate restructuring, change in management or spin-off) that potentially will trigger a price increase in the near to medium term.
Stocks Pressured by U.S.-Related Developments
The positive global economic growth trends that characterized 2017 remained in place during the first half of 2018, with most European and Asian economies continuing to expand and corporate earnings continuing to rise. However, international equities came under pressure from intensifying inflation concerns in the United States and heightened protectionist rhetoric and actions by the U.S. government. Stocks of companies deemed vulnerable to international trade disruptions were hit particularly hard. European stocks were further undermined by a constitutional crisis in Italy, which exacerbated sovereign risk worries. In Japan, political scandals affecting Prime Minister Shinzo Abe added to investor uncertainties.
Concerns surrounding U.S. inflationary pressures eased during the second half of the reporting period, and international trade concerns focused more narrowly on the relationship between the United States and China. In response, European and Japanese equity markets recouped much of the ground they lost earlier, with most regaining positive territory by the end of the reporting period. Asian markets, on the other hand, continued to dip after tariffs were imposed by the U.S. administration on Chinese imports, followed by Chinese retaliation and threats of additional tariffs from both countries. South Korean equities declined despite optimism surrounding political overtures from North Korea.
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
Individual Stock Selections Undermined Relative Performance
The fund lagged the Index most significantly in France, mostly due to disappointing performance from global tire maker Compagnie Générale des Établissements Michelin, which appeared vulnerable to rising U.S. trade tensions, and information technology services provider Atos, which failed to meet high earnings expectations. Lack of exposure to the relatively strong energy sector further detracted from relative returns in France. In Japan, industrial robotics parts manufacturer Harmonic Drive Systems reported weaker-than-expected earnings, and electronic component maker Alps Electric was hurt by the underwhelming rollout of Apple’s newest smartphone, which incorporates some of the company’s devices. The fund’s investment in Japanese telecommunications company KDDI partly compensated for these disappointments when the stock rose due to accelerating growth and the introduction of new services. In Belgium, mail delivery service bpost also failed to meet earnings expectations.
On a more positive note, the fund enhanced returns in the lagging Australian market, partly through underweighted exposure and partly through relatively strong individual stock selections, such as diversified financial firm Macquarie Group and casino equipment maker Aristocrat Leisure. Favorable stock selections also bolstered the fund’s performance in Italy, where apparel manufacturer Moncler and communications services provider Telecom Italia gained ground in a down market. In Norway, energy exploration-and-production company Aker BP advanced after announcing plans to expand production.
Finding Opportunities in a Challenging Environment
While the current political environment of heightened international trade tensions may pose challenges for many trade-dependent companies going forward, underlying economic fundamentals in most of the developed world continue to improve, with many corporations reporting rising earnings and revenues. As of the end of the reporting period, we have positioned the fund to benefit from these positive economic trends while keeping a watchful eye on political developments. The fund currently holds overweighted exposure to the financials, utilities, and energy sectors, and underweighted exposure to the real estate and materials sectors.
July 16, 2018
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 May 1, 2019, 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 MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization-weighted index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. Investors cannot invest directly in any index.
Please note: the position in any security highlighted with italicized typeface was sold during the reporting period.
Equities are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
The fund’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 Value Portfolio made available through insurance products may be similar to those of 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.
4
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, 2018 to June 30, 2018. 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, 2018 | |||||||
|
|
|
| Initial Shares | Service Shares | ||
Expenses paid per $1,000† | $4.20 | $5.42 | |||||
Ending value (after expenses) | $970.20 | $968.10 |
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, 2018 | |||||||
|
|
|
| Initial Shares | Service Shares | ||
Expenses paid per $1,000† | $4.31 | $5.56 | |||||
Ending value (after expenses) | $1,020.53 | $1,019.29 |
† Expenses are equal to the fund’s annualized expense ratio of .86% for Initial shares and 1.11% for Service shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
June 30, 2018 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 99.0% | |||||||
Australia - 6.7% | |||||||
Aristocrat Leisure | 29,646 | 677,931 | |||||
BHP Billiton | 20,999 | 526,972 | |||||
Macquarie Group | 9,331 | 853,853 | |||||
South32 | 131,876 | 352,317 | |||||
Woodside Petroleum | 18,894 | 495,820 | |||||
Woolworths Group | 22,352 | 504,850 | |||||
3,411,743 | |||||||
Austria - 2.0% | |||||||
Erste Group Bank | 8,112 | a | 338,667 | ||||
OMV | 12,184 | 691,078 | |||||
1,029,745 | |||||||
Belgium - 2.0% | |||||||
bpost | 13,233 | 209,086 | |||||
UCB | 10,204 | 802,440 | |||||
1,011,526 | |||||||
Finland - 1.1% | |||||||
UPM-Kymmene | 14,813 | 529,684 | |||||
France - 10.0% | |||||||
Atos | 3,845 | 525,128 | |||||
BNP Paribas | 15,376 | 955,086 | |||||
Cie Generale des Etablissements Michelin | 5,414 | 659,434 | |||||
Edenred | 13,427 | 424,303 | |||||
Orange | 80,521 | 1,348,897 | |||||
Renault | 3,532 | 300,400 | |||||
Thales | 2,242 | 288,920 | |||||
Vinci | 5,773 | 555,248 | |||||
5,057,416 | |||||||
Germany - 6.8% | |||||||
Allianz | 3,453 | 713,819 | |||||
Bayer | 7,056 | 777,445 | |||||
Deutsche Post | 13,641 | 445,561 | |||||
Evonik Industries | 13,837 | 473,940 | |||||
Fresenius & Co. | 9,084 | 729,852 | |||||
Hapag-Lloyd | 7,957 | a,b | 283,412 | ||||
3,424,029 | |||||||
Hong Kong - 3.0% | |||||||
AIA Group | 95,000 | 830,657 | |||||
Sun Hung Kai Properties | 44,000 | 664,015 | |||||
1,494,672 |
6
Description | Shares | Value ($) | |||||
Common Stocks - 99.0% (continued) | |||||||
Italy - 4.1% | |||||||
Enel | 158,905 | 882,754 | |||||
Leonardo | 29,967 | 296,272 | |||||
Moncler | 5,361 | 244,163 | |||||
UniCredit | 38,688 | 645,892 | |||||
2,069,081 | |||||||
Japan - 23.7% | |||||||
Alps Electric | 15,000 | 385,585 | |||||
Chubu Electric Power | 29,900 | 448,574 | |||||
Denso | 14,300 | 699,016 | |||||
Harmonic Drive Systems | 7,500 | 317,708 | |||||
Hitachi | 133,000 | 938,922 | |||||
ITOCHU | 23,000 | 417,039 | |||||
KDDI | 19,000 | 520,155 | |||||
Mitsubishi Electric | 35,000 | 466,129 | |||||
Nintendo | 1,200 | 392,359 | |||||
Panasonic | 26,900 | 362,870 | |||||
Recruit Holdings | 14,700 | 407,083 | |||||
Seven & i Holdings | 17,900 | 781,059 | |||||
Shionogi & Co. | 12,800 | 657,949 | |||||
Shiseido | 6,400 | 508,578 | |||||
Showa Denko | 15,900 | 706,571 | |||||
Sony | 20,800 | 1,064,094 | |||||
Sumitomo Mitsui Financial Group | 30,300 | 1,178,447 | |||||
Suzuki Motor | 12,800 | 707,315 | |||||
Taiyo Yuden | 12,000 | 335,456 | |||||
THK | 10,800 | 309,714 | |||||
Zeon | 31,000 | 366,798 | |||||
11,971,421 | |||||||
Macau - 1.6% | |||||||
Sands China | 151,600 | 810,597 | |||||
Netherlands - 6.9% | |||||||
ABN AMRO Group | 13,779 | b | 357,545 | ||||
Heineken | 7,407 | 744,065 | |||||
Koninklijke Philips | 14,933 | 635,207 | |||||
NN Group | 16,230 | 660,337 | |||||
Royal Dutch Shell, Cl. B | 30,570 | 1,094,754 | |||||
3,491,908 | |||||||
Norway - 1.7% | |||||||
Aker BP | 16,894 | 623,956 | |||||
Telenor | 12,311 | 252,664 | |||||
876,620 | |||||||
Portugal - 1.4% | |||||||
Galp Energia | 36,530 | 696,848 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 99.0% (continued) | |||||||
Singapore - 1.2% | |||||||
United Overseas Bank | 30,900 | 606,887 | |||||
Spain - 3.6% | |||||||
ACS Actividades de Construccion y Servicios | 12,550 | 508,560 | |||||
Amadeus IT Group | 5,229 | 412,795 | |||||
Banco Santander | 164,706 | 883,243 | |||||
1,804,598 | |||||||
Sweden - 1.6% | |||||||
Alfa Laval | 16,936 | 401,998 | |||||
Swedbank, Cl. A | 18,295 | 391,769 | |||||
793,767 | |||||||
Switzerland - 7.6% | |||||||
Adecco Group | 6,485 | 384,791 | |||||
Ferguson | 5,261 | 427,007 | |||||
Julius Baer Group | 14,871 | a | 875,171 | ||||
Lonza Group | 2,890 | a | 768,974 | ||||
Novartis | 12,122 | 921,482 | |||||
STMicroelectronics | 21,887 | 488,445 | |||||
3,865,870 | |||||||
United Kingdom - 13.4% | |||||||
Anglo American | 20,836 | 466,041 | |||||
BAE Systems | 72,012 | 614,704 | |||||
Cineworld Group | 110,455 | 387,173 | |||||
Diageo | 32,929 | 1,182,927 | |||||
Fiat Chrysler Automobiles | 35,122 | a | 669,947 | ||||
Legal & General Group | 177,285 | 622,365 | |||||
Prudential | 36,878 | 844,176 | |||||
SSE | 52,360 | 936,333 | |||||
Unilever | 19,197 | 1,062,052 | |||||
6,785,718 | |||||||
United States - .6% | |||||||
iShares MSCI EAFE ETF | 4,770 | 319,447 | |||||
Total Common Stocks (cost $47,007,440) | 50,051,577 |
8
Description | 7-Day | Shares | Value ($) | ||||
Other Investment - .1% | |||||||
Registered Investment Company; | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1.83 | 63,404 | c | 63,404 | |||
Total Investments (cost $47,070,844) | 99.1% | 50,114,981 | |||||
Cash and Receivables (Net) | .9% | 450,101 | |||||
Net Assets | 100.0% | 50,565,082 |
ETF—Exchange-Traded Fund
a Non-income producing security.
b Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2018, these securities were valued at $640,957 or 1.27% of net assets.
c Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the respective investment company’s prospectus.
Portfolio Summary (Unaudited) † | Value (%) |
Financials | 21.3 |
Industrials | 14.0 |
Consumer Discretionary | 13.0 |
Health Care | 10.5 |
Consumer Staples | 9.5 |
Energy | 7.1 |
Materials | 6.8 |
Information Technology | 6.2 |
Utilities | 4.5 |
Telecommunication Services | 4.2 |
Real Estate | 1.3 |
Exchange-Traded Funds | .6 |
Money Market Investment | .1 |
99.1 |
† Based on net assets.
See notes to financial statements.
9
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS (Unaudited)
Registered Investment Company | Value | Purchases($) | Sales ($) | Value | Net | Dividends/ |
Dreyfus Institutional Preferred Government Plus Money Market Fund | 243,064 | 5,666,188 | 5,845,848 | 63,404 | .1 | 1,840 |
See notes to financial statements.
10
STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS June 30, 2018 (Unaudited)
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation)($) |
Barclays Bank | |||||
British Pound | 116,529 | United States Dollar | 153,325 | 7/2/18 | 464 |
United States Dollar | 86,298 | Euro | 74,027 | 7/2/18 | (151) |
Gross Unrealized Appreciation | 464 | ||||
Gross Unrealized Depreciation | (151) |
See notes to financial statements.
11
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2018 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments: |
|
|
| |||
Unaffiliated issuers | 47,007,440 |
| 50,051,577 |
| ||
Affiliated issuers |
| 63,404 |
| 63,404 |
| |
Cash denominated in foreign currency |
|
| 275,202 |
| 274,020 |
|
Receivable for investment securities sold |
| 233,917 |
| |||
Tax reclaim receivable |
| 117,298 |
| |||
Dividends receivable |
| 61,454 |
| |||
Unrealized appreciation on forward foreign |
| 464 |
| |||
Prepaid expenses |
|
|
|
| 3,027 |
|
|
|
|
|
| 50,805,161 |
|
Liabilities ($): |
|
|
|
| ||
Due to The Dreyfus Corporation and affiliates—Note 3(b) |
|
|
| 28,697 |
| |
Cash overdraft due to Custodian |
|
|
|
| 21,947 |
|
Payable for investment securities purchased |
| 153,789 |
| |||
Trustees fees and expenses payable |
| 6,298 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 4,659 |
| |||
Interest payable—Note 2 |
| 375 |
| |||
Unrealized depreciation on forward foreign |
| 151 |
| |||
Accrued expenses |
|
|
|
| 24,163 |
|
|
|
|
|
| 240,079 |
|
Net Assets ($) |
|
| 50,565,082 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 60,683,695 |
|
Accumulated undistributed investment income—net |
| 685,550 |
| |||
Accumulated net realized gain (loss) on investments |
|
|
|
| (13,842,833) |
|
Accumulated net unrealized appreciation (depreciation) |
| 3,038,670 |
| |||
Net Assets ($) |
|
| 50,565,082 |
|
Net Asset Value Per Share | Initial Shares | Service Shares |
|
Net Assets ($) | 20,480,342 | 30,084,740 |
|
Shares Outstanding | 1,749,708 | 2,566,406 |
|
Net Asset Value Per Share ($) | 11.71 | 11.72 |
|
See notes to financial statements. |
12
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2018 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends (net of $107,213 foreign taxes withheld at source): |
| |||||
Unaffiliated issuers |
|
| 975,957 |
| ||
Affiliated issuers |
|
| 1,840 |
| ||
Total Income |
|
| 977,797 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 281,247 |
| ||
Professional fees |
|
| 64,862 |
| ||
Distribution fees—Note 3(b) |
|
| 43,591 |
| ||
Custodian fees—Note 3(b) |
|
| 21,832 |
| ||
Prospectus and shareholders’ reports |
|
| 12,331 |
| ||
Trustees’ fees and expenses—Note 3(c) |
|
| 3,288 |
| ||
Shareholder servicing costs—Note 3(b) |
|
| 1,000 |
| ||
Loan commitment fees—Note 2 |
|
| 868 |
| ||
Interest expense—Note 2 |
|
| 375 |
| ||
Miscellaneous |
|
| 21,304 |
| ||
Total Expenses |
|
| 450,698 |
| ||
Less—reduction in expenses due to undertaking—Note 3(a) |
|
| (164,453) |
| ||
Less—reduction in fees due to earnings credits—Note 3(b) |
|
| (33) |
| ||
Net Expenses |
|
| 286,212 |
| ||
Investment Income—Net |
|
| 691,585 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions | 2,888,978 |
| ||||
Net realized gain (loss) on forward foreign currency exchange contracts | (9,200) |
| ||||
Net Realized Gain (Loss) |
|
| 2,879,778 |
| ||
Net unrealized appreciation (depreciation) on investments |
|
| (5,212,366) |
| ||
Net unrealized appreciation (depreciation) on |
|
| 287 |
| ||
Net Unrealized Appreciation (Depreciation) |
|
| (5,212,079) |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (2,332,301) |
| ||
Net Increase from Payment by Affiliate |
|
| 102 |
| ||
Net (Decrease) in Net Assets Resulting from Operations |
| (1,640,614) |
| |||
See notes to financial statements. |
13
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 691,585 |
|
|
| 821,565 |
| |
Net realized gain (loss) on investments |
| 2,879,778 |
|
|
| 2,755,383 |
| ||
Net unrealized appreciation (depreciation) |
| (5,212,079) |
|
|
| 9,080,667 |
| ||
Net increase from payment by affiliate |
| 102 |
|
|
| 1,201 |
| ||
Net Increase (Decrease) in Net Assets | (1,640,614) |
|
|
| 12,658,816 |
| |||
Distributions to Shareholders from ($): |
| ||||||||
Investment income—net: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (342,309) |
|
|
| (293,637) |
| |
Service Shares |
|
| (500,324) |
|
|
| (394,293) |
| |
Total Distributions |
|
| (842,633) |
|
|
| (687,930) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 1,556,502 |
|
|
| 2,586,028 |
| |
Service Shares |
|
| 1,461,737 |
|
|
| 8,168,542 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 342,309 |
|
|
| 293,637 |
| |
Service Shares |
|
| 500,324 |
|
|
| 394,293 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (2,481,178) |
|
|
| (2,796,223) |
| |
Service Shares |
|
| (6,628,829) |
|
|
| (6,422,662) |
| |
Increase (Decrease) in Net Assets | (5,249,135) |
|
|
| 2,223,615 |
| |||
Total Increase (Decrease) in Net Assets | (7,732,382) |
|
|
| 14,194,501 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 58,297,464 |
|
|
| 44,102,963 |
| |
End of Period |
|
| 50,565,082 |
|
|
| 58,297,464 |
| |
Undistributed investment income—net | 685,550 |
|
|
| 836,598 |
| |||
Capital Share Transactions (Shares): |
| ||||||||
Initial Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 126,761 |
|
|
| 239,807 |
| |
Shares issued for distributions reinvested |
|
| 28,313 |
|
|
| 28,619 |
| |
Shares redeemed |
|
| (201,708) |
|
|
| (249,081) |
| |
Net Increase (Decrease) in Shares Outstanding | (46,634) |
|
|
| 19,345 |
| |||
Service Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 117,414 |
|
|
| 731,930 |
| |
Shares issued for distributions reinvested |
|
| 41,315 |
|
|
| 38,318 |
| |
Shares redeemed |
|
| (544,916) |
|
|
| (582,351) |
| |
Net Increase (Decrease) in Shares Outstanding | (386,187) |
|
|
| 187,897 |
| |||
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 | ||||||||||
Initial Shares | June 30, 2018 | Year Ended December 31, | ||||||||
(Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||
Per Share Data ($): | ||||||||||
Net asset value, beginning of period | 12.27 | 9.70 | 10.04 | 10.55 | 11.82 | 9.82 | ||||
Investment Operations: | ||||||||||
Investment income—neta | .16 | .19 | .18 | .18 | .19 | .18 | ||||
Net realized and unrealized | (.52) | 2.54 | (.33) | (.45) | (1.27) | 2.04 | ||||
Total from Investment Operations | (.36) | 2.73 | (.15) | (.27) | (1.08) | 2.22 | ||||
Distributions: | ||||||||||
Dividends from | (.20) | (.16) | (.19) | (.24) | (.19) | (.22) | ||||
Payment by affiliate | .00b,c | .00b,c | .00b,c | - | - | - | ||||
Net asset value, end of period | 11.71 | 12.27 | 9.70 | 10.04 | 10.55 | 11.82 | ||||
Total Return (%) | (2.98)c,d | 28.52c | (1.45)c | (2.72) | (9.32) | 22.99 | ||||
Ratios/Supplemental Data (%): | ||||||||||
Ratio of total expenses | 1.45e | 1.37 | 1.38 | 1.38 | 1.29 | 1.25 | ||||
Ratio of net expenses | .86e | .86 | .85 | .83 | .99 | .95 | ||||
Ratio of net investment income | 2.61e | 1.75 | 1.87 | 1.66 | 1.68 | 1.71 | ||||
Portfolio Turnover Rate | 36.63d | 62.39 | 108.21 | 147.24 | 45.43 | 57.30 | ||||
Net Assets, end of period ($ x 1,000) | 20,480 | 22,045 | 17,241 | 21,814 | 33,147 | 42,421 |
a Based on average shares outstanding.
b Amount represents less than $.01.
c The fund received proceeds from a class action settlement from The Bank of New York Mellon Corporation. This payment had no impact on total return.
d Not annualized.
e Annualized.
See notes to financial statements.
15
FINANCIAL HIGHLIGHTS (continued)
Six Months Ended | |||||||||||||
Service Shares | June 30, 2018 | Year Ended December 31, | |||||||||||
(Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||
Per Share Data ($): | |||||||||||||
Net asset value, beginning of period | 12.28 | 9.72 | 10.04 | 10.55 | 11.82 | 9.82 | |||||||
Investment Operations: | |||||||||||||
Investment income—neta | .15 | .17 | .13 | .17 | .16 | .16 | |||||||
Net realized and unrealized | (.54) | 2.54 | (.29) | (.47) | (1.28) | 2.03 | |||||||
Total from Investment Operations | (.39) | 2.71 | (.16) | (.30) | (1.12) | 2.19 | |||||||
Distributions: | |||||||||||||
Dividends from | (.17) | (.15) | (.16) | (.21) | (.15) | (.19) | |||||||
Payment by affiliate | .00b,c | .00b,c | .00b,c | - | - | - | |||||||
Net asset value, end of period | 11.72 | 12.28 | 9.72 | 10.04 | 10.55 | 11.82 | |||||||
Total Return (%) | (3.19)c,d | 28.14c | (1.58)c | (2.98) | (9.57) | 22.69 | |||||||
Ratios/Supplemental Data (%): | |||||||||||||
Ratio of total expenses | 1.70e | 1.62 | 1.61 | 1.63 | 1.54 | 1.50 | |||||||
Ratio of net expenses | 1.11e | 1.11 | 1.10 | 1.08 | 1.24 | 1.20 | |||||||
Ratio of net investment income | 2.37e | 1.49 | 1.41 | 1.53 | 1.40 | 1.47 | |||||||
Portfolio Turnover Rate | 36.63d | 62.39 | 108.21 | 147.24 | 45.43 | 57.30 | |||||||
Net Assets, end of period ($ x 1,000) | 30,085 | 36,253 | 26,862 | 18,566 | 23,038 | 32,104 |
a Based on average shares outstanding.
b Amount represents less than $.01.
c The fund received proceeds from a class action settlement from The Bank of New York Mellon Corporation. This payment had no impact on total return.
d Not annualized.
e Annualized.
See notes to financial statements.
16
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
International Value 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 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.
17
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in 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.
18
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant American Depository Receipts and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Trustees (the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
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, 2018 in valuing the fund’s investments:
19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total | ||||
Assets ($) | |||||||
Investments in Securities: | |||||||
Equity Securities - Foreign Common Stocks | 49,732,130 | - | - | 49,732,130 | |||
Exchange-Traded Funds | 319,447 | - | - | 319,447 | |||
Registered Investment Company | 63,404 | - | - | 63,404 | |||
Other Financial Instruments: | |||||||
Forward Foreign Currency | - | 464 | - | 464 | |||
Liabilities ($) | |||||||
Other Financial Instruments: | |||||||
Forward Foreign Currency | - | (151) | - | (151) |
† Amount shown represents unrealized appreciation (depreciation) at period end.
At December 31, 2017, $56,869,688 of exchange traded foreign equity securities were classified within Level 2 of the fair value hierarchy pursuant to the fund’s fair valuation procedures. It is the fund’s policy to recognize transfers between levels at the end of the reporting period.
(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
20
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.
(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 and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(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, 2018, 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, 2018, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended December 31, 2017 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010, the fund is permitted to carry forward capital losses for an unlimited
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
The fund has an unused capital loss carryover of $16,716,592 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to December 31, 2017. These long-term capital losses can be carried forward for an unlimited period.
The tax character of distributions paid to shareholders during the fiscal year ended December 31, 2017 was as follows: ordinary income $687,930. 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 an $830 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.
The average amount of borrowings outstanding under the Facilities during the period ended June 30, 2018 was approximately $25,400 with a related weighted average annualized interest rate of 2.98%.
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 contractually agreed, from January 1, 2018 through May 1, 2019, to waive receipt of its fees and/or assume the direct expenses of the fund, so that the direct 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 .86% of the value of the fund’s average daily net assets. On or after May 1, 2019, Dreyfus may terminate this expense limitation agreement at any time. The reduction in expenses, pursuant to the undertaking, amounted to $164,453 during the period ended June 30, 2018.
(b) Under the Distribution Plan adopted pursuant to Rule 12b-1 under the Act, Service shares pay the Distributor for distributing its shares, for
22
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, 2018, Service shares were charged $43,591 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, 2018, the fund was charged $225 for transfer agency services and $33 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were offset by earnings credits of $33.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended June 30, 2018, the fund was charged $21,832 pursuant to the custody agreement.
During the period ended June 30, 2018, the fund was charged $6,320 for services performed by the Chief Compliance Officer and his staff. These fees are included in Miscellaneous in the Statement of Operations.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $43,591, Distribution Plan fees $6,622, custodian fees $21,926, Chief Compliance Officer fees $6,320 and transfer agency fees $2,090, which are offset against an expense reimbursement currently in effect in the amount of $51,852.
23
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(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.
(d) During the period ended June 30, 2018, the fund received proceeds of $102 from a class action settlement from BNY Mellon related to foreign exchange transactions.
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, 2018, amounted to $20,407,146 and $25,900,826, 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, 2018 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
24
changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. Forward contracts open at June 30, 2018 are set forth in the Statement of 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.
At June 30, 2018, derivative assets and liabilities (by type) on a gross basis are as follows:
Derivative Financial Instruments: |
| Assets ($) |
| Liabilities ($) |
|
Forward contracts | 464 | (151) | |||
Total gross amount of derivative | |||||
assets and liabilities in the | |||||
Statement of Assets and Liabilities | 464 | (151) | |||
Derivatives not subject to | |||||
Master Agreements | - | - | |||
Total gross amount of assets | |||||
and liabilities subject to | |||||
Master Agreements | 464 | (151) |
The following table presents derivative assets net of amounts available for offsetting under Master Agreements and net of related collateral received or pledged, if any, as of June 30, 2018:
Financial | ||||||
Instruments | ||||||
and Derivatives | ||||||
Gross Amount of | Available | Collateral | Net Amount of | |||
Counterparty | Assets ($) | 1 | for Offset ($) | Received ($) |
| Assets ($) |
Barclays Bank | 464 | (151) | - | 313 | ||
25
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Financial | ||||||
Instruments | ||||||
and Derivatives | ||||||
Gross Amount of | Available | Collateral | Net Amount of | |||
Counterparty | Liabilities ($) | 1 | for Offset ($) | Pledged ($) |
| Liabilities ($) |
Barclays Bank | (151) | 151 | - | - | ||
1 Absent a default event or early termination, OTC derivative assets and liabilities are presented at gross amounts and are not offset in the Statement of Assets and Liabilities. |
The following summarizes the average market value of derivatives outstanding during the period ended June 30, 2018:
|
| Average Market Value ($) |
Forward contracts | 203,150 | |
At June 30, 2018, accumulated net unrealized appreciation on investments inclusive of derivative contracts was $3,044,450, consisting of $5,364,297 gross unrealized appreciation and $2,319,847 gross unrealized depreciation.
At June 30, 2018, the cost of investments inclusive of derivative contracts 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 February 14-15, 2018, 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 management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended December 31, 2017, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
27
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
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 with representatives of Dreyfus and/or its affiliates the results of the comparisons and considered that the fund’s total return performance was at or above the Performance Group median for all periods, except for the three-year period when it was below the median, and below the Performance Universe median for all periods, except for the one- and two-year periods when it was above the median. The Board considered the relative proximity of the fund’s performance to the Performance Universe median in certain periods when performance 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.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that: the fund’s contractual management fee was above the Expense Group median, the fund’s actual management fee was below the Expense Group and Expense Universe medians (second lowest in the Expense Group and Expense Universe) and the fund’s total expenses were at the Expense Group median and below the Expense Universe median.
Dreyfus representatives stated that Dreyfus has contractually agreed, until May 1, 2019, to waive receipt of its fees and/or assume the direct expenses of the fund so that the direct expenses of none of its classes (excluding Rule 12b-1 fees, shareholder services fees, taxes, interest, brokerage commissions, commitment fees on borrowings and extraordinary expenses) exceed 0.86% of the fund’s average daily net assets.
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 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 considered the expense limitation 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
28
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, considered in relation to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Dreyfus representatives stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also stated 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 took into consideration the soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by Dreyfus are adequate and appropriate.
· The Board generally was satisfied with the fund’s overall performance.
· The Board concluded that the fee paid to Dreyfus continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to 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 Dreyfus and the services provided to
29
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
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 the Agreement for the fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, 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 fund’s arrangements, or substantially similar arrangements for other Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreement.
30
NOTES
31
NOTES
32
NOTES
33
Dreyfus Variable Investment Fund, International Value Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
Telephone 1-800-258-4260 or 1-800-258-4261
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 Attn: Institutional Services Department
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
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, D.C. 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.
© 2018 MBSC Securities Corporation |
Dreyfus Variable Investment Fund, Opportunistic Small Cap Portfolio
SEMIANNUAL REPORT June 30, 2018 |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of 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
With Those of Other Funds | |
in Affiliated Issuers | |
the Fund’s Investment | |
Advisory Agreement |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF DREYFUS
Dear Shareholder:
We are pleased to present this semiannual report for Dreyfus Variable Investment Fund, Opportunistic Small Cap Portfolio, covering the six-month period from January 1, 2018 through June 30, 2018. 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.
Volatility returned to the financial markets over the first half of 2018. Although stocks set a series of new record highs in January amid growing corporate earnings, reduced corporate tax rates and synchronized global economic growth, investors later grew nervous about rising interest rates, renewed inflationary pressures, escalating geopolitical tensions and the prospects of more protectionist U.S. trade policies. Consequently, U.S. stocks produced mildly positive returns over the reporting period. Meanwhile, bonds typically lost a degree of value over the first six months of the year due to rising interest rates and inflation concerns.
Despite the return of heightened market volatility, we believe that underlying market fundamentals remain sound. Ongoing economic growth, robust labor markets, rising corporate earnings and strong consumer and business confidence seem likely to support stock and corporate bond prices over the months ahead. Monetary policymakers have indicated that short-term interest rates probably will rise further, but U.S. government bond prices may already reflect those expectations. As always, we encourage you to discuss the risks and opportunities of today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee Laroche-Morris
President
The Dreyfus Corporation
July 16, 2018
2
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from January 1, 2018 through June 30, 2018, as provided by David A. Daglio, Primary Portfolio Manager; James Boyd, Dale Dutile, and Brian Duncan, Portfolio Managers
Market and Fund Performance Overview
For the six-month period ended June 30, 2018, Dreyfus Variable Investment Fund, Opportunistic Small Cap Portfolio’s Initial shares produced a total return of 5.46%, and its Service shares produced a total return of 5.32%.1 In comparison, the Russell 2000® Index (the “Index”), the fund’s benchmark, produced a total return of 7.66% for the same period.2
Small-cap stocks produced strong gains in a volatile market over the reporting period amid rising corporate earnings, sustained economic growth, and intensifying merger-and-acquisition activity. The fund lagged the Index, mainly due to security selection shortfalls in the materials, health care, and industrials sectors.
The Fund’s Investment Approach
The fund seeks capital growth. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in the stocks of small-cap companies. The fund currently considers small-cap companies to be those companies with market capitalizations that fall within the range of the companies in the Index. 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 catalyst. In general, the fund seeks exposure to securities and sectors that are perceived to be attractive from a valuation and fundamental standpoint.
Market Volatility Increased Despite Positive Economic Trends
A positive economic backdrop supported U.S. equity markets at the start of 2018, including moderate GDP growth, robust labor markets, and higher growth forecasts from the Federal Reserve Board (the “Fed”). Enactment of corporate tax cuts as part of major tax reform legislation in late December 2017 sparked additional market gains, driving the Index to new all-time highs in January.
Economic data in January indicated robust levels of consumer spending during the critical year-end shopping season, and long-awaited signs of wage growth began to appear. However, concerns about rising inflationary pressures and prospects for more aggressive interest-rate hikes soon began to weigh on market sentiment, sparking renewed volatility that sent stock prices sharply lower in early February. Political rhetoric regarding potentially protectionist U.S. trade policies also took a toll on many stocks, and rising bond yields further contributed to heightened volatility.
Small-cap stocks fared particularly well over the second quarter of 2018. Despite an additional interest-rate hike from the Fed, the Index rallied in an environment of persistently strong economic growth, rising corporate earnings, and higher levels of merger-and-acquisition activity. In addition, investors concerned about the impact of trade tariffs on large, multinational companies increasingly turned to more domestically oriented small-cap companies. Consequently, the Index again reached new highs in May and June.
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
Security Selections Constrained Fund Performance
The fund’s performance compared to the Index was mainly the result of stock selection shortfalls across several market sectors. In the materials sector, U.S. Concrete and Eagle Materials encountered sluggish demand for building materials due to weather-related construction delays. In addition, the fund’s holdings of gold producers declined modestly along with gold prices. In the health care sector, Sage Therapeutics and Revance Therapeutics gave back some of the robust gains they had achieved in 2017, but their financial results and future guidance remained strong. Among industrials companies, car rental agency Avis Budget Group was hurt by concerns regarding vehicle utilization and pricing pressures that we believe to be temporary. Freight carriers Knight-Swift Transportation Holdings and Werner Enterprises struggled with a shortage of truck drivers, which constrained shipping volumes.
The fund achieved better relative results in the information technology sector, where networking equipment maker VIAVI Solutions and communications equipment manufacturers Infinera and Ciena saw a rebound in orders that had been deferred in 2017. Electronic payments specialist Verifone was acquired at a substantial premium to its stock price at the time, and data integration software vendor Talend reported strong billings and order volumes.
The fund further benefited from lack of exposure to the lagging real estate sector and underweighted exposure to utilities, which generally did not meet our valuation criteria.
An Optimistic Outlook for Small-Cap Stocks
As of midyear, we have remained encouraged by favorable economic and business fundamentals for many small-cap companies. We currently expect robust earnings growth to continue, market valuations have remained reasonable, and investors should favor smaller companies that are not expected to be affected by more protectionist U.S. trade policies. In this environment, our research-intensive investment process has identified an ample number of investment opportunities in the information technology, financials, health care, consumer discretionary, and industrials sectors. In contrast, we have found relatively few opportunities among small-cap companies in the real estate, utilities, and telecommunication services sectors.
July 16, 2018
¹ Total return includes reinvestment of dividends and any capital gains paid. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. The fund’s performance does not reflect the deduction of additional charges and expenses imposed in connection with investing in variable insurance contracts, which will reduce returns.
² Source: Lipper Inc. — The Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2,000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2000 is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set. Investors cannot invest directly in any index.
Please note: the position in any security highlighted with italicized typeface was sold during the reporting period.
Equities are subject generally to market, market sector, market liquidity, issuer, and investment style risks, among other factors, to varying degrees, all of which are more fully described in the fund’s prospectus.
Stocks of small- and/or mid-cap companies often experience sharper price fluctuations than stocks of large-cap companies.
The fund is only available as a funding vehicle under variable life insurance policies or variable annuity contracts issued by insurance companies. Individuals may not purchase shares of the fund directly. A variable annuity is an insurance contract issued by an insurance company that enables investors to accumulate assets on a tax-deferred basis for retirement or other long-term goals. The investment objective and policies of Dreyfus Variable Investment Fund, Opportunistic Small Cap Portfolio made available through insurance products may be similar to those of 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.
4
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, Opportunistic Small Cap Portfolio from January 1, 2018 to June 30, 2018. 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, 2018 | ||||||||
Initial Shares | Service Shares | |||||||
Expenses paid per $1,000† | $4.33 | $5.60 | ||||||
Ending value (after expenses) | $1,054.60 | $1,053.20 |
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, 2018 | ||||||||
Initial Shares | Service Shares | |||||||
Expenses paid per $1,000† | $4.26 | $5.51 | ||||||
Ending value (after expenses) | $1,020.58 | $1,019.34 |
† Expenses are equal to the fund’s annualized expense ratio of .85% for Initial shares and 1.10% for Service shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
June 30, 2018 (Unaudited)
Description | Shares | Value ($) | |||||
Common Stocks - 98.7% | |||||||
Automobiles & Components - 2.6% | |||||||
Delphi Technologies | 65,290 | 2,968,083 | |||||
Visteon | 21,003 | a | 2,714,428 | ||||
5,682,511 | |||||||
Banks - 9.3% | |||||||
Ameris Bancorp | 22,633 | 1,207,471 | |||||
Atlantic Capital Bancshares | 107,458 | a,b | 2,111,550 | ||||
FCB Financial Holdings, Cl. A | 36,943 | a | 2,172,248 | ||||
First Interstate BancSystem, Cl. A | 75,899 | b | 3,202,938 | ||||
First Merchants | 37,977 | 1,762,133 | |||||
Great Western Bancorp | 76,255 | 3,201,947 | |||||
MGIC Investment | 174,782 | a | 1,873,663 | ||||
Midland States Bancorp | 27,921 | 956,573 | |||||
Union Bankshares | 87,548 | b | 3,403,866 | ||||
19,892,389 | |||||||
Capital Goods - 3.2% | |||||||
Simpson Manufacturing | 62,515 | 3,887,808 | |||||
Tennant | 26,676 | b | 2,107,404 | ||||
Wesco Aircraft Holdings | 72,670 | a | 817,538 | ||||
6,812,750 | |||||||
Commercial & Professional Services - 1.2% | |||||||
Deluxe | 39,816 | 2,636,217 | |||||
Consumer Durables & Apparel - 1.0% | |||||||
G-III Apparel Group | 46,668 | a,b | 2,072,059 | ||||
Consumer Services - 5.0% | |||||||
Adtalem Global Education | 44,947 | a | 2,161,951 | ||||
Dave & Buster's Entertainment | 22,800 | a,b | 1,085,280 | ||||
Eldorado Resorts | 17,589 | a,b | 687,730 | ||||
Penn National Gaming | 23,413 | a,b | 786,443 | ||||
Pinnacle Entertainment | 48,135 | a | 1,623,594 | ||||
Planet Fitness, Cl. A | 99,662 | a | 4,379,148 | ||||
10,724,146 | |||||||
Diversified Financials - 6.8% | |||||||
Cannae Holdings | 73,794 | a | 1,368,879 | ||||
Capitol Investment Corp. IV | 127,394 | 1,312,158 | |||||
Green Dot, Cl. A | 20,392 | a | 1,496,569 | ||||
Investment Technology Group | 105,392 | 2,204,801 | |||||
OneMain Holdings | 154,268 | a | 5,135,582 | ||||
SLM | 177,610 | a | 2,033,634 | ||||
TPG Pace Holdings | 89,822 | 943,131 | |||||
14,494,754 |
6
Description | Shares | Value ($) | |||||
Common Stocks - 98.7% (continued) | |||||||
Energy - 10.0% | |||||||
Arch Coal, Cl. A | 14,943 | b | 1,171,979 | ||||
Ardmore Shipping | 67,489 | a | 553,410 | ||||
Delek US Holdings | 113,936 | 5,716,169 | |||||
GasLog | 54,580 | b | 1,042,478 | ||||
Green Plains | 98,444 | b | 1,801,525 | ||||
Navigator Holdings | 37,285 | a | 471,655 | ||||
PBF Energy, Cl. A | 59,766 | 2,505,988 | |||||
RSP Permian | 55,457 | a | 2,441,217 | ||||
Scorpio Tankers | 719,673 | b | 2,022,281 | ||||
Select Energy Services, Cl. A | 252,581 | a,b | 3,670,002 | ||||
21,396,704 | |||||||
Exchange-Traded Funds - .3% | |||||||
iShares Russell 2000 ETF | 4,578 | b | 749,739 | ||||
Food & Staples Retailing - .6% | |||||||
US Foods Holding | 31,678 | a | 1,198,062 | ||||
Health Care Equipment & Services - 4.4% | |||||||
AxoGen | 56,572 | a,b | 2,842,743 | ||||
Evolent Health, Cl. A | 187,170 | a,b | 3,939,928 | ||||
HMS Holdings | 119,747 | a | 2,588,930 | ||||
9,371,601 | |||||||
Materials - 12.0% | |||||||
Alamos Gold, Cl. A | 313,049 | 1,781,249 | |||||
Cabot | 94,804 | 5,856,043 | |||||
Eagle Materials | 29,848 | 3,133,145 | |||||
IAMGOLD | 507,723 | a | 2,949,871 | ||||
Methanex | 33,747 | 2,385,913 | |||||
OMNOVA Solutions | 301,380 | a | 3,134,352 | ||||
Tahoe Resources | 443,486 | 2,181,951 | |||||
US Concrete | 82,916 | a,b | 4,353,090 | ||||
25,775,614 | |||||||
Media - 5.3% | |||||||
Criteo, ADR | 75,468 | a | 2,479,124 | ||||
Gray Television | 94,823 | a,b | 1,498,203 | ||||
Nexstar Media Group, Cl. A | 42,580 | b | 3,125,372 | ||||
Sinclair Broadcast Group, Cl. A | 136,051 | b | 4,374,040 | ||||
11,476,739 | |||||||
Pharmaceuticals, Biotechnology & Life Sciences - 10.6% | |||||||
Flexion Therapeutics | 109,982 | a,b | 2,843,035 | ||||
G1 Therapeutics | 46,881 | b | 2,037,448 | ||||
PRA Health Sciences | 11,482 | a | 1,071,960 | ||||
Revance Therapeutics | 129,427 | a,b | 3,552,771 | ||||
Sage Therapeutics | 25,072 | a,b | 3,924,520 | ||||
TherapeuticsMD | 1,103,628 | a | 6,886,639 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Shares | Value ($) | |||||
Common Stocks - 98.7% (continued) | |||||||
Pharmaceuticals, Biotechnology & Life Sciences - 10.6% (continued) | |||||||
Zogenix | 53,780 | a,b | 2,377,076 | ||||
22,693,449 | |||||||
Software & Services - 7.3% | |||||||
Acxiom | 198,000 | a | 5,930,100 | ||||
Cardtronics, Cl. A | 133,607 | a | 3,230,617 | ||||
CommVault Systems | 22,181 | a | 1,460,619 | ||||
Talend, ADR | 80,243 | a | 4,997,534 | ||||
15,618,870 | |||||||
Technology Hardware & Equipment - 9.7% | |||||||
Ciena | 254,117 | a,b | 6,736,642 | ||||
Finisar | 138,438 | a,b | 2,491,884 | ||||
Infinera | 582,027 | a,b | 5,779,528 | ||||
Sierra Wireless | 168,820 | a | 2,701,120 | ||||
Viavi Solutions | 311,987 | a | 3,194,747 | ||||
20,903,921 | |||||||
Transportation - 9.4% | |||||||
Avis Budget Group | 145,412 | a | 4,725,890 | ||||
Knight-Swift Transportation Holdings | 127,827 | 4,884,270 | |||||
Scorpio Bulkers | 81,592 | 579,303 | |||||
SkyWest | 96,906 | 5,029,421 | |||||
Werner Enterprises | 131,265 | b | 4,929,001 | ||||
20,147,885 | |||||||
Total Common Stocks (cost $174,030,327) | 211,647,410 | ||||||
Number of Warrants | |||||||
Warrants - .0% | |||||||
Diversified Financials - .0% | |||||||
Landcadia Holdings (6/1/23) | 60,324 | 49,767 | |||||
7-Day | |||||||
Other Investment - 1.1% | |||||||
Registered Investment Company; | |||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1.83 | 2,208,875 | c | 2,208,875 |
8
Description | 7-Day | Shares | Value ($) | ||||
Investment of Cash Collateral for Securities Loaned - 7.4% | |||||||
Registered Investment Company; | |||||||
Dreyfus Institutional Preferred Government Money Market Fund, Institutional Shares | 1.85 | 15,897,822 | c | 15,897,822 | |||
Total Investments (cost $192,179,251) | 107.2% | 229,803,874 | |||||
Liabilities, Less Cash and Receivables | (7.2%) | (15,379,353) | |||||
Net Assets | 100.0% | 214,424,521 |
ADR—American Depository Receipt
ETF—Exchange-Traded Fund
a Non-income producing security.
b Security, or portion thereof, on loan. At June 30, 2018, the value of the fund’s securities on loan was $40,081,079 and the value of the collateral held by the fund was $47,886,202, consisting of cash collateral of $15,897,822 and U.S. Government & Agency securities valued at $31,988,380.
c Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the respective investment company’s prospectus.
Portfolio Summary (Unaudited) † | Value (%) |
Materials | 12.0 |
Pharmaceuticals, Biotechnology & Life Sciences | 10.6 |
Energy | 10.0 |
Technology Hardware & Equipment | 9.7 |
Transportation | 9.4 |
Banks | 9.3 |
Money Market Investments | 8.5 |
Software & Services | 7.3 |
Diversified Financials | 6.8 |
Media | 5.3 |
Consumer Services | 5.0 |
Health Care Equipment & Services | 4.4 |
Capital Goods | 3.2 |
Automobiles & Components | 2.6 |
Commercial & Professional Services | 1.2 |
Consumer Durables & Apparel | 1.0 |
Food & Staples Retailing | .6 |
Exchange-Traded Funds | .3 |
107.2 |
† Based on net assets.
See notes to financial statements.
9
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS (Unaudited)
Registered Investment Company | Value | Purchases($) | Sales($) | Value | Net | Dividends/ |
Dreyfus Institutional Preferred Government Plus Money Market Fund | 3,920,146 | 25,880,583 | 27,591,854 | 2,208,875 | 1.1 | 19,865 |
Dreyfus Institutional Preferred Government Money Market Fund, Institutional Shares | 16,964,289 | 69,510,758 | 70,577,225 | 15,897,822 | 7.4 | - |
Total | 20,884,435 | 95,391,341 | 98,169,079 | 18,106,697 | 8.5 | 19,865 |
See notes to financial statements.
10
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2018 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 174,072,554 |
| 211,697,177 |
| ||
Affiliated issuers |
| 18,106,697 |
| 18,106,697 |
| |
Cash |
|
|
|
| 53,709 |
|
Receivable for investment securities sold |
| 1,351,265 |
| |||
Dividends and securities lending income receivable |
| 36,678 |
| |||
Prepaid expenses |
|
|
|
| 8,171 |
|
|
|
|
|
| 231,253,697 |
|
Liabilities ($): |
|
|
|
| ||
Due to The Dreyfus Corporation and affiliates—Note 3(b) |
|
|
| 154,806 |
| |
Liability for securities on loan—Note 1(b) |
| 15,897,822 |
| |||
Payable for investment securities purchased |
| 687,418 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 58,197 |
| |||
Trustees fees and expenses payable |
| 116 |
| |||
Accrued expenses |
|
|
|
| 30,817 |
|
|
|
|
|
| 16,829,176 |
|
Net Assets ($) |
|
| 214,424,521 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 158,973,208 |
|
Accumulated investment (loss)—net |
| (227,774) |
| |||
Accumulated net realized gain (loss) on investments |
|
|
|
| 18,054,464 |
|
Accumulated net unrealized appreciation (depreciation) |
| 37,624,623 |
| |||
Net Assets ($) |
|
| 214,424,521 |
|
Net Asset Value Per Share | Initial Shares | Service Shares |
|
Net Assets ($) | 193,079,150 | 21,345,371 |
|
Shares Outstanding | 3,596,499 | 413,852 |
|
Net Asset Value Per Share ($) | 53.69 | 51.58 |
|
See notes to financial statements. |
11
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2018 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Cash dividends: |
| |||||
Unaffiliated issuers |
|
| 636,089 |
| ||
Affiliated issuers |
|
| 19,865 |
| ||
Income from securities lending—Note 1(b) |
|
| 38,004 |
| ||
Total Income |
|
| 693,958 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 790,321 |
| ||
Professional fees |
|
| 52,594 |
| ||
Distribution fees—Note 3(b) |
|
| 25,941 |
| ||
Prospectus and shareholders’ reports |
|
| 18,275 |
| ||
Trustees’ fees and expenses—Note 3(c) |
|
| 7,949 |
| ||
Custodian fees—Note 3(b) |
|
| 6,416 |
| ||
Loan commitment fees—Note 2 |
|
| 2,116 |
| ||
Shareholder servicing costs—Note 3(b) |
|
| 545 |
| ||
Miscellaneous |
|
| 17,660 |
| ||
Total Expenses |
|
| 921,817 |
| ||
Less—reduction in fees due to earnings credits—Note 3(b) |
|
| (85) |
| ||
Net Expenses |
|
| 921,732 |
| ||
Investment (Loss)—Net |
|
| (227,774) |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments | 18,262,025 |
| ||||
Net unrealized appreciation (depreciation) on investments |
|
| (6,859,650) |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| 11,402,375 |
| ||
Net Increase in Net Assets Resulting from Operations |
| 11,174,601 |
| |||
See notes to financial statements. |
12
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment (loss)—net |
|
| (227,774) |
|
|
| (465,496) |
| |
Net realized gain (loss) on investments |
| 18,262,025 |
|
|
| 35,249,723 |
| ||
Net unrealized appreciation (depreciation) |
| (6,859,650) |
|
|
| 7,783,367 |
| ||
Net Increase (Decrease) in Net Assets | 11,174,601 |
|
|
| 42,567,594 |
| |||
Distributions to Shareholders from ($): |
| ||||||||
Net realized gain on investments: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (31,237,676) |
|
|
| (2,000,341) |
| |
Service Shares |
|
| (3,518,843) |
|
|
| (218,974) |
| |
Total Distributions |
|
| (34,756,519) |
|
|
| (2,219,315) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 6,332,175 |
|
|
| 10,596,553 |
| |
Service Shares |
|
| 950,382 |
|
|
| 1,191,330 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 31,237,676 |
|
|
| 2,000,341 |
| |
Service Shares |
|
| 3,518,843 |
|
|
| 218,974 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (12,933,313) |
|
|
| (21,682,843) |
| |
Service Shares |
|
| (1,003,320) |
|
|
| (2,291,881) |
| |
Increase (Decrease) in Net Assets | 28,102,443 |
|
|
| (9,967,526) |
| |||
Total Increase (Decrease) in Net Assets | 4,520,525 |
|
|
| 30,380,753 |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 209,903,996 |
|
|
| 179,523,243 |
| |
End of Period |
|
| 214,424,521 |
|
|
| 209,903,996 |
| |
Accumulated investment (loss)—net | (227,774) |
|
|
| - |
| |||
Capital Share Transactions (Shares): |
| ||||||||
Initial Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 110,259 |
|
|
| 197,277 |
| |
Shares issued for distributions reinvested |
|
| 603,627 |
|
|
| 38,007 |
| |
Shares redeemed |
|
| (229,657) |
|
|
| (403,156) |
| |
Net Increase (Decrease) in Shares Outstanding | 484,229 |
|
|
| (167,872) |
| |||
Service Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 17,201 |
|
|
| 22,928 |
| |
Shares issued for distributions reinvested |
|
| 70,731 |
|
|
| 4,288 |
| |
Shares redeemed |
|
| (18,617) |
|
|
| (44,121) |
| |
Net Increase (Decrease) in Shares Outstanding | 69,315 |
|
|
| (16,905) |
| |||
See notes to financial statements. |
13
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, 2018 | Year Ended December 31, | |||||
Initial Shares | (Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 60.91 | 49.44 | 46.02 | 47.78 | 47.03 | 31.66 |
Investment Operations: | ||||||
Investment (loss)—neta | (.05) | (.12) | (.02) | (.13) | (.01) | (.09) |
Net realized and unrealized | 3.00 | 12.21 | 7.07 | (.91) | .76 | 15.46 |
Total from Investment Operations | 2.95 | 12.09 | 7.05 | (1.04) | .75 | 15.37 |
Distributions: | ||||||
Dividends from net realized | (10.17) | (.62) | (3.63) | (.72) | - | - |
Net asset value, end of period | 53.69 | 60.91 | 49.44 | 46.02 | 47.78 | 47.03 |
Total Return (%) | 5.46b | 24.69 | 17.07 | (2.28) | 1.60 | 48.55 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | .85c | .85 | .86 | .85 | .83 | .93 |
Ratio of net expenses | .85c | .85 | .86 | .85 | .83 | .93 |
Ratio of net investment (loss) | (.19)c | (.22) | (.05) | (.27) | (.03) | (.23) |
Portfolio Turnover Rate | 33.99b | 70.11 | 88.08 | 65.26 | 77.96 | 84.80 |
Net Assets, end of period ($ x 1,000) | 193,079 | 189,582 | 162,171 | 151,992 | 170,570 | 188,702 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
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Six Months Ended | ||||||
June 30, 2018 | Year Ended December 31, | |||||
Service Shares | (Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 58.98 | 48.01 | 44.90 | 46.75 | 46.14 | 31.13 |
Investment Operations: | ||||||
Investment (loss)—neta | (.12) | (.25) | (.13) | (.24) | (.13) | (.18) |
Net realized and unrealized | 2.89 | 11.84 | 6.87 | (.89) | .74 | 15.19 |
Total from Investment Operations | 2.77 | 11.59 | 6.74 | (1.13) | .61 | 15.01 |
Distributions: | ||||||
Dividends from net realized | (10.17) | (.62) | (3.63) | (.72) | - | - |
Net asset value, end of period | 51.58 | 58.98 | 48.01 | 44.90 | 46.75 | 46.14 |
Total Return (%) | 5.32b | 24.37 | 16.79 | (2.52) | 1.32 | 48.22 |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.10c | 1.10 | 1.11 | 1.10 | 1.08 | 1.18 |
Ratio of net expenses | 1.10c | 1.10 | 1.11 | 1.10 | 1.08 | 1.18 |
Ratio of net investment (loss) | (.44)c | (.47) | (.30) | (.52) | (.28) | (.48) |
Portfolio Turnover Rate | 33.99b | 70.11 | 88.08 | 65.26 | 77.96 | 84.80 |
Net Assets, end of period ($ x 1,000) | 21,345 | 20,322 | 17,353 | 16,528 | 18,094 | 19,590 |
a Based on average shares outstanding.
b Not annualized.
c Annualized.
See notes to financial statements.
15
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 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 is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC registrants. The fund’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.
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(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
Investments in 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.
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NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Securities not listed on an exchange or the national securities market, or securities for which there were no transactions, are valued at the average of the most recent bid and asked prices. These securities are generally categorized within Level 2 of the fair value hierarchy.
Fair valuing of securities may be determined with the assistance of a pricing service using calculations based on indices of domestic securities and other appropriate indicators, such as prices of relevant ADRs and futures. Utilizing these techniques may result in transfers between Level 1 and Level 2 of the fair value hierarchy.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Company’s Board of Trustees (the “Board”). Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
The following is a summary of the inputs used as of June 30, 2018 in valuing the fund’s investments:
Level 1- | Level 2 – Other | Level 3 - | Total | |
Assets ($) | ||||
Investments in Securities: | ||||
Equity Securities - Domestic Common Stocks† | 192,006,972 | - | - | 192,006,972 |
Equity Securities - Foreign Common Stocks† | 18,890,699 | - | - | 18,890,699 |
Exchange-Traded Fund | 749,739 | - | - | 749,739 |
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Level 1- | Level 2 – Other | Level 3 - | Total | |
Assets ($) | ||||
Registered Investment Companies | 18,106,697 | - | - | 18,106,697 |
Warrants† | 49,767 | - | - | 49,767 |
† See Statement of Investments for additional detailed categorizations.
At December 31, 2017, $929,658 of exchange traded equity securities were classified within Level 2 of the fair value hierarchy pursuant to the fund’s fair valuation procedures. It is the fund’s policy to recognize transfers between levels at the end of the reporting period.
(b) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of 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. Additionally, the contractual maturity of security lending transactions are on an overnight and continuous basis. During the period ended June 30, 2018, The Bank of New York Mellon earned $8,720 from lending portfolio securities, pursuant to the securities lending agreement.
19
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
(c) Affiliated issuers: Investments in other investment companies advised by Dreyfus are defined as “affiliated” under the Act.
(d) Dividends and distributions to shareholders: Dividends and distributions are recorded on the ex-dividend date. Dividends from investment income-net and dividends from net realized capital gains, if any, are normally declared and paid annually, but the fund may make distributions on a more frequent basis to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended (the “Code”). To the extent that net realized capital gains can be offset by capital loss carryovers, it is the policy of the fund not to distribute such gains. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP.
(e) Federal income taxes: It is the policy of the fund to continue to qualify as a regulated investment company, if such qualification is in the best interests of its shareholders, by complying with the applicable provisions of the Code, and to make distributions of taxable income sufficient to relieve it from substantially all federal income and excise taxes.
As of and during the period ended June 30, 2018, 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, 2018, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended December 31, 2017 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, 2017 was as follows: long-term capital gains $2,219,315. 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 an $830 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.
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During the period ended June 30, 2018, 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, 2018, Service shares were charged $25,941 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, 2018, the fund was charged $380 for transfer agency services and $54 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were offset by earnings credits of $54.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended June 30, 2018, the fund was charged $6,416 pursuant to the custody agreement. These fees were partially offset by earnings credits of $31.
21
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
During the period ended June 30, 2018, the fund was charged $6,320 for services performed by the Chief Compliance Officer and his staff. These fees are included in Miscellaneous in the Statement of Operations.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $135,442, Distribution Plan fees $4,494, custodian fees $8,377, Chief Compliance Officer fees $6,320 and transfer agency fees $173.
(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, 2018, amounted to $70,314,829 and $76,720,599, respectively.
At June 30, 2018, accumulated net unrealized appreciation on investments was $37,624,623, consisting of $40,727,650 gross unrealized appreciation and $3,103,027 gross unrealized depreciation.
At June 30, 2018, 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).
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INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 14-15, 2018, 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 management’s brokerage policies and practices (including policies and practices regarding soft dollars) and the standards applied in seeking best execution.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended December 31, 2017, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
23
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENT (Unaudited) (continued)
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 with representatives of Dreyfus and/or its affiliates the results of the comparisons and considered that the fund’s total return performance was above the Performance Group and Performance Universe medians for all periods (ranking first or second in the Performance Group in five of the six periods shown), except for the ten-year period when it was slightly below the Performance Group median. 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 considered that: the fund’s contractual management fee was below the Expense Group median and the fund’s actual management fee and total expenses were below the Expense Group and 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 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 Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement, considered in relation to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Dreyfus representatives also stated that, as a result of shared and allocated costs among funds in the Dreyfus fund complex, the extent of
24
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 took into consideration the soft dollar arrangements in effect for trading the fund’s investments.
At the conclusion of these discussions, the Board agreed that it had been furnished with sufficient information to make an informed business decision with respect to the renewal of the Agreement. Based on the discussions and considerations as described above, the Board concluded and determined as follows.
· The Board concluded that the nature, extent and quality of the services provided by Dreyfus are adequate and appropriate.
· The Board was satisfied with the fund’s performance.
· The Board concluded that the fee paid to Dreyfus continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to 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 Dreyfus 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 the Agreement for the fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, 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 fund’s arrangements, or substantially similar arrangements for other Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreement.
25
Dreyfus Variable Investment Fund, Opportunistic Small Cap Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
Telephone 1-800-258-4260 or 1-800-258-4261
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 Attn: Institutional Services Department
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
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, D.C. 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.
© 2018 MBSC Securities Corporation |
Dreyfus Variable Investment Fund, Quality Bond Portfolio
SEMIANNUAL REPORT June 30, 2018 |
The views expressed in this report reflect those of the portfolio manager(s) only through the end of the period covered and do not necessarily represent the views of 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
With Those of Other Funds | |
in Affiliated Issuers | |
Currency Exchange Contracts | |
the Fund’s Investment | |
Advisory Agreement |
FOR MORE INFORMATION
Back Cover
| The Fund |
A LETTER FROM THE PRESIDENT OF DREYFUS
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, 2018 through June 30, 2018. 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.
Volatility returned to the financial markets over the first half of 2018. Although stocks set a series of new record highs in January amid growing corporate earnings, reduced corporate tax rates and synchronized global economic growth, investors later grew nervous about rising interest rates, renewed inflationary pressures, escalating geopolitical tensions and the prospects of more protectionist U.S. trade policies. Consequently, U.S. stocks produced mildly positive returns over the reporting period. Meanwhile, bonds typically lost a degree of value over the first six months of the year due to rising interest rates and inflation concerns.
Despite the return of heightened market volatility, we believe that underlying market fundamentals remain sound. Ongoing economic growth, robust labor markets, rising corporate earnings and strong consumer and business confidence seem likely to support stock and corporate bond prices over the months ahead. Monetary policymakers have indicated that short-term interest rates probably will rise further, but U.S. government bond prices may already reflect those expectations. As always, we encourage you to discuss the risks and opportunities of today’s investment environment with your financial advisor.
Thank you for your continued confidence and support.
Sincerely,
Renee Laroche-Morris
President
The Dreyfus Corporation
July 16, 2018
2
DISCUSSION OF FUND PERFORMANCE (Unaudited)
For the period from January 1, 2018 through June 30, 2018, as provided by David Bowser, CFA , Portfolio Manager
Market and Fund Performance Overview
For the six-month period ended June 30, 2018, Dreyfus Variable Investment Fund, Quality Bond Portfolio’s Initial shares produced a total return of -2.90%, and its Service shares produced a total return of -2.95%.1 The Bloomberg Barclays U.S. Aggregate Bond Index (the “Index”), the fund’s benchmark, achieved a total return of -1.62% for the same period.2
Bonds generally lost value over the reporting period due to rising interest rates and intensifying inflationary pressures in a growing global economy. The fund underperformed the Index, mainly due to its exposure to emerging-market securities that were hurt later in the reporting period by a strengthening U.S. dollar against local currencies.
The Fund’s Investment Approach
The fund seeks to maximize total return, consisting of capital appreciation and current income. To pursue its goal, the fund normally invests at least 80% of its net assets, plus any borrowings for investment purposes, in bonds. The fund’s investments include 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, typically are rated A or better or are the unrated equivalent as determined by The Dreyfus Corporation and in securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, including treasury inflation-protected securities (“TIPS”).
The fund also may invest 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 issued by foreign issuers whether denominated in U.S. dollars or in a foreign currency.
The fund has no limit with respect to its portfolio maturity or duration.
Rising Interest Rates Dampened Fixed-Income Returns
U.S. government bonds lost a degree of value over the reporting period as the Federal Reserve Board (the “Fed”) twice raised short-term interest rates and continued to unwind its balance sheet. Expectations of higher interest rates intensified early in the year due to strengthening economic data and the likelihood that recently enacted corporate tax cuts would further boost corporate earnings. Market volatility spiked in February when investors grew concerned about accelerating inflation stemming from higher wages in a tight labor market. These developments led to lower prices for U.S. government securities over the first quarter of 2018, but corporate bonds benefited at the time from favorable business conditions. Meanwhile, a U.S. dollar that weakened against most other currencies helped support returns from international bonds for U.S. investors.
The second quarter of the year saw continued pressure on U.S. government securities in the rising interest-rate environment. Moreover, corporate-backed bonds began to give back some of their previous gains due to a surge in the supply of newly issued securities, which stemmed in part from higher levels of merger-and-acquisition activity. The increase in supply was met by reduced demand from international investors, putting additional downward pressure on corporate bond prices.
In addition, currency exchange rates reversed course when European economic data proved less robust than U.S. economic data, and the U.S. dollar began appreciating against the euro and other local currencies. This change eroded the value of international investments for U.S. residents during the second quarter.
3
DISCUSSION OF FUND PERFORMANCE (Unaudited) (continued)
Emerging-Market Bonds Constrained Fund Performance
The fund’s performance compared to the Index was undermined by overweighted exposure to emerging-market bonds denominated in local currencies. In addition, the fund held modestly heavy exposure to investment-grade corporate-backed bonds. These positions weighted on relative results over the reporting period’s second half.
In contrast, other strategies added value. Most notably, investments in TIPS fared well when U.S. inflationary pressures increased. Relatively defensive interest-rate strategies also helped bolster relative performance, as we maintained the fund’s average duration among U.S. securities in a position that was mildly shorter than that of the Index. This positioning helped the fund cushion the adverse impact of rising interest rates.
A Cautiously Opportunistic Investment Posture
We currently expect the global economic expansion to persist, and the Fed and other central banks seem poised to continue to move away from the aggressively accommodative monetary policies of the past decade. However, we also believe that recent weakness among corporate securities and emerging-market bonds may prove temporary as business and global economic fundamentals remain sound.
Therefore, we have maintained the fund’s overweighted exposure to investment-grade corporate bonds, and we have increased its holdings of emerging-market bonds that are denominated in the U.S. dollar. We have maintained underweighted positions in mortgage-backed securities due to concerns regarding supply-and-demand dynamics. From an interest-rate perspective, we have maintained a modestly defensive duration posture in markets where interest rates seem likely to rise, including the United States, Canada, and the United Kingdom.
July 16, 2018
1 Total return includes reinvestment of dividends and any capital gains paid. Past performance is no guarantee of future results. Share price and investment return fluctuate such that upon redemption, fund shares may be worth more or less than their original cost. The fund’s performance does not reflect the deduction of additional charges and expenses imposed in connection with investing in variable insurance contracts, which will reduce returns.
2 Source: Lipper Inc. — The Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment-grade, U.S. dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS (agency and nonagency). Investors cannot invest directly in any index.
Bonds 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, 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 those of 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.
4
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, Quality Bond Portfolio from January 1, 2018 to June 30, 2018. 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, 2018 | |||||||
|
|
| Initial Shares | Service Shares | |||
Expenses paid per $1,000† | $6.11 | $7.33 | |||||
Ending value (after expenses) | $971.00 | $970.50 |
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, 2018 | |||||||
|
|
| Initial Shares | Service Shares | |||
Expenses paid per $1,000† | $6.26 | $7.50 | |||||
Ending value (after expenses) | $1,018.60 | $1,017.36 |
† Expenses are equal to the fund’s annualized expense ratio of 1.25% for Initial shares and 1.50% for Service shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).
5
STATEMENT OF INVESTMENTS
June 30, 2018 (Unaudited)
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 97.1% | |||||||||
Asset-Backed Certificates - 1.1% | |||||||||
Dell Equipment Finance Trust, | 2.19 | 10/24/22 | 105,000 | b | 103,919 | ||||
Starwood Waypoint Homes Trust, | 3.04 | 1/17/35 | 189,123 | b,c | 190,051 | ||||
Tricon American Homes Trust, | 2.93 | 1/17/36 | 125,000 | b | 120,542 | ||||
414,512 | |||||||||
Asset-Backed Ctfs./Auto Receivables - 2.9% | |||||||||
AmeriCredit Automobile Receivables Trust, | 2.54 | 6/8/20 | 275,000 | 274,974 | |||||
CarMax Auto Owner Trust, | 2.33 | 5/15/23 | 85,000 | 83,159 | |||||
CarMax Auto Owner Trust, | 2.64 | 6/15/23 | 180,000 | 178,036 | |||||
Enterprise Fleet Financing, | 2.13 | 5/20/23 | 100,000 | b | 99,057 | ||||
Nissan Auto Receivables Owner Trust, | 1.95 | 10/16/23 | 190,000 | 185,372 | |||||
OSCAR US Funding Trust VII, | 2.45 | 12/10/21 | 40,000 | b | 39,595 | ||||
OSCAR US Funding Trust VII, | 2.76 | 12/10/24 | 50,000 | b | 49,225 | ||||
OSCAR US Funding Trust VIII, | 3.50 | 5/12/25 | 190,000 | b | 190,865 | ||||
1,100,283 | |||||||||
Commercial Mortgage Pass-Through Ctfs. - 1.7% | |||||||||
Commercial Mortgage Trust, | 4.20 | 3/10/47 | 70,000 | 71,232 | |||||
Commercial Mortgage Trust, | 3.35 | 2/10/48 | 170,000 | 168,301 | |||||
Commercial Mortgage Trust, | 3.63 | 2/10/50 | 290,000 | 289,469 | |||||
Houston Galleria Mall Trust, | 3.09 | 3/5/37 | 100,000 | b | 96,548 | ||||
625,550 | |||||||||
Consumer Discretionary - 2.4% | |||||||||
21st Century Fox America, | 4.00 | 10/1/23 | 90,000 | 91,251 | |||||
21st Century Fox America, | 4.75 | 11/15/46 | 55,000 | 56,976 | |||||
Amazon.com, | 4.05 | 8/22/47 | 105,000 | 103,115 |
6
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 97.1% (continued) | |||||||||
Consumer Discretionary - 2.4% (continued) | |||||||||
AMC Networks, | 4.75 | 8/1/25 | 35,000 | 33,732 | |||||
Charter Communications Operating, | 5.38 | 5/1/47 | 100,000 | 91,060 | |||||
Comcast, | 3.15 | 3/1/26 | 155,000 | 145,648 | |||||
Cox Communications, | 4.60 | 8/15/47 | 85,000 | b | 77,913 | ||||
Dollar Tree, | 4.00 | 5/15/25 | 55,000 | 53,822 | |||||
Dollar Tree, | 4.20 | 5/15/28 | 40,000 | 38,678 | |||||
Newell Brands, | 4.20 | 4/1/26 | 95,000 | 91,835 | |||||
Warner Media, | 5.35 | 12/15/43 | 110,000 | 107,703 | |||||
891,733 | |||||||||
Consumer Staples - 1.9% | |||||||||
Anheuser-Busch InBev Finance, | 4.90 | 2/1/46 | 115,000 | 118,685 | |||||
Anheuser-Busch InBev Worldwide, | 4.00 | 4/13/28 | 50,000 | 49,964 | |||||
Kraft Heinz Foods, | 3.95 | 7/15/25 | 155,000 | 150,843 | |||||
Kraft Heinz Foods, | 6.88 | 1/26/39 | 100,000 | 117,657 | |||||
Maple Escrow Subsidiary, | 4.06 | 5/25/23 | 20,000 | b | 20,097 | ||||
Maple Escrow Subsidiary, | 4.60 | 5/25/28 | 60,000 | b | 60,315 | ||||
Post Holdings, | 5.50 | 3/1/25 | 95,000 | b | 92,981 | ||||
Reynolds American, | 4.85 | 9/15/23 | 90,000 | 93,624 | |||||
704,166 | |||||||||
Energy - 4.5% | |||||||||
Andeavor Logistics, | 3.50 | 12/1/22 | 40,000 | 39,110 | |||||
Cenovus Energy, | 5.25 | 6/15/37 | 80,000 | 78,853 | |||||
Cheniere Corpus Christi Holdings, | 5.13 | 6/30/27 | 75,000 | 74,625 | |||||
Concho Resources, | 4.88 | 10/1/47 | 30,000 | 30,337 | |||||
Ecopetrol, | 5.88 | 5/28/45 | 60,000 | 57,132 |
7
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 97.1% (continued) | |||||||||
Energy - 4.5% (continued) | |||||||||
Energy Transfer Partners, | 5.15 | 2/1/43 | 195,000 | 174,106 | |||||
Energy Transfer Partners, | 6.25 | 12/31/49 | 115,000 | 106,734 | |||||
EQT, | 3.90 | 10/1/27 | 85,000 | 79,470 | |||||
Genesis Energy, | 6.75 | 8/1/22 | 95,000 | 96,425 | |||||
Kinder Morgan, | 7.75 | 1/15/32 | 160,000 | 195,455 | |||||
Marathon Petroleum, | 3.63 | 9/15/24 | 150,000 | 146,635 | |||||
MPLX, | 4.13 | 3/1/27 | 70,000 | 66,869 | |||||
MPLX, | 5.20 | 3/1/47 | 60,000 | 59,610 | |||||
Petrobras Global Finance, | 7.38 | 1/17/27 | 115,000 | 115,144 | |||||
Petrobras Global Finance, | 7.25 | 3/17/44 | 40,000 | 37,150 | |||||
TransCanada PipeLines, | 4.25 | 5/15/28 | 90,000 | 90,424 | |||||
Western Gas Partners, | 4.50 | 3/1/28 | 35,000 | 33,734 | |||||
Western Gas Partners, | 5.30 | 3/1/48 | 25,000 | 23,038 | |||||
Williams Partners, | 4.50 | 11/15/23 | 130,000 | 132,084 | |||||
Williams Partners, | 6.30 | 4/15/40 | 65,000 | 72,769 | |||||
1,709,704 | |||||||||
Financials - 9.7% | |||||||||
American Express Credit, | 2.60 | 9/14/20 | 135,000 | 133,497 | |||||
American International Group, | 4.20 | 4/1/28 | 120,000 | 117,421 | |||||
Bank of America, | 3.00 | 12/20/23 | 43,000 | 41,722 | |||||
Bank of America, | 4.00 | 4/1/24 | 122,000 | 123,115 | |||||
Bank of America, | 3.50 | 4/19/26 | 125,000 | 120,990 | |||||
Bank of America, | 3.42 | 12/20/28 | 109,000 | 102,724 | |||||
Bank of America, | 3.97 | 3/5/29 | 100,000 | 98,501 |
8
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 97.1% (continued) | |||||||||
Financials - 9.7% (continued) | |||||||||
Barclays, | 4.38 | 1/12/26 | 200,000 | 194,741 | |||||
Citigroup, | 3.40 | 5/1/26 | 205,000 | 194,825 | |||||
Citigroup, | 3.89 | 1/10/28 | 120,000 | 116,357 | |||||
Citigroup, | 4.65 | 7/30/45 | 185,000 | 184,657 | |||||
Citigroup, | 4.75 | 5/18/46 | 50,000 | 47,688 | |||||
Cooperatieve Rabobank, | 3.75 | 7/21/26 | 250,000 | 234,353 | |||||
ERAC USA Finance, | 3.85 | 11/15/24 | 60,000 | b | 59,778 | ||||
Goldman Sachs Group, | 2.75 | 9/15/20 | 105,000 | 103,740 | |||||
Goldman Sachs Group, | 3.69 | 6/5/28 | 50,000 | 47,435 | |||||
Goldman Sachs Group, | 3.81 | 4/23/29 | 50,000 | 47,557 | |||||
Goldman Sachs Group, | 3.44 | 11/15/18 | 245,000 | c | 245,929 | ||||
Goldman Sachs Group, | 3.92 | 11/29/23 | 55,000 | c | 56,857 | ||||
JPMorgan Chase & Co., | 4.25 | 10/1/27 | 205,000 | 203,809 | |||||
JPMorgan Chase & Co., | 3.63 | 12/1/27 | 100,000 | 94,221 | |||||
KeyBank, | 2.50 | 11/22/21 | 250,000 | 242,877 | |||||
Lloyds Banking Group, | 4.65 | 3/24/26 | 205,000 | 201,962 | |||||
Morgan Stanley, | 5.50 | 7/28/21 | 100,000 | 105,885 | |||||
Morgan Stanley, | 3.75 | 2/25/23 | 65,000 | 65,094 | |||||
Principal Financial Group, | 4.30 | 11/15/46 | 90,000 | 85,838 | |||||
Quicken Loans, | 5.75 | 5/1/25 | 95,000 | b | 93,459 | ||||
Visa, | 3.15 | 12/14/25 | 110,000 | 106,500 | |||||
Wells Fargo & Co., | 3.07 | 1/24/23 | 110,000 | 107,001 |
9
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 97.1% (continued) | |||||||||
Financials - 9.7% (continued) | |||||||||
Wells Fargo & Co., | 4.30 | 7/22/27 | 95,000 | 93,760 | |||||
3,672,293 | |||||||||
Foreign/Governmental - 9.9% | |||||||||
Argentine Government, | EUR | 5.25 | 1/15/28 | 100,000 | 100,675 | ||||
Argentine Government, | ARS | 0.00 | 2/8/19 | 5,025,000 | 188,709 | ||||
Buenos Aires Province, | ARS | 27.50 | 5/31/22 | 2,400,000 | c | 72,394 | |||
Canadian Government, | CAD | 0.50 | 12/1/50 | 180,000 | 142,273 | ||||
Hellenic Government, | EUR | 3.90 | 1/30/33 | 170,000 | 185,769 | ||||
Ivory Coast Government, | EUR | 5.25 | 3/22/30 | 100,000 | b | 112,199 | |||
Japanese Government, | JPY | 0.10 | 3/10/26 | 142,600,000 | d | 1,368,172 | |||
Mexican Government, | MXN | 5.75 | 3/5/26 | 2,705,000 | 121,752 | ||||
Qatari Government, | 5.10 | 4/23/48 | 200,000 | 199,846 | |||||
Romanian Government, | EUR | 2.50 | 2/8/30 | 75,000 | b | 84,055 | |||
Russian Government, | RUB | 7.70 | 3/23/33 | 5,550,000 | 88,766 | ||||
Saudi Arabian Government, | 4.63 | 10/4/47 | 200,000 | 186,908 | |||||
Senegalese Government, | EUR | 4.75 | 3/13/28 | 100,000 | 109,161 | ||||
Senegalese Government, | EUR | 4.75 | 3/13/28 | 100,000 | b | 109,161 | |||
Spanish Government, | EUR | 2.90 | 10/31/46 | 150,000 | b | 191,284 | |||
Spanish Government, | EUR | 2.70 | 10/31/48 | 160,000 | b | 194,451 | |||
Ukrainian Government, | 0.00 | 5/31/40 | 95,000 | e | 60,438 | ||||
Uruguayan Government, | UYU | 8.50 | 3/15/28 | 2,900,000 | b | 80,155 | |||
Uruguayan Government, | 4.38 | 10/27/27 | 150,000 | 152,344 | |||||
3,748,512 |
10
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 97.1% (continued) | |||||||||
Health Care - 3.7% | |||||||||
Abbott Laboratories, | 4.90 | 11/30/46 | 120,000 | 128,894 | |||||
AbbVie, | 3.20 | 5/14/26 | 135,000 | 126,108 | |||||
Aetna, | 2.80 | 6/15/23 | 265,000 | 252,919 | |||||
AmerisourceBergen, | 3.25 | 3/1/25 | 95,000 | 90,216 | |||||
CVS Health, | 4.30 | 3/25/28 | 115,000 | 113,615 | |||||
Gilead Sciences, | 3.65 | 3/1/26 | 55,000 | 54,337 | |||||
Gilead Sciences, | 4.75 | 3/1/46 | 80,000 | 82,700 | |||||
HCA, | 5.38 | 2/1/25 | 95,000 | 93,784 | |||||
Medtronic, | 4.63 | 3/15/45 | 90,000 | 95,550 | |||||
Shire Acquisitions Investments Ireland, | 2.88 | 9/23/23 | 135,000 | 127,095 | |||||
Teva Pharmaceutical Finance Netherlands III, | 3.15 | 10/1/26 | 120,000 | 96,581 | |||||
UnitedHealth Group, | 4.75 | 7/15/45 | 115,000 | 123,055 | |||||
1,384,854 | |||||||||
Industrials - 2.5% | |||||||||
Corning, | 4.38 | 11/15/57 | 80,000 | 69,983 | |||||
CSX, | 2.60 | 11/1/26 | 75,000 | 67,793 | |||||
FedEx, | 4.40 | 1/15/47 | 125,000 | 118,726 | |||||
General Electric, | 5.00 | 12/31/49 | 395,000 | 390,161 | |||||
General Electric, | 2.86 | 1/14/19 | 155,000 | c | 155,269 | ||||
Republic Services, | 3.38 | 11/15/27 | 40,000 | 37,971 | |||||
Waste Management, | 4.10 | 3/1/45 | 110,000 | 108,690 | |||||
948,593 | |||||||||
Information Technology - .8% | |||||||||
Dell International, | 6.02 | 6/15/26 | 110,000 | b | 115,818 |
11
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 97.1% (continued) | |||||||||
Information Technology - .8% (continued) | |||||||||
Hewlett Packard Enterprise, | 4.40 | 10/15/22 | 70,000 | 71,801 | |||||
Oracle, | 2.65 | 7/15/26 | 140,000 | 129,204 | |||||
316,823 | |||||||||
Materials - 2.1% | |||||||||
Anglo American Capital, | 4.50 | 3/15/28 | 200,000 | b | 193,333 | ||||
Chemours, | 5.38 | 5/15/27 | 35,000 | 33,950 | |||||
Dow Chemical, | 3.50 | 10/1/24 | 100,000 | 97,486 | |||||
Glencore Funding, | 4.63 | 4/29/24 | 70,000 | b | 70,528 | ||||
Israel Chemicals, | 6.38 | 5/31/38 | 80,000 | 79,250 | |||||
LYB International Finance, | 4.00 | 7/15/23 | 95,000 | 95,282 | |||||
OCP Group, | 6.88 | 4/25/44 | 200,000 | 210,813 | |||||
780,642 | |||||||||
Municipal Bonds - 2.8% | |||||||||
California, | 7.30 | 10/1/39 | 340,000 | 482,827 | |||||
New Jersey Economic Development Authority, | 4.45 | 6/15/20 | 305,000 | 311,417 | |||||
New York City, | 5.99 | 12/1/36 | 200,000 | 249,328 | |||||
1,043,572 | |||||||||
Telecommunications - 1.5% | |||||||||
AT&T, | 4.90 | 8/15/37 | 150,000 | b | 142,683 | ||||
AT&T, | 5.45 | 3/1/47 | 205,000 | 201,797 | |||||
Verizon Communications, | 3.38 | 2/15/25 | 159,000 | 152,935 | |||||
Zayo Group, | 5.75 | 1/15/27 | 75,000 | b | 73,875 | ||||
571,290 | |||||||||
U.S. Government Agencies Mortgage-Backed - 22.9% | |||||||||
Federal Home Loan Mortgage Corp.: | |||||||||
3.00%, 11/1/46 | 315,371 | f | 305,607 | ||||||
3.50%, 8/1/45 | 187,232 | f | 187,069 | ||||||
5.50%, 5/1/40 | 2,147 | f | 2,296 |
12
Description | Coupon | Maturity | Principal | a | Value ($) | ||||
Bonds and Notes - 97.1% (continued) | |||||||||
U.S. Government Agencies Mortgage-Backed - 22.9% (continued) | |||||||||
Federal National Mortgage Association: | |||||||||
2.87%, 1/1/48 | 307,283 | f | 306,729 | ||||||
2.89%, 12/1/47 | 276,367 | f | 275,668 | ||||||
3.00%, 11/1/30 | 379,081 | f | 378,230 | ||||||
3.50%, 5/1/30-1/1/48 | 4,234,529 | f | 4,231,272 | ||||||
4.50%, 10/1/40 | 568,391 | f | 597,076 | ||||||
5.00%, 3/1/21-10/1/33 | 313,274 | f | 333,345 | ||||||
7.00%, 6/1/29-9/1/29 | 14,701 | f | 15,292 | ||||||
Government National Mortgage Association I: | |||||||||
5.50%, 4/15/33 | 233,686 | 256,341 | |||||||
Government National Mortgage Association II: | |||||||||
3.00%, 11/20/45 | 883,547 | 869,379 | |||||||
4.00%, 10/20/47-1/20/48 | 846,556 | 868,611 | |||||||
7.00%, 9/20/28-7/20/29 | 3,108 | 3,535 | |||||||
8,630,450 | |||||||||
U.S. Government Securities - 25.1% | |||||||||
U.S. Treasury Bonds | 4.50 | 2/15/36 | 545,000 | g | 666,103 | ||||
U.S. Treasury Floating Rate Notes, | 1.97 | 7/31/19 | 1,805,000 | c | 1,806,885 | ||||
U.S. Treasury Inflation Protected Securities, | 0.63 | 1/15/26 | 785,349 | g,h | 781,290 | ||||
U.S. Treasury Inflation Protected Securities, | 0.38 | 1/15/27 | 731,036 | h | 710,445 | ||||
U.S. Treasury Notes | 2.38 | 3/15/21 | 865,000 | 859,780 | |||||
U.S. Treasury Notes | 2.38 | 4/15/21 | 675,000 | 670,702 | |||||
U.S. Treasury Notes | 2.50 | 3/31/23 | 3,185,000 | 3,152,528 | |||||
U.S. Treasury Notes | 3.13 | 5/15/48 | 790,000 | 811,339 | |||||
9,459,072 | |||||||||
Utilities - 1.6% | |||||||||
Dominion Energy, | 2.85 | 8/15/26 | 165,000 | 149,677 | |||||
Exelon Generation, | 6.25 | 10/1/39 | 85,000 | 90,540 | |||||
Kentucky Utilities, | 4.38 | 10/1/45 | 80,000 | 82,324 | |||||
Louisville Gas & Electric, | 4.38 | 10/1/45 | 90,000 | 92,615 | |||||
Nevada Power, | 6.75 | 7/1/37 | 150,000 | 197,912 | |||||
613,068 | |||||||||
Total Bonds and Notes | 36,615,117 |
13
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Description /Number of Contracts/Counterparty | Exercise | Expiration Date | Notional Amount | Value ($) | |||||
Options Purchased - .1% | |||||||||
Call Options - .0% | |||||||||
Euro, | 1.16 | 8/2018 | 100,000 | 987 | |||||
Euro, | 1.17 | 8/2018 | 100,000 | 1,369 | |||||
New Zealand Dollar Cross Currency, | AUD | 1.10 | 8/2018 | 75,000 | 279 | ||||
2,635 | |||||||||
Put Options - .1% | |||||||||
British Pound, | 1.35 | 12/2018 | 140,000 | 2,517 | |||||
Mexican Peso, | 20.00 | 12/2018 | 190,000 | 5,402 | |||||
Norwegian Krone Cross Currency, | EUR | 9.35 | 7/2018 | 50,000 | 56 | ||||
Polish Zloty, | 3.64 | 8/2018 | 380,000 | 2,085 | |||||
Russian Ruble, | 62.00 | 8/2018 | 380,000 | 3,870 | |||||
South African Rand, | 12.49 | 12/2018 | 190,000 | 1,100 | |||||
South Korean Won, | 1,085 | 9/2018 | 60,000 | 377 | |||||
Swedish Krona Cross Currency, | EUR | 9.60 | 7/2018 | 50,000 | 0 | ||||
Turkish Lira, | 4.50 | 11/2018 | 380,000 | 3,519 | |||||
Turkish Lira, | 4.60 | 9/2018 | 380,000 | 5,845 | |||||
Turkish Lira, | 4.70 | 9/2018 | 60,000 | 1,476 | |||||
26,247 | |||||||||
Total Options Purchased | 28,882 | ||||||||
Description | Yield at | Maturity Date | Principal Amount ($) | Value ($) | |||||
Short-Term Investments - 1.6% | |||||||||
U.S. Treasury Bills | 1.76 | 8/2/18 | 105,000 | i,j | 104,837 | ||||
U.S. Treasury Bills | 2.03 | 12/13/18 | 500,000 | j | 495,379 | ||||
Total Short-Term Investments | 600,216 |
14
Description | 7-Day | Shares | Value ($) | ||||||
Other Investment - 1.6% | |||||||||
Registered Investment Company; | |||||||||
Dreyfus Institutional Preferred Government Plus Money Market Fund | 1.83 | 615,963 | k | 615,963 | |||||
Total Investments (cost $38,423,512) | 100.4% | 37,860,178 | |||||||
Liabilities, Less Cash and Receivables | (0.4%) | (142,599) | |||||||
Net Assets | 100.0% | 37,717,579 |
BADLAR—Buenos Aires Interbank Offer Rate
GO—General Obligation
LIBOR—London Interbank Offered Rate
ARS—Argentine Peso
AUD—Australian Dollar
CAD—Canadian Dollar
EUR—Euro
JPY—Japanese Yen
MXN—Mexican Peso
RUB—Russian Ruble
UYU—Uruguayan Peso
a Amount stated in U.S. Dollars unless otherwise noted above.
b Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2018, these securities were valued at $2,661,887 or 7.06% of net assets.
c Variable rate security—rate shown is the interest rate in effect at period end.
d Principal amount for accrual purposes is periodically adjusted based on changes in the Japanese Consumer Price Index.
e Zero coupon until a specified date at which time the stated coupon rate becomes effective until maturity.
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 Security, or portion thereof, on loan. At June 30, 2018, the value of the fund’s securities on loan was $1,447,392 and the value of the collateral held by the fund was $1,501,884, consisting of U.S. Government & Agency securities.
h Principal amount for accrual purposes is periodically adjusted based on changes in the Consumer Price Index.
i Held by a counterparty for open exchange traded derivative contracts.
j Security is a discount security. Income is recognized through the accretion of discount.
k Investment in affiliated issuer. The investment objective of this investment company is publicly available and can be found within the respective investment company’s prospectus.
15
STATEMENT OF INVESTMENTS (Unaudited) (continued)
Portfolio Summary (Unaudited) † | Value (%) |
U.S. Government and Agencies/Mortgage-Backed | 48.0 |
Corporate Bonds | 30.7 |
Foreign/Governmental | 9.9 |
Asset-Backed | 4.0 |
Short-Term/Money Market Investments | 3.2 |
Municipal Bonds | 2.8 |
Commercial Mortgage-Backed | 1.7 |
Options Purchased | .1 |
100.4 |
† Based on net assets.
See notes to financial statements.
16
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS (Unaudited)
Registered Investment Company | Value | Purchases($) | Sales($) | Value | Net | Dividends/ |
Dreyfus Institutional Preferred Government Plus Money Market Fund | 364,281 | 6,379,814 | 6,128,132 | 615,963 | 1.6 | 2,185 |
Dreyfus Institutional Preferred Government Money Market Fund, Institutional Shares | - | 9,263,462 | 9,263,462 | - | - | - |
Total | 364,281 | 15,643,276 | 15,391,594 | 615,963 | 1.6 | 2,185 |
See notes to financial statements.
17
STATEMENT OF FUTURES
June 30, 2018 (Unaudited)
Description | Number of | Expiration | Notional | Value ($) | Unrealized Appreciation (Depreciation) ($) | |
Futures Long | ||||||
Euro BTP Italian Government Bond | 3 | 9/2018 | 441,035a | 445,773 | 4,738 | |
U.S. Treasury 2 Year Notes | 21 | 9/2018 | 4,446,125 | 4,448,391 | 2,266 | |
U.S. Treasury 5 Year Notes | 16 | 9/2018 | 1,813,559 | 1,817,875 | 4,316 | |
Futures Short | ||||||
Canadian 10 Year Bond | 13 | 9/2018 | (1,326,077)a | (1,351,866) | (25,789) | |
Euro 30 Year Bond | 3 | 9/2018 | (602,653)a | (622,555) | (19,902) | |
Euro-Bobl | 5 | 9/2018 | (766,050)a | (771,742) | (5,692) | |
Euro-Bond | 3 | 9/2018 | (564,571)a | (569,478) | (4,907) | |
Japanese 10 Year Bond | 1 | 9/2018 | (1,360,246)a | (1,362,417) | (2,171) | |
Long Gilt | 6 | 9/2018 | (967,714)a | (974,450) | (6,736) | |
Ultra 10 Year U.S. Treasury Notes | 9 | 9/2018 | (1,146,064) | (1,154,109) | (8,045) | |
Gross Unrealized Appreciation | 11,320 | |||||
Gross Unrealized Depreciation | (73,242) |
a Notional amounts in foreign currency have been converted to USD using relevant foreign exchange rates.
See notes to financial statements.
18
STATEMENT OF OPTIONS WRITTEN
June 30, 2018 (Unaudited)
Description/ Expiration Date/ Exercise Price | Counterparty | Number of Contracts | Notional Amount | a | Value ($) | |
Call Options: | ||||||
Norwegian Krone Cross Currency, | Citigroup | 50,000 | 50,000 | EUR | (3) | |
South Korean Won, | Barclays Bank | 60,000 | 60,000 | (394) | ||
Swedish Krona Cross Currency, | UBS | 50,000 | 50,000 | EUR | (2,554) | |
Put Options: | ||||||
New Zealand Dollar Cross Currency, | Goldman Sachs International | 75,000 | 75,000 | AUD | (37) | |
Total Options Written (premiums received $2,068) | (2,988) |
a Notional amount stated in U.S. Dollars unless otherwise indicated.
AUD—Australian Dollar
EUR—Euro
See notes to financial statements.
19
STATEMENT OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS June 30, 2018 (Unaudited)
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation)($) |
Bank of America | |||||
United States Dollar | 127,878 | Canadian Dollar | 170,000 | 7/31/18 | (1,508) |
Barclays Bank | |||||
Czech Koruna | 1,570,000 | United States Dollar | 70,698 | 9/12/18† | 174 |
Euro | 380,000 | United States Dollar | 439,872 | 7/31/18 | 4,960 |
Malaysian Ringgit | 30,000 | United States Dollar | 7,676 | 7/23/18 | (253) |
Norwegian Krone | 1,375,000 | United States Dollar | 168,593 | 7/31/18 | 457 |
Singapore Dollar | 160,000 | United States Dollar | 118,052 | 9/12/18 | (428) |
United States Dollar | 70,698 | Euro | 60,781 | 9/12/18† | (693) |
United States Dollar | 1,207,337 | Japanese Yen | 132,600,000 | 7/31/18 | 7,029 |
United States Dollar | 226,993 | Taiwan Dollar | 6,825,000 | 9/12/18 | 1,914 |
Citigroup | |||||
Australian Dollar | 80,000 | United States Dollar | 59,088 | 7/31/18 | 123 |
British Pound | 85,000 | United States Dollar | 112,985 | 7/31/18 | (637) |
Russian Ruble | 3,500,000 | United States Dollar | 54,494 | 9/12/18 | 798 |
United States Dollar | 29,142 | Brazilian Real | 110,000 | 8/2/18 | 876 |
United States Dollar | 1,720,068 | Euro | 1,469,000 | 7/31/18 | 440 |
United States Dollar | 117,499 | Mexican New Peso | 2,470,000 | 9/12/18 | (5,379) |
Goldman Sachs International | |||||
United States Dollar | 29,653 | Brazilian Real | 110,000 | 8/2/18 | 1,387 |
HSBC | |||||
Mexican New Peso | 1,140,000 | United States Dollar | 56,110 | 9/12/18 | 603 |
Swedish Krona | 2,090,000 | United States Dollar | 235,870 | 7/31/18 | (1,956) |
United States Dollar | 55,002 | New Zealand Dollar | 80,000 | 7/31/18 | 816 |
JP Morgan Chase Bank | |||||
Argentine Peso | 120,000 | United States Dollar | 4,454 | 8/31/18 | (568) |
20
Counterparty/ Purchased | Purchased Currency | Currency | Sold | Settlement Date | Unrealized Appreciation (Depreciation)($) |
JP Morgan Chase Bank (continued) | |||||
Indonesian Rupiah | 1,663,575,000 | United States Dollar | 115,785 | 9/13/18 | (910) |
Indian Rupee | 1,969,500 | United States Dollar | 28,582 | 9/12/18 | (96) |
Polish Zloty | 215,000 | United States Dollar | 57,833 | 9/12/18 | (363) |
Russian Ruble | 3,800,000 | United States Dollar | 58,791 | 9/12/18 | 1,241 |
United States Dollar | 29,321 | Brazilian Real | 110,000 | 8/2/18 | 1,055 |
United States Dollar | 58,226 | Euro | 50,000 | 7/31/18 | (305) |
United States Dollar | 124,718 | Hong Kong Dollar | 970,000 | 1/8/19 | 674 |
United States Dollar | 110,407 | Hong Kong Dollar | 860,000 | 4/10/19 | 303 |
United States Dollar | 111,879 | Hungarian Forint | 31,160,000 | 9/12/18 | 878 |
United States Dollar | 28,992 | South Korean Won | 32,210,000 | 9/12/18 | 18 |
United States Dollar | 173,157 | Philippine Peso | 9,320,000 | 9/12/18 | (850) |
United States Dollar | 88,951 | Romanian Leu | 360,000 | 9/12/18 | (902) |
UBS | |||||
Colombian Peso | 224,815,000 | United States Dollar | 77,636 | 9/12/18 | (1,205) |
Czech Koruna | 5,865,000 | United States Dollar | 264,104 | 9/12/18† | 648 |
United States Dollar | 264,104 | Euro | 226,886 | 9/12/18† | (2,389) |
United States Dollar | 7,478 | Malaysian Ringgit | 30,000 | 7/23/18 | 55 |
Gross Unrealized Appreciation | 24,449 | ||||
Gross Unrealized Depreciation | (18,442) |
† Cross currency forward exchange contracts.
See notes to financial statements.
21
STATEMENT OF SWAP AGREEMENTS
June 30, 2018 (Unaudited)
Centrally Cleared Interest Rate Swaps | ||||
Notional | Currency/ | (Pay) Receive | Expiration | Unrealized (Depreciation) ($) |
5,800,000 | MXN-Mexico Interbank TIIE 28 Day | 7.90 | 3/19/2038 | (12,264) |
Gross Unrealized Depreciation | (12,264) |
† Clearing House-Chicago Mercantile Exchange or LCH (Clearing)
See notes to financial statements.
22
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2018 (Unaudited)
|
|
|
|
|
|
|
|
|
| Cost |
| Value |
|
Assets ($): |
|
|
|
| ||
Investments in securities—See Statement of Investments |
|
|
| |||
Unaffiliated issuers | 37,807,549 |
| 37,244,215 |
| ||
Affiliated issuers |
| 615,963 |
| 615,963 |
| |
Cash |
|
|
|
| 13,914 |
|
Cash denominated in foreign currency |
|
| 39,439 |
| 29,555 |
|
Dividends, interest and securities lending income receivable |
| 263,216 |
| |||
Unrealized appreciation on forward foreign |
| 24,449 |
| |||
Cash collateral held by broker—Note 4 |
| 20,584 |
| |||
Receivable for futures variation margin—Note 4 |
| 4,581 |
| |||
Prepaid expenses |
|
|
|
| 1,135 |
|
|
|
|
|
| 38,217,612 |
|
Liabilities ($): |
|
|
|
| ||
Due to The Dreyfus Corporation and affiliates—Note 3(b) |
|
|
| 31,605 |
| |
Payable for investment securities purchased |
| 379,867 |
| |||
Unrealized depreciation on forward foreign |
| 18,442 |
| |||
Outstanding options written, at value |
| 2,988 |
| |||
Payable for shares of Beneficial Interest redeemed |
| 2,719 |
| |||
Payable for swap variation margin—Note 4 |
| 1,510 |
| |||
Trustees fees and expenses payable |
| 565 |
| |||
Accrued expenses |
|
|
|
| 62,337 |
|
|
|
|
|
| 500,033 |
|
Net Assets ($) |
|
| 37,717,579 |
| ||
Composition of Net Assets ($): |
|
|
|
| ||
Paid-in capital |
|
|
|
| 39,033,001 |
|
Accumulated undistributed investment income—net |
| 237,369 |
| |||
Accumulated net realized gain (loss) on investments |
|
|
|
| (910,121) |
|
Accumulated net unrealized appreciation (depreciation) |
| (642,670) |
| |||
Net Assets ($) |
|
| 37,717,579 |
|
Net Asset Value Per Share | Initial Shares | Service Shares |
|
Net Assets ($) | 34,559,137 | 3,158,442 |
|
Shares Outstanding | 3,014,258 | 276,593 |
|
Net Asset Value Per Share ($) | 11.47 | 11.42 |
|
See notes to financial statements. |
23
STATEMENT OF OPERATIONS
Six Months Ended June 30, 2018 (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income ($): |
|
|
|
| ||
Income: |
|
|
|
| ||
Interest |
|
| 645,312 |
| ||
Dividends from affiliated issuers |
|
| 2,185 |
| ||
Income from securities lending—Note 1(c) |
|
| 1,096 |
| ||
Total Income |
|
| 648,593 |
| ||
Expenses: |
|
|
|
| ||
Investment advisory fee—Note 3(a) |
|
| 126,060 |
| ||
Professional fees |
|
| 66,096 |
| ||
Prospectus and shareholders’ reports |
|
| 17,434 |
| ||
Distribution fees—Note 3(b) |
|
| 4,080 |
| ||
Custodian fees—Note 3(b) |
|
| 3,916 |
| ||
Trustees’ fees and expenses—Note 3(c) |
|
| 1,764 |
| ||
Shareholder servicing costs—Note 3(b) |
|
| 247 |
| ||
Loan commitment fees—Note 2 |
|
| 1 |
| ||
Miscellaneous |
|
| 27,041 |
| ||
Total Expenses |
|
| 246,639 |
| ||
Less—reduction in fees due to earnings credits—Note 3(b) |
|
| (80) |
| ||
Net Expenses |
|
| 246,559 |
| ||
Investment Income—Net |
|
| 402,034 |
| ||
Realized and Unrealized Gain (Loss) on Investments—Note 4 ($): |
|
| ||||
Net realized gain (loss) on investments and foreign currency transactions | (375,428) |
| ||||
Net realized gain (loss) on options transactions | (14,529) |
| ||||
Net realized gain (loss) on futures | 738 |
| ||||
Net realized gain (loss) on swap agreements | 85,300 |
| ||||
Net realized gain (loss) on forward foreign currency exchange contracts | 38,136 |
| ||||
Net Realized Gain (Loss) |
|
| (265,783) |
| ||
Net unrealized appreciation (depreciation) on investments |
|
| (1,201,200) |
| ||
Net unrealized appreciation (depreciation) on options transactions | (18,886) |
| ||||
Net unrealized appreciation (depreciation) on futures |
|
| (63,218) |
| ||
Net unrealized appreciation (depreciation) on swap agreements |
|
| (26,593) |
| ||
Net unrealized appreciation (depreciation) on |
|
| 18,850 |
| ||
Net Unrealized Appreciation (Depreciation) |
|
| (1,291,047) |
| ||
Net Realized and Unrealized Gain (Loss) on Investments |
|
| (1,556,830) |
| ||
Net (Decrease) in Net Assets Resulting from Operations |
| (1,154,796) |
| |||
See notes to financial statements. |
24
STATEMENT OF CHANGES IN NET ASSETS
|
|
|
| Six Months Ended |
| Year Ended |
| ||
Operations ($): |
|
|
|
|
|
|
|
| |
Investment income—net |
|
| 402,034 |
|
|
| 906,349 |
| |
Net realized gain (loss) on investments |
| (265,783) |
|
|
| 364,265 |
| ||
Net unrealized appreciation (depreciation) |
| (1,291,047) |
|
|
| 876,408 |
| ||
Net Increase (Decrease) in Net Assets | (1,154,796) |
|
|
| 2,147,022 |
| |||
Distributions to Shareholders from ($): |
| ||||||||
Investment income—net: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (477,602) |
|
|
| (813,417) |
| |
Service Shares |
|
| (39,863) |
|
|
| (171,803) |
| |
Total Distributions |
|
| (517,465) |
|
|
| (985,220) |
| |
Beneficial Interest Transactions ($): |
| ||||||||
Net proceeds from shares sold: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 839,181 |
|
|
| 3,032,116 |
| |
Service Shares |
|
| 213,076 |
|
|
| 743,815 |
| |
Distributions reinvested: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| 477,602 |
|
|
| 813,417 |
| |
Service Shares |
|
| 39,863 |
|
|
| 171,803 |
| |
Cost of shares redeemed: |
|
|
|
|
|
|
|
| |
Initial Shares |
|
| (2,809,021) |
|
|
| (6,262,415) |
| |
Service Shares |
|
| (292,395) |
|
|
| (10,408,658) |
| |
Increase (Decrease) in Net Assets | (1,531,694) |
|
|
| (11,909,922) |
| |||
Total Increase (Decrease) in Net Assets | (3,203,955) |
|
|
| (10,748,120) |
| |||
Net Assets ($): |
| ||||||||
Beginning of Period |
|
| 40,921,534 |
|
|
| 51,669,654 |
| |
End of Period |
|
| 37,717,579 |
|
|
| 40,921,534 |
| |
Undistributed investment income—net | 237,369 |
|
|
| 352,800 |
| |||
Capital Share Transactions (Shares): |
| ||||||||
Initial Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 71,557 |
|
|
| 254,562 |
| |
Shares issued for distributions reinvested |
|
| 40,892 |
|
|
| 68,573 |
| |
Shares redeemed |
|
| (240,483) |
|
|
| (527,187) |
| |
Net Increase (Decrease) in Shares Outstanding | (128,034) |
|
|
| (204,052) |
| |||
Service Shares |
|
|
|
|
|
|
|
| |
Shares sold |
|
| 18,368 |
|
|
| 63,079 |
| |
Shares issued for distributions reinvested |
|
| 3,426 |
|
|
| 14,585 |
| |
Shares redeemed |
|
| (25,406) |
|
|
| (874,202) |
| |
Net Increase (Decrease) in Shares Outstanding | (3,612) |
|
|
| (796,538) |
| |||
See notes to financial statements. |
25
FINANCIAL HIGHLIGHTS
The following tables describe the performance for each share class for the fiscal periods indicated. All information (except portfolio turnover rate) reflects financial results for a single fund share. Total return shows how much your investment in the fund would have increased (or decreased) during each period, assuming you had reinvested all dividends and distributions. The fund’s total returns do not reflect expenses associated with variable annuity or insurance contracts. These figures have been derived from the fund’s financial statements.
Six Months Ended | ||||||
June 30, 2018 | Year Ended December 31, | |||||
Initial Shares | (Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 11.96 | 11.69 | 11.72 | 12.16 | 11.85 | 12.37 |
Investment Operations: | ||||||
Investment income—neta | .12 | .23 | .20 | .23 | .20 | .21 |
Net realized and unrealized | (.45) | .29 | (.02)b | (.43) | .36 | (.39) |
Total from Investment Operations | (.33) | .52 | .18 | (.20) | .56 | (.18) |
Distributions: | ||||||
Dividends from | (.16) | (.25) | (.21) | (.24) | (.25) | (.34) |
Net asset value, end of period | 11.47 | 11.96 | 11.69 | 11.72 | 12.16 | 11.85 |
Total Return (%) | (2.90)c | 4.50 | 1.52 | (1.65) | 4.79 | (1.54) |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.25d | .98 | .94 | .92 | .85 | .92 |
Ratio of net expenses | 1.25d | .98 | .94 | .92 | .85 | .92 |
Ratio of net investment income | 2.09d | 1.97 | 1.65 | 1.91 | 1.68 | 1.76 |
Portfolio Turnover Ratee | 69.63c | 161.74 | 227.98 | 314.50 | 387.86 | 397.26 |
Net Assets, end of period ($ x 1,000) | 34,559 | 37,584 | 39,133 | 44,057 | 49,880 | 55,337 |
a Based on average shares outstanding.
b In addition to net realized and unrealized gains on investments, this amount includes a decrease in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.
c Not annualized.
d Annualized.
e The portfolio turnover rates excluding mortgage dollar roll transactions for the periods ended June 30, 2018 and December 31, 2017, 2016, 2015, 2014 and 2013 were 59.37 % , 106.51%, 172.50%, 120.54%, 182.67% and 176.37% %, respectively.
See notes to financial statements.
26
Six Months Ended | ||||||
June 30, 2018 | Year Ended December 31, | |||||
Service Shares | (Unaudited) | 2017 | 2016 | 2015 | 2014 | 2013 |
Per Share Data ($): | ||||||
Net asset value, beginning of period | 11.91 | 11.64 | 11.67 | 12.11 | 11.80 | 12.33 |
Investment Operations: | ||||||
Investment income—neta | .11 | .20 | .17 | .20 | .17 | .18 |
Net realized and unrealized | (.46) | .29 | (.02)b | (.42) | .36 | (.40) |
Total from Investment Operations | (.35) | .49 | .15 | (.22) | .53 | (.22) |
Distributions: | ||||||
Dividends from | (.14) | (.22) | (.18) | (.22) | (.22) | (.31) |
Net asset value, end of period | 11.42 | 11.91 | 11.64 | 11.67 | 12.11 | 11.80 |
Total Return (%) | (2.95)c | 4.25 | 1.27 | (1.89) | 4.56 | (1.80) |
Ratios/Supplemental Data (%): | ||||||
Ratio of total expenses | 1.50d | 1.23 | 1.19 | 1.17 | 1.10 | 1.17 |
Ratio of net expenses | 1.50d | 1.23 | 1.19 | 1.17 | 1.10 | 1.17 |
Ratio of net investment income | 1.84d | 1.64 | 1.40 | 1.66 | 1.43 | 1.51 |
Portfolio Turnover Ratee | 69.63c | 161.74 | 227.98 | 314.50 | 387.86 | 397.26 |
Net Assets, end of period ($ x 1,000) | 3,158 | 3,338 | 12,537 | 14,314 | 17,359 | 19,561 |
a Based on average shares outstanding.
b In addition to net realized and unrealized gains on investments, this amount includes a decrease in net asset value per share resulting from the timing of issuances and redemptions of shares in relation to fluctuating market values for the portfolio investments.
c Not annualized.
d Annualized.
e The portfolio turnover rates excluding mortgage dollar roll transactions for the periods ended June 30, 2018 and December 31, 2017, 2016, 2015, 2014 and 2013 were 59.37 %, 106.51%, 172.50%, 120.54%, 182.67% and 176.37% %, respectively.
See notes to financial statements.
27
NOTES TO FINANCIAL STATEMENTS (Unaudited)
NOTE 1—Significant Accounting Policies:
Quality Bond 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 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 a sales charge. The fund is authorized to issue an unlimited number of $.001 par value shares of Beneficial Interest in each of the following classes of shares: Initial and Service. Each class of shares has identical rights and privileges, except with respect to the Distribution Plan, and the expenses borne by each class, the allocation of certain transfer agency costs and certain voting rights. Income, expenses (other than expenses attributable to a specific class), and realized and unrealized gains or losses on investments are allocated to each class of shares based on its relative net assets.
The Company accounts separately for the assets, liabilities and operations of each series. Expenses directly attributable to each series are charged to that series’ operations; expenses which are applicable to all series are allocated among them on a pro rata basis.
The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) is the exclusive reference of authoritative U.S. generally accepted accounting principles (“GAAP”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal laws are also sources of authoritative GAAP for SEC 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
28
arrangements is unknown. The fund does not anticipate recognizing any loss related to these arrangements.
(a) Portfolio valuation: The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price). GAAP establishes a fair value hierarchy that prioritizes the inputs of valuation techniques used to measure fair value. This hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
Additionally, GAAP provides guidance on determining whether the volume and activity in a market has decreased significantly and whether such a decrease in activity results in transactions that are not orderly. GAAP requires enhanced disclosures around valuation inputs and techniques used during annual and interim periods.
Various inputs are used in determining the value of the fund’s investments relating to fair value measurements. These inputs are summarized in the three broad levels listed below:
Level 1—unadjusted quoted prices in active markets for identical investments.
Level 2—other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3—significant unobservable inputs (including the fund’s own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy. Valuation techniques used to value the fund’s investments are as follows:
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), 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
29
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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 is engaged under the general supervision of the Board.
When market quotations or official closing prices are not readily available, or are determined not to accurately reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded (for example, a foreign exchange or market), but before the fund calculates its net asset value, the fund may value these investments at fair value as determined in accordance with the procedures approved by the Board. Certain factors may be considered when fair valuing investments such as: fundamental analytical data, the nature and duration of restrictions on disposition, an evaluation of the forces that influence the market in which the securities are purchased and sold, and public trading in similar securities of the issuer or comparable issuers. These securities are either categorized within Level 2 or 3 of the fair value hierarchy depending on the relevant inputs used.
For restricted securities where observable inputs are limited, assumptions about market activity and risk are used and such securities are generally categorized within Level 3 of the fair value hierarchy.
Investments denominated in foreign currencies are translated to U.S. dollars at the prevailing rates of exchange.
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. Investments in swap agreements
30
are valued each business day by the Service. Swaps are valued by the Service by using a swap pricing model which incorporates among other factors, default probabilities, recovery rates, credit curves of the underlying issuer and swap spreads on interest rates 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 following is a summary of the inputs used as of June 30, 2018 in valuing the fund’s investments:
Level 1 -Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total | |
Assets ($) | ||||
Investments in Securities: |
|
|
|
|
Asset-Backed | - | 1,514,795 | - | 1,514,795 |
Commercial | - | 625,550 | - | 625,550 |
Corporate Bonds† | - | 11,593,166 | - | 11,593,166 |
Foreign Government | - | 3,748,512 | - | 3,748,512 |
Municipal Bonds† | - | 1,043,572 | - | 1,043,572 |
Registered Investment Companies | 615,963 | - | - | 615,963 |
U.S. Government | - | 8,630,450 | - | 8,630,450 |
U.S. Treasury | - | 10,059,288 | - | 10,059,288 |
Other Financial Instruments: | ||||
Futures†† | 11,320 | - | - | 11,320 |
Forward Foreign | - | 24,449 | - | 24,449 |
Options Purchased | - | 28,882 | - | 28,882 |
Liabilities ($) | ||||
Other Financial Instruments: | ||||
Futures†† | (73,242) | - | - | (73,242) |
Forward Foreign | - | (18,442) | - | (18,442) |
Options Written | - | (2,988) | - | (2,988) |
Swaps†† | - | (12,264) | - | (12,264) |
† See Statement of Investments for additional detailed categorizations.
†† Amount shown represents unrealized appreciation (depreciation) at period end.
31
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
At June 30, 2018, there were no transfers between levels of the fair value hierarchy. It is the fund’s policy to recognize transfers between levels at the end of the reporting period.
(b) Foreign currency transactions: The fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Net realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized on securities transactions between trade and settlement date, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the value of assets and liabilities other than investments resulting from changes in exchange rates. Foreign currency gains and losses on foreign currency transactions are also included with net realized and unrealized gain or loss on investments.
(c) Securities transactions and investment income: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income, including, where applicable, accretion of discount and amortization of premium on investments, is recognized on the accrual basis.
Pursuant to a securities lending agreement with The Bank of New York Mellon, a subsidiary of BNY Mellon and an affiliate of 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. Additionally, the contractual maturity of
32
security lending transactions are on an overnight and continuous basis. During the period ended June 30, 2018, The Bank of New York Mellon earned $228 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.
(e) Dividends and distributions to shareholders: Dividends and distributions 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 29, 2018, the Board declared a cash dividend of $.039 and $.036 per share for the Initial shares and Service shares, respectively, from undistributed investment income-net payable on July 2, 2018 (ex-dividend date) to shareholders of record as of the close of business on June 29, 2018.
(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, 2018, 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, 2018, the fund did not incur any interest or penalties.
Each tax year in the three-year period ended December 31, 2017 remains subject to examination by the Internal Revenue Service and state taxing authorities.
Under the Regulated Investment Company Modernization Act of 2010, the fund is permitted to carry forward capital losses for an unlimited period. Furthermore, capital loss carryovers retain their character as either short-term or long-term capital losses.
33
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The fund has an unused capital loss carryover of $597,547 available for federal income tax purposes to be applied against future net realized capital gains, if any, realized subsequent to December 31, 2017. The fund has $187,473 of short-term losses and $410,074 of 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, 2017 was as follows: ordinary income $985,220. 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 an $830 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, 2018, 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, 2018, Service shares were charged $4,080 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.
34
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, 2018, the fund was charged $196 for transfer agency services and $23 for cash management services. These fees are included in Shareholder servicing costs in the Statement of Operations. Cash management fees were offset by earnings credits of $23.
The fund compensates The Bank of New York Mellon under a custody agreement for providing custodial services for the fund. These fees are determined based on net assets, geographic region and transaction activity. During the period ended June 30, 2018, the fund was charged $3,916 pursuant to the custody agreement. These fees were partially offset by earnings credits of $57.
During the period ended June 30, 2018, the fund was charged $6,320 for services performed by the Chief Compliance Officer and his staff. These fees are included in Miscellaneous in the Statement of Operations.
The components of “Due to The Dreyfus Corporation and affiliates” in the Statement of Assets and Liabilities consist of: investment advisory fees $20,231, Distribution Plan fees $651, custodian fees $4,310, Chief Compliance Officer fees $6,320 and transfer agency fees $93.
(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 (including paydowns) of investment securities, excluding short-term securities, forward contracts, futures, options transactions and swap agreements, during the period ended June 30, 2018, amounted to $27,278,071 and $31,580,059, respectively, of which $4,019,517 in purchases and $4,025,860 in sales were from mortgage dollar roll transactions.
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,
35
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
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, 2018 is discussed below.
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 futures in order to manage its exposure to or protect against changes in the market. A futures contract represents a commitment for the future purchase or a sale of an asset at a specified date. Upon entering into such contracts, these investments require initial margin deposits with a counterparty, which consist of cash or cash equivalents. The amount of these deposits is determined by the exchange or Board of Trade on which the contract is traded and is subject to change. Accordingly, variation margin payments are received or made to reflect daily unrealized gains or losses which are recorded in the Statement of Operations. When the contracts are closed, the fund recognizes a realized gain or loss which is reflected in the Statement of Operations. There is minimal counterparty credit risk to the fund with futures since they are exchange traded, and the exchange guarantees the futures against default. Futures open at June 30, 2018 are set forth in the Statement of Futures.
Options Transactions: The fund purchases and writes (sells) put and call options to hedge against changes in the values of interest rate 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
36
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 maximum payout for those contracts is limited to the number of put option contracts written and the related strike prices, respectively.
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. Options written open at June 30, 2018 are set forth in the Statement of Options Written.
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
37
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
date the forward contract is closed. The fund realizes a gain if the value of the contract decreases between those dates. With respect to purchases of forward contracts, the fund incurs a loss if the value of the contract decreases between the date the forward contract is opened and the date the forward contract is closed. The fund realizes a gain if the value of the contract increases between those dates. Any realized or unrealized gains or losses which occurred during the period are reflected in the Statement of Operations. The fund is exposed to foreign currency risk as a result of changes in value of underlying financial instruments. The fund is also exposed to credit risk associated with counterparty nonperformance on these forward contracts, which is generally limited to the unrealized gain on each open contract. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. Forward contracts open at June 30, 2018 are set forth in the Statement of Forward Foreign Currency Exchange Contracts.
Swap Agreements: The fund enters into swap agreements to exchange the interest rate on, or return generated by, one nominal instrument for the return generated by another nominal instrument. Swap agreements are privately negotiated in the OTC market or centrally cleared. The fund enters into these agreements to hedge certain market or interest rate risks, to manage the interest rate sensitivity (sometimes called duration) of fixed income securities, to provide a substitute for purchasing or selling particular securities or to increase potential returns.
For OTC swaps, the fund accrues for interim payments on a daily basis, with the net amount recorded within unrealized appreciation (depreciation) on swap agreements in the Statement of Assets and Liabilities. Once the interim payments are settled in cash, the net amount is recorded as a realized gain (loss) on swaps, in addition to realized gain (loss) recorded upon the termination of swap agreements in the Statement of Operations. Upfront payments made and/or received by the fund, are recorded as an asset and/or liability in the Statement of Assets and Liabilities and are recorded as a realized gain or loss ratably over the agreement’s term/event with the exception of forward starting interest rate swaps which are recorded as realized gains or losses on the termination date.
Upon entering into centrally cleared swap agreements, an initial margin deposit is required with a counterparty, which consists of cash or cash equivalents. The amount of these deposits is determined by the exchange on which the agreement is traded and is subject to change. The change in valuation of centrally cleared swaps is recorded as a receivable or payable for variation margin in the Statement of Assets and Liabilities. Payments
38
received from (paid to) the counterparty, including upon termination, are recorded as realized gain (loss) in the Statement of Operations.
Fluctuations in the value of swap agreements are recorded for financial statement purposes as unrealized appreciation or depreciation on swap agreements.
Interest Rate Swaps: Interest rate swaps involve the exchange of commitments to pay and receive interest based on a notional principal amount. The fund may elect to pay a fixed rate and receive a floating rate, or receive a fixed rate and pay a floating rate on a notional principal amount. The net interest received or paid on interest rate swap agreements is included within realized gain (loss) on swap agreements in the Statement of Operations. Interest rate swap agreements are subject to general market risk, liquidity risk, counterparty risk and interest rate risk.
For OTC swaps, the fund’s maximum risk of loss from counterparty risk is the discounted value of the cash flows to be received from the counterparty over the agreement’s remaining life, to the extent that the amount is positive. This risk may be mitigated by Master Agreements, if any, between the fund and the counterparty and the posting of collateral, if any, by the counterparty to the fund to cover the fund’s exposure to the counterparty. There is minimal counterparty risk to the fund with centrally cleared swaps since they are exchange traded and the exchange guarantees these swaps against default. Interest rate swaps open at June 30, 2018 are set forth in the Statement of Swap Agreements.
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, 2018 is shown below:
|
| Derivative |
|
|
| Derivative | |
Interest rate risk | 11,320 | 1 | Interest rate risk | (85,506) | 1,2 | ||
Foreign exchange risk | 53,331 | 3,4 | Foreign exchange risk | (21,430) | 4,5 | ||
Gross fair value of | 64,651 | (106,936) | |||||
Statement of Assets and Liabilities location: | |||||||
1Includes cumulative appreciation (depreciation) on futures as reported in the Statement of Futures, but only the unpaid variation margin is reported in the Statement of Assets and Liabilities. | |||||||
2Includes cumulative appreciation (depreciation) on swap agreements as reported in the Statement of Swap Agreements. Unrealized appreciation (depreciation) on OTC swap agreements and only unpaid variation margin on cleared swap agreements, are reported in the Statement of Assets and Liabilities. | |||||||
3Options purchased are included in Investments in securities—Unaffiliated issuers, at value. | |||||||
4Unrealized appreciation (depreciation) on forward foreign currency exchange contracts. | |||||||
5Outstanding options written, at value. |
39
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
The effect of derivative instruments in the Statement of Operations during the period ended June 30, 2018 is shown below:
Amount of realized gain (loss) on derivatives recognized in income ($) | |||||||||||
Underlying | Futures | 1 | Options | 2 | Forward | 3 | Swap | 4 | Total | ||
Interest | 738 | (12,801) | - | 85,300 | 73,237 | ||||||
Foreign | - | (1,728) | 38,136 | - | 36,408 | ||||||
Total | 738 | (14,529) | 38,136 | 85,300 | 109,645 | ||||||
Change in unrealized appreciation (depreciation) | |||||||||||
Underlying | Futures | 5 | Options | 6 | Forward | 7 | Swap | 8 | Total | ||
Interest | (63,218) | 8,021 | - | (26,593) | (81,790) | ||||||
Foreign | - | (26,907) | 18,850 | - | (8,057) | ||||||
Total | (63,218) | (18,886) | 18,850 | (26,593) | (89,847) | ||||||
Statement of Operations location: | |||||||||||
1 | Net realized gain (loss) on futures. | ||||||||||
2 | Net realized gain (loss) on options transactions. | ||||||||||
3 | Net realized gain (loss) on forward foreign currency exchange contracts. | ||||||||||
4 | Net realized gain (loss) on swap agreements. | ||||||||||
5 | Net unrealized appreciation (depreciation) on futures. | ||||||||||
6 | Net unrealized appreciation (depreciation) on options transactions. | ||||||||||
7 | Net unrealized appreciation (depreciation) on forward foreign currency exchange contracts. | ||||||||||
8 | Net unrealized appreciation (depreciation) on swap agreements. |
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.
40
At June 30, 2018, derivative assets and liabilities (by type) on a gross basis are as follows:
Derivative Financial Instruments: |
| Assets ($) |
| Liabilities ($) |
|
Futures | 11,320 | (73,242) | |||
Options | 28,882 | (2,988) | |||
Forward contracts | 24,449 | (18,442) | |||
Swaps | - | (12,264) | |||
Total gross amount of derivative | |||||
assets and liabilities in the | |||||
Statement of Assets and Liabilities | 64,651 | (106,936) | |||
Derivatives not subject to | |||||
Master Agreements | (11,320) | 85,506 | |||
Total gross amount of assets | |||||
and liabilities subject to | |||||
Master Agreements | 53,331 | (21,430) |
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, 2018:†
Financial | ||||||
Instruments | ||||||
and Derivatives | ||||||
Gross Amount of | Available | Collateral | Net Amount of | |||
Counterparty | Assets ($) | 1 | for Offset ($) | Received ($) |
| Assets ($) |
Barclays Bank | 14,911 | (1,768) | - | 13,143 | ||
Citigroup | 13,775 | (6,019) | - | 7,756 | ||
Goldman Sachs | 5,185 | (37) | - | 5,148 | ||
HSBC | 1,419 | (1,419) | - | - | ||
JP Morgan | 15,253 | (3,994) | - | 11,259 | ||
UBS | 2,788 | (2,788) | - | - | ||
Total | 53,331 | (16,025) | - | 37,306 | ||
41
NOTES TO FINANCIAL STATEMENTS (Unaudited) (continued)
Financial | ||||||
Instruments | ||||||
and Derivatives | ||||||
Gross Amount of | Available | Collateral | Net Amount of | |||
Counterparty | Liabilities ($) | 1 | for Offset ($) | Pledged ($) |
| Liabilities ($) |
Bank of America | (1,508) | - | - | (1,508) | ||
Barclays Bank | (1,768) | 1,768 | - | - | ||
Citigroup | (6,019) | 6,019 | - | - | ||
Goldman Sachs | (37) | 37 | - | - | ||
HSBC | (1,956) | 1,419 | - | (537) | ||
JP Morgan | (3,994) | 3,994 | - | - | ||
UBS | (6,148) | 2,788 | - | (3,360) | ||
Total | (21,430) | 16,025 | - | (5,405) | ||
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. | ||||||
† See Statement of Investments for detailed information regarding collateral held for open exchange traded derivative contracts. |
The following summarizes the average market value of derivatives outstanding during the period ended June 30, 2018:
|
| Average Market Value ($) |
Interest rate futures | 13,810,344 | |
Interest rate options contracts | 743 | |
Foreign currency options contracts | 14,564 | |
Forward contracts | 9,328,391 | |
The following summarizes the average notional value of swap agreements outstanding during the period ended June 30, 2018:
|
| Average Notional Value ($) |
Interest rate swap agreements | 9,042,270 | |
At June 30, 2018, accumulated net unrealized appreciation on investments inclusive of derivative contracts was $632,433, consisting of $445,785 gross unrealized appreciation and $1,078,218 gross unrealized depreciation.
At June 30, 2018, the cost of investments inclusive of derivative contracts for federal income tax purposes was substantially the same as the cost for financial reporting purposes (see the Statement of Investments).
42
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENTS (Unaudited)
At a meeting of the fund’s Board of Trustees held on February 14-15, 2018, 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.
Comparative Analysis of the Fund’s Performance and Management Fee and Expense Ratio. The Board reviewed reports prepared by Broadridge Financial Solutions, Inc. (“Broadridge”), an independent provider of investment company data, which included information comparing (1) the fund’s performance with the performance of a group of comparable funds (the “Performance Group”) and with a broader group of funds (the “Performance Universe”), all for various periods ended December 31, 2017, and (2) the fund’s actual and contractual management fees and total expenses with those of a group of comparable funds (the “Expense Group”) and with a broader group of funds (the “Expense Universe”), the information for which was derived in part from fund financial statements available to Broadridge as of the date of its analysis. Dreyfus previously had furnished the Board with a description of the methodology Broadridge used to select the Performance Group and Performance Universe and the Expense Group and Expense Universe.
43
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
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 considered that performance generally should be considered over longer periods of time, although it is possible that long-term performance can be adversely affected by even one period of significant underperformance so that a single investment decision or theme has the ability to affect disproportionately long-term performance. The Board discussed with representatives of Dreyfus and/or its affiliates the results of the comparisons and considered that the fund’s total return performance was below the Performance Group and Performance Universe medians for all periods, except for the one- and ten-year periods when it was above and at the medians, respectively. The Board also considered that the fund’s yield performance was below the Performance Group median for each of the ten one-year periods ended December 31st and below the Performance Universe median for nine of the ten one-year periods. The Board considered the relative proximity of the fund’s yield performance to the Performance Group and/or Performance Universe median in certain periods when the yield performance 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 it was considered that the fund’s returns were above the returns of the index in five of the ten calendar years shown.
The Board also reviewed the range of actual and contractual management fees and total expenses of the Expense Group and Expense Universe funds and discussed the results of the comparisons. The Board considered that: the fund’s contractual management fee was 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 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.
44
The consulting firm also had analyzed where any economies of scale might emerge in connection with the management of a fund.
The Board considered, on the advice of its counsel, the profitability analysis (1) as part of its evaluation of whether the fees under the Agreement, considered in relation to the mix of services provided by Dreyfus, including the nature, extent and quality of such services, supported the renewal of the Agreement and (2) in light of the relevant circumstances for the fund and the extent to which economies of scale would be realized if the fund grows and whether fee levels reflect these economies of scale for the benefit of fund shareholders. Dreyfus representatives stated that a discussion of economies of scale is predicated on a fund having achieved a substantial size with increasing assets and that, if a fund’s assets had been stable or decreasing, the possibility that Dreyfus may have realized any economies of scale would be less. Dreyfus representatives also stated 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 took into consideration 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.
· While noting the improved relative performance in the most recent one-year period, the Board expressed concern about the fund’s performance and agreed to closely monitor performance.
· The Board concluded that the fee paid to Dreyfus continued to be appropriate under the circumstances and in light of the factors and the totality of the services provided as discussed above.
· The Board determined that the economies of scale which may accrue to 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
45
INFORMATION ABOUT THE RENEWAL OF THE FUND’S INVESTMENT ADVISORY AGREEMENTS (Unaudited) (continued)
other interactions with Dreyfus and its affiliates, of Dreyfus 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 the Agreement for the fund, or substantially similar agreements for other Dreyfus funds that the Board oversees, 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 fund’s arrangements, or substantially similar arrangements for other Dreyfus funds that the Board oversees, in prior years. The Board determined to renew the Agreement.
46
NOTES
47
NOTES
48
NOTES
49
Dreyfus Variable Investment Fund, Quality Bond Portfolio
200 Park Avenue
New York, NY 10166
Investment Adviser
The Dreyfus Corporation
200 Park Avenue
New York, NY 10166
Custodian
The Bank of New York Mellon
240 Greenwich Street
New York, NY 10286
Transfer Agent &
Dividend Disbursing Agent
Dreyfus Transfer, Inc.
200 Park Avenue
New York, NY 10166
Distributor
MBSC Securities Corporation
200 Park Avenue
New York, NY 10166
Telephone 1-800-258-4260 or 1-800-258-4261
Mail The Dreyfus Family of Funds, 144 Glenn Curtiss Boulevard, Uniondale, NY 11556-0144 Attn: Institutional Services Department
E-mail Send your request to info@dreyfus.com
Internet Information can be viewed online or downloaded at www.dreyfus.com
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, D.C. 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.
© 2018 MBSC Securities Corporation |
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.
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 8, 2018
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 8, 2018
By: /s/ James Windels
James Windels
Treasurer
Date: August 8, 2018
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)